There were doubts earlier on but now the Gulf’s rulers might be feeling positively foolhardy for basing the future of their economies so heavily on such a capricious industry as financial services. What now of the Gulf’s dreams to host some of the world’s capitals of capital?
In coming years, Gulf cities probably will become slightly less insignificant as global financial centres, rather than just Gulf regional ones – provided the oil price holds up. If it does, the credit crisis, paired with cash surpluses, will give Gulf cities slightly more of a competitive advantage in financial services. The Gulf will become a more essential stopping point in global investment-banking roadshows. Mergers between two companies in the US, for example, will more often require a final injection of debt or equity from the Gulf. More joint venture partnerships between global private equity groups and Gulf entities might also increase the statuses of Gulf cities as global financial centres.
On the other hand, extravagant and often useless state-sponsored real estate projects continue to proliferate in the Gulf and rulers are already setting aside more of their money to prop-up their the home country’s banks and capital markets.