CHAPTER 3

3.0 BAHRAIN
3.1 INTRODUCTION

Bahrain is a small island country situated near the western shores of the Persian
Gulf in the Middle East. It is an archipelago with Bahrain Island, the largest land mass,
at 55 km (34 mi) long by 18 km (11 mi) wide. Saudi Arabia lies to the west and is
connected to Bahrain by the King Fahd Causeway while Iran lies 200 km (124 mi) to
the north across the Persian Gulf. The peninsula of Qatar is to the southeast across the
Gulf of Bahrain. The population in 2010 stood at 1,234,571, including 666,172 non-
nationals.

The country's capital, Manama, is home to many large financial structures.

Bahrain has a high Human Development Index and was recognized by the World Bank
as a high income economy. Gained its independence in 15 August 1971 by The United
Kingdom, the Kingdom of Bahrain since then has diversified from its largest national
revenue from oil and gas industry to tourism and agriculture, aluminum production,
hospitality, retails and also become a leading regional banking center, mainly in
Islamic banking and finance.

Bahrain has reached it modernization era and still growing despite of political
prevalent between Islamic Sunni and Shia in governmental structure and its people,
the government ruled by a constitutional monarchy with an elected legislative
assembly has offered a wide range of opportunity to the foreign trade to invest in the
country. Synerlitz (Malaysia) Sendirian Berhad-SYN, decided that this window of
opportunity not to be missed to achieve the company objective and business vision and
mission.

Their national oil and gas company, The Bahrain Petroleum Company, known
as BAPCO, was established in 1929 in Canada, by Standard Oil Company of
California during their exploration in Bahrain. Bahrain’s government took over the

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company and the company was established with a corporate’s name in 1976. This
potential client is the highlight of the strategic business management of this paperwork.
Our focus is to get interaction and become the business partner within the said industry.
The prospect is studied together with the environment scanning that been conducted
in wide range and continuously.

3.2 DEMOGRAPHIC OF BAHRAIN (PESTEL ANALYSIS)

3.2.1 Population, Nationality of People in Bahrain

The people of Bahrain, the Bahraini, is consist of 46% of local
and original Arabic people who were born or their ancestor migrated to
Bahrain before independence. This 46% is a mixture of several ethnics
came from surrounding countries and resided long time ago.

The other 54% were immigrant to conclude the overall

population. Majority of 54% of the population come from South Asia
and Southeast Asia, according to government statistics and reports from
most media dated in 2005-2009. Roughly 290,000 Indians, 125,000
Bangladeshis, 45,000 Pakistanis, 45,000 Filipinos, and 8,000
Indonesians.

From this statistic, it shown that half of population there is the

workforce that generates the economic influence in Bahrain. For
mobilization of new branch in Bahrain, workforce is an essential
resource one have to consider. These immigrants are majorly involved
in unskilled worker, labor, semi-skilled worker, retail outlet labor, and
services. SYN will bring in all the professional personnel, project
management team, engineers and also our international suppliers and
partners in providing engineering, products, equipment and bulk
fabrication in shipping.

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 Pic. 1: Population Pyramid of Bahrain in 2012, taken from CIA
World Factbook website.

Picture 1 shown a statistic record of Bahrain citizen according

to age group. Male group aged between 25 years old to 39 years old
dominates the statistic. A greater chance of getting a potential labor or
man power within this group age. Female also shown the same age
group which is potentially for office and clerical work to be employ in
SYN in Bahrain.

3.2.2 Politic in Bahrain

Bahrain under a constitutional monarchy headed by the king,
Shaikh Hamad bin Isa Al Khalifa. King Hamad established a wide but
closed executive authorities which include appointing the Prime
Minister and his ministers, commanding the army as Commander of the
Bahrain Defense Force, chairing the Higher Judicial Council,
appointing the parliament's upper half and dissolving its elected lower
half. The Prime Minister, Shaikh Khalīfa bin Salman Al Khalifa, is the
uncle of the current king who has served in this position since 1971,
making him the longest serving prime minister in the world.

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 In 1999, Sheikh Hamad has initiated wide ranging political
reforms, giving women the right to vote, freeing all political prisoners
and holding parliamentary elections. Within this reformation period, in
February 2002, the country's official name from the State of Bahrain
changed to the Kingdom of Bahrain. In 2010, about half of the
government was composed within the Al Khalifa family. Bahrain has a
bicameral National Assembly (alJam'iyyah alWatani) consisting of the
Shura Council (Majlis AlShura) and the Council of Representatives
(Majlis AlNuwab).
The opening up of politics saw big gains for both Shīa and Sunnī
Islamists in elections, which gave them a parliamentary platform to
pursue their policies. It gave a new prominence to the political system,
with the most senior Shia religious leader playing a vital role.
But in 2005 the government called off the Shia branch of the
"Family law" after over 100,000 Shia took to the streets. Islamists
opposed the law because of dissatisfaction in government action in
overruled the present law over distribution of seats and power between
Sunni and Shia.
Some Islamist parties have been particularly critical of the
government's readiness to sign international treaties such as the United
Nations' International Convention on Civil and Political Rights. This
include the women rights in political involvement. During history of
Bahrain’s political issue, a few female candidates have been elected in
several position in government ministry.

