Qatar looks to $70bn in project finance
The Middle East has emerged as the world’s biggest project
finance market. Qatar alone will spend $130bn across various
sectors over the coming six or seven years, Minister of Finance
H E Yousuf Hussain Kamal said while delivering the keynote
address at the opening day of Meed Middle East project finance
conference opened at Ritz-Carlton yesterday.
Quoting latest data he said:”In January this year, Meed put the
value of projects across the GCC at over $1 trillion, dominated
by the construction, oil and gas and petrochemicals industries.
The size of debt market in the region has almost trebled in the
last year. One international bank estimates that the Mena region
alone accounted for an estimated $91bn in debt finance-$68bn of
which came from bank lending”, the minister said.
In global context, during the first half of 2006, the region had
accounted for $33bn in project finance — outstripping the total
raised over the whole of 2005-indicating the region’s share of
the global total soaring from one quarter to one third of funds
raised, he added.
“In Qatar, the $130bn we plan to spend across various sectors
over the coming six or seven years will be reliant to a
significant extent on the project finance industry.
Approximately $70bn will be project financed, with roughly $55bn
coming through syndications and $15bn raised in bonds”, he said
However, despite the bountiful opportunities that exist in Qatar and
the Gulf, the project fiancé industry faces new and exciting
challenges. The most obvious of these is the competition from the
international banks that has driven down the cost of funding.
Yousuf Hussain added:” Qatar has created a most favourable
environment in the world for the financial institutions. It has a
financial centre tailored to the needs of the financial community
including setting up of a regulatory authority and a court system
with the independence and transparency to give the institutions
confidence, a favourable tax environment, an infrastructure designed
to make your working life easier and more efficient, a programme of
down streaming and diversification opening many new opportunities
and the encouragement of a whole range of financial instruments”.
Delivering the key note address on ‘The role of the insurance market
in supporting global projects, Lord Levene, Chairman of Lloyd’s,
said “risk exposures in today’s business environment are growing”.
However, in this post-Enron, post 9/11 world with global warming the
stakes have never been higher.
“There can be few places in the world experiencing faster growth of
project finance than the Middle East. The region’s GDP is estimated
to exceed $700bn this year. I saw a statistics from last year which
said there were 1,400 projects underway in the second quarter, with
a value of more than trillion dollar. These exposures clearly need
large-scale risk transfer solutions”, he said.
However, the good news is that the appetite within the global
insurance and reinsurance markets currently looks strong, for at
least three reasons. To begin with, the market’s capital base is
growing. Secondly, there is growing trend towards diversification
amongst insurers and reinsures since the 2005 hurricanes. Finally,
there is increasing creativity in the sector as insures start to
work with the wider financial markets, he said.