It was mentioned in the development of the Middle East market that the Kingdom of Bahrain, one of the GCC countries, knew that the development of local e-commerce was limited, so it took a different approach and used its local geographical advantages to provide support for the development of Middle Eastern e-commerce from the perspective of logistics and transportation. So how does it help?
First, the goods are sent from China to Bahrain, and then from Bahrain to the customers. There are two modes involved here, direct express delivery and overseas warehouses. Because the express delivery from China to the Middle East is currently sent directly to the destination country, there is almost no service to go to Bahrain first and then to the destination country, so this point will not be discussed first. The following mainly talks about the second one, using Bahrain overseas warehouses, which can be self-built or leased.
The overseas warehouse here is different from the overseas warehouse mentioned above. The traditional overseas warehouse is directly established at the sales destination. For example, if the seller is stationed in Souq’s Saudi station, an overseas warehouse is set up in Saudi Arabia, while here the overseas warehouse is established in Bahrain, and then sent from the warehouse in Bahrain to the user. It seems to be a lot of trouble, but it is not. There are the following advantages to establishing an overseas warehouse in Bahrain.
Logistics and transportation.
(i) Fast customs clearance
The development of a region’s logistics industry can be seen from its customs clearance speed. Under normal circumstances, the customs clearance speed of goods shipped from China to the United Arab Emirates or Saudi Arabia can be as fast as one week or as slow as one or two months. This is one of the reasons why several major e-commerce platforms do not allow direct express delivery. Slow customs clearance will directly affect consumers’ shopping experience. Bahrain’s customs clearance speed is very fast. According to statistics from the Economic Development Board of the Kingdom of Bahrain, the customs clearance speed of the Bahrain Port is no more than 7.5 hours at the fastest, and no more than 24 hours through the King Fahd Bridge with a special cargo clearance channel.
(ii) Duty-free
Products shipped from China to Saudi Arabia are subject to different tariffs according to their categories, with a tariff of 0~ 50%, and the Kingdom of Bahrain has signed bilateral economic and free trade agreements (FTAPs) with more than 40 countries, China is one of them, eliminating tariff barriers, and Bahrain’s transactions with the GCC member states and the 17 member states of the Greater Arab Trade Area are duty-free. This means that goods entering the Middle East from Bahrain do not need to declare tariffs, which saves cross-border sellers another cost.
(III) Fast transportation
Bahrain is located in the core of the Gulf region and is a fast channel to enter the Gulf market. Bahrain is close to Saudi Arabia, the largest economy in the Gulf region. It is only a 30-minute drive to the Eastern Province of Saudi Arabia, and a 2-hour drive to cover 75% of Saudi Arabia. ’s market scope, and is less than an hour’s flight from other major economies, such as the UAE and Qatar. Bahrain is closely connected to other markets in the Middle East by sea, road and air, providing a convenient and efficient expressway for companies’ goods and services to enter the Middle East market.
National policy.
E-commerce logistics is a project that the Kingdom of Bahrain has focused on supporting in recent years. In order to assist the development of the e-commerce logistics industry in the Middle East, a series of favorable policies have been formulated to encourage foreign capital to set up offices in Bahrain, and overseas warehouse companies are one of them.
(i) Preferential tax system
There are almost no taxes or fees for setting up overseas warehouses in Bahrain, such as corporate income tax, personal income tax, capital gains tax, etc. Tax, withholding tax and dividend remittance tax, etc., only very few indirect taxes are charged, such as 10% municipal tax.
According to the 2019 data of the Economic Development Board of the Kingdom of Bahrain, the corporate income tax level in the GCC countries.
The UAE and Saudi Arabia are the regions with the most overseas warehouses, and the taxes alone are a considerable expense every year.
(ii) 100% foreign shareholding
If Chinese companies want to set up offices in the UAE or Saudi Arabia, they can only hold a maximum of 49% of the shares, and the other 51% must be local people. Bahrain is different. Companies in Bahrain can enjoy 100% foreign shareholding, and can also transfer 100% of capital, profits and dividends.
(III) Government support
The government-supported Bahrain Labour Fund Tamkeen is committed to providing subsidies, financing subsidies, consulting services and other support to enterprises, such as providing subsidies of up to 50% for enterprise audits, equipment procurement, cloud service procurement, exhibitions, advertising and other activities. If recruiting Bahraini employees, enterprises can also receive corresponding employee salary subsidies (up to 50% of the salary subsidies for undergraduate graduates in the first 18 months), and even up to 100% of the subsidies for employee training, certification or international internships.
(IV) Low cost
Bahrain’s total industrial operating costs are the lowest in the GCC region, about 30% less than neighboring commercial centers. Leasing, Internet and telephone services are more affordable, and employee costs are also at a low level in all aspects. For the logistics industry, Bahrain’s transportation, port and warehousing costs are lower than other GCC markets.
However, logistics is still the biggest pain point for e-commerce in the Middle East. Although the Kingdom of Bahrain is making every effort to develop its own e-commerce logistics, it is still in the development stage, because it is not easy to establish an overseas warehouse in Bahrain. First of all, a large amount of investment is needed, and how much to introduce is still a problem. At present, there are not many companies that have established overseas warehouses in Bahrain, and most of them are large logistics companies such as 4PX Express and DHL. Through these companies, goods are shipped from China to Bahrain, and then sold to other parts of the Middle East. Although tariffs are saved, the logistics costs themselves will not be much cheaper, which runs counter to the original purpose of the seller to forward to the UAE or Saudi Arabia through Bahrain. In addition, a series of uncertainties that may arise after the introduction are also difficult to control. Therefore, although the starting point of this model is good, it may take a lot of time to actually implement it.