Looking back on 2004 in the GCC

The most obvious feature of 2004 was the fourth year of high oil prices, indeed a year when both prices and production in the GCC touched new highs. Economists now expect a 35% hike in annual oil revenues, leaving the GDP of the Gulf States some 10% higher at around $430 billion.

This meant a booming regional economy, and high rewards for those who work here. But equally less free time and problems with neglected family and friends. Endlessly rushing out new projects and companies is very draining, if an exhilarating experience at the same time.

That meant 2004 was also the year of real estate mega-projects, and soaring stock markets and IPO oversubscriptions.

In the past month Dubai has witnessed the launch of the Palm Deira, the biggest of three ongoing palm island construction projects offshore, and the unveiling of the 64 million square feet Business Bay extending the Dubai Creek and creating a massive new business free zone.

Perhaps fittingly the biggest IPO oversubscription was also in the UAE, this time in Abu Dhabi for Addar Properties. This single share offer attracted more than $103 billion in subscriptions which dwarfed the $1.7 billion Google IPO in the US that attracted a lot more global media interest.

Even more incredibly the Addar IPO caused minimal disruption to the UAE economy, despite being almost twice the size of the national GDP. There was no liquidity problem. Quite the reverse, all the nations of the GCC in 2004 showed signs of excess liquidity.

In short, so much money was gushing out of the ground that nobody knew what to do with it. Kuwait MPs voted a $680 grant to every citizen - at least that dealt with some of the excess cash, although whether this helped with the cost of living is debatable as putting more money into circulation may prove inflationary.

Not surprisingly Dubai's real estate sector has now many imitators, and large land reclamation schemes are the vogue in the Gulf. No matter that the interior has vast tracks of desert which is easy to develop, water is better for land values it seems. So from Bahrain to Qatar and Oman, investors are piling into giant offshore real estate projects.

Canny Dubai has also been channeling billions into its tourism and leisure infrastructure with the opening of fantastic hotels like the Madinat Jumeirah, and the creation of the $5.5 billion Dubailand theme park, a group of enormous leisure based projects that should keep parents and children amused for days.

It does not stop there in Dubai. For there is a new 'City' for every type of diversification, from the newest Dubai International Financial Centre to the Dubai Healthcare City, or the Outsourcing Zone, or the Chinamex, or the expansion of the Dubai Media City and Dubai Internet City. This can not continue, people say, and then another even bigger project is announced.

There is no doubt that 2004 was a boom year across the GCC, and particularly in Dubai. Yet the scale of funds committed to these mega projects mean that the economic boom is not likely to go away for many years, even if the enthusiasm for IPOs and off-plan sales falls away in the near future.

For the key to understanding the Gulf oil boom of the early 2000s is that post 9/11 the focus of investment for GCC funds has shifted decisively from foreign capital markets to its own backyard. That is why there are so many cranes in every town.