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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.

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