Bahrain

Bahrain's foreign economic strategy is based on free market economy principles of the Hong Kong or Singapore kind. Bahrain is open for cooperation with any country in the sphere of trade and economic relations on free competition terms.

Bahrain leaders of all levels, including at the very top, are willing to develop partnership relations with Russia. This may be illustrated by Bahrain's efforts to achieve a number of intergovernmental agreements with Russia. Trade and economic contacts between the two countries are still at the stage of formation. The Russia-Bahrain trade turnover remains insignificant, the annual average around one million US dollars during the last five years. In 1998 it remained at the preceding year level of US million, and the bulk of it are Russian exports.

Russian exports to Bahrain in 1998 amounted to US,000. Its pattern remains almost the same as in the previous year, i.e. industrial raw materials and products accounted for 86% of overall exports: 471 tons of newsprint (US,000), 352 tons of rolled steel (US,000), 255 tons of pig iron (US,000) and 20 tons of magnesium (US,000). It should be noted here that deliveries of magnesium (for an aluminum plant) from Russia have been on the downwards (from 442 tons in 1995 to 20 tons in 1998) being replaced by cheaper Ukrainian magnesium.

Russian imports from Bahrain in 1998 amounted to a mere US,000 and consisted only of passenger cars (in 1997 there were no imports from Bahrain).

The bilateral trade is restrained above all by the low competitiveness of Russian export prices and terms of delivery, and certain specific features of the Bahrain market—small orders, acute competition and lack of well-established transportation routes. In the absence of large wholesale entities, deliveries of small shipments of goods to private companies prove unprofitable due to high transportation costs. Large companies (oil and gas, power engineering, etc.) are mostly state-owned and place their orders only with registered suppliers (i.e., meeting preliminary qualifying requirements) through international tenders. So far no Russian supplier has obtained such preliminary qualification. Another serious barrier for Russian products are strict standards (basically British and US) applied to export goods on the local market. At the same time, Bahrain offers broad opportunities for Russian imports (aluminum shapes, tableware, clothes, small sea-going motor boats, air-conditioners, furniture, etc.). Bahrain's products, distinguished for high quality and competitive prices, are in fairly good demand.

Russian and Bahrain educational institutions are establishing partnership contacts in the field of vocational training. The director of the Bahrain Institute of Personnel Training visited the Russian Ministry of Education in August 1998. Under the contracts signed as a result of the talks, at the moment two Russian teachers work at the Institute.

In 1998 a dolphinarium was built in Bahrain with the participation of the Moscow-based Oceanology Institute. The project totalling US million was financed by investors from Saudi Arabia. The Russian side provided know-how and technical supervision over the construction work. Russia also delivered dolphins and sent three trainers, a veterinary surgeon and a maintenance engineer. In 1998 Bahrain made sizable concessions to Aeroflot thanks to which regular flights to Manama are to be resumed in 1999.

In 1998, the Russian Union of Industrialists and Entrepreneurs continued its efforts to arrange a Russian commercial centre in Bahrain. In August board chairman of the Moscow-based Avangard trading house, A.P. Cherevaty, visited the Ministry of Commerce and the Chamber of Industry and Commerce of Bahrain to discuss practical matters concerning the future centre's activities. Basic terms of opening in Bahrain in 1999 of a permanent display of Russian goods offered to the Gulf countries have been agreed with the Bahrain side, as well as lists of goods which may be in demand on the local market. A similar display room is planned to be opened in Moscow for goods offered to Russia by the Gulf countries.

Due to the financial crisis in Russia, Mezhcombank and Rossiyskiy Kredit bank had to close their offices in Bahrain in 1998 and it would take great efforts to regain trust in Russian banks in Bahrain.

Bahrain may be Russia's reliable and helpful partner. With its high financial soundness and small size, Bahrain is annually importing US billion worth of goods. Russia may well become its supplier of ferrous and non-ferrous metal, pipes, timber, newsprint, chemicals, cables, building materials, certain kinds of machinery and equipment (in particular, for power engineering and road building) and other goods. But if this objective is to be achieved, Russian companies concerned must make an adequate all-out effort, and on a regular basis at that, because single visits and events, however spectacular they may seem, would not help.

During talks with Russian trade and economic delegations the Bahrain side repeatedly raised the issue of cooperation in oil and oil product deliveries on the offset basis as was the case in Bahrain's cooperation with the former USSR in respect of India.

The draft agreement on trade, economic and technical cooperation ratified by the parties covers industry, power engineering, transport, construction, communications, know-how exchanges, agriculture, water resources, health care, banking, formation and training of personnel, tourism and other fields.

According to marketing analysis results, construction of a diamond-cutting joint venture, and possibly a precious metal refinery, in Bahrain seems a very lucrative project. It was discussed in Bahrain with various Russian companies with a view to regular supplies of raw materials, transfer of know-how and personnel training. Bahrain is a very promising option for the implementation of the project thanks to the lack of taxation and currency control, political stability and security, as well as the country's high rating on the jewellery market, cheap workforce, direct access to the Gulf area markets, Saudi Arabia in particular, encouragement of medium-size businesses by the government, etc. However, Russian companies did not submit any specific offers in 1998. Meanwhile, Bahrain is intensively negotiating the project with companies from other countries, for instance Hong Kong.

Bahrain also offers broad re-export opportunities for promoting Russian goods to the Gulf area as a whole (proximity to the Saudi market, above all its industrialised Eastern Province, low rates for railway and road carriage, cargo handling and seaport storage costs, etc.). The Bahrain side shows interest in this line of contacts with Russia.

Establishment of partnership relations with Russian regions. Over 800 representatives of various regions of the Russian Federation visited Bahrain since 1994 as members of trade and economic delegations and participants in international fairs and conferences. Bahrain delegations and representatives of business circles visited Russia.

During 1998, progress was made along certain lines of economic contacts. For instance, the Kazan-based Spartak footwear factory fully agreed the terms of delivery of 10,000 pairs of special footwear ordered by the Bahrain ministry of defence. Possible lines of partnership between the shipyards of the Leningrad Region (Regan, Almaz, Avrora, the Shipbuilding Research Institute, Prometei and other companies) and the inter-Arab ship repair company in Bahrain have been defined.

The Voronezh Mechanical Engineering Plant manufacturing gates and fountain fixtures for the oil and gas industry has been making great efforts to enter the markets of the Gulf countries, Bahrain in particular. These products are in demand in the region (at the moment, they are imported from the West at higher prices) but the Voronezh plant has not yet gone through all the preliminary qualifying formalities with the Bahrain national oil company to get on the suppliers' list.

Representatives of the Novosibirsk Regional Council had fruitful talks in Manama in 1998. The Novosibirsk-based Siberia company, a participant in a Building Industry exhibition in Bahrain, offered to supply to Bahrain and neighbouring Arab countries furniture accessories, doors, windows, parquet, etc. made of Siberian pine, cedar and larch, and local businessmen showed interest in the offer. An agency firm has been selected to arrange the company's presentation in Bahrain scheduled for February-March 1999.

Generally, Russian regions are taking their first steps in a bid to enter the sophisticated and highly competitive market of Bahrain. Of crucial significance at this stage is information support, i.e. English-language business directories, properly compiled product catalogues, decent advertising material, etc. An indispensable condition of success in this matter is a reliable telephone and fax line to Bahrain and an English-speaking officer available at any time. As they try to enter a new market, Russian regional businessmen should also take into account specific features of local business mentality: local businessmen are not very enthusiastic but careful and not inclined to take risks, they do not like scrupulous preparatory work and prefer to deal with partners who would do it themselves and specify their offers to the minute detail.