Bahrain WT/TPR/S/185/Rev.1 
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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. The services sector is a key component in Bahrain's overall policy of economic 
diversification; financial services, in particular, ha ve developed strongly over the last few years. In 
July 2004, Bahrain liberalized its fixed and inte rnational telecommunication services. Private sector 
participation is being encouraged though the removal of obstacles to foreign investment. 
Nevertheless, provision of certain services, such as ro ad and maritime transport, is restricted to 
Bahraini nationals. Under the General Agreement on Trade in Services (GATS), Bahrain scheduled 
commitments only in some financial services. Bahrai n has tabled its revised conditional offer in the 
ongoing services negotiations. 
2. The mining and quarrying sector, basically petroleu m and natural gas, is dominated by several 
state-owned companies, notably Bahrain Petrol eum Company (BAPCO) and Bahrain National Gas 
Company (BANAGAS). The Government is seeking to  further develop its petroleum resources either 
directly or in cooperation with foreign enterpri ses through production-sharing agreements. Bahrain is 
also increasing its electricity network and upgrading generation capacity in order to meet its growing 
demand. MFN tariffs on mining and quarrying produc ts average 4.9% and range from zero to 5%.  
Imports of electricity carry a 5% tariff rate. 
3. Bahrain's manufacturing sector is based on its comparative advantage in energy-intensive 
industries, particularly aluminium. Despite recent pr ivatizations, the State retains a significant role in 
the sector. The Government holds a majority stake or is an important shareholder in manufacturing 
companies, such as Aluminium Bahrain (ALBA), and the Arab Shipbuilding and Repair Yard 
Company (ASRY). Manufacturing is being promoted partly through investment incentives, including exemption from import duties, and a five-year grace period on rent payment for land in the industrial zones. MFN tariffs on manufactured imports average 5.4% (down from 8% in 2000), ranging up to 125% on alcoholic beverages. 
4. Bahrain is implementing a 2004-15 plan for sust ainable agriculture development to improve 
production and raise productivity. The sector is constrained by, inter alia , the limited availability of 
good quality soil and water, and the unfavourable clim ate. Bahrain is a net importer of agricultural 
products. The simple average applied MFN tariff on agricultural imports (Major Division 1 of ISIC 
Revision 2) is 3.3%  (down from 4.3% in 2000). The Government assists agricultural producers mainly 
by offering subsidies for a number of inputs, such as pesticides, veterinary drugs, machinery services, 
and irrigation material. Export prohibitions and restri ctions apply to some agricultural products (e.g. 
"bul-bul" bird, live horses, camels, palm tree offshoot). 
(2) A
GRICULTURE AND RELATED ACTIVITIES  
(i) Main features 
5. Agriculture (including fishing) contributes only 0.6% to Bahrain's real GDP (0.9% in 1998) 
and 1.3% of total employment , mainly due to limited water resources, the poor and declining quality 
of the soil, and unfavourable climate.  In 2005, arable agricultural land was estimated at around 6,400 ha (of which about 3,600 ha (56%) were cultivated), comp ared with 11,000 ha in 2000 
(4,186 ha cultivated). According to the FAO,  urban development has caused significant loss of 
traditionally agricultural areas.  Soil salinization, r esulting from the deterioration in the quality of the 
groundwater used in irrigation, has also led to a general reduction of cultivated land.
1  Some other key 
                                                      
1 FAO online information. Viewed  at: http://www.fao.org /ag/agl/aglw/aquastat/c ountries/bahrain/index 
.stm [1 November 2006]. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 48 
 
 
difficulties facing agriculture in Bahrain include tenancy problems, small farms holdings and labour 
shortages which restrict investments; high production costs; and competition from similar cheap imported products. 
6. Traditional and modern farming methods are u sed, traditional farms, which average 4 ha, 
depend heavily on government support.  Modern fa rming, which currently accounts for approximately 
8% of all farms, uses modern agricultural ma nagement and production techniques, and comprises 
mainly large agricultural holdings managed by pr ivate companies or state-owned corporations.  
Modern farming methods are used mainly for livest ock production, poultry, fodder, feed concentrates, 
milk, and vegetables (Table IV.1). 
Table IV.1 
Livestock, poultry and fisheries production, 1999-05 
(Tonnes) 
Crop  1999 2000 2001 2002 2003 2004 2005 
Milk and dairy products 19,400 19,240 10,400 20,200 18,480 19,400 14,800 
Eggs 3,100 2,650 2,130 2,450 2,600 2,450 2,025 
Fish 11,500 11,864 11,230 11,204 13,638 14,655 11,854 
Red meat 8,739 8,844 7,690 8,644 9,640 10,432 12,525 
Poultry meat 5,106 5,777 5,553 4,938 5,500 5,640 5,050 
Source: Ministry of Municipalities Affairs and Agriculture (2005), Annual Agricultural Statistics Bulletin , and information 
 provided by the authorities.  
7. Bahrain remains heavily dependant on imports  to meet its domestic demand for most 
agricultural products:  almost all cereals, vegetables,  and livestock products are imported.  Agriculture 
under greenhouse was introduced in 1976 with the aim of achieving a higher level of self-sufficiency 
in various agricultural products, particul arly high-quality fresh vegetables crops.2  T h e  m a i n  
greenhouse crops produced are: tomato, cucumber, peppe r, squash, eggplant, le ttuce, strawberry, bean 
and cut flowers (Table IV.2). 
8. Bahrain has at least 23 varieties of date palm  and half a million palm trees.  Before the 
development of the oil industry, Bahrain produced  sufficient dates for domestic consumption and 
export.  Nevertheless, changing food consump tion habits, as well as the increasing salinity of the 
irrigation sources, led to gradual decline in date cultivation.  A significant number of palm groves 
have been taken over by urban development. 
9. Bahrain is a net importer of agricultural prod ucts. In 2005, its agricultural trade deficit 
reached US$337.7 million (up from US$129.5 million in 1999).  Agricultural exports amounted to 
US$182.8 million (1.8% of total merchandise export s), compared with US$145 million (2.2%) in 
2003.  The majority of agricultural exports are fi sh and meat; in addition, dry onions (mainly from 
India and Iran to Saudi Arabia), cereals, ve getables, fruit, and livestock are re-exported.3 In 2005, 
agricultural products represented 5.7% of total merchandise imports (down from 9.7% in 2003).   
10. The simple average applied MFN tariff for agri cultural products (Major Division 1 of ISIC 
Revision 2) is 3.3%  (down from 4.3% in 2000).  Imports of so me agricultural raw materials and basic 
food products are duty free.  Alcoholic beverages ar e subject to the highest tariff rate (125%), while 
alternate tariffs apply to tobacco products (1 00% or specific duties, whichever is higher) 
(Chapter III(2)(iv)(a)).  
                                                      
2 See WTO (2000). 
3 Ministry of Municipal Affairs and Agriculture (2004). Bahrain WT/TPR/S/185/Rev.1 
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Table IV.2 
Vegetable crops production, 1999-05 
(Tonnes) 
Crop  1999 2000 2001 2002 2003 2004 2005 
Tomato 3,305 4,213 3,397 2,048 3,753 2,085 2,244 
Cabbage 902 782 736 677 838 563 556 
Cauliflower 414 421 314 318 169 403 217 
Lettuce 616 633 670 813 1,021 1,069 666 
Carrot 61 87 75 84 30 95 120 
Onion 1,440 1,526 1,255 1,312 1,259 1,149 1,287 
Eggplant 490 469 584 384 352 252 500 
Root Beet 47 39 30 38 21 25 26 
Turnip 72 58 41 67 32 68 57 
Potato 10 31 11 19 18 36 5 
Cucumber 497 299 293 137 105 108 70 
Cantaloupe 123 100 175 118 151 99 116 
Okra 95 89 91 102 120 105 55 
Marrow 492 436 466 499 347 423 189 
Pumpkin 116 129 186 208 125 175 192 
Other vegetables 1,608 1, 328 1,376 1,098 1,163 1,071 1,258 
Total Crop 10,288 10,640 9,700 7,922 9,504 7,726 7,558 
Area (ha) 987 991 850 815 805 714 680 
Dates 16,000 16,000 16,000 14,500 14,000 14,000 14,500 
Green fodder 20,824 21,155 23,000 22,500 22,221 22,004 35,200 
Total 47,112 47,795 48,700 44,922 45,725 43,730 57,258 
Source: Ministry of Municipal Affairs and Agriculture (2004), Annual Agricultural Statistics Bulletin , and information 
 provided by the authorities.  
(ii) Agricultural policy  
11. The Ministry of Municipal Affairs and Agriculture (MMAA) is in charge of policy 
formulation for crops and livestock. It is also r esponsible for providing technical assistance to farmers 
and enforcing sanitary and phytosanitary measures.  The Plant Health Dir ectorate, under the MMAA, 
is in charge of research in plant production, da te palm and ornamentals, permanent fruit crops, soil 
and water, animals and fodder, technology transfer , and agricultural services (production of seeds and 
seedlings, soil, water, food, and feed analysis). 
12. Bahrain's agricultural policy reflects ove rall economic policy, which emphasizes 
diversification of the production base.  Developm ent efforts in agriculture have included the 
promotion of intensified farmi ng, increasing food self-sufficiency and conservation, and further 
development of existing agricultural resources.  A two-phase plan covering 2004-15 is being 
implemented by the MMAA, in cooperation with the FAO, for sustainable agriculture development;  
it stresses the need to improve production and raise productivity in the sector.4  According to the 
authorities, a shortage of financial resources has been the main problem in achieving sustainable agriculture development.  
13. The limited availability of good quality soil and water has resulted in the concentration of 
agriculture in a relatively narrow strip of land along the north-western coast of Bahrain with isolated 
                                                     
 
4 The first phase of the plan (some  US$19.5 million) consists of a treated sewage effluent water and 
groundwater plant. Phase two (some US$12.4 million) includes: a plant protection laboratory; expansion of 
protected cultivation; flower production; strengthening of the plant tissue culture laboratory; improvement of existing land drainage system; livestock development strategy; and agricultural census. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 50 
 
 
pockets in the north central areas and along the east  coast.  One of the major challenges facing the 
sector is freshwater supply, which has declined cons iderably due to the increasing demands associated 
with the accelerating population growth.  Therefor e, programmes are being implemented to re-use 
treated wastewater for irrigation purposes. Acco rding to the authorities, an investment of 
US$143 million would allow about 3,000 ha  be irrigated by treated water. 
14. Recent water-related strategies have concentr ated mainly on increasing the supply of 
desalinated water and upgrading the efficiency of the water distribution system.  Their key aim is to restore a balance between demand for groundwater  and supply from undergro und sources.  In 1990, 
Bahrain adopted a Water Management  Strategy covering the period up to 2010.  The main objectives 
are: a comprehensive demand-management plan aimed at cutting water loses; the installation of 
meters; progressive application of higher tariffs fo r higher consumption brackets to encourage water 
conservation; public awareness campaigns; encouragem ent for the use of treated wastewater; and use 
of desalinated seawater.
5 
15. Agricultural production in Bahrain is supported through, inter alia , the provision of subsidies: 
84% of the cost of machinery services (for land preparation)6; 40% of the price of modern irrigation 
material and 50% of the price of pesticides; 40% of  the price of plastic sheet; 50% of the price of 
veterinary drugs and animal vacci nes; and 5% of the price of lo cal poultry meat (slaughtered by 
Delmon Poultry Company) (Chapter III(4)(i)).7  Loans are also provided to farmers intending to 
launch programmes to protect date palms, and other farming activities.   
16. According to the Red Sea Livestock Trade Commission8, Bahrain is free of animal diseases.  
Bahrain has applied the GCC Laws on Veterinary  Quarantine and Plant Quarantine since 2003.  
Imported, exported, and domestically produced plan ts and animals are subject to inspection by the 
Agricultural Quarantine Unit of the MMAA.  Import s of foodstuffs are inspected organolepticaly by 
the Ministry of Health to ensure that they ar e free from contaminants.  Meat and poultry products 
must also be accompanied by a health certificate fr om the country of origin, and a halal slaughter 
certificate issued by an appropriate Islamic centre in  the country of origin. All eggs must be stamped 
(Chapter III(2)(vii)(b)). Export prohibitions and r estrictions apply to some agricultural products 
(Chapter III(3)(iii)). 
(iii) Fisheries  
17. The fisheries subsector (including aquaculture) contributed 0.2% to Bahrain's GDP in 2004, 
and employed 6,852  persons (full or part-time professional fi shermen). Some 2,727 fishing boats are 
in operation.9 Per capita seafood consumption decreased fro m a peak of 27.2 kg/person/year in 1984 
to 16.7 kg/person/year in 2003-04, mainly due to fast-food replacing traditional diets.10  All fisheries 
in Bahrain are artisanal, and no large-scale industria l fisheries have been undertaken since 1 June 
1998, when Ministerial Decree No. 7/1997  banned the fish-trawl fishery vessels from operating in 
Bahraini waters.  MFN tariffs on fisheries average 1.6%, with rates ranging up to 5% (Table AIV.1). 
                                                      
