cost of doing business in...
TRANSCRIPT
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Cost of Doing Business in Bahrain Manufacturing February 2016
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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 countrys 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 (m) 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
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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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The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Disclaimer1 Executive Summary2 Company Formation3 Land Rental and Construction4 Utilities5 Manpower6 Visa and Labor7 Ports and Customs8 AppendixRenting Commercial Office SpaceBahrainDubaiQatar