BAHRAIN BEST PRACTICES FOR SUSTAINABLE GROWTH IN THE FOURTH INDUSTRIAL REVOLUTION AGE
This article is the second issue of a series of articles covering best practices for sustainable growth in the fourth industrial revolution age in various Arab countries. It considers best practices in Bahrain.
In this article, best practices in the fourth industrial revolution age is considered at macro level (national / country) and industry level where various industries are considered including emerging technologies, Fintech, oil, urban design, and education.
Our identification of a best practice is based on studying the supporting infrastructure and the existing ecosystem to address the challenges of the fourth industrial revolution. This involves the identification of the elements of the ecosystem (people, institutions, and resources). The role of banks and regulatory authorities is important in driving the ecosystem. It also involves the assessment of the readiness of the ecosystem to embrace the needed change of the digital transformation brought by the fourth industrial revolution and its role in supporting innovation and startups growth. Various industries are considered including vital ones for economic growth.
This article is divided into four main sections:
The first section focuses on the study of Bahrain supporting infrastructure. This involves a quick overview of the kingdom facts and figures, country key strengths and role in the region, and government initiatives.
The second section focuses on Bahrain supporting ecosystem. This involves the identification of the ecosystem main building blocks and the ecosystem role in innovation.
The third section focuses on growth industries shaping the country economy.
The fourth section presents a summary blueprint highlighting key points addressed in the article and motivating future agenda to consider best practices from other countries, establish benchmarks and select best practice model to be tailored and adopted by various countries for sustainable growth in the fourth industrial revolution age.
- BAHRAIN SUPPORTING INFRASTRUCTURE
1.1 Country facts and figures
“BAHRAIN IS A SMALL VIBRANT KINGDOM”
According to The National news sources, Bahrain is not a big country. It is the smallest island nations in the world, and relatively small when contrasted with its closest neighbour, the giant Saudi Arabia, where the land area of a single airport built 20 years ago is bigger than the entire country of Bahrain.
In 1932, Bahrain was the first country in GCC to discover oil. Facing the oil price drop, the country made various efforts towards diversifying its economic activity and adopting strategy to shift towards a digital economy. These efforts were mainly driven by Bahrain’s Economic Development Board (EDB).
Bahrain is entering a new era of global economic development and is carrying what is needed to revitalise the region and incrementally rebuild the economy:
Bahrain’s Economic Development Board announced the inauguration of the new Salman Industrial City. This new zone had already attracted large investments and various projects were completed.
The Bahrain International Investment Park offers 240 hectares for manufacturing and international services.
The Bahrain Investment Wharf consists of 170ha of warehousing and logistics projects, and even includes residential zones for employees.
The Hidd Industrial Area compromises 650ha with various industrial investments (such as the Hidd Power Company, which supplies 75 per cent of Bahrain’s clean water requirements, and a newly planned integrated steel complex).
The king of Bahrain officially opened the Khalifa bin Salman Port, which is adjacent to the industrial zone and five minutes away from the international airport.
Greater proposals are in the pipeline, ranging from the expansion of both the main aluminium and petrochemical companies, Aluminium Bahrain and Gulf Petrochemical Industries Company, to building a causeway to Qatar and plans for a new port and international airport.
Bahrain has over the past few years marketed itself as a financial hub, with massive developments and pushed for tourism and commerce
1.2 Country Key Strength
“BAHRAIN HAS A WORLD RENOWN FRIENDLY BUSINESS ENVIRONMENT”
One of the key drivers of Bahrain’s growth is its favourable business environment. It offers a favourable legal and regulatory environment and has minimal restrictions on foreign ownership. Bahrain is also proud home to financial services sector and has more than four decades of experience.
“ACCORDING TO BAHRAIN EDB SOURCES, Bahrain is progressing towards digital globalisation in steady steps”
Bahrainis are early adopters: Bahrain is one of the top countries in the world for consumer adoption of technology. The Kingdom also has one of the highest mobile and broadband penetration rates in the GCC
Bahrain has invested heavily in its ICT infrastructure: Bahrain is actively developing its infrastructure to increase its readiness for a digital economy. The country is consistently ranked among the top in the region in ICT preparedness.
Bahrain is building a vibrant and internationally connected ecosystem for digital startups: supported by strategically developed accelerators and incubators, including the region’s first cloud-based accelerator.
Bahrain’s regulatory environment is continually monitored and updated to ensure it is as startup-friendly and digital-friendly as possible.
Bahrain has one of the region’s most liberal business environments: Bahrain’s government has a strong track record of reform and deregulation, and is committed to minimising operational costs and tax burdens for ICT firms. The government does not collect corporate or personal taxes, and allows 100% foreign-owned enterprises in the ICT sector.