5 United Nations (2004). 
6 All the machinery is owned by the Government.  Du e to the small scale exploitation, machinery is not 
used for harvesting. 
7 Ministry of Municipal Affairs and Agriculture (2004). 
8 This is an autonomous body under the African Union's Inter-African Bureau for Animal Resources 
(AU-IBAR):  its main activity is to promote exports of live animals to the Middle East. 
9 Mainly small fibreglass boats (87%), with the rest made of wood.  
10 FAO (2003). Bahrain WT/TPR/S/185/Rev.1 
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18. Bahrain is a net exporter of fishery products . In 2005, exports were worth US$12.4 million 
(6,902 tonnes), mostly to the Republic of Korea (2,200 tonnes), followed by Saudi Arabia (1,900 tonnes), while imports amounted to US$5.6 million (3,231 tonnes).  
19. Since its previous TPR, Bahrain's total landings have stabilized at around 11,000 tonnes per 
year.  The species mix has changed, with declines in  shrimp catches being offset by increases in the 
catch of finfish and crab (previously discarded).  According to the FAO, Bahrain's fisheries has 
reached maturity.  Nonetheless, the combination of  habitat destruction and over-exploitation makes 
for very limited development prospects for wild fisheries.
11   
20. The National Mariculture Centre (NAMAC) was established under the MMAA in 1993 to 
develop the subsector.  No regulations are in place for aquaculture.  According to the FAO, this sub-
sector may have some potential, but limited suitable ma rine, coastal or land-based sites may inhibit its 
growth.12 
21. The main fisheries law in Bahrain is Royal Decree No. 20/2002.  The General Directorate for 
the Protection of Marine Resources (GDPMR), under  the Public Commission for the Protection of 
Marine Resources, Environment and Wild Life, is the main agency respon sible for fisheries and 
marine resource management.  Its main objectives are to develop the subsector, protect fish and 
marine resources, introduce commercial mariculture ; and conducts surveys and produce statistical 
reports on the status of the fisheries.  The GDPMR has introduced controls to ensure supplies of fish 
to the local market; exports are permitted only if ther e are surpluses in the local market:  it checks the 
local market to ensure adequate fish supplies.  If a surplus exists, the GDPMR issues export permits 
for the excess volume.  These permits are on a per shipment basis.  Since 1987,  Bahrain has been 
applying  export restrictions on certain fish and seafood,  such as shrimp, lobster, grouper, mackerel, 
trevallies, and rabbit fish.   Fish exports are usually permitted two days a week, but a suspension of 
exports of all species has been in place, sin ce March 2007, to ensure local market supply. 
22. In 1994, the national fishing company, Fishing Project  was sold to the Bahrain and New 
Zealand Company (BANZ), a private investor.  The Bahrain Development Bank (BDB) grants 
long-term, lower rate loans to Bahraini fishermen.  According to the authorities, during 2003-05, 
BD 8.5 million were granted to three large fishing harbours, and starting from 2007, BD 7.5 million have been allocated for medium and small fishing harbours. 
23. The shrimp industry began in 1967 with the est ablishment of the Bahrain Fishing Company.  
Despite having been identified as a major export potential, shrimp fishery (mainly penaeus 
semisulcatus ) declined from 3,565 tonnes in 1996 to 1, 527 tonnes in 2004-05,  representing 11% of 
total landings (25.7% in 1998).
13  The main reasons for this reduc tion are: over fishing and limited 
compliance with regulations. Since 1998, indus trial shrimp trawling has been banned. 
24. Ministerial Decree No. 1/2007 determines the opening and closing of the shrimp season 
annually.  Bahrain increased its closed season from th ree to five months.  At the GCC level, efforts 
are being made to harmonize the shrimp closed seasons to six month annually, and an ongoing 
regional shrimp stock assessment programme is in place. 
25. All commercial shrimp vessels need to be licen sed annually by the Directorate of Fisheries 
Resources of the GDPMR.   Driftnets are banned by law, but continue to be used routinely by 
fishermen.  According to the FAO,  compliance with those regulations has been limited.  It seems that, 
                                                      
11 FAO (2003). 
12 FAO (2003). 
13 FAO online information. Viewed at: http://www.f ao.org/fi/fcp/en/BHR/body.htm [30 October 2006]. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 52 
 
 
uncontrolled recreational fishing, and illegal fishing methods are commonly used, in direct 
competition with commercial fishermen.  In 1997, a Fisheries Enforcement Committee was 
established to address the issue of illegal fishing. 
26. Environmental issues remain a major challenge fo r the fishing industry in Bahrain. Extensive 
land reclamation, dredging, and destruction of r eef areas in addition to ove r-exploitation have had a 
significant impact on fish stocks.  Recent attempts  to address these issues through the construction of 
a system of artificial reefs have not yet been assessed.14 
27. Due to SPS considerations, Bahrain is still unabl e to export fish products to the European 
Union.  In addition, Bahrain may not export shri mps to the United States because the proper turtle 
exclusion device (TED) is not used (Chapter III(2)(vii)(b)). 
(3) MINING , QUARRYING , AND ENERGY  
(i) Overview 
28. The mining and quarrying sector, basically petroleum and natural gas, accounts for almost 
12% of real GDP (down from 17.5% in 2001), and around 70%  of government income and 
merchandise export earnings; thus, the fortunes of the sector have been closely linked to the evolution 
of world oil prices. 
29. The industry's main policy goals include: self-su fficiency in fossil fuels; promoting economic 
growth, and employment of Bahrai ni nationals; diversifying the economic base (e.g. aluminium and 
petrochemicals); strengthening the participation of the private sector through privatization; protecting 
the environment through, inter alia , increased consumption of natural gas; and contributing to the 
stability of the world oil market.   
30. In 2005, the National Oil and Gas Authority (NOGA) replaced the Supreme Oil Council as 
the implementing authority for petroleum and gas re lated issues;  it represents the State in regional 
and international organizations, notably the Orga nization of Arab Petroleum Exporting Countries 
(OAPEC).15  NOGA's main responsibilities are: proposing and implementing the general policy on oil 
and gas; conducting studies and research on oil and gas resources, and on techniques that will prolong 
the  life of the reserves; determining the appropriate  pricing policies; and cons idering strategic options 
to meet Bahrain's oil and gas requirements, including the incorporation of a holding company to 
acquire the Government's shareholdings.16  In 2005, a Technical Comm ittee was formed in NOGA to 
negotiate the importation of natural gas.17  A Bahraini-Qatari Committee was also formed in 2005 to 
negotiate the supply of Qatari gas to Bahrain. 
31. NOGA also regulates and oversees the various oi l/gas-related companies, notably: Bahrain 
Petroleum Company (BAPCO), Bahrain National Gas Company (BANAGAS), Gulf Petrochemical 
Industries Company (GPIC), and Bahrain Aviation Fuelling Company (BAFCO).   
32. BAPCO, a wholly state-owned company, was incorporated on 29 December 1999 upon the 
merger of the Bahrain National Oil Company (BANOCO)18 and the previous Bahrain Petroleum 
Company. BAPCO's main activities are: oil and gas exploration and drilling; field production; 
refining of crude oil; and storage and distribution (i ncluding shipping and ma rketing) of finished 
                                                      
14 FAO (2003). 
15 Royal Decree No. 63/2005. 
16 NOGA (2006). 
17 Ministerial Order No. 1/2005. 
18 For more information on BANOCO, see WTO (2000). Bahrain WT/TPR/S/185/Rev.1 
 Page 53 
 
 
products.  Geological and geophysical studies are bei ng carried out to evaluate hydrocarbon potential 
in offshore blocks. BAPCO is the exclusive agen t for the Government in the conduct of oil 
exploration, production, and expo rtation. BAPCO also has a monopoly over production of associated 
and non-associated gas. Distribution, storage, and importation of oil/gas products are open to 
competition (local and foreign).  Refi ning of petroleum products is also de jure  open to competition, 
but a de facto  monopoly is in place; BAPCO refines the total crude produced in Bahrain.19  Local 
consumption of refined products is  subsidized by the Government. 
33. Created in 1979, BANAGAS is owned jointly by  the Government of Bahrain (75%), Caltex 
(12.5%), and the Arab Petroleum Inve stment Corporation (APICORP) (12.5%).20  Its key objectives 
are: maximizing the use of gas resources by pr ocessing associated gas into marketable products 
(mainly propane, butane, and naphtha); enhancing th e supply of residue gas for local industry use; and 
creating more employment and training opportunities for locals.21 
34. GPIC was established in 1979, as a joint-ventur e equally owned by Bahrain, Saudi Arabia 
(Saudi Basic Industries Corporation), and Kuwait (Petrochemical Industries Company), with the main 
objective of using Bahrain natural gas in petrochemi cal industries.  Its mains products are urea (42% 
of GPIC's total production), amm onia (30%), and methanol (28%).22 
35. BAFCO was established in 1985 to provide avia tion fuel at Bahrain International Airport 
owned by BAPCO (60%), Caltex23 (27%), and British Petroleum (BP) (13%).  However, BAPCO, 
Caltex and BP each market and sell fuel to the individual airlines in separate sales operations.24 
36. Bahrain joined the informal Independent Petroleum Exporting Countries (IPEC) in 1993.25   
37. Corporate income tax is levied at 46% on petr oleum and gas companies.  The marketing of 
petroleum products and of Bahrain's share of cr ude oil from the Abu Saafa field, locally and 
internationally, is carried out by BAPCO. 
38. MFN tariffs on mining and quarrying products average 4.9% and range from zero to 5% 
(Table AIV.1).  The customs tariff on electricity is 5%. 
(ii) Petroleum 
39. Bahrain's crude oil is produced in an onshor e oilfield, located in Awali (19.6% of total 
production in 2006), and the offshore Abu Saafa fi eld shared with Saudi Arabia (80.4% of 
production).26  Bahrain's crude oil production has remained  relatively stable over the past few years 
and reached about 67 million barrels in 2006 ( 66 million barrels in 2000 (Table IV.3)).   
                                                      
19 In 2003, BAPCO received ISO 9 001:2000 certification for its adhe rence to the highest quality 
standards from the British Standards Institute (BSI).  In 2005, a US$140 million project was launched to enhance BAPCO's environmental standards in line with ISO 14001. 
20 APICORP is an OAPEC established entity. 
21 In 2003, BANAGAS received the standard BS EN  ISO 9001:2000 certifica tion, for its quality 
management system, from the BSI. In 2006, 93% of BANAGAS workforce (around 370 persons) was Bahraini; 
it is the highest employer of locals amongst the country's major industrial companies. 
22 NOGA (2005). 
23 Caltex is a Chevron company. Until 2002, Caltex was responsible for handling all BANAGAS sales 
and marketing activities.  
24 NOGA (2006). 
25 Other IPEC members include Canada, China (P. R.), Mexico, Norway, the United Kingdom, and the 
Russian Federation. 
26 The Abu Saafa field is managed and operated by Saudi Arabia;  however, under an agreement signed 
by the two countries in 1965, output of the field was split evenly between Bahrain and Saudi Arabia. The share 
of Bahrain in the Abu Saafa oil field amounted to 53,823 million barrels in 2006, at a daily rate of 147,461 barrels. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 54 
 
