The terror attacks in the United States have taken their toll on the drive by Gulf Arab monarchies to attract foreign investment, seen as crucial to diversify their oil-dependent economies, experts and businessmen say.
In the 18 months prior to the September 11 attacks, Saudi Arabia attracted a total of nine billion dollars in investment, 16 percent of which came from abroad, said Prince Abdullah Bin Faisal Bin Turki Al-Saud, chairman of the kingdom's General Investment Authority (SAGIA).
SAGIA, a body tasked with facilitating investments, "has continued to register new projects" since the attacks "but not a single investor came from abroad," he added on the sidelines of a business conference.
The suicide hijackings came at a bad time for the Gulf Cooperation Council (GCC) states of Saudi Arabia, Kuwait, the United Arab Emirates (UAE), Qatar, Bahrain and Oman.
They need massive cash flow to develop their infrastructures in line with high population growth. The financial requirements of their power projects alone for the next 10 years stand at around $45 billion.
Experts forecast that the GCC will be able to attract at least a part of the $800 billion their citizens have invested elsewhere because of the uneasy situation Arabs and money funds now face in the West. But there is little chance this will happen soon, because of the limited investment opportunities immediately available in the Gulf.
The GCC's stock markets weigh all in all $136 billion, which is less than half the capitalization of Taiwan's. As for the bond market, it is almost non-existent.
Among the current hurdles to investments in the Gulf markets is the limited availability of "good quality financial information" and "the small number of companies to choose from", said Azhar Zafar, corporate finance director at Arthur Andersen in the Middle East.
"We have noticed Gulf money leaving the United States, but it heads primarily to banks in Switzerland," not back home, said a western banker at the conference, asking not to be named.
He said the deposits' main feature is that they were "short term, as if prepared to move again to places were they can get better rewards" than the two percent interest offered for the greenback in Swiss banks. "Even if money does come back, it will go elsewhere again if it doesn't find a home" in the Gulf, said Hong Kong-based investment advisor Marc Faber.
Local businessmen also point out that the issue is not only the money but the technology and the transfer of technology that come with foreign investment. "We seek to build a base for an industry that does not depend on oil and promote the development of the population. So it is not only a matter of money and business, it's a matter of technology and expertise," said Rashad Al-Moosa, managing director of the Dubai-based Gulf Drug Establishment.
He thinks that another effect of direct foreign investment would be to "promote cultural understanding" between the Gulf Arabs and the West at this time of a crisis of confidence, due largely to the fact that the number one suspect in the attacks, Osama Bin Laden, hails from Saudi Arabia.
"If businessmen come from the West and interact with us, it will help eliminate many pre-conceived ideas about us. They will see that we lead a normal life, that we go to work, and take our children to school, just like the rest of the world," Moosa said. ― (AFP, Dubai)
by Maher Chmaytelli
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
