Middle East boom to bust?

[einreb]

Is it a 'new paradigm' for the middle east? All that construction... nowhere to go but up, right?

[legion]

Most of the middle east is built from a small number of people profiting from one thing being exported. They have very little infrastructure and the sand will reclaim much of what has been built when the wells dry up.

[einreb]

Originally Posted by legion

Most of the middle east is built from a small number of people profiting from one thing being exported. They have very little infrastructure and the sand will reclaim much of what has been built when the wells dry up.

We used to be a country that manufactured and exported. We aren't any more.

They are attempting to do the same thing, only they are doing it while being heavily financed by oil revenue. We did it because the Japanese, Chinese, etc kicked our asses.

[einreb]

EPIC LOLZ...

LINK


Credit crunch catches up with oil-rich Persian Gulf states


Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones) -- Cracks appeared Thursday in the economies of the oil-rich Persian Gulf states where banks are finally reining in lending in the wake of the biggest crisis to hit Wall Street since the Great Depression.

Cushioned by record oil earnings Saudi Arabia, the United Arab Emirates and four other Arab sheikdoms have so far been impervious to the global credit crunch that claimed this week Lehman Brothers Holdings Inc. (LEH) and American International Group Inc. (AIG) as its latest victims.

"Liquidity in this region is not available as it used to be months earlier," Deutsche Bank AG Mideast chief Henry Azzam said in a phone interview with Zawya Dow Jones. "We are seeing a very tight credit market. When there is a crisis, companies delay plans to IPO and freeze their bond programs."

In the U.A.E., the world's fifth largest oil producer, international banks stopped lending this week to other financial companies, tantamount to a credit crisis, said Ajay Sehgal deputy group treasurer at Emirates NBD PJSC the oil-rich region is teetering on the brink of its own liquidity crisis that could threaten economic growth and unravel $2.3 trillion worth of spending on infrastructure and real estate.

"There's a systemic breakage in the money markets right now," said Sehgal, adding that foreign banks are not lending and all players are looking at covering their own positions.

Bond prices in the Middle East have plummeted over the past week as investors fear that a squeeze on liquidity in the region spells the end of the oil boom. Even government-owned companies are feeling the pain.

Yields on a $270 million Islamic note issued by Nakheel L.L.C., the real estate developer that's partnering Donald Trump to develop property in Dubai, have shot up more than 50% this week, according to Zawya.com data.

"The price of credit has been going up in the U.A.E. but with the collapse of Lehman Brothers, Merrill Lynch and American Investment Group, this has added fuel to the fire," said Nazem Al Kudsi, chief executive of the Abu Dhabi Investment Co, or Adic, an investment company owned by Abu Dhabi's rulers.
Property Bubble

Starved of finance, real estate, which has underpinned growth in the region's boom towns like Dubai, could be the first industry to suffer."It's fair to say that the ongoing crisis will influence the climate across real estate markets throughout the world," Aldar Properties Co.'s chief executive Ronald Barrott told Zawya Dow Jones by telephone from Italy. "It's likely to impact margins and conditions for lending and banks will be more cautious about who they lend to."

Property shares in the U.A.E. have fallen sharply as fears of an economic slowdown hit the region, and a growing number of police probes in real estate companies. In Abu Dhabi, Aldar Properties shares have slumped nearly 40% since the beginning of August, while Sorouh Real Estate, the region's largest developer by market value, have fallen almost 30%.

Aldar is developing about $70 billion worth of projects, including the $40 billion Yas Island project off Abu Dhabi's coast and the $18 billion Al Raha Beach project, two of the largest real estate ventures in the Middle East.

"Markets in this region are amongst the most robust and will remain interesting for those people who still want to invest," Barrott said. "Our market is more insulated from the slowdown than others."

But it's unlikely that property speculators will be able to continue driving up real estate prices if access to bank finance dries up.

Just as speculators flipped condominiums in Miami and Las Vegas in the run up to the U.S. crisis, foreign and local investors have pumped billions into properties in Dubai, Abu Dhabi, and Qatar.