Business (un)friendly Bahrain

Bahrain: Bahrain is not just taking aim at protesters. Its business credentials are in the firing line as well. The island’s international reputation was already hanging by a thread after images of its teargas-filled harbour — which houses Bahrain’s financial district - were broadcast around the world. Now the government's decision to shut down a corporate telecom provider is adding to the pain.

Revoking the licence of 2Connect, which has links to the arrested head of an opposition party, undermines Bahrain's claim to provide a stable climate for businesses. Other telecom providers can probably fill the gap. But when combined with the violent crackdown on protesters and the numerous checkpoints that have sprung up since a state of emergency was imposed last week, the move adds to the nightmare of doing business in Manama.

The financial damage caused by the turmoil is hard to gauge. The stock market, which is down only 1.5 per cent since the start of the year, is not very liquid. The Bahraini dinar has held firm despite reports of outflows from the offshore banking sector, which is several times the size of the country’s GDP. And while growth forecasts for the current year have more than halved, Saudi Arabia is expected to provide financial support if needed. But the security issue alone may yet prompt Bahrain's most prominent corporate residents to leave. After all, half of the island’s 1.2 million inhabitants are foreigners. The United States and Britain have advised against travelling there, and courier FedEx has suspended operations.

The likes of France’s BNP Paribas, one of the few big international lenders with regional headquarters in Bahrain, may struggle to justify keeping 300 employees at their desks. Bahrain is no stranger to social discord, but previous unrest has been concentrated in villages not the financial centre. Rich Qataris and Saudis with a stronger stomach for unrest may quickly resume their weekly visits to this regional playground — the first Gulf nation to discover oil, establish a financial centre, and adopt liberal norms. But foreigners and their families with easy alternatives in places like Dubai and Abu Dhabi, which look relatively stable, have ample reason to cut their losses.