EDITOR'S TAKE: Financial district clashes will be the final straw for many Bahrain-based bankers
The sanguine, wait-and-see attitude most financial sector workers in Bahrain have been adopting in wake of the civil unrest in the kingdom is unlikely to persist in the wake of violent protests on their doorstep.
Thousands of anti-government protesters descended on Bahrain's financial centre yesterday, blocking off access to the district and grinding the banking hub to a halt. Police fired tear gas and rubber bullets at demonstrators, and more than 100 people were injured, signalling an end to the more recent peaceful approach by the government.
Until yesterday it was possible for most financial sector workers in Bahrain to remain relatively detached from the problems in Manama. Despite the disturbing scenes in mid-February, during which two protesters were killed, much of the unrest was confined to Pearl Square - the heart of Shiite majority's operations.
The situation has changed. Parliamentary groups have asked for a three-month period of martial law; Saudi troops have entered Bahrain; those financial sector workers that made it into work today look like being trapped in their buildings as protests escalate, and recruiters have described how interviews scheduled for this week - amazingly, for people still interested in making the move to Bahrain - have been cancelled.
Aside from the short-term upheaval, the new protests are going to have many questioning how wise it is to stick around in Bahrain. Protesters have said that the Financial Harbour has become a symbol of royal excesses - amid unemployment and poverty among the Shiite majority - and few bankers will be comfortable with their new scapegoat status.
Throughout the protests, Bahraini authorities have attempted to downplay the effect on the financial sector. The Bahrain Association of Bank suggested there would be "no long-term damage" to the sector's reputation, the Central Bank's $1bn bond issue is still schedule to go ahead, while a conveniently-timed press release spoke of growth in the number of people employed in the kingdom's financial services industry in 2010.
It's easy to see why. It may no longer be the preeminent financial sector in the Gulf, but the industry in Bahrain still accounts for 25% of GDP, and employs more than 14,300 people. Cracks are already beginning to show, with Fitch downgrading both Bahrain's sovereign debt and the ratings of a number of banks and insurance companies on the back of recent unrest.
In theory, Bahrain's loss will be UAE and Qatar's gain in terms of an influx of new talent. Unfortunately, in a relatively subdued job market, it's unlikely either financial centre would be able to support a mass exodus from the kingdom.
