The petrodollar windfalls, in excess of $2 trillion over this decade, will help drive the GCC efforts to diversify their economies away from hydrocarbons, says a report.

NCB Capital (NCBC) has released a detailed investment strategy report highlighting how the GCC economies are capitalising on their petrodollar windfalls.

The report states the resultant project pipeline in the region, estimated to be in excess of $1.5 trillion, is creating significant opportunities for banking and financial services, construction, cement and building materials, as well as creating derived business opportunities for companies in allied sectors.

In an extensive 68-page report titled ‘Capitalising on the Petrodollar Windfall’, NCBC projects Saudi Arabia, UAE and Qatar to generate 49 per cent, 70 per cent and 45 per cent of their respective GDPs from non-hydrocarbon sectors by 2010.

NCBC highlights how non-hydrocarbons related sectors will emerge as important contributors to growth. The report says that over 59 per cent of Saudi Arabia’s incremental growth between 2006-2010 will be driven by non-hydrocarbons sector, while in UAE and Qatar over 80 per cent and 53 per cent of their incremental GDP will be contributed by sectors other than oil & gas and petrochemicals.

NCBC’s report also discusses the key investment themes that investors can use to capitalise on the region’s vibrant business activity and robust economic outlook.

For instance, the estimated infrastructure investment translates to almost 6.5 times the GCC’s combined public expenditure. NCBC perceives this as a significant opportunity for the financial sector as loans to GDP across Saudi (39 per cent) and Qatar (47 per cent) have a long way to catch up with global averages or even UAE (at 84 per cent).

Given that all the GCC countries have investment grade sovereign ratings and currently stand above those for the BRIC countries, this would put the region on global investor’s radar.

With over 66 per cent of the region’s population below the age of 30, NCBC identifies that over a longer horizon the region’s demographics will lead to a rapid expansion in the work force driving demand for housing, consumer durables, utilities, mortgage and personal finance.

The report identifies that the outlook for Saudi banks looks healthy in 2008 with credit off-take gaining momentum and equity markets recovering from sharp corrections in 2006.

Although competition is set to increase, low loan penetration offers significant scope for expansion. Additionally liberalisation of the insurance sector and regulations mandating motor and health insurance are expected to raise spending on insurance, which accounted for just 0.53 per cent of GDP in 2006.

The construction and cement sectors were identified as key beneficiaries of the 2.2 million new housing units that need to be built in the next 14 years as well as the construction of the proposed 6 economic cities in Saudi Arabia.

The report is the first in a series of reports that will follow in the coming months which will include investment strategy as well as sector and company coverage notes aimed at providing investors with specific investment views and ideas to capitalize on the themes they have identified. - TradeArabia News Service