Bahrain has made strong strides in privatisation as part of its general economic policy and has also succeeded in drawing to itself a substantial amount of foreign direct investment (FDI) over the past few years.

It has advanced from receiving an average annual FDI of $460 million before 2000 to $2.9 billion in 2006, a progress Bahrain’s Export Development Society chairman Dr Yousuf Mashal attributes partially to the government’s strategies and the priority to privatisation.
Utilities and ports have done rather well in the privatisation initiative. Al Ezzel Power Company, Bahrain’s first private power project, has a capacity of 960 MW and is being operated by a consortium of Suez Energy International (formerly Tractebel Electricity & Gas International) and Gulf Investment Corporation.
The Bahrain Government sold the Al Hidd Water and Power Plant to a consortium of International Power, Sumitomo Corporation and Suez.
In the ports sector, it has granted a concession to APM Terminals to operate Mina Salman and the new port at Hidd, Mina Khalifa bin Salman, once it is completed in the  third quarter of 2008.
“The decision to privatise our ports will prove to be sound both in terms of its benefit to the economy as well as to the expected reduction in both ports services and shipping costs,” said head of Customs, Ports and Free Zone Affairs Shaikh Daij bin Salman Al Khalifa. It has been estimated that the government stands to save as much as BD350 million in the next 25 years just by having someone run its ports.
An advantage in privatising the ports can be seen in APM’s decision to work beyond operations and invest in high-tech equipment and expansions.
One of the developments in the ports sector was the formation of the General Organisation of Sea Ports, a regulatory body.
The privatisation policy also covers the creation of a special economic zone adjacent to the new port.
Greatly encouraged by the privatisation developments, the government is hoping private businesses, both local and foreign, will invest in other sectors.
A Brand Positioning Strategy being implemented by the Eeconomic Development Board aims to disseminate the opportunities available in the kingdom.
The financial sector has old roots in Bahrain and has transformed it into a Gulf financial hub. But Bahrain is keen that manufacturing makes strides. And while regionally well known companies such as Alba, Garmco and Gulf Petrochemical Industries are based in the country, there is potential for other sophisticated industries. Gulf Industrial Investment Co, which makes iron ore pellets, is building a steel mill in a diversification move.  Garmco plans to build another aluminium rolling plant in a joint venture with regional companies.
The government has informed that a “bumper crop” of some 236 industrial licences was issued in 2006, generating what Industry and Commerce Minister Dr Hassan Fakhro said was “a potential windfall of investment and jobs.”
The Bahrain Investment Wharf’s warehousing and logistic facility will soon throb with activity. According to the promoters of the facility, it will be a boon to SMEs engaged in the import and export business. The points in its favour are easy access to airports, seaports and the overland route to Saudi Arabia.
Another factor with potential to spur business in Bahrain is the Free Trade Agreement (FTA) with the US. The deal helped bilateral trade reach $1.1 billion in 2006.  Bahraini businessmen need to be as enthusiastic as their American counterparts in availing themselves of the benefits accruing from the FTA, the American Chamber of Commerce in Bahrain has said.
However, the larger companies including Alba and GPIC did better in their exports. While the FTA guarantees preferential treatment, one issue is reducing the gains that Bahrain companies can obtain from exports to the US. There is no direct shipping line and charges are calculated for two segments – Bahrain to Europe and Europe to the US – which raises freight costs.