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Massive project spending planned in Gulf region.

Byline: Babu Das Augustine, Deputy Business Editor

Dubai: Infrastructure spending by Gulf countries is expected to reach $205 billion (Dh752 billion) by 2013, according to latest estimates by Standard Chartered Bank.

Although funding has emerged a big challenge in the context of the global credit crisis, economists expect Gulf governments to support most infrastructure projects and bond issues will emerge a major source of funding.

Saudi Arabia alone accounts for more than 50 per cent of regional infrastructure spending with $105 billion in investments planned in projects such as hospitals, roads, railways and airports.

"In the Gulf region infrastructure is almost exclusively government driven, and largely falls under the regional government's fiscal expansionary spending outlays. In Dubai, for example, the state budget has set aside close to 40 per cent for expansion and development of the transportation network," said David Barclay, a Commodity Strategist with Standard Chartered.

"These projects are likely to underpin regional demand for both base metals and steel," he said.

Annual GCC electricity demand is projected to grow by 10 per cent and desalination demand by 8 per cent until 2015.

The Gulf countries intend to spend close to $70 billion in the next four years to expand facilities and create new capacity. Project finance for many large-scale projects is expected to be tight due to the global credit crunch.

Analysts and bankers predict a slow recovery in the project finance market during the next two quarters.

With the activity on the bond issuance front picking up and very strong interest for bond offerings by state-affiliated Gulf entities bankers do not expect major hurdles for these projects on in the financing front.

Investors in the region are starting to show strong appreciate for bond issues. Earlier this year, the UAE's Dolphin Energy successfully refinanced a $1.25 billion bond issue, above initial guidance of a $750million tranche.

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Publication:Gulf News (United Arab Emirates)
Date:Sep 28, 2009
Words:326
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