 
40. Bahrain is also a significant importer of crude petroleum, which, along with locally produced 
crude oil from the Awali field, is destined mainly fo r its refinery; crude oil from the Abu Saafa field is 
exported.27  Imports of crude oil from Saudi Arabia amounted to almost 224,000  barrels per day (b/d)  
in 2006  (against 225,879 b/d in 1999).  In 2006, Bahr ain's refining capacity was 258,709 b/d, and was 
based on crude oil imported from the region, especia lly Saudi Arabia, by undersea pipeline (only one-
sixth was obtained from wells in Bahrain).28  The main export markets are Japan, Africa, and other 
GCC countries.  Major upgrades to the production capac ity and infrastructure have been completed in 
BAPCO's refinery.  The major refined products are diesel, gas oil, fuel oil,  kerosene, naphta, and 
gasoline. 
41. In 2006, around 88 million barrels of petroleum pr oducts were exported;  diesel accounted for 
38.4% (Table IV.3), two thirds of which were des tined to Africa; gasoline and fuel oil accounted for 
26.5%, mainly to GCC countries. In 2006, gasolin e and diesel consumption in Bahrain reached 
4.3 million and 2.4 million barrels, respectively.  Lo cal sales of petroleum products have increased 
during the last few years due mainly to major road  construction, land reclam ation activities, and the 
higher number of vehicles arriving from neighbouring countries. 
42. Government policy in the petroleum sector h as focused on consolidating the oil industry, 
including the further developing petroleum resources, expanding seismographic surveys, and enhancing developmental drilling. Foreign investme nt in petroleum extrac tion is permitted through 
exploration and production-sharing agreements with th e Government of Bahrain.  In this regard, the 
Government has signed exploration and production-sh aring agreements for oil and gas with several 
foreign petroleum companies, including Petronas (Malaysia) and Chevron-Texaco. In addition, 
NOGA held meeting with representatives of several international petroleum companies (e.g. Shell, 
Total, Maersk Oil and Gas, Petroleum India Inte rnational, and Petro-Canada) to encourage their 
participation in oil and gas offshore exploration programmes. 
43. Private investment in refining activities is also permitted.  The national refinery has also kept 
abreast of the newest technology to ensure optimal  operational performance and quality;  a number of 
projects are under way.  The construction of a ne w unit to produce low sulphur diesel (LSD) was 
awarded, in 2005, to the Japanese Oil Engineering Company, to bring diesel products into compliance with new emission regulations in the United States and the EU.  The contract was estimated at US$696.7 million, and is scheduled to be operational in mid 2007.  According to the authorities, the 
LSD project will contribute US$200 million annually to  Bahrain's revenue, and is the main element of 
BAPCO's strategic investment programme.
29  Once this project is completed, BAPCO will have the 
flexibility to produce gasoil, kerosen e, and liquefied petroleum gas. 
44. BAPCO's strategic investment programme (US$1. 3 billion), under which the refinery is being 
modernized, includes: the low sulphur diesel Production project (US$696.7 million); a refinery gas desulphurization (about US$140 million), which started in September 2005 and is scheduled for 
completion by June 2008, and incorporates a sulphur  recovery unit, liquid sulphur degassing, and a 
tail gas treatment unit; a LPG (commercial propane and butane) recovery project (US$3.4 million) 
was completed in June 2005
30; the lube oil manufacturing plant (close to US$300 million); waste 
                                                      
27 Abu Saafa petroleum has a higher sulphur content than output from the Awali oilfield.  
28 The A-B pipeline extends 27 km over land and a further 27 km under the sea before reaching the 
north-west of Bahrain. 
29 The goal is to reduce sulphur concentrations from an average of 0.7% currently to 0.001%. 
30 Gases from the refinery, previo usly used as furnace fuel, are now transferred to BANAGAS to 
recover butane, propane, and naphtha.   Bahrain WT/TPR/S/185/Rev.1 
 Page 55 
 
 
water treatment (US$100.2 million); the sulphur project (US$37 million); and the A-B pipeline new 
route (US$76 million).31 
Table IV.3 
Production, consumption, and exports of  oil, gas, and refined products, 2000-06 
 2000 2001 2002 2003 2004 2005 2006 
P r o d u c t i o n         
Crude oil  ('000 barrels)   66,021.0 66,582.0 67,885.0 68,866.0 68,585.0 68,096.0 66,908.0 
Abu Saafa field 52,255.0 52,926.0 54,085.0 55,146.0 54,938.0 54,748.0 53,823.0 
Bahrain field 13,766.0 13,656.0 13,800.0 13,720.0 13,647.0 13,348.0 13,085.0 
Natural and associated gas 
(million cubic feet)  393,369.0 424,358.0 429,169.0 434,537.0 428,375.0 470,413.0 487,932.0 
Arab gas 9,670.0 9,280.0 9,328.0 7,278.0 6,474.0 .. .. 
Associated gas 95,323.0 96,464.0 96,176.0 94,739.0 103,683.0 107,447.0 106,206.0 
Khuff gas 316,844.0 327,894.0 332,994.0 339,798.0 324,692.0 362,966.0 381,726.0 
Refined products  
from Saudi Arabiaa 
Bahrain field  94.0 
80.2 13.8 87.6 
74.0 13.6 90.8 
76.9 13.9 92.9 
79.2 13.7 93.0 
79.4 13.6 97.3 
83.9 13.4 94.4 
81.3 13.1 
Crude run (MBPCD)b 258.0 240.0 249.0 255.0 255.0 266.4 258.7 
(million barrels)  143.8 141.1 .. .. 148.1 152.2 .. 
Aviation fuel (jet A-1)        
production ('000 U.S. barrels) 2,804.0 2,998.0 3,279.0 3,663.0 4,057.0 4.332.0 4,660.0 
aircraft refuelled 26,541.0 27,037.0 27,423.0 30,581.0 33,371.0 .. .. 
Sales local consumption   
('000 U.S. barrels)  4,694.0 4,884.0 5,416.0 5,956.0 6,506.0 7,448.0 7,559.0 
asphalt 82.0 81.0 110.0 204.0 257.0 273.0 254.0 
diesel 972.0 984.0 1,255.0 1,439.0 1,677.0 2,339.0 2,375.0 
jayed 1,720.0 1,832.0 1,883.0 1,940.0 1,980.0 2,029.0 2,058.0 
kerosene 226.0 242.0 243.0 264.0 280.0 294.0 173.0 
LPG 342.0 352.0 371.0 392.0 417.0 441.0 460.0 
mumtaz 1,352.0 1,393.0 1,554.0 1,717.0 1,895.0 2,072.0 2,239.0 
Exports ('000 U.S. barrels)        
Petroleum products 89,106.0 85,484.0 87,774.0 89,462.0 87,982.0 90,951.0 88,045.0 
asphalt 961.0 1,788.0 1,120.0 1,069.0 2,119.0 1,623.0 1,953.0 
butane .. .. .. .. .. 106.0 178.0 
diesel 30,406.0 29,980.0 30,935.0 30,615.0 30,954.0 32,485.0 33,809.0 
feed stock .. 308.0 .. 354.0 1,102.0 .. .. 
fuel oil 20,544.0 17,872.0 19,126.0 20,254.0 18,038.0 18,618.0 18,834.0 
gasoline 4,048.0 3,316.0 2,789.0 3,566.0 2,386.0 3,601.0 3,308.0 
jet fuel 14,924.0 15,412.0 15,476.0 15,321.0 16,985.0 14,731.0 14,350.0 
kerosene 3,030.0 2,736.0 2,905.0 4,138.0 2,620.0 5,703.0 703.0 
naphta 14,954.0 13,803.0 15,195.0 13,915.0 13,566.0 13,732.0 11,649.0 
propane .. .. .. .. .. 118.0 189.0 
sulphur 239.0 269.0 228.0 230.0 212.0 234.0 233.0 
Petrochemical 7,464.0 8,149.0 8,439.0 7,559.0 7,737.0 7,464.0 8,233.0 
Liquid gas 3,579.0 3,809.0 3,699.0 3,669.0 3,504.0 3,973.0 3,506.0 
.. Not available. 
a Imported through the A-B pipeline.  
b One thousand barrels per calendar day. 
Source: BAPCO (2004), Annual Review 2004 , BAPCO (2005) , More than oil- Annual Review 2005; NOGA (2006) , Oil 
 and Gas – Facts and Figures ; and information provided by the authorities . 
                                                      
31 BAPCO (2005), and information provided by the authorities. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 56 
 
 
(iii) Natural gas 
45. BANAGAS operates a gas liquefaction plant, with a capacity of 280 million standard cubic 
feet of gas per day (mscfd), two and a half times the original design capacity following a series of expansion projects.
32  Table IV.4 shows BANAGAS' production and exports of associated gas liquids 
(propane, butane, and naphta) during 1999-06.  A ll propane and butane produ ction is exported; the 
naphtha is delivered to the BAPCO refine ry to be processed and also exported. 
Table IV.4 
BANAGAS gas production and exports, 1999-06 
('000 tonnes unless otherwise specified) 
 1999 2000 2001 2002 2003 2004 2005 2006 
Production         
 Propane 92,000 85,000 85,000 89,000 82,000 83,000 86,000 98,000 
 Butane 93,000 88,000 89,000 89,000 85,000 90,000 94,000 107,000 
 Naphtha 179,000 173,000 170,000 171,000 175,000 190,000 190,000 192,000 
 Feed gas a 96,000 95,000 96,000 96,000 95,000 104,000 107,000 108,000 
Exports          
 Propane 99,000 78,000 92,000 83,000 78,000 71,000 105,000 87,000 
 Butane 105,000 81,000 94,000 90,000 86,000 85,000 107,000 101,000 
 Naphtha 108,000 176,000 174,000 175,000 173,000 181,000 183,000 180,000 
a Million standard cubic feet. 
Source: BANAGAS (undated), Serving Bahrain for 25 years , and information provided by the authorities. 
46. Bahrain's natural gas production is consumed locally by the power generation subsector and 
by industrial companies; it is also used in o il-well re-injection operations , intended to maintain 
production.  In 2006, the electricity generating s ubsector took around 30% of gas output, Aluminium 
Bahrain (ALBA) some 27%, and the rest was distributed to other industries.  BAPCO itself used 
about 18% for gas injection to improve  productivity in oilfield operations.33  
47. As in the petroleum subsector, the Government  is seeking to increase production by attracting 
foreign investment into gas exploration, and tec hnical studies are being conducted by various foreign 
companies to evaluate the potential for offshore expl oration.  Bahrain has also been exploring the 
possibility, along with other GCC countries, of crea ting a network of natural gas pipelines throughout 
the GCC countries. 
(iv) Electricity 
48. The Ministry of Electricity and Water (MEW) is responsible for electricity generation, 
transmission, and distribution in Bahrain. 
49. Bahrain's main power stations are: the Rifpa Power Station (gas/diesel) (43.4% of total 
capacity); Hidd Power and Water Station (gas) (43%); the Sitra Power and Water Station (gas/diesel) 
(7.8%); the Manama Power Station (gas) (3.9%); and the Muharraq Power Station (diesel) (1.9%).  
About 47% of total capacity comes from gas fuel turb ines, followed by dual fuel gas turbines (45%), 
steam turbines (6%), and diesel  fuel gas turbines (2%).34  ALBA generates its own electricity for its 
energy needs, and meets 13% of Bahrain's energy requirements. 
                                                      
32 The initial design capacity was 110 million cubic feet per day, for the production of 2,900 b/d of 
propane, 2,400 b/d of butane and 3,600 b/d of naphtha. 
33 NOGA (2005). 
34 Ministry of Electricity and Water (2003). Bahrain WT/TPR/S/185/Rev.1 
 Page 57 
 
 
50. In 2006, Bahrain's energy consumption reach ed 9,101 million kWh (an increase of 65% over 
2000).35  Domestic users consume around half of total electricity in Bahrain, followed by commercial 
users (about 30%);  the remainder are industrial user s.  There are four consumer tariff categories 
(Table IV.5), with a subsidized tariff in place fo r the industrial sector (since August 1990) and private 
hospitals (since November 2002) on the basis of a Ministry of Industry and Commerce regulation.  
Electricity prices are set by the Cabinet, based on a MEW proposal. 
Table IV.5 
Electricity tariffs, 2007 
Tariff category  Range (kWh) Tariff (fils)a 
Domestic residential tariff 1-3,000  
3,001-5,000  
Above 5,001 3 
9 
16 
Domestic non-residential tariffb 1-2,000  
2,001-5,000  
Above 5,001 6 
12 
16 
Industrial tariff All units 16 
Subsidized industrial tariff  
(for industrial sector and private hospitals only) c All units 12 
a 1BD=1,000 fils. 
b Applicable when the monthly average consump tion for July to October is 2,200 kWh or less. 
c Applicable in accordance with Ministry of  Industry and Commerce rules and regulations. 
Source: Information provided by the authorities.  
51. Since 1985, overall production costs have been higher than average sales prices, the gap 
ranging from 6.7 fils/kWh in 1985 to 2 fils/kWh in 2003.36  Total production costs increased by about 
70% during 1985-03:  costs are made  up of generation (36%), distri bution (28%), transmission (23%), 
and import from ALBA (13%). 
52. Since 2002, several major projects to enhance th e electricity network and upgrade generation 
capacity have being introduced, such as: the inst allation of three 140 MW gas turbine at the Hidd 
power and water station; the rehabilitation of the first and second phases of the Riffa power station 
(66 KV and 220 KV, respectively); and improvement of  the electricity transmission network.  The 
rehabilitation of the first phase of production units at  Sitra power and water station has already been 
concluded.   In 2004, Tractabel of Belgium won the US$500 million contract to build the first private 
power station in Bahrain.37 
(4) MANUFACTURING  
(i) Main features 
53. Manufacturing accounted for 13.3% of Bahrain's real GDP in 2005 (up from 11.9% in 2001).  
The sector is based mainly on energy-intensive indu stries, notably aluminium, metal industries, and 
chemicals. Aluminium and aluminium products contributed almost 11% to Bahrain's total 
merchandise exports in 2005, followed by chemic als (2.7%), machinery and transport equipment 
                                                      
