Cost of Doing Business in Bahrain

Manufacturing February 2016

Contents

1 Executive Summary 2

2 Company Formation 4

3 Land Rental and Construction 5

4 Utilities 7

5 Manpower 9

6 Visa and Labor 10

7 Ports and Customs 11

8 Appendix 13

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Disclaimer

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. KPMG does not guarantee that the use of guidance in the report will lead to any particular outcome or result. KPMG shall not be liable to anyone in respect of any business losses, including without limitation loss of or damage to profits, income, revenue, use, production, anticipated savings, business, contracts, commercial opportunities or goodwill.

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1 Executive Summary

This report looks at the typical costs associated with setting up and operating a manufacturing business in the Gulf Cooperation Council (GCC) countries.

The report compares a wide range of costs involved in setting up and operating a manufacturing business across specific jurisdictions within each of the GCC countries. Some of these are one-time costs related to setting up of the business and its supporting infrastructure, while others are annual recurring costs pertaining to operations and regulatory requirements.

The key costs compared in this report pertain to:

• Company Formation

• Land Rental and Construction

• Utilities

• Manpower

• Visa and Labor

• Ports and Customs

The costs have been compared across specific Free Trade Zones (FTZs) and Investment Parks / Cities within each GCC country and have been benchmarked for the purpose of this report. These include:

• Investment Parks / Cities such as:

– Bahrain International Investment Park, Hidd, Bahrain (BIIP)

– King Abdullah Economic City, Jeddah, KSA (KAEC)

– Small and Medium Scale Industrial Area, Doha, Qatar (SMSIA)

• Free Trade Zones such as:

– Jebel Ali Free Zone, Dubai, UAE (JAFZA)

– Khalifa Industrial Zone, Abu Dhabi, UAE (KIZAD)

– Sharjah Airport International Free Zone, Sharjah, UAE (SAIF)

– Ras Al Khaimah Free Trade Zone, Ras Al Khaimah, UAE (RAKFTZ)

– Sohar Port and Free Zone, Sohar, Oman (SoharFTZ)

– Kuwait Free Trade Zone, Kuwait City, Kuwait (KWTFTZ)

All the above FTZs and Investment Parks / Cities allow for 100% foreign ownership, with the exception of SMSIA in Qatar which requires an approval from the Ministry of Energy and Industry to setup a 100% foreign-owned industrial company.

Bahrain exhibits the lowest values for a majority of the cost components, thereby presenting an optimal case for establishing a manufacturing business. At an overall level, the cost for operating a manufacturing business in the GCC is lowest in Bahrain (BIIP), being 21% lower than the most expensive location, RAKFTZ in UAE.

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The following table outlines the overall cost of operating a manufacturing business across the GCC:

Figure 1: Comparison of Operating Cost1

Average Annual Operating Costs (USD)

Cost Head BIIP JAFZA KIZAD SAIF RAKFTZ SoharFTZ KAEC SMSIA KWTFTZ

Annual License Renewal Fees2

130 1,490 1,350 2,030 1,670 1,000 1,350 1,620 1,700

Land Rental3 13,300 56,200 41,850 33,750 33,750 35,000 21,950 10,130 7,650

Manpower & Visa Cost4 1,485,790 1,672,570 1,672,570 1,672,570 1,672,570 1,507,490 1,908,920 1,820,540 1,711,790

Utility Cost5 155,450 370,870 191,540 383,580 399,580 171,710 151,000 67,530 64,320

Total Cost 1,654,670 2,101,130 1,907,300 2,091,930 2,107,570 1,715,190 2,083,220 1,896,440 1,785,460

Source: KPMG Research & Analysis

1All figures have been rounded off to the nearest 10 2Reflects the annual cost associated with renewing a license for industrial activity 3Reflects the average annual cost of renting a 5000sqm plot of industrial land within each FTZ and Investment Park/City 4Reflects the annual average manpower and visa costs for 65 employees consisting of: 15 unskilled workers, 15 semi-skilled

workers, 10 skilled workers, 7 administrative staff, 7 associates, 5 deputy managers, 4 managers and 2 senior management members

5Reflects the annual utilities cost based on a 3,000 sqm built-up area consuming 255,810 kWh of electricity per month and 70m3

of water per month

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2 Company Formation

Businesses involved in manufacturing activities in Free Trade Zones (UAE, Oman and Kuwait) are regulated by the respective FTZ Authorities, while businesses not operating within FTZs (Bahrain, Qatar and Saudi Arabia) are regulated by the country specific Industry and Commerce Ministries.

