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29 March 2024

Bahrain contractors hit by diesel, asphalt price rise

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By Staff

Bahrain’s contractors have been caught off guard by a government decision to raise diesel prices and lift subsidies on local asphalt supplies, with one expecting losses for contacting firms of up to USD7.8 million through 2014 alone.

In remarks published in Bahrain’s newspapers, the contractors said the decision to lift BD billions in government subsidies on asphalt would largely push up prices while others said higher diesel prices would create upheaval in the market and stifle growth in the island nation’s economy which has yet to recover from domestic unrest and the 2008 global fiscal distress.

“Contracting companies which are currently executing projects or are about to embark on projects will suffer from large losses as a result of the decision to liberalize asphalt prices in the market,” the Arabic language daily Akhbar Al Khaleej said, quoting Samir Nas, a local contractor and businessman.

It quoted another unnamed contractor as saying the decision, which will be enforced on January 1, would inflict losses of between BD1.3-3 million.

The paper said asphalt subsidies cost the government around $68 million between 2009 and October 2013 while the accumulating bill reached BD1.26 billion by the end of 2012, including nearly BD749 million for oil products.

“The decision to lift subsidies will be devastating for companies which manufacture products, in which asphalt is a component…certainly, these companies will raise their prices to offset losses and this means they will lose regional and global markets…this decision has been taken without any study,” Nas said.

Another Arabic language daily, Al Wasat, said contactors believe the decision to raise diesel prices by 20 fils (52 cents) every year for four years would lead to an increase in some products and in transport fees.

“This will hurt contractors while the transport sector and the citizen will be the first to be harmed by this increase…we call on the government to keep the subsidies on fuels until the economy full recovers from the global crisis and the security situation in Bahrain,” Ibrahim Yousuf, chairman of Bahrain’s contractors’ association, told Al Wasat.

“We believe this increase will create confusion among the contractors and upheaval in the market…we do not support any increase that will hurt the transport and contracting sector, as well as the citizens in such an economic situation,” he added.

Akhbar Al Khaleej also reported the chairman of Bahrain’s economists’ association as saying higher diesel prices would curb investment and smother GDP growth.

“There is no doubt this decision will reduce chances for attracting foreign investment into Bahrain amidst growing competition in the region,” Jaafar Al Sayegh said.

“It will also obstruct growth for small and medium enterprises and this will consequently reduce chances for supporting growth in the Kingdom…decision-makers in Bahrain should not have generalized the diesel price rise to all productive units as many of them have built their production policies on available subsidies for fuel.”