Gulf wealth funds may cut inv'ts in the West - Al Suwaidi

UAE central bank governor Sultan Bin Nasser Al Suwaidi, whose country is home to one of the world’s largest sovereign wealth funds, the Abu Dhabi Investment Authority, said sovereign wealth funds may become more “passive” investors in the West and may stop investing in Western companies altogether. He spoke at a conference in Dubai late Monday. “Sovereign Wealth Fund source countries should also be interested in investing in mega projects in the region for three reasons.”

“The global financial crisis proved that investments through industrialized advanced countries’ investment banks are not totally risk-free.”

“There is a need within SWF source countries to safeguard flow of food imports at reasonable prices, and the possibility for incorporating companies as direct investment projects in countries in the region is a realistic possibility, when investment laws are enacted and maintained at international standards.”

“SWF source countries should be interested in the maintenance of social order, peace and stability in the regions of this area.”

“Another reason that makes me think that SWFs from our region might change the flow of their direct investments, is that once we see the proposed regulations re sovereign wealth funds in the industrialized advanced economies start being implemented, more questions will be asked and more forms will become necessary to fill and more disclosure and transparency will be demanded. This behavior will signal that there is no strong need for foreign capital in the West, and that the political mood has changed.”

“Therefore, we might see gradual tightening of the scrutiny on capital flows from SWF countries at one stage, especially funds that are destined for direct investment in certain companies.”

“Faced with all this nonsense, SWFs will certainly come to the conclusion that it is time to change strategy. This could make SWFs avoid direct investment in certain companies, or even avoid direct investment in all companies, and become more of passive investment vehicles in the West. As SWFs have large sums to invest, this might make them a direct part of their investments to existing or newly created companies in the region. This situation, if it happens soon, will lead to creating a new regional development cycle.”