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Tue 12 Feb 2008 12:53 AM

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Soaring growth not sustainable, warns minister

Gulf markets urged to monitor global issues which could negatively affect growth.

The soaring growth in the Gulf real estate and construction sectors may not be sustainable in the wake of a global market slowdown, a government official warned on Monday.

Sheikha Lubna Al Qasimi, UAE Minister of Economy, said the Gulf markets needed to closely monitor global issues to address risks posed by a lack of liquidity, at the Arabian World Construction Summit in Abu Dhabi.

Sheikha Lubna said major projects worth 5.9 trillion dirhams ($1.6 trillion) are currently being implemented across the gulf, a increase of more than a third from 2007, and questioned whether the huge market growth was sustainable in view of the imminent liquidity slowdown.

The industries needed to identify global issues that could negatively affect their growth sustainability and continuity, including the availability of raw materials and labour, she said.

Despite the warning on sustainability of the UAE’s new projects, Sheikha Lubna said huge growth is predicted within the region’s real estate and construction markets.

“The Middle East in the middle of a construction boom brought on largely by economic diversification efforts, and huge government investment in the financial, industrial and tourism sectors.”

The real estate and construction sectors are the UAE’s leading economic drivers and are predicted to deliver compound annual growth rates of 24.4% and 29.6% by 2010 respectively, she said.

The sectors are also anticipated to combine to contribute around 23% of the country’s economic value by 2010, compared to 16% in 2006, while construction contributed over 40 billion dirhams to Abu Dhabi’s GDP in 2007 and is expected to generate 1 trillion dirham over the long term.

A landmark UAE property law introduced in 2002 allowing overseas investor to purchase property in Dubai had seen the real estate and construction industry exceed growth expectations for the past five years, she said.

This government investment and new legislation had opened the opportunity for the Gulf to host the world’s biggest structural projects, but had has also magnified existing risk and introduced new risks for uninformed investors, she said.

Over 400 member of the real estate and construction sectors throughout the Gulf and Middle East are attending the two-day Arabian World Construction Summit in Abu Dhabi to address risk issues within the industry.

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