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GLOOM: George Soros described the global credit crunch as the worst financial crisis in 60 years.

As global buyout deals slow to a trickle and lending costs soar, the oil-fuelled economies of the Gulf are providing the liquidity needed to sustain a local infrastructure boom while at the same time funding deals in new markets.

Gulf economies could generate US1$ trillion budget surpluses within a decade, fuelling a boom in private equity deals and the expansion of the region's largest family-run trading groups.

That prediction from the Abraaj Capital CEO Arif Naqvi explains why private equity is poised for unprecedented growth in the Middle East, as the flood of petrodollars from Riyadh to Doha replaces liquidity lost from global credit markets.

The region needs infrastructure investment of about US$676bn according to Naqvi, which he says can only be described as "silly money". As much as US$200bn of this is needed for power infrastructure while a further $188 billion is required for transport projects.

"It's going to happen in a public-private partnership and when it happens, the knock-on effect for the private sector will be massive," he told a gathering of private equity professionals in Dubai this week.

Such private partnerships are expected to fuel the expansion of the sector in the Gulf while the changing structure of the region's traditional family businesses will also create demand for private equity from a second generation of Arab entrepreneurs.

The six Gulf states supply about 22 percent of the world's oil, earning them about US$1.5bn a day at current prices, from pumping about 15 million barrels of crude. Saudi Arabia earned about US$206bn from oil sales last year.

The rising oil price has helped fund a building boom, with the region developing projects worth about US$1.5 trillion, according to a report from ING Wholesale Banking.

The surging oil price is also expected to see local economies grow at an average of 9 percent in 2008, or more than twice the global average.

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