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Bahrain presents companies operating or planning to invest in the country with a moderate corruption risk. Petty corruption is not an obstacle for investors to carry out routine government actions, however, high-level corruption is more likely to impede businesses. This is particularly the case of public procurement and the extractive industries, where political interference and patronage networks render licensing and contracting opaque. Bahrain has set up a legal anti-corruption framework and the Penal Code criminalizes most corruption offenses in both the public and the private sector; including passive and active bribery and abuse of office. Nonetheless, enforcement is poor and officials have engaged in corruption with impunity.
Last updated: August 2016
Corruption risks are low in Bahrain’s judiciary. Judicial decisions are rarely influenced in return for bribes or other illegal payments (GCR 2015-2016). Nonetheless, the courts’ independence is threatened by political pressure (HRR 2015). The judicial system is headed by members of the ruling elite and the institution is often manipulated to intimidate opposition activists and politicians (BTI 2016). Businesses find the courts to be moderately effective in challenging government regulations and settling disputes (GCR 2015-2016).
Bahrain has acceded to the New York Convention of 1958 and is also a member of the International Centre for the Settlement of Investment Disputes (ICSID).
Businesses face a low corruption risk when dealing with the security apparatus in Bahrain. The police force is reported to be fairly reliable by companies in protecting them from crime and enforcing law and order (GCR 2015-2016). Nonetheless, impunity among officials, however, remains a problem (HRR 2015).
Petty corruption is rare in Bahrain and thus companies contend with a low risk of corruption when acquiring licenses, utilities or other public services (ICS 2015). Starting a business in Bahrain is less time-consuming and less costly than the regional average by far; taking only seven procedures and requiring nine days at a cost of 0,8% of income per capita (DB 2016). Nonetheless, dealing with construction permits is more time consuming than the regional average, taking 145 days (DB 2016). The Bahrain Investors Center (BIC) functions as one-stop-shop providing companies with all commercial licensing and registration services (ICS 2015). The BIC is one among the government’s efforts in making Bahrain business-friendly.
The land administration carries a mid to low-level corruption risk for companies. Property rights are adequately protected and facilitated under the law (ICS 2016). Nonetheless, occasional abuse of property rights does occur and is mainly the result of abuse of power by the ruling elite (BTI 2016). Registering property is more time-consuming in Bahrain compared to the neighboring countries’ averages (DB 2016).
In one case opposition leader Ali Salman exposed the purchase agreement of the land on which Bahrain’s Financial Harbor site was built revealing that the prime minister had paid one Bahraini dinar for his purchase (BTI 2016). Protestors during the 2011 uprising in Bahrain, waived a one-dinar note in front of the site as a symbol of the corruption involved (BTI 2016).
The tax administration carries a low corruption risk for business. Bribes and irregular payments are very rarely exchanged when meeting with tax officials (GCR 2015-2016). Paying taxes in Bahrain is almost four times less time-consuming than in neighboring countries; taking on average 60 hours per year (DB 2016).
The customs administration carries a mid to low level corruption risk for companies. Transparency at the border is rather high and bribes and irregular payments are rarely exchanged when meeting with customs (GETR 2014). Customs procedures, however, are perceived to be moderately burdensome (GCR 2015-2016). Importing and exporting in Bahrain is generally less time-consuming and less costly compared to the regional average (DB 2016).
Business contends with a high risk of corruption when dealing with public procurement in Bahrain. Companies report that price and technical merit are not always the only criteria upon which companies are awarded contracts (ICS 2015). Favoritism towards well-connected companies often taints the decision of procurement officials when awarding public contracts (GCR 2015-2016). However, bribes and irregular payments are not perceived to be widespread in the procurement process (GCR 2015-2016).
