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DUBAI-Middle East governments have traditionally handled infrastructure developments, but that method will have to change with the massive increase in need brought on by billion-dollar developments and increases in population, according to a recent Ernst & Young study. In “Bridging the Gap: Private Investment in Middle East Infrastructure,” the company points out that there is about $1.3 trillion of infrastructure projects now underway in the Middle East, and a dwindling desire of governments to solely fund such ventures. The region will likely see about $100 billion in public-private partnerships to help accomplish the infrastructure needs, according to the study.

Mike Lucki, global infrastructure leader with the company, tells GlobeSt.com that there are many reasons why the countries, a few led by dictators or ruling families, will look to branch out their infrastructure work. For example, he says, the governments are taking in their profit, in the hundreds of billions of dollars, and reinvesting it into refineries that will allow the easier, cheaper-to-handle sale of gasoline instead of selling barrels of crude. “I also think that over time, as this area of the world becomes more westernized and they want the Middle East to become the next financial center of the world, that they need to start looking at how the rest of the world works and finances projects,” Lucki says.

Massive developments, the construction of entire cities, also put a heavy burden on the governments to pay for the required infrastructure, according to the study. A partnership with a private firm would save the government money, while allowing the company to directly profit from use of the infrastructure, such as toll roads or railroads, or through use taxes for projects such as water desalination plants. Current projects already underway include the $315 million Saudi Airport Project, the $5 billion Saudi Landbridge Project, the $8.1 billion Dubai Metro System and the $633 million Oman desalination plant.

Dubai and Saudi Arabia combine to have the most need for infrastructure, though the other countries have their massive projects. These developments include the Dubai Internet City, the Dubai International Free Financial Center, King Abdullah Economic City in Saudi, the $8 billion Prince AbdulAziz Bin Mousaed Economic City, the $25 billino Knowledge Economic City in Saudi, the Abu Dhabi media center project and Masdar City, Energy City in Qatar, and the $86 billion Kuwait City of Silk.

Fortunately, the region is seen as stable, or at least more stable than Russia, Lucki says. “Russia is in between communism and capitalism, where governments in the Middle East are strong, mostly centralized affairs,” he says. The governments have many investments in the US, and thus aren’t immune from what’s going on with the world economy, he says, and the quickly dropping price of oil is also going to have a large effect. At the risk of getting bricks thrown through his office window, Lucki says he sees oil, now selling for about $60 a barrel, going back up closer to $100 a barrel. “This recession is not going to last long,” he says. “Also, the Middle East countries, ironically, are also investing heavily in alternative fuels.”

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