Bahrain leads the way in diverse funding options: Bahrain is home to the region’s longest established financial centre.
Bahrain is committed to training and education: Bahrain is developing its labour market through continuous investment in education and training programmes.
Economic diversification: Bahrain have one of the most diversified economies in the GCC, with non-oil sectors contributing 80% of GDP.
1.3 Country role in the region
“BAHRAIN IS DEVELOPING ITS INFRASTRUCTURE TO BECOME DIGITAL GATEWAY TO GCC”
Bahrain is a gateway to the GCC region offering great access to Saudi Arabia’s market. Global Information Technology (IT) companies choose Bahrain as a hub due to the availability of talent, cost competitiveness, ownership structure and market access to the overall region. According to World Bank Doing Business 2017 report, Bahrain was ranked second in MENA in the ease of doing business index. Bahrain has a Business-friendly regulatory framework. Bahrain’s market, although small, hosts a range of IT companies within the areas of IT services, IT distribution, IT consultancy, data management systems, software developers and customer support centres. Ranked the first in MENA for ICT readiness, Bahrain offers the most competitive and affordable ICT services in the region.
Bahrain offers information and communications technology companies various benefits including a business-friendly regulatory environment, great access to the regional market, a robust ICT infrastructure, a cost competitive location, powerful internet connectivity systems, availability of skilled human capital and various office setup options.
1.4 Government initiatives
“BAHRAIN INTRODUCED MAJOR REFORMS TO ADDRESS THE DIGITAL AGE CHALLENGE”
In the technology sector, the government recently implemented a “cloud first” policy to encourage government entities and businesses to use cloud services for technology solutions. United States tech giant Amazon has chosen Bahrain to launch its first ever Amazon Web Services (AWS) infrastructure in the Middle East. In the education sector, the government is focused on providing tech education and talent development opportunities. Bahrain has embarked on a major reform agenda as part of its Vision 2030.
- BAHRAIN ECOSYSTEM
2.1 Ecosystem building blocks
“BAHRAIN IS BUILDING A STRONG INNOVATION ECOSYSTEM TO EMBRACE THE FOURTH INDUSTRIAL REVOLUTION”
Bahrain ecosystem consists of various entities including among others:
Bahrain’s Economic Development Board (EDB): EDB guides new or expanding companies through every part of the business process. EDB can help in benefiting from Bahrain’s business infrastructure, find a business location, discover talent, and navigate any legal requirements. EDB acts as the startups’ consultants. It guide startups through the whole business process.
Governmental and non-governmental agencies supporting the use and development of the latest innovations and technologies: These include the Bahrain Chamber of Commerce and Industry, the Ministry of Industry, Trade and Tourism of the Kingdom of Bahrain, the General Secretariat of the League of Arab States, The Arab Investment & Export Credit Guarantee Corporation and the UNIDO International Center for Entrepreneurship and Investment in Bahrain.
Tamkeen: It has invested $1B in Bahraini ventures.
Startup Bahrain: It is creating an environment where startups can grow.
Amazon Web Services: It has opened their first office in the Kingdom to encourage software service and cloud technology in Bahrain.
The Information and eGovernment Authority
The Central Bank Of Bahrain (CBB)
Startup Accelerators: Flat6Labs Bahrain is a new startup accelerator supported by Tamkeen to accelerate and launch both local and international Startups in the Kingdom of Bahrain.
2.2 Ecosystem role in innovation
“Bahrain aims at becoming a regional centre for innovation”
According to the Industry Chapter of the Report Bahrain 2019, the Bahraini authorities are working on a wide range of initiatives to facilitate the kingdom’s transition towards Industry 4.0, with the aim of becoming a regional hub for the fourth industrial revolution relevant technologies. These include an initiative with advanced analytics platform provider to establish several pilot projects in the kingdom. Two local Internet of Things-focused incubation and acceleration initiatives were launched in 2018, both involving Hong Kong-based start-up investor Brinc. A key facilitator of Industry 4.0 will be the rollout of 5G mobile internet networks.
“ACCORDING TO EDB SOURCES, BAHRAIN SET FOUR KEY INNOVATION PRIORITIES”
Openness to cross-border trade and information transfers.
Regulatory reforms: Bahrain has a strong track record of reform and deregulation, which has attracted industry-leading companies like Amazon Web Services (AWS) to invest in the country.
