OBG talks to Ali Moosa, Senior Country Officer for Bahrain, JP Morgan

 Interview: Ali Moosa

How will upcoming GCC investments influence the wholesale market, and what specific projects do wholesale banks find most appealing?

ALI MOOSA: Undoubtedly, GCC government participation plays a vital role in boosting the opportunities available to the wholesale sector. Investment boosts developing sectors and aids growth in existing non-hydrocarbons industries. They fundamentally support corporate and banking businesses, which in turn enhance the wholesale segment in many ways. It is in the interests of the wholesale market business community that GCC investments continue to drive economic growth. Examples of such projects include the $4.8bn Bahrain Petroleum Company refinery upgrade, the Qatar-Bahrain Causeway (QBC) and the intra-GCC rail project. In addition to infrastructure, further integration into global capital markets will give local firms access to additional means to raise capital and grow their businesses.

What methods should the Central Bank of Bahrain (CBB) utilise to attract more international banks?

MOOSA: The CBB is taking the right measures in promoting a stable regulatory environment. There is a wide consensus that Bahrain is a cost-efficient jurisdiction, with a mature regulatory framework, strong legal infrastructure and an accessible central bank. The CBB still plays an active role in supporting bank mergers and consolidation trends. As an idea, the industry should look into the “passport-ability” of GCC mutual funds. This is an area that can introduce additional market efficiencies by making mutual funds available across GCC jurisdictions and attracting financial institutions looking to manage and distribute investment products.

More broadly, promoting interest from foreign institutions is not the sole responsibility of the CBB; this requires wider efforts from support agencies, development boards and the country’s influential financial sector participants. The kingdom’s commitment to ensuring stability has been recognised by Standard & Poor’s, which revised Bahrain’s outlook from negative to stable in January 2013. The country’s stable outlook is also confirmed by the banking sector’s resilience following the aftermath of the Arab Spring. Furthermore, the opportunity exists for Bahrain to get back its A- rating, which will further boost the economy’s outlook and enhance investor confidence. Foreign direct investments, fiscal revenue diversification, small business support and infrastructure development will all play a key role in attracting international banks to Bahrain.

How can Bahrain maintain its primacy as a financial centre in an increasingly competitive region?

MOOSA: Bahrain has significant fundamentals that continue to make it a competitive place to run regional operations. Although GCC investments to attract foreign banks have been aggressive in the last several years, there remain several areas where Bahrain has a competitive advantage. For example, the country’s educated workforce makes it particularly appealing in terms of quality and availability. Bahrain also offers relative cost advantages that are unparalleled regionally. Proximity to the Eastern Province of Saudi Arabia and ease of access is another important advantage.

How do you expect retail growth to compare with wholesale growth moving forward?

MOOSA: Retail segment growth is an opportunity for wholesale expansion and vice versa. When the retail sector grows this translates into inter-bank transaction volumes, cross-border trade and wholesale lending to finance projects. In 2012 we saw positive signs in the retail segment with a rise in consumer lending and deposits. The wholesale segment is exposed to international demand for exports by large corporates and multinational corporations, which were relatively unaffected by the 2011 economic slowdown in Bahrain. An example of this is Aluminium Bahrain, which is currently undergoing a $4.4bn product line development. As the need for large-scale projects in the region increases, the outlook for the wholesale segment is positive.