Bahrain: State of Emergency Lifted, Protests to Continue

The state of emergency in Bahrain, a business hub scrambling to salvage its business-friendly brand, has now been lifted.

Formula 1 track, Bahrain
Formula 1 track, Bahrain

A day earlier, King Hamad Bin Isa Al-Khalifa called for reforms involving all parties without “preconditions” on July 1st, and by-elections going forward. But tensions remain high and sources from the royal court tell CNBC that protests are more than likely on Wednesday afternoon.

The practical implications of the lifting of the state of emergency, in place since March, remain ambiguous, with Gulf Cooperation Council (GCC) forces expected to remain but reports emerging that tanks have withdrawn from selected towns.

Jasim Husain, a former member of parliament for the main opposition Wefaq, was quoted as welcoming the King’s statement.

However, the prospect of further protests has not dissipated, and the US embassy in Bahrain has warned that some could materialize.

In his recent address describing his vision for the Middle East following the Arab Spring, US President Barack Obama put pressure on Bahrain by saying “the only way forward is for the government and opposition to engage in a dialogue, and you can't have a real dialogue when parts of the peaceful opposition are in jail. The government must create the conditions for dialogue."

It has been a thorny situation for Bahrain’s business community. The country had been selling itself as a regional financial hub.

“This is very good news. Doing business will be easier and hopefully in the very near future, we can get to a situation that we can call normal”, Jean-Paul Mollie, Regional President, Middle East, South Asia and Africa for Dow Corning, based in Bahrain, told CNBC.

Meanwhile, Mahdi Mattar, chief economist of Dubai-based CAPM Investments, told CNBC that the latest development was positive but would have limited impact on equities.

“Markets in the region have already recovered most of the losses incurred from geopolitical events”.

The local exchange is one of the smallest in the region and closed just below the flatline in Tuesday’s trade. Last week ratings agency Moody's cut Bahrain's credit rating by one notch to Baa1 with a negative outlook, adding that “political tensions in the country remain high and there seems little prospect of the underlying causes of the unrest being peaceably resolved, at least over the short term."

On Friday, the World Motorsport Council is expected to make a decision about the possibility of rescheduling the Bahrain’s Formula 1 Grand Prix. The season-opening event was cancelled after the wave of unrest earlier in the year. On the sidelines of the race in Monaco last weekend, F1’s boss Bernie Ecclestone said he remained hopeful that the event would take place.