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by Gérard Al-Fil
In the wake of the Arab Spring, within the GCC the Kingdom of Bahrain was hit the hardest by civil unrest, strikes and clashes on its streets. Not only was the Formula-1 Grand Prix cancelled, but also some international banks closed some operations and shifted them to Dubai.
When HH King Hamad bin Isa Al Khalifa set up an inquiry to examine the role of the police during demonstrations, the smallest GCC state (1.2m inhabitants) moved into the global spotlight, because this was the first time that an Arab nation's ruler voluntarily installed an independent fact-finding commission. As a result, the monarch promised to bring those police officers to justice if they violated law.
Open wounds
Finding facts about an economic revival in Bahrain, however, is far more difficult than bringing police officers to justice. Masood Ahmed, International Monetary Fund (IMF) Director Middle East and Central Asia department estimates the Bahrain economy will grow 1.5% in 2011, the growth lowest rate in the GCC, and with minus 7.7%, the country has the only negative fiscal balance among the six GCC members. As a result there is still plenty of office space available in the Bahrain Financial Harbour and in the twin towers of the Bahrain World Trade Center.
As AMEinfo.com has learned in Manama, hotel occupancy is lower than a third and the rather small airport is no match to Dubai International, which receives 50 million passengers annually. Therefore it is little surprise that the recently opened luxury shopping mall in the Bahrain World Trade Center remains almost empty. When AMEinfo.com visited the Bahrain Financial Harbor (BFH) Mall at the cornice, a surprised security officer stopped us at the entrance and asked: "You really want to visit the mall? There are just a handful of shops open..."
With the Euro zone crisis showing little signs of easing and with China's economy preparing for a soft landing, "Business friendly Bahrain", as the kingdom calls itself, cannot be sure to catch a life buoy from the world economy next year. "A Recession in 2012 is on everybody's mind," Bahrain's Central Bank governor Rasheed Al-Maraj told AMEinfo.com at the sidelines of the World Islamic Banking Conference a month ago. At the same time, Rasheed stressed the GCC was still working on creating a common currency, the planned "Khaleeji". But the IMF recently warned that the costs of obtaining a Euro-style monetary union in the Gulf may outweigh the benefits, "as long as the member states do not raise the degree of business synchronization."
The banking sector in the Bahraini capital Manama avoided a total meltdown, but the wounds are visible. Crédit Agricole moved their entire operations to Dubai and trading at the local stock market Bahrain Bourse remains insignificant. The Bahrain All Share Index trades at a multi-year low, having lost 19.10% year-to-date (as of the close of trading of December 15).
In the shadow of Dubai
The Bahrain Financial Exchange or BFX started on November 23rd, with a delay of more than a year, and is far from playing the regional role it aimed to do. Designed as a multi-product platform for conventional and Shari'ah-compliant financial products, the BFX has so far attracted three securities.
Staff
