Bahrain MPs propose minimum BD100,000 capital requirement for foreign businesses

TDT | Manama     

The Daily Tribune – www.newsofbahrain.com

Bahrain lawmakers are gearing up for a critical vote on a proposal set to reshape the landscape for foreign investors. Spearheaded by MPs Mamdouh Al Saleh, Mohammed Al Ahmed, Ahmed Qarata, Jalal Hassan, and Mahdi Al Shuwaikh, the proposal seeks to enforce a minimum capital requirement of BD100,000 for foreign companies looking to establish a presence in the country.

The proposed amendment targets Article 345 of Decree Law No. 21 of 2001, addressing concerns within the Commercial Companies Law. This contentious issue is slated for debate and voting during Tuesday's session, promising a showdown among parliamentarians.

Proponents argue that the measure is crucial for safeguarding the national economy and bolstering the position of Bahraini investors. They contend that the absence of a minimum capital requirement for foreign entities has adversely impacted the economy, particularly by undercutting the vitality of small and medium-sized enterprises (SMEs).

Fierce opposition

However, opposition to the proposal is fierce. The Ministry of Industry and Commerce voices concerns over potential repercussions, warning of adverse effects on the financial services industry, foreign capital companies, and overall financial activity.

Additionally, it raises objections on the grounds of contradicting the government's strategic goals of attracting foreign investment and advancing economic reform. Support for the proposal comes from key business organisations such as the Bahrain Chamber of Commerce and Industry (BCCI) and the Bahrain Businessmen Association (BBA).

Both advocate for the necessity of introducing a minimum capital requirement to curtail the negative impact on Bahraini SMEs and foster a more equitable investment landscape. According to BCCI, the absence of an investment ceiling for foreign ownership of commercial registrations has adversely affected Bahrain's vision pillars of fairness, competitiveness, and sustainability.

BCCI argues that this scenario has fostered an unhealthy parallel market, undermining the position of Bahraini SME owners. BBA underscores the necessity of tackling the adverse effects stemming from the absence of a minimum capital requirement for foreign companies and institutions.

Despite strong advocacy, the proposal faces an uphill battle. The Parliament's Financial and Economic Affairs Committee recommends its rejection, citing potential conflicts with Bahrain's Economic Vision 2030 and concerns over its implications for economic growth and foreign investment attractiveness.

The Committee is also worried that the proposal might hamper the Kingdom's economic growth trajectory and convey an unfavourable signal to international investors. This comes at a critical juncture when the national economy requires a dynamic investment environment to allure additional foreign direct investment.