Arab Today, arab today eu crisis will cause ripples in gulf
Last Updated : GMT 19:10:18
Arab Today, arab today
Arab Today, arab today

EU crisis will cause ripples in Gulf

Arab Today, arab today

Arab Today, arab today EU crisis will cause ripples in Gulf

Dubai - Arabstoday

The unfolding Eurozone crisis will have damaging repercussions on the GCC petrochemical industry, analysts said at a recent petrochemicals conference. The EU is the world\'s largest economy and a major consumer of plastics. According to Andrew Monro, partner and global head of petrochemicals at KPMG, continued Eurozone turmoil will have a big impact on petrochemical demand worldwide and in turn a negative impact on the burgeoning GCC petrochemical industry. \"Europe is China\'s largest export market and many emerging markets including the Gulf hold large portions of European sovereign debt. The continued uncertainty in Europe is a big risk to the chemical industry here in the region,\" said Monro, speaking yesterday at the sixth Gulf Petrochemicals and Chemicals Association Forum conference in Dubai. The crisis will not only affect global demand and trade in petrochemicals but will also produce tighter financing conditions, creating an unwelcoming environment for the growth of an industry. \"It\'s not a government finance crisis, it\'s a banking sector crisis. A disorderly break-up of the Eurozone would cause a shortage of liquidity and more caution by the EU would discourage them from participating outside the euro area while they correct their balance sheets. It could also bring a risk of further regulation, so financing could become more costly,\" said Brad Bourland, chief economist and managing director of proprietary investments at Jadwa Investment, a Riyadh-based petrochemical house. Around $30 billion (Dh110.17 billion) of GCC bank lending goes to the petrochemical sector, said Bourland. \"As a per cent of total lending it\'s between 5 and 6 per cent. If you consider all forms of lending with banks in the region such as credit cards and corporate loans, for the petrochemical sector alone to make up 6 per cent of total loans is quite impressive,\" he said. The petrochemical industry has emerged as a prominent sector in the GCC as the regional governments look to develop the downstream industry in order to create jobs for a growing population. Prince Faisal Bin Turki Al Saud, adviser to the Saudi Ministry of Petroleum and Mineral Resources, had on Wednesday urged regional players to focus on increasing supplies to the refining industry to foster sustainable growth and job creation. \"Exporting the vast majority of the petrochemical production means jobs are being created elsewhere and this is a growing concern. With a fast-growing, well-educated population who want jobs, successful economic diversification and downstream expansion have become a necessity,\" he said. Oil exploration and refining are capital-intensive and not labour-intensive activities. In order to produce the volume of jobs needed, there needs to be a stronger GCC collaboration, according to Monro. \"We need much stronger than GCC collaboration. Not only between countries but between chemical producers. \"We don\'t see enough collaboration between the big players and the countries in the region to create a really powerful chemical industry,\" he said.

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