Preheat oven to 350° F. Grease a 2-quart baking dish; set aside.
In a large skillet, cook bacon over medium heat until crisp, about 7-8 minutes. Use a slotted spoon to remove bacon to a paper towel-lined plate, reserving the drippings in the pan. Melt butter in the same skillet over medium-high heat. Add onion and cook, stirring, until the onion softens, 3 to 4 minutes. Add the garlic and cook, stirring constantly, until fragrant, about 30 seconds. Stir in the tomato paste, kosher salt, sugar and pepper. Cook for 1 more minute.
Add the bacon, water and rice. Bring to a simmer, then reduce the heat to low. Cook, uncovered, stirring occasionally, until the liquid has reduced slightly, about 8-10 minutes. Use a wooden spoon to scrape up any browned bits from the bottom of the skillet as you stir.
Transfer to the prepared baking dish. Cover and bake until the rice is tender, about 40-45 minutes, stirring every 15 minutes.
Fluff the rice, garnish with fresh parsley, and serve.