Significant developments under way in Bahrain's transport sector

 

With construction under way on the $1.1bn expansion of its international airport and a further $700m investment being made on road and bridge building, Bahrain is working hard to improve its connections to the rest of the world while shortening journey times for its residents. Public transit is also a priority. After one year of operation, the average daily ridership had risen to more than 36,000 passengers, and the government has commissioned a detailed feasibility study on a light rail network. Plans for a new rail and road causeway to Saudi Arabia have been discussed for some time; currently the project is under review to consider private sector involvement, which looks promising.

GROWING SIGNIFICANCE: Transport and communications is a growing component of Bahrain’s economy. According to the Economic Development Board (EDB), in 2015 the sector grew by 5.9%, only slightly decelerating from annual growth of 6.5% in 2014. According to data from the Information and eGovernment Authority, the sector’s contribution to GDP in 2015 was its highest for more than five years at 7.27% at constant prices and 7.52% at current prices, with the latter reflecting a contribution of BD879.67m ($2.3bn) to the economy in 2015. In the first two quarters of 2016 the pace of the sector’s growth moderated to 3% and then 2.4%.

A white paper titled “Drivers of Economic Growth”, which was published by the EDB, identified transport and communications as a key potential driver of economic growth and diversification, and the report noted that the sector’s contribution to GDP had grown from around 4.3% in 2001 to 6.8% in 2011.

DRIVING DEVELOPMENT: In Bahrain’s Economic Vision 2030, the key roadmap steering government strategy published in 2008, policymakers recognised the importance of transport and interconnectivity to the growth and prosperity of the country. It stipulated, “The country will have outstanding road, sea and air connections to global markets” and said it recognised the importance of cutting-edge infrastructure and an appealing living environment for the country’s existing population, but also to attract investment from overseas. In the “Global Competitiveness Report 2016-17”, the World Economic Forum ranked Bahrain 48th among 138 global economies. Although its overall position slipped from 39th place in 2015-16, its infrastructure was given a rank of 32nd, with roads awarded 25th position, ports 30th and the quality of airport infrastructure judged to be 46th. Inadequate supply of infrastructure was, however, the sixth most common cause for complaint among the businesses surveyed for the report.

RENEWAL & EXPANSION: The country is working to improve infrastructure and connectivity, as well as the speed at which people and goods can enter and leave Bahrain. A considerable portion of the $10bn the kingdom is receiving in investment from GCC neighbours as part of the Gulf Development Fund package is being devoted to the transport sector, where key facilities have long since surpassed the volumes of traffic they were designed to carry.

Bahrain International Airport was established in 1927 as the first airport in the Arabian Gulf, with the last major upgrade completed in 1994, handled more than 8.5m in 2015. The airport’s total capacity is also to be expanded to 14m passengers per annum. The 25-km King Fahd Causeway linking Bahrain to Saudi Arabia, which opened in 1986, almost 20 years later in 2005 saw some 12.7m people cross the bridge. By 2015 this had increased to 23m. The Abu Dhabi Fund for Development is funding 80% of the $1.1bn Airport Modernisation Project that is already under way, and both Saudi Arabia and Bahrain have made firm commitments to build a second causeway that will carry railway traffic, as well as cars and lorries.

GATEWAY HUB: These infrastructure improvements are vital if Bahrain is to leverage its strategic position in the northern Gulf and its close proximity to the largest economy in the region in order to fulfil its potential to grow as a gateway logistics hub for the GCC. Many of the most recognisable names in international logistics have already recognised the country’s potential, with Aramex, FedEx, Kuehne+Nagel, TNT and UPS among those well established in the kingdom. DHL made Bahrain its Middle East hub in 1976. Forty years later, in January 2016, the Bahrain News Agency reported that DHL had unveiled the two newest additions to its MENA air fleet, which is based at Bahrain International Airport. The Boeing 767-200 aircraft have a maximum take-off weight of 159,200 kg and will join nine 757-200s based in the kingdom, increasing the number of weekly flights to destinations across the region to 155. DHL aircraft from Bahrain fly to destinations in Saudi Arabia, the UAE, Afghanistan and Pakistan, and starting in February 2016 DHL Aviation also increased its service from Bahrain to Beirut to offer an alternative for companies unable to ship overland to Lebanon, due to the ongoing conflict in Syria. New firms either considering investing in logistics or hoping to service the wider Gulf region through exports of manufactured goods or services have opportunities to invest in a country that can offer a well-educated, bilingual workforce, as well as increasingly generous rules on foreign ownership in many sectors. In July 2016 the Cabinet approved legislation allowing 100% foreign ownership of firms in the following sectors: administrative services, arts, entertainment and leisure, food, health and social work, information and communications, manufacturing, mining and quarrying, professional, scientific and technical services, real estate and water supply.

