While we wring our collective hands about how the infrastructure companies are going to lose all their business as crude drops from $100 to $75, and projects will be cancelled due to their rich customers actually giving a rat's behind if crude is $100 or $75 let's take a look at reality. I noticed a story in the NY Times this weekend on Saudi Arabia - so I'd like to overlay that with just a snapshot of what is going on in some of the other countries in this part of the world - the Kuwaits, the Oman's, the Abu Dhabi's, the Qatar's....
... because perhaps I think most of us still are very inward looking as Americans and do not realize what is truly going on in this globe. I keep returning to the theme of this transfer of wealth - each day we become more of a debtor nation and our wealth is being transferred out. Only to return to buy our assets from beneath us (and not just banks). If not with imports (to Asia) than with the "great tax" that is petrol. A "tax" on all of us, and our country as a whole. Instead of devoting resources to stop taxing ourselves, we just give lip service or misguided pushes into corn ethanol of all things. We just don't seem too worried about it, because it's a creeping problem - it's incremental, like erosion (or inflation). I would like to highlight we are in a global economic 'competition', but there seems to be very little awareness of this from 'leadership'. Thankfully, we have some of the most financially innovative institutions to lead us through this.... errr, wait. Never mind that. But that's neither here nor there as an investor; I'll let others argue about the implications - I have my views, but I am just trying to make money off the trends. But I do have to say, it is interesting to see an over reaching national vision proposed by many of these "3rd world" countries 'leadership' - something we used to do here... but I guess you need money to do any large scale projects; along with a government that can actually pass something useful and not only in self interest.
Now as with all good booms (as we see in Asia and the Middle East) there is no clean situation - there will be intermittent booms and mini-busts, but I am speaking to the greater long term trend here. Specific to the Middle East, it appears this go around, as opposed to the 70s, the countries realize that their oil reserves are not unlimited and this time they are reinvesting the monies in ways that can leverage today's riches into future rewards. Maybe they'll succeed, maybe they won't, but they seem intent on trying.
I'd recommend clicking the link I posted to the January story and taking a view of some of the pictures as well - it really pays to educate yourself so when the talking heads talk about the end of this or that boom because the dollar rallies 2% you can feel the confidence to simply chuckle at them, instead of making the mistake of actually listening to their old world view. We are selling off America piece by piece to sustain our addiction.
- The Chrysler building, an Art Deco icon of the New York City skyline, has sold to a fund controlled by Abu Dhabi for $800m. The Abu Dhabi Investment Council, a sovereign wealth fund controlled by the oil-rich sheikdom paid $800m for the 77-story building, Bloomberg reported.
- Middle Eastern investors have spent $1.8bn this year on commercial real estate in the US, more than other international buyers
While inflation is a serious threat in these countries right now, I guess with a starting salary of $180K USD, they will be able to handle it a lot better than our middle class. Take a look below at where your gas money is going... people are living the high life off our lack of addressing our overuse of everything. The amount of money is staggering as I outlined in [Feb 27: $2 Trillion of Petrodollars Needs a Home this Year]
8 comments:
" I think most of us still are very inward looking as Americans and do not realize what is truly going on in this globe"
This is so true.. It really bothers me to see CNN run headlines such as "America's Gas Price Problem"... We have it easy compared to many other countries...
And I really miss a great monthly magazine called "World News Review" ( Now defunct) ... It would pick a topic of the month and then translate and print articles from around the world regarding the material .. **And** annotate the source with their political and government affiliations so you could read it with an eye to it's point of view..
Anyway... A great point..We are too insular!
Thx jegan
World News? No chance in the US.
If it doesn't happen here, it does not happen! :) These 300M are the blessed and we must only focus on their light and prowess.
Other than some of the national rags I try to read UK papers online. Always fun to see how different they view things, although I could use less tales of Prince Harry's nightclub incidents. I'd like to read some other countries papers, but I struggle enough just trying to read English ;) And I need to sleep every so often.
We get what we deserve. We elect moron presidents who do nothing to advance an effective energy policy. The USD is worth crap and we continue to borrow and borrow and borrow (largest debtor nation in the world). It sucks. I can't wait until we elect a leader who can actually lead.
GCC to invest $4.2tr locally
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13 July 2008
DUBAI -- GCC countries are set to collectively deploy $4.2 trillion within their own borders over the next 14 years as their focus increasingly shifts from overseas to domestic investments, a report said.
Signalling a strategic shift in GCC's global investment pattern, the new trend suggests that a growing share of the enormous oil wealth will be invested in local financial markets to spur regional development. The latest research from the McKinsey Global Institute (MGI) said the six GCC countries, emerging as global financial powerhouses, will nevertheless continue to invest trillions of dollars beyond their borders as they pass through a period of unprecedented economic boom spurred by skyrocketing oil prices.
'But the funds that flow into global markets will be invested differently in the future than in the past.'
'If the GCC states continue to increase their domestic investments by the rate prevailing since 1993 -- 6.1 per cent annually -- by 2020, their cumulative domestic investment will reach $3.2 trillion, or $230 billion a year. However, if the domestic-investment rate for the GCC rise to 28 per cent of the GDP in line with what other fast-growing economies have sustained over a 15-year period, the region's oil exporting countries would collectively deploy $4.2 trillion within their borders over the next 14 years -- a 7.4 per cent annual increase,' said the MGI research.
