UAE and three Gulf countries to spend $150b on infrastructure
- 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
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
The increased estimate comes as investment banks put more
resources into the sector.