Gulf 'will be insulated from US recession'

Dubai: The impact of a US recession on the Gulf countries would be largely insulated due to the trading ties forged between the region and its neighbours, the head of a global management-consulting firm said this week.

Paul Laudicina, managing officer and chairman of A.T. Kearney, said fallout from a US slowdown would be minimised because the Gulf has diversified relations with other economies.

"The Gulf is not a principal US trading partner, and so it would be more insulated than others," said Laudicina during a press briefing in Dubai on Sunday. He tempered his outlook, however, with the possibility of a fall in oil demand from the US. "Hydrocarbon sales would have more of an impact," he said.

Talk of a US recession have grown in recent weeks, with former Federal Reserve chairman Alan Greenspan saying the chances were "greater than one in three."

The A.T. Kearney chairman described the growing importance of a nexus of economic interests developing between China, India, the Middle East and Africa.

Technology and know-how from China and India and natural resources from Africa were attracting fin-ancing from the Middle East, he said, in an alliance among developing countries that could refashion the global economic system. "The locus of power is shifting."

After oil and gas revenues tripled in four years, Laudicina estimates Gulf countries have accumulated some $4.1 trillion in investable capital, and this could increase as oil prices continue to soar.

A.T. Kearney is positioning itself for this growth through its Dubai office and plans to open offices in Abu Dhabi, Bahrain, and Riyadh.

However, Laudicina also warned that the hydrocarbon era would eventually end and that innovation was the key to avoiding a crash landing when energy reserves fell.

"Every economy that succeeds, innovates, before they were compelled to do so," he said. "It's the same as in nature - either grow or die."

Examples of innovative thinking was already present in the UAE, said Dirk Buchta, vice president and managing director of A.T. Kearney's Gulf operations. His examples included the aerospace service cluster being developed by Dubai Aerospace Enterprise, Islamic finance, Nakheel's man-made islands, DP World's global ports network and Emaar's large-scale real estate projects.