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Thu 30 Oct 2008 04:00 AM

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Any port in a financial storm

Until recently the whipping boys of US politicians, sovereign wealth funds are being invited to the party once again.

Until recently the preferred whipping boys of xenophobic politicians in Washington, sovereign wealth funds are now being invited to all the fashionable parties again.

The world's SWF's now control about $3.6 trillion worth of assets - predicted to grow by 15 percent per year and reach $10 trillion by 2015.

Such colossal numbers are proving beguiling for world leaders as they struggle to find solutions amid the worst financial crisis in 80 years.

The world’s SWF’s now control about $3.6 trillion worth of assets — predicted to grow by 15 percent per year and reach $10 trillion by 2015.

As deputy US Treasury secretary Robert Kimmitt toured around the region on an SWF charm offensive last week, British prime minister Gordon Brown was encouraging those same states to help stump up the cash needed by the IMF to deal with the global financial meltdown.

It must have felt a bit like eating humble pie for Kimmitt as he reassured Gulf-based sovereign wealth funds that their investment was now welcome.

That wasn't the message two years ago when Congress threw out an attempt by a Dubai company to run American ports. A lot has changed since then and those same congressmen are happy to drop anchor in any port during the financial storm they find themselves in - even if most of them happen to be in the Arabian Gulf.

Similarly placatory noises are now also emerging from the UK.

Earlier in the week, Gordon Brown told a group of economists at London's Imperial College that sovereign wealth funds existed not to "gain political power by making decisions of a political nature", but simply to "get an adequate rate of return".

He went on to say that they represented a big means of securing future investment through technology transfer while also giving oil countries a hedge against the falling price of crude.

Yet until now, the only real example of such a technology transfer happening was the $8bn commercial finance fund announced between GE and Abu Dhabi's Mubadala in July.

Back then Mubadala announced it intended to become a top 10 shareholder in GE through stock purchases. The share price of GE subsequently declined by about 32 percent between July 22, when the deal was announced, and when Arabian Business went to press this week.

Since then we have heard nothing of when or how that partnership will materialise and neither could visiting GE executive Charlene Begley shed any more light on the proposed partnership when she visited the UAE last week.

Other than the GE announcement and the move by Qatar Investment Authority to invest in Credit Suisse Group in October, the sovereign wealth funds have been reluctant to catch a falling knife.

The ports may be open again, but perhaps the West will find that the SWF boats have already sailed.

Sean Cronin is the editor-in-chief of Arabian Business English.

mohammad 11 years ago

A really good article, shedding the light on how the west now is begging money to be saved. Couple of years ago, US refused "free "money from Dxb and now they find themselves dire with only gulf money to bail tem out..sorry, tHE GULF SHOULD INVEST THE MONEY elsewhere and let the west deal with his issues

mohammad UAE 11 years ago

Rightly said by the author, when DP 2 years ago pitched