In a large corruption case in 2014, a unit of Alcoa Inc., the US’s largest aluminum producer, admitted to paying USD tens of millions in bribes to members of Bahrain’s royal family and officials employed at a state-owned company in Bahrain in return for public contracts (Bloomberg, Jan. 2014). Reportedly, a consultant was hired by Alcoa, at the request of Bahraini government officials responsible for contracting at the state-owned Aluminum Bahrain BSC., Alba, who in turn functioned as a middleman to bribe government officials (Bloomberg, Jan. 2014). Reportedly, USD 1,06 billion of public funds were diverted through the scheme (HRR 2015). Alcoa agreed to pay USD 384 million to settle Foreign Corrupt Practices Act probes in the US, while a former CEO of Alba received a USD 5,1 million fine and a 16-month jail sentence for corruption (BTI 2016). Investors are advised to exert caution when bidding on public tenders and are recommended to use a specialized procurement due diligence tool.
Companies may face high corruption risks when dealing with the natural resource sector in Bahrain. The natural resources sector and extractive industries suffer from large patronage and clientelistic networks impeding competitive investment. There is no independent licensing process and disclosure policies are fragmented and incomplete (Natural Resource Governance Institute 2013). For instance, several families in Bahrain with close ties to the ruling family bestow of licenses with an oligopolistic nature allowing them to sell particular brands and products on the local market or to pose as local agents for foreign companies with the ability to manipulate prices (BTI 2016). In another example, the largest state-owned company operating in the extractive sector, BAPCO, discloses little information on revenue generation, joint ventures, and other activities, and the company is not subject to independent audits (Natural Resources Governance Institute 2013).
The government of Bahrain has set up a legal anti-corruption framework, however, laws are poorly enforced (ICS 2016). Penal Code criminalizes active and passive bribery, and the acceptance or offer of any other undue advantage such as gifts, abuse of power, embezzlement, money laundering, in both the public and the private sector. Bribery and embezzlement can carry a sentence of up to 10 years’ imprisonment (Blakes, Jul. 2013). Government officials are not subject to financial disclosure laws and many engage in corruption with impunity (HRR 2015).
The law provides for freedom of speech and press, yet in practice, these freedoms have been severely limited (BTI 2016). The Bahraini press law is vaguely formulated, allowing for broad interpretations by the authorities; ‘disturbance of public decency’ or criticism of the king is punished by imprisonment (BTI 2016). Consequently, journalists commonly practice self-censorship (HRR 2015). Internet use is also restricted by authorities and several websites are inaccessible (BTI 2016). Internet activists routinely face intimidation and torture (BTI 2016). No law in Bahrain provides the public with access to government information (FitW 2015). The press environment in Bahrain is described as ‘not free’ (FotP 2015).
The law provides for freedom of assembly, yet these rights are restricted in practice (HRR 2015). Crackdown on civil society has increased in the aftermath of the 2011 uprising Bahrain witnessed as a legacy of the Arab Spring (FitW 2015). Registration applications of civil society organizations are arbitrarily rejected and government supervision is intrusive (BTI 2016). Ghada Jamsheer, a women’s rights activist, was arrested on charges of defamation subsequently to her tweets on alleged corruption at King Hamad University Hospital (FitW 2015). Jamsheer remained free on bail (HRR 2015).
- Bertelsmann Foundation: Bertelsmann Transformation Index – Bahrain 2016.
- World Bank & IFC: Doing Business 2016.
- US Department of State: Investment Climate Statement – Bahrain 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Freedom House: Freedom of the Press – Bahrain 2015.
- Freedom House: Freedom in the World – Bahrain 2015.
- US Department of State: Human Rights Practices Report – Bahrain 2015.
- US Department of State: Investment Climate Statement – Bahrain 2015.
- World Economic Forum: Global Enabling Trade Report 2014.
- Bloomberg: ‘Alcoa Pays $384 Million to Resolve Bahrain-Bribery Probe’, 10 January 2014.
- Blakes: ‘Bahrain Law Combats Private-Sector Anti-Corruption and Bribery’, 4 July 2013.
- Natural Resource Governance Sector: Bahrain 2013.
- Freedom House: Nations at the Crossroads – Bahrain 2012.