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UAE and three Gulf countries to spend $150b on infrastructure

(MENAFN - Khaleej Times) DUBAI The UAE, Kuwait, Qatar and Bahrain, the world's largest consumers of capital per capita due to the ongoing construction boom, are expected to spend another $150 billion on infrastructure over the next three years, according to Merrill Lynch.

In its recent Global Research Highlights, Merrill Lynch said infrastructure spending in emerging markets could exceed $1 trillion in the next three years as investment banks boost their activity in the sector.

The new estimate, up from its previous estimate of $705 billion, was based on higher spending forecasts for China and the emergence of new sources of spending in Russia and in the Middle East, particularly the GCC countries, Merrill Lynch said.

"Vast domestic savings in the developing world are finally being mobilised for investment in infrastructure projects to enhance growth potential. "Infrastructure and consumer spending represent the best secular investment themes in the emerging markets, in our judgment," the report said.

The key drivers of infrastructure are underinvestment in infrastructure projects in the past and the pressing need to improve quality; the need to ease bottlenecks that could retard or reverse the substantial progress towards lowering inflation that the emerging markets have made in recent years, sharp increases in the population of urban centres through the developing world, and improved sources of funding related substantial improvement in budget balances, current account surpluses, oil revenues, economic growth and foreign exchange reserves.

An IMF forecast said the combined current account surplus of the GCC countries, which accounted for 25.3 per cent of their gross domestic product in 2005, is poised to surge to 28.8 per cent with the oil prices hovering around $65 per barrel this year.

The report said infrastructure spending has the potential to boost earnings in a number of sectors, including telecom, power and energy, transportation, natural resources, water, sanitation and environmental services, and engineering and construction.

China is forecast to become the biggest spender, making up just over a third of the total, followed by Russia, the Gulf states and India.

The increased estimate comes as investment banks put more resources into the sector.



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