Digital infrastructure investment: Bahrain continues to actively invest in infrastructure to increase readiness for a digital economy. This includes large data centres that will boost cloud adoption for business and the roll out of a nationwide 5G network. The Kingdom is an ideal home for growth industries, like autonomous vehicles and Internet of Things.
Capitalising on talent: With nearly 60% of the population under the age of 30, heavy investments in specialised training programmes in emerging industries have advanced readiness among Bahraini young population.
“BAHRAIN OFFERS A GREAT STARTUPS SUPPORT”
Bahrain has announced a new program that will support Arab startups shaping the Fourth Industrial Revolution. The programme includes: access to the Bahraini market fast-tracking of applications to establish a presence in Bahrain; the creation of a special Arab startups concierge service to help startups navigate and benefit from the local Bahraini startup ecosystem; opportunities to pitch and access funding from Bahrain’s Sovereign Wealth Fund, as well as the Venture Capital VC partners of Al Waha Fund of Funds and family offices in the Kingdom.
“BAHRAIN WITNESSED REMARABLE STARTUP GROWTH”
According to government figures, the number of Bahraini tech startups has grown considerably which highlights the growing importance of entrepreneurship to the kingdom’s economic growth. Bahrain launched the $100m Al Waha Venture Capital Fund of Funds, which aims to invest in promising regional tech startups. The main criterion for fund eligibility is that venture capitalists should have some kind of presence in Bahrain. There is a vast untapped opportunity to create technology solutions in Bahrain and the opportunity to innovate in e-commerce platform is quite vast. Bahrain aspires at building “regional tech leaders” and creating more Arabic media content.
- BAHRAIN GROWTH INDUSTRIES
3.1 Emerging Technologies
“According to Bahrain eGovernment Authority sources, the Kingdom of Bahrain is emerging as a regional leader in digital transformation”
Bahrain was the first country in the Arab Gulf region to liberalize its telecom sector. Today, Bahrain is leading the region with its well-established information and communications technology (ICT) infrastructure. Bahrain ranks first in the Arab region in information and communications technology (ICT) Development Index (IDI) as per International Telecommunication Union (ITU) report and ranks fourth globally in Telecommunication Infrastructure Index (TII) as per United Nation eGovernment Development Index.
The National Digital Strategy of the Kingdom of Bahrain sets the directions on how to take advantage of the emerging technologies to streamline service delivery in Bahrain and take the Kingdom towards a better life for all.
Emerging technologies such as artificial intelligence, biotechnology, material sciences, and robotics hold incredible promises for the advancement of Bahraini society and spur economic growth in the Kingdom. As Bahrain witnessed rapid advancement in the technologies, the focus has been shifted to create the right ecosystem for fostering innovation through emerging technologies within and across the Bahraini society.
The use of these technologies has contributed to achieving the Kingdom’s Vision 2030 and supporting the implementation of Government Action Plan 2019-2022.
“VARIOUS FORMS OF EMERGING TECHNOLGIES IN BAHRAIN INCLUDES: OPEN BANKING, INTERNET OF THINGS, BLOCKCHIAIN, DATA ANALYTICS, CLOUD COMPUTING, eWallet Payment Solutions, Electronic Know You Customer (eKYC), ARTIFICIAL INTELLIGENCE AND ROBOTICS”
Open Banking: Bahrain is the first country in the Middle East to adopt Open Banking.
Internet of Things IoT: The Kingdom of Bahrain was the first in the GCC to issue standards for IoT connectivity. Information & eGovernment Authority has provided government entities with the required frequency bands that will contribute to the Kingdom’s Digital Transformation journey and support achieving 2030 Kingdom’s vision.
Blockchain Technology: Many industry leaders in Bahrain have already achieved significant benefits by adopting Blockchain technology in their business operations. They have achieved greater transparency, enhanced security, improved traceability, increased efficiency and speed of transactions, and reduced costs. Examples of Blockchain application in the public sector in Bahrain include the Blockchain Vehicle Registration project at the General Directorate of Traffic (GDT) which is part of the Government of Bahrain’s drive to achieve the objectives of Bahrain Economic Vision 2030.
Data Analytics: Bahrain Open Data Portal provides a wide range of multi-sectorial government data without any restrictions to be reused, analyzed, or shared while respecting all personal data privacy rules under the Personal Data Protection law. Dealing with Big data has enabled Bahrain to implement several projects that require analysis of large amounts of data such as the population census and other administrative records of the state institutions, saving effort, time and expenses.