Company formation costs typically comprise of three key components:

• One-time application / registration fees to form a limited liability company, usually non-refundable

• Annual license renewal fees, depending on the type of license held

• Minimum capital requirement represents the mandated paid up capital for starting the business; however, this is not required by some FTZs and Investment Parks / Cities. Moreover, there is usually no restriction on the usage of the capital once the company has been legally established.

BIIP has significantly lower Application Fees and Annual License Renewal Fees as compared to the rest of the FTZs and Investment Parks / Cities.

The figures below include costs for registering a limited liability company with multiple corporate shareholders, and the corresponding annual license renewal fees.

Figure 2: Licensing and Registration Fees6

Annual Fees & Application Fees (USD)

Cost Head7 BIIP JAFZA8 KIZAD SAIF RAKFTZ SoharFTZ KAEC SMSIA9 KWTFTZ10

Application Fees 320 4,050 3,375 2,700 1,890 2,730 6,750 3,780 6,780

Minimum Capital11 None None 40,500 40,840 27,230 51,950 None 54,950 211,880

Annual License Renewal Fees 130 1,490 1,350 2,030 1,670 1,000 1,350 1,620 1,700

Source: FTZ Authorities, Investment Park/City Authorities, Bahrain Investor Center, World Bank Doing Business Report 2014, Qatar Ministry of Energy and Industry

6All figures have been rounded off to the nearest 10 7Reported figures for application and annual license renewal fees may vary based on specific activity, number of products

produced and other relevant government bodies’ approval fees for example Ministry of Health Permits and Environmental impact assessments

8JAFZA has no requirement for minimum capital - However, if a certificate of incorporation is required, USD 27,225 must be available in the official bank account

9Application fees in Qatar range from USD 3,100 to USD 4,460 – average value has been considered 10Minimum capital requirement in Kuwait range from USD 169,500 to USD 254,250 – average value has been considered 11Minimum Capital requirements may also vary based on the activities of the company

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3 Land Rental and Construction

All the FTZs and Investment Parks / Cities considered in this report provide land plots on long to mid-term lease, for constructing a manufacturing unit. Land plots of 5,000 sqm area across the different FTZs and Investment Parks / Cities command rentals in a wide range, with average rates starting from USD 1.53 up to USD 11.02 per sqm per year.

The significant variation can be attributed to supply and demand characteristics in each country, maturity level of the individual FTZs and Investment Parks / Cities, as well as location of the particular land plot.

In terms of land rental rates, Bahrain, Qatar and Kuwait lie at the lower end of the spectrum while Oman and UAE lie at the higher end, with JAFZA in UAE commanding the highest rates.

Figure 3: Industrial Land Rental Rates

Average Land Rental Rates (USD per sqm per year)

Cost Head BIIP JAFZA12 KIZAD SAIF RAKFTZ SoharFTZ13 KAEC SMSIA14 KWTFTZ15

Land Rental 16 2.66 11.02 7.56 6.75 6.75 7.00 3.78 2.03 1.53

Source: FTZ Authorities and Investment Park/City Authorities

Construction costs vary significantly between the GCC countries, and the same trend reflects for these costs within the respective FTZs and Investment Parks / Cities. Bahrain offers the lowest construction costs for light and heavy duty factories, with Qatar being the most expensive. Heavy duty factories can be categorized as those utilizing large and heavy equipment and facilities and complex processes, such as the automotive and machinery manufacturing industries. Conversely, light duty factories produce light weight products such as furniture, apparel and home appliances industries. Heavy and light duty

12The typical rental rate of USD 11.02 has been reported. However, rental rates may range from USD 6.89 to USD 22.03 13SoharFTZ is subject to a variable annual rental increase not exceeding more than 2% per annum 14An average value has been calculated for land rental at SMSIA as rates range from USD 1.35 to USD 2.70 15An average value has been calculated for land rental at KWTFTZ as rates range from USD 1.02 to USD 2.03 16Additional service charge is applicable for JAFZA at 2% of annual rent, KIZAD at 0.81 USD per sqm and KAEC at 0.61 per

sqm

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factories vary in construction costs as structures are required to meet different specifications such as resistance to chemicals, suppression of shock transfer and heavy load bearing.

