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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Gulf economy booming


A kite flies over construction sites of Jumeira Beach Towers in Dubai, United Arab Emirates on Thursday. 
 (Associated Press / The Spokesman-Review)
Jim Krane Associated Press

DUBAI, United Arab Emirates – In the United States, the Sept. 11, 2001, attacks are seen as the catalyst for a period of fear, war and economic worry.

But in the oil-rich Arab countries of the Persian Gulf, Sept. 11 is increasingly viewed as the event that kicked off a galloping economic boom, when Arabs divested from America and reinvested at home.

Arab investors pulled tens of billions of dollars out of the United States. They were angered by perceived American hostility toward Arabs. They worried their assets would be frozen by U.S. counter-terror measures. And U.S. markets happened to be plummeting while economies in the Gulf were on the upswing, buoyed by rising oil prices.

The results have been spectacular.

Since late 2001, economies in the six Gulf Cooperation Council countries – Bahrain, United Arab Emirates, Kuwait, Oman, Qatar and Saudi Arabia – have soared, with stock markets up a collective 400 percent. Over the same period, the Standard & Poor’s 500 rose 24 percent.

Most of the credit for the wealth influx here is due to the near-tripling of oil prices since 2001 to current levels of more than $67 a barrel.

“It’s just been an exceptional period, the likes of which the region hasn’t seen in 20 years,” said Simon Williams, a Middle East analyst with the Economist Intelligence Unit in London.

Gulf oil revenues are expected to reach almost $300 billion this year, up from just $61 billion in 1998.

In Saudi Arabia, gross domestic product rose 37 percent between 2001 and last year. In the Emirates, GDP jumped almost 50 percent.

By contrast, the U.S. economy rose 16 percent during the same period.

The boom is changing the face of Gulf states. Building cranes line the horizon in the Emirates, Qatar and Bahrain.

New highways are slicing across once empty desert, and hives of imported laborers are erecting hospitals, universities and entire districts of shimmering high-rise apartment towers – even artificial islands covered in luxury villas.

The changes are most visible in Dubai, which in the past four years has become one of the world’s fastest-growing cities.

Dubai has $20 billion in residential and commercial building projects either under way or announced, said Daniel Hanna, chief economist at Standard Chartered Bank in Dubai.

Walid Shihabie, head of research at Dubai-based Shuaa Capital, cited anger at U.S.-led wars and Middle East policy, and general hostility toward Arabs as a reason for the exodus.

“The Americans shot themselves in the foot by being so harsh,” said Beshr Bakheet, owner of Bakheet Financial Advisers in Riyadh. “Do you want to put your money in a country that is involved in wars all over the globe? Not only Saudis, but a lot of people aren’t comfortable with this.”

There are also more pragmatic reasons Arab investors fled America, Hanna said. Many lost money in the bursting of the dot-com bubble.

Others lost faith in U.S. regulators after accounting scandals at Enron, WorldCom and elsewhere, Hanna said.

“I lost about $200,000 in the U.S. market,” said Mohammed al-Ghussein, a Dubai-based private investor. “So I took it back to the Gulf and I made the money back.”