Design and construction supervision of BIW works assigned to Hyder - Bahrain Times of Oman - 01/12/2006

MUSCAT - Bahrain Investment Wharf (BIW), under development by Bahrain-based Tameer, has assigned the detail design and construction-supervision services of the primary infrastructure facilities contract to Hyder Consulting Middle East Limited, says a press release from Manama.

The contract was signed by BIW vice-chairman and managing director Laith Al Memar and the area director for Northern Gulf Alan Lord of Hyder Consulting Middle East Limited, in the presence of Muhannad Al Durrah, CEO of BIW; Yazan Haddad, BIW's project director; Mohammed Khalil, projects manager of Tameer; Zahir Al Ugaily, Bahrain area manager and Michael Wing, regional business development director of Hyder Consulting Middle East Limited. Hyder Consulting will be responsible for the detail design and construction-supervision of the primary infrastructure facilities within the BIW development such as roads, water and electrical distribution networks, storm

and sewer drainage systems, district cooling system, telecommunications, street lighting, landscaping and other utilities.

Bahrain Investment Wharf is planned to house an industrial park for medium and light industries, a logistics park for storage and logistics purposes, in addition to residential, commercial and business communities.

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Powering a new beginning

Financial Times

Less than a decade ago, Arab Gulf states were beset by financial troubles, as governments grappled with budget deficits and rising public debt, and fretted about falling per capita income and rising youth unemployment.

But times have changed and dramatically so. Thanks to the rise in oil prices, the region has emerged from the shadows to shake off its financial worries and ride a wave of unprecedented financial liquidity.

True, the Middle East is still plagued by wars and political crises. But despite the US invasion of Iraq in 2003, a wave of terrorist attacks in Saudi Arabia, and tensions over Iran's nuclear programme, the Gulf is experiencing an economic and financial boom that is delivering double-digit economic growth rates and large fiscal and external account surpluses.

The most visible signs may be in the frenzied rise of Dubai as a leading regional financial centre. But new cities are emerging in Abu Dhabi, Qatar and Saudi Arabia as construction projects across the region reach beyond the $1,000bn mark.

Conventional bank profits soared last year. The rush to capture the liquidity has also fuelled explosive growth in Islamic finance, tapping into funds only willing to invest according to Sharia, or Islamic law, which bans dealing in interest.

"The vast pools of liquidity are allowing investments to be made within Gulf countries," says John Weguelin, chief executive of the European Islamic Investment Bank, a new UK-based institution helping companies tap into Gulf liquidity.

"There's been a lot of innovation and an increase in demand for alternative forms of asset classes, as people look to diversify away from local real-estate and equity markets."

The boom has accelerated the development of a financial services industry and introduced sophisticated instruments. With much of the liquidity staying within the Middle East, a rash of new private equity and investment firms have been set up.

The economic expansion has lured international financial institutions, with investment banks flocking to Dubai to establish regional offices.

Bankers speak of a "war for talent" as expanding regional firms and international banks compete for a limited supply of Arab finance professionals.

Investment banking

"This is a region that's come of age in its requirements for global investment banking services," says May Nasrallah, managing director and head of investment banking for the Middle East and North Africa at Morgan Stanley in Dubai.

"Companies and institutions have substantial financial and strategic aspirations and are looking within the region, as well as internationally, for investment opportunities and consolidation prospects."

According to the Institute for International Finance, the size of the economy of the Gulf Cooperation Council which groups Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman has grown by 74 per cent over the last three years, making it the world's 17th largest.

Per capita income, the IIF estimates, surged to more than $17,000 in 2005, from less than $11,000 three years earlier. Qatar, with a per capita income of over $50,000, now ranks as the fourth highest in the world.

Soaring oil revenues have boosted the GCC's aggregate current account surplus, which should average around 30 per cent of GDP this year and next, raising foreign assets by nearly $450 billion over the same period.

The financial liquidity has spurred a new wave of petrodollar recycling, sending government investment arms on an aggressive global acquisitions spree.