Figure 4: Construction cost for Heavy and Light Duty Factories17

Average Construction Costs (USD per sqm)

Factory Type BIIP JAFZA KIZAD18 SAIF19 RAKFTZ20 SoharFTZ KAEC SMSIA KWTFTZ21

Light Duty Factory 620 630 630 630 630 780 740 990 690

Heavy Duty Factory 700 930 630 930 930 990 950 1,150 870

Source: FTZ Authorities, Investment Park/City Authorities, AECOM Middle East Handbook 2014

Warehouse units are available for rental through private developers or directly from FTZs and Investment Parks / Cities.

Warehouse rental rates typically vary based on location and facilities provided (such as maintenance services, warehouse management services). A comparison of the average rental rates for warehouses located within or nearby the benchmarked FTZs and Investment Parks / Cities indicates that RAKFTZ, BIIP and KAEC are amongst the lowest while SMSIA in Qatar is the highest.

Figure 5: Warehouse Unit Rental Rates22

Average Warehouse Rental Rates (USD per sqm per year)

Cost Head BIIP JAFZA KIZAD23 SAIF RAKFTZ SoharFTZ KAEC SMSIA KWTFTZ

Warehouse Rental 80 130 108 100 70 110 80 150 140

Source: FTZ Authorities, Investment Park/City Authorities, KPMG Research & Analysis

17All figures have been rounded off to the nearest 10 18JAFZA construction costs have been assumed for SAIF 19JAFZA construction costs have been assumed for KIZAD 20JAFZA construction costs have been assumed for RAKFTZ 21Kuwait construction costs have been calculated based on typical construction costs for commercial space 22All figures have been rounded off to the nearest 10 and do not include any additional facilities / services 23Prebuilt warehouses are not currently offered in KIZAD FTZ therefore the quoted figure is for non-FTZ prebuilt warehouses

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4 Utilities

Electricity and Water are the utilities that are most commonly used in manufacturing. Fuels such as Gas, Petrol and Diesel have different usages based on the type of product(s) being manufactured.

Electricity and water tariffs for industrial consumption can vary based on multiple factors including total number of units utilized, as well as peak, off-peak and seasonal rates. Bahrain commands the lowest rate for water, while Kuwait and Qatar offer the lowest rates for electricity. In contrast, the UAE charges the highest industrial tariffs for the utilization of both electricity and water. At an overall level, utility charges in Bahrain are less than half of those in the UAE.

Gas prices in the GCC countries ranges between USD 0.80 and 4 per MMBTU with gas prices in UAE being significantly higher than other GCC countries. In terms of petrol and diesel prices, Saudi Arabia offers the lowest rate, while UAE has the highest rate. Bahrain offers the second lowest diesel price and third lowest petrol price amongst the GCC nations.

Utility rates across the GCC have been subject to revisions throughout 2015 and early 2016 as governments look to reduce spending on subsidies as a result of the lower price of oil. Recently, all utility and fuel prices in Bahrain have been adjusted and the reported figures are not expected to change in the coming year.

Figure 6: Average Cost of Utilities

Average Cost of Utilities (USD)

Utility BIIP JAFZA24 KIZAD SAIF RAKFTZ SoharFTZ25 KAEC26 SMSIA KWTFTZ

Electricity (per kWh) 0.05 0.12 0.06 0.12 0.13 0.06 0.05 0.02 0.02

Water (per m3) 1.06 2.44 1.08 2.77 2.08 1.72 2.16 1.46 2.24

Gas (per MMBTU) 27

2.50 4 4 4 4 3 1.25 3 0.80

Petrol (per liter) 28 0.42 0.43 0.43 0.43 0.43 0.51 0.22 0.33 0.24

Diesel (per liter) 0.32 0.43 0.43 0.43 0.43 0.42 0.12 0.41 0.37

Source: FTZ Authorities, Investment Park/City Authorities, GCC Electricity and Water Authorities and GCC National Petroleum and Gas Companies

The figures quoted above are estimated based on average consumption rates of light manufacturing operations and compare the per unit industrial tariffs for utilizing 10,000 kilowatt-hour (kWh) units of power and 70 cubic meters (m3) of water, per month. Consumption may vary depending on activity.

