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Investment could hit $4b by next year if truce holds


Reuters - Aug. 24th. 2006


Beirut: Foreign investment in Lebanon should jump dramatically in 2006 and 2007 over last year if a truce that halted a devastating war between Israel and Hezbollah holds, its investment agency said.


Nabil Itani, head of the Investment Development Authority of Lebanon (IDAL), said if Lebanon could maintain stability, investment would more than double in 2006, from $1.6 billion a year earlier, and rise further next year.

"This year we were expecting $3.5 billion before the war, and I now think this investment will still be here," he told Reuters.


"I'm speaking now to those who invested before the war or who were preparing to do so. They are now waiting for security stability, but their intention is to proceed... If we have that situation, for 2007 we expect more than $4 billion."


The main investors in Lebanon in recent years have been companies from other Arab states: the UAE Saudi Arabia and Kuwait.


Itani said this year's forecast was still quite high because figures from the first quarter alone showed $1.1 billion in the sale of Beirut real estate to foreign investors.


"They want to see the arrival of a UN force, the deployment of the Lebanese army, no more fighting," Itani said, citing aspects of a UN-backed truce agreement that halted the fighting on August 14.


The five-week war killed around 1,200 people in Lebanon, mostly civilians, and at least 157 Israelis.


Prime Minister Fouad Siniora's government has estimated the damage to bridges, roads, and other infrastructure at $3.6 billion. Damage to economic activity is seen at billions more, including $3 billion lost from tourism receipts this summer.


Itani said his estimates for incoming investment did not include billions of dollars in aid expected to be injected by Lebanon's government, private firms and donor states to rebuild infrastructure devastated by Israeli attacks.


"These figures are for investment projects, technology parks, conference centers: investment, not reconstruction, not housing," he said of the forecasts for 2006 and 2007.


Itani said at least 10 large factories had been destroyed, erasing up to five per cent of Lebanon's industrial sector, which itself makes up 12 percent of the economy.


Other sectors of the economy have also ground to a halt. The government expects zero or negative economic growth this year, from previous forecasts for around six percent.


"Some sectors have been completely destroyed," Itani said.


"But if you look at the entire situation, you can see the infrastructure of investment in Lebanon is still stable. Our competitive advantages are still here."


Courtesy: Gulfnews





Energy Conservation needed to avoid resource conflict

By Eckart Woertz

DUBAI Oil constitutes more than 90 per cent of all transport fuels and 35 per cent of the world's primary energy demand no doubt, the world economy is addicted to oil and the Gulf countries have what everybody is longing for: They possess a breathtaking 61 per cent of worldwide reserves and contribute 30 per cent of production. Thus, with time, their importance will grow further.

As demand continues to rise and production in other regions like the US and the North Sea declines, more and more countries will have to turn to the Gulf for imports of oil. On top of that the region becomes increasingly important in the gas business, as Qatar and Iran intend to expand their exports. All this constitutes a potentially explosive cocktail of geo-strategic interests from various sides, namely from the US, West Europe and China.

All of them consume much more oil than they produce. China used to be a net exporter until 1993. But now it imports 40 per cent of its requirements in 20 years it will be 70 per cent. No wonder China is heavily engaging in energy diplomacy and trying to secure oil imports from around the world. In Africa it has vast investments in Sudan, Angola, and Nigeria while in Canada it has taken on tar sand projects in the north of the country. Recently it bought Petro-Kazakhstan for $4.2 billion and the first pipeline from Kazakhstan to China has been inaugurated.

Half of its imports though come from the Gulf, mainly Saudi Arabia. King Abdullah and the Chinese President Hu Jintao emphasised this increasingly important relationship during a series of mutual visits at the beginning of this year. China is building a multi-billion sea port in Gwadar, Pakistan that may serve as the starting point for a pipeline into its west, while Saudi Aramco invests in Chinese refinery capacity for sour crude and helps the country build up a strategic oil reserve.

So far two thirds of the Gulf's oil exports go to Asia, all of whose countries are as energy hungry as China. Only 3.4 per cent of the worldwide oil reserves are located in this huge land mass where half of the globe's population lives. But in the future there will be more soliciting from the US and West Europe. Germany, for example, gets a third of its oil from Russia and a third from the two North Sea producers, UK and Norway. So far, it only imports 10 per cent of its needs from the Gulf countries. But as the production in the North Sea is declining rapidly, it will have to turn to other exporters soon to meet its needs. Given their reserve dominance, most likely these exporters will be from the Gulf. The US's import dependence finally has grown from near self sufficiency until 1972 to 60 per cent now. One of the first things the Bush Administration did in 2001 was to establish an Energy Task Force which basically came up with two recommendations: Oil-drilling in natural reserve parks in Alaska and geo-strategic securing of foreign oil imports.

This unilateral securing of foreign energy sources went terribly wrong in Iraq, as we now know. The Iraqi quagmire is not only causing immeasurable human loss, it also prevents any meaningful recovery of the country's oil industry.

Oil production remains stubbornly below pre-war levels, which were already depressed and anti-Americanism in the region has reached new highs. The disastrous outcome has shown the limits of unilateralism and the necessity for cooperation with the producer countries and international dialogue on energy issues.

Resource conflicts can be avoided only if every side feels that it will get a fair share of the world's dwindling energy sources. Europe so far has been content to sail in the geo-political wake of the US but may consider a more neutral stance, while the nations in the southern hemisphere especially in the rapidly growing emerging markets have rising energy needs that they want to be seen addressed. Among them are the Gulf states themselves, which have high population growth and ambitious and energy intensive development plans.


(Eckart Woertz is Programme Manager Economics at Gulf Research Centre.)


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