Formula 1's shifting sands
Forget Monaco – the setting for this year’s F1 business forum was the desert kingdom of Bahrain, a sure sign of motor sport’s growing love affair with the Middle East
By Rob Widdows
In the sweltering heat, on an island that floats in the Gulf of Arabia, they are building a Financial Harbour. There are plans for an Investment Wharf. They are constructing a new Bay of Bahrain, designed to be a mini-Caribbean for tourists seeking sand, sea, sunshine and gated security. There are cranes as far as the eye can see, bulldozers reclaiming huge chunks of land from the sea. The island is getting bigger by the hour.
Until the advent of air-conditioning, the most valuable real estate was surely a pool of shade beneath the palms. Not now. This desert kingdom is booming, hot in every sense of the word.
Bahrain means business. Bahrain is business-friendly, a message that hangs, in large letters, from hoardings on every horizon. These are the catchphrases, created by M&C Saatchi, of a campaign to sustain the country’s reputation as the financial hub of the Middle East. And never has the message been so important as it is in Grand Prix week.
No wonder the Formula 1 community has taken to this sultry land where visitors, especially the wealthy, are received with open arms, big smiles, delicious coffee and large helpings of traditional Arabic hospitality. The Saudis built and paid for a causeway across the sea from Saudi Arabia, so they too can join the party. Another causeway, this time to Qatar, is planned. Bahrain is making connections.
And no wonder the Motor Sport Business Forum has, for the first time, ventured out of Monaco and put its toe in the warm waters of the Gulf. Motor racing is big business in the Middle East and, under the banner of Connecting Financial Markets, Bahrain is a big player on this world stage. The Kingdom, for example, has no corporate or personal taxes, and foreign ownership of companies is encouraged. Where once the Bedouins wandered with their camel trains and tents, out of this arid land have grown banks, insurance companies, luxurious hotels and of course a Grand Prix circuit.
The Bahrain International Circuit, celebrating its fifth year as part of the World Championship calendar, is host to the aforementioned forum. Before the racing cars take to the track, there are financial connections to be fostered.
The Kingdom of Bahrain, in the shape of the Mumtalakat Holding Company, owns 30 per cent of the McLaren Group; its neighbours the Kuwaitis have the lion’s share of Aston Martin. Both Ron Dennis and David Richards, chairmen of McLaren and Aston Martin respectively, are here to speak at the forum. Just along the coast, Dubai is building the world’s first Formula 1 theme park in its newly created Motor City. Next year will see the first Grand Prix in neighbouring Abu Dhabi. Across the water in Qatar they’ve already held a Grand Prix at night, for the MotoGP series, and they are making noises about joining the F1 calendar. This month the World Rally Championship goes to Jordan. In October the Kingdom will host a round of the P1 Powerboat world series at a brand new marina in the south of the island. It’s estimated that in the past five years as much as 12 billion dollars has been invested in motor sport infrastructure in the Gulf. Getting the picture?
His Excellency Shaikh Mohammed bin Essa Al Khalifa, chief executive of the Bahrain Economic Development Board, is here to inaugurate the first Middle Eastern forum. It is a long-standing saying in Arabia that what makes the desert beautiful is that somewhere it hides a well. And they are only partly joking. The oil is not hidden here, it is flowing into the economy, and is a pipeline of growth. But what also makes the desert beautiful, certainly for His Excellency, is the Grand Prix circuit and its iconic Al-Sakhir tower with tented roof and circular viewing balconies overlooking the track.
“Yes, we are proud of this,” he says. “We have been the leader in bringing F1 to the Gulf and now others have been inspired to follow our example. The Grand Prix has put us on the world map, in sport and in business. We always intended to develop motor sport here, and now we have three Bahraini drivers in the British Formula 3 Championship, all of them graduates of our karting system. F1 has also created investor interest – during Grand Prix weekend we have people worth tens of billions of dollars coming to watch the race, yes, but also to discuss business opportunities. These people are responsible for over a trillion dollars worth of investment.
“You should never let the size of your country limit your ambitions. We have reclaimed more than 20 square miles of land in the past 20 years and we will expand by another 50 square miles in the next 25 years. It must not get out of control, but this is one of the benefits of being an island. Now we try to develop in a controlled way so it is not just an explosive economic boom. We have had seven per cent growth since the turn of the century. We are not afraid of competition, for example, from Dubai or Abu Dhabi, as what is good for them is good for the region.”
Outside, a hooded falcon is perched on the arm of its trainer. This bird, the hunting saqar, provides another kind of sport. Falconry and the riding of Arabian horses are the country’s top two sporting activities, the sharpest-eyed birds costing upwards of £10,000. Back to money and business.
You could be forgiven for forgetting the motor racing. Mechanics toiling in the paddock and the sudden bark of a V8 are reminders that F1 is here to race, not simply to do business. David Richards, foremost a racer, has flown in from South America, worried about electrical problems that prevented his Prodrive team bringing both its Subarus home in the top three in Rally Argentina. But he is a businessman, too, acutely aware of the investment needed to succeed at the highest level, of the sport’s ability to consume cash at an alarming rate.
“I first came here 32 years ago, to organise a rally for Rothmans in Kuwait,” says the man who won the world championship as co-driver to Ari Vatanen in 1981. “Little did I dream that motor sport would develop so strongly in the Middle East. The Bahrain Motor Club was started by ex-pats in 1952 and motor sport was mainly police cars chasing would-be racers off the roads. Now the Grand Prix makes up 10 per cent of the traffic through the airport each year and this is no trophy asset, this is big, long-term business. Historically Beirut was the financial capital of the region but the Bahrainis are capturing that position. The investment is here, and if you look at the UK and Europe, getting investment into motor racing is quite a challenge. Setting up a racing team in the UK is a costly exercise and not at all straightforward. The Middle East is all about inward investment – you won’t see F1 teams moving out here, but I can see research centres here, smaller specialised parts of the business. The failing of Grand Prix racing in the past was that it was too European-centric. If you want to promote a global sport, it has to take place on all the continents of the world.”
Within the Bahrain motor racing community Talal Al Zain, who drives a blue Ferrari, is a big player. “The challenge is always to be ahead of the game,” says the chief executive of Mumtalakat, part-owner of McLaren. “We were the first to have a Grand Prix. Now we will build an automotive business park next to the circuit, near to the University of Bahrain. The total cost of this development will be in the region of five billion dollars. Here we will focus on renewable energies and alternative fuels, as well as research and development in engineering. We have a free trade agreement with the USA and that is another big advantage for our country.”
The omnipotent Bernie Ecclestone, himself no slouch when it comes to business, is full of praise for the Sakhir circuit. “They do a super job,” he says. “It is absolutely one of the best races on the calendar, if not the best. The organisation is so good; this is what I’m looking for.” Praise indeed.
Here on ambassadorial duty for the Royal Bank of Scotland, Sir Jackie Stewart, another man of some business acumen, is impressed with progress in the country. “They’ve done a wonderful job and Crown Prince Shaikh Salman bin Hamad Al Khalifa has a personal interest in this business. When you have someone passionate like him leading it, then it’s always going to be better.”
The capital city Manama, meaning ‘sleepy’ in Arabic, is 8000km from New York and over 3000km from London. But a watchful eye is being kept on this ‘sleepy’ giant, especially by the motor racing community. On Grand Prix weekend the drivers provided a momentary distraction from the dollars. Earlier in the week, on April Fool’s Day, a local newspaper published pictures of UFOs in the night sky above the downtown skyscrapers. Could these have been Unidentified Financial Objectives? Not likely.