Bahrain Financial Harbour: Business Location in the Middle East
|Wednesday, 29 June 2011 10:19|
Interview with Omar Al Mardi, Managing Director, Bahrain Financial Harbour
What is your perception about the recent events that have happened in the area? How do you think Bahrain will face these challenges? Do you think Bahrain is currently volatile?
I think the situation in Bahrain is unique compared to other political movements in the region and we face both external and internal issues. If you consider Bahrain’s location in the Gulf region whereby we are surrounded by Arab and non-Arab Muslim countries, then you will appreciate our multiculturalism. Bahraini nationals are of Arab, Persian and Asian descent, and within each of these ethnicities, there are both Sunni and Shia Muslims. This diversity has enabled Bahrain to develop into the culturally rich nation that it is today, but conversely, it can at times create tension within our country.
How has this affected the real estate sector?
A multitude of factors have affected real estate in Bahrain. Before the political crisis, we were faced with the world economic crisis which had an effect on liquidity and its availability, among other things. This adversely affected the real estate market because people were reluctant to invest.
During this time, land prices increased greatly as did building materials prices. This required financing at high rates of interest. When people realized the continuing international ‘bubble’, then prices decreased rapidly but were on the increase again until the political situation caused a drop yet again. As a result, there are many projects that have yet to be completed and we are hoping we can find the financing to start them up again soon.
Bahrain has very little when it comes to natural resources and so we depend on direct foreign investment. When there is political instability which threatens security, then we are at risk of having little foreign investment. We are hopeful that the situation will improve but the adverse effects on the real estate market are still present. On a positive note, the oil price has increased. This benefits the region as it brings investors from oil rich countries into the country.
There is also a higher local demand in Bahrain that differs to other Gulf countries. Because our population density is very high- with 600-700 people per square kilometer, the local demand is enough to push the construction market.
Bahrain Financial Harbour ("BFH") has recently signed a 7 year BD90.5 million (US$ 240 million) Ijara facility for the Financial Center Project with Al-Salam Bank- Bahrain (as Mandated Lead Arranger), BBK, Kuwait Finance House (Bahrain and Kuwait), and National Bank of Bahrain (as Co-Lead Arrangers), and Bahrain Islamic Bank (as Arranger). Are you going to seek further financing and what does this project mean for BFH?
This was a very unique transaction because it was not done under Islamic or traditional banking guidelines but rather, with a combination of both. It was subject to Shariah Law and to English law and it also provided the assurances that foreign investors would like to see.
I believe that this is an excellent example of a successful business venture for foreign investors interested in coming to the region. This proves that the market is progressing because investors are willing to provide us with a significant amount of capital in order to continue development. With this financing, our intention is to complete the infrastructure systems and facilities in Bahrain and to support the businesses within the Financial Harbour complex to eventually become the business location of the choice in the Middle East.
At BFH, we also have a mall with boutiques to fund as well as social/cultural events to sponsor. We also endeavour to strengthen our communications role; in the near future, we aim to develop a TV channel to cater to the Harbour, and promote businesses. BFH will become the leading business location in the Middle East.
Are you looking for any new investors?
For the time being we are quite satisfied, however, we are still hoping to complete our facilities and infrastructure as well as other projects in the complex. Some of these have been delayed much longer than anticipated and I believe that if we reach a stage where we have made our facilities operational and successful then we will determine ways in which to support the completion of the other projects.
When do you think the whole thing will be done?
I think the political situation is calming down and now it is time to get back to business as usual. Within the next six months to a year we will seek new targets and projects and we hope that we will be successful in our endeavors.
Gulf Finance House sold its remaining stake of 49.88% in BFH Company to Emaar, a Bahrain- based investment company with its headquarters in Bahrain. What are your expectations from the change in ownership at BFH and how is this going to impact your project?
Since we began this development we had a vision which was for this to be 100% Bahraini project. Now that it is, we have the ability to align our aspirations with the 2030 national vision.
Our aim is to facilitate our economy’s growth. In order to do this, we knew that we needed to have complete control over the project and commercially speaking it was viable for us to acquire the premises. We wanted to have the freedom to develop BFH in a manner that is fitting with Bahraini society in order to encourage people to develop an affinity towards BFH as a landmark and thereby recognize it as a necessary part of Bahrain’s landscape.
How has your strategy shifted due to the crisis internally in Bahrain and the financial crisis? What would you like to achieve by the end of the year and the beginning of next year?
Although we have not changed our strategy, perhaps we have changed our priorities because of the financial problems that we face. We are trying to accommodate for the difficulties facing our investors so they can tackle these issues in short time.
Our priority is to complete the infrastructure of the development and attract more investors to the building in order to increase occupancy so that we can be stronger both financially and commercially. Within a short period of time, we believe that we will revert to our original strategy which was aimed at improving Bahrain’s national interest as well as attracting investors from the region and abroad.
What is your dream for Bahrain Financial Harbour?
Many people who have witnessed the recent events in Bahrain do not know that we have faced similar problems in the past and instead wrongly associate this with similar uprisings in the region.
Again, they should be reminded that there are many different factions within Bahrain who saw the attention given to the uprisings in the region as an opportunity to get international attention and therefore to try to achieve their own goals.
In the last decade there was a focus on solving similar problems by prioritizing security measures, but then, the government began to look towards other factors such as political reform. For example, transparency has now been adopted as a policy for the government and education, healthcare and the media have also become priorities.
I believe that the individuals who started this recent movement had their own objectives in mind. Of these persons, those who were under twenty have not seen how the achievements and reforms of the past thirty to forty years have shaped the current situation and improved the country dramatically. We understand that some of these young people have new interests and outlets and they see the world through the internet and media. They are aspiring for better jobs, opportunities, and freedoms and any legitimate goal will of course be achieved. Our generation will help them in achieving more. Education is significantly higher in priority in this regard.
Unfortunately, we have limited resources for educational programs and most of what we have is based on foreign investment. And so it is imperative that we continue our endeavor to make the country eligible and attractive for foreign investment.
As for the BFH, my dream is to establish the best business location in the Middle East. For example, if a business would like to establish their headquarters in the Middle East - the no.1 choice should be BFH and Bahrain.