35 In 2006, energy consumption was distributed as follows: 5,098 million kWh domestic; 2,583 million 
kWh commercial; 1,378 million kWh industrial; and 43 million kWh agricultural. 
36 The smallest gap was registered in 1999, when it wa s 0.6 fils/kWh.  The fils is a subdivision of the 
currency: 1BD=1,000 fils . 
37 Ministry of Oil (2004). WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 58 
 
 
(1.5%), and textiles and clothing (1.1%).38 The importance of food processing39, and shipbuilding and 
repair in Bahrain's manufacturing sector has increased over the last few years.40  
54. In 2006, Bahrain imported mainly non-ferrous  metals (57.2%), machinery and equipment 
(16.4%), chemicals (6.4%), food products (2.8%), and textiles and clothing (2.3%).41  Engineering, 
metal, food and chemical industries form up to 70%  of the total number of small and medium-sized 
enterprises (SMEs) in Bahrain.42 
(ii) Policy framework  
55. Bahrain's main long-term objectives for the manufacturing sector include increasing its 
contribution to GDP to help diversify the economy  away from crude oil and natural gas; developing 
SMEs; and creating more employ ment for Bahraini nationals.   Bahrain's Economic Development 
Board  (EDB)  formulates and oversees the overall economic de velopment strategy while the MIC is 
the implementing body. 
56. In 2002, the Bahrain Business Incubator Centre  (BBIC) was created as a promotion and 
development institution, mainly for SMEs.  BBIC' s main objectives are: creating new businesses; 
improving the performance and efficiency of SMEs; supporting innovation; encouraging 
entrepreneurship; promoting the development of cl oser links between larger manufacturing firms and 
small enterprises; and helping new business grow faster, thus creating more jobs. 
57. According to the authorities, the main areas  for potential investment in manufacturing 
include: downstream activities from existing primar y aluminium, oil, gas and steel industries, 
especially petrochemicals, plastics, engineering, and ship repair services;  component manufacture for 
finished goods; and food processing, packaging, a nd distribution; local assembly;  high technology 
production processes;  components for industrial,  drilling, refinery and mining applications; 
pharmaceuticals; transportation equipment a nd systems;  and textiles and clothing.43 
58. According to the authorities, 100% foreign ownership is allowed in: industrial projects; 
industrial support service centres, such as large wo rkshops providing specialized maintenance, 
reconditioning, and repairing, as well as the fabri cation and galvanization of steel; maintenance of 
sophisticated industrial instruments; and highly specialized scientific laboratories.44 
                                                      
38 In 2004, Bahrain's textiles and clothing industry comprised 22 garment factories and provided 
employment to 11,000 people.  It is entirely export oriented, mainly to the United States, Canada, and the EU.  Tax exemptions on imports of equipment and raw material s are in place. As from 20 02, the export fees were 
eliminated. 
39 The food processing industry, with US$85 million invested, has 112 factories and employs 
2,582 persons (45% Bahrainis). It is based on conversion processes, such as drying, cooling,  freezing, biological 
and chemical processing, and preserving of agricultural and animal products. 
40 The Arab Shipbuilding and Repair Yard Company (ASRY), founded in 1974 with an authorized 
capital of US$340 million, is the main company in the subsector. The Government of Bahrain holds 18.5% of 
the shares; the remaining shares are owned by Kuwait,  Qatar, Saudi Arabia, UAE, Iraq, and Libya. ASRY 
carries out all operations related to shipbuilding, repairs, and maintenance for oil tankers, ships, and other 
marine transport for the carriage of  hydrocarbons. It also repairs, inter alia , industrial and el ectrical equipment 
and apparatus, and marine high-pressure tanks. 
41 BMA (2006). 
42 Ministry of Industry and Commerce (2006). 
43 Ministry of Industry and Commerce (2006). 
44 Ministry of Industry and Commerce (undated). Bahrain WT/TPR/S/185/Rev.1 
 Page 59 
 
 
59. The manufacturing sector is being promoted pa rtly through various investment incentives, 
such as tariff exemptions for import of machin es, equipment and raw material; a reduction in 
electricity tariffs from 16 fils per kWh to 12 fils per kWh for investors in the sector; and a five-year 
grace period on rent for land in the industrial zon es.  These incentives are the same for local and 
foreign investors. In addition, other general incen tives for all investors include short- and long-term 
loans with low interest rates from the Bahrain De velopment Bank (BDB) for financing capital assets, 
and a core portion of working capital for small and medium-sized industrial projects; low rents for 
land in government industrial areas; low energy tari ffs for production; and flexible regulations and 
procedures to import workforce (Chapter III(4)(i)).45 
60. MFN customs tariffs on manufactured goods average 5.4% (down from 8% in 2000);  they 
range up to 125% on alcoholic beverages (Chart IV.1).  
(iii) Aluminium 
61. Aluminium remains the most important manufacturing industry and the largest source of 
exports in the sector.  Bahrain is one of the largest producers of aluminium in the GCC.  The strategy 
for development of the downstream aluminium i ndustry is based on establishing: aluminium-based 
industries, to produce goods that are currently imported and used by industries in Bahrain and in the 
region; new semis operations to e xpand the range of semis being trad ed internationally (including the 
raw materials for new downstream industries); new downstream industries based on existing/new 
semis produced in Bahrain; and priority for new downstream products used for the transportation and 
packaging sectors as these are the fastest growing sectors and have the highest long-term potential.46 
62. The Ministry of Finance, the MIC, and the EDB, with the cooperation of UNIDO, have 
launched the Invest Aluminium Bahrain Programme , aiming to: capitalize on the global potential of 
Bahrain in developing aluminium downstream industries; create more job opportunities for Bahrainis; 
enhance export earnings; and achieve greater value added. 
63. The main aluminium company in Bahrain is  ALBA, one of the largest in the world.47  It has 
steadily increased its smelter production capac ity to 830,000 tonnes per year (t/y).48  ALBA has one of 
the highest Bahrainization levels at 87% of its workforce (Chapter I(4)).  About 60% of its output is 
sold to various downstream aluminium companies located in Bahrain and other GCC countries; the 
remaining 40% is sold to Asia, mainly Japan.  ALBA has its own power plant on site (1,500 MW), 
which supplies all its energy needs, and provides 13% of Bahrain's energy requirements.  In 2005, a new reduction line (line 5), the longest in the world,  was built, as part of a US$1.7 billion expansion 
project that includes the construction of a new power station, and other facilities. A 450,000 tonnes 
calcined coke plant and water desalination plant is  also in operation in its marine terminal.
49 
 
                                                      
45 Legislative Decree No. 11/1985 on the protection and support of national industry, 5 May 1985; and 
Law No. 3/2004 regarding the ratification of the GCC Supreme Council resolution on the exemption of industrial installations from customs duties levied on industrial inputs, 29 March 2004. 
46 UNIDO (undated). 
47  In 2000, ALBA was accredited with the Environmental Management System standard ISO 14001. 
48 ALBA is owned by the Government of Bahrain (77% of total shares);  the Saudi Public Investment 
Fund (20%), and Breton Investments (3%). 
49 Calcined coke is a raw material used to make carbon anodes, which play an  essential part in the 
electrolytic process of producing aluminium. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 60 
 
 
0.020.040.060.080.0100.0120.0140.0
111 122 210 230311313 321 323 331341351353 355 361369372382384 390
WTO Secretariat calculations, based on data provided by the Bahraini authorities.International Standard Industrial Classification, Revision 2
Source :111 
121 122130210220230390311312313314321322323
324
331332
341
342Description
Agricultural and livestock production
ForestryLoggingFishingCoal miningCrude petroleum and natural gas productionMetal ore miningOther miningFood productionOther food products and animal feedsBeveragesTobacco manufacturingTextilesManufacture of wearing apparel, except footwearLeather products, except footwear and wearing apparelFootwear, except vulcanized rubber or plastic footwearWood and wood products, except furnitureManufacture of furniture and fixtures, except primarily of metalPaper and paper productsPrinting, publishing and allied industriesDescription
Industrial chemicals
Other chemicals, including pharmaceuticalPetroleum refineriesManufacture of miscellaneous petroleum and coalproductsManufacture of rubber products n.e.s.Manufacture of plastic products n.e.s.Pottery, china and earthenwareManufacture of glass and glass productsOther non-metallic mineral productsIron and steel basic industriesNon-ferrous metal basic industriesFabricated metal products, except machinery and equipmentNon-electrical machinery including computersElectrical machinery apparatus, appliances and suppliesTransport equipmentProfessional and scientific equipmentOther manufacturing industriesElectrical energy351
352353354
355
356361362369371372381
382
383
384
385390410Chart IV.1
Bahrain's MFN tariff by ISIC classification, 2007
Per cent
AverageMaximum
Minimum
 
 Bahrain WT/TPR/S/185/Rev.1 
 Page 61 
 
 
64. Other aluminium companies include:  Bahrain Aluminium Extrusion Company (BALEXCO), 
privatized recently;  the Gulf Aluminium Ro lling Mill Company (GARMCO), a GCC joint-venture 
since 1986 (Bahrain holds 38% of the shares);  Al uwheel, a joint-venture (Bahraini investors hold 
51% of the shares) which exports alloy wheels ma inly to European vehicle manufacturers; and 
Bahrain Alloy Manufacturing Company (BAMCO),  a joint venture established in 1996.  
65. MFN tariffs on aluminium and aluminium products average  6.9%, with rates ranging up to 
20%. 
(5) SERVICES  
(i) Overview 
66. Services account for almost 75% of Bahrai n's real GDP, and employ over 50% of the 
workforce.  In 2005, the largest subsector was financial services (27.6% of total GDP), followed by 
government services (14.5%), trade (12.9%), a nd transport and communications services (8.6%).50 A 
number of companies in the services sector have  been privatized over the past ten years 
(Chapter III(4)(iii)).  
67. Services is a crucial component of Bahrain's overall policy of economic diversification, and 
the Government is promoting the development of the sector.  Full foreign owne rship is allowed in the 
majority of services subsectors, but is still not a llowed or is restricted in certain subsectors 
(Chapter II(5)). 
68. Under the General Agreement on Trade in Serv ices, Bahrain scheduled commitments only in 
some financial services (Table AIV.2).51  Bahrain made no commitments on the movement of natural 
persons, although it benefits from the presence of a significant foreign working population, estimated 
at over 70% of the labour force.52  Presence of self-employed foreign natural persons is not allowed.  
In the 1997 negotiations leading to the Fifth Prot ocol to the GATS (WTO Agreement on Financial 
Services), Bahrain expanded its offer to include banking and other financial services.  Although some 
subsectors, such as tourism and transport, are not included in Bahrain's Schedule of specific 
commitments, they are significantly liberalized.  Bahrain has no MFN exemptions under Article II of 
the GATS.  Bahrain tabled its revised conditi onal offer in the ongoing services negotiations in 
June 2005.53 
(ii) Financial services 
(a) Overview 
69. Since its last TPR, Bahrain has emerged as a major regional financial centre with 
376 financial institutions: 206 banks (25 retail, 86 wholesale, 2 specialized, 34 representative offices, 
27 investment business firms, 18 money changers, 4 financing companies, 9 providers of ancillary 
services, and 1 broking company); 156 insurance and insurance-related firms; and 14 stockbrokers.54  
In 2006, the subsector employed 8,219 persons, and contributed 27.6% to Bahrain's real GDP in 2005 
(up from 16.4% in 2001).  
                                                      
50 Central Informatics Organisation (2006). 
51 WTO document S/DCS/W/BHR, 24 January 2003. 
52 Housing, social programmes, and some aspects of free health care ar e limited to Bahraini citizens.  
53 WTO documents TN/S/O/BHR/Rev.1, 2 June 2005, and TN/S/O/BHR/Rev.1/Corr.1, 10 June 2005. 
54 Central Bank of Bahrain online information.  Viewed at: http://www.cbb.gov.bh/cmsrule/media/pdf/ 
statistics/bulletin/January2007.pdf [4 April 2007]. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 62 
 
