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Inward shift by Gulf funds will impact global finance
An inward shift in investments by Gulf wealth funds will impact the global financial system, according to an economist.
- By Nadia Saleem, Staff Reporter
- Published: 23:32 October 28, 2008
Dubai An inward shift in investments by Gulf wealth funds will impact the global financial system, according to an economist.
Philippe Dauba-Pantan-acce, senior economist for MENA and global markets with Standard Chartered Bank, told Gulf News that sovereign wealth funds of the Gulf Cooperation Council (GCC) countries that have been investing internationally are beginning to consider internal investments.
Recently, Kuwait said that it would redirect some money from the oil proceeds to meet local needs like softening the impact of the financial crisis.
The Abu Dhabi Investment Authority (ADIA), world's largest sovereign wealth fund flush with oil revenue, bailed out Citibank.
As the bank becomes less able to provide loans with liquidity drying up, if there is need for financial support, ADIA investment "will be redirected to our local interests in terms of infrastructure development", according to Dauba-Pantanacce.
He added that GCC countries should look towards investing in local economies "... by carefully choosing the type of projects and think of long-term type of investments".
"In the current situation of decelerating growth in the GCC, it is a good way of using oil proceeds to substitute a feeling of ailing consumption by well chosen public infrastructure development projects," he said.
The current account surpluses that have been accumulated over the years will be cushioning the blow of the global crisis in the region, he said.
"This is the time when it should be used and it will be. The UAE has already announced that they would step up their public spending by 21 per cent in 2009, so this should be welcomed."
If the financial condition should deteriorate further in Dubai, Abu Dhabi would step in, he believes. "Normally this would happen by Abu Dhabi having a close look at what Dubai does. I don't think that there will be a blank cheque written by Abu Dhabi."
In the worst-case scenario, projects in Dubai that have strategic importance to Dubai and the country in general will be focused on, in terms of financial support.
The regional current accounts are in surplus of 20 per cent. In the UAE, the figure will reach 30 per cent, according to Dauba-Pantanacce.
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