A CDGE, Great Decisions and IT Collaboration

Impact of Arab Spring on Bahrain

On February 14, 2011, people in the United States were giving chocolate and flowers to their loved ones. They bought Hallmark cards with sappy poems. In Bahrain the mood was much different; it was the first of the Arab Spring protests. Hallmark does not make cards celebrating ones first protest.

The first demonstration, known as a “Day of Rage” was organized by activist through social media sites, like Facebook and Twitter. They were protesting discrimination against the Shias by the Sunni dynasty and the disrespect for human rights. The activists wanted a new constitution and a democratically elected government. Police forces responded to the protestors by firing teargas and rubber bullets.

Within one year after that first day of protesting, 1,600 peaceful protestors were arrested, more than 100 people convicted, and 35 people died due to violence from police responses (http://www.crin.org/violence/search/closeup.asp?infoID=26590). Of all the riots in the Arab world in 2011, Bahrain’s government was the only one to temporarily succeed through force. However, doing so may have destroyed the society’s sense of a single community and the dozens of protests hurt Bahrain’s economy.

There has been a direct loss to the economy. The chairman of the Bahrain Chamber of Commerce and Industry, Essam Fakhro, estimates that Bahrain has lost over $2 billion. The GDP and public finance have decreased $391 million and $690 million, respectively (http://www.geopolicity.com/upload/content/pub_1318911442_regular.pdf). The cost of the Arab Spring to Bahrain’s economy is relatively low because of its stable oil production, which contributes 30% to the GDP. Public expenditure increased by $2.1 billion because the government gave each family $2,660 in an attempt to improve living standards and compensate for the declining economy (http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/cost-of-arab-spring-more-than-55-billion/article2201119/). However, by giving families money, inflation will rise because the money supply increases. The compensation will hurt the Bahrain family and their economy in the long run more than it will help.

Due to the unrest, many events were cancelled. Most noticeably, the Bahrain Grand Prix, which was scheduled for March in 2011, was cancelled (http://latimesblogs.latimes.com/babylonbeyond/2011/06/bahrain-formula-1-boss-says-grand-prix-postponed.html). The Bahrain Grand Prix is a Formula One championship race and is the first to take place in the Middle East. Since the first race in 2004, it has greatly contributed to Bahrain’s economy. The race generates around $220 million through ticket sales, television coverage, transport, accommodation, food, and merchandise. There was no Grand Prix in 2011, which means Bahrain did not get the money they anticipated.

In 2010, Bahrain had extremely high economic openness (http://arabnews.com/economy/article477485.ece). Its economy was open to trade and inflows and outflows of international investment. After the uprisings in 2011, Bahrain’s degree of openness decreased because other countries did not want to interact with them. The smaller a country, the more open its economy should be. Small countries must specialize in the production of few goods or services to be competitive and attain optimal scale. Therefore, they must export those goods and import the goods they do not produce. An open economy is needed for these transactions.

The Arab Spring created uncertainty for the economy. Bahrain suffered dramatically from the protests and unrest and it will require a lot of effort from the government to recover. It is widely believed to rebound in the near future; however, a full recovery may not be possible if the citizens continue their anti-dynasty protests. Bahrain may never be a financial hub again.