Blog: Food for Thought

September 28, 2020 | posted in: Uncategorized | by

By Mo Fakhro

The coronavirus pandemic has created a great deal of hardship for people across the world. The primary negative effect has been on the people who have been directly impacted by the virus. This includes the millions of people who have been infected, those who have become seriously ill, those who have died, and the loved ones who have seen the impact of the pandemic on their households.

While I acknowledge their hardship, I write here to address a hardship of a different kind. I write here to address the livelihoods of the people who have been financially affected by this virus. The people who have lost their jobs, those whose businesses have suffered, and others whose income has been otherwise affected.

More specifically as it relates to Bahrain, I write to address the impact on the livelihoods of restaurants in Bahrain, by the closures relating to the coronavirus pandemic. While the health tragedy of the pandemic is clear, I write here to address the opportunity to minimize the economic impact of the pandemic, by prioritizing activity that results in economic transactions, particularly economic transactions that have a high multiplier component.

In economics, every time that a transaction is made, a contribution is made towards GDP. This can be a transaction of any kind. It is especially true in the case of the restaurant sector, because of the multiplier effect of an industry that largely buys products and services locally.

This simple fact means that the utilization of a free service, such as going to the beach, visiting a place of worship, visiting a public pool, or meeting friends and extended family at their homes, does not directly impact GDP and does not contribute to economic growth, even though they all contribute to the spread of the coronavirus. In parallel, a number of other activities, such as going out to a restaurant, contribute to GDP while contributing (but I would argue to a lesser extent) to the spread of the conoravirus. The question that then needs to be addressed, is what can we do to minimize the economic cost of the pandemic, while also minimizing its spread.

I am not a doctor and so I could not make a medical case for my point of view. However, I do oversee the operations of restaurants across the Gulf. In Saudi Arabia and Kuwait, the restaurants sector has reopened and sales have improved. While the pandemic is still present in both countries, the opening up of the restaurants sector does not seem to have led to a significant increase in cases to the best of my knowledge. While this is not a scientific assessment, it is a point worth noting. The reopening of restaurants in both countries has however helped to revive their economies by allowing for transactions to restart.

Unfortunately, the coronavirus pandemic has hit Bahrain’s tourism industry very badly. The industry is in urgent need for a reopening to avoid detrimental long term damage, particularly the restaurants segment. This has come at a critical time, when the country’s natural resources are running out, and its debt levels have risen substantially.

The country’s tourism industry represents a significant opportunity over the long term for tax revenues to pay down debt levels, and to increase foreign exchange reserves from tourists. The current closures of tourism facilities over the past six months have put the entire industry at risk. I would not be surprised if we begin to see mass and permanent closures of restaurants facilities if the current trends continue. This will have the unfortunate effect of reducing the product offering to tourists who decide to come to Bahrain for their weekends or extended breaks.

It will also likely reduce future investment in the sector, as companies deplete their reserves to survive the pandemic. This is the harsh reality that we now face as a country. It is a Sophie’s choice of sorts, between the survival of a crucial industry of the country and the need to ensure the health and wellbeing of a nation.

While the risks of opening the restaurant sector are present, I would argue that opening up restaurants to increase their revenues and prevent their closures will not have a significant impact on the trajectory or case numbers. It would also provide a vital lifeline to a sector that has become known regionally for its vitality and vibrancy, and has come to represent a key driver of tourism to the country.

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