Opposition activists want Formula One to cancel a race which the government hopes will boost confidence in Bahrain.

Manama, Bahrain – It was a scene the Bahraini government is hoping to avoid: Hundreds of young protesters clashing with riot police and chanting slogans against next month’s Bahrain Grand Prix, a race which many officials here describe as a watershed for the country’s struggling economy.

The demonstration on Saturday night attracted a small crowd, according to witnesses, and it drew a large response from the police, which deployed more than two dozen SUVs and armoured vehicles to Sitra. Protesters threw rocks and Molotov cocktails at them, and quickly dispersed after a volley of tear gas.

At least three people were arrested, and a woman was injured after being hit by a tear gas canister.

Last year’s grand prix was canceled because of widespread unrest in Bahrain, and this year’s race has become a battleground. The opposition is lobbying Formula One to cancel the race as a rebuke to the ongoing abuses committed by Bahraini security forces.

“No Formula One without human rights” was a popular slogan on Saturday. Another chant warned the race’s main backer, crown prince Salman bin Hamad Al Khalifa, that “your project will not succeed”.

The government, meanwhile, is keen to present the race as a sign that the situation in Bahrain has finally stabilised. It says that ticket sales for the Formula One race, still three weeks away, are already outpacing sales from 2010.

“It will send a message to the business community, to people abroad, that things are going back to normal,” said Essam Fakhro, chairman of Bahrain’s chamber of commerce. “It’s important.”

’How do people invest?’

Bahrain’s economy grew by just 2.2 per cent last year, its lowest level since 1994. And macroeconomic indicators suggested that the business climate continues to worsen: Growth in the fourth quarter was just 1.3 per cent, adjusted for inflation, down from 2.2 per cent in the previous quarter.

Construction on many projects has come to a halt. A businessman who sits on the board of one of Manama’s five-star hotels said the property postponed building a new tower because it couldn’t secure funding. The financial sector has been hit hard, too: Arcapita, a major Bahraini investment bank, recently filed for bankruptcy protection in the United States after it failed to restructure $1.1bn in debt.

Occupancy rates at some hotels have dipped to 20 per cent, down from normal levels of 70 to 80 per cent before the unrest began. Taxi drivers sit idly outside malls and hotels, lamenting the lack of business. “The flow of expatriates has come almost to a standstill,” Fakhro said.

Weekend visitors from Saudi Arabia are a major contributor to Bahrain’s economy, but traffic across the causeway is still down by as much as 25 per cent, according to officials and business leaders here.

Clashes like Saturday’s anti-Formula One protest in Sitra are still a daily occurrence in many villages [EPA]

“Just because there was worry that things may go wrong in February this year, business from Saudi Arabia did not want to come in,” said Adel al-Miskati, a member of Bahrain’s economic development board, referring to February 14, the one-year anniversary of widespread protests here. “Every day is the anniversary of something… how do people invest?”

All of this has the government anxious to portray “business-friendly Bahrain” as open for business once again, but that is a difficult claim to make.

The capital remains mostly quiet, but violent clashes are an almost nightly occurrence in the villages; tear gas at times wafts over major highways and neighbourhoods in Manama. At least six people have died this week from tear gas inhalation, including two people on Friday night, according to rights groups.

Riot police, meanwhile, are a common sight at intersections and along highways, as are convoys of armoured vehicles speeding off to clash with protesters.

’It isn’t distributed fairly’

The opposition says that the government’s argument is backwards: that Bahrain’s economic woes are not just a result of the unrest, but also a leading cause. The official unemployment rate here is less than 4 per cent, but estimates of youth unemployment are much higher, up to 15 per cent.

Many people here, particularly those who live in the villages, earn meagre salaries of just 200 to 300 dinars per month ($530 to $800). “This is a rich country, but it isn’t distributed fairly,” said one youth activist. “The rest of us live paycheck to paycheck, we survive with loans.”

Activists whisper about widespread corruption at major companies, though the lack of transparency in big businesses here means these allegations are hard to prove.

An oft-cited example is Gulf Air, the national airline, which lost more than half a billion dollars last year; officials blame the downturn on unrest in Bahrain and in the broader Arab world. But the airline, once the largest in the region, has been bleeding money for years, and many people here blame the losses on corruption. “How else could it be losing money when all the other Gulf airlines are growing?” asked one activist, a young woman with an engineering degree who can’t find work in her field.

The unrest continues to create economic hardship for protesters, too. Thousands of Bahrainis were dismissed from their jobs for political reasons last year. The exact numbers are hotly disputed, but hundreds – if not thousands – are still unemployed, and not all of those who returned to work have received back pay from last year.

Others have struggled to find work since being released from jail, even those sentenced for political offenses.

Fadila Mubarak, 38, was the first woman jailed during last year’s unrest: She was arrested at a checkpoint for “listening to revolutionary music,” and sentenced to four years in prison, though she was released after nine months. Amnesty International dubbed her a “prisoner of conscience.”

She emerged from jail to 800 dinars ($2,100) of unpaid loans on her car and a notice that her former employer was taking her to court for “unauthorized absence” – even though the company knew she’d been jailed, she said. Mubarak hasn’t been able to find work since her release last month, and survives partly on donations from other activists; she worries about losing her rented apartment.

“I left jail and I have more tension in my life. When I was inside, I only had tension because of my son,” Mubarak said, referring to her eight-year-old son, who was in the car with her when she was arrested. “Now I’m outside, and it’s worse than before – not only my son, but my rent, my car, my life.”