Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events


The Bahrain Monetary Agency (BMA) reduced by 0.5% its recommended maximum rate of interest on deposits in Bahrain dinar, increased by 0.5% over the Bahrain dinar deposit rate, its recommended rate for certificates of deposit of BD 30,000 and above for period up to one year.a3(first entry)


All money changers should obtain approval from the BMA before registering with the Ministry of Commerce and Agriculture.a3


The stock exchange began operations. Actual trading on the floor of the stock exchange started on June 17.a3


The introduction of the Insider Trading Laws.a4


The maximum recommended interest for BD deposits with a maturity of six months or less were canceled and banks were allowed to offer rates of their choice.a3


ADR effective date. (Company=ARAB INSURANCE GROUP - REG S)a11


A stand-alone global index for Bahrain was added to the S&P Emerging Market Indices with a base date of Dec. 31, 1998. The index consisted of 15 stocks and had a market capitalization of $4.2 billion at the beginning.


Bahrain global index joined the S&P/IFCG Composite, EMEA, and Middle East & Africa indices.


Recent transforms include: loosening foreign investment restrictions on listed equities; signing a Bilateral Investment Treaty with the U.S. guaranteeing "free transfer of capital, profits, and royalties" between the two countries; stemming money laundering activities. Several largest banks announced new Islamic investment vehicles to maintain Bahrain's position as a regional financial hub. Trading remained thin for the rest of the year.


(Controls on direct investment) GCC national are allowed to own 100% in domestic enterprises, and non-GCC national are allowed to own up to 49%.a3


Following an Amiri Decree, the market was opened up to foreign investors, with GCC nationals being allowed to own up to 100% - up from 49%, and non-GCC investment up from 24% to 49%, with the Minister of Commerce and Industry having been given the authority to increase this limit, if he deems fit. ii


Investcorp took 79% stake in Independent Wireless One Corp. in the U.S.. Later in the quarter, Investcorp posted profit.


Financial sector saw a loss when the Gulf oil ministers dealt with intensified international concerns about higher oil prices and the government consolidated the structure of its state-owned petroleum sector. The third largest commercial bank, Al-Ahli, merged with United Bank of Kuwait.


S&P lowered the long-term credit and financial strength rating on ARIG from 'A' to 'A-'.


In the third quarter, the emir appointed four women and a foreign-born person to senior advisory positions for the first time. Bahrain considered joining an online data source set up by Arab stock markets within GCC, a step to develop the transparency of stock markets.


The market gained 2.5% after OPEC's decision to leave oil quotas unchanged. TAIB Securities launched a direct-access online trading service, the first one of its kind in the Middle East.


Signing of an agreement between the BSE and the Bank of Bahrain and Kuwait, appointing them as the Settlement Bank for the new Automated Clearing, Settlement and Central Depository (CDS) System. hh


The Bahrain Stock Exchange (BSE) implemented the first stage of an electronic clearance and settlement system. Equity indices slid.


Equities rose 3.2% higher as the government opened the telecommunications industry, increased land access to foreign investors, introduced stringent anti-laundering legislation to attract legitimate financial deposits, and planed to seek bids from international companies to develop oil and gas fields. OPEC agreed to oil production cut. A World Court ruling granted Bahrain sovereignty over the Hawar Islands.


Qatar and Bahrain agreed to develop a joint gas and oil project and bank. Cabinet reshuffled.


Rating agencies gave Bahrain investment grade status to reflect solid macroeconomic fundamentals and an improved investment climate. Bahrain ventured into the issuance of new short-term and medium-term Islamic financing instruments by signing a Bilateral Investment Treaty with the United States.


Terrorist attacks in the United States weighed heavily on the markets.


US$100 million of Islamic leasing issues listed on the BSE in a move to deepen Bahraini capital markets. The BSE signed an agreement with the Bank of Bahrain and Kuwait, making it the settler of trades by brokers under the new capital central depository system.


International rating agencies raised Bahrain's credit rating in recognition of the country's significant economic and political reforms.


Launching of the TV ticker service in cooperation with Bahrain Radio & Television Corporation. hh


Bahrain pegged the dinar to the dollar in anticipation of serious efforts to establish a common currency for the GCC countries.


Sheikh Hamad proclaims himself king and sets dates for parliamentary elections as envisaged under the NAC. However, the opposition strongly opposes his decision to enact an amended constitution and grant the appointed consultative chamber of the new parliament powers equal to those of the elected chamber.


The first parliamentary elections in three decades took place. Voters elect 40 members for the Chamber of Deputies. Four opposition groups boycott the elections to protest amendments to the constitution made by the king. Turnout at the polls is about 53%.


King Hamad inaugurates the first legislative session of the new National Assembly.


A US$100m Islamic bond issue (Ijara Sukuk) was oversubscribed despite risks generated by the US-led invasion of Iraq. Bahrain is upping its use of Shari'a-compliant debt instruments in its drive to become a global hub for Islamic financing. b1


Banks in the Central Governorate started to pay full taxes. They were paying a reduced fee since 1998. b2


The Bahrain Monetary Agency (BMA) has published a consultation paper outlining proposed new Security and Exchange Regulations (SER) in an effort to strengthen the regulation of the financial services sector. They are expected to provide for the creation of exchanges other than securities exchanges, for example a trading floor for futures, and should help consolidate the strength of Bahrain's banking and finance sector. b1


The government in March approved in principle a plan to end free provision of healthcare for expatriates, instead requiring them or their sponsors to pay for medical services. As of 2002, there were 254,184 expatriates working and living in Bahrain, comprising 37.8% of total population. a17


Bahrain and the US concluded a free-trade agreement (FTA), only four months after formal talks began. The agreement will provide duty-free access to all trade in non-textiles industrial goods, all Bahraini exports and 98% of US agricultural exports, stimulating bilateral trade and investment. Bahrain is the first Gulf country with which the US has concluded an FTA, and was the first state with which the US embarked on FTA talks following the US's announcement of an initiative to set up a US-Middle East free-trade zone by 2010. a17


Regulations on Foreign Investors


Restrictions: Nonresidents can not own more than 1% of a listed company's shares and a maximum of 25% for foreign share holdings.

Taxation: No tax on dividends or capital gains.a6


Restrictions: Foreigners are entitled to invest in up to 49% of a domestic public-shareholding company's equities, while seven banks are 100% open to foreign investors

Taxation: No change. a7


No change.


Bahrain set up the Economic Development Board to streamline the investment process by creating a “one-stop shop” for potential investors. the government liberalized land and other laws to allow 100 percent foreign ownership of many types of companies, Foreigners are also restricted to owning a maximum of 49% of any company listed on the Bahrain Stock Exchange and can buy property only in certain designated areas of the country

Taxation: no personal or corporate taxation or restrictions on capital repatriation b3


Restriction: Bahrain revealed a government plan to allow foreigners to own 100% of any business in Bahrain by end-2005.

Taxation: No change. a17