The opposition explicitly sought to achieve its political goals by putting Bahrain’s leadership in an economic stranglehold. It is fair to ask, how much has the opposition cost Bahrain in purely financial terms; in lost economic development, destroyed businesses, and squandered revenues? How much money was wasted on policing, rebuilding vandalized property and compensating those harmed by the unrest, that could have been used to fund education, better infrastructure, subsidized housing and job creation?
Lost economic growth
Economic growth stood at an estimated 1.3% in 2011, down from an estimated 4% in 2010, after plunging to a record low of -6.6% in March 2011. Although the economy has rebounded over the following years, experts have estimated the gross economic loss to the economy at around $3bn over the past three years.
At the end of 2011 the Bahraini Government estimated the economic impact of the unrest to be $2.5bn. Unemployment has fluctuated between around 3.5-4.5 over the past three years, reaching 4.4% in late 2013.
Cancelling the F1 and other events
Canceling the Grand Prix in 2011 cost Bahrain an estimated $480-$800 million. During 2011 other major events were cancelled or relocated abroad, such as the Middle East Project Finance 2011 seminar, the Cisco Networkers Conference; and the 2011 Bahrain Spring of Culture festival was called off.
Cancelling these events had significant knock-on effects on the hotel, catering and tourism sectors; with many of these businesses relying disproportionately on the Grand Prix week.
Losses to small and medium businesses; closures due to strike days & rioting
The Bahraini Government estimated that small and medium businesses had suffered damages of around $200m as a result of the unrest. Even during 2013, if you visited hotspots for the rioting you would find whole high-streets of closed shops and businesses. Many of these localities remained closed for days on end as a result of chronic rioting and violence and growing numbers of businesses had been forced to close permanently. This meant that certain communities were disproportionately affected. During the worst of the unrest in early 2011 Bahrain’s four main shopping malls were cut off from customers for several days.
Extra policing; vandalism, sabotage and terrorism
Tens of millions of dinars of the Government’s budget have had to be spent on policing to manage consistently high levels of rioting and protests across the country, as well as dealing with a growing threat from terrorism. Millions have also been spent on compensating businesses and localities hit by vandalism and sabotage.
Losses in the tourism, travel & construction sectors
STR Global reports that hotel occupancy fell about 38% to an average of 42% in 2011. During 2011 the Gulf Hotel complained that “our occupancy has dropped from the high 90s to the low 25 and 30s”.
Gulf Air, one of the region’s oldest national carriers, reported losses of over $500m during the crisis; as tourism plunged and non-essential travel to Bahrain was being discouraged. The smaller Bahrain Air went into voluntary liquidation in February 2013 as a direct result of the financial difficulties of the previous two years.
The construction sector was already facing difficulties resulting from the 2008 global economic crisis and 2011 saw even more high-end projects mothballed indefinitely, with substantial losses to investors. Growth in this sector was -7.9% in 2011; rebounding to 4.1% in 2012. This can be compared with -17.2% in the hotels and restaurants sector in 2011 and 13.6% in 2012.
Lost investment, lost business and lost reputation
As a result of the unrest, in June 2011 Moody’s downgraded Bahrain’s sovereign credit rating to Baa1 from A3. As a symptom of the difficulties faced by the banking sector over this period, Arcapita Bank filed for bankruptcy in March 2012. “The country’s reputation as a regional financial center has also been damaged. Many institutions pulled out staff following the violence in 2011, moving operations to Dubai, and it is questionable if they will return;” reported Q Finance.
Conclusion
Economic growth rebounded strongly in 2013, at a level of around 5% and tourism has rebounded strongly, mainly as a result of support from nearby Arabian Gulf states.
It is always very difficult to put a figure on the economic losses and squandered funds as a result of the unrest. For example, how do you quantify the economic impact when commercial banks permanently relocate to Malaysia or Dubai, an economic loss that continues to reverberate decades later? What is the cost of a damaged reputation which may deter potential investors and visitors?
When we estimate that the total loss to Bahrain is in the region of $3-5bn. This fails to reflect the sufferings of small businessmen and their families who have lost everything.
If even a tenth of these lost funds had been available for housing programmes, education and job creation, thousands of young Bahrainis would have already been benefitting from greater prosperity and a brighter future. The opposition claims to be acting in the interests of poor and disadvantaged Bahrainis. However, the result of their actions has been forcing these Bahrainis to remain disadvantaged on the economic margins of society and making the poor of Bahrain even poorer.
(This article was originally published in 2014)