Infrastructure investment in the GCC – under development or planned – now stands in excess of $1.7 trillion (Dh6.2trn), buoyed by urbanisation, policy reforms and increased openness apart from moves to market-based economies.
Dr Nasser Saidi, chief economist at DIFC Authority, citing estimates from the World Bank, Global Insight and Dubai International Financial Centre, said the investment will increase productivity and export capacity through improved logistics.
“This will further enable economic diversification, lead to higher total factor productivity and labour productivity growth as well as underpin growth of financial markets,” Saidi told Emirates Business.
The bulk of these investments are in the energy sector. According to UAE-based Proleads, the total budget for energy construction projects in the GCC this year has reached $1trn. Figures from Proleads show investments for oil and gas, petrochemicals, water and power in the region are worth $944bn.
Oil projects have the largest investment with $266bn followed by power with $264bn and gas with $140bn. Petrochemical projects at $194bn, while water investments at $70bn.
“In 2007, the capital expenditure is set at $67bn, a whopping 148 per cent increase compared to the $27bn in 2006,” Proleads director Emil Rademeyer said. “The forecast for 2008 is even higher and amounts to an enormous $82bn; and this is only for oil, gas and petrochemical projects.”
The Proleads database on infrastructure – seen exclusively by Emirates Business – shows Saudi Arabia’s projects valued at $522bn followed by the UAE with $145bn and Qatar with $135bn. Kuwait has earmarked $81bn, while Oman’s investments are valued at $42bn. Bahrain, the GCC’s smallest oil and gas economy, has the lowest investments worth $17bn.
Funding of these projects has been sustained, thanks to the massive wealth created from windfall oil profits.
Saidi said the value of oil wealth of Middle East exporters increased by more than $30trn between 1995 and 2007. And given the global energy demand growth projections, using conservative estimates for oil prices at $65 per barrel, the projected cumulative oil and natural gas revenues for the GCC in the 2005 to 2030 period totals $8.1trn.
“The region’s oil and gas exports receipts look set to rise to near $800bn in 2008 with current account surpluses running at 20 to 25 per cent of the GDP,” he said.
These surpluses are increasingly recycling back into regional economies, Saidi said. Mena international reserves have tripled between from $242.9bn in 2003 to $776.6bn in 2007. For this year, the reserves are forecast at $967.5bn.