Page 44 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

CHAPTER 1 Floating on Wealth 29

economy dwarfs that of the GCC (about seven times as large in PPP
terms), 20 China’s public-sector surplus in 2008 (in absolute terms)
was only about half that of the UAE alone and around a third that of
Saudi Arabia. China’s government-funded investment vehicles there-
fore had significantly less fresh capital to draw on for foreign invest-
ment than their counterparts in the GCC. At the same time, India,
while having a large and fast-growing domestic market, experienced
a deficit of 2 percent of its GDP.
Comparisons with the United States reveal that the Gulf, despite
its growing significance, remains a relatively small economy when
compared to that of the United States’. The US economy was about 13
times that of the GCC in total, and around 24 times the size of the
Saudi economy. And although the Gulf surplus figures seem large, it
would take about three times the GCC’s 2008 surplus to pay for the
US deficit in that one year alone. The Gulf does have significant pub-
lic-sector prosperity, but the scale of its economy is a fraction of that of
the United States and about half that of the United Kingdom. 21

“HOT” ECONOMIC GROWTH . . .
In recent years, economic growth in the GCC region has significantly
outpaced growth in other parts of the global economy. This fast growth
has led to sustained prosperity in the region—a key component of the
“opportunity formula” that is driving the Gulf’s attractiveness as a
place to do business. In addition, the region’s favorable demographic
trends—young populations, high literacy, increasing global connectiv-
ity, and the like—make its consumers a prime market for global firms.
Finally, ongoing regulatory reform—with all GCC states now being
members of the WTO, for example—has made Gulf markets more
accessible than before. This opportunity formula of prosperity, demo-
graphics, and reform (discussed at length in Dubai & Co.) has made
doing business in the region a key strategic initiative for many global
firms.
Figure 1.2 shows the annualized growth rates of a range of inter-
national economies during the five-year period 2002–2006.
Over the period—boom times for the Gulf—economic growth in
the GCC far outpaced growth globally and in the world’s developed
markets. The cumulative annualized growth rate (CAGR) for the
GCC economies (in aggregate) was 6.5 percent—more than 40 percent
higher than the world average of 4.5 percent. In the same period, the
world’s most developed economies grew at about one-third the