24Electricity Tariffs in UAE include a surcharge of between USD 0.01 and 0.02 as per FEWA/DEWA/SEWA tariff structures.

Applies to JAFZA, SAIF and RAKFTZ 25Sohar electricity tariff is calculated as a weighted average of seasonal tariffs 26KAEC electricity tariff is calculated as an average of reserved capacity and variable consumption rates 27MMBTU denotes Million Metric British Thermal Units 28Figures reported are for 95 octane unleaded gasoline

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Figure 7: Utility Cost per Unit (USD)

Figure 8: Fuel Cost per Unit (USD)

Utility tariff in Bahrain and structured as tariff slabs based on the total monthly consumption of water and electricity. No seasonal or peak rates are applicable under the country’s current tariff structure. The below figures indicate the cost per unit for electricity and water in Bahrain. Figure 9: Electricity and Water Tariff Structure in Bahrain

Electricity Tariff (USD)

Electricity Consumption (kWh) Tariff

0 – 5,000 0.04

5,000 – 250,000 0.05

250,000 – 500,000 0.06

More than 500,000 0.08

Water Tariff (USD)

Water Consumption (m³) Tariff

0 – 450 1.06

451 – 1,000 1.33

More than 1,000 1.99

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5 Manpower

For comparison of manpower cost, employees across different categories have been considered, ranging from Unskilled Workers up to Senior Management.

When comparing the average salary earned by employees working in the GCC manufacturing sector, Bahrain exhibits the lowest manpower cost for junior positions. Salary cost for the more senior positions is typically lowest in Oman, with Bahrain being a close second. Saudi Arabia exhibits the highest manpower cost.

Figure 10: Manpower Costs29

Manpower Costs (USD per month)

Employee Category Bahrain KSA Qatar Kuwait UAE Oman

Unskilled Worker30 390 480 450 440 420 410

Semi-Skilled Worker31 470 570 540 520 500 490

Skilled Worker 1,320 1,630 1,600 1,550 1,390 1,420

Administration Staff 1,180 1,580 1,510 1,460 1,390 1,270

Executive / Associate 2,720 3,380 3,340 3,010 3,120 2,650

Assistant Manager 32 3,340 4,150 4,100 3,690 3,820 3,250

Manager 5,540 7,570 7,160 6,260 6,480 5,760

Senior Manager and above 15,060 18,810 18,000 17,040 16,730 14,890

Source: Salary Explorer Survey, Gulf Business Salary Survey, KPMG Research & Analysis

Salaries quoted above indicate gross monthly salary which includes housing allowance, transport allowance and medical insurance. These allowances have been calculated as 25% to 50% of the basic salary, varying across levels.

Figure 11: Annual Manpower Cost33 for a Manufacturing Company (USD ‘000) -

29All figures have been rounded off to the nearest 10 30Unskilled Worker costs for the GCC have been estimated using Semi-Skill Worker cost differential between Bahrain and the

rest of the GCC countries 31Semi-skilled worker costs for Kuwait have been estimated using Administration Staff cost differential as compared to Qatar 32Assistant Manager cost for rest of GCC have been estimated based on the cost in Bahrain, and using a differential as compared

to Manager position 33Reflects the average annual manpower costs for 65 employees consisting of: 15 unskilled workers, 15 semi-skilled workers, 10

skilled workers, 7 administrative staff, 7 associates, 5 deputy managers, 4 managers and 2 senior management members

1,469 1,491 1,653 1,665 1,799 1,865

-

500

1,000

1,500

2,000

Bahrain Oman UAE Kuwait Qatar KSA

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6 Visa and Labor

Visa and Labor charges represent the cost associated with employing foreign workers, and typically include the following key components:

• One-time entry visa

• Work / Residency permit

• Medical fees

• ID card creation

While all the four components mentioned above are required for employing a foreign worker in the GCC, in Bahrain, a separate one-time entry visa and medical test are not required as the work permit includes these components.

The annual residency permit renewal forms the larger portion of visa and labor related costs, and varies significantly across the GCC, with Kuwait being the most expensive. In UAE, the renewal process also requires the medical test and ID card issuance to be repeated, thereby increasing the overall work permit renewal cost substantially. Hence, Oman and Bahrain are observed to offer amongst the lowest cost for work permit renewal.

