Until the 1990s, West Asian SWFs were largely risk-averse investors abroad, investing primarily in dollar-denominated United States Treasury bill holdings. Their role was mainly to support economic stabilization, particularly in the 1990s when oil prices fell to around $10 per barrel. For example, the Saudi Arabian Monetary Agency, which has been accumulating surplus oil revenues since the 1970s, helped fund expansion in Saudi Arabia throughout the decade of low growth from 1980 to 1990. The Kuwait Investment Authority emerged as the main driver of the country’s rebuilding efforts in the aftermath of the first Gulf War.

In the late 1990s, GCC governments decided to reduce their dependence on oil by diversifying their investments. With fewer immediate possibilities at home, their SWFs started investing in relatively riskier assets abroad, such as stocks and real estate. This trend gained strength as oil prices started to rise at the beginning of the 2000s, and grew stronger with increased globalization. With oil prices rising further, the strategies of SWFs sought not just to support economic stability and investment diversification, but also to maximize returns, which drove most of them to undertake riskier investments.
The recent oil price boom also led some SWFs to adopt a new approach, using part of their financial surplus to invest in industries that their governments perceive as particularly relevant for the development and diversification of their national economies. This led the more proactive SWFs to seek greater involvement in managing the companies in which they invested. Recent examples of proactive investors include Mubadala Development Company, Dubai Investment Corp (both United Arab Emirates) and Qatar Investment Authority (QIA). Mubadala, for instance, was created in 2002, and over the past few years it has used its assets to develop a network of international and domestic partnerships in numerous industries, including energy, automotives,
aerospace, real estate, health care, technology and infrastructure and services. These are industries that benefit the United Arab Emirates’ overall economic development objectives. For example, in acquiring a 5% stake in Ferrari in 2005, it improved the potential for increased tourism in Abu Dhabi in the form of the Ferrari theme park. It has also invested $8 billion in an R&D partnership with General Electric (United States), which in turn has committed to increasing its investments and transfer of technology to the United Arab Emirates.
However, the recent collapse of real estate and equity markets has generated large losses for SWFs (table II.14), but it also offers investment opportunities. It is too early to gauge the impact of the financial crisis on the investment strategies of these funds. Some have helped European and North American banks weather the crisis,a but, after sustaining large losses,b they have become more cautious in their investments abroad and are switching to investments in support of their local economies. Others are continuing to engage in strategic investments by making smaller scale acquisitions that support their national economic development objectives
(see section d).
Source: UNCTAD

KUWAIT, Dec 5, (RTRS): Divisions within Kuwait’s ruling family are exacerbating a political crisis that has paralysed legislation and threatened economic reforms in the OPEC state, lawmakers, analysts and diplomats said. Last month, the cabinet resigned after deputies moved to question the prime minister, a senior member of the royal family, over mismanagment charges and allowing the visit of an Iranian Shiite cleric to the Sunni-ruled country. “The political crisis in Kuwait is difficult to relate to one factor, but no doubt the infighting in the ruling family and their disagreement is one of the main causes,” Islamist parliament member Faisal al-Muslim said. Other MPs, speaking on condition of anonymity, echoed those sentiments. Kuwaiti newspapers often report that members of the ruling Al-Sabah family have encouraged MPs to grill ministers in order to weaken the government and boost their own influence.

“There is interference by some members of the ruling family to stir up trouble for the prime minister,” said liberal MP Ali al-Rashid. A senior Western diplomat who regularly speaks to Al-Sabah family members agreed: “You hear it again and again from Sabah members that some of them are trying to use lawmakers to stir trouble as they want to hold key posts in the country,” he said. The standoff is the latest in a series of rows between parliament and the government, which have in the past often led to ministers’ resignations, cabinet reshuffles and the dissolution or even suspension of parliament.
This time, HH the Amir Sheikh Sabah Al-Ahmad Al-Sabah, who has the last say in politics, is expected to accept the resignation and reappoint his nephew Sheikh Nasser Al-Mohammad Al-Sabah as prime minister but no new lineup is likely to be unveiled until the new year.