Since 1993, GCC investment rates have averaged 20 per cent of the GDP, on par with European and US levels but almost one-quarter lower than the 24 per cent average investment rate of Brazil, China, India, and Russia combined. Private investors in the region currently hold an estimated 25 per cent of their portfolios in local financial products, up from 15 per cent in 2002.
But oil revenues, which are not invested locally, will spill over into global capital markets, the research said. 'If oil lingers at above $100 a barrel and domestic investment stays at historic levels, the GCC would send $5.1 trillion in new funds into world markets over the next 14 years, boosting these countries' total foreign wealth to $10.5 trillion by 2020.'
According to Dubai-based investment analysts, the increasing trend towards local investments and a new GCC foreign investment strategy are bound to affect interest rates, liquidity and financial markets around the world.
MGI research estimates that exports of crude oil will earn these states $5 trillion to $9 trillion from 2007 to 2020 and that they will invest 30 to 60 per cent of their oil windfall abroad.
'Oil prices will determine the volume of wealth the GCC states will have available to invest. At current prices, floating above $100 a barrel, they would earn more than $9 trillion in 12 years.'
By Issac John (Deputy Business Editor)
© Khaleej Times 2008
It sucks. I can't wait until we elect a leader who can actually lead.
Well considering who the choices are this time around we won't have the chance of electing a leader who can lead until 2012.
Where are the Dubais getting the steel to build out all that infrastructure?
Judging from the chart, US Steel (X). ;)
Mittal (MT) is also about 10% of all world steel now, large Indian powerhouse.
Some more news about the booming Middle East economy :)
Surge in capital inflow, oil boosts fiscal surplus
By
Nadim Kawach on Monday, July 14, 2008
A surge in private capital inflow allied with higher exports of oil and other products boosted the UAE's external fiscal surplus by nearly eight times in 2007 to its highest level since the country was created 37 years ago, figures showed yesterday.
The surplus in the balance of payment (BoP), the difference between the country's internal and external financial and commercial transactions, rocketed to more than Dh183 billion last year despite an increase in imports and the outflow of public sector funds, showed the figures by the Central Bank.
From around Dh23.8bn in 2006, the BoP's surplus swelled to an all time high of Dh183.2bn in 2007, an increase of nearly eight times over the 2006 surplus and more than 19 times the 2005 surplus of around Dh9.bn.
The Central Bank's latest quarterly bulletin for October-December, released yesterday, showed the net balance of the BoP's financial account rose to Dh41.5bn in 2007 compared with a deficit of Dh58.99bn in 2006. "This was mainly due to the sharp increase in private sector's inflows, which leaped from Dh87.59bn in 2006 to Dh217.32bn in 2007, an increase of around 148.1 per cent, despite the large rise in the public sector's outflows from about Dh146.58bn in 2006 to Dh175.80bn in 2007," it said.
"The final position of the balance of payments in 2007 shows a surplus of as high as Dh183.24bn, against a surplus of Dh23.89bn in 2006."
The report gave no reason for the sharp growth in private capital inflow but experts attributed it to the fact that many companies have repatriated part of their overseas investments following global market turmoil and an upsurge in local projects. The upsurge was reflected in a large increase in the country's imports, which leaped by more than Dh100bn to a record Dh486.5bn in 2007 from Dh367.4bn in 2006.
But the increase was offset by a similar growth in exports and re-exports, which jumped to around Dh664.3 bn last year from Dh534.6bn in 2006. The surge was a result of a sharp rise in oil exports to Dh261.4bn from Dh213.3bn because of a rise in average oil prices by around $10 a barrel.
Gas exports also grew to Dh28.5bn from Dh26bn, while free zone exports climbed to a record Dh83.6bn from Dh75.2bn. Other exports leaped to nearly Dh42bn from Dh29.2bn in the same period, according to the Central Bank. The report showed investment income, another key BoP component, rose to Dh21.5bn from Dh17.4bn, while capital outflow by foreign oil companies operating in the UAE increased to Dh26.5bn from Dh20.8bn in the same period.
Another factor negatively affecting the BoP is the expatriate workers' transfers, which peaked at Dh31.9bn in 2007 compared with Dh28bn in 2006.
While there was an increase in foreign direct investment inflow to Dh52.1bn from Dh47bn, there was also a bigger increase in FDI outflow to Dh53.5bn from Dh40bn. Portfolio investments edged up to Dh5.3bn from Dh4.4bn.
The report put the current account surplus at Dh135.9bn last year compared with around Dh132.3bn in 2006.
Bankers said the swelling BoP surplus allowed the UAE to consolidate its assets abroad and support its ongoing drive to diversify sources of income. "These surpluses mean the UAE's overseas assets will continue to grow, especially those controlled by the Abu Dhabi Investment Authority," a bank source said.
The numbers
Dh183bn: Was the surplus in the balance of payment last year despite an increase in imports and the outflow of public sector funds
Dh28.5bn: From Dh26bn was the rise in gas exports
Dh261bn: From Dh213.3bn was the sharp surge in oil exports because of a rise in average oil prices by $10 a barrel
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