I do not begrudge the Gulf States getting rich because we are so foolish to believe in economic models that do not include energy independence.
I do wonder why we give away military protection for nothing, and cannot get Arab states to police other Arab states.
I do get angry when I see the squalid streets of Afghanistan and the perpetual open sewer of Palestine and listen to the reasoning that it is always an American responsibility. It isn't and it never was.
___________________Gulf states’ foreign assets to top $2,000bn
By Simeon Kerr in Abu Dhabi Financial Times
January 16 2008
The net foreign assets of Gulf Arab states are set to rise to more than $2,000bn by the end of this year on rocketing oil prices, according to new research. The Institute of International Finance said the region’s public and private overseas wealth stood at $1,800bn (€1,211bn, £916bn) at the end of 2007.
“High oil prices are enabling the GCC [Gulf Co-operation Council] governments to place a growing volume of resources into reserve and wealth management funds, which will play increased roles in international financial markets,” said Charles Dallara, managing director of the IIF, a Washington-based association representing global financial institutions.
Sustained high oil prices will generate more capital spending and foreign investment as the GCC’s combined current account surplus should exceed $250bn in 2008, up from $215bn in 2007. Most of the foreign assets are controlled by sovereign wealth funds. The IIF said a slowdown in the US economy could cause a knock-on effect on global oil demand, causing prices to soften and a drop in GCC government revenues. However, the IIF believes that ongoing infrastructure investment among the six-member grouping should provide enough economic momentum for nominal growth to continue at 8 to 10 per cent in 2009.
But the report warned of serious inflationary pressures. Inflation in the GCC reached a 15-year high of 5.3 per cent in 2006, likely rising to 6.7 per cent in 2007, according to official figures that may understate price pressures.
While supply-side bottlenecks amid rampant population growth were driving up inflation, the report said: “The situation is being aggravated by policy shortcomings.” With five members of the GCC fixing their currencies to the US dollar, the region has few monetary options to stem liquidity growth as central banks are forced to track lower interest rates while the region booms.
The GCC’s nominal gross domestic product of $900bn in 2008 is more than double the amount registered in 2003. The region’s external debt is estimated to have reached $226bn in 2007, a three-fold rise on 2003, but at 28 per cent of GDP, the IIF described the aggregate ratio of debt as benign.
Hydrocarbons continue to form the bulk of the GCC’s wealth, accounting for 77 per cent of 2007 export earnings, up from 73 per cent in 2002. Oil export receipts reached $381bn in 2007, 8 per cent higher than in 2006, while natural gas revenues rose 18 per cent in 2007 to $26bn, driven by gas-rich Qatar.
But the private sector was playing an increasingly important role in the region’s latest petrodollar surge with the GCC’s non-oil sector growing this year at 14 per cent in nominal terms, the report said. Public expenditure had fallen from an average of 34 per cent in 2002 to 29 per cent in 2007.
While non-oil growth was providing job opportunities, most of these positions were taken by expatriate workers.
Copyright The Financial Times Limited 2008