Repeated political bickering is threatening long-awaited economic reforms, such as the creation of a regulator for the bourse that has shed over 30 percent of its value this year. Such reforms have been made even more urgent by the global financial crisis, which has already forced the government to step in to rescue one of the Gulf Arab country’s largest banks.

Kuwaiti rulers have dissolved parliament five times since it was formed in the early 1960s and suspended the assembly in 1976 and 1986 for several years to end crises in the US ally. The Amir dissolved the last assembly in March and called fresh elections in May but tensions have bubbled up again. There are no political differences between the two wings but deputies and diplomats said some senior members of the Al-Sabah family want to play a bigger role and use parliament as a way to target the government. “I’ve heard it twice from Sabah sources that some members try to persuade MPs to submit questioning requests to provoke a dissolution,” another Western diplomat said. Others say some discontent may stem from the fact that the Salem wing is currently represented in only one key job – that of foreign minister.

“The ruling family is not united,” said political analyst Ali al-Baghli, a former oil minister. Sheikh Sabah has appointed his brother HH Sheikh Nawaf Al-Ahmad Al-Sabah as crown prince and his nephew Sheikh Nasser as the prime minister, which means that the top three Al-Sabah officials now all come from the Jaber wing. Analyst Shafiq al-Ghabra said there were also differences within the political and business elite over whether Kuwait should open up to become a major commercial hub like Dubai, or adopt a more conservative approach. “There are different views about what to do,” said Ghabra, who heads the American University of Kuwait. Islamist and tribal MPs, who increased their grip on parliament in the May elections, often raise motions to strengthen Islamic values in education and have blocked government plans to explore some northern oil fields, partly because some object to the involvement of Western firms.

Copyright The Financial Times Limited 2008

By EDITH M. LEDERER , 11.21.08, 05:50 PM EST

Libya wants to open a new chapter in relations with the United States by investing some of its $100 billion sovereign wealth fund in U.S. companies and sending thousands of students to study in America, the son of Libya’s leader said Friday. In an interview with The Associated Press, Seif al-Islam Gadhafi also outlined plans for Libya to move from the one-man rule of his father, Moammar Gadhafi, to a constitutional democracy as part of the country’s modernization process.

The younger Gadhafi said he expects a constitution providing for democratic elections to be adopted by September 2009 – the 40th anniversary of the 1969 revolution that brought his father to power. He said he also expects Libya to reform its central government and follow a model similiar to the U.S. federal government, with strong regional and local governments.

Seif al-Islam Gadhafi, who was a key figure in normalizing Libya’s relations with the United States, stepped from the political stage in August and is on a private visit to the United States. But his visit had definite political overtones, including meetings with Secretary of State Condoleezza Rice and other administration officials as well as about 30 members of Congress.

It also coincided with Friday’s confirmation of Gene Cretz as the first U.S. ambassador to Libya in 36 years. Gadhafi was in Washington Thursday when the Senate approved the appointment after it was confirmed families had received full compensation from Libya for the loss of relatives in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland. The bombing killed 180 Americans.

This week’s events – including an unprecedent phone call between Bush and Moammar Gadhafi – capped a halting, five-year rapprochement between the two countries that began in 2003 when the Libyan leader renounced terrorism and weapons of mass destruction. The process gained traction in August when the U.S. and Libya agreed on the compensation deal.

The younger Gadhafi, who also met with human rights and environmental groups, said his main message was: “We are good people, and nice. We’ll make business. We’ll invest, and we have friends here in the states and we have a new chapter in the relations.”

He said Libya’s new sovereign wealth fund, a government-owned investment fund with almost $100 billion, “wants to invest here in America” despite the current financial crisis.

DUBAI – The UAE accounts for 50 per cent of GCC foreign debt repayable in 2009, a study by Merrill Lynch economists said. GCC countries have an estimated $15 billion in foreign debt (bonds and loans) that needs to be repaid over the remainder of this year and a further $35 billion in 2009.

