Guidance

Overseas business risk: Bahrain

Updated 19 June 2023

1. General overview

The bilateral relationship between the Kingdom of Bahrain and the United Kingdom is strong and long-standing; Bahrain was a protectorate of the United Kingdom until independence in 1971 and in 2016, the UK and Bahrain marked the bicentenary of bilateral relations. Many senior Bahraini business and political figures were educated in the UK and consider the UK their second home. There are strong business ties between both countries and a strong appetite for continued bilateral trade and investment.

The Kingdom of Bahrain is an Arab island nation strategically located in the Gulf with direct access to the Gulf’s largest economy, Saudi Arabia, via the King Fahad Causeway. Islam is the official religion, though other religions are also accommodated, and Arabic the official language, but English is widely spoken. Bahrain’s population stands at around 1.5 million, of which over 50% are expatriates.

2. Political

In 1999, Sheikh Hamad bin Isa Al-Khalifa succeeded his father as ruler and by 2002 had successfully introduced a Parliament and transformed Bahrain from an emirate into a kingdom. The Parliament consists of 2 chambers; an Upper House, the ‘Shura’ appointed by the King, and a Lower House, the ‘Nuwab’, elected by the population. Both councils serve for 4 years. The King retains the power to amend the constitution.

Following unrest in 2011 Bahrain instituted wide-ranging reforms informed by the Bahrain Independent Commission of Inquiry (BICI) recommendations. For further information on human rights in Bahrain see the FCDO’s Human Rights Priority Country report for 2021.

For further information on the security situation please see the FCDO travel advice for Bahrain and the British Embassy Bahrain webpages.

3. Economics

Although the smallest economy in the Gulf Cooperation Council (GCC) region, Bahrain’s economy is the most diversified and is slowly moving away from dependence on oil and gas, which now accounts for approximately 19% of GDP. Financial services and manufacturing are the largest non-hydrocarbon sectors, contributing around 17% and 14% respectively to overall GDP. Bahrain is the UK’s 60th largest trading partner. Trade between the two countries increased by 93.5% in the year to the end of Q4 in 2022. Bilateral trade in goods and services amounted to £3.1 billion in 2022 (compared to £1.5 billion in the four quarters to the end of Q4 2021). Total UK exports to Bahrain increased by 40.5% (or £220 million) and amounted to £763 million in the four quarters to the end of Q4 in 2022. In the same period, total UK imports from Bahrain were worth £2.3 billion (an increase of 121% from the previous year). 50.6% of UK exports to Bahrain (worth £386 million) were in goods in the four quarters to the end of Q4 2022 and 49.4% (£377 million) were in services. UK exports of goods to Bahrain increased by 31.3% (£92 million) compared to the four quarters to the end of Q4 2021 while UK exports of services to Bahrain increased by 51.4% (£128 million) compared to the four quarters to the end of Q4 2021.

Bahrain’s economy is one of the most diversified in the Gulf. According to the Ministry of Finance and National Economy, non-oil sectors contributed to 83.1% of total GDP in 2022. Bahrain also boasts strong economic ties with the wider GCC, especially Saudi Arabia, which is also a key source of tourism. Key macro-level challenges going forward will be reducing government expenditure and diversifying revenue streams to insulate the State budget’s vulnerability to oil price fluctuations. According to Bahrain’s Ministry of Finance and National Economy, real GDP grew by 4.9% in 2022 compared to the previous year, which is the highest real GDP growth rate since 2013. According to Fitch Ratings, the Bahrain government budget deficit narrowed to 3.6% of GDP in 2022 from 9.6% of GDP in 2021, owing to the rebound in oil prices and the doubling of the VAT rate to 10%. In December 2022 Fitch Rating affirmed Bahrain’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Stable Outlook.

For more detailed information on doing business in Bahrain please refer to the Department for Business and Trade’s (DBT) export guide to Bahrain

4. Business and human rights

Bahrain’s Labour Law was fundamentally overhauled with the introduction of the Labour Law for the Private Sector No.36 of 2012. This law conforms much more closely to international standards and is aligned to the domestic laws of several other Arab countries and international labour treaties and conventions. The Law granted employees considerably more rights, including:

• recognition of women’s rights
• anti-discrimination rules
• a framework for the resolution of labour disputes

The Law covers every person who is legally employed. No one is allowed to work more than 8 hours in a day, unless by mutual agreement, or more than 48 hours in a week. In July 2017, constraints on the sponsorship system were eased. The new Law allows expatriates to work and live in Bahrain without an employer (sponsor) by obtaining a renewable 2-year work permit.

5. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. Additionally, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In Bahrain, the financial sector is regulated by the Central Bank of Bahrain with anti-money laundering laws in place. According to Transparency International’s Corruption Perception Index, Bahrain ranked 68th of 180 countries in 2022. For more information, please see our bribery and corruption page.

6. Terrorism threat

For more information on threats in Bahrain, please see FCDO travel advice for Bahrain, including on how to reduce your risk from terrorism abroad.

7. Intellectual property

Intellectual Property (IP) Rights are territorial, that is they only give protection where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets. The Industrial Property Directorate in the Ministry of Industry, Commerce and Tourism has created a framework of legislation for patents, design and trademarks. Bahrain is also bound by the Trademarks Law of the GCC. However, there are no specialist IP courts and there is a limited supply of specialist local advocates. A GCC Patent can be obtained by filing an application with the Patent Office in Saudi Arabia. Certificates of Patents granted by the GCC Patent Office secure legal protection of the inventor’s rights in all member states (UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait). For further information see the WIPO site.

8. Organised crime

For more information, please see our organised crime page.

9. Department for Business and Trade (DBT) in Bahrain

For information on doing business in Bahrain please refer to DBT’s export guide to Bahrain.

The government can provide finance or credit insurance specifically to support UK exports through UK Export Finance – the UK’s export credit agency. For up-to-date country specific information on the support available, please see UK Export Finance’s country cover policy and indicators.

10. Contact

For further support and advice regarding exporting to Bahrain or establishing a business in Bahrain contact the DBT team in Bahrain.