Gulf Economy at Crossroads amid Middle East Unrest
    2011-12-26 01:46:17     Xinhua       Web Editor: Cui Chaoqun

After a year of unrest and turmoil in 2011, a new Middle East is on the way to be shaped. But the final result may not be seen in 2012, neither the year after. This decade will rather expose the region in a gigantic transition.

The Gulf economy, largely based on oil and gas reserves and also on the drive of diversification, has achieved a high GDP growth this year, but challenges remain ahead amid the risk of deteriorating global outlook and Middle East and North Africa ( MENA) unrest.

The turmoil is still ongoing after four Arab heads of states, in Tunisia, Egypt, Libya and Yemen, were toppled by rallying masses. Syria faces ongoing riots, while Egypt and Bahrain are rocked by demonstrations with death victims. Even Saudi-Arabia, Arab world's largest economy, saw sporadic demonstrations early this year.

"Intra-Arab trade was hit by the turmoil, and this certainly also affected the Gulf Arab states, albeit by a lower degree than the North African countries," said Masood Ahmed, the International Monetary Fund (IMF) Director for the Middle East and Central Asia.

As energy demand from crisis-ridden Europe and the United States weakens, "revenues for the Gulf Arab region might decline next year," Ahmed said.

The tensions between Iran and the Western powers, which blame Tehran of secretly building nuclear weapons under the disguise of its nuclear energy program, is also likely to bring the Arab Gulf states to a tricky 2012.

A BIPOLAR STATUS QUO

The dichotomy in the Arab world is more obvious than ever. While Arab oil and gas exporters like Algeria, Saudi Arabia, the United Arab Emirates (UAE) and Kuwait are projected to achieve real GDP growth rates of above 3 percent, Arab oil importers like Syria and Egypt are more likely to stagnate, according to IMF.

The six oil-rich Gulf Arab states, Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman, have been forming the Gulf Cooperation Council (GCC) since 1981. According to the IMF, the GCC countries will achieve the highest real GDP growth rates in 2012, and will only be outperformed by Iraq with an expected real GDP growth of 12.6 percent.

The UAE, and its business hub Dubai in particular, have benefited from the turmoil, a phenomenon which already occurred in the 1980s during the Iran-Iraq war and during the second Iraq war in 2003.

The UAE's political stability and Dubai's connectivity to the world, thanks to its international airport and free trade maritime port, both the largest in the region, have always been a safe harbor for global companies operating in MENA, especially during times of Middle Eastern wars and unrest.

Dubai has attracted new banks from Switzerland, India and New Zealand this year, and even a number of Bahrain-based lenders such as France's lender Credit Agricole, the sixth largest bank worldwide, shifted their Gulf offices from Bahrain's capital Manama to the onshore hub Dubai International Financial Centre ( DIFC). Bahrain was hit the hardest in the Gulf Arab region.

At the same time, Dubai's state-owned carrier Emirates Airline ordered 50 Boeing 777 long-haul planes, worth 18 billion U.S. dollars. This was the single largest commercial airplane order in Boeing's history by dollar value.

As Western tourists hesitate to spend their holidays in Egypt due to security concerns, Dubai benefits from its safe-haven status. The Dubai International Airport for the first time hosted over 50 million passengers this year. A number of luxury hotels opened in 2011, among them the Jumeira Zabeel Saray on the man- made island Palm Jumeira. In 2012, the first Waldorf Astoria hotel in the sheikhdom is also set to open on the palm island.

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