Investment funds in Arab countries

The Peninsula Newspaper Wednesday, 23 May 2012 06:27 The experience of the UAE to invest in Europe and especially in Germany is worthwhile to be pursued as it completes the process initiated by the other GCC countries in the use of financial returns from higher oil prices and investment in industrial companies, and real estate, financial, economic and sports sectors. But the fear lies in the welcome by the West at the beginning of the crisis as the drowning person asks the help from the passengers on the ship, in order to try to burn it after a helping hand was extended to him. We have the experience of DP World in the United States yesterday and Qatari investments in France today and such experiences serve a lesson for us for a long time. (1) The recent studies and statistics estimated the balance of Gulf sovereign funds at $2trn. The American Institute of International Finance confirmed that 36pc of the total cumulative volume of Gulf assets has been pumped into the global markets during the last five years, and Europe attracted 55pc of financial flows from the Gulf States, while the Middle East, including the Arab states acquired 11pc of these flows. The investment activity of the Gulf funds resulted in increasing the savings and led to increase the international liquidity by more than 44pc to contribute to moving the global economy and saving the troubled Western banks as a result of its involvement in the mortgage securities. It is noted that the economic media and newspapers in Germany are racing to distribute the titles on Arab investment, especially from the UAE as it has been called the “White Horse”, “potential saviour” and “guardian angel”. The UAE investments have been diversified as they acquired “Man” complex and became the first contributor to the “Daimler” group for the automotive industry. The UAE also invested in a factory specialised in solar energy. The official statistics indicate that the UAE is the first trade partner of Germany among the Arab countries, whereas the volume of trade exchange between the two countries reached $11bn in 2011. Heino Viesa, a specialist financial advisor pointed out that a lot of small investors in Europe and especially in Germany who no longer get loans from the banks are trying to get money from the Arabs or the Russians as they are the only ones who still have money and cash. There is the fear that the sudden fluctuations can occur in Berlin with Abu Dhabi as they occurred in Paris with Doha, as the Qatari investments, after they were welcomed and praised and the red carpet was laid on the road to the Elysee Palace, were criticised a lot because the French media termed those investments as “hegemony”, “expansion” and “invasion”. Qatar’s name not only became the investment system that raises many frightening questions in the mind of a French individual, even in the neighbourhoods inhabited by poor families for which Qatar tried to contribute to the provision of humanitarian support and assistance through the allocation of fund for development and assistance. (2) But is the investment in Europe meaningful, and is it better than the United States or Asian countries such as China, India or even Brazil, and will that help to improve the stereotype image and change the negative perceptions, which turned into a frightening bogeyman linked to the term (Islamophobia and Arabophobia) as that perception occupies a large area of the mentality of Western society. The recent criticism came in the words of the US President Barack Obama, who pointed out that Europe is still suffering from the repercussions of the financial crisis, because it did not adopt the procedures to stand up like the United States. The latest data released by the European Commission, pointed out that the biggest partners of Germany in the euro zone, France, Italy, and Spain, would be unable to fulfill the objectives of the European Union, because of the budget deficit for next year. It is supposed that in 2013 France and Spain will reduce their budget deficit below the barrier of 3pc of GDP, while Italy will undertake to achieve a disciplined budget by the same year. The American newspaper “Washington Times” confirmed that the victory of the socialist Francois Hollande in the presidential election in France and the harsh defeat of the supporters of austerity plans and financial rescue for Europe in France and Greece, confirm that Europe will remain mired in the financial problems plaguing the continent for several months. The newspaper said that Europe, which set up its development and well-being on the shoulders of the private sector, has refused to ease the burden on this sector, which can generate significant growth opportunities, as a result of rejection of European politicians to abandon the idea of control, which eventually led to a contraction of the economies and high unemployment rates. The basic problem in Europe, especially in countries such as Italy, Spain, Ireland, Greece and Portugal is that the borrowing cannot get them out of the debt. The newspaper pointed out that apart from Germany and the Netherlands, which have shown the signs of limited growth, all the countries of the European Union are suffering and even if these countries were able to relatively get out of the vortex of recession and economic downturn, they will continue to face the huge structural deficit. (3) According to the Institute of sovereign wealth funds there are 55 sovereign funds in the world and fourteen of them are stationed in the Gulf Cooperation Council (GCC). According to the estimates by the Institute of sovereign wealth funds a number of Arab countries own sovereign investment funds with huge estimates as the investment value of the funds of the authority of Abu Dhabi is estimated at about $627bn and the value of sovereign fund of Saudi Arabia reaches about $440bn. The investment authority of Kuwait owns more than $200bn and the Qatar Investment authority has more than $85bn, and Algeria’s “Fund revenue management” have around $57bn. The managers of the investment funds must think outside the traditional framework and invest in different areas and new places. The Minister of Trade and Industry in Rwanda, Francois Kanimba at the International Forum of investments held in conjunction with the United Nations Conference on Trade and Development in Doha recently said, “We have created a good environment, but we have not seen any influx of direct investments”. The Arab countries after the revolutions are also in need of internal investment in the region and the advancement of education, health, agriculture, industry sectors and the elimination of unemployment, poverty and diseases, so why are the Arab countries investing in other countries.