In the oil booms of the 1970s and 1980s, Kuwait led the pack in global investments. But now the UAE, and to a lesser extent Qatar, are competing with international companies for acquisitions.

"Everyone is beginning to take notice that there's a lot of money in the region and that there are sophisticated investors here," says Sameer Al Ansari, head of Dubai International Capital, one of the new investment arms set up by the government.

Analysts say that since the attacks of September 11, 2001, Arab money has been more cautious about US investments.

The trend has been accentuated by the quest for greater diversification, and by this year's controversy over Dubai ports operator DP World's purchase of the UK's P&O. The deal provoked a political storm in Washington and forced the Dubai company to divest P&O's US port facilities.

Europe appears to be a main beneficiary of the globalisation of Gulf money, with a string of transactions announced this year. Government investment arms, however, are also increasingly looking for acquisitions in China and India.

The region's financial boom, however, has not been without excesses. And, given the dependence on hydrocarbons in Gulf economies, there are still doubts about whether current trends can produce lasting economic transformation.

Too much liquidity chasing too few investment opportunities led to an extraordinary surge in stock markets in 2004 and 2005 as small retail investors rushed to buy into initial public offerings. But a wave of selling earlier this year provoked a bruising crash, driving prices down by as much as 60 per cent.

The speculation that has also driven real estate prices to new highs is creating fears of a similar correction, a downturn that could have a bigger impact on a banking sector that has been active in financing the real- estate boom.

Moreover, newfound confidence and unbridled ambition is leading at times to a duplication of projects, with virtually every Gulf state, for example, planning its own financial centre. Some analysts say there will be room for everyone, but others are more sceptical.

Market

"It's a catch 22: to have a market you need to have issues but issuers want to see depth in the market first," says Eyad Duwaji, chief executive officer of Dubai-based Shuaa Capital, an investment bank.

The liquidity flows have been so rapid that they have challenged the physical and financial infrastructure of the region. Companies complain of shortages in talent, materials, and long-term project finance.

Stock markets are not sufficiently open to foreign investors the largest, in Saudi Arabia, remains closed and this has deterred institutional buyers which could provide more stability through less speculative investment.

On the private equity side, raising money is far easier than executing deals, as many companies are still reluctant to sell shares to the public.

In the UAE, for example, the ministry of commerce determines the value of companies going public and dictates that they sell off a majority stake.

Still, economists and bankers find comfort that government spending has been more prudent than in the past and that it has largely targeted more productive sectors. They estimate that this will create a more diversified economic base.

Mukhtar Hussain, a senior HSBC official who until recently co-headed corporate and investment banking for the Middle East and North Africa, says three factors make the Gulf's economic transformation sustainable.

First, oil prices are unlikely to fall below the $40 per barrel mark over the next three to five years. Second, the liquidity flows have been largely towards the productive sector, with infrastructure, oil industry and industrial investments taking priority.

Finally, he says, the private sector is now more viable and active, unlike the 1970s where all economic growth was largely government-led.

In Saudi Arabia, where tales of waste during previous oil-fuelled surges in liquidity are legendary, Samba, a leading Saudi bank, says management of the economy this time has been cautious and has not derailed economic liberalisation, including World Trade Organisation accession.

In Qatar, meanwhile, the government is hoping that oil and gas will contribute less than 50 per cent of the state budget requirements over the next decade, down from near 70 per cent today, says Philip Thorpe, head of Qatar's Financial Centre Regulatory Authority.

Finance specialists in the region say that while much remains to be done, the progress of recent years should not be underestimated.

"Finance in the Gulf is still at an embryonic stage but it has gone a long way in the last five years," says Ali Shihabi, head of Rasmala Investments, a Dubai-based investment bank.

There will be corrections when oil prices drop, and some smaller financial firms may not survive.

"But you have a lot of exciting opportunities now, and it's long overdue," says Shihabi. "The region needs a more diverse, creative financial services sector."