 
70. Bahrain's financial subsector is robust.55  Regional geo-political events could be a source of 
disturbance, yet the Bahraini financial system has su ccessfully weathered such events in the past.  Its 
advantages in the subsector include: its geographical  location; its reputation for being well-regulated; 
its innovation in developing all forms of Islamic fi nance and establishing ins titutions to promote the 
deepening of Islamic financial markets; the availab ility of a well-qualified workforce of nationals and 
expatriates; and reasonable operating costs.   The level of observance of financial policy standards is 
generally high.  According to the authorities, the pr ovisions of the Basel II capital accord are going to 
be introduced in stages. 
71. In 2002, supervisory responsib ility for the insurance subsector was transferred to the Bahrain 
Monetary Agency (BMA) from the MIC, and securi ties markets oversight was moved to the BMA 
from the Bahrain Stock Exchange (BSE). In add ition, the BMA assumed responsibility for granting 
all financial institution licences, and for regulati ng the issuance of securities in Bahrain. In 
March 2005, the BMA and the BSE agreed on a Me morandum of Understanding (MOU) in order to 
clarify their respective roles and responsibilities.56 
72. On 1 July 2006, the BMA issued a new inte grated licensing framework for all financial 
institutions.57  The licensing categories are now referred to  as "regulated activity", rather than 
"institution type".  According to the authorities, th is new categorization mak es the framework flexible 
and inclusive, and able to respond to market cha nges.  The five new basi c licensee categories are: 
conventional banks; Islamic banks; insurance; i nvestment business; and specialized licences.  
73. In July 2006, the subcategor y of full commercial banks (F CB) was replaced by retail banks, 
while offshore banking units (OBUs) and investment  banks (IBs) were merged into wholesale bank. 
Under this new framework, wholesale banks are now allowed to undertake individual onshore 
transactions above US$18.5 million in deposit ta king and the provision of credit, and above 
US$250,000 for investment business transactions, incl uding the sale of  investment products.  The 
existing banks have been given a transition period to adjust.58 
74. Decree No. 64/2006 (Central Bank of Bahrain (C BB) and Financial Institution Law) enacted 
on 7 September 2006, created the CBB, which repl aced the BMA as regulator of all financial 
services.59 The CBB approves all off-market transactions , including exempted transactions.  A new 
Securities and Exchange Regulation (SER) is to be  issued under the CBB Law.  According to the 
authorities, the CBB and Financial Institution Law m odernizes and amalgamates the various laws that 
previously governed the financial services into a single, comprehensive law, and reinforces the 
autonomy of the regulator. 
(b) Banking 75. Positive macroeconomic conditions have, inter alia , encouraged the rapid expansion of 
Bahrain's banking system over the last few years.   The number of banks has been growing steadily, 
with the participation of many small players. However, assets are still concentrated among a few 
                                                     
 
55 IMF (2006). 
56 The BMA became a member of the International Organization of Securities Commissions (IOSCO) 
in 1990. 
57 The IMF provided technical assistan ce in developing the framework.  
58 "The Business of Banking", Banker Middle East, July 2006. Viewed at:  http://www.bankerme.com/ 
bme/2006/jul/bma.asp [5 October 2006]. 
59 The CBB was established with an authorized ca pital of BD 500 million (US$1.3 billion). The 
Governor of the CBB is appointed for a five-year te rm, renewable, and holds Ministerial rank. Decree 
No. 64/2006 replaced both the BMA La w of 1973 and the Legislative Decr ee No. 17/1987 (the Insurance Law). Bahrain WT/TPR/S/185/Rev.1 
 Page 63 
 
 
players, with the top seven wholesale banks acc ounting for more than 75% of total assets. The 
majority of wholesale and retail banks  are foreign branches, and foreign investors appear to have 
major equity ownership in local banks.  The Government of Bahrain fully owns the Bahrain 
Development Bank (BDB) and the Housing Bank, and holds 49% of the equity of the National Bank 
of Bahrain.60  According to the authorities, no banking activ ities are monopolies, by law or in practice. 
Some foreign governments own shares in certain institutions. 
76. Banks in Bahrain are well-capitalized, and have  registered strong profitability in recent 
years.61  At end-December 2006, the total assets of  banks operating in and from Bahrain totalled 
US$187.4 billion (up from US$106.4 billion in 2000) (Table IV.6). 62 
Table IV.6 
Structure of the banking system, December 2006 
(US$ million)  
 Number of institutions Total assets Asse t share in group Assets as per cent of 
GDPa 
Retail banks 25 23,091.6 100.0 172.6 
 locally 10 15,532.0 67.3 116.1 
 branch 15 7,559.6 32.7 56.5 
 of which Islamic 6 4,798.7 20.8 35.9 
 locally 5 4,699.2 20.4 35.1 
 branch 1 99.5 0.4 0.7 
Wholesale banks 86 164,263.2 100.0 1,227.6 
 locally 43 64,424.6 39.2 481.5 
 branch 43 99,838.6 60.8 746.1 
 of which Islamic 18 7,409.6 4.5 55.4 
 locally 16 7,253.2 4.4 54.2 
 branch 2 156.5 0.1 1.2 
a 2005 GDP. 
Source: Central Bank of Bahrain.  
77. Licensing procedures are the same for Bahraini  and foreign-owned banks.  Investors must 
apply to the CBB for a licence.  The CBB may atta ch terms and conditions it judges appropriate for 
the granting of a licence.  The criteria and proce dures for licensing are under regular review by the 
CBB.  Licences are granted by the CBB with the appr oval of the Chairman of the CBB's Board of 
Directors. 
78. Banks may be universal or specialized; they must not operate insurance companies or 
branches of insurance, although they may engage in  stockbroking through subsidiaries.  There is no 
requirement for domestic companies to employ sp ecified banking companies for certain services. 
79. Foreign ownership of locally incorporated re tail and wholesale banks is allowed up to 100% 
(exception to Article 345 of the Commercial Comp any Law) (Chapter II(5)). There are no national 
management requirements, including for board memb ers and senior executives, but a "fit and proper 
test" is applied on an ongoing basis.  The "fit and pr oper test", according to the authorities, refers to 
the experience, integrity, and suitability of the person concerned to hold a senior position in a bank; 
                                                      
60 BDB, Bahrain's primary financial development ins titution, was established in 1992 to encourage and 
develop investment in the industrial, commercial, and bu siness service sectors.  Nevertheless, some commercial 
activities (e.g. purchase of real estate; repayment or refinancing of debt obligations; purchase of consumer 
goods; and financing of wholesale and/or retail operations) are not eligible.   
61 Bahrain has been ranked in Category B of the Fitch Banking System Indicator (BSI), on a par with 
developed countries.  
62 Central Bank of Bahrain online information.  Vi ewed at:  http://www.cbb.gov.bh/cmsrule/media/pdf/ 
statistics/bulletin/January2007.pdf [4 April 2007]. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 64 
 
 
factors considered include qualifications and the fina ncial history of the person concerned. There are 
no explicit limitations to employment of fo reign nationals, though emphasis is placed on the 
employment of Bahraini nationals wherever appropr iate (Chapter I(4)).  Foreign-based retail banks 
may raise funds from or grant loans to residents, a nd may own and operate bran ches in Bahrain;  there 
are no restrictions on the level of foreign equity ownership in branches.  They also have access to 
credit and deposit insurance in the local market and are free to install any equipment they require for 
their activities. 
80. Banks are required to maintain a 5% BD deposits in unremunerated reserves at the CBB 
(including unrestricted investment accounts in Islami c banks); reserve balances must be maintained 
continuously throughout the subsequent month. State-owned banks, like the Housing Bank and the 
BDB, grant preferential loans. Rules and regulations governing preferential lending are set by the Ministry of Finance.  The housing sector, small businesses, and project finance receive preferential lending.   
81. The variety and popularity of Islamic instrument s have surged since Bahrain’s last TPR.  
Consolidated assets of Islamic banks grew from US$1.9 billion at end 2000 to US$12.2 billion at end 
2006.  This trend is likely to continue over the coming years.
63 Regulated services consist of three 
main activities: acceptance of Sharia money placemen t/deposits; management of  Sharia profit-sharing 
investment accounts; and offering of Sharia fina ncing contracts.  Various supplementary activities 
may also be undertaken.  Islamic bank licences are divided into two categories: conventional retail 
banks, and conventional wholesale banks. 
82. Bahrain was selected as the location for the Inte rnational Islamic Financial Market (IIFM), a 
non-profit institution that bega n operations on 11 August 2002.64  The main objectives of the IIFM are 
to: establish, develop, and promote an internatio nal financial market based on Sharia rules and 
principles; develop self-regulatory standards; stream line and enhance the market through guidelines to 
players issuing and marketing Islamic financial pro ducts and instruments; cr eate an environment to 
encourage both Islamic and non-Islamic financial ins titutions to actively participate in the Islamic 
Capital and Short Term Financia l Market; and enhance the cooperative framework among Muslim 
countries and their financial institutions.  
83. The Accounting and Auditing Organization for Is lamic Financial Institutions (AAOIFI) is an 
international autonomous non-profit corporate body th at prepares accounting, auditing, governance, 
ethics and Sharia standards for Islamic financia l institutions.  It was created in 1991 and has 
26 members.65  Its headquarters are based in Manama.  The CBB requires the adoption of AAOIFI 
recommendations on the computation of capital ade quacy, which recognizes the risk undertaken by 
investment holders. 
                                                      
63 Central Bank of Bahrain online information.  Vi ewed at:  http://www.cbb.gov.bh/cmsrule/media/pdf/ 
statistics/bulletin/January2007.pdf. [4 April 2007]. 
64 Amiri Decree No. 23/2002.  The IIMF is an inte rnational infrastructure institution, founded by the 
central banks and monetary agencies of Bahrain, Brunei, Indonesia, Malaysia, Sudan, and the Islamic 
Development Bank based in Saudi Arabia (IMF onli ne information.  Viewed at: http://www.iifm.net/ 
[12 October 2006]). 
65 The members are: Algeria, Australia, Bahrain,  Bangladesh, Brunei, Cayman Islands, Egypt, 
Indonesia, Iran, Jordan, Kenya, Kuwait, Lebanon, Malaysia, Pakistan, Palestine, Qatar, Russian Federation, 
Saudi Arabia, South Africa, Sri Lanka, Sudan, Republic of Yemen, Tunisia, Turkey, and the UAE (AAOIFI online information.  Viewed at: http://www.aao ifi.com/main/main.html [20 September 2006]). Bahrain WT/TPR/S/185/Rev.1 
 Page 65 
 
 
84. In 2001, a comprehensive anti-money-laundering (AML) legal framework was established by 
Decree Law No. 4/2001.66  An Anti-Money Laundering Unit (AMLU), established within the General 
Directorate of Criminal Investigation at the Ministry  of the Interior, is responsible for AML activities.  
Currently four cases of money laundering are before the courts, all of which have been generated from 
local investigations.67  In 2003, the MIC issued Anti-Money Laundering Guidelines.  The MIC is the 
primary regulator for designated non-financial business and professions. 
85. Financing of terrorism is not currently consid ered as a criminal offence in Bahrain.  The 
authorities believe that they currently have sufficien t powers to take action agai nst terrorist financing, 
based on an interpretation of what constitutes illega lity under the general criminal law of Bahrain.  
Nevertheless, a draft law on this  issue is before Parliament.68 
(c) Securities 86. The BSE was established in 1987, through Legi slative Decree No. 4, and became operational 
in June 1989.  The BSE is an independent legal en tity, managed by a board of directors, chaired by 
the Governor of the CBB.  In 2006, the market capitalization of the BSE grew by 21.7%, exceeding 
US$21.1 billion (150% of GDP). The shares listed on the BSE comprise 50 companies, 35 mutual 
funds, 9 Bahraini government corporate bond issues (including Islamic securities ("sukuks")), and 
10 corporate bond issues.  Currently, there are 13 brokerages licensed by the CBB and trading on the 
BSE. 
87. The securities industry comprises brokerage companies, market makers
69, and individual 
brokers.  Custodianship services are offered by  banking and no n-banking institutions.  Share 
registration services are offered by the companies themselves as well as assigned auditing firms.  
Securities and financial instruments traded on the BSE include shares, bonds, mutual funds, and 
currency warrants. 
88. Since the last TPR of Bahrain, the main cha nges to regulations for companies listed on the 
BSE are: (i) they must comply with Law No. 21/2001 (Commercial Companies Law (Chapter II(5)); 
(ii) a listed company should issue its annual audite d financial statements a nd hold its annual general 
meeting within three months following the end of its financial year; (iii) the number of registered 
shareholders in the company should not be less than  100; (iv) the net worth (assets) of the company 
should exceed its paid-up capital by at least 20%; and (v) the total annual sales (turnover) should not 
be less than BD 500,000.70 
89. The Clearing, Settlement, Depository, and Regist ry System (CSDR) covers settlement risks 
through a Guarantee Contribution Fu nd (GCF) for non-government securities.71  The BSE uses GCF 
assets as collateral for the credit facilities provided by the Settlement Bank72, to settle obligations 
arising from securities transactions concluded on the B SE for individuals who fail to pay, or if the 
                                                      