Cloud Computing: The Kingdom of Bahrain has taken serious steps to adopt Cloud technology in the public sector in Bahrain to increase efficiency and effectiveness, and reduce operational cost at the same time especially in the light of the government directions towards fiscal-balance and IT expenditure optimization. The Kingdom of Bahrain has launched its unique policy “Cloud-First” that gives a clear road map and guidance for adopting cloud technology at the public sector levels to maintain all measures, including information security.
eWallet Payment Solutions: In order to facilitate the e-Payment solutions in Bahrain, many entities and financial institutions have introduced eWallet technology for on-spot payment as well as online payment.
Electronic Know You Customer (eKYC): Electronic Know-Your-Customer (e-KYC) employs the latest technology to streamline customer authentication in many service providers such as Telecom companies, Banks, and Financial Institutions.
Artificial Intelligence (AI): Bahrain recognizes the importance of Artificial Intelligence in streamlining the business process and has taken various steps in the study and application of AI in different fields.
Robotics: The Kingdom of Bahrain has witnessed several initiatives that reflect the Kingdom’s direction towards adopting robotic technologies in facilitating customer service delivery.
Robotic technology has been implemented in the FinTech industry in Bahrain lately:
The Arab Banking Corporation in Bahrain (ABC) has unveiled Fatema in 2019, the region’s first emotionally-intelligent digital employee.
Bahrain Islamic Bank (BISB) has also launched its first virtual employee Dana as part of BISB’s efforts towards transforming their banking services through emerging technologies.
Kuwaiti Financial House (KFH) in Bahrain has used the first robotic assistant for loan applications. The robotic named “Baitak” Assistant handles customer loan applications and autonomously create credit reports for applicants.
3.3 Financial Technology “FINTECH”
“The Kingdom of Bahrain IS the most established financial centre in the Middle East region due to its advanced regulatory system and educated workforce”
The Kingdom is also home to the world’s highest concentration of Islamic finance institutions with more than 25 institutions covering almost every aspect of Islamic banking. The Banking and Finance sector alone continues to be the largest non-oil contributor to Bahrain’s real GDP. The Central Bank of Bahrain (CBB) is widely regarded as one of the region’s most advanced supervisors. It continuously enhances a tried-and-trusted regulatory framework that meets international best practice and plays a leading role in achieving regional standardization.
“Bahrain is putting in place the building blocks for a vibrant fintech ecosystem”
According to the Special Report of “Arab World: Banking and Finance”, Bahrain fintech ecosystem building blocks include an open, complete and unambiguous regulatory framework, access to talent and human capital development, corporate and start-up incubation, venture funding and market accessibility. Bahrain fintech model offers blueprint for rest of the region Middle East.
“Bahrain leads the region in nurturing and encouraging the growth of digital banking & financial services”
Bahrain has taken steps forward to embrace the FinTech industry with the development of a wide range of financial innovations and initiatives.
Examples of Bahrain FinTech initiatives are: Bahrain FinTech Bay (the region’s largest FinTech hub), Regulatory Sandbox (the only onshore sandbox in the region that will allow startups, FinTech firms, and licensees to provide innovation in banking and financial solutions), in addition to the issuance of Crowdfunding regulations for both conventional and Islamic Banking services and other initiatives that take Bahrain Financial sector to new heights.
Bahrain launched the region’s first regulatory sandbox whereby ideas could be tested, refined, and licensed within a controlled environment until they were ready for market. The central bank has set out rules and frameworks that govern crowdfunding, cryptoassets, robo-advice, open banking and insurance aggregation, as well as creating the FinTech and Innovation unit to smooth the process for start-ups.
“Bahrain is becoming one of MENA’s Fintech hubs”
There is a particular promise in Bahrain’s fintech space. The regulatory framework and the type of technical expertise and history of banking in Bahrain help support the growth of that sector.
The Kingdom’s innovative initiatives in its financial services sectors have revealed its goal of becoming a Fintech powerhouse with $6.47B being the projected value of Bahrain’s Fintech industry in 2020, according to EDB. The industry was propelled forward when Bahrain Fintech Bay was founded in 2017. Fintech Bay is a dedicated co-working space aimed at bringing the full spectrum of financial market participants and stakeholders together. Fintech startups which join this network receive access to meeting rooms, innovation labs, acceleration programs, curated activities, and educational opportunities.
According to society of petroleum engineers, Bahrain is developing its Oilfield 4.0 where Petroleum Intersects the 4th Industrial Revolution
In light of the 4th industrial revolution, the Oil & Gas 4.0 initiative in Bahrain adopts emerging technologies to transform the downstream, midstream, and upstream activities into a connected, information-driven environment through Artificial Intelligence AI and Internet of Things IoT solutions.
