The opening of Bahrain Financial Harbour’s first phase, offering 60,000 sq m of office space, coincides with the central bank’s efforts to fine-tune regulations to attract financial firms, especially those focusing on Islamic banking, asset management and insurance.
The kingdom, which took the mantle of regional financial hub from Beirut in the 1970s as Lebanon slid into civil war, has in recent years watched a string of international names moving to Dubai International Financial Centre and Qatar Financial Centre.
Saudi Arabia, the region’s largest oil-driven economy, is also courting international finance, doubling the number of banks and licensing more than 50 investment banks and brokerages in the past few years, threatening Bahrain’s role as Saudi Arabia’s offshore banking hub.
Financial firms are investing in the Gulf to chase business associated with increasing petrodollars that have seen the Gulf states’ foreign reserves growing by about $155bn (€114bn, £78bn) a year over the past three years, according to Saudi Arabia’s Samba Financial Group. With $1,000bn of projects planned in the region, banks are seeking financing opportunities as the Gulf uses oil surpluses to build infrastructure.
New regulations encouraging alternative investment firms such as hedge funds to Bahrain are expected to be passed within days, Rasheed Mohammed al-Maraj, Bahrain’s central bank governor, told the Financial Times.
The central bank has fostered the development of Islamic financial products by leading the issuance of Islamic bonds and will soon introduce new products to help the sector.
Stephen Rothel, Bahrain Financial Harbour’s chief executive, said a significant portion of the first building has received leasing commitments from interested firms, including local institutions and Dexia Asset Management of Luxembourg.
Jane Dellar, managing director of Bahrain Financial Services Development, part of Bahrain’s Economic Development Board, says the kingdom is growing from a solid base, having already licensed 391 financial services firms, more than Dubai and Qatar.
But competition from neighbouring Dubai is strong, with most main investment banks opening headquarters at the Dubai International Financial Centre, using the tax-free zone in the region’s business and tourism hub as a launch pad for serving the region. Qatar has developed a more inwardly focused centre, aiming to create a domestic financial services sector to serve its rapidly growing, gas-fuelled economy.
A key target for the new development is Royal Bank of Scotland, which has received a licence to operate in Bahrain but is also opening offices in two other Gulf states, and has yet to define its regional base.
Nicola Horlick, chief executive of Bramdean, said the company was considering opening an office in Bahrain as a regional base for asset management services.
"We have chosen Bahrain," she said on the sidelines of an FT conference in Bahrain.