66 Ministerial Order No. 23/2002 on the prevention and prohibition of money laundering. 
67 Natural persons may face imprisonment of up to seven years as well as a BD 1 million fine, and 
corporate bodies may be fined up to BD 1 million.  
68 IMF (2006b). 
69 Market makers are defined, in the BSE By-Law, as natural persons or corporate bodies that are 
licensed by the Board of Directors of the BSE, to deal on their own behalf on the exchange floor.  They do not 
have the right to act for others. 
70 For more information on the regulatory framework of the BSE, see WTO (2000). 
71 Resolution No. 4/2000 on the establishment of a Guarantee Contribution Fund at the BSE, 
28 November 2000. 
72 The regulated bank that provides the BSE and its participants with the necessary facilities to effect 
payments relating to the settlement of securities transactions executed on the BSE. WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 66 
 
 
liquidity reserve funds are insufficient to fulfill ob ligations pertaining to the concluded transaction on 
the BSE.73 
90. The GCF is managed by a three-member special  Committee, appointed by the Chairman of 
the BSE's Board of Directors, for a period of three years.  The Committee is constituted by: the 
Chairman representing the BSE; a representative of th e brokerage companies (to be nominated by the 
BSE); and a representative of the Settlement Bank.  The BSE charges a management fee of 0.25% of the Guarantee Fund's amount per year.  Upon admission to the CSDR participants pay a fixed minimum of BD 50,000 for Class (A) brokers, or  BD 25,000 for other brokers (US$132,980 and 
US$66,490, respectively).
74 
91. Decree Law No. 21/2002 amended Articles 1 and 5 of Decree Law No. 4/1987, stipulating 
that the stock exchange shall be administered by a Board, chaired by the Governor of the CBB.  The 
CBB also issues guidelines and rules on the capital market; renews the licences of all stockbrokers 
members of the BSE; inspects all the BSE's broke rs; approves prospectuses for IPO's and the offer 
documents for other issues; gives approval for any off-market transactions; and approves all the 
amendments to the internal regulations or rules of the BSE. 
92. The BSE is responsible for overseeing the organi zation and regulation of securities trading in 
Bahrain.75  Its main duties are to ensure that dealings in securities are proper and sound, and that the 
CSDR System/operator complies w ith any relevant requirement. 
93. In 2004, the BMA's Capital Markets Supervisi on Directorate issued guidelines on insiders' 
holdings and dealings for use by listed companies, brokerage firms, and other intermediary service 
providers in the securities market.76  According to the authorities, the guidelines clarify legal and 
administrative requirements.  The main objectiv es are: to operate under the principle of full 
transparency, through on-going disclosure; to set ou t listed companies' obligations, in relation to 
insider holdings and dealings in their securities; to  help promote a culture of self-compliance among 
the insiders, and for overseeing the company's obligati ons to operate appropriate systems and internal 
controls, in order to meet the standards in the most  efficient manner; to maintain standards of conduct 
at the highest level of integrity; and to avoid conf lict between the interests of insiders and the listed 
companies, and to protect the interest of public investors. 
94. The activities of Financial Trusts are regulat ed by Law No. 23 of 11 July 2006.  New 
mandatory disclosure standards entered into force on 1 January 2004, for all listed companies quoted 
on the BSE.  The fees or charges imposed by the BSE or CSDR in its capacity as an exchange or 
clearing house must be approved by the CBB.  Capita l markets licensees are subjected to Ministerial 
Order No. 7/2001 and Resolution No. 1/2004. 
(d) Insurance 95. In 2005, the insurance subsector represented a bout 6% of GDP in gross premiums per year, 
higher than in most GCC countries.  It comprises 156  companies (up from 88 in 1999), but not all 
                                                     
 
73 If the Fund has been reduced by more than 50% of its original value, the BSE may terminate its 
trading, clearing, and settlement services to all participants.  
74 BSE Board Resolution No. 2/1995.  Brokers class (A) are licensed to trade in securities of local, 
GCC, and international issuers registered at the BSE, on behalf of clients and for their own accounts.  They are 
also allowed to act as custodians and offer ad visory and research services (WTO, 2000).  
75 Amiri Law No. 4/1987, 25 February 1987. 
76 BMA (2004) Viewed at:  http://www.bahrainst ock.com/downloads/law/BMA_Guidelines_Insiders. 
pdf [26 September 2006]. Bahrain WT/TPR/S/185/Rev.1 
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licensees are operational.  In add ition, other insurance-related services operators are registered in 
Bahrain, including insurance brokers, insurance consultants, surveyors and loss adjusters, 
representative offices, and actuaries. 
96. Domestic and branches of foreign companies d eal with general (motor, fire, marine, and 
other) and life insurance. At the end of 2006, the to tal assets of domestic in surance companies reached 
US$1.9 billion, while their investments amounted to US$1.2 billion (10.9% GDP).  Two on-shore 
Islamic insurance companies operate in Bahrain.  All the offshore insurance companies are foreign 
owned, and are mainly engaged in offering insu rance products in Saudi Arabia.  Nevertheless, 
following the promulgation of an insurance law in Saudi Arabia, some companies have moved there.77  
Total gross premiums for the offshor e market segment exceed US$1 billion. 
97. By law, insurance monopolies are not allowed.  However in practice, the United Insurance 
Company, has exclusive rights over international ve hicular traffic crossing the Causeway connecting 
Bahrain and Saudi Arabia. 
98. The subsector is regulated and supervised by  the CBB (previously by the MIC).  A Rulebook 
on insurance applicable to a ll insurance companies was issued in April 2005; establishing a 
comprehensive regulatory framework, in line with In ternational Association of Insurance Supervisors 
(IAIS) principles. 78 
99. Bahraini insurance and reinsura nce companies, branches of fo reign insurance companies in 
Bahrain, exempt (offshore) joint-stock insurance and reinsurance companies, any other insurance 
organization, and representative offices of foreign insurance companies are covered by the Insurance 
Law (Legislative Decree No. 17 of 1987).  The Bahrain Islamic Insurance Company operates under 
the Sharia (Islamic) Law and applies the concept of Islamic cooperative insurance.79  Classes of 
insurance operations defined by law are: life insura nce;  savings and fund accumulation insurance;  
fire insurance;  insurance against land, river, sea, and air transport hazards;  insurance against 
accidents and liabilities;  motor insurance;  reinsura nce operations;  and other insurance.  According 
to the authorities, direct insurers must take the form of a joint-stock company, in which foreign 
ownership of up to 49% of total e quity is permitted.  An indirect  insurance company may be in the 
form of a limited liability company, with a maxi mum of 49% foreign equity  ownership.  Offshore 
companies in all branches of insurance and foreig n branches of insurance companies may be 100% 
foreign owned.  Certain national management require ments are established by law, and include a "fit 
and proper test" as well as physical presence in Bahr ain.  Applications by reinsurance companies for 
licences must demonstrate technical viability, an d include details of the proposed reinsurance 
programme. 
100. Tier 1 minimum capital requirements under Volume 3 (Insurance Rulebook) are at least 
BD 5 million for Bahraini joint-stock companies (public and closed);  and BD 10 million for all reinsurance firms.
80  According to the authorities, for othe r "insurance related services" the minimum 
paid-up capital requirement is BD 20,000, except for insurance brokers, where the minimum paid-up 
capital requirement is BD 50,000.  The authorities re tain the right to require higher capitalization.  
Insurance companies are required to set aside 10%  of their annual net profits in a Compulsory 
                                                      
77 As at April 2005, the BMA ha d already withdrawn ten licences. 
78 Central Bank of Bahrain (2007). Viewed at: http://www.bma.gov.bh/cmsrule/index.jsp?action= 
article&ID=20 [4 April 2007]. 
79 Shareholders include the Bahrain Islamic Bank,  the Bahrain Islamic Investment Company, the 
Orphans Fund at the Ministry of Justice, and prominent Bahraini nationals (WTO, 2000). 
80 Article 9 of Implementing Regulations of Legislative Decree No. 17/1987 with respect to Insurance 
Companies and Organizations. WT/TPR/S/185/Rev.1 Trade Policy Review 
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Reserve Fund until the amount reaches 100% of the capital.   Cash deposits must be made in one of six 
national banks listed in the Law81, to the amount of BD 50,000 for life insurance, BD 25,000 for 
general insurance (increased by BD 10,000 for each class of insurance up to a maximum of 
BD 75,000), and BD 150,000 for reinsurance.  Lo ng-term business assets must be maintained 
separately, and each branch of insurance must be accounted for and reported separately.  Currently, 
there are no prudential requirements for maintaining reserves in specified local assets, composition of 
portfolio, or maximum exposure to specified risks,  but the new draft insurance law defines specific 
solvency margins for insura nce companies and provides for an investment policy.   
(iii) Telecommunications and postal services 
101. Bahrain's telecommunications network has grown considerably during the last few years: 
subscribers in the mobile market increased from 205, 700 in 2000 to 7 67,103 in 2005 (Table IV.7).  
The number of internet users climbed from 40,000 to 152,700 in the same period.  At the end of 2005, there were 193,520 fixed telephone lines in service, i. e. a teledensity of 27.05 per 100 inhabitants (up 
from 25.44 in 2000). The network for both fixed and cellular telecommunications is entirely digital. 
Table IV.7 
Selected telecommunica tion indicators, 2000-05 
 2000 2001 2002 2003 2004 2005 
Telephone subscribers ('000) 376.7 473.4 564.4 628.9 841.3 945.2 
Telephone subscribers per 100 inhab itants 56.1 69.1 81.1 89.1 117.5 130.1 
Cellular mobile subscribers ('000) 205.7 299.6 389.0 443.1 649.8 767.1 
Cellular subscribers per 100 inhabitants 30.6 43.7 55.9 62.8 90.8 103.0 
Internet users ('000) 40.0 100.0 122.8 150.0 152.7 152.7 
Internet hosts 1,121.0 1,718.0 1,339.0 1,334.0 1,850.0 1,850.0 
Personal computers ('000) 95.0 100.0 107.0 114.0 121.0 121.0 
Personal computers per 100 inhabitants 14.1 14.6 15.4 16.2 16.9 16.9 
Source:  ITU (2006), Telecommunication Indicators , Geneva;  and information provided by the authorities.  
102. The Telecommunication Law, enacted on 23 October 200282, established the 
Telecommunication Regulatory Authority (TRA).  A Bo ard of Directors consisting of five members, 
appointed for four years by Decree of the Council of Ministers, is responsible for managing the TRA.  
The TRA is managed by a General Director, appointed by a Decree based on a  proposal by the 
Council of Ministers upon the recommendation of the Board.  The main duties of the TRA are to: 
protect the interests of subscribers and users in  respect of: the tariffs charged for services, the 
availability and provision of services, and protecti on of personal and particulars and privacy of 
services; promote effective and fair competiti on among new and existing licensed operators; and 
when assessing applications for provision of public telecommunications services, ensure that 
applicants be able to provide those services. 
103. The TRA's sources of funding are: licence applica tion, initial, and renewal fees; revenue from 
annual licence fees based, in the case of an indivi dual licence, on the gross annual turnover of an 
individual licencee resulting from the licence, provided the fees do not exceed 1% of gross annual turnover; fees charged by the TRA for any services that it provides; and fines on licencees on the 
basis of their licences.  The TRA can grant indi vidual licences (to a particular person), and class 
                                                     