3.2.3 Economic Structure in Bahrain

New operations are encouraged by the authorities and local

partner might be enthusiastically supportive. Export and manufacturing
industries are especially strongly supported by government,
particularly as regards the acquisition of land on which to construct a

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 factory. To set up such a business in a free trade zone, of which there
are several in the region, it’s granted exemptions from import and
export duties, commercial taxes, building and property licence fees,
land tax and restrictions on the transfer of capital invested in the zone.
The country's capital, Manama is home to many large financial
structures. In 2008, Bahrain was named the world's fastest growing
financial center by the City of London's Global Financial Centers Index.
Petroleum production is Bahrain's most exported product, 60% of
export receipts, 70% of government revenues, and 11% of GDP.
Aluminum production is the second most exported product, followed
by finance and construction materials.
According to the 2011 Index of Economic Freedom, Bahrain
has the freest economy in the Middle East and North Africa region and
is the world’s tenth freest economy. Bahrain's urgency in embracing
economic liberalization is due to its need to diversify the economy away
from its limited oil supplies. The revenues has expanded into banking,
heavy industries, retail and tourism. Bahrain is the main banking hub
for the Persian Gulf and a center for Islamic finance, which has been
attracted by the strong regulatory framework for the industry.
In 2005, Bahrain signed the US-Bahrain Free Trade Agreement.
A massive privatization: utilities, banks, financial services, and
telecommunications have started transforming into private sector. Since
2002 when the oil prices sustained, the well growth of Bahrain’s
economy has been well positioned. From the extra revenues, the
government build an advanced infrastructure in transportation and
telecommunications. Tourism has proved another significant source of
income. It has succeeded in attracting investment in infrastructure
development and other projects to improve the standard of living;
health, education, housing, electricity, water, and roads. Bahrain has
initiated a series of labor reforms under Minister of Labor Majeed Al
Alawi in order to bring the labor market into line with international
standards. Bahrain intends to expand its high tech industries, invest in

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 research and development, and strengthen its competitive edge within
a global economy.
Petroleum and natural gas are the only significant natural
resources in Bahrain. Despite of that, Bahrain has worked to diversify
its economy over the past decade. Bahrain has stabilized its oil
production at about 40,000 barrels (6,400 m³) per day, and reserves are
expected to last 10 to 15 years. The Bahrain Petroleum Company
refinery has a capacity of about 250,000 barrels (40,000 m³) per day,
and was the first in the Persian Gulf.
After selling 60% of the refinery to the state-owned Bahrain
National Oil Company in 1980, Caltex, a U.S. company, now owns
40%. Saudi Arabia provides most of the crude for refinery operation via
pipeline. Bahrain also receives a large portion of the net output and
revenues from Saudi Arabia's Abu Saafa offshore oilfield. The Bahrain
National Gas Company operates a gas liquefaction plant that utilizes
gas piped directly from Bahrain's oilfields. Gas reserves should last
about 50 years at present rates of consumption. The Gulf Petrochemical
Industries Company (GPIC) is a joint venture of the petrochemical
industries of Kuwait, the Saudi Basic Industries Corporation, and the
Government of Bahrain. The plant, completed in 1985, produces
ammonia, methanol and urea for export.
Bahrain's other industries include Aluminum Bahrain, which
operates an aluminum smelter—the largest in the world with an annual
production of about 525,000 metric tons—and related factories, such as
the Aluminum Extrusion Company and the Gulf Aluminum Rolling
Mill Company. Other plants include the Arab Iron and Steel Company's
iron ore pelletizing plant (4 million tons annually) and a shipbuilding
and repair yard. With its highly developed communication and transport
facilities, Bahrain is home to numerous multinational firms with
business in the Persian Gulf. A large share of exports consists of
petroleum products made from imported crude. Construction proceeds
on several major industrial projects.

