VZCZCXRO4014
OO RUEHDE RUEHDIR
DE RUEHMK #0503/01 1550723
ZNY CCCCC ZZH
O 040723Z JUN 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6885
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHAM/AMEMBASSY AMMAN PRIORITY 1324
RUEHLB/AMEMBASSY BEIRUT PRIORITY 0677
RUEHEG/AMEMBASSY CAIRO PRIORITY 0937
RUEHDM/AMEMBASSY DAMASCUS PRIORITY 1203
RUEHLO/AMEMBASSY LONDON PRIORITY 0998
RUEHFR/AMEMBASSY PARIS PRIORITY 0905
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 3600
RUEHJM/AMCONSUL JERUSALEM PRIORITY 2652
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RHBVAKS/COMUSNAVCENT  PRIORITY

C O N F I D E N T I A L SECTION 01 OF 04 MANAMA 000503 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 06/04/2017 
TAGS: ECON PGOV KISL BA ECTRD POL
SUBJECT: ISLAND OF PLEASURE?  TOURISM CLAMPS TARGET LOW END 
OF MARKET 
 
Classified By: Ambassador William T. Monroe for reasons 1.4 (b) and (d) 
. 
 
------- 
Summary 
------- 
 
¶1.  (SBU) Two Ministry of Information Tourism Directorate 
circulars closing low-end nightclubs and restricting the sale 
of alcohol in certain locations entered into force recently, 
impacting 85 two- and three-star hotels.  Critics complain 
that the clubs primarily served as a front for organized 
prostitution.  Affected hotel owners have reacted angrily as 
their occupancy rates plummeted from 90 to 40%.  These hotels 
derived 70% of total income from their clubs.  A business 
leader told EmbOff that the Bahrain Chamber of Commerce and 
Industry supports upgrading the tourism sector but opposes 
such a sudden move, and he argued in favor of a multi-year 
transition period.  A hotel owner accused the government of 
trying to appease the Islamist blocs in parliament.  The 
high-end of the market continues to boom as the government 
received 48 applications for four- and five-star hotels, 15 
of which are already under construction.  The economic impact 
of the restrictions is likely to be marginal, but the 
political impact could be more serious, depending upon how 
forcefully parliamentarians push the issue.  End Summary. 
 
------------------------------------- 
Restrictions Hit "Island of Pleasure" 
------------------------------------- 
 
¶2.  (U) Bahrain, which marketed itself as the "Island of 
Pleasure" at the early May Arabian Travel Market exhibition 
in Dubai, recently implemented new orders restricting some 
restaurants and hotels, mostly at the low-end of the market, 
from offering Arabic-oriented dance shows and alcohol.  The 
Ministry of Information's Tourism Directorate issued two 
circulars in November 2006 impacting the tourism industry. 
The first ruled that permits previously issued to hotels to 
stage "Arabic and foreign musical shows" were no longer valid 
as of March 4, 2007, later extended to April 15.  The second 
stated that as of May 1, 2007, bars and nightclubs in hotels 
and restaurants located in "residential areas or near schools 
and mosques" would be banned from serving alcohol.  Five-star 
hotels were exempted from the directives as were four-star 
hotels located in tourist and commercial zones.  The 
circulars were both signed by Acting Assistant Under 
Secretary for Tourism Affairs Fawzi Touleifat, and were 
 
SIPDIS 
issued at a time when Minister of Information Mohammed Abdul 
Ghaffar was outside the country.  According to official 
statistics, more than half a million tourists enter Bahrain 
each month, over 90% of whom come via the causeway from Saudi 
Arabia. 
 
¶3.  (U) Local hotel owners have clarified to EmbOffs that the 
circulars were intended to address two specific segments of 
the tourism industry.  The first is clubs housed in two- and 
three-star hotels normally frequented by visiting Gulf Arabs 
featuring bellydancers and bands playing Arabic music.  The 
circular uses the Arabic term "marqas," which best translates 
as dance hall, as opposed to clubs or discos, which play 
Western music and cater to a range of audiences.  Critics 
complain that the shows at the dance halls primarily serve as 
a front for organized prostitution, with the women "dancers" 
offering to visit clients in their rooms.  The second 
circular targeted restaurants, bars, and clubs located in the 
midst of residential areas.  An industry leader said that the 
first directive was being implemented in a somewhat selective 
way, with ministry inspectors focusing mostly on clubs where 
patrons and women presumed to be prostitutes loiter in the 
streets in the early morning hours.  He said that the 
government had not yet tried to follow up implementation of 
the second directive.  According to press reports, 
approximately 85 hotels have been impacted by the measures. 
 
