Making the world your oyster

Bahrain has throughout the millennia been an important trading hub in the Gulf region and beyond. While many businesses are carrying on that tradition, Bahrain’s substantial merchandise exports today are heavily dominated by petroleum products and metals – to the tune of three-quarters of the total. The vast majority of Bahrain-based businesses today are purely focused on the home market.

The reason for this domestic bias is found in history. In recent decades, the economy grew strongly thanks to long periods of increasing oil revenues and government spending along with robust population growth. It was easy to claim a slice of a growing pie and most business owners did so in areas where the initial barriers to entry and capital requirements were the lowest. This drove what in retrospect may appear like a disproportionate focus on retail trade, restaurants, construction, and basic services, all activities mainly focused on the home market.

In recent years, new oil market realities, fiscal consolidation, and a gradual downtrend in population growth have reshaped the economic realities. With slower demand growth and increasing costs, the minimum efficient scale for businesses has been increasing. If ever there was a time for fresh ideas, it is now. With many of the preferred sectors for company formation increasingly saturated, and often challenged by technological change as well, business model overhauls are growing in urgency as is the need for innovation.

Start-up businesses leveraging digital technologies are often inherently outward-, often globally focused. But also businesses can harness new opportunities by looking beyond the confines of the Bahraini market.  While such ambitions are now being facilitated by a growing range of financial and other support solutions, the way forward is not always simple. Information about opportunities outside of Bahrain is often not readily available. The competitive environment can be a challenge and many businesses lack the scale and resources to easily take on competitors in larger markets.

It is important to keep in mind that direct exports are not the only road to internationalization. Many small economies globally thrive by integrating themselves in cross-border value chains. It is important for Bahraini companies to better understand external opportunities and their options for tapping them, whether it is through partnerships, collaboration, consolidation, or exports. As with most things, the road to success will start with understanding the potential options. But it is increasingly obvious that the most compelling development opportunities for local businesses are now increasingly found outside of Bahrain. Seizing them will ultimately deliver a more resilient corporate sector and increased employment.