A Bahraini government pledge to assist Bahrain's oldest dairy has helped avert a shutdown at its plant.
Bahrain Danish Dairy (BDD) has been in the red since 1995, with BD800,000 ($2.1 million) estimated as the total loss from October 1999 to September 2000.
"We approached the Government for help as a last resort to avoid closing down the company, which would have cost several nationals their jobs, at a time when Bahrain is striving to create more employment opportunities for its people," said chief executive officer Dr Abdulla Al Mulla.
A joint committee of the Commerce and Industry and Finance and National Economy ministries is to review the company's plight. BDD hopes the panel will come out with measures including giving priority to national products in purchasing for Government institutions such as hospitals and schools.
Despite heavy losses, the company's shareholders had injected BD400,000 ($1.1 million) over the past two years to keep the plant going. Al Mulla said the company's existence had been threatened by fierce competition from GCC dairy giants. BDD, the oldest and largest national dairy, employs about 250 people, 65 per cent of whom are Bahrainis.
Established 37 years ago, the firm entered the fresh milk market in 1999, but last year the big players slashed the price from 950 fils ($2.6) for a two-litre bottle, to 700 fils. "We had no choice but to follow suit.
The price reduction came in the summer when milk production by cows is at its lowest," recalled Al Mulla.
"In January this year, when there was no scarcity of milk, the Saudi dairies increased the price to 850 fils. Again, we followed them."
Besides milk and milk products, BDD produces ice cream, fresh juice and tomato paste.
Al Mulla said the Saudi companies enjoyed huge subsidies from their government in terms of land and cattle feed, enabling them to advertise on international television channels.
Consequently "it has been difficult for BDD, with its modest financial capability, to compete with such giants."
BDD has a three-year contract with a firm in the Eastern Province of Saudi Arabia to supply fresh milk. The company has also invested heavily on pasteurising and processing equipment.
Al Mulla was Gulf Organisation for Industrial Consulting (Goic) studies head in Doha and the GCC Secretariat's senior economic adviser in Riyadh. He founded Gulf Economic Studies and Consultancy in Dubai, before joining BDD in January this year.
He had earlier served as a consultant for BDD during its initial development phase and when it emerged as a 100 per cent Bahraini firm after the Danish Dairy group sold its shares in 1994.
"Though we live in an open market, the Government should protect national industries from unfair competition posed by big companies," said Al Mulla.
"Dairy giants with excess production capacity should not be allowed to throw their surplus in our small market. With due respect to all economic concepts, I must say that it should not reach a stage which threatens the existence of national companies.
"There are clauses in the World Trade Organisation (WTO) and General Agreement on Trade and Tariffs (Gatt) to allow developing countries to take measures to protect their own national industries."