-------------------------------- 
The "Talibanization" of Bahrain? 
-------------------------------- 
 
¶4.  (SBU) Affected hotels owners have reacted angrily.  Ahmed 
Sanad, President of the Bahrain Society of Hotel and 
 
MANAMA 00000503  002 OF 004 
 
 
Restaurant Owners (BSHRO) and General Manager of the Zubara 
Hotel, complained to Pol/Econ Chief that "this is just the 
first step" of the Talibanization of Bahraini society.  Sanad 
and his colleagues Ahmed Al Alawi, Operations Manager of the 
Middle East Hotel, and Majeed Adeeb, Managing Director of the 
Half Moon Hotel, said that their occupancy rates had 
plummeted from 90 to 40% even though they dropped room rates 
from BD 15-17 ($40-45) to BD 8 ($21) per night.  Before the 
imposition of the new regulations, the hotels derived 70% of 
their total income from the clubs.  The situation is so 
severe, Adeeb said, that he laid off most of his 45 
employees, 15 of whom were Bahraini, and he recently sold a 
plot of land to keep his business liquid. 
 
¶5.  (SBU) Nabeel Kanoo, who is the head of the Bahrain 
Chamber of Commerce and Industry's (BCCI) Tourism Committee, 
said that his organization supports improved zoning to keep 
commerce, including hotels and restaurants, out of 
residential areas.  He acknowledged that the government in 
the past had given licenses for hotels and restaurants to be 
built anywhere.  But the BCCI does not support a sudden 
change in the rules after people had invested millions of 
dollars in their facilities.  He had proposed a transitional 
period of at least one year, and ideally three to five years, 
for hotel owners to upgrade their properties and decrease 
their dependence on nightclubs.  The Tourism Directorate gave 
them less than six months, which was insufficient, in his 
view. 
 
¶6.  (C) BSHRO President Sanad accused Information Minister 
Abdul Ghaffar of being responsible for the directives, 
claiming that Abdul Ghaffar is sympathetic to the policies of 
the Muslim Brotherhood organization in Bahrain.  (Note:  We 
have heard this claim before.)  He said Abdul Ghaffar had 
directed Acting Assistant Under Secretary Touleifat to issue 
the circulars so that Abdul Ghaffar would not be directly 
responsible for them, knowing they were controversial.  Sanad 
told the press that the restrictions were "an attempt to 
appease the Islamist blocs in parliament."  (Note:  The BSHRO 
filed a court case against the orders, saying an acting 
assistant under secretary does not have the authority to 
issue directives.  The case is pending, and there are 
indications that Touleifat might be willing to negotiate the 
details of the restrictions in return for BSHRO withdrawing 
the case.) 
 
--------------------------------------------- 
"Protecting Society" with Alcohol Limitations 
--------------------------------------------- 
 
¶7.  (U) In fact, the two major Sunni Islamist blocs in the 
elected lower house Council of Representatives, Al Asala, a 
Salafi group, and Al Minbar, which is associated with the 
Muslim Brotherhood, for years have urged the government to 
clean up the tourism sector, even going so far as to say that 
alcohol should be banned in the country.  Although they have 
yet to take action to ban alcohol outright, on May 29 MPs 
voted unanimously on an "iqtirah bi qanoon" (proposed law) to 
prohibit the sale of alcohol at social and civic clubs.  Al 
Asala MP Ibrahim Busandal pointed out that "we are not 
speaking about alcohol in general, we are speaking about 
establishments that should be protecting society."  (Note: 
Clubs popular with Western expatriates, such as the British 
Club, the Rugby Club, and the Dilmon Club would be impacted 
by this measure, should it clear the remaining hurdles in the 
government and parliament.) 
 
¶8.  (U) Islamist MPs point to family, or "clean," tourism as 
representing the future for Bahrain's hotel industry. 
Busandal told the press, "We have to promote Bahrain, but not 
as another Bangkok.  We are an Islamic country and have our 
own culture and rules.  We do not want tourism at the cost of 
that.  The tourism we are looking for is one at the highest 
levels, where families come because of the country's history, 
traditions, and climate."  An advisor at the Information 
Ministry who just completed a Ph.D. on the topic said that 
Bahrain should promote cultural tourism, including a focus on 
traditional handicrafts.  Touleifat told the press that the 
Tourism Directorate would help develop a tourism "oasis" 
featuring a desert encampment, traditional band, luxury 
tents, camels, falcons, and crafts. 
 
MANAMA 00000503  003 OF 004 
 
 
 
-------------------------- 
Efforts to Upgrade Tourism 
-------------------------- 
 
¶9.  (U) At the government's request, the UN World Tourism 
Organization (UNWTO) participated in a two-day seminar on 
hotel development May 14-15.  UNWTO technical cooperation 
official James Yoo said the aim of the conference was to 
increase awareness among government officials, hoteliers, and 
investors of best practices and current trends in the 
industry.  The seminar also endeavored to create an 
understanding of the skills required to achieve international 
standards of excellence in establishing and managing hotels. 
Yoo said the UNWTO would work with the government and local 
industry to develop a new hotel classification system that 
would provide information to tourists on what they can expect 
from different classifications of hotels, as well as provide 
hoteliers with a clear perspective on what services and 
facilities they should offer.  The BCCI's Kanoo commented 
that this is just the sort of practical information the 
industry needs to develop further. 
 