INVESTMENT PARK: Foreign ownership is also under consideration for companies that open at the Bahrain International Investment Park (BIIP), a 2.5m-sq-metre serviced business park that was established in 2005 and is located 10 minutes from Bahrain International Airport, five minutes from Khalifa Bin Salman Port and 20 minutes from the King Fahd Causeway to Saudi Arabia. The park has 121 companies on-site, employing 4500 workers and has already allocated approximately 86% of its land and 92% of the space in an office building on the site. “Companies are attracted to the physical infrastructure, with the close proximity of the port and airport, but also by Bahrain’s relationship with Saudi Arabia, as there is only one traffic light between here and the causeway,” Maria Gilsenan, marketing executive of BIIP, told OBG.

INVESTMENT WHARF: Logistics companies can also choose to locate at Bahrain Investment Wharf, which consists of a 900,000-sq-metre light industry and warehousing park, with facilities for cold storage, package and re-distribution, along with companies producing pharmaceuticals, plastics, paper, electronics and electrical machinery, textiles and chemical products.

LOGISTICS ZONE: Close by is a Customs bonded logistics zone, the Bahrain Logistics Zone, which covers over 1m sq metres and caters specially for a number of companies involved in all aspects of component assembly, labelling, packaging, repackaging, weighing, kitting, palletising, testing and repair.

The EDB’s September 2016 quarterly reported stated that Bahrain’s first freehold trade zone, phase 1 of the Investment Gateway Project, had opened on a 600,000-sq-metre reclaimed island in Hidd, offering 300 plots for warehousing, light industry and showroom space. Manara Developments has sold 95% of the first phase, but is building an additional 2m-sq-metre area that will be completed in 2018.

The clustering of these industrial zones with such ease of access to land, sea and air distribution hubs is a draw in itself, alongside low prices and ease of access to the biggest economy in the region. “There are 37 entry points to Saudi Arabia and the King Fahd Causeway is the most efficient, and in these difficult economic times when companies are trying to save costs, these factors offer excellent opportunities for businesses to save both time and money,” Hamad Fakhro, director of the Logistics Zone Directorate at the Ministry of Transportation and Telecommunications (MTT), told OBG.

Another attraction for multinational enterprises are the bilateral trade agreements that Bahrain already has established with some 40 countries, including free trade agreements with the UK, Singapore and the European Free Trade Association states Iceland, Liechtenstein, Norway and Switzerland, as well as dutyfree access to a total of 17 Arab nations.

REGIONAL COMPARISONS: These attractive ingredients were recognised in the 2016 Agility Emerging Markets Logistics Index, which ranked Bahrain as seventh out of 40 countries for market connectedness, which is one of the factors used to determine its overall rankings. The UAE was judged to be top for connectedness, with Saudi Arabia and Oman ranked fifth and sixth. Qatar was below Bahrain in eighth place and Kuwait ranked 29th. In another key index, the World Bank’s 2017 ease of doing business index, Bahrain jumped up three places to rank 63rd out of 189 countries, although its ranking under the category of trading across borders remained unchanged at number 82nd. The Doing Business report for this category measured the expense and time required to import and export goods and complete Customs procedures.

Although export fees were considerably cheaper than both the wider MENA region and OECD high-income countries, when it came to dealing with border agents at the ports, the time and cost involved in receiving government export documents took much longer and cost more than in OECD countries. It took 24 hours to receive the documents, compared to the three hours on average for OECD countries, and a typical cost of $211 in Bahrain, compared to $36 in OECD nations.

TRADING PARTNERS: Bahrain’s pivotal role as a regional centre for both exports of products manufactured in the country as well as re-exports are evident from its trading figures. For instance, the EDB reported that in August 2016 the main export markets were Saudi Arabia ($79m), the US ($67.2m) and Qatar ($42.8m), while leading re-export destinations were Saudi Arabia ($48.2m), the UAE ($13.8m) and Kuwait ($4.8m). The most valuable categories of imports were for cars, followed by aluminium oxide and mobile phones with China, the UAE, the US and Japan representing the most significant import markets.

