Bahrain fights unrest, competition to remain business hub

When Bahrain announced plans last December to cut fuel subsidies, it was a rare step towards economic reform in a region where lavish cradle-to-grave welfare systems are the norm. The National Oil and Gas Authority said it would gradually raise the domestic selling price for diesel fuel, almost doubling it by 2017. But the plan soon got bogged down in domestic politics.
Some members of parliament boycotted their weekly meeting to protest the price hikes. Prime Minister Sheikh Khalifa bin Salman al-Khalifa visited parliament to say the plan should be reviewed. Six months later, it is not clear if it will go ahead. The subsidies saga underlines the obstacles facing Bahrain as it seeks to move on from the events of 2011, when the country's Sunni rulers put tanks on the streets to quell Shia-led pro-democracy protests.
The tiny Gulf state is now struggling to remain a major regional business centre in the face of continuing domestic political unrest and tough competition from wealthier rivals such as Dubai and Qatar. Growth in its financial industry remains sluggish, while the unrest hinders Bahrain's efforts to market itself as a logistics and tourism hub. The government wants to reform its finances, freeing up money to spend on developing the economy, but it will risk more dissent if it cuts back generous welfare payments.
"Even though the subsidy plan is for diesel and not gasoline that's used in cars, it's not something that will be accepted by the public, and that's something the government doesn't want to deal with," Jamal Fakhroo, deputy chairman of the Shura Council, a consultative body for the government, told Reuters.
"People in the region in general are used to having a government that takes care of them. Now in Bahrain people are not paying their electricity bills because they expect the king to pardon them." By some measures, Bahrain's economy has recovered well since the protests in early 2011. Gross domestic product grew 5.3 percent in 2013, its fastest since 2008 and comparable to other states in the six-member Gulf Co-operation Council. That was up from 3.4 percent in 2012.