The head of Mumtalakat, Bahrain’s state holding company, has resigned after a four-year term to return to the private sector.
The move looks set to boost the Gulf state’s troubled financial sector, but it has also raised concerns about the erosion of reformists from leading government roles.
Talal al-Zain said he was proud of the achievements of his term as chief executive of the sovereign wealth fund, managing state companies such as Aluminium Bahrain and national carrier Gulf Air.
“We were formed to manage these investments on a commercial basis, creating best practice and corporate governance across state-owned companies,” he says.
Mr Zain, previously at private equity group Investcorp, is setting up his own financial services company, which will become a joint venture with a global investment house.
“I see lots of opportunities for investment in the Middle East and north Africa, with strong interest from Asia in our region, we want to be a contact point for that,” says Mr Zain.
The entry of a prominent financial services company will be a fillip for the embattled sector, which accounts for a quarter of Bahrain’s economic output.
Several foreign banks have moved from Bahrain amid the political crisis between the majority Shia, who are pressing for more democracy, and the minority Sunni-led government, which insists it is reforming after the excessive violence of last year’s crackdown.
The departure of US-educated Mr Zain, an ally of the reformist crown prince, is being described by some as a blow.
Analysts are concerned that the reform-minded elements in government are sliding into the background as security concerns take centre stage.
“This is not good; we need the crown prince’s people to remain in place,” says one opposition member. The opposition fears the dilution of reforms, including Mumtalakat’s transparency drive.
Mr Zain rejects any such concerns, saying the company’s governance systems and strong board will keep its mission intact.
“My loyalty is to Bahrain and the leadership,” he adds. “I will continue to contribute where I can, by investing in the region and bringing business here.”
Sheikh Khalid bin Abdullah al-Khalifa, Mumtalakat’s chairman, said in a statement announcing the departure that Mr Zain “leaves behind a strong team capable of continuing the steady strides undertaken over the past five years”. He added: “As the investment arm of Bahrain, Mumtalakat will continue to be a strategically important institution and execute its mandate of managing the kingdom’s strategic commercial assets.”
Mumtalakat, which oversees assets valued at $9bn, was formed in 2006 during a government drive to boost transparency among the companies it controls outside of the energy sector.
Corruption claims have repeatedly dogged the ruling elite, becoming a central element of the protest movement’s grievances.
Analysts say the effort to diversify the economy into an outward-looking commercial and tourist hub appears to be in retreat, replaced by an even greater dependence on Saudi Arabia, Bahrain’s larger neighbour.
Sheikh Salman bin Hamad al-Khalifa, the crown prince, led government attempts to open a dialogue with the opposition last February, but talks failed to develop before Riyadh led Gulf troops on to the island to back up the clampdown, which included the sacking of thousands of protest sympathisers in both the public and private sectors.
Analysts say the crown prince’s sphere of influence has since diminished as the minority Sunni community have become more vocal against concessions to “disloyal” Shia.
Bahrain’s economic development board, which used to take the lead on economic policy, now bears the hallmarks of a more passive trade promotion body.
Significant labour market reforms, including taxes on business for expatriate labour, have been suspended to help the struggling economy, rolling back the most serious attempt in the Gulf to address the festering issue of unemployment among nationals.
As to the future, the restructuring of lossmaking Gulf Air will be one of the biggest challenges of Mr Zain’s replacement, whose appointment now rests with the board.