TRANSPORT IMPORTS: Although some of the vehicles imported to the kingdom may subsequently be re-exported, the full-year data for 2015 shows the importance of the transport sector to import trade. Among its top-100 import categories in 2015, the country imported 52,726 motor vehicles of various sorts with a combined value of BD554.37m ($1.5bn), as well as BD21.84m ($58m) worth of Japanese car parts.

The single most valuable import commodity of the year was Japanese Jeeps, current year, spark ignition over 3000 cc. These 12,897 new four-wheel drives were valued at BD175.42m ($465.3m), more than the BD174.33m ($462.4m) in aluminium oxide imported from Australia to feed Bahrain’s aluminium industry.

The US, Thailand and Germany were other key exporters of cars to Bahrain in 2015. In the same year, Bahrain also imported BD55.82m ($148.1m) in aircraft and helicopter parts and engines from the US and the UK and 19 turbo-jets at a combined value of BD6.9m ($18.3m) from the US. In 2015 Bahrain imported 19 tugs and pusher craft for a combined value of BD35.9m ($95.2m) from the UK, Panama and Singapore. In addition, BD6.7m ($17.8m) worth of electric power railway coaches were imported from Canada.

VEHICLE NUMBERS: The dominance of private transport in Bahrain can be demonstrated when vehicle registrations are compared to the total population. By the end of 2016, according to data from the Information and eGovernment Authority, there were 522,780 privately owned cars in Bahrain, when the total population (including citizens, expatriates and children) was 1.37m, which works out as one car for every three people in the country. In the same year, 32,595 new private vehicles were registered in the kingdom. The total number of private vehicles registered on Bahrain’s roads grew by over 109% during the course of 11 years, from 226,918 registered in 2004 to 475,406 in 2015.

BUS COMPANY: In an attempt to reduce congestion on Bahrain’s roads and to offer a transport alternative, a joint venture was created to run a new network of buses. The partners in the Bahrain Public Transport Company (BPTC) are the UK’s National Express and Ahmed Mansour Al Aali, a major Bahrain construction and contracting group. The previous bus operator in Bahrain had 35 buses, but the new firm has 141 vehicles and has been granted a 10-year concession with the MTT as the client. It runs 29 routes that by 2016 covered 77% of the country. The buses are manufactured by MANS and Optare and feature CCTV cameras, free Wi-Fi and air conditioning. An app has been created for finding timetables and fares, and a Go card, similar to London’s Oyster card, has been introduced to enable cash-free transactions for passengers. “We currently have 4 bus shelters that have air conditioning so that we can test the design in local conditions, and we are also working on solar panels tenders to power bus shelter lighting and digital information screens,” Nada Yousif Deen, director of land transportation projects at the MTT, told OBG. British company Trueform won the contract to provide 300 of these innovative bus shelters for the MTT. According to figures from the MTT’s Land Transport Affairs Office, the busiest day on record for the BPTC was in July 2016, when it carried 73,000 passengers. By December 2016, average daily passenger numbers had grown from 16,000 to 36,000, and the target is to reach 51,000. In 2017 the MTT has launched a new feasibility study into developing a light rail network for Bahrain, which would further increase the incentives for people to use public transport and reduce congestion on the roads.

CAUSEWAY TRAFFIC: Easing traffic and avoiding lengthy delays on the King Fahd Causeway is one of the key objectives of transport planners on both sides of the border. The 25-km bridge is heavily used by commuters in both directions, with many expatriate oil workers preferring to base their families in Bahrain, and many Saudi residents driving their children to schools and universities in Bahrain. It is Bahrain’s key freight route, and thus vitally important to companies supplying the market in Saudi Arabia or relying on imports for their manufacturing processes. Bahrain is also a popular weekend destination for Saudi citizens, many of who have weekend homes in the country, and the crossing can become particularly busy when weekends coincide with holidays. The Ministry of the Interior’s Nationality, Passports and Residence Affairs (NPRA) Directorate is responsible for checking passports, while Customs Affairs, another branch of the same ministry, is responsible for border protection and cargo examination. According to the NPRA, visitors arriving through the causeway in 2016 rose by 3.4%, compared to 11.82m 2015, to a total of 12.22m. More than 23m people travelled across the causeway in 2015, a 5.8% increase on 2014, according to a January 2016 Gulf News report. The average number of vehicles crossing the bridge was 28,569, a 6.23% increase on 2014. To speed toll payments and passport controls, there is a plan in place to increase the number of Customs and immigration lanes from 17 to 45 in 2017. Both Saudi Arabia and Bahrain have made commitments that a new crossing, to be called the King Hamad Causeway, will be completed by 2023. The new $3bn crossing is designed to carry both road vehicles and trains and will allow Bahrain to connect to the GCC rail network. The deadline for the completion of the wider rail network has been delayed to 2021 after member countries acknowledged that the original 2018 deadline would not be met. The MTT expects 36% of freight and 6% of passenger traffic to switch over from road to rail when the new bridge is completed.