“The majority of outstanding debt comes from the UAE at 91 per cent and 50 per cent for 2008 and 2009 respectively while Kuwait and Saudi Arabia make up the rest of the debt for 2009 (22 per cent and 10 per cent, respectively),” Merrill Lynch economists said.

According to their report, state-owned companies account for 92 per cent of the total debt to be repaid this year and 61 per cent for next year.

“Despite their deep pockets of savings, the rapid change in the global financial scenario puts GCC countries in a tight corner. The level of private sector indebtedness has increased sharply since 2007, especially in the UAE. Given the deepening credit crunch, redemptions in the pipeline, and the surged investment activity, funding has become an issue for GCC countries,” they said.

They noted that the drop in oil prices was not only deteriorating investor sentiment but also limiting money and credit growth.

“As oil prices and excess liquidity created by oil windfall reverse, the region’s hot real estate market will come under pressure as asset bubbles continue to deflate elsewhere. Though governments inject liquidity into the system to ease short-term funding constraints and weather the strong headwinds, lower GDP growth in both oil and non-oil sectors seems inevitable,” they said.

Although GCC countries are better positioned for the global downturn this time around, the net impact will still be lower growth and smaller surpluses, they pointed out.

“The UAE, as the most open and most leveraged economy in the GCC, will be more adversely affected. As the tourism and trading hub of the region, global downturn should negatively impact the UAE the most. As such, we cut our 2008 and 2009 GDP growth forecasts to 6.8 per cent (from 7.2 per cent) and to 4.5 per cent (from 6.8 per cent), respectively.”

They expect GCC’s GDP growth to slow to 4.5 per cent in 2009 from 6.2 per cent this year. “Assuming oil prices at $90/bbl in line with our house view, the region should still enjoy a current account surplus of 20 per cent of GDP and a budget surplus of 15 per cent of GDP.”

The lowest breakeven oil price that would bring 2008- 2009 budgets into balance in Saudi Arabia is $30/bbl, followed by the UAE at $40/bbl and Qatar at $55/bbl). This means that Saudi Arabia can maintain the current level of budget spending even if the oil price were to fall to $30/bbl. The highest breakeven is in Kuwait ($75/bbl), but that is mainly due to the one-off budget transfer of $20 billion to capitalise the social security system in FY08/09. The average breakeven for GCC is $50/bbl.

Published Date: October 13, 2008
By B Izzak, Staff Writer

KUWAIT: The National Assembly’s financial and economic affairs committee yesterday commended in a marathon seven-hour meeting steps taken by the Central Bank to ward off the effects of the global financial crisis. The meeting was attended by the finance and commerce ministers, governor of the Central Bank, managing director of Kuwait Investment Authority and several economists, members of the Chamber of Commerce and Industry, Kuwait Economic Society, Kuwait Banking Association and others.

The central bank has used monetary tools at the right time and that helped reduce the extent of losses,” head of the committee MP Nasser Al-Sane told reporters following the meeting. Sane said MPs called on the government to inform the Assembly of decisions taken regarding the financial crisis in order for these measures to be transparent and have full impact on the market. Finance Minister Mustafa Al-Shamali said the government explained to the committee measures that have been taken by the government in
the past few weeks, adding that “we will continue to do what we have been doing”.

The Kuwait Stock Exchange meanwhile rebounded strongly at the end of trading yesterday to trim most of early big losses that sent the index crashing more than 400 points, affected by regional stock markets. The Index closed the day down just 47 points, or 0.34 percent, at 11,858 points. In the past few days, the central bank has pumped more than KD 400 million into local banks to help them meet cash shortages.

It also cut discount rates by a large 1.25 percentage point to 4.5 points and raised the lending cap for local banks from 80 percent to 85 percent of deposits. The two decisions made lending cheaper and provided local banks more cash available for lending. The Kuwait Investment Authority (KIA) has also pumped hundreds of millions of dinars through investment funds and companies to buy shares on the stock market in a bid to boost the declining market.

