Post September 11 recovery gathers pace

In the Middle East, the shock of September 11 was felt most in hotels and aviation, and to a lesser extent in the financial sector where deals went on hold and personal credit tightened.

Six months on and the green shoots of recovery can be seen in these three sectors. In Dubai the beach hotels are full again and the city properties are also busy. This week the new Dubai Fairmont boasted 75-80 per cent occupancy, much better than it forecast on opening at the start of last month.

In the aviation sector Lufthansa has had to put on a Jumbo 747 to cope with passenger demand levels from Germany, albeit just for the Dubai Shopping Festival. And Emirates has announced more flights to Frankfurt from August 1, perhaps just a case of a return to expansion as usual.

Even the Egyptian tourism minister told journalists at the ITB in Berlin last week that he expected a full recovery by the end of the year, and that visitor numbers were up since December.

The Middle East's leading arranger of foreign project finance, Barclays Capital, said this week that it was eyeing opportunities worth a total of $41 billion. First to roll will probably be the independent power and water project Umm Al-Nar in Abu Dhabi with requests for proposals out by the end of this month.

Other targets in Barclays' sights include the Dolphin Energy gas pipeline and third and fourth LNG trains for Qatar. And the $25 billion Saudi Gas Initiative also offers scope for funding investments made by Saudi Aramco in the three main projects.

Supporting these green shoots is a timely recovery in the oil price, now topping $25 per barrel. With Opec's solidarity vindicated, the chances of sustaining oil in its old price band of $22-28 per barrel through the rest of the year must be good.

That will underpin a nice bounce for the GCC states whose stock markets are already responding to better news from the oil sector and growing confidence in the non-oil private sector. And it could even be that overbuilding in the property sector will be much more easily absorbed into a recovering economy than previously anticipated.

In any case, low interest rates presently favor investment in property and continue to benefit the economy in general. For example, car sales are steady thanks to financing at rates as low as 4.75% from MeBank.

Iraq remains the sole cloud on the horizon, apart from the continuing Palestinian emergency, and both appear isolated from the regional economy at present. It could be that military action against Iraq throws a spanner in the works later in the year, but for now the post September 11 recovery is in full swing.