The Associated Press
DUBAI, United Arab Emirates — In the United States, the Sept. 11, 2001, attacks are seen as the catalyst for a period of fear, war and economic worry.
But in the oil-rich Arab countries of the Persian Gulf, Sept. 11 is increasingly viewed as the event that kicked off a galloping economic boom, when Arabs divested from America and reinvested at home.
Arab investors pulled tens of billions of dollars out of the United States. They were angered by perceived American hostility toward Arabs. They worried their assets would be frozen by U.S. counter-terror measures. And U.S. markets happened to be plummeting while economies in the Gulf were on the upswing, buoyed by rising oil prices.
The results have been spectacular. Since late 2001, economies in the six Gulf Cooperation Council countries — Bahrain, United Arab Emirates, Kuwait, Oman, Qatar and Saudi Arabia — have soared, with stock markets up a collective 400 percent. Over the same period, the Standard & Poor’s 500 rose 24 percent.
Most of the credit for the wealth influx here is because of the near-tripling of oil prices since 2001 to current levels of more than $67 a barrel.
“It’s just been an exceptional period, the likes of which the region hasn’t seen in 20 years,” said Simon Williams, a Middle East analyst with the Economist Intelligence Unit in London.
Gulf oil revenues are expected to reach almost $300 billion this year, up from just $61 billion in 1998.
In Saudi Arabia, gross domestic product rose 37 percent between 2001 and last year. In the Emirates, GDP jumped almost 50 percent. By contrast, the U.S. economy rose 16 percent during the same period.
The boom is changing the face of Gulf states. Building cranes line the horizon in the Emirates, Qatar and Bahrain. New highways are slicing across once empty desert, and hives of imported laborers are erecting hospitals, universities and entire districts of shimmering high-rise apartment towers — even artificial islands covered in luxury villas.
The changes are most visible in Dubai, which in the past four years has become one of the world’s fastest-growing cities. Dubai currently has $20 billion in residential and commercial building projects either under way or announced, Hanna said.
Prices on luxury properties have tripled or quadrupled since foreigners were given permission to buy here in 2002.
Investors and economists say the jump in oil revenues is the biggest factor for the boom, but the shift in strategy that led Gulf Arabs to divert funds from U.S. investments to home markets laid the groundwork.
Before 9-11, World Bank figures show Middle Eastern oil exporting countries were plowing as much as $25 billion a year into U.S. investments. For the three years of 2001-03, the figure only reached $1.2 billion.
“We found an alternative asset class in our own backyard that is performing substantially better,” said Walid Shihabie, head of research at Dubai-based Shuaa Capital.
Gulf investors also feared their assets would be seized by U.S. courts probing capital flows for links to Sept. 11 terrorists. Saudi Arabia was the birthplace of 15 of the 19 terrorists; two others came from the Emirates.
“Capital is a coward,” Shihabie said. “There was more risk after 9-11. People were worried about their assets being frozen because they were from the Gulf.”
Shihabie and others cited anger at U.S.-led wars and Middle East policy, and general hostility toward Arabs as another reason for the exodus.
“The Americans shot themselves in the foot by being so harsh,” said Beshr Bakheet, owner of Bakheet Financial Advisers in Riyadh. “Do you want to put your money in a country that is involved in wars all over the globe? Not only Saudis, but a lot of people aren’t comfortable with this.”
There also more fundamental reasons Arab investors fled America, said Daniel Hanna, chief economist at Standard Chartered Bank in Dubai. Many lost money in the bursting of the dot-com bubble. Others lost faith in U.S. regulators after accounting scandals at Enron, WorldCom and elsewhere, Hanna said.
“I lost about $200,000 in the U.S. market,” said Mohammed al-Ghussein, a Dubai-based private investor. “So I took it back to the Gulf and I made the money back.”
Investments pulled out of America were redirected into stocks and real estate in the Gulf and the wider Middle East, laying the ground for a boom that accelerated as the price of oil shot skyward. Oil money is now bankrolling more than $100 billion in construction in the Gulf this year alone, according to the Washington-based Institute of International Finance.
Meanwhile, Arab money began returning to U.S. markets that were recovering by 2004, and after it became clear that asset seizures weren’t a problem. World Bank figures show Arab investment in America in 2004 returned to previous levels — which doesn’t reflect the huge increases in revenue from the oil boom.