Shaikh Salman bin Khalifa Al Khalifa, Honorary Chairman of Bapco in his address to the Asia Summit 2012 held in Singapore highlighted the importance of diversification, vision and creating a sustainable economy.
“When Bahrain gained independence in 1971, it found itself in a situation similar to that of Singapore. It became a free country with precious few natural resources of its own. Like Singapore, it had to determine its future, and build a sustainable, prosperous nation by adding value. It looked initially to the service industries, specifically the financial sector, to establish a platform, and to make its mark in the world economy. Therefore despite the physical distance between our two countries, it is not surprising that we have forged ahead with strong ties when you consider the similarities between our two nations,” he said.
“The two countries hold a vision of promoting and developing niche markets in financial services – and they have implemented it. In Bahrain for example, the contribution of the financial sector has grown steadily to almost 30% of GDP. The fledgling industry in the early 1970s consisted of only three retail banks; Standard Chartered Bank, British Bank of the Middle East (known today as HSBC), and the National Bank of Bahrain. Bahrain continued to successfully build a reputation as a jurisdiction of choice for the financial sector, and it currently has more than 400 institutions licensed by the CBB, including conventional banks; Islamic institutions; insurance companies; and fund managers. These companies vary in size from small and medium sized representative offices to large scales of operation such as Nomura Middle East.”
“By steadfastly implementing best practices; robust regulatory principles and good governance we now enjoy the reputation as one of the world’s most respected financial centre.”
“Singapore has built a similar reputation as well. To have achieved this in such a short period of time is testimony to the vision and dedication of the people who have developed and improved the regulatory frameworks, very often in challenging economic circumstances.
“A specific example in respect of Bahrain is that it is recognised as a key centre for Islamic finance. It is the home of a number of organisations which set Islamic standards. These institutions continue to play a leading role in the evolution interpreting Shari’a principles and practices, and they are instrumental in facilitating greater standardisation to the industry at large.
“Bahrain has also led the way in other financial initiatives. For example the Government of Bahrain has attracted sophisticated investors from a wide geographical spread to invest in its own sovereign Sukuk and bond issues. In November of last year the CBB successfully attracted almost $2billion for a $750million, seven year Sukuk, priced at an attractive yield. This was its first sovereign issue since March of 2010. Encouragingly there was a very strong regional demand from investors in the Gulf as well as in the Middle East.
“In a wider GCC context the financial markets saw increasingly broad, positive, progress in terms of volume trading during the first quarter of 2012, further building on the recovery that began to take shape in the second half of last year. This forward momentum was particularly evident in bank lending and Sukuk markets.
“These encouraging trends are underpinned to a significant extent by the strong regional economic growth which has benefited from a re-focus in government spending, especially towards infrastructure projects. The Bahrain Government emphasises social housing, education, health services, and social welfare as its main priorities, as well as promoting positive progress in the oil sector.
“Notwithstanding this, not everything is straightforward, and nothing can be taken for granted. Whilst it is true that the GCC markets have occasionally shown themselves to be sensitive to external disruptions, there is no doubt in my mind about the increasing resilience of the Region to ‘buck the trend’ in times of global challenges. This is most obvious in respect of the Islamic banking sector, which has remained largely stable during the current crisis.
“From a broader geographical perspective, the impact of on-going challenges in the Eurozone has resulted in a downturn in demand for oil. Despite this, the price of a barrel remains largely robust, allowing Bahrain to invest in new oil and gas facilities with confidence that the demand will continue to grow. In addition, Singapore, like Bahrain, has very significant oil refining and port facilities. It is a little known fact that Bahrain exports almost one third of its oil production to Singapore.
“There are a number of other significant and very strong trends that link Bahrain with Singapore. These links are one part of the reason that the Bahrain economy has targeted a 4% growth for this year, which is almost double the previous 2.2% growth achieved in 2011. We seek to continuously cement our friendly and prosperous relationship between our two countries.
“But we know we can do better. We will work harder to foster relationships; build and improve our networks of contacts; and share ideas and experiences. This will be founded upon the ingenuity and creativity of both nations, from which we have benefitted hugely in the past. Looking forward we shall identify opportunities to increase the provision of services to our larger neighbours, and use the immense growth of the economic importance of both our nations over the last three decades as a major platform for these ventures.
“We understand that the cost of funding may prompt issuers of Sukuk or other capital-raising instruments to delay their plans to go to the capital markets. Initially whilst we are likely to continue to experience market volatility, the trend in the Region is generally positive. One of the most encouraging aspects of the GCC financial markets, particularly in Bahrain, has been the recent steady increase of its bank lending. These are critical elements in the growth of any economy.
“There are other areas in which both countries have developed in parallel during the recent past, the most high profile of which was the introduction of Formula 1 motor racing to our respective regions. In April during grand prix, the F1 teams participated hand-in-hand in what was a fascinating event as Sebastian Vettel, the two-time world champion leader in Bahrain, edged out against Lewis Hamilton at the Shakhir Grand-Prix Circuit.
“The introduction of F1 has provided both nations with significant, global media exposure, and we shall continue to explore more opportunities and to optimise the benefits of such exposure. Despite media pessimism and criticism, the event attracted huge crowds, with large numbers of local people mingling freely with visitors from many parts of the world to watch the best of the best in one the most exciting sporting events in the world. This provides Bahrain and Singapore with many opportunities and similarities to showcase the value they add to the world economy, and this in turn helps the national economy to grow and diversify even further.
Notwithstanding these other major successes, many would consider that Bahrain and Singapore are recognised primarily as leading financial centres.
Throughout the last three decades, we have embraced each other not as competitors but as colleagues, working together with a mutually-shared interest in the development and implementation of international best practices in the field of financial services.
“The CBB and the Monetary Authority of Singapore have also developed strong supervisory ties for more than thirty years. We shall continue to strengthen the liaison between our two regulatory bodies, and work together to improve the awareness of the sound economic principles of Islamic finance.
“This forum represents the latest initiative in this recognition of the growing importance of blocs and regions outside of the Eurozone and the USA in providing the engine of growth in the Global economy. During the remainder of this Summit I will meet as many of you as possible to promote and continue the bi-lateral ties between Asia and the Middle East.