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Old leader plans a comeback

Traditionally Bahrain dominated finance in the Gulf but initiatives elsewhere in the region, particularly Dubai, have undermined its lead. Now Bahrain's central bank is making up lost ground.

Bahrain is to issue a $500 million five-year sovereign Eurobond early next year, a significant expansion of its presence on international capital markets.

The bond, which will be lead managed by Salomon Smith Barney and BNP Paribas, is expected to be marketed mainly to regional institutions. The political uncertainties in the Middle East, which have already caused some western banks to withdraw money from Bahrain, is likely to lessen its appeal to European and US investors. One consequence is that the bond has a shorter maturity than the 10 years the government was hoping for.

Bahrain does not need the money as its economy is relatively strong, with present policy firmly focused on liberalization and privatization. But ministers are thought to be keen to take advantage of the A- rating it received recently from Standard & Poor's. Capital Intelligence and Moody's rate the country BBB-.

The decision to issue a bond is also evidence of a more active management of Bahrain's economic and financial sector. Sheikh Ahmed bin Mohammed Al-Khalifa, the governor of the Bahrain Monetary Agency, has sought to give the central bank an expanded regulatory role and to modernize supervisory standards. This is designed to reinforce a reputation, built up over the past 30 years, for adopting international best practice.

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