ABSTRACT
The progressive consumption of the oil wealth of the Gulf States calls for a compensatory investment policy, and the emphasis has to be on foreign investment because of the limited opportunities available in the domestic economies. The creation of a Gulf Dinar, linked to the price of oil would help to protect foreign investments of Gulf States against the effects of inflation. The needs for investment are so huge that the availability of savings seems to be the only operational limit to capital accumulation. The existence of huge needs for investment in the developing countries would have helped bring about the necessary change in effective demand using OPEC savings. However, all the Gulf states' savings are too small to finance massive investment in all developing countries, and hence there is a need for concentration on a regional basis. Absorptive capacity limits the extent of domestic investment, and world inflation threatens to erode foreign investment.
