Gulfnews: Construction 'has reached limit'
Gulfnews: Construction 'has reached limit': "Construction 'has reached limit'
Reuters
Abu Dhabi: Gulf Arab states must pour more of their record oil revenues into export industries rather than giant construction projects, a senior World Bank official said.
Governments in the region are ploughing money into giant infrastructure projects to help wean their economies off oil exports. More than $1 trillion worth of projects are in the pipeline. 'There is enough construction...,' Hossein Razavi, director of the World Bank's private sector finance and infrastructure department in the Middle East and North Africa, told Reuters in an interview.
'(Gulf states should) develop export-oriented industries because that is the source of long-term sustainable growth for the region and I think that is the one area that should have the highest priority,' he said on the sidelines of a conference in Abu Dhabi.
Razavi said the vast building projects, from roads and ports to tourist resorts, were feeding domestic demand and driving up inflation.
'A lot of current growth is actually growth based on consumption. The money is injected into the economy and is spent on importing goods. What the money should be invested is developing the capacity to produce which is not an easy thing,' he said.
Last week the UAE economy minister blamed a spike in inflation, estimated at around 6 per cent in 2005, on soaring construction costs, driven by regional demand for everything from cement to labour.
Governments across the region are footing the bill for most of the projects, either directly or through state-owned companies and investment arms.
Razavi called for more fiscal discipline.
'I think a much stricter fiscal policy (will mean) limiting expenditure to the absorptive capacity of the country, limiting expenditure to creating a business environment that does not lead to inflation,' he said.
Razavi said governments could finance infrastructure by tapping capital markets and developing partnerships with the private sector.
'Any other investment that depends on utilising oil revenue is not a sustainable investment. But when you bring the private sector to making investments, that is essential and it is what we are hoping the governments in this region do.'
"
Reuters
Abu Dhabi: Gulf Arab states must pour more of their record oil revenues into export industries rather than giant construction projects, a senior World Bank official said.
Governments in the region are ploughing money into giant infrastructure projects to help wean their economies off oil exports. More than $1 trillion worth of projects are in the pipeline. 'There is enough construction...,' Hossein Razavi, director of the World Bank's private sector finance and infrastructure department in the Middle East and North Africa, told Reuters in an interview.
'(Gulf states should) develop export-oriented industries because that is the source of long-term sustainable growth for the region and I think that is the one area that should have the highest priority,' he said on the sidelines of a conference in Abu Dhabi.
Razavi said the vast building projects, from roads and ports to tourist resorts, were feeding domestic demand and driving up inflation.
'A lot of current growth is actually growth based on consumption. The money is injected into the economy and is spent on importing goods. What the money should be invested is developing the capacity to produce which is not an easy thing,' he said.
Last week the UAE economy minister blamed a spike in inflation, estimated at around 6 per cent in 2005, on soaring construction costs, driven by regional demand for everything from cement to labour.
Governments across the region are footing the bill for most of the projects, either directly or through state-owned companies and investment arms.
Razavi called for more fiscal discipline.
'I think a much stricter fiscal policy (will mean) limiting expenditure to the absorptive capacity of the country, limiting expenditure to creating a business environment that does not lead to inflation,' he said.
Razavi said governments could finance infrastructure by tapping capital markets and developing partnerships with the private sector.
'Any other investment that depends on utilising oil revenue is not a sustainable investment. But when you bring the private sector to making investments, that is essential and it is what we are hoping the governments in this region do.'
"
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