LONDON/DUBAI, 30 March 2006 — Bahrain is creating a holding company to manage government assets and scour the globe for strategic investment opportunities, a senior government official said.
Mohammed Bin Essa Al-Khalifa, chief executive of Bahrain’s Economic Development Board, told Reuters that the Cabinet had approved the creation of the holding company and that it would be in place in a month or two. “The key goals are to act to increase government revenues and be the strategic investment vehicle of the country,” Al-Khalifa said on the sidelines of an investor conference in London. He said the holding company could invest both domestically and abroad.
A source close to the Economic Development Board said the new company would likely be a more active investor than Dubai Holding of the United Arab Emirates which bought a stake in DaimlerChrysler and British engineering firm Doncasters last year.
The source said the new company would control government stakes in all businesses outside the energy sector. The government’s assets range from a $3 billion real estate development to some of the Gulf’s biggest banks. “This company will do whatever is required to increase profitability and make some money,” the source told Reuters. “It should play a very proactive role. It should have the tools to go outside (Bahrain) and acquire if necessary. It should be more active than Dubai Holding.”
Dubai Holding is one of several government-linked Gulf enterprises that ploughed more than $30 billion into foreign mergers and acquisitions last year, part of a drive to diversify the economies of the world’s biggest energy exporting region. Bahrain, financial hub of the Gulf, has relatively little oil and is one of the region’s poorer countries. Its government has played little part in the wave of petrodollar takeovers.
Bahrain pioneered the Gulf’s economic diversification drive with a push into financial services in the 1970s. But Bahrain’s economic development during the latest oil boom has been overshadowed by the stellar growth of Qatar and the UAE.
The Economic Development Board is trying to raise Bahrain’s profile with foreign investors by pushing reforms to cut red tape and improve labor productivity.
Al-Khalifa said Bahrain was positioning itself as financial center in the region that offers niche and higher value added structured products and specializes in deal making. He said Bahrain was more interested in boosting quality of its financial centre and would not focus just on the volumes.
Bahrain’s central bank is set to launch the Gulf Arab region’s first Islamic repo transactions in the next year to manage liquidity in one of the world’s fastest growing niche debt markets.
