Financing golf tournaments and grand prix is part of a multibillion-dollar charm offensive to improve the Gulf's image, writes Richard Gillis
Rory McIlroy, the Northern Irish golfing prodigy, strides confidently on to the practice ground in preparation for his first round in the South Africa Open Championship at Pearl Valley Golf Estate, just north of Cape Town. The sun is hot and Rory's cherubic features have a pink tinge.
A few yards away Ernie Els, Greg Norman and the rest of the field go through their routines in relaxed, opulent surroundings. The manicured fairways are lined by a few hundred spectators, the green grass contrasting with azure blue skies, the view framed by the stunning Drakenstein mountain range in the distance. Beyond the confines of the course lie some of the world's great vineyards.
Some of the players have chosen as their base one of the new luxury homes that form part of the estate. A number have gone as far as to put in offers to buy one; the exchange rate makes the multimillion rand investment an attractive place to put their prize money.
This week offers a snapshot of the lives of top touring golf professionals. However, the presence of the golfers this week is part of a bigger trend, one that stretches beyond professional golf.
The event, one of the oldest national championships in the world, is being funded by oil money. Isthitmar, a Dubai-based investment group which owns the course, has put up the prize fund and is selling the houses lining the fairways. Oil has paid for the players to turn up and has paid for the huge marketing push that has helped to lure a decent crowd to this beautiful, remote part of South Africa.
As the price of oil moves toward $100 (€70) a barrel, the six member states of the Gulf Co-Operation Council (GCC) - Saudi Arabia, Qatar, Oman, Kuwait, Bahrain and the United Arab Emirates - are enjoying a boom, the second since the 1970s. GCC nations pump about 20 per cent of the world's crude, earning more than $1.2 billion a day. Over $1.5 trillion has flowed in to the GCC in four years.
A feature of the 1970s oil boom was the ostentatious spending of a privileged few. The subsequent criticism was that the sheikhs had squandered an opportunity to improve the lot of their people. Analysts expect oil production to fall by nearly 50 per cent over the next 25 years, so this time there is pressure to spend the money wisely. Nasser Saidi, chief economist of the Dubai International Financial Centre, said: "Governments and private-sector companies have learnt the lessons of the 1970s and 1980s, investing in assets that are not correlated with oil."
For Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum, sport forms part of a multibillion-dollar charm offensive to improve the region's image, drive tourism and alleviate its economic dependency on oil and natural gas. Tiger Woods has been a regular at Dubai's current flagship event, the Dubai Desert Classic. His long-standing commercial relationship with golf in Dubai, the tournament organisers, earns him $2 million to turn up, a figure that compares favourably to the total purse of $2.6 million. He was paid another $20 million to design his first golf course - in Dubai.
Horse racing has long been a passion, especially of Sheikh Mohammed. The Dubai World Cup meeting has been held annually since 1996 and prize money has grown from $5 million in the inaugural race to $22 million this year. A $1.3 billion new home, the Dubai Maydan racecourse, will be built by 2010.
After a relatively poor showing in 2007, Godolphin, the Dubai-backed international racing team, spent more than $100 million on bloodstock this year, including over $10m for Playful Act, a world record for a broodmare. Motor sports have also been quick to take the oil dollars on offer. Bahrain has held a grand prix since 2004 and Dubai money is behind the new A1GP series, an alternative to Formula One. Abu Dhabi, which has the greatest oil reserves in the Gulf, is due to host its F1 grand prix in 2009. This was facilitated by the government's purchase of a five per cent stake in Ferrari.
The race will take place on an island in the shadow of a new Ferrari theme park. Manchester United, another iconic sporting brand, was recently paid $50 million to set up a soccer academy in Dubai.
The same investors bought a franchise package from the Louvre in Paris for an estimated $1.3 billion, including $520 million to use the name and $747 million for art and cultural exhibitions over the next 30 years. This forms part of a cultural attraction on Saadiyat Island, a development costing $27 billion.
Qatar, with a population of fewer than a million, illustrates the unbounded ambition of the Gulf's rulers. The state-owned Qatar Investment Authority (QIA) has a fund of $50 billion. It is using this money to buy a place at the top table in all spheres of business, including a 14 per cent stake in the London Stock Exchange and a $21.2 billion bid for Sainsbury's. Qatar's capital Doha has just announced its intention to bid for the Olympic Games in 2016, placing it in competition with Tokyo, Rio de Janeiro and Madrid.
However, when put into context, the amounts being channelled in to sport are pocket change. Total foreign petrodollar investments amount to between $3.4 trillion $3.8 trillion, according to consultancy McKinsey. The oil-hungry economies of China and India are extremely important; 70 per cent of the Middle East region's oil is exported to Asia.
To facilitate this growth, there is set to be a boom in infrastructure investment. According to a new Middle East Industry Outlook 2020 study, the 19 largest airlines in the region were expected to spend at least $143 billion adding 876 planes to their fleets. The largest buyers in terms of aircraft purchased and total investment are set to be Emirates Airline, buying 245 aircraft at $60 billion, and Qatar Airway, purchasing 150 planes for $52 billion.
The study makes the growth plans for Dublin airport look like a garden extension. The 10 largest airports in the Gulf are expecting to add capacity for at least 320 million passengers. The two largest spending airports were Dubai World Central (Al Maktoum International) at $8.2 billion and Saudi Arabia's King Abdulaziz International at Jeddah, which is investing $8 billion. When complete, the Dubai airport will be the size of Cardiff, with capacity for 120 million passengers.
The influx of people matches the flow of petrodollars sweeping through the financial markets. US banks have found the liquidity useful during the credit crunch, but the lack of transparency of its source is troubling some. Oil is a political issue that extends to the money flowing around the world's financial centres.
But such issues seem a million miles away from the golfers at Pearl Valley. Ernie Els recently said that "it's time to get the wheelbarrow out" when talking about the rise in prize money. It's a sentiment that people working in many other areas of business would agree with.