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 3.2.4 Social Environment in Bahrain
3.2.4.1 Education in Bahrain
The education system has been established since
1930 when Bahrain government controlled two primary schools
for boys only and later one school for all girls. The literacy rate
of Bahrain stands at 94.6%, a data recorded in 2010. As of 2008,
education expenditure accounts for 2.9% of Bahrain's GDP.
Schooling and related costs are entirely paid for by
the government and the acceptance are high based on records of
attendance of the pupils. Bahrain also encourages institutions of
higher learning, raising the expatriate talent and the increasing
pool of Bahrainis returning from abroad with advanced degrees.
University of Bahrain was established in 1986 for standard
undergraduate and graduate study, and the College of Health
Sciences, operating under the direction of the Ministry of
Health, trains physicians, nurses, pharmacists, and paramedics.
The establishment of the Quality Assurance
Authority for Education and Training, which primarily focuses
on scrutinizing all the programs offered by each university, due
to some complaints of low standard of education in some of
private institution of higher educations.
With a multi-cultural, multi-ethnic and multi-
denominational society, along with a low cost of living,
excellent education facilities offering curricula from around the
world and high-quality healthcare, Bahrain is an attractive
destination for expatriate families.
SYN company team member will benefited from
this education modernization of Bahrain as they can rest assured
their family member’s education abroad in Bahrain is in high
standard.

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 From this socio-education analysis is concerned, the
Bahraini is well educated and SYN project team should not have
major problem dealing in professional interaction, business and
integrity of world class workmanship.

3.2.4.2 Religion Practice in Bahrain

Islam is the official religion. The citizen population

is 99.8% Muslim, although the Muslim proportion falls to
70.2% when the non-national population is included. Muslims
belong to the Shi'a and Sunni tribes. Roughly, the Shi'a
constitute 46% to 60% of the Bahraini Muslim population.
Foreigners that are mostly from South Asia and other Arab
countries, constituted 54% of the population, record shown as in
2010. Foreigners are 45% Muslim and 55% are non-Muslim,
including Christians, primarily Catholic, Protestant, Syrian
Orthodox, Mar Thoma from South India, Hindus, Baha’is,
Buddhists, and Sikhs.
SYN workforce are generally Malaysian with multi-
cultural and multi-religion and we are living together with
harmony without any conflict of religion practice in Malaysia.
This culture is among our key factor to strong indication that
SYN can grow strong in working together with Bahraini people
to generate the opportunity to work together.

3.2.4.3 Bahrain Foreign Affairs

Bahrain plays a modest, moderating role in regional
politics and adheres to the views of the Arab League on Middle
East peace and Palestinian rights. Since achieving independence
in 1971, Bahrain has maintained friendly relations with most of
its neighbors and with the world community. It generally

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 pursues a policy of close consultation with neighboring states
and works to narrow areas of disagreement. It also established
bilateral relations with 190 countries worldwide. As of 2012,
Bahrain maintains a network of 36 embassies, 3 consulates and
4 permanent missions to the Arab League, United Nations and
European Union respectively. Bahrain also signed Free Trade
Agreement with United States to ensure economic trading
flourish internationally. Several issues raised between Bahrain
and its ancient ties Iran recently that sees their ambassadors
retreated from each country due to political and tenses which
somehow strained their relationship.
Such conflicts, nations’ tense and turmoil in the
affair between big power countries (Bahrain, United States and
Iran) sparked outrage not only between the said countries but
also internally. The Shia people, by prediction that some of the
family originally came from Iran, the Bahraini have their own
conflicts with the Sunni in Bahrain themselves.
SYN need to have a close analysis on the chaos and
such disturbance within internal and external threat like this. To
understand the situation, SYN need to work closer with the
government agency and for the sake of economic and public
interest, all disagreement or approval in the stand of
professionalism and the safety of SYN work personnel,
especially from Malaysia is the top priority at all times.

3.2.4.4 Music, Arts and Literatures

The music style in Bahrain is similar to that of its
neighbors. The Khaliji style of music, which is folk music, is
popular in the country.
The modern art movement in the country officially
emerged in the 1950s, culminating in the establishment of an art

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 society. Expressionism and surrealism, as well as calligraphic
art are the popular forms of art in the country. Pottery making
and textile weaving are also popular products that were widely
made in Bahraini villages. The Bahrain national museum houses
a permanent contemporary art exhibition. The architecture of
Bahrain is similar to that of its neighbors in the Persian Gulf.
The wind tower, which generates natural ventilation in a house,
is a common sight on old buildings, particularly in the old
districts of Manama and Muharraq.
Literature retains a strong tradition in the country
most traditional writers and poets write in the classical Arabic
style.

3.2.4.5 Sports
Association football is the most popular sport in
Bahrain. Bahrain's national football team has competed multiple
times at the Asian Cup, Arab Nations Cup and played in the
FIFA World Cup qualifiers, though it has never qualified for the
World Cup. Bahrain has its own top-tier domestic professional
football league, the Bahraini Premier League. Basketball,
Rugby and horse racing are also widely popular in the country.
Bahrain also participated in the world-class
motorsport racing. The international racing circuit provides
facilities to all kind of races; drag car, Formula One Racing,
Motobike Grand Prix and Supercar, inviting racers and
international racing team from around the globe.

