Bahrain moves economic reformer off policymaking body

DUBAI, March 13 Tue Mar 13, 2012 4:00pm EDT

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DUBAI, March 13 (Reuters) - The man who led efforts to diversify Bahrain's oil-reliant economy has lost his job as head of the kingdom's top economic policy-making body, further clouding the future of reforms which have stalled since anti-government unrest last year.

The state news agency said on Tuesday that Sheikh Mohammed bin Essa Al Khalifa had left by royal decree his post as chief of the Economic Development Board to become a political and economic adviser to Crown Prince Salman.

"Sheikh Mohammed will still be involved very closely," said a source close to the EDB, a brainchild of the crown prince.

But one observer speculated it could signal the end of the EDB as the main executive body for economic policy.

The EDB, which has tried to train and employ Bahrainis in a country where the majority Shi'ite community complains of economic marginalisation, may be reduced to its former role of an advisory body.

Bahrain has been in the grip of political conflict over the past year after Shi'ites, inspired by revolts in Egypt and Tunisia, led a protest movement for democratic reforms.

The ruling Al Khalifa family crushed the uprising after one month, as hardliners in government appeared to take the reins after the crown prince had begun discussions with opposition parties on political reforms.

Protests and clashes between police and Shi'ite youths continue daily in the U.S. ally, host to Washington's Fifth Fleet. The economy has taken a hit, with some banks quitting the country and the tourism and real estate sector slowing up.

Jasim Husain, a economist from the opposition Wefaq party, said a change of guard was needed at the organisation.

"There was a need for a new face. I like the idea of bringing someone with fresh ideas, but it would be better if it's not someone from the royal family," he said.

"Sheikh Mohammed did a good job in bringing investment to Bahrain, and he had the right idea on labour reform, but since the crackdown last year that had not been a priority."

An oil state with dwindling supplies, Bahrain imposes no personal income tax and many Bahrainis enjoy a high standard of living, but inequalities have helped to spur discontent.

Some reforms, such as reducing reliance on expatriate labour, have slowed in the past year as a consequence of a conflict within government over the political stalemate. The EDB board had not met in a year because of the crisis.

COMMONER TECHNOCRAT STEPS IN

Recently-appointed Transport Minister Kamal Ahmed will take over as the EDB's chairman until a replacement is appointed, the Bahrain News Agency also said.

Ahmed is a former chief operating officer at the EDB whose recent appointment as transport minister was welcomed by many. He is viewed as a technocrat commoner in a country where the Al Khalifa family holds the levers on many areas of public life.

The source close to the EDB said Ahmed's appointment in the interim was a sign that the policies of Sheikh Mohammed, who held the job since 2005, would continue.

An observer, who is close to official circles, said the removal of Sheikh Mohammed signalled the effective downgrading of the EDB to an advisory body.

He said this made sense because the body had operated as a quasi-cabinet, but expressed concern over the fate of reforms.

"We cannot have two cabinets. One of them had to go and the EDB had not functioned for a year," he said, saying that hardliners in the government could give senior economic and academic positions to loyalists close to the security apparatus.

"All economic reform projects have been watered down and merged into the mainstream hardline tendency," he said. (Writing by Andrew Hammond; editing by David Stamp)

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