Fast-racing Ferraris, Mercedes, McLarens and Lotuses have typically been a draw for thrill-seeking celebrities and moguls alike, meaning that Formula 1 motor racing has always been a glamorous affair. It was this glamour that Bahrain was hoping to encapsulate when it spent $40m on the right to host one of F1's grand prix races. But instead of the prestigious event it had hoped for, the country found that international attention focused upon its fraught politics rather than the race itself.

Situated in the Persian Gulf off the shore of Saudi Arabia, Bahrain has been affected by the wave of changes since the ‘Arab Spring’ political uprisings.


“The negative publicity was new, and the reality is that we had to deal with it one day at a time,” says Vivian Jamal, director of business development at Bahrain’s Economic Development Board (EDB).

Marketing ploy

However, Ms Jamal says that behind the negative headlines is a thriving economy. “Bahrain still has companies coming in, and when the [Arab Spring protests] happened, it was actually one of our best years at the EDB in attracting FDI,” she says.

Figures from investment tracker fDi Markets show that the number of greenfield investments in Bahrain increased from 57 in 2010 to 72 in 2011, at a time when the region was in the throes of political turmoil.

The Bahraini government’s decision to host the grand prix was part of a slick marketing campaign to shine a spotlight on Bahrain and dispel misconceptions about the country’s business environment. And, according to EDB, it was a success. "BASF, a German chemicals company, has signed up with us, and the UK firm British American Tobacco set up its regional distribution centre in Bahrain to access the rest of the Gulf Co-operation Council [GCC] region,” says Ms Jamal.

Being a small archipelago of 33 islands with a total population of 1.3 million people, Bahrain's growth strategy has been outward facing. With six satellite offices located outside of the country, the EDB has proactively marketed the country as a location with well-established industries.

Although Bahrain’s wealth has been built off its oil sector, which contributes up to 90% of government revenues according to the EDB, the country has worked to reduce its reliance on this sector. A large part of this has been the country's efforts to develop a reputation in the financial services sector, which now accounts for 28% of its GDP. According to Ms Jamal, Bahrain is now the largest centre in the Middle East for financial services, has become a hub for private banking and asset and fund management, and hosts a number of the key global players in this field, including Citibank and HSBC.

In addition, the EDB is already seeking to expand into Islamic finance. “Islamic finance is one of the areas that Bahrain is looking at,” says Ms Jamal. “The central bank is currently developing a new set of regulations and we have got Ithmaar Bank and Kuwait Finance House considering investing in Bahrain.”

Facilitating investors

Given the country's relatively small domestic market, the EDB has also marketed Bahrain as a platform from which companies can serve neighbouring GCC countries. “The Economist Intelligence Unit forecast that the GCC would be a $2000bn market by 2020, so it is a significant market,” says Ms Jamal. “We are set up in a way that helps a company from when they set foot in the country – we have someone that holds their hand and adds a personal touch.”

To further facilitate investors, the government has invested in its logistics sector to increase Bahrain’s appeal as an access point to the GCC region. Bahrain’s International Investment Park, which is located close to the country’s Khalifa bin Salman Port, has experienced success in attracting 70 global firms, including the US-based beverage products firm Kraft Foods and German engineering and electronics firm Siemens, which have used the zone as a captive distribution centre.

“Logistics will be a major area for us,” says Ms Jamal. “We not only go after big names but also smaller enterprises. And we also show investors the personal side as well as the business side to Bahrain.”