Gulf projects still booming (page 1 of 2)

Financial analysts and the media continue to lament that September 11th was "the day the world changed" against the backdrop of European and US recession. But as fears of a prolonged global downturn rise, oil-rich Gulf economies, while expecting a slowdown in growth in the coming year, are still seeing solid commitments from international banks. In the two months that followed the attacks, Qatar, Kuwait, the UAE, Oman and Saudi Arabia have all seen large-scale financing progress with only minimal delays. Gulf bankers continue to talk of "business as usual."
Taking flight. Immediately after the attacks, Gulf officials were keen to talk up the region. The head of the Saudi Arabian General Investment Agency, Prince Abdullah bin Faisal bin Turki Al-Saud, told the audience at an investment conference that financing delays in the immediate term were simply a result of more challenging logistics - changes to flight schedules and the like, which were preventing foreign investors from accessing the region. The economic fundamentals, he claimed, remained sound and were perfectly conducive to continued investment growth.
Two weeks after the attacks, Saudi Arabia's minister of finance, Ibrahim al-Assaf, noted that the kingdom had not witnessed any immediate negative economic impact, saying that the main factors that influence the growth of the Saudi economy and financial stability are domestic ones. Al-Assaf pointed out that the country's banks still enjoyed healthy liquidity and were in a strong position.
Bankers were telling the same tale. The managing director of Saudi American Bank, Mike Graffenried, said that his bank was optimistic. "All the signs we see tend to point to future growth," he said, adding that visits with his customers showed that "despite what is happening in the outside economy, their business is moving along - plans are not changing."
The region's banks continue to defy pessimistic projections elsewhere with many of the key players turning in a very solid performance for the first nine months of the year. The National Bank of Kuwait reported in October that its profits were up by five percent, while Saudi banks - with the exception of Al-Rajhi - showed across-the-board improvements. According to the National Commercial Bank, the nine listed Saudi Arabian banks have reported a 12 percent rise in profits for the first six months of 2001 with the sector expected to report another "good year" in 2001.
Against this backdrop, large-scale financings moved ahead, albeit somewhat more slowly than they might have. Qatar, in particular, with its massive wealth in natural gas and successful hosting of the latest World Trade Organization summit, seems barely perturbed by the doom and gloom. In mid-November, the Ras Laffan Electricity Company secured a loan from local and international banks for $567 million.
Local financiers say that this kind of sentiment is likely to prevail for some time given the number of large-scale projects planned for the near future. These include infrastructure projects in preparation for the 2006 hosting of the Asian Cup, plans for a new airport, the construction of the causeway that is to link the country to Bahrain, and other new residential and commercial building projects.
Kuwaiti sources are less upbeat. Kuwait's oil minister, Adel Khalid al-Sabeeh, following the recent OPEC meeting spoke gloomily of the prospect of oil falling to $10 per barrel, but domestically life goes on. The National Bank of Kuwait (NBK), Kuwait Finance House and Citibank recently finalized a $900 million refinancing agreement with Kuwait's Equate petrochemical project - signed, sealed and delivered in record time given the current tight rein on credit.