Bahrain tourism, finance hit by protests
Manama, March 1, 2011
Bahrain's tourism and financial sectors have been hit by protests and it will take until at least the second half of 2011 for the kingdom to restore its reputation as a business-friendly hub, said analysts.
'It will take at least until the second half of the year until investors reconsider (investments). We're looking at a lost year,' said Jarmo Kotilaine, chief economist at NCB Capital.
He estimated the immediate loss to Bahrain's GDP at about $200 million due to the lower output during the days of unrest.
Bahrain's hotel industry, which relies on a regular calendar of business conferences to keep rooms full, has taken the most severe hit.
So far, one project finance conference has decided to move a long-planned event to Dubai and Bahrain's Spring of Culture, a festival to take place this month, has been downsized.
'You're not going to believe it, I have two guests in my hotel right now,' said Ahmed Sanad, head of Bahrain's hotel and restaurant association and owner of a one-star hotel.
Last week, Crown Prince Sheikh Salman bin Hamad Al-Khalifa decided to postpone the season opener Formula One Grand Prix, which draws over 40,000 every year, scheduled for March 13.
The influx of tourists from Saudi Arabia who come to enjoy Bahrain's more liberal nightlife every weekend and spend their wealth in Manama's shopping malls and jewellery stores has also dried up.
Malls are noticeably emptier, and parking spaces outside nightclubs don't have as many luxury cars with Saudi licence plates.
Bahrain established itself as the Gulf's financial hub in the 1980s when banks catering to the region's wealth left Beirut during the Lebanese civil war.
Its financial sector accounts for about a quarter of GDP and is an important sector in the government's strategy to create jobs for Bahrain's youth and diversify from oil industries.
NCB Capital's Kotilaine said the protests would dampen Bahrain's real estate market, to which many Bahraini banks and investment firms are exposed. 'We will have another wave of financial institutions running into financial difficulties,' he said.
Bahraini investment firms such as Gulf Finance House have failed to find new revenues after a 2008 property bust in the Gulf region eroded their business models. 'This is a second tsunami and the defences are still down from the first one,' said Kotilaine.
The Central Bank of Bahrain (CBB) said banks were operating normal and that nothing indicated major capital flight. It also said it would not change forecast of 4-5 per cent growth for 2011.
Others are equally optimistic and point out that the protest has not hurt Bahrain's fundamental advantages over other countries in the region, such as a liberal regulatory framework and a skilled and motivated local work force.
Adel Maskati, managing director of the Maskati business group, said economic reforms implemented by the Crown Prince in recent years were helping the country to attract businesses despite the protest.
'The regulatory system, the openness here, the infrastructure, all that helps us,' Maskati added.-Reuters