Gov't-owned GCC firms lose $118bn over last two years

Government-owned companies in the GCC lost around $118bn, or nearly 40 percent, of their value over the last two years, according to a report by the Kuwait Financial Centre.

The report found that the 51 government owned entities (GOEs) in the GCC together operate 179 companies across a variety of sectors and account for 29 percent of GCC market capitalisation.

Kuwait Financial Centre, commonly known as Markaz, compiled a list of GOEs in April 2008, known as ‘The Golden Portfolio’ and estimated their collective value at around $300bn.

A review of the same entities in 2010 showed that the economic downturn and the global recession has seen the portfolio of companies shrink in value by 39.3 percent to $181.944bn.

The GOEs vary in size and value, with the top ten accounting for 89 percent of the total value and Saudi Arabia’s Public Investment Fund (PIF) – the top GOE on the list – accounting for 40 percent.

Saudi Arabia is the biggest government operator in the GCC, with its ten GOEs having a market value of $109bn. This is followed by the UAE, whose ten GOEs are worth $28bn, while Qatar’s eight contribute $26bn and Kuwait’s ten are valued at $11.7bn. Bahrain’s nine GOEs are worth and $3.5bn Oman’s fourteen GOEs are collectively valued at $2.7bn.

The top five GOEs are Saudi Arabia’s Public Investment Fund ($71bn), General Organisation for Social Insurance ($$17.7bn), Emirates Investment Authority ($13.3bn) from the UAE, Qatar Investment Authority ($11.7bn) and Qatar Petroleum ($10.6bn).

The Public Investment Fund, the largest in the region, enjoys a 40 percent share in total, predominantly due to its 70 percent investment in Sabic, the largest capitalised company in the Middle East.

“Strong government presence in the stock market opens up a larger debate on their impact, both short-term and long-term. The holdings are mostly strategic and hence may sap free float thereby inhibiting efficient price discovery,” Raghu Mandagolathur, the head of research at Markaz, said in the report.

However, he added that “the companies in the golden portfolio may also enjoy government funding and may add more shareholder value in the long-term.”