Business | Investment
US seeks Gulf investment to tide over financial crisis
A top US official made a strong pitch on Tuesday for Gulf Arab investment.
- By Shakir Husain, Staff Reporter
- Published: 23:31 October 28, 2008
- Robert Kimmitt, Deputy Secretary of the US Department of the Treasury, calls for collective efforts to rebuild confidence in the markets at a press conference held at the Dubai Investment Financial Centre on Tuesday.
- Image Credit: Arshad Ali/Gulf News
Dubai: A top US official on Tuesday made a strong pitch for Gulf Arab investment and promised them better treatment than meted out to Dubai port operator DP World more than two years ago as America tries to overcome turmoil in its financial system.
Robert Kimmitt, deputy secretary of the Treasury, told a gathering in Dubai that the crisis is not limited to the US and Europe, but "has ramifications for all countries, including in the Gulf".
Kimmitt called for collective efforts to rebuild confidence in the markets and stressed investment funds controlled by governments in the region had a role to play in this.
If sovereign wealth funds (SWFs) continue their "over five decades of track record of investing on sound commercial basis both in the US and elsewhere", they can contribute to spurring global economic growth, he told reporters.
In recent months, there has been increased scrutiny of SWFs in the West with concerns about the possibility of their investments being made on political rather than on commercial considerations.
Kimmitt said a set of principles developed recently after a meeting of 26 countries that operate SWFs and with the involvement of the International Monetary Fund, will promote better understanding of such funds and underscore their commitment to global financial stability and free flow of capital across borders.
The US official's regional tour also covers Saudi Arabia, Qatar and Kuwait.
Trying to allay investor fears about US politics that has thwarted some high-profile acquisitions of US assets by foreign companies in the past, Kimmitt said the system that vets transactions for national security concerns has become more efficient.
In 2006, DP World was prevented from managing six US ports it had acquired as part of the P&O deal. That debacle led many in the Arab world to believe that Arab investors faced discrimination in the US.
Kimmitt tried to address the issue again with the promise that "much has changed, and changed for the good, in the two and half years" since then.
"That controversy made clear to US policymakers the importance of reconfirming our commitment to open investment and of taking proactive steps to respond to the lessons learned," he said in his remarks at the Dubai International Financial Centre (DIFC).
Although the P&O deal had been cleared by the Committee on Foreign Investment in the United States (CFIUS), which scrutinises sensitive foreign takeovers of US businesses, opposition from Congress politicians made it virtually impossible for the Dubai firm to conduct business in the US.
Kimmitt asserted Washington has improved its internal processes as to how cases are handled among the agencies that constitute CFIUS.
He said there were 2,000 acquisitions by foreigners in the US in 2007 and only 125 came before CFIUS and none was blocked.
From 2005 to 2008, CFIUS has reviewed or is reviewing 30 cases from Middle Eastern countries. Twenty of them involved foreign government control and only six went into a second stage review. Just one came before the US president and none was stopped, the US official emphasised.
"I lay out this important track record because investment from the Gulf region is playing a growing role in the success of the US economy," he explained, adding that his country received $7 billion in investment from the Middle East and North Africa last year.
While the US may have removed some deficiencies from its system, it remains to be seen if that is enough for Arab investors to put their money in the US in the current turmoil.
Many Gulf investors are waiting for asset prices in the US to fall further.
DIFC governor Omar Bin Sulaiman noted funds in the region are "trying to understand whether it [crisis] has reached the bottom."
Do you expect Gulf investors to play a bigger role in the aftermath of the global financial crisis? Should Gulf investors bail out the US? Or should they focus on the regional market?
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