Iraq 'could become the economic giant of Gulf'
Gulf Daily News, Bahrain
KUWAIT CITY: While Arab stocks rally on the war and local firms bag lucrative contracts, some Gulf analysts fear a rebuilt Iraq will be a powerhouse that could squeeze the region's other economies over the long term.
It may be too early to talk about the dawn of the Iraq Decade but all the pieces will eventually be in place for the sleeping giant of Baghdad to become a dominant economic force in the Middle East in the future.
In addition to the world's second-largest oil reserves after Saudi Arabia, Iraq boasts a highly educated workforce and a relatively high percentage of farmable land, providing a solid base for its agriculture sector.
"For the long term it will be a negative for the other nations in the Gulf," says Ali Al-Nimesh, an economist in Kuwait.
"The main thing is the oil price. Once Iraq is fully producing and exporting, prices will go down. Income from the oil sector could be reduced by 20 to 25 per cent in the other Gulf nations' budgets."
So far, the war that brought about the fall of Saddam Hussein has been a boon for the region's pocketbooks.
The Kuwait stock exchange hit an all-time high before a slight correction last week, while the Saudi bourse has chalked up five straight weeks of gains and saw its capitalisation top $100 billion for the first time ever this month.
Meanwhile Kuwaiti firms are already reaping the benefits of the government's support for the war - the emirate was the main ground base for the invasion - by landing contracts to provide water, food and services across the border. While that makes for a rosy picture now, analysts underline that it will be the Americans and not the Iraqis who decide how the lucrative deals for reconstruction are doled out.
Even if the Gulf states do end up sharing a considerable slice of the Iraqi pie, however, it is the prospect of Iraq's oil taps once again flowing at full throttle that has some business nerves in the region on edge.