Meanwhile, MP Abdulaziz Al-Shayeji inquired in a question to the finance minister about the losses of Kuwaiti investments abroad, estimated at around $300 billion as a result of the global financial crisis. In a related development, MP Nasser Al-Duwailah yesterday called for the establishment of a national salvation committee to deal with the crisis in the Kuwait Stock Exchange, adding that the committee should be headed by Foreign Minister Sheikh Mohammad Al-Sabah.

Duwailah also called for forcing Kuwaiti banks to merge to be able to overcome “the financial storm because banks will not be able to face the crisis individually”. The lawmaker also proposed that Kuwait banks should merge with Saudi banks. He said that the current crisis is huge and that the Kuwaiti economy has been affected not because it is weak, but because it is linked to the global economy.

Duwailah warned that the crisis is not in the stock market only but in the whole economy, which is affected by global economic developments. The lawmaker claimed that the value of assets in the world has dropped sharply because of the current crisis and that “Kuwaiti assets which were worth $300 billion before the crisis are now worth between $25 and 75 billion”.

Shamali earlier told Al-Anba that the Arab world’s second-largest bourse would recover after the government took measures to bolster flagging shares, adding that it was time to buy into the market again. “Kuwait is economically safe and the Kuwait bourse is one of world’s best exchanges,” Shamali said, adding that the KIA would be one of the main supporters of the market.

Al-Qabas said in an unsourced report that KIA had given the green light to invest an extra KD 1 billion ($3.73 billion) in the stock market after having spent KD 280 million in a first step. Several newspaper reported other government institutions, such as a social wealth fund, might invest on the local bourse as well.

Separately, Al-Watan said in an unsourced report that the central bank has temporarily allowed borrowers to increase monthly interest and repayment installments to as much as 60 percent of their salaries. The central bank had limited such payments to 40 percent in March in a bid to curb credit growth as part of efforts to tackle inflation.

28/09/2008 00:20:00
Speaking after a meeting of the Libyan Investment Authority (LIA) on Monday, the Secretary of the GPC Mr. Al-Baghdadi Al-Mahmoudi said that Libyan investments abroad were not hurt by the turmoil in the financial markets around the globe.

He said the meeting of the Council of Secretaries of LIA, which took place on Monday 22 September, made a comprehensive review of Libyan investments and deposits around the world and concluded that they were not hurt.

“I would like to reassure you that we have not been hurt by the World Financial Market’s crisis and that none of Libya’s investments have been affected as well,” he said.

Al-Mahmoudi said the reason why the investments remained sound is due to the measures that have been undertaken by Libya’s foreign investment policy makers.

“As you know, the Libyan Investment Institution was recently originated; consequently it has not started any high-risk project.

So far it has been focusing on low-risk projects with good earnings; accordingly, we have not been influenced by the current situation of the international markets,” he told reporters in Tripoli.

He also said due to the fact that LIA is newly established, it did not went after high risk deals or ventures and in that way it remained secure.

The LIA meeting also review a future plan focused on how further protect Libyan finances and assets in the face of similar financial crises in the world.

Among the measures agreed upon in the meeting are the adoption of medium-risk investment projects with desirable revenues and limited time periods, the distribution of Libyan investments over various regions in the world and not to be concentrated in one.

On his part, the CEO of the LIA told reporters that among the measures also are to adopt other currencies beside the Dollar in its dealings and also for its currency reserves including the Euro, Sterling, Swiss Franc. He also said that the Dollar would remain a major currency in Libyan investment dealings.

He also said that LIA is still new institution and currently under structuring and organization and that it has contracted an international consultant to structure it.

http://tripolipost.com/articledetail.asp?c=1&i=2407

LONDON, Sept 28 (Reuters) – The Qatar Investment Authority has bought a 20 percent stake in British property company Chelsfield Partners LLP, boosting the Gulf state’s interest in commercial real estate, the two partners said on Sunday.

