Subsidised salaries and upskilled workers: How Bahrain is encouraging firms to hire citizens

Bahrain might be the smallest country in the Gulf, but it is taking huge steps as it joins the race along with other nations in the six-member bloc to attract foreign capital.

Noor bint Ali Alkhulaif, the chief executive of Bahrain’s Economic Development Board (EDB), is pragmatic about the country's approach.

“Everyone is looking for ‘how do I get the best quality at the lowest cost?’ – that's the formula that they have to live by. So we're not surprised by it … we do understand that this is how businesses work,” Ms Alkhulaif, who is also Bahrain’s Minister of Sustainable Development, told The National in a recent interview in Bahrain.

Bahrain’s “cost competitiveness” comes from having no local corporate tax other than the global minimum tax of 15 per cent, no income tax, no repatriation taxes, no capital gains tax – so “all of that is a huge saving for an investor”, she explained. Investors can also own 100 per cent of their businesses across several activities, which offers flexibility.

A central element, however, is its pool of skilled labour and talent, Ms Alkhulaif said. Bahrain’s labour fund Tamkeen, under its National Employment Programme, encourages private sector enterprises to employ citizens by offering wage support ranging from 30 per cent to 70 per cent of salaries between three and five years.

“This makes a huge difference for a company, even if it's a large company, the moment you start in a new setup, it's a huge upfront investment,” Ms Alkhulaif said.

“So, if we can support and reduce that cost, while ensuring that Bahrainis get given an opportunity to work, that is really the formula that we go by when it comes to direct incentives that are given to companies,” she said.

Tamkeen also subsidises the cost of training and upskilling for Bahrainis. The aim is to not only offer incentives in terms of cost, but also change behaviour, Ms Alkhulaif said.

“So at the moment, if I need a lot more coders than I need lawyers, a lot of the programmes would go towards digitisation. So, you'll have new programmes introduced to say you can get support for moving into a digital system, or you'll get more support if you hire coders. So, changing then the design of the programmes to incentivise behaviour so that your economy moves towards what the future needs is also an important thing.”

Bahrain’s unemployment rate stood at 6.16 per cent in 2024, and the country is taking several steps to boost the hiring of its citizens, similar to localisation policies followed across the Gulf countries.

In 2023, Bahrain also launched a golden licence initiative to attract new investment projects and boost job creation in the country. Companies with strategic projects that will create more than 500 jobs in Bahrain, or those with an investment value exceeding $50 million, are eligible for the licence.

The EDB has been recoding growth in foreign direct investment – the entity said last month that it attracted $1.52 billion in direct investments from 75 local and international projects during the first nine months of this year. These projects are projected to generate more than 4,300 jobs within three years.

The EDB, which attracted $1.8 billion in FDI last year, up from $1.75 billion in 2023, has set an “ambitious target” for this year, which it is also hoping to exceed, Ms Alkhulaif said, without disclosing a specific figure.

The country's total FDI, as a stock percentage to gross domestic product, stood at 96.5 per cent last year, according to official figures.

No impact from regional conflict

In June this year, when the Israel-Gaza war intensified and the US bombed Iranian nuclear facilities, there were concerns about the impact on Bahrain, which is home to the US Central Command’s regional base. The Gulf state at that time issued work from home orders and ramped up security.

However, investors remain confident about the security and stability in the country, Ms Alkhulaif said.

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“The economy is able to bounce back from any of the issues that are happening around it. And so far, even during the peak of the conflict, we haven't seen investors backing out … from our experience as EDB,” she said. “No one changed their travel plans, because we have that ongoing communication with them, and they do trust us because it's something that we build over time, and there is that awareness.”

She stressed that with no country immune to challenges, it is essential to stay agile. “As a region, we want peace … But so far, our economies have shown how agile and resilient they are to shocks, and it's because everyone across the economy and the country is working towards one goal – it's the recognition that economic development brings peace, prosperity, and social protection.”

Deals spree

Bahrain has also not been affected by the global trade turmoil caused by tariffs introduced by US President Donald Trump and remains subject only to the minimum 10 per cent base tariff rate that was in place earlier, Ms Alkhulaif said.

The country signed a comprehensive security integration and prosperity agreement (C-Sipa) with the US in 2023, which provides a framework for the enhancing of collaboration across sectors including emerging technology, trade and investment.

“The US Department of State continues to work with Bahrain to bolster trade and investment opportunities under C-Sipa, particularly related to supply chain resilience and infrastructure,” according to the EDB.

In July, private sector companies from Bahrain and the US also signed investment deals worth $17 billion. The deals, covering aviation, technology, industry and investment, were signed during the US visit of Bahrain’s Crown Prince Salman bin Hamad Al Khalifa, who is also Prime Minister.

The relationship with the US is on a “security level, on a political level, but also on an economic level”, Ms Alkhulaif said.

“We are open for business with the world, but we do have strategic markets, and they're the US, UK and Europe."

The EDB is also in discussions with markets in the Mena region and is seeing “a lot of interest, also from Asia, from the east”, she added.

The country, which has signed nine free trade agreements, also has additional deals in negotiation to boost investments. The EDB is currently focusing on the five country-wide strategic sectors, including financial services, manufacturing, logistics, tourism and technology, while also working on education and health care.

The entity has set high targets “because we believe in our products, we believe in our value proposition, and we also believe in the interest that the region is seeing”, Ms Alkhulaif said.

“We see the flow of wealth, whether it's investments coming in, whether it's high net worth individuals moving in, and we want to capture a part of that.”

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