Figure 12: Visa and Labor Costs

Visa and Labor Costs (USD per employee)

Cost Head Bahrain UAE Oman KSA Qatar Kuwait

Entry Visa34 77 35 68 112 36 540 54 34

Work Permit (Residency) / annum 37

265 186 38 261 675 39 327 718 40

Medical Fees 191 243 41 52 41 41 136

ID Card Nil 100 42 26 230 43 Nil 7

Source: Relevant Foreign Affairs and Manpower Ministries in the GCC and KPMG Research & Analysis

34Entry Visa is a one off payment and is typically required for temporary entry before applying for a work permit (residency) in

most GCC countries 35The entry visa fee is only applicable if the employee enters the country prior to an application for a work permit. If a work permit

is applied for prior to the employee entering the country then the single entry visa fee is not applicable 36Includes an application fee of USD 47 37All reported work permit figures are annual and are calculated by dividing the renewal fees by the duration of visa in years and

include stamping fees for passports 38The reported figure is the calculated annual cost for a 3 year visa available at FTZs 39A work permit in Saudi Arabia is called a labour card and does not imply residency status which is only applicable after being

issued an ID card (Iqama). The reported figure can be lower if localization targets are met however, this is typically not the case in Saudi Arabia for manufacturing operations

40The reported figure is half if localization targets are met however, this is typically not the case in Kuwait for manufacturing 41Medical tests are required for work permit renewals in UAE which can range from USD 162 to USD 243 with the latter typically

applicable in Dubai 42Renewal of ID cards are required for work permit renewals in UAE 43The ID card in Saudi Arabia signifies residency status and must also be stamped in employees’ passports. The figure reported

is for a single entry whereas multiple entry would cost USD 311

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7 Ports and Customs

When importing from outside of the GCC jurisdiction, all countries levy a customs duty of 5% for general items. Import duties are not imposed on companies operating in a FTZ or on a custom bonded area or on trade between GCC jurisdictions under the Greater Arab Free Trade Agreement. However, mainland companies (not located in FTZs) in the industrial and manufacturing sector can be exempt from paying import duties for raw materials and equipment subject to approval from relevant regulatory authorities. This is the case for companies operating in BIIP, KAEC and to a limited extent in SMSIA44.

Customs duty applies on products that are manufactured within FTZs and sold in the mainland - For example, goods manufactured by a company within JAFZA will attract an import duty if they are sold within UAE. Conversely, this becomes a key advantage for manufacturers located outside FTZs (like BIIP, KAEC and SMSIA), as finished products from these jurisdictions are not subject to import duties when sold within the mainland.

Illustrated below are the import duties that would apply to products manufactured within FTZs and Investment Parks / Cities and sold within the mainland.

Figure 13: Custom Duties

Custom Duties (USD)

Custom Duties BIIP JAFZA KIZAD SAIF RAKFTZ SoharFTZ KAEC SMSIA KWTFTZ Customs Duty applicable on products sold within the GCC (general items)

0% 5% 5% 5% 5% 5% 0% 0% 5%

Source: KPMG Research & Analysis

Sea Port charges are indicative costs of handling, clearing, documentation and last mile transportation charges for standard items. The table below represents the sea port charges applicable in GCC countries, indicating that Bahrain offers the best rates.

Figure 14: Sea Port Costs45

Sea Port Charges (USD)

Charge Type Bahrain Qatar Dubai Sharjah Ras Al Khaimah

Abu Dhabi Jeddah Dammam Kuwait Oman Units

Terminal Handling Charges46

90 160 200 180 200 200 240 270 90 100 per 20’ contain

er Clearing, Documentation & Transportation Charges47

290 390 310 310 350 310 330 400 420 320 per 20’ contain

er

Source: Port Authorities, Freight forwarders, Shipping lines and KPMG Research & Analysis

Port Storage Charges are the costs associated with storing containers at cargo terminals. The typical pricing structure for storage at ports include a limited period of ‘free time’ during which no charges are levied. After the free time allowance, a daily rate for storage is levied, which increases based on the

44Exemption on import duties do not apply in Qatar; however transit importation is permissible whereby imported

material/equipment is exempt from import duties if they are deposited in a free trade zone or exported within six months 45All figures have been rounded off to the nearest 10 46All reported figures factor in multiple ports across each country 47Transportation charges are calculated between the port and city limits. Clearing and documentation requirements vary at

different ports

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number of days that containers remain at the terminal. Typically, importers and exporters limit storage at ports to the free time period to keep their logistics costs low.