 
81 National Bank of Bahrain;  Bank of Bahrai n and Kuwait;  Al Ahli Commercial Bank;  Bahrain 
Islamic Bank;  Bahrain Saudi Bank; and Grindlays Bahrain Bank. 
82 Legislative Decree No. 48/2002. Bahrain WT/TPR/S/185/Rev.1 
 Page 69 
 
 
licences.  A class licence is mandatory for the operation of a telecommunications network or the 
provision of telecommunication services.83 
104. On 1 July 2004, the subsector was liberalized for national fixed and international services.  
Until July 2004, the Bahrain Telecommunicati ons Company (BATELCO) had a monopoly over the 
provision of basic telecom services and most value-added services, including internet;  the exceptions 
were VSAT and audio-text services, which were provided by private companies.84  BATELCO is one 
of the major employers of Bahrainis; its shareholde rs include the Government (36.7% of the shares), 
government agencies, and Cable and Wireless.85 
105. Every three years, a National Telecommunication Plan (NTP) is prepared by the Ministry of 
Transportation , stipulating the strategy and the general po licy for the subsector.  The NTP has to be 
approved by the Council of Ministers.  The 2007-09 NTP is to be issued in the second half of 2007; 
the Government's main objectives for the subsector are to: stimulate economic activity; rapidly create 
a free-market environment that would attract pr ivate investment in the subsector; enhance the 
effectiveness of Bahrain as a business centre by  making it a regional communication hub; create 
opportunities for BATELCO to adapt and grow by bala ncing the mechanism that  ensures it competes 
fairly with the stimulation of competition; give c onsumers access to a wide range of the most modern 
telecommunications services; and generate employmen t mainly through the separation of retail and 
wholesale channels, and through the entry of new operators.86 
106. Under the Telecommunication Law, the requirement s to grant a licence are: that the applicant 
is a juristic entity incorporated in Bahrain, or a branch of a foreign company licensed to operate in 
Bahrain in accordance with the Co mmercial Company Law (Chapter II(5)); and that substantially all 
the infrastructure and personnel associated with the provision of telecommunications services are located in Bahrain.
87  Licences are granted for 15 years.88  Chapter X of the Law provides for the 
gradual liberalization of the subsector.  Among the licences granted during 2002-06, 2 were for 
mobile operators89; 8 for very small aperture term inal (VSAT); 29 for international 
telecommunications services (ISL);  and 20 for internet service provider class (ISP).   In 2005, revenue 
from licence fees collected by the TRA was about BD 2.9 million (US$7.6 million), an increase of 
64% over 2004.90 
                                                      
83 With the exception of a licence granted for the us e of: (i) radio frequency spectrum; (ii) telephone 
numbers under the national numbering plan; and (iii) the provision of: mobile telecommunications, mobile 
virtual network operator, very smal l aperture terminal (VSAT), paging , public access mobile radio, national 
fixed, international facilities, international services, in ternet exchange, internet service providers and value 
added.  
84 WTO (2000). 
85 BATELCO was the first telecommunications company in the Middle East to be awarded ISO 9002 
accreditation (in 1996), in recognition of its high quality standards.  
86 TRA (2003). 
87The TRA has the right to waive this condition where substantial demand exists for a 
telecommunications service that cannot be provided ef ficient other than by means of infrastructure and 
personnel located outside Bahrain, provided that such a service will be to the direct benefit of subscribers and 
users, as determined by the TRA; and licensees breach  the obligation that a licensed operator shall not do or 
omit to do anything that has the effect of materially preventing, restricting or distorting competition in the 
course of operating a telecommunications network or providing a telecommunications service.  
88 All licensees must be established juristic entities in Bahrain, which in the case of foreign entities may 
mean establishing a local branch office. 
89 In 2003, MTC-Vodafone became the second GSM mobile operator in Bahrain. 
90 Telecommunications Regulatory Authority (2005) . WT/TPR/S/185/Rev.1 Trade Policy Review 
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107. In 2005, an independent Developm ent Review Panel was formed in the TRA, to scrutinize the 
activities carried out by TRA since its creation and recommend improvements.  The priority action areas identified were: ensuring that new entrants to  the international and broadband markets have key 
access and interconnection products on fair terms and within a reasonable timescale; streamlining 
some of the TRA processes, including the licensi ng process; consideration of a change in the way 
prices are controlled; reviewing tariffs to reflect  costs; reviewing the demand, availability, and 
management of spectrum; and capacity building for the TRA's staff and access to external expertise.
91 
108. The Bahrain Internet Exchange (BIX), a no n-profit entity, was licensed by the TRA in 
March 2004.  BIX acts as the hub for local internet connec tivity for all internet traffic within Bahrain.  
It provides the holders of internet service licenc es with a connection mechanism in which internet 
communications are aggregated, transmitted and dist ributed to licensed internet services providers.92  
The BIX has access to BATELCO's internati onal telecommunications facilities.  BIX's 
telecommunications facilities are available to all hol ders of an internet service.  Licensed internet 
service providers use BIX facilities for a period of two years from the date on which the licence is issued; these facilities are open to  other internet exchanges. 
109. The Telecommunication Law (Section 57(e)) requires a licensed operator in a dominant 
position to offer access to its telecommunications network and facilities on fair and reasonable terms 
to any licensed operators on request.  Such operators  are obliged to offer access to ducts to a licensed 
operator only if TRA considers that substantive demand exists for such access.  Such demand is 
deemed to exist in the case of a holder of a mobile telecommunications licence.
93 
110. Licensed operators, with significant market power94, are subject to tariff approval by the TRA  
for any telecom service for which the TRA de termines that insufficient competition exists.95 An 
Access Regulation was issued by the TRA in Apr il 2005, making it mandatory for licensees declared 
in a dominant position in access markets to make publicly available their terms and conditions, 
including tariffs, for giving service providers access  to their network.  A Mergers and Acquisitions 
Regulation entered into effect on 1 October 2004.  The TRA has the power to prohibit a potential 
transaction or impose conditions intended to remove potential anti-competitive concerns.96  Public 
telecommunications operators, with significant ma rket power, are subject to universal service 
obligations:  the operator provides basic public teleph one services at its prevailing standard rates.  The 
Telecommunications Law contemplates the creation of a three-member arbitration panel to determine disputes between the TRA and any licensed operator.
97 
111. In 2003, the TRA issued four interim interconnec tion orders, to set out the terms between the 
two operators in the mobile sector unable to agree on interconnection terms (BATELCO and MTC-
Vodafone). On 15 July 2004, the companies signed an interim interconnection agreement, but a full 
agreement was not reached until early 2005, when the TRA issued its final determination on the 
matter.98 
                                                      
91 TRA online information.  Viewed at: http://www .tra.org.bh/en/Dev elopment_2005.asp 
[23 October 2006]. 
92 TRA (2004). 
93 Chapter XII, Decree No. 48/2002, 23 October 2002. 
94 The Decree defines this as: a licensed operator that  holds 25% or more of the share of the market.  
The TRA may determine that an operator has significant market power even if it holds less than 25% of the 
market, or that it does not have significant power even if it holds more than 25%. 
95 Chapter XIII, Decree No. 48/2002, 23 October 2002.   
96 TRA (2004). 
97 Chapter XVII, Decree No. 48/2002, 23 October 2002. 
98 Telecommunications Regulatory Authority (2004). Bahrain WT/TPR/S/185/Rev.1 
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112. Under the Telecommunication Law, a dominan t operator, like BATELCO, must publish a 
Reference Interconnection Offer (RIO) every six mo nths, with the approval of the TRA. The TRA 
approved BATELCO's first RIO in June  2004, and its second in August 2005.99  It received six 
complaints in 2005, mainly related to bill ing, compared with 22 the previous year. 
113. In 2004, with the aim of creating a regulator y framework capable of delivering enhanced 
services, efficiency, and value for consumers, the TRA issued the following regulations: carrier pre-
selection (CPS), which allows consumers to select a menu of different operators for different types of 
service100; accounting separation, that requires the submi ssion of separate financial reports for each 
licensed activity101; and mergers and acquisitions, which put in  place safeguards to protect the interest 
of both consumers and other competitors when structural changes in  the industry occur.102 
114. Postal services are under the control of Bahrain Post (BP), a state-owned monopoly, while the 
Ministry of Transportation (MOT) is the supervis ory authority.  Postal services are considered 
important, inter alia , to: prepare a suitable environment for investment; promote Bahraini goods and 
services all over the world; provide employment to nationals; and contribute  in developing various 
other industries.   The Government strategies for postal services are to, inter alia : (i) meet the needs of 
urban development in Bahrain; (ii) keep up with technological development; (iii) automate all postal 
services and provide information systems for the operations; (iv) convert post offices to service 
centres; and (v) help to simplify and facilitate the provision of government services through postal 
services.103 
115. Bahrain became member of the Universal Postal Union on 21 December 1973.  It is also one 
of the countries that established the Gulf Postal Orga nization.  In 2003, BP a nd Emirates Post signed a 
deal for a postal services automation system in the 14  post offices in Bahrain.  In 2005, to increase the 
efficiency and productivity of postal services, the GCC agreed to establish a regional service standard, 
requiring them to deliver 85% of the mail circulat ing between them within four days by 2006, 85% 
within three days in 2007, and 90% within two days by 2008.104 
(iv) Transport 
(a) Maritime transport 
116. Bahrain's merchant fleet remains relatively sma ll. In 2005, it had a dead-weight tonnage (dwt) 
of 396,000 (450,000 in 2000), of which over one third were oil tankers (Table IV.8). 
117. The maritime transport subsector is overseen by the General Organization of Ports (GOP), 
under the Ministry of Finance. The GOP establish es the overall policy for the subsector, while the 
Directorate General of Ports is responsible fo r the regulation of ports and shipping services, 
management and operation of cont ainer and cargo terminals, and commercial and other activities, 
including formulation and implementation of ma ritime safety policy.  As a member of the 
International Maritime Organization (IMO) si nce 1976, the GOP appli es international safety 
conventions and regulations  with the assistance of classification societies, which are members of the 
International Association of Classification Societies (IACS). 
                                                      
99 The RIO sets out the technical and commer cial terms for interconnecting operators. 
100 BATELCO launched CPS commercially in 2006. 
101 To ensure that tariffs charged to consumers and to other operators are fair and reasonable, and that 
multiple licence operators are not cross-subsidizing one activity through another in an anti-competitive way.  
102 Telecommunications Regulatory Authority (2004).  
103 Ministry of Transportation (undated). 
104 Universal Postal Union (2001), p. 11. WT/TPR/S/185/Rev.1 Trade Policy Review 
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Table IV.8 
Maritime transport services, 2000-05  
 2000 2001 2002 2003 2004 2005 
Total merchant fleet (dwt)a 450,000 450,000 374,000 353,000 380,000 396,000 
 Bulk carriers 60,000 60,000 60,000 60,000 85,000 85,000 
 Container ships 100,000 100,000 100,000 100,000 100,000 100,000 
 General cargo 98,000 98,000 26,000 4,000 4,000 4,000 
 Oil tankers 153,000 153,000 188,000 153,000 154,000 154,000 
 Other 39,000 39,000 0 36,000 37,000 53,000 
a Deadweight tonnes. 
Source: UNCTAD , Review of Maritime Transport, 2000, 2001, 2002, 2003, 2004, 2005 and 2006,  Geneva;  and 
 information provided by the authorities .  
118. Legislation regulating the subsector includ es the Bahrain Maritime Code, promulgated by 
Legislative Decree No. 23/1982;  the GCC Rules and Regulations for Seaports, of 2006;  and Decree 
No. 20/1979 on small vessel registration and safety requirements. 
119. Maritime transport services may be provided by the private sector (foreign and Bahraini).  
Companies wishing to provide shipping and p assengers transport services require GOP approval. 
120. A small number of shipping companies operate  in Bahrain.  The United Arab Shipping 
Company, a semi-private company with 5% of shares owned by the Government, deals with cargo services.  A few others deal with the shipping of construction materials. 
121. Freight and passenger transport charges are not regulated under Bahraini legislation.  There is 
no obligation for government cargo to be carried by state-owned shipping companies;  however, the 
Government appears to favour the United Arab Shipping Company for government cargo.
105  
Shipments to Bahrain must be by ships that ar e permitted entry into Bahraini waters (based on, 
inter alia , flag/ownership, age of vessel). 
122. According to the authorities, the only conditions associated with flying the Bahraini flag are 
registration and certification.  Any ship may acquire Bahraini nationality if it is registered at any port 
in the Kingdom of Bahrain, and if the owner or owners are Bahraini nationals;  in the case of a corporation, it must have Bahraini nationality.  Th e Minister of Finance may, with the consent of the 
Council of Ministers, award Bahraini nationality to ships owned by foreigners.
106  According to the 
authorities, there are no incentives for flying the Ba hraini flag, and cabotage is not regulated;  
however, under Article 4 of the Maritime Code, coast al navigation, fishing, towing and pilotage in 
territorial waters, as well as navigation between Bahr aini ports, are permitted exclusively by ships 
flying the Bahraini flag.  International and nati onal safety measures must be maintained.  Multimodal 
transport is encouraged and regulated through national laws. 
123. No special government funding is available to the maritime subsector although the Minister of 
Finance holds a general reserve for use in the case of an emergency.  Key personnel, maritime 
engineers, and the number of crew members employed  on ships, and the qualifications they must fulfil 
are defined by the applicable laws, re gulations, and international conventions.107 According to the 
authorities, there are no restrictions on nationality of  crew and key personnel employed on ships or by 
shipping companies.  
                                                      