3.5 Urban design and Smart Cities
“Bahrain is trying to develop a new transport system linking all Bahraini cities”
An important pillar of urban design is transportation design. The transport sector in Bahrain needs more efficiency in its performance. It is considered the biggest source of environmental pollution and the deterioration of the local and regional climate of Bahrain, because of traditional transport and traffic plans. Bahrain authorities are realising the need for adopting the role of governance and decision-making in the Bahraini transport sector and buildings rules sector to develop it according to the new industrial revolution.
Bahrain has initiated the movement towards smart cities whereby the urban areas in Bahrain can become more efficient and sustainable in both the short and long term with the active participation from public administration, citizens and businesses.
“Bahrain is developing education in the service of the Fourth Industrial Revolution”
To ensure fair and inclusive education for all and to enhance lifelong learning opportunities for all, the Kingdom of Bahrain is working hard to achieve a sustainable, knowledge-based and diversified economy in line with developments in the technology sector in education In order to achieve the objectives of Bahrain Economic Vision 2030.
Bahrain hosted several events to raise awareness of the fourth industrial revolution under the support of His Majesty King Hamad bin Issa Al Khalifa, the Union of Arab Chambers, the Bahrain Chamber of Commerce and Industry, the Ministry of Industry, Trade and Tourism of the Kingdom of Bahrain, the General Secretariat of the League of Arab States, The Arab Investment & Export Credit Guarantee Corporation and the UNIDO International Center for Entrepreneurship and Investment in Bahrain.
- SUMMARY BLUEPRINT
This article considered best practice for sustainable growth in the fourth industrial revolution age in the Kingdom of Bahrain. It highlighted the following key points:
BAHRAIN SUPPORTING INFRASTRUCTURE MAIN CHARACTERISTICS ARE:
BAHRAIN IS A SMALL VIBRANT KINGDOM
BAHRAIN HAS A WORLD RENOWN FRIENDLY BUSINESS ENVIRONMENT
Bahrain is progressing towards digital globalisation in steady steps
BAHRAIN IS DEVELOPING ITS INFRASTRUCTURE TO BECOME DIGITAL GATEWAY TO GCC
BAHRAIN INTRODUCED MAJOR REFORMS TO ADDRESS THE DIGITAL AGE CHALLENGE
BAHRAIN ECOSYSTEM AND INNOVATION MAIN CHARACTERISTICS ARE:
BAHRAIN IS BUILDING A STRONG INNOVATION ECOSYSTEM TO EMBRACE THE FOURTH INDUSTRIAL REVOLUTION
Bahrain aims at becoming regional centre for innovation
BAHRAIN SET FOUR KEY INNOVATION PRIORITIES
BAHRAIN OFFERS A GREAT STARTUPS SUPPORT
BAHRAIN WITNESSED REMARABLE STARTUP GROWTH
BAHRAIN GROWTH INDUSTRIES INCLUDE:
Emerging Technologies: the Kingdom of Bahrain is emerging as a regional leader in digital transformation. VARIOUS FORMS OF EMERGING TECHNOLGIES IN BAHRAIN INCLUDES OPEN BANKING, INTERNET OF THINGS, BLOCKCHIAIN, DATA ANALYTICS, CLOUD COMPUTING, eWallet Payment Solutions, Electronic Know You Customer (eKYC), ARTIFICIAL INTELLIGENCE AND ROBOTICS.
Financial Technology FINTECH: The Kingdom of Bahrain IS the most established financial centre in the Middle East region due to its advanced regulatory system and educated workforce. Bahrain is putting in place the building blocks for a vibrant fintech ecosystem. Bahrain leads the region in nurturing and encouraging the growth of digital banking & financial services. Bahrain is becoming one of MENA’s Fintech hubs.
Oil: Bahrain is developing its Oilfield 4.0 where Petroleum Intersects the 4th Industrial Revolution.
Urban design and Smart Cities: Bahrain is trying to develop a new transport linking all Bahraini cities.
Education: Bahrain is developing education in the service of the Fourth Industrial Revolution.
Future articles will consider best practices from other countries, establish benchmarks and select best practice model to be tailored and adopted by various countries for sustainable growth in the fourth industrial revolution age.
For further references about the topic of the fourth industrial revolution you are invited to read the newly published book by the Union of Arab Banks: “The Fourth Industrial Revolution: Definition, Challenges, and Opportunities – ISBN: 978-1-912227-03-7 by Dr Soha Maad. The book takes you through an enjoyable journey to understand the underlying concepts, frameworks, technologies, drivers, and enablers of the fourth industrial revolution.
Dr Soha Maad is UAB international consultant
and founder and manager of IGROW EEIG
in Dublin Ireland.