Banks abandon Bahrain for Dubai as six dead in violence, UK expats told to leave
Posted on 17 March 2011 with 3 comments from readers
The imposition of martial law amid massive street protests in Bahrain this week has led to many international banks either shutting up shop or sending key staff to nearby Dubai. Yesterday three protestors and three members of the security forces were killed amid violent clashes to clear the streets of Manama.
International banks with large operations in Bahrain include Citigroup, HSBC, Societe Generale, BNP Paribas and Standard Chartered. The National reported today that banks were telling staff that they should either leave the city or stay at their own risk. British nationals have been told to leave on commercial flights to Dubai today or a UK charter plane.
Bank exodus
This exodus has happened so fast that staff have mainly ended up in hotels and serviced accommodation in Dubai where there is plenty of space available after the recent real estate boom. They can work from the bank’s existing offices in Dubai, although clearly it will not be possible to transfer all their business from Bahrain.
It is a tragedy for Bahrain which makes a quarter of its GDP from the banking sector. All the banks say this is a temporary relocation. However, that is presumably what they said on leaving Beirut for Bahrain two decades ago during that city’s civil war.
For Dubai the sudden influx has not resulted in an immediate demand for new rental property. Leases of at least a year ensure that staff will want to be certain of their future before signing up for a new home. Buying a home is not the first thing a sudden exile decides to do. Schools for their children, on the other hand, will be a top priority.
DIFC gains
Dubai has been establishing itself as a regional financial centre since the Dubai International Financial Centre was set up in 2002 and more than 300 financial institutions are licensed by the free zone which has suffered a considerable loss of business since the global financial crisis and Dubai real estate crash two years ago.
That all looks like being swiftly consigned to history if the Bahrain exodus proves to be more than temporary. The historical parallel with Beirut suggests that bankers do not go back after violence erupts in a financial centre. They are after all supposed to be safe custodians of their clients’ wealth not the unfortunate occupants of a war zone.
Bahrain’s loss will be Dubai’s gain. But this will take sometime to begin to make an impact on the depressed real estate sector in the city, and even the local bourse is currently overshadowed by fears about regional instability and the global economy.
3 Comments posted by readers:
How many businessmen would want to stay somewhere where 70% of the population was very discontented? Not too many, unless there was no alternative. Last time I checked, Bahrain didn’t have, oh say, large platinum mines that CAN’T be moved.
The Aussies are going to make a killing selling coal and LNG to Japan now. Chevron and the rest of them may speed up their LNG plant construction off the Northwest coast.
Over the past month or so, this website and several members of its readership have commented on the major “mis-steps” of the Bahrain government and of how truly “fragile” Bahrain is. Why is it that we have seen what has happened, and then extrapolated about what those events would mean, in terms of business, finance, and the stock markets? And yet many others, especially those in government, don’t extrapolate the “unintended consequences” of their actions. I’m puzzled.
Why is it that government people around the world continually fail to see the obvious, time and time again? Tunisia, Egypt, Libya are but recent examples. Well, the so-called “unintended consequences” are rather obvious for those who exercises a little clear thinking.
And why is it that the Bahrain government didn’t realize that much of their “business” (and hence their GDP) would quickly leave for Dubai, once they agreed to establish a “police state” by inviting Saudi troops and tons more UAE police?
It ain’t gonna get any better in Bahrain for quite a while.
The government tore down the big monument. That will provide more room for the demonstrators to gather! It really doesn’t matter because the country is now, in all but name, a part of Saudi Arabia. They probably won’t be leaving anytime soon. It should be easy to isolate the island in order to prevent the entry of explosives. If that isn’t the case, I would get out of there. Neighbors in the vicinity might decide to make it a target, which is easy to do with a largely sympathetic local population. Then again, the chances of getting killed in a terrorist bombing is pretty small. But why take the chance if you don’t have to? Just head on over to Dubai.