The construction sector in Bahrain has finally gained momentum after the 2008-09 financial crises. The government is taking strong initiatives to push the sector by investing heavily and the total value of projects planned or underway is estimated to be around USD 52 billion. The construction sector in Bahrain currently contributes 5% to the local GDP and is expected to increase by 4-6% annually. It is projected to reach USD XX billion by 2021 at a CAGR of X%. Greater exposure to trade, attractive investment environment, competition, and diversification are factors affecting the growth of this market.
The economy here is more diversified than other GCC countries and strong government initiatives to invest in major construction projects is driving the sector. Private contractors have benefitted from the expansion and construction projects with the government’s Economic Vision 2030 plan in sight. As a part of this plan, many projects have been proposed, including construction of USD 5 billion rail network, USD 5 billion Saudi-Bahrain causeways etc., which are targeted to be completed by next year.
Restraints and Challenges
The process of project approval in Bahrain is a tedious task and discourages foreign companies from investing in construction projects here. Political instability threatens the economic stability, thus adding to more complications for foreign investors. Being an oil and gas-dependent economy, the price movements remain a source of risk as the changes in prices affect every other sector, alarming foreign investors.
Most of the labor and workers in Bahrain are unskilled and difficulty in availability of visa discourages foreign labor.
The cost of setting up and running a construction project in Bahrain is very low as compared to other GCC countries. Bahrain is a ‘free zone’, which allows 100% foreign ownership of business and real estate; and free movement of profits, capital, and dividends for the investors. Bahrain is a great financial hub and its developed banking sector attracts more foreign investors.
Many labor market reforms backed by the economic development board shall boost growth and improve productivity and output in the construction sector. For domestic players, signing of the Bahrain-US FTA has been very beneficial and has opened new opportunities and projects.
Key Deliverables in the Study