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Bahrain's survival instincts

Bahrain's reputation as the pre-eminent financial centre on the Arabian Gulf is being challenged by the threat of civil unrest, a domestic sector which is overbanked and foreign banks questioning their need for a presence in the region. But local and regional opportunities arising from privatization programmes and economic restructuring offer banks a way forward. By Nigel Dudley

On the surface, all appears calm on the main streets of Manama, Bahrain's capital. The international bankers, whose presence underpins the city's position as the regional financial centre, still fill the restaurants. The five-star hotels are full of several hundred American and Gulf businessmen and ministers attending a meeting aimed at increasing cooperation between the two regions. Another conference centre is filled by delegates to an international advertising conference.

One of the few signs that the country's traditional stability is under threat comes from the greater alertness of the police and security guards and searches of the luggage of all those entering the hotels.

These are uncomfortable days for Bahrain: resentment felt by the majority Shia population towards the minority Sunnis, who retain the real power and wealth, has escalated into a bombing campaign which has targeted five-star hotels and restaurants. These attacks, together with the government's response of executing a youth convicted of killing a policeman and the riots that followed, made headline news around the world and raised questions in international boardrooms about Bahrain's long-term future as a financial centre. But even if there are more bombs, there is broad agreement that there is unlikely to be a direct threat to the ruling al-Khalifah family for the foreseeable future.

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