Bahrain boosts infrastructure spending

The Bahrain government has stepped up its efforts to develop the infrastructure sector as a step towards diversifying its economic base, notes a new report from Global Investment House.

The development of its infrastructure sector is also aimed at reducing burgeoning unemployment rate. The entire GCC region is witnessing a real estate and construction boom and Bahrain is not far away from this.

Several billion dollars of projects are in progress or on the horizon. The Kingdom's dream project is the US$1.3bn Bahrain Financial Harbour. Final tenders for the main project are expected to be opened early 2004.

The government is anticipating that the first offices will be moved in 30 months' time after the awarding of the contract early 2004. This project will also create 2,500 direct job opportunities in addition to the numerous training opportunities on the site like engineering, architecture and building designing.

The BFH has been conceived as a centre of financial excellence that will catapult Bahrain into the league of top global economic centres such as London, Hong Kong, Singapore and Tokyo.

The entire reclamation work on the Phase 1 of the project, The Financial Centre, which covers an area of approximately 58,000 sq.m., had been completed as per schedule. This includes the reclamation for the 50 storey Dual Towers, Harbour House and the Financial Mall components of the project.

In fact, the piling work on this phase has already commenced and is expected to be completed by the end of the January 2004. Bahrain's move to tap the financial markets for its Bahrain Financial Harbour project through the US$32mn BFH Holding Company Fund has been heavily over-subscribed.

Bahrain's most ambitious project in its recent history is the hosting of Formula One event. On April 4, 2004 a brand new racing circuit, under construction at Sakhir at a cost of around US$150mn, will host the third of the 17 race 2004 Formula One calendar.

The infrastructure work required to host the F1 race are going on as per scheduled despite the advancement of the race in April 2004 from October 2004. The country has built 5.5 km, 16 turn main track, in addition to other main facilities - the main grandstands, the pit houses etc. are also taking shape.

In the longer term F1 event could prove just the catalyst that Bahrain needs. Bahrain government is investing heavily to make Formula One a success. A US$500mn is already in the pipeline to develop a state-of-the-art equestrian centre near the Sakhir track. The Bahrain international circuit is being built to accommodate up to 70,000 spectators.

The race facilities are costing US$150mn and a further US$150mn is being spent on the infrastructure needed to ensure that the very demanding Formula One followers are comfortable at all stages of their visits.

In view of the influx of tourists in 2004, the government is also upgrading and expanding the airport and its surrounding facilities at a cost of US$200mn. The airport is likely to see revamp of duty free complex, first class lounge and the additional immigration counters and the luggage carousels designed to speed their way through the airport.

On the back of tourism boom in Bahrain, the Kingdom is witnessing hectic activity in resorts development. Such projects are creating other opportunities as well. Bids are being invited to develop access roads to the resorts.

The access road to Durrat Al-Bahrain is a 28 km dual carriageway from the north and it will cost around US$50mn, thus making it one of the biggest road projects in Bahrain. This causeway is also going to link east coast of Bahrain to Qatar.

The government has also planned to improve the Kingdom's entire road network. In addition, a major development of four new townships comprising 250,000 new homes is in the design phase.

Bahrain, which has been witnessing occasional power shortages in summer, plans to overhaul and upgrade its power infrastructure as part of its strategy to provide the optimum environment for attracting foreign investment.

In line with these aims, the government has awarded the contract to foreign firms to draw up a masterplan of Bahrain's power and water requirements from 2006-20. In a significant development, the Kingdom has pressed ahead with efforts to attract private investment into its electricity sector.

The government has announced plans for the country's first independent power project at the Hidd industrial complex on Muharraq and has appointed three advisors for the project. BNP Paribas has been appointed financial advisors.

Mott MacDonald of the UK has been appointed as the technical advisor and Freshfileds Bruckhaus Derringer as the legal advisor. Bids are expected to be invited in Jan 2004 and selection to be made by June 2004, with the first output due in mid-2006.

The first phase of the project involves the installation of 380-420MW of generating capacity. The facility is eventually expected to boast capacity of 1,000MW. There is also a possibility that the project to expand water desalination capacity at the complex may be linked to the power project in the future.

Thus, privatization is scheduled for power and water production and in the longer-term privatisation of the services at Mina Salman and at the new Hidd Container Port is also likely to take place.

The government has allocated substantial sum of Budget for the year 2003 and 2004 for infrastructure and public utilities sectors. Around BD31.4mn has been allocated for electricity and water, BD39.4 for roads, bridges and sewerage, BD76.1mn for housing services and BD14.7mn for civil aviation. The challenge ahead is the ability of the government to funds various infrastructure projects.

Funding such a huge investment is likely to translate into increased indebtedness, putting some pressure on Bahrain's creditworthiness and at the same time successful implementation of these schemes would help the economy grow at a faster rate in the long-term.