$1.5 trillion for a 10 year GCC infrastructure boom

To put this into some perspective the infrastructure spending on a population of 32 million in the GCC will be bigger than the amount spent on 250 million Americans or more than a billion Indians. And in per capita terms, GCC infrastructure spending will be 12 times higher than the US and 94 times higher than in India.

In is hardly surprising therefore that HSBC was keen to sponsor a conference on infrastructure in the Middle East this week, especially as the global trend towards greater private sector involvement in the finance, construction and operation of projects is also manifest in this region.

'We want to be the foremost global forum for infrastructure,' said HSBC Middle East CEO Youssef Nasr opening the event. 'Dubai has shown the way in developing its ports and infrastructure.'

Private sector

Down-on-the-ground the regional infrastructure vision is shifting towards a private sector led model despite the dominance of the government in local economies.

The Abu Dhabi model for independent water and power projects has been widely copied. The conference was addressed by ACWA Power Projects president and CEO Paddy Padmanathan, whose company presently has $9.5bn worth of IWPP projects under development in Saudi Arabia.

'We have had no difficulty in raising funds for these projects,' he said. 'Twenty-five per cent came from the Kingdom, another 30 per cent from the region and the balance overseas.'

Several speakers touched on the willingness of foreign lenders to back infrastructure projects in the GCC, something that has not been affected by the sub-prime lending crisis. Indeed, the general opinion was that the latter had increased interest in long-term infrastructure projects in the Middle East.

Underpinning this confidence is a belief that high energy prices are here for the long-term. Futurologist Hamish McRae opened the conference with an optimistic presentation that stressed the likelihood of higher energy prices and their importance in promoting the development of renewable energy sources.

Hydrocarbon wealth

Revenues from oil and gas will, however, be crucial to the huge planned expansion of infrastructure across the GCC. But the involvement of the private sector will allow appropriate levels of project finance to maximize internal rates of return, and a holistic view of long-term operating efficiency.

'The private sector is about a lot more than building cheaply,' said 3i Investments partner Neil King, whose normal project timeframe is 10 years. 'The asset will be built for efficient management and operation to maximize return.'

In a sense the provision of modern infrastructure has come full circle through the nationalization of the 20th century and back to the private sector model of the 19th century golden era of canal and railway projects. And this should ensure that money spent on GCC infrastructure is better invested that in the 1970s oil boom.

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