|
|
|
[Home Page] |
|||||
|
|||||
Advertisers Bank of Bahrain and Kuwait B.S.C.
|
 |
Bahrain: The financial hub of the Middle East
Bahrain stepped in to fill the banking void that befell the Middle East when Lebanon - the banking capital of the region until the '70s - got mired in its civil war. Since then, Bahrain hasn't looked back. While planning its economic diversification, Bahrain took advantage of its position as the Gulf's central oil supplier to attract the world's leading banks and insurance companies. Bahrain is now known as an international and regional wholesale interbank money center for the Middle East and beyond.
"The Bahrainis were smart enough (during the Lebanese Civil War) to create a tax haven," said Michael Langton, director of the Bahrain Institute of Banking and Finance. "Bahrain is a platform in the Gulf, and it's definitely worth partnering with. It has the visionary leadership of the emir, the crown prince and the prime minister - all who fully appreciate globalization."
The first offshore banking license was awarded in 1975. The country now has dozens of OBU's, as well as commercial banks, specialized banks, investment banks, representative offices, money and foreign exchange brokers and moneychangers. It also has a large number of insurance companies.
"In many countries, the word 'globalization,' or 'opening the markets, probably comes as a shock or a surprise. But in Bahrain the banking center has been open to various international banks, and we have presences of a good number of banks from the United States, from Europe, from the Far East, and from the region. It is also the largest center for Islamic banking - a concept of banking that is catching up very fast and is complementing the conventional banks," said Murad.
Bahrain's ability to branch out into new economic endeavors has helped the country. According to Dr. Abdullah Dl-Kuwaiz, Gulf International Bank's general manager, "Bahrain is the most diversified economy in the Gulf, which came by both plan and default."
El-Kuwaiz said this because "Bahrain had contacts with the outside world from the very beginning, and it had the highest rate of educated people, per capita, in the Arab world. We have a 90 percent rate of literacy, so the economy benefits from this."
"When the economy is diversified, it is able to absorb shocks," said El-Kuwaiz. So when the price of oil dropped, we were affected, but we had so much diversification that we were not crippled.
Gulf International Bank's general manager noted the importance of Bahrain's location next to Saudi Arabia, "which is a huge economy. When you have an economic slowdown, Saudi Arabia will come to Bahrain, rather than Europe."
"It is also very important to remember that Bahrain has a transparent legal system, which you won't find elsewhere in the Arab world," said El-Kuwaiz.
Some bankers feel Bahrain may soon risk becoming over-saturated with banks.
"Also, one of Bahrain's attractions is its closeness. Don't forget that one of the attractions of this country is its proximity to Saudi Arabia, and its ease of access to Saudi Arabia, which has a significantly larger economy than here."
As with real estate agents, some bankers stress the importance of "location, location, location."
"The downturn in oil prices or other strategic commodities does not by itself have a negative impact of business. Therefore, we are not dependent on oil prices, to a certain degree; however, we are involved in many oil and gas projects. We have clients who are in the business, such as commodity traders, oil services, and contractors to the global oil industry," said Ghazi Abdul-Jawad, president and chief executive of the Arab Banking Corp.
"We actually are in a win-win situation, if oil prices increase, naturally the pace of economic development in many oil-based countries would open up opportunities for our banking services. Equally, a drop in oil prices would tend to create opportunities for us.
Albert Kittaneh, Chief Executive Officer of Bahrain Middle East Bank agrees. “Bahrain does not have ‘boom or bust cycles.’ We did not have distrubing negative effects when oil prices declined. Even in the 1980s when the region had eceonomic troubles, Bahrain still maintained an economic equibibrium.”
Bahrain recently signed a bilateral investment treaty with the United States.
"We have set year-end 2001 as a deadline for securities staff at banks, brokerage firms, investment banks, investment advisory services and asset management firms operating in Bahrain to be certified and registered with the Bahrain Stock Exchange," said BSE Director Shaikh Ahmed bin Mohammed Al Khalifa.
Al-Ahli's CEO agrees with the BIT, and believes it is important for Bahrain to keep in step with the times as globalization is hitting its shores. "We are in the process of merging with a Kuwaiti-owned London-based bank, called the United Bank of Kuwait. All banking units in the Gulf and Middle East are far too small and in the process of consolidation and rationalization that you've seen elsewhere.
'It was always bound to hit this part of the world," said Fuller, "I'm just surprised it didn't get here sooner. Banks need a wider range of products and they need more capital, particularly as the regulatory environment becomes tougher."
|
|
Table of Contents The Al Khalifa Dynasty - Ruling Bahrain Since 1783 |
|
One of the first things a visitor notices driving down the streets of Manama, Bahrain's capital, is that many impressive bank buildings -- new and gleaming of marble, glass and brass - line the roads. From that observation, it's easy to figure out that Bahrain is the financial services capital of the Middle East.
"The fact that we have this excellent selection of international financial institutions operating out of Bahrain talks well of how we have worked together," said Murad Ali Murad, chief executive officer and general manager of the Bank of Bahrain and Kuwait.
Bahrain realized it had to diversify "because we don't have much oil, the oil sector contributes only 25 percent of the Gross Domestic Product.
"My own perception is that, of course, there are far too many banks, because it makes life tough," said Michael Fuller, CEO of Al-Ahli Commercial Bank. "Nevertheless, we've managed to increase our profit every year for the last six or seven years. So I guess there must be enough business to go around.
"There are many things that augur very well for Bahrain, the banking section as a whole, has never seen or lived through a real crisis: There has been no scandal, and it has become resilient with the changing global environment in terms of international finance," said Abdul-Jawad.