Mar
09
REGIONAL SOVEREIGN WEALTH FUNDS - Looking to the future

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Net foreign assets of GCC states reaching as high as US dollar 1.9tr

by end-2012

* By Dr Jasim Ali, Special to Gulf News

* Published: 12:53 August 25, 2012

Sovereign wealth funds (SWFs) of the six-nation Gulf Cooperation

Council (GCC) states are substantial enough on the one hand

and have positive implications for regional and global economies

on the other.

In other words, benefits of these SWFs are not confined to

GCC economies, as these investments in the form of

deposits, own ownership of securities issued by authorities

in the US and others as well as investments are all

over the world.

By one account, combined value of various SWFs of GCC

authorities surpassed US dollar 1.7 trillion at the start of

the year.

Certainly, this is a staggering figure by virtue of being some

dollar 600 billion above the monetary value of gross domestic

product (GDP) of GCC states put together.

The UAE in general and Abu Dhabi in particular is noted for

amassing a substantial amount of assets through its SWF.

According to the Sovereign Wealth Fund Institute, which tracks

SWFs, Abu Dhabi Investment Authority (ADIA) is the richest

of its kind in the world.

Latest statistics and rankings released by the institute put

ADIA's assets at an exceptional dollar 627 billion.

Interestingly enough, the Government Pension Fund

of Norway follows suit with assets of dollar 611 billion.

Still, Saudi Arabia's Sama Foreign Holdings is ranked

second regionally and fourth internationally with assets

of dollar 533 billion.

Kuwait provides an example of a country putting a part

of its SWF to use in 1990 in order to finance liberation war.

In fact, the country's authorities drew on the reserves to

provide financial support to their citizens whilst

being abroad during the occupation period.

Yet, with nearly dollar 300 billion in reserves, Kuwait

Investment Authority (KIA) ranks number six worldwide

in terms of amount of SWF.

Launched in 1953, KIA is the oldest SWF of its kind in the

GCC region.

In many respects, GCC economies practically redistribute

revenues generated from petroleum sources via their SWFs.

Suffice to refer to the ever-growing investments made by

GCC member-state of Qatar nowadays.

These investments cover real estate, hospitality and luxury

goods amongst others.

Of all GCC countries, Qatar stands out of placing funds in

numerous sectors and industries and across the world.

It emerged recently that Qatari authorities opted depositing

a notable dollar 2 billion in Egyptian banks in

order to shore up credit support for Egypt's economy.

Also, Qatar is noted for making public announcements

of its investments reflecting a conscious state policy.

Also, GCC states have proven their willingness to use their SWFs to

shoulder their international responsibility during critical times.

Reference is made to GCC's contribution of a special fund

designated by IMF in the aftermath of the global financial

crisis of 2008.

It is believed that GCC states have made generous contribution

to the fund deemed essential to provide assistance

countries via credit in soft conditions.

Unsurprisingly, revenues generated from the numerous SWFs help

achieving a key strategic goal for GCC economies, namely that of

diversifying away from oil.

To be sure, the petroleum sector, which includes all activities

related to oil and gas, contribute about three

quarters of exports, two thirds of treasury income and one third of

GDP within GCC economies on average. However, oil dependency

could only be worse but for all the positive matters relating to

SWFs, in turn helping bringing in other sources of income.

What's more, the Institute of International Finance or IIF projects

net foreign assets of GCC states reaching as high as dollar 1.9 trillion

by end-2012 and for the first time ever crossing the dollar 2 trillion

mark in 2013. Net foreign assets are total assets minus liabilities.

The writer is a Member of Parliament in Bahrain.

Source : http://gulfnews.com/business/opinion/

high-marks-for-regional-sovereign-wealth-funds-1.1065689

Comments:

Amounts at stake are considerable.

What do we do to attract part of these funds to France

in high tech, defense, agriculture, industry, service and

hospitality?

What is French and EU approach to improve mutual

cooperation with these funds and create wealth, instead

of depression and excess of regulation in this country?

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