AIR TRAFFIC: As construction work on its new $1.1bn terminal gets under way, passenger numbers at Bahrain International Airport are increasing. The total number of passengers travelling through the airport reached 8.02m by the end of November 2016, compared to 7.85m in the first eight months of 2015, a 2.2% increase, according to the MTT. The new airport building will not provide additional cargo facilities. MTT data for 2016 to the end of August showed demand was unchanged, with 139.6m tonnes carried in 2015, compared to 140m tonnes in 2016. Maher Al Musallam, CEO of Gulf Air, told OBG, “There is a lot of growth to look forward to. Bahrain is a mature market in aviation as one of the oldest in the GCC, yet it is emerging in terms of the existing new areas of potential that we are constantly looking to leverage. As we work to build upon the synergy between local aviation entities, Bahrain’s national carrier has a future of strategic growth that sees continued focus on passenger comforts and convenience. Alongside this we are witnessing the development of Bahrain’s aviation infrastructure – boosting the kingdom as a whole.”

GULF AIR: The national carrier, Gulf Air, which is 100% owned by the government’s Mumtalakat Holding Company, is investing in $7.6bn worth of aircraft orders that are expected to begin arriving in 2018. The airline will purchase 16 Boeing 787-9 Dreamliners and 29 Airbus A320s and A321s over a number of years. As part of its fleet renewal programme, it awarded B/E Aerospace a contract to supply all business class seating, while Rolls-Royce was awarded a $900m contract for Trent 1000 engines to power 10 Boeing Dreamliner aircraft and provide long-term service support, while giving Gulf Air the option to buy a further six engines. In tandem, an agreement with Thales will secure the AVANT in-flight entertainment system for the newest 787s.

In 2015 Gulf Air reported a 62% decrease in losses to BD24.1m ($63.9m), reflecting continued improvement in the airline’s overall performance since its restructuring back in 2013. Losses have eased by a combined 88% since 2012, when they totalled around BD196m ($519.9m). This positive trend is expected to continue in the years ahead, given the company’s ongoing strategy of investing in the airline’s controlled future growth.

SEA TRAFFIC: Since 2009 the Khalifa Bin Salman Port (KBSP) has handled most seaborne freight traffic in Bahrain, with the older Mina Salman Port serving the requirements of the US Navy’s Fifth Fleet. KBSP has an 1800-metre quay that includes a 900-sq-metre container terminal served by four 61-metre post-Panamax cranes. It also has facilities to handle general cargo, roll-on/roll-off and passenger craft, with cruise liners among the many ships calling at the port.

The port is operated by the private operator APM Terminals and supervised by the MTT’s Ports and Maritime Affairs Directorate. Data published by APM Terminals for 2016 showed a decline in volumes of some general cargo, which may have more to do with wider changes in the economy or particular business ventures than the port’s operations. For instance, there was a dramatic decrease in the number of livestock shipped through the port from more than 439,000 to just over 117,000, which may have resulted from the government’s ending of meat subsidies in the second half of 2015. Meanwhile, the reduction in tonnage of sugar shipped from 285,668 tonnes to 60,618 may be a reflection of the activities of the country’s sugar refinery. The number of cars handled by the port also declined from 95,534 to 53,817. The container shipping levels had increased slightly by 1.2% from 260,857 full twenty-foot-equivalent units (TEUs) to 263,981 in 2016. The number of empty containers handled has also increased marginally from 109,2020 TEUs to 110,494 TEUs, as did overall number of containers handled, which was up from 370,059 TEUs to 374,475 TEUs.

OUTLOOK: The start of construction work at Bahrain International Airport and the regular sight of red public buses on the streets of the kingdom are signs of progress being made in improvements to the country’s public transport facilities and services. Although the prospect of a new light rail network and a second causeway may be more distant, transport planners in the country know that these are challenges that must be solved if the economy is to grow through improvements in tourism, logistics, transportation and trade.

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The Report: Bahrain 2017

Transport chapter from The Report: Bahrain 2017