Frost & Sullivan Observes That Petrodollars go a Long way in Times of Economic Uncertainties

DUBAI - After the 2002 surge in oil prices, most oil-exporting countries started
setting up dedicated investment funds exclusively for the oil surplus they
had earned. They were further encouraged when in 2006, the price of oil
increased from an average of $28 per barrel to $80 per barrel.

Consequently, the gross domestic product (GDP) of the petro-states
increased manifold and created substantial liquidity and large-scale
opportunities for overseas investments. In fact, the funds of the Gulf
Cooperation Council (GCC) alone accounted for more than half the assets held
by Sovereign Wealth Funds globally.

New analysis from Frost & Sullivan (
www.financialservices.frost.com), Petrodollars - Transformation of Oil
Wealth into Financial Wealth, reveals that petrodollars are one of the most
powerful financial tools in the present day scenario. The funds of the GCC
are expected to touch more than $1.500 trillion by 2010.

If you are interested in a virtual brochure, which provides a brief
synopsis of the research and a table of contents, then send an e-mail to Tanu
Chopra/ Nimisha Iyer, Corporate Communications, at tanuc@frost.com/
niyer@frost.com, with your full name, company name, title, telephone number,
company e-mail address, company website, city, state and country. Upon
receipt of the above information, an overview will be sent to you by e-mail.

“In the beginning of 2000, the funds of GCC did not constitute more than
$350.00 billion and investments were predominantly concentrated in the U.S.
assets,” says Frost & Sullivan Research Associate Preetha S. “However, by the
end of 2006, their assets grew to over $1.000 trillion and the pattern of
investments also changed from low-risk portfolios to high-risk ones such as
equity and alternative investments.”

Nevertheless, the global economic slowdown has had ramifications across
industries and regions and the petro-states have not been spared either. They
have experienced a significant drop in the prices of their major export
constituent and thereby, their revenue growth rates. The prices of oil
plummeted from a high of $147 per barrel in the beginning of 2008 to nearly
$60 per barrel by the end of that year. Experts expect this trend to persist
and prices to hover around the $40 per barrel mark.

However, unlike the other oil-importing nations of the west, the Middle
East petro-states’ loss has been minimal with regard to capital or source of
revenues.

“The mere slowdown in the pace at which the revenue gets accumulated
clearly reveals that the petro-states are more insulated than any other
economy, either developed or developing,” notes Preetha. “Owing to this,
almost all the global leaders are considering petrodollars as the only option
to gradually bail them out of the financial predicament.”

The refuge offered by petrodollars notwithstanding, the falling oil
prices may alter the investment strategies of the petro-states. The
international financial meltdown and the discovery of alternate sources of
energy could accelerate the quantum of petrodollar investments.

Domestic investments are likely to increase in order to lower the
region’s dependence on oil revenues. This will, in turn, accelerate the
region’s urban development, economic diversification and create more job
opportunities.

Meanwhile, investments in the international banking and financial
services sector are estimated to reduce to approximately 30.0 percent of the
total investments made by the petro-states. Although this does not imply that
the percentage of investments in the financial services sector will fall
drastically, not many will consider investing in this sector until the market
stabilizes, as it is directly related to the global financial environment.

“Investors are likely to withdraw the invested capital from international
banking and financial services sector and channel them into real estate,
hospitality, and tourism sectors,” observes Preetha. “The petro-states
consider the real estate sector a very attractive investment option,
especially in the United States and other developed countries, since the
prices of the property market have reached the lowest possible levels.”

Petrodollars - Transformation of Oil Wealth into Financial Wealth is part
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Petrodollars - Transformation of Oil Wealth into Financial Wealth
N50E

Contact:
Tanu Chopra
Corporate Communications - Middle East
P: +91-22-4001-3437
F: +91-22-2832-4713
E: tanuc@frost.com

Caroline Lewis
Corporate Communications- South Asia
P: +91-22-4001-3438
F: +91-22-2832-4713
E: caroline.lewis@frost.com

Nimisha Iyer
Corporate Communications - South Asia & Middle East
P: +91-22-4001-3404
F: +91-22-2832-4713
E: niyer@frost.com

www.frost.com

Source: Frost & Sullivan (India) Pvt. Ltd.

Contact: Tanu Chopra, Corporate Communications - Middle East, P: +91-22-4001-3437, F: +91-22-2832-4713, E: tanuc at frost.com; Caroline Lewis, Corporate Communications- South Asia, P: +91-22-4001-3438, F: +91-22-2832-4713, E: caroline.lewis at frost.com; Nimisha Iyer, Corporate Communications - South Asia & Middle East, P: +91-22-4001-3404, F: +91-22-2832-4713, E: niyer at frost.com