Bahrain's business ambitions take a hit as protests rock country

The unrest in 'business friendly' Bahrain has professionals wondering what the protests mean for the nation's prospects as a regional base.

The current political turmoil in Bahrain is posing some difficult questions for businesses located and thinking of locating in the kingdom.

The slogan is "Business friendly Bahrain", but many professionals are wondering whether the strife-torn kingdom is still the best location from which to build a regional base.
The main questions they are asking themselves: is it time to cut and run from the kingdom? And are the undoubted advantages of Bahrain as a Gulf base being permanently eroded by a sea change in the security situation?
At Bahrain International Airport on Tuesday, it was obvious that many had arrived at an answer. The departure lounge was filled with expatriates - Europeans, Americans and Asians - looking to get out of the country. Flights to Dubai were booked solid two days out.
If those professionals leave permanently, their withdrawal will be a body blow to Bahrain's ambitions to be one of the financial hubs of the region. Already facing tough competition from Dubai, Abu Dhabi and Doha, Bahrain could find itself knocked out of the race.
Anthony Harris, a former British ambassador to the UAE and now an insurance executive in Dubai, puts it like this: "One wonders if the situation has gone past being saveable."
The blow dealt to the business community in Bahrain over the past few days has been considerable, and many will feel obliged to relocate if it carries on."
On Tuesday afternoon, central Manama was as business-unfriendly as it is possible to be.
The twin towers of the Bahrain Financial Harbourwere inaccessible, locked behind barricades erected by anti-government protesters. A business suit attracted the immediate suspicion that a foreign banker was seeking to break the blockade.
Progress past the barricades had to be negotiated with protest leaders and was in any case futile: the financial professionals who normally throng the area had stayed away en masse. Once one got inside either tower, there was no one with whom to do business. The demonstrators were later pushed back by security forces, which re-established the government's writ in the business district. But people on the ground said the area was still deserted and rubble-strewn yesterday afternoon.
Can Bahrain bounce back from its difficulties? It had three main advantages as a place to do business: it was close to Saudi Arabia, the biggest market in the Gulf, a 15-minute drive away across the causeway; it was regarded as friendlier and more accessible than the other big centres; and foreign executives felt more comfortable with its corporate legal system, which is based on British law.
David Robinson, the chief executive in the Middle East, Turkey and Africa for the global communications group Hill & Knowlton, said: "26 years ago when we first opened in the Gulf, Bahrain was the place to be. It was liberal, open and there was talent there." This year, Bahrain was rated the top country in the region on an index of economic freedom by the Heritage Foundation and The Wall Street Journal.
But even before the current serious trouble, Bahrain was falling behind Dubai, which is seen as having the best infrastructure and facilities in the Gulf, as well as cash-rich Abu Dhabu and Doha, which weathered the global financial crisis relatively well.
Bahrain's innate advantages have been more seriously eroded over the past three days. In one way, Saudi Arabia, with 1,000 troops in Bahrain, is closer than ever, but the causeway between the two countries remains closed to most non-military traffic.
The image of friendliness and comfort is hard to maintain in a place where sectarian tensions are rising and bloody attacks taking place. Corporate law has not changed, of course, but the "state of national safety" declared for the next three months raises questions about the stability of the legal infrastructure.
"At this point, we remain confident that Bahrain will overcome its problems, and we are committed to being here," said Mr Robinson, but he added: "We are on standby to evacuate if the violence escalates."
Much of the exodus from Bahrain seems to be headed to the UAE. Dubai has the hotel and apartment capacity to accommodate those seeking an escape.
Whether that turns into a permanent relocation will do much to determine the future shape of Gulf financial markets.
 
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