Illustrated below are the storage charges applicable to relevant sea ports for each of the benchmarked FTZs and Investment Parks / Cities:

Figure 15: Port Storage Costs

Port Storage Charges (USD)

Port

BIIP JAFZA SAIF RAKFTZ Abu Dhabi SoharFTZ KAEC Dammam SMSIA KWTFTZ

Khalifa Bin

Salman Port

Jebel Ali Port

Port Khalid Saqr Port Khalifa

Port Sohar Port

King Abdullah

Port

Dammam Port

Port of Doha

Shuwaikh Port

Free Time Allowance 11 days 10 days 10 days 15 days 14 days 10 days 7 days 20 days 10 days 3 days

Port Storage Costs (per day per 20’ container)

4 (Day 12 to 21) 21.8

(Day 11 to 15)

20.4 (Day 11 to 15)

4.1 (Day 16

onwards)

19.4 (Day 15 to 20)

3.3 (Day 11 to 20)

4.0 (Day 8

onwards)

21.6 (Day 8

onwards)

10 (Day 11 to 20) 16.5 (Day

4 to 6) 5.3 (Day 22 to 31)

4.6 (Day 21 to 30)

16.6 (Day 21 to 30) 8 (Day

32 to 41) 40.8 (Day 16

onwards)

38.1 (Day 16

onwards)

36.45 (Day 21

onwards)

33 (Day 7 onwards) 13.3

(Day 42 onwards)

6.5 (Day 31

onwards)

23.2 (Day 31

onwards) Source: Port Authorities, KPMG Research and Analysis

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8 Appendix

The following table provides an overview of the different incentives offered by the benchmarked FTZs and Investment Parks / Cities.

Figure 16: Incentives Offered by FTZs and Investment Parks / Cities

Incentives

Incentive Type BIIP JAFZA KIZAD SAIF RAKFTZ SoharFTZ KAEC SMSIA KWTFTZ

Exemption from tax48

100% foreign ownership

Subject to approval

100% repatriation of capital/profits

Duty Free Imports of raw materials and equipment49

Subject to

approval

Duty Free access to GCC markets

Source: FTZ Authorities, Investment Park/City Authorities and KPMG Research & Analysis

48Tax exemptions are only guaranteed at BIIP and SoharFTZ for a period of 10 years and 25 years respectively 49Exemption on import duties do not apply in Qatar; however, transit importation is permissible whereby imported

material/equipment is exempt from import duties if they are deposited in a free trade zone or exported within six months

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The following table provides an overview of the freight cost when exporting from Bahrain to the rest of the GCC by Air, Sea and Road.

Figure 17: Average Freight Cost and Duration for exporting from Bahrain to other GCC countries

Average Freight Cost (USD) and Duration (Days)50

Freight Type Qatar UAE KSA Kuwait Oman Units

Air Freight Cost 3.2 3.2 3.2 3.2 3.9 Per KG

Air Number of Days 1 1 1 – 2 1 1 Days

Road Freight Cost 0.94 0.28 0.56 0.94 0.65

Per KG for loose truck

load

Road Number of Days51 2 – 3 3 – 4 2 – 4 3 – 5 3 – 5 Days

Source: KPMG Research & Analysis, Freight Forwarding Agents and Logistic Companies

Average Freight Cost (USD) and Duration (Days)52

Freight Type

Qatar UAE - Dubai

UAE – Sharjah

UAE - RAK

UAE – KIZAD

KSA - Dammam

KSA - Jeddah Kuwait Oman

Units Port of Doha

Jebel Ali Port

Port Khalid

Saqr Port

Khalifa Port

Dammam Port

King Abdullah

Port

Shuwaikh Port

Sohar port

Sea Freight Cost53

488 150 500 650 450 400 500 513 538 Per 20’ container

Sea Number of Days

11 – 12 2 10 12 11 10 15 11 11 Days

Source: KPMG Research & Analysis, Freight Forwarding Agents and Logistic Companies

50All reported figures exclude duties & clearing, documentation and transportation charges 51Road Freight duration is subject to variation based on border congestion 52All reported figures exclude duties & clearing, documentation and transportation charges 53Sea freight cost can vary significantly based on carrier, cargo type, cargo volume and value, shipping line scheduling,

frequency of freight shipping and charges levied by freight forwarding agents

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Renting Commercial Office Space

Bahrain Rental rates for commercial office space have remained stable in 2015 with the exception of rental rates in the Diplomatic Area. Rental rates are expected to reduce further in 2016 given current market conditions. At these rates, Bahrain is the most competitive commercial office space market when compared with Dubai and Qatar.

