Just the start of a long decline for Bahrain?
Posted on 10 April 2011 with 1 comment from readers
Bankers putting a brave face on the unrest and subsequent military clampdown of the past few months in Bahrain told The National newspaper that damage to the local economy is in the range of $2-3 billion, and that surging oil prices would help cover this gap.
But the real danger to Bahrain is that its reputation as a safe place for regional banking is in tatters. Many executives have fled to Dubai with their wives and children worried about the men-on-the-streets with guns and tanks at the school gates.
Great fall
Can the local government realistically paste this humpty dumpty that had a great fall back together again? Bahrain will have around $5 billion in oil revenues this year. But then tourism alone is estimated to have lost $500 million in the past six weeks with the loss of the Formula One Grand Prix a particular blow.
A $1 billion GCC financial aid package will also help. Yet the financial services sector which makes up about a quarter of the island state’s $23 billion GDP will be less easy to salvage from this mess.
Banks are not big risk takers. Their staff demand to live in a safe location with their families, and assurances about the future security of Bahrain are bound to be taken with a huge pinch-of-salt after what has happened this year.
Who can really say it will not happen again? Or that the repercussions of what has happened will not continue to destabilize local politics for years? The scars of this type of event run deep and are not easily forgotten.
Royal hopes
Crown Prince Sheikh Salman bin Hamad bin Isa Al Khalifa spoke on local TV last week about ‘painful losses’ to the local economy.
‘Bahrain’s progress and prosperity cannot be ruined by a few that wanted to make it fail,’ he said. ‘The main challenge … is to work for the continuation of the process of building, modernising and development in this country.’
Fine sentiments but how do you make it happen? Something had clearly gone wrong in the government of the country to lead to the current disaster. Will the government now learn from its experience and do better?
Banks and businesses now losing money in Bahrain will have to make their own decisions on that. And indeed that assessment is going to be made in many boardrooms this summer as the reputation of once ‘business friendly’ Bahrain comes under the microscope and business decides on whether to back the kingdom for the long-term.
Temporary relocations of staff could well turn into something more permanent. The Heritage Foundation will surely have to re-think its economic freedom ranking for Bahrain this year which already looked a nonsense when it was published (click here).
1 Comment posted by readers:
It might become a proxy terror battlefield for much larger regional powers. Let’s hope not, but Ireland is an island, and there was certainly no shortage of bombings there. Even with the settlement, police recruits are still being murdered by extremists planting bombs under their cars. Why take a chance of getting blown up IF you have a choice?
Steven Rattner on CNBC is saying that the denial of raising of the US debt limit by the US Congress does not necessarily mean an immediate default on the US government debt. He says the Government has ways to delay an actual default for several months. Good luck with that plan! Imagine what that could do to the stock market. So get ready for a mess. Some people are saying that early July is the target date, by which time the bill must be passed.
This week Obama will reveal some parts of HIS deficit reduction plan. That talk could boost the stock market even higher. EVERYONE seems to agree that not much will get done until after the next election.
A lot of people think THE DONALD is going to run for President. I would pay to see that circus. He is just hyping his reality show for the morons. He is right about one thing. If oil goes up too high, the recovery, such as it is, will be history. He is claiming that oil should be selling for $40 a barrel. That would shut down a lot of the world oil industry. CNBC has a picture of him before he had his latest peroxide hair treatment on their TV feed as they are interviewing him over the telephone. The reporters, and the TV networks (and Obama) are PRAYING that he runs. He says the USA should have taken the oil fields of Iraq as spoils of war. A serious candidate, no doubt. Let us ALL pray for the great free entertainment that will result from Donald getting into at least one of the first Republican primaries. I may say a rosary to get to see that. I think my rosary is in the 20mm ammo box in my closet. There is some irony in that, but they were the ONLY containers that remained completely dry inside during the Katrina flood. Salt water even got inside sealed plastic food storage bags. I’m still trying to figure that out.