Reasons to be optimistic about the New Year

There are certainly many reasons to be optimistic about the business outlook in the Middle East in 2005.

First, the oil price starts the year comfortably above $40 a barrel, and with every prospect of another 12 months of near record prices and production levels. Even if 2005 oil revenues do not quite exceed 2004, this is going to be another very good year.

Secondly, the geo-politics of the region look to be about to enter a more stable period. There are elections in Iraq and Palestine which hopefully will produce moderate governments that will work to establish a peaceful settlement of outstanding problems. Iraq will regain its sovereignty while Palestine is working on it.

Thirdly, the wind of economic and political reform is blowing strongly through the region. In the UAE, for example, the new administration is committed to economic modernization, while in Saudi Arabia municipal elections will be held for the first time in February.

Indeed, the whole legal framework of autarkic economics - which kept economies isolated and restricted ownership - is being reformed. Whether this means ownership of real estate or companies things are changing for the first time in a generation.

Economic reform will multiply the good effects of high oil revenues. Already we are seeing a greater propensity to invest locally in the Middle East, and this is not just about 9/11, it is about the creation of viable projects in this region.

The long-term impact of this huge inward investment flow can not be overstated. Infrastructure - whether it is hotels, airports or villas - is something that remains for the use of future generations and does not evaporate overnight with changes in the oil market.

Perhaps this is the best reason to be optimistic about the outlook for business in 2005. Very large investments are being committed in the Middle East that will guarantee economic growth in the years ahead, and continue to produce economic returns once the projects are actually built.

This is a virtuous upward spiral in economic development terms, and only China, the Middle East and Eastern Europe are currently on this progressive track. Prospects elsewhere do not look so good for 2005.