In the run-up to the February 14 anniversary, attempts by protesters from the majority Shia community to march on the now destroyed Pearl roundabout, the epicentre of the Bahrain uprising, have been met with a vast show of force.
But the occasional spillover of violence on to the streets of Manama, an echo of the chaos that accompanied last year’s uprising, offers a stark reminder of the long-term damage the unrest is causing to an island economy short on confidence.
The island’s reputation as a commercial hub has been in decline since the protests and ensuing crackdown left the country riven by sectarian hatred. About 60 people have died to date, according to opposition estimates, in a country of approximately 1.2m, half of whom are Bahrainis.
Businessmen are concerned about the economic impact of civil unrest, which is estimated by the government to have cost $2.5bn, and have urged the minority Sunni-led government to crack down on “rioters”. Tourist hawkers and cab drivers bemoan the slump in trade that accompanied Bahrain’s year of revolt and repression.
Sunil, the manager of an Indian restaurant in central Manama, says business has slumped 60 per cent since a year ago. The anniversary of the protests coincided with Valentine’s day, but such romantic spots remained quiet. “We don’t get families here any more,” he said. “Bahrain used to be so beautiful, but now it is ruined by the protesters.”
STR Global, the hospitality research provider, says hotel occupancy fell about 38 percentage points to average 42 per cent in 2011, a decline on a par with Egypt’s tourism industry.
Buoyed by support from neighbouring states, however, HSBC says economic growth will recover to 2.4 per cent after plummeting to 1.3 per cent last year.
The government remains bullish about the “stable and improving” situation, saying 2012 growth should return to 2010 levels of about 4 per cent.
Bahrain’s fundamentals, such as lower costs than other regional business hubs, and a skilled workforce, remain intact to attract foreign investment, says Sheikh Mohammed bin Essa al-Khalifa, chief executive of the country’s Economic Development Board.
Businessmen are relieved that the most violent protests around February 14 were confined to the villages surrounding Manama, apart from a few incidents at the Pearl roundabout.
Attention will now focus on the island’s Formula One Grand Prix motor race, which, after last year’s cancellation, has been scheduled for April, despite opposition from human rights activists.
Bernie Ecclestone, the F1 commercial chief, has indicated his support for the race, playing down protests as “kids having a go at the police”.
Sheikh Mohammed says the race comes amid a very different situation, “not least because there have been significant strides in addressing areas of international and domestic concern”.
Yet most on the ground concede that a political solution will be needed to ease tensions and allow the economy to recover.
The travails of the strategically important state’s economy are most clearly outlined in the case of Gulf Air, the national carrier. An annual loss of approximately $500m in 2010 is expected to have increased last year, as the airline, one of the Middle East’s oldest, was affected by regional unrest.
Security concerns over the influence of neighbouring countries with large Shia populations led to the closure of two of the airline’s most profitable destinations, Iraq and Iran, leaving regional rivals to take market share.
Bahrain’s parliament is considering various options, including bankruptcy and the formation of a new airline, to save costs while sustaining a national carrier.
A helping hand has been extended by Saudi Arabia, the oil-rich kingdom that led Gulf troops into the island in March to support the crackdown.
Riyadh is opening some domestic destinations to Gulf Air, hoping to give it a much-needed edge on competitors in the fast-growing Saudi economy. Prince Alwaleed bin Talal al-Saud, the Saudi billionaire, has chosen Manama as the base for his new satellite television news channel, Alarab.
These gains notwithstanding, the days when Bahrain would at least try to compete with Dubai as an outward-looking, commercial and financial hub are slipping away, after several banks relocated some operations to neighbouring Dubai.
Bahrain’s opposition says it is not to blame, calling for a real dialogue leading to reform as the only way to safeguard the Gulf state’s faltering economy.
Hopes for a political settlement have risen modestly amid informal contacts between the government and opposition parties, including the main Shia group al-Wefaq and the secularist Waad, whose leader remains jailed.
“Economic prosperity is linked to political reform, it will produce a better economic situation for all, and stability for investment,” says Sheikh Ali Salman, secretary-general of al-Wefaq.
Government officials, who argue that the opposition should engage as a response to its attempts to reform the judiciary and police, say talk of negotiations is encouraging.
“We will not let the events of last year deter us from ensuring that the Bahrain economy is as broad and diversified as it can be,” says the EDB’s Sheikh Mohammed.
