Bahrain Set to Emerge as a Major Middle Eastern Startup Hub

Cities across the Middle East and North Africa are emerging as leaders in entrepreneurship. Dubai, for example, continues to attract entrepreneurs with promises of funding and unique forms of startup support. Another contender for the best Middle Eastern startup climate is Bahrain. A rather small country with a population of only 1.5 million people, Bahrain has worked for more than a decade to situate itself as a top spot for incubating small businesses.

In 2006, the Bahrain government established Tamkeen to grow the country’s private sector. This organization has since helped 100,000 people and enterprises, providing individuals with the tools they need to launch a business and guiding them towards increased productivity. Tamkeen has largely tailored its programs to appeal to early-stage startups and small business owners with business planning assistance, incubation services, and funding, even for foreign entrepreneurs. Bahrain also boasts Tenmou, an angel investment network supported by the United Nations Industrial Development Organization’s Investment and Technology Promotion Office.

Bahrain policy permits complete foreign ownership, and the nation has few taxes. These facts, paired with the nation’s cheap rents, may start to draw entrepreneurs away from Dubai. In November, Amazon announced that it would collaborate with Bahrain and a startup stock exchange is set to launch in 2016. These advancements point to a bright future for the nation.

Bahrain, night
Image courtesy user Philippe Leroyer on Flickr

Bahrain’s Ideal Geographic Location

Many factors contribute to Bahrain’s potential as a center for entrepreneurship, including its proximity to the two largest startup ecosystems in the Middle East: the UAE and Saudi Arabia. Saudi Arabia used government funds to launch KAUST, which offers $2 million in seed funding to new enterprises, and the UAE instituted Vision 2021, which includes a number of initiatives to increase entrepreneurship. In addition, Qatar, has founded several different programs to support startup companies. Many of these Gulf countries have economies much larger than that of Bahrain, but this is largely to Bahrain’s advantage.

Due to the nation’s smaller economy, these funds will stretch much longer in Bahrain than they would in larger economies, thereby giving individuals more time to turn a profit or secure more funding before running out of money. Many smaller companies have taken advantage of this growing ecosystem, later expanding to larger markets once their product established a foothold. For example, Eat, a table reservation software company, recently relocated to Dubai after starting in Bahrain. Similarly, White Payments, a Bahrain startup, expanded into the UAE after its acquisition.

A Mutually Beneficial System

Some individuals might ask why Bahrain has created an ecosystem that seems to incubate companies, only to have them eventually move into larger markets. In fact, Bahrain’s focus on creating an entrepreneurial ecosystem is an investment in the future. At present, more than 80 percent of the revenue supporting the Bahrain government comes from oil and gas. While these resources have supported the country for a long time, the government understands the importance of diversification.

About a decade ago, Bahrain had one of the fastest growing economies in the Middle East. However, weakness in the oil sector combined with political instability have reduced annual GDP growth from 6.8 to 2.9 percent. At the same time, Bahrain ranks 18th in the world in terms of economic freedom (ahead of the rest of the Middle East and North Africa) according to the Heritage Foundation and The Wall Street Journal. This economic freedom can fuel the growth of entrepreneurship, which Bahrain officials see as the solution to its reliance on oil revenues.

Bahrain already has a fairly healthy small business ecosystem. Altogether, small businesses account for about 30 percent of the country’s gross domestic profit (GDP) and nearly 40 percent of all job opportunities. The government hopes to lift the GDP contribution of small businesses up to 35 percent by 2018.

Organizations like the Bahrain Economic Development Board and the Bahrain Development Bank both offer free advice and assistance to entrepreneurs as they set up their businesses. While the services are free, Bahrain is hoping to launch the next Careem or Talabat and generate enough jobs and income to reduce reliance on oil and gas. The country’s innovative efforts hold a great deal of promise to attract top entrepreneurs. For example, the startup stock exchange set to launch in 2016, the first of its kind in the Middle East, was envisioned specifically to attract foreign entrepreneurs to Bahrain.