3.2.5 Technology Development in Bahrain

3.2.5.1 Infrastructures
Bahrain has one main international airport, the
Bahrain International Airport (BIA) which is located on the

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 island of Muharraq, in the northeast. The airport handled more
than 100,000 flights and more than 8 million passengers in 2010.
Bahrain's national carrier, Gulf Air operates and bases itself in
the BIA.
Bahrain has a well-developed road network,
particularly in Manama. The discovery of oil in the early 1930s
accelerated the creation of multiple roads and highways in
Bahrain, connecting several isolated villages, such as Budaiya,
to Manama. To the east, a bridge connected Manama to
Muharraq since 1929, a new causeway was built in 1941. The
four main islands and all the towns and villages are linked by
well-constructed roads. There were 3,164 km (1,966 mi) of
roadways in 2002, of which 2,433 km (1,512 mi) were paved. A
causeway stretching over 2.8 km (2 mi), connect Manama with
Muharraq Island, and another bridge joins Sitra to the main
island. The King Fahd Causeway, measuring 24 km (15 mi),
links Bahrain with the Saudi Arabian mainland via the island of
Umm an Nasan. It was completed in December 1986, and
financed by Saudi Arabia. In 2008, there were 17,743,495
passengers transiting through the causeway.
Bahrain's port of Mina Salman is the main seaport
of the country and consists of 15 berths. In 2001, Bahrain had a
merchant fleet of eight ships of 1,000 GRT or over, totaling
270,784 GRT. Private vehicles and taxis are the primary means
of transportation in the city.
Bahrain has a Formula One racetrack, The Bahrain
International Circuit which hosted the inaugural Gulf Air
Bahrain Grand Prix on 4 April 2004, the first in an Arab country.
This was followed by the Bahrain Grand Prix in 2005. Bahrain
hosted the opening Grand Prix of the 2006 season on 12 March
of that year. The Bahrain International Circuit also features an
organized invitational events featuring some of Europe's top

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 racing teams to try to raise the profile of the sport in the Middle
East.

3.2.5.2 Telecommunications
Bahrain implemented its telecommunications law
which included the establishment of an independent
Telecommunications Regulatory Authority (TRA). In 2004,
Zain (a rebranded version of MTC Vodafone) started operations
in Bahrain and in 2010 VIVA (owned by STC Group) became
the third company to provide mobile services.
Bahrain has been connected to the internet since
1995 with the country's domain suffix is '.bh'. The country's
connectivity score (a statistic which measures both Internet
access and fixed and mobile telephone lines) is 210.4 percent
per person, while the regional average in Arab States of the
Persian Gulf is 135.37 percent. The number of Bahraini internet
users has risen from 40,000 in 2000 to 250,000 in 2008 or from
5.95 to 33 percent of the population. As of August 2013, the
TRA has licensed 22 Internet Service Providers.

3.2.6 Environment Aspect in Bahrain

Bahrain is united with nationwide agencies which involved with
international agreements. A member of United Nation environmental
body to biodiversity, Climate Change, Climate Change Kyoto Protocol,
Desertification, Hazardous Wastes, Law of the Sea, Ozone Layer
Protection and Wetlands.

Current issues reported in Bahrain land are desertification

resulting from the degradation of limited arable land, periods of
drought, and dust storms, coastal degradation (damage to coastlines,
coral reefs and sea vegetation) resulting from oil spills and other
discharges from large tankers, oil refineries, and distribution stations,

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 lack of freshwater resources (groundwater and seawater are the only
sources for all water needs).

3.2.7 Law And Legal Institution in Bahrain

The Amir is the Head of the State, his person shall be immune
and inviolable, and he shall exercise his powers through his Ministers
who shall collectively report to him on the general policy of the
Government, and each Minister shall be responsible for the affairs of
his Ministry. Legislative power shall be vested in the Amir and the
National Assembly in accordance with the Constitution. The Amir
shall, after the traditional consultations, appoint the Prime Minister or
relieve him of office by an Amiri decree. The Amir shall also appoint
Ministers or relieve them of office by an Amiri decree, upon the
recommendations of the Prime Minister.

The system of government in the Kingdom of Bahrain is

democratic, sovereignty being in the hands of the people, the source of
all powers. Bahrain has Supreme Court of Appeal, Constitutional Court
and High Sharia Court of Appeal system in the national legal
constitution.

A local partner is necessary to help the company to start up the

business in Bahrain. The “local sponsorship” is a local partner who
holds the majority interest and can therefore control the business. The
local partner is required in order to encourage foreign investment,
practiced in some parts of Bahrain.

Guidance of starting up a business in Bahrain must be done

thoroughly with compliance of legal requirement set out in Bahrain,
plus the customary local practice can ensure SYN have their branch lay
out in the land of Bahrain in no time.

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