¶10.  (U) In fact, there has been quite a bit of high-end 
tourism development in Bahrain.  The press reported that the 
government had received 48 applications for four- and 
five-star hotels, 15 of which are already under construction. 
 There are several high-profile development schemes like 
Durrat Al Bahrain, Al Amwaj, and Riffa Views that feature 
hotels, villas, and apartments for wealthy customers.  In 
May, Singapore-based Banyan Tree Hotels and Resorts, a 
high-end resort operator, opened its first property in the 
region, a $170 million development that will have a total of 
156 luxury villas.  It is a key part of Gulf Finance House's 
$1 billion Al Areen development.  Another component of Al 
Areen is the $50 million Lost Paradise of Dilmon Water Park, 
which is scheduled to open in August and aims to attract 
300,000 visitors per year.  In two prominent cases, the 
Banyan Tree project and the new Four Seasons Hotel being 
built at Al Amwaj, Islamic financial institutions are 
providing the capital, Gulf Finance House for Banyan Tree and 
Arcapita for the Four Seasons.  These investments must 
conform with Islamic principles, including not serving 
alcohol or pork. 
 
------------------------------- 
Economic Impact Likely Marginal 
------------------------------- 
 
¶11.  (U) Those opposed to the Tourism Directorate's 
restrictions complain they will harm Bahrain's economy.  A 
senior banker told the Ambassador that sales of luxury items 
such as chocolates and flowers were down 10% since the 
imposition of the restrictions.  BSHRO president Sanad told 
the press that "the effect of the decisions will not be 
limited to hotels.  The whole market in Bahrain will be 
affected."  Hotel owner Hussein Al Mozawib said publicly that 
Bahrainis working in the tourism sector and related 
industries would be harmed.  Shaikh Mohammed bin Abdul Rahman 
Al Khalifa, who owns three hotels, told the press that the 
restrictions would likely impact food and beverage suppliers, 
taxis, and property owners, causing a ripple effect on the 
economy.  Businessman Adel Fakhro told P/E Chief that closing 
down the clubs harms the investment climate, particularly as 
Bahrain competes with well-funded regional adversaries like 
Dubai and Qatar. 
 
¶12.  (SBU) Others dispute this analysis.  Kanoo described 
indicators pointing to the health of the economy and tourism 
sector.  The average price of land in the country continues 
to rise, the April Formula One racing event "was packed," and 
he detects no slowing in the retail sector.  Jassim Hussein, 
a Bahrain University economist and member of parliament 
representing Shia opposition political society Al Wifaq, told 
P/E Chief that tourism's contribution to the economy (as 
represented by income generated by hotels and restaurants) is 
relatively low.  According to Central Bank of Bahrain 
statistics, in 2005 hotels and restaurants earned BD 106 
million ($281 million), amounting to 2% of total GDP.  In 
Hussein's view, only a small percentage of the BD 106 is 
generated by the types of hotels and nightclubs affected by 
 
MANAMA 00000503  004 OF 004 
 
 
the government restrictions.  Thus the overall impact on the 
economy will be minimal.  And, he pointed out, the drinking, 
dancing, and other activities can still go on, but behind 
closed doors.  The Central Bank estimated total employment in 
the sector in 2005 to be 7,000 people, of whom 25% (1,788) 
were Bahraini and 75% (5,215) were foreign.  Among the 
Bahrainis, 85% (1,519) were men and 15% (269) were women. 
Among the foreign workers, 77% (4,030) were men and 23% 
(1,185) were women. 
 
------- 
Comment 
------- 
 
¶13.  (C) While certainly harming low-end hotel owners and 
those who work in the hotels, the new restrictions have a 
greater political impact than economic.  The imposition of 
the restrictions could be a savvy move to appease members of 
parliament who, if permitted to do so, would push much 
further, or it could represent just the first of many steps 
to "clean up" a sector often at odds with a strict 
interpretation of Islamic principles.  The Council of 
Representatives' May 29 vote, which needs to be approved by 
the Cabinet, the upper house Shura Council, and the King 
before it would have the force of law (an unlikely 
occurrence), shows the mood of the elected deputies.  Even 
those MPs committed to attracting foreign investment and 
preserving Bahrain's open society felt compelled to vote in 
favor of banning alcohol at social clubs, so they are not 
seen by their constituents as un-Islamic.  The government 
retains a great deal of legislative power, and the appointed 
Shura Council and government should be able to constrain the 
more puritanical impulses of the lower house.  The longer 
term question hinges on how forcefully MPs push the issue and 
the government's commitment to retaining an industry that is 
unique and often at odds with prevailing conditions in the 
region. 
 
 
********************************************* ******** 
Visit Embassy Manama's Classified Website: 
http://www.state.sgov.gov/p/nea/manama/ 
********************************************* ******** 
MONROE