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Infrastructure Development Opportunities Emerge from the Downturn in the Gulf

Amidst the celebratory fireworks at the launch of Dubai’s 1,500 room Hotel Atlantis in November, there were less than celebratory murmurings about the state of the countries economy, which has been booming for the past 10 years, but faced a withdrawal of liquidity from the financial markets as property prices plunged in recent months.

And Dubai is not alone in facing the crisis as local stock markets throughout the Emirates have collapsed. As a result of the downturn, Sovereign Wealth Funds in the Gulf are switching there focus from investments in the west in order to help the struggling economies in the Middle East and to protect them from portfolio losses in London and New York. Investment funds in Dubai and Abu Dhabi in the UAE, (along with Kuwait and Qatar), who have lost billions in shares held in western companies, have revised their investment strategy to shore up Gulf based banks and local shares to boost confidence.

As the smoke cleared following the Atlantis celebrations, some good news appeared for infrastructure related companies in the region as new programs targeting major developments were disclosed. This could be very encouraging for the equity funds awaiting feasible infrastructure projects to invest in if Public Private Partnership (PPP) structures are to be considered for many of the new developments.
According to a respected placement agent, it is estimated that $21.5 billion has been raised for investment in infrastructure development projects in the first nine months of 2008, and $94 billion of infrastructure funds are targeted in the next 12 months.

The appetite for infrastructure is certainly there, but is the debt funding going to be made available? Watch this space.