• Jitender Shekhawat

Has the Bahrain Economy Bottomed Out?

Times in Bahrain are changing but, are we starting to see the light at the end of the long dark tunnel? Are there any opportunities in the business landscape in Bahrain? Will we lose all our investment if we start now?

These are some of the questions that plague the smartest of businesses in the GCC countries today, especially more so in Bahrain where the surpluses are low and risk aversion high. It is true that Bahrain has gone through a tough period the past few years. The global economic crisis in 2008-09 and the civil unrest in 2011 gave two very strong and successive blows to the business fraternity and there are still some who are reeling under the effects of these two mega trends. This coupled with lower oil prices has left a significant dent in the ability of the government to spend.

We had a candid chat with Mr. Khalid Al Romaihi (Chief Executive – EDB) in May 2016, and he shared an important economic principle with us – at times of downturn, the Government sets in motion reforms, starts to look at diversification and cleans up its own act. Furthermore, the Government starts to invest. There are various initiatives and projects the state announces and the general flow of awarding contracts related to these initiatives and projects is from Government to Business (G to B), then from Business to Business (contractors to sub-contractors, B to B) and finally from Business to Local and Small Businesses (B to LC). Money from these projects trickles slowly. This process takes between 12 – 18 months followed by a steady flow of cash across the economic circulatory system. We are starting to witness this now.

It is important to note that the downturn is just a phase in the economic cycle any country faces. Every economy goes through these cycles and below is what Bahrain has experienced:

So, what is changing? Why are we talking about looking at the economy with a different perspective now?

What most investors and businesses seem to have suffered from is what could be referred to as the “strategic myopia”, the short-term view is clear but the future looks unduly unclear and for some, dark and uncertain. Now let’s look at some basic economic theory – what goes up must go down and based on the elasticity bounce back up, what we saw in 2012 was the worst form of contraction witnessed in Bahrain. Sure, it came after a significant contraction from the 2008 highs and that’s what made it that much worse to counter. It was a double whammy for most businesses with consumer sentiment at a low and liquidity quickly drying up. The oil prices slump led to Bahrain’s economy being downgraded.

Have things changed now? Well YES they have, and there are various examples of those who dug their heels and waded the storm and are now in a very strong financial position. Look at the Bin Faqeeh group, they are redefining the real estate landscape of Bahrain; DHL, they are investing heavily in the future of Bahrain as a logistics hub for the region; City Center that came up at the worst of times is one of the most successful retail stories in the country; Cineco has had exponential growth in the past few years. We could go on and on about how these companies looked at the economic downturn as an opportunity.

So, have you missed the boat? Definitely NO. This is what a business needs to do in uncertain times:

  1. Take stock – consumer preferences change. The demand doesn’t go away, it changes form.

  2. Get lean – look at how you can do what you do, better and more efficiently.

  3. Show that you care – retain talent and pass on the benefits to your consumers.

  4. Look for opportunities – it’s a sale! Invest when assets are cheap, they won’t be at these prices forever.

  5. Strategize – look beyond the short term and then find innovative and sustainable ways to deliver.

  6. Innovate – nobody else is doing it so if you do, you will gain significantly.

  7. Take help – you understand your business better than anyone else but, there are those who understand the economy and the market better than you, look them up and ask them for help.

There’s never really a “right time” to invest in your existing business or start a new business. If you want to survive the long term, at some point, you will most likely deal with a difficult economy, a stringent funding climate or other financial circumstances beyond your control. Understanding, learning and knowing how to navigate in these times will set you up for the future – and the sooner you learn, the better. Not every company will succeed but history is replete with examples of those who came out stronger.

In conclusion, during tough times, it's important to keep a positive outlook, take off the dark shades and look at a brighter world. It takes courage and wisdom to invest in uncertain times, but if done correctly, you will definitely see positive results down the road.

At Falak, we are constantly looking to help businesses grow out of these uncertain times, we have seen it before, we have dealt with it and we can use our vast experience to enable you to do the same.

#economy #Bahraineconomy #BahrainTV



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