Business | Economy

GCC states spread the wealth around

Combined value of the Gulf's sovereign wealth funds amounted to a staggering $2.367 trillion by end-March

  • By Jasim Ali, Special to Gulf News
  • Published: 12:35 June 14, 2014
  • Gulf News

The Gulf Cooperation Council (GCC) maintains a quite substantial sovereign wealth funds (SWFs), and much to their credit, they invest these across a wide global footprint.

In fact, they have a track record of showing readiness to contribute handsomely to solve critical global financial problems. This was put to display at the height of sub-prime market crisis in 2008, with the GCC contributing generously to a special fund to help those hit with the calamity.

Several international banks depended on financial support from GCC funds to help overcome the crisis, in part through buying stakes in the affected banks.

Specific to the euro-zone crisis, one GCC state rented islands as a means of helping Greece overcome its debt problem.

The combined value for the GCC amounted to a staggering $2.367 trillion by end-March, a new record, according to figures from the Sovereign Wealth Institute, which tracks SWFs.

This constitutes 36 per cent of the overall sovereign funds deployed worldwide, estimated at $6.585 trillion.

The UAE alone accounts for $1.014 trillion, or a notable 16 per cent of the total SWF. The contributions derive mainly for Abu Dhabi.

Three other GCC member-states maintain sizeable SWFs, specifically $743 billion for Saudi Arabia, $410 billion for Kuwait and $170 billion for Qatar. Oman and Bahrain maintain relatively smaller — by regional standards — funds of $19 billion and $11 billion.

The SWF value of GCC states stood at $1.775 trillion by end 2012, including $813 billion for the UAE. The sharp growth is in the main credited to solid oil prices, hovering around $100 per barrel.

The fact that the petroleum sector contributes some 60 per cent of sources of funds for SWFs tells a great deal. Two of them, namely Saudi Arabia and Qatar, are, respectively, the largest exporters of crude oil and liquefied natural gas in the world.

Fiscally conservative

Fiscally conservative GCC countries are noted for assuming lower than market rates for the average oil price while preparing budgets — a conscious strategic choice.

Stronger income coupled with relatively lower than actual spending would pave the way for record surpluses and thereby add to the SWF corpus. In 2013, all GCC countries except for Bahrain registered budgetary surpluses.

Not surprisingly, GCC countries are conservative about their international investments. Of these countries with sizeable SWFs, Qatar stands out for publicising its international investments as demonstrated in the buying of Harrods in 2010 for about $2.3 billion.

Undoubtedly, fellow Arab states get priority when it comes to viable projects. This is particularly the case of the Wessal Capital scheme involving Morocco, and funding from the UAE, Qatar and Kuwait, and, more recently, Saudi Arabia.

With a capital of $3.4 billion, the innovative project is designed to assist Morocco meeting its Vision 2020 through strengthening the country’s tourism sector. The scheme aims at setting up residential units, hotels and other tourist sites in numerous parts of Morocco.

Without a doubt, the GCC not only possess substantial wealth, but share these with others.

The writer is a Member of Pariament in Bahrain.

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