The table below reflects the rentals for the Net Internal Area (NIA)54. Typically, an additional 15% of the rent would be charged as maintenance charges for the common areas which include staircases and lobbies.

Figure 18: Prime commercial asking rental rates in Bahrain

Asking rental rates in Bahrain by office locations (USD per sqm per month)55

Location 2013 2014 2015

Bahrain World Trade Center 24 21 21

Bahrain Financial Harbor 24 24 24

Seef Area 21 19 19

Diplomatic Area / Manama 22 19 17 Source: Primary Research, Cluttons Bahrain Market Report 2015, KPMG analysis

Both Bahrain World Trade Center and Bahrain Financial Harbor offer furnished and non-furnished office space options.

Figure 19: Typical prime commercial asking rents

Bahrain asking rents in 2015 (USD per month)

Location 50 sqm 100 sqm 200 sqm 300 sqm

Bahrain World Trade Center 1,060 2,120 4,240 6,370

Bahrain Financial Harbor 1,200 2,400 4,800 7,200

Seef Area 960 1,910 3,820 5,730

Diplomatic/Manama 890 1,790 3,570 5,360

Source: Primary Research, Cluttons Bahrain Market Report 2015, KPMG analysis

54 Net Internal Area refers to the total floor area excluding area taken up by lobbies, stairs and escalators, lifts and other

maintenance areas. 55 All figures have been rounded to the nearest integer

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Dubai Rental rates for commercial properties in Dubai remain high when compared to Bahrain. DIFC has recently increased rental rates across all office locations. On average, prime office space rental rates in Dubai are two times the rate of Bahrain.

Figure 20: Prime commercial asking rental rates in Dubai

Asking rental rates in Dubai by major office locations (USD per sqm per month) 56

Location 2013 2014 2015

DIFC – Gate Village 56 56 60

DIFC – Gate Precinct 62 62 67

DIFC – Gate Building 67 67 72 Source: Primary Research, KPMG analysis

DIFC further charges USD 14.7 per square meter per month as service and utility charges.

Typical rents for occupying at the DIFC are as below:

Figure 21: Typical prime commercial asking rents

Dubai asking rents in 2015 (USD per month)

Location 50 sqm 100 sqm 200 sqm 300 sqm

DIFC – Gate Village 2,990 5,980 11,970 17,950

DIFC – Gate Precinct 3,360 6,720 13,430 20,150

DIFC – Gate Building 3,600 7,200 14,410 21,610

Source: Primary Research, KPMG analysis

56 All figures have been rounded to the nearest integer

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Qatar Rental rates in the Diplomatic District / West Bay have increased due to increased occupancy rates. Rental rates at QFC reduced as more prime office supply became available in Qatar. On average, prime office space rental rates in Qatar are 199% higher than Bahrain.

Figure 22: Prime commercial asking rental rates in Qatar

Asking rental rates in Qatar by major office locations (USD per sqm per month) 57

Location 2013 2014 2015

Qatar Financial Center (QFC) 69 66 66

Diplomatic District / West Bay (average) 55 57 57

Source: Primary Research, Al Asmakh Qatar Report 2015, KPMG analysis

In addition to the base rent in Diplomatic District/West Bay, 15% of the monthly rate is charged as service charge. QFC charges 10% of the asking rental rate as service charge.

Figure 23: Typical prime commercial asking rents

Qatar asking rents in 2015 (USD per month)

Location 50 sqm 100 sqm 200 sqm 300 sqm

Qatar Financial Center 3,300 6,610 13,220 19,830

Diplomatic District / West Bay (average) 2,840 5,690 11,370 17,060

Source: Primary Research, Al Asmakh Qatar Report 2015, KPMG analysis

57 All figures have been rounded to the nearest integer

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