A long hot summer for Middle East business

Usually the summer months in the Middle East herald a slowdown in new orders but there is no sign of it yet this year.

Over the past week we have seen Abu Dhabi announce a VW car factory and $8 billion worth of residential skyscrapers. Qatar has been mulling bids for the first phase of its $5 billion new airport, while Qatar National Bank appointed a designer for its $55 million new headquarters.

There is almost a competition developing among oil and gas producer nations to see how much they can spend. Some new hotels, why not? Let's make it one hundred! Reclaim some land for a new island, sure, how many?!

It is easy to be frivolous - although how much economic sense some of the more ambitious projects make is open to conjecture by highly paid consultants. Anyone can go into a business and make a loss. Profits are supposed to be what business is about.

The BBC Middle East business programme recently argued that so many airlines were being launched or expanded that a medium-term oversupply of capacity was all but inevitable.

Indeed, new carriers like Air Arabia and Etihad Airways have taken to the skies. But foreign carriers are still adding capacity, and Emirates Airline turned a huge profit this year, so there is no crisis in the air.

However, one phenomenon that is not so healthy is the tendency for regional governments to look enviously at Dubai, and say, hey we should be having a go at that too.

The dash into real estate for sale to foreigners, for example, is not being very clearly thought through in many countries.

Why also do the first projects always have to be so big? Would it not make sense to sell a few modest villas to expatriates before reclaiming huge sections of land from the sea, surely an unnecessary expense in view of the vacant desert available with no other useful purpose?

Part of the problem maybe that there is such a sudden upsurge in liquidity in the region that large scale real estate and infrastructure projects is the best way to absorb it. Contractors and architects would agree that this is not a bad point, and in truth construction does have the advantage of remaining after the oil price subsides.

In the meantime we are back to the boom times of the late 1970s with a mass of real estate development and infrastructure spending. Not all of it will be money wisely spent but perhaps it is better spent in building the nations of the region than in increasing stock prices in global stock markets.

Hopefully, the good times are back to stay for sometime. Certainly the oil price situation seems to have no easy downside unless global markets crash into a huge recession, and there is no sign of it yet.