Diversifying to fuel trade

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01 April 2007

Supported by a wealth of petrodollars, infrastructure investments in the GCC region are on the increase across all sectors. Commercial appetite for Middle East debt remains strong, however ECA finance is still recognized as a viable funding gap solution. Rebecca Spong examines the market and says demand for ECA support could grow considerably.

Diversifying their economies away from a reliance on oil revenues has become a top priority for Gulf Cooperation Council (GCC) governments. Compared to the oil booms of previous eras, this time round the region is investing in its future, managing to use its finite pool of petrodollars as a means of securing longer-term revenue streams. In Saudi Arabia alone non-crude oil based exports are predicted to hit $20 billion. Sectors such as petrochemicals, shipping, water and power projects and aluminium are all attracting investment from the local and international commercial markets.

The development of these downstream sectors, along with local liquidity has created a tough marketplace with aggressive pricing and competitive tenors. In a region lacking an ECA tradition, the use of export credit could easily become marginalized.

Yet, given the sheer number of infrastructure projects in the pipeline, pressure on the region's liquidity is increasing. With commercial banks' appetite...

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