Chelsfield, which owns London’s Camden market among other notable properties, was formed by Elliott Bernerd and Stuart Lipton, who together created Chelsfield Plc — a listed business that was taken private three years ago.

No financial details of the latest deal were given but one person familiar with the situation said a newspaper report that the Qataris had paid more than 80 million pounds ($147 million) for the 20 percent holding was “exaggerated”.

Hussain Abdullah, executive board member of the Qatar Investment Authority (QIA), said property represented a core asset class for the sovereign fund and the investment in Chelsfield offered an opportunity to acquire further assets.

Bernerd said both Chelsfield and the QIA saw considerable opportunities becoming available due to present worsening market conditions.

The QIA, founded by the state of Qatar in 2003, already has some sizeable investments in British companies, including a stake in J Sainsbury (SBRY.L:) of approximately 27 percent, a stake in the London Stock Exchange (LSE.L:) of 15 percent and a 6 percent holding in Barclays (BARC.L:).

Its property interests include a 15 percent stake in Songbird Estates (SBDb.L:). (Reporting by Ben Hirschler; Editing by Paul Bolding)

By Ulf Laessing

KUWAIT, Sept 23 (Reuters) – Kuwait Investment Authority (KIA), the Gulf Arab state’s sovereign wealth fund, said on Tuesday it was eyeing investment opportunities abroad but was not in the business of bailing out struggling foreign banks.

Facing criticism in parliament for pouring $5 billion in January into Citigroup and Merrill Lynch, which has since been bought by Bank of America, Managing Director Bader al-Saad said KIA was seeking to benefit from lower asset prices due to the global financial crisis.

“Disasters in the United States, some European countries or Asian countries create investment opportunities in the real-estate sector, the financial industry or other sectors,” he told Al Arabiya station in a rare television interview.

“We are not responsible for saving foreign banks … This is the duty of the central banks in these countries. We have social and economic responsibilities towards our own country.”

Gulf Arab funds have lost billions of dollars by entrusting cash to Western banks in emergency capital-raising exercises this year and last.

But Saad said KIA had made up to $600 million from the initial public offering of credit card firm Visa Inc. In June, he told Reuters KIA had invested some $800 million in the Visa IPO.

He said KIA had made no losses from the Merrill Lynch deal but had lost $270 million on its Citigroup investment

KIA has brushed off criticism of its investments in U.S. banks by repeatedly saying it sees itself as a long-term strategic investor and approaches foreign investments from that perspective.

EYEING ASIA?

KIA, which manages the sovereign wealth of the world’s seventh-largest oil exporter, has pumped more than 100 million dinars ($374.7 million) into the local stock market to shore up falling share prices, he said.

KIA said last week it would boost investments in local stock market funds to support the Arab world’s second-largest bourse but had not disclosed how much money it could spend.

Naser al-Nafisi, General Manager at the al-Joman Center of Economic Consultancy, estimated KIA’s overall declared investments on the Kuwait bourse to be worth 3.4 billion dinars, making the recent injection look small.

Saad gave no details about possible investments in the United States, Europe and Asia but Kuwaiti officials have repeatedly stressed Asia would play an important role.

In 2006, Saad said KIA’s board had decided in 2005 to lift its Asia investments to 20 percent from 10 percent. No new target has been published since then.

Kuwait’s finance minister, Mustapha al-Shamali, said in July KIA was looking to boost investments across asset classes in Asia, particularly Japan, India and China.

A Kuwaiti delegation including Saad and Shamali went on an Asian tour earlier this year to boost economic ties and sound out new investments, including looking into farms to secure food supplies as the desert state grapples with rising import costs.

In August, Shamali told state news agency that KIA planned to as much as triple investments in Japan to $48 billion.

Nafisi said he was critical of KIA buying into the local bourse, saying the market should regulate and correct itself without intervention of a government vehicle. (Reporting by Lin Noueihed and Ulf Laessing, Editing by Swaha Pattanaik and Quentin Bryar)