Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 1, 1991 TAG: 9103010308
SECTION: NATIONAL/INTERNATIONAL PAGE: A7 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: NEW YORK LENGTH: Medium
The estimate by Sheik Salem Al Sabah in the French newspaper Le Monde, which was 10 to 12 times higher than previous estimates, helped ignite a rally in the stocks of U.S. and European companies expected to benefit from the Kuwaiti reconstruction effort.
"Clearly, the extent of the damage in Kuwait - the mining of the oilfields, the destruction of hotels and other public buildings - wasn't anticipated," said David Snow, an analyst with Derby Securities in New York. "This is shaping up as one of the most massive construction projects of all time."
Al Sabah said that with about 650 oil wells in Kuwait on fire, he did not expect Kuwaiti oil production to resume for nine months. And with its oil revenues cut off, Kuwait will turn to international credit markets to finance its reconstruction expenditures, the sheik said.
Japanese engineering and construction companies, normally ferocious competitors for Middle East construction jobs, watched unhappily from the sidelines as the Kuwaitis began to make good on their pledge to award most of the contracts to companies from nation that sent troops to liberate Kuwait.
"If we just go for reconstruction after having not sent soldiers, it will give a bad reputation to our company and Japan," said a spokesman for Chiyida Corp., a plant engineering company. "Even if we do, Middle East countries will not take us seriously."
In an effort to calm jittery markets, he and other Kuwaiti officials said the nation would not sell off Kuwait's extensive stock holdings.
"We will not liquidate any core investments," Kuwaiti Finance Minister Sheik Ali al Khalifa al Sabah told the British Broadcasting Corp. "We will not throw millions and millions of stocks onto the market. We are responsible investors."
The Kuwaitis aren't alone in their newly found status as borrowers. Saudi Arabia, which once paid cash for all its imports, is also seeking credit as a result of expenses associated with the war.
Already, Kuwait has ordered computers from IBM, mobile phones from Motorola Inc. and generators from Caterpillar. American Telephone & Telegraph has also moved a portable satellite Earth station to Kuwait to re-establish telephone links to the emirate.
Initial service will come over just 120 lines that will be installed at a site in Kuwait city selected by the Kuwaiti Ministry of Communications.
AT&T said it is negotiating with Kuwaiti officials for a contract to restore the country's telecommunications network, which was knocked out during the Iraqi invasion. Other telecommunications companies are also believed to be holding similar negotiations.
But there were indications that Wall Street's enthusiasm may have become overheated. "There is a lot of potential in Kuwait, and we are interested in that potential," said Caterpillar spokesman Keith Butterfield. "But as of now, it is mostly potential."
"Even if the Middle East were to result in some increased business, based on what we know now, we just don't see it offsetting the negative impact from the ongoing recessions in several industrialized countries," he added.
by CNB