105 WTO (2000). 
106 WTO (2000). 
107 WTO (2000). Bahrain WT/TPR/S/185/Rev.1 
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124. Mina Salman, Bahrain's main port, is still owned by the State but under concession.  
Construction of a new port, Mina Khalifa bin Salm an Port (MKSP) at South Hidd on the island of 
Muharraq, started in 2001 and is expected  to become operational in September 2008.   In 
February 2006, APM Terminals International from the Netherlands was granted a 25-year concession 
for both ports.  By investing in port facilities, the Govern ment intends to develop Bahrain into a 
regional distribution centre.  Although Mina Salman and MKSP are restricted to Government 
ownership, most port activities, such as stevedori ng, have been gradually privatized since 1974 
(Chapter III(4)(iii)). 
125. In the context of the GCC, rules and regula tions for seaports (2006) were approved to, 
inter alia : (i) bring port infrastructure, equipment, sy stems and services in accordance with best 
international practices, standards and norms; (ii)  contribute to the national social and economic 
objectives and to promote ports' competitive strengt hs and the GCC States' trade objectives in the 
global market; (iii) encourage the harmonization of  standards, codes, and benchmarks in the 
performance of port services, and assure that the disp atch of ships matches with users needs; (iv) 
pursue the GCC commitment to promote the re levant UN Organizations (IMO and ILO); 
(v) encourage private sector participation in the pr ovision of port services with a view to ensuring 
efficient use of resources and enhancing fair co mpetition; and (vi) promote national employment, 
education, and life-long learning of the ports' human resources.108  Prices of freight, towage, and other 
transport services (excluding passengers) are set by the operators subject to GOP approval. 
(b) Air transport 
126. In 2006, Bahrain International Airport (B IA) handled around 7 million passengers (up from 
3.4 million in 1999), despite having a single runway (Table IV.9).109  Air cargo handled amounted to 
358,670  tonnes in 2006 (176,112 tonnes in  2002);  and total aircraft movements reached 81,789  
(54,763 in 1999). During 2006, 38 scheduled airlines, including six  cargo/courier carriers, operated to 
Bahrain.  Gulf Air, based in Bahrain, accounts for the highest share of passenger traffic to all 
destinations, with an average of 70% of the to tal, 384 weekly flights, and 39 destinations. 
Table IV.9  
Air transport services, 2002-06 
 2002 2003 2004 2005 2006 
Passengers  4,147,105 4,296,979 5,144,200 5,581,503 6,696,025 
Arrivals 1,905,057 1,957,814 2,309,407 2,595,153 3,224,608 
Departures 1,870,126 1,929,142 2,307,641 2,574,678 3,137,757 
Transit 371,892 410,023 527,152 411,672 333,660 
Cargo services (tonnes) 176,112 231,239 301,906 334,832 358,670 
Aircraft movement 61,965 69,493 72,530 73,891 81,789 
Source:  Information provided by the authorities.  
127. Bahrain does not have a national air carrier.  Until 2002, Gulf Air was jointly owned by 
Bahrain, Qatar, the UAE, and Oman. The Qatari Government dropped its shareholding in May 2002 
to develop its own national airline (Qatar Airways).110  The Abu Dhabi Government dropped its 
shareholdings in 2005.111  Gulf Air shares are now owned by Bahrain and Oman (50% each). Gulf Air 
began a three-year recovery plan in 2001 to halve its loses, and despite fuel price rises, achieved its 
                                                      
108 The Cooperation Council for the Arabs States of the Gulf (2006).  
109 According to the authorities, BIA can handle up to ten million passengers a year. 
110 See WTO (2005). 
111 See WTO (2006). WT/TPR/S/185/Rev.1 Trade Policy Review 
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first operational profit (US$4 million) in 2005.  It comprises a fleet of 26 aircraft (14 wide bodies), 
and its main hubs are at Manama and Muscat.  A lthough not part of any major alliance, it has 
code-sharing agreements with a num ber of major carriers (i.e. American Airlines, Air India, KLM, 
Thai Airways, and Saudi Arabian Airlines). Gulf  Traveller (6 airplanes), a full service economy 
subsidiary of Gulf Air, was launched in 2003, beco ming the first of its type in the region. The only 
other airline established in Bahrain is DHL Internati onal, a private, majority foreign-owned, courier 
and cargo operator, set up with a local partner.  No tax incentives are provided to airlines as no taxes 
are applied to the subsector in general. 
128. The following incentives are granted to pr omote Bahrain's airport as a regional hub: 
(i) landing and parking fees are free of charge for two years for new airline entrants; (ii) exemption of 
air navigation fees for two years; and (iii) 50% of charges are paid by air cargo (on an unlimited basis). 
129. Gulf Air's exclusive access to some routes was eliminated in 2001. There are no restrictions 
or incentives placed on Gulf Air to purchase aircraft or equipment from particular sources, and the Government actively encourages Gulf Air to cooperate  with other carriers, in particular from other 
GCC countries;  agreements between carr iers are made on a commercial basis. 
130. Since Bahrain's last TPR, there have been no major changes in the regulatory framework of 
the subsector. The Civil Aviation Affairs (CAA) is th e supervisory authority responsible for all civil 
aviation regulatory matters, the provision and manageme nt of air traffic services, meteorology, and 
the management of all air-transport-related servi ces at BIA.  The CAA is headed by the Under-
Secretary for Civil Aviation who reports directly to  the Deputy Prime Minister, who is responsible for 
civil aviation.  Legislation on the subsector c onsists of the Civil Aviation Law, enacted under 
Amiri Decree No. 6/1995; Air Navigation Technical  Regulations, under Resolution No. 2/1997; and 
Ministerial Decree No. 1/1999 on Sales and Marketi ng of Air Transport Products and Services, and  
Ministerial Decree No. 1 of 2002 on the organization and licensing of air cargo agencies. In addition, 
74 bilateral air transport agre ements, and temporary operating permits are in force. 
131. Airlines operating in Bahrain require approval from the CAA either under the provisions of 
an air transport services agreement or through a te mporary operating permit .  Key parameters in 
bilateral air transport agreements are reciprocity of  capacity and frequency.  Airlines are free to set 
prices.  Approvals for cargo operati ons, including prices, do not, in genera l, appear to be restricted;  
prices must be submitted to the authorities for in formation purposes.  According to the authorities, 
there are, in principle, no objections to  allowing new entrants into the market. 
132. According to the authorities, Bahrain adopts a multiple designation approach in its bilateral 
negotiations; this allows more than one carrier from a State to operate the permitted services.  
Benefits, including special rebates, discounts, and incentives for landing, take-off, and parking 
charges, are provided to airlines on a case-by-case basis.  Some classes of aircraft are exempt by law 
from payment of these charges; these include aircra ft of the Kingdom of Bahrain, of the United 
Nations and its agencies, the League of Arab States and its agencies, aircraft used without 
remuneration, and any other aircraft that may be exempted by the CAA.
112 
133. There is no specific slot-allocation system in operation at BIA.  Airlines submit their tentative 
schedules on a seasonal basis for approval by the CAA following discussions with the relevant authorities, including Gulf Air, in an Airport Sche duling Committee.  There is no difference in slot 
allocation between peak and off-peak hours;  howev er "grandfather" rights are respected.  Schedule 
                                                     
 
112 Ministry of Transportation, Civil Aviation Affairs, Civil Aviation Law, (Article 119). Bahrain WT/TPR/S/185/Rev.1 
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clashes at peak periods are resolved by mutual agreement between the airline concerned and the CAA 
to facilitate handling and customer convenience. 
134. BIA is state-owned, and managed by a director ate under the CAA, which is also responsible 
for the airport's fire services.  A private company,  Bahrain Airport Services, established in 1978 and 
operating since 1996 under a 25-year sole-right franchise agreement, carries out ground, cargo, and 
mail handling and in-flight catering, and operates ca tering facilities in the terminal.  Airlines may 
handle some or all of these services themselves. Other facilities include fuel services, which are 
provided by the Bahrain Airport Fuelling Company, on behalf of its three shareholders, BAPCO, 
Caltex, and Air BP;  and duty-free facilities, which are provided by the Bahrain Duty Free company 
under a franchise agreement. 
(c) Road transport 
135. Bahrain has a good highway system, which connect s all the main cities of the country; most 
roads are hard-surfaced.  Bahrain's foreign road co nnections are via Saudi Arabia:  it is connected 
with Europe, via the Trans-Arabia Highway in Sa udi Arabia, and with the UAE and Oman through a 
hard-surfaced route, also through Saudi Arabia.  Bahrain has a public bus transport system.113 
136. Road transport activities are regulated by th e Ministry of Works, responsible for, inter alia , 
urban development, construction of  highways, and road maintenance.  Given the importance of road 
transport for the urban, industrial, and commercial de velopment of Bahrain, the main policy goal is to 
continue to expand the road infrastructure.  So me major road projects are under way to ease traffic 
congestion in Manama, and make Bahrain's ro ad network one of the safest in the world.114 Moreover, 
Bahrain and Qatar are building the Bahrain-Qatar Friendship Bridge, a 45-km causeway that will 
connect the two countries (at a cost of US$4 billion).115 
(v) Tourism 
137. Development of tourism activities is a key po licy objective in Bahrain, as part of its 
diversification efforts. The number of visitors is  expected to increase as several projects, mainly 
tourist resorts and shopping complexes, are being constructed.  Around 5.4 million tourists visited 
Bahrain in 2005 (up from 5.2 million in 2004).116  It is estimated that around 11.7% of tourist arrivals 
to Bahrain use the Causeway connecting Bahrain to Saudi Arabia;  these tourists are predominantly 
from GCC countries. 
138. The key tourist attractions in Bahrain include historical and cultural sites, shopping malls, 
spas and resorts, golf, water sports, pearl-diving ex peditions, scuba-diving, the Bahrain International 
Circuit (holding Formula 1 races since 2004), Sakhir City, and the Bahrain Financial Harbour.  In 
addition, there is a craft centre in Manama used free of charge by artisans.  The main projects 
developed in the centre include: hand-made palm l eaf paper; stained glass; woodwork; embroidery; 
and Arabic calligraphy. Moreover, Bahrain has a well-developed infrastructure including high 
standard hotel accommodation, consisting of 104 classi fied and 6 non-classified hotels, with a total of 
about 700,000 rooms in 2005, as well as a range of entertainment. 
                                                      
113 Taxis, which can be quite expensive, or private rental cars are the main ways of getting around the 
country for those who do not have their own means of transport. 
114 Two studies are currently under way on road safe ty strategy and to introduce an intelligent transport 
system ( Gulf Daily News , 11 February 2007). 
115 Gulf Daily News, 25 April 2007. 
116 UNIDO (undated). WT/TPR/S/185/Rev.1 Trade Policy Review 
Page 76 
 
 
139. Tourism Affairs, in the Ministry of Informa tion, supervises tourism activities and implements 
all tourism-related regulations a pproved by the Supreme Council of Tourism.  The Supreme Council 
of Tourism, established by Amiri Decree in 1985, is chaired by the Minister of Information, and includes representatives from other ministries, the Bahrain Chamber of Commerce and Industry, and 
the hotel and travel industry.  All tourism facilitie s and activities must be licensed by Tourism Affairs 
prior to completing commercial registration proc edures with the MIC. The moratorium on new 
licences for one-, two-, and three-star hotels still app lies, that is, licences are only granted for four and 
five star hotels if the projects proposed offer new attractions not available in hotels of similar 
categories. 
140. The authorities have intensified efforts in rece nt years to promote tourism and to diversify 
tourist activities.  While general government policy is  to encourage tourism projects that preserve the 
culture of the country and allow Bahrainis to par ticipate, it has also concentrated on specialized 
tourism, such as sports activities, conference-re lated tourism, and promotion of up-scale shopping 
centres.  According to the authorities, Bahrain's mass tourism is mainly from neighbouring GCC countries that share similar customs, traditions, an d language, and hence do not have a negative effect 
on Bahrain's local culture.  Mass tourism to Bahrai n from outside the region is not discouraged but 
nor is it targeted.  The objective is to attract touris ts with high levels of expenditure and to increase 
the average stay, rather than the number of arrivals.  The culture and history of Bahrain are also used 
to promote tourism.  The Government has spent signi ficant funds restoring historical sites, and intends 
to focus on marketing them.  To facilitate tour ism, the visa application process has been eased. 
141. More than 90% of investment in  the industry has been  by the private sector.  In general, the 
Government restricts its activities to the provision of infrastructure rather than investment in projects 
that may compete with the private sector, although it  may partner the private sector when requested.  
Foreign investors may, subject to th e Companies Law, own up to 100% of  total equity (Chapter II(5)).   
142. In general, there are no taxes on tourism activiti es.  However, a 5% government levy is added 
to all hotel bills, with two percentage points used  to promote tourism in Bahrain and to develop 
supporting infrastructure. Bahrain WT/TPR/S/185/Rev.1 
 Page 77 
 
 
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