26
Country ProFILE bahraIn
Formula for success
Less glitzy and longer established than rivals such as Dubai, Bahrain is counting
on its diversified, Gulf-oriented economy – and base in Islamic finance – to help
it ride out the global economic turmoil
“
Bahrain has lost
some ground to Dubai
and Qatar, but it
can still lay claim
to a couple of things
that I think are
important. One is
Islamic finance and
the other is funds
”
hani Kablawi, managing
director and head of Middle
east and africa, bny Mellon
by helen burggraf
When 23-year-old racing
driver Lewis Hamilton took
the Formula One championship
in Brazil last month,
it was widely seen as a triumph
for the UK. But it
was also a victory for
Bahrain, whose sovereign
wealth fund (SWF), Mumtalakat
Holding Company,
has a 30% stake in Hamilton’s
McLaren Group, which
it acquired in January 2007.
While the SWFs of such
other newly affluent countries
as China and Singapore
have seen the wheels fall
off some of their recent
investments, Mumtalakat’s
managers will no doubt be
pleased with their gamble
– even if, as some cynics
might suggest, it had more
to do with Bahraini affection
for Formula One racing
than a fund manager’s skill
at picking a winner.
Within hours of Hamil-
ton’s victory, there were
reports that McLaren –
which is 40%-owned by
Mercedes – was considering
following fellow F1 carmaker
Ferrari into the commercial
sports car market.
l Bahraini approach
Mumtalakat could be seen
as a quintessentially Bahraini
enterprise. For one
thing, a few months ago it
was named the most transparent
SWF in the Gulf
(alongside Kuwait) by the
California-based Sovereign
Wealth Fund Institute. This
is possibly an unsurprising
honour for the SWF of a
country that places a high
priority on the openness
and 35-year track record of
its financial regulatory
environment.
Also, like Bahrain, which
in recent years has made a
point of keeping abreast of
developments in global
INTERNATIONAL ADVISER [www.international-adviser.com] DEcEmbER 2008
finance and investment,
Mumtalakat has been at the
forefront of new investment
strategies, such as the use
of syndicated loans to raise
money for investment rather
than bonds.
Finally, just as Mumtalakat
appears set to fare
better with McLaren than,
for example, China’s SWF
has done lately with its
stakes in Morgan Stanley
or Blackstone, Bahrain
bahraIn FInanCIaL FaCts
n 2,636, registered funds – 108 Bahrain domiciled, 43 Islamic
n $20.14bn assets under management
n More than 400 licensed financial institutions
n More than 150 Islamic institutions and funds
n More than 165 insurance companies
n 150 licensed banks
n $269.5bn assets held in banks at end of June ’08
n Financial services industry is worth $2.8bn
n Bahrainis make up 72% of those employed in the financial sector
n No personal income taxes (beyond a 1% contribution to
unemployment insurance), corporation, withholding, capital gains,
or inheritance taxes, and no ‘free zones
itself seems to have avoided
some of the worst of
the global turmoil.
While other financial
centres are reeling from
over-exposure to US and
UK financial stocks, and
complex debt instruments,
Bahrain has been cushioned
by its diversification.
Some say the inherently
conservative investment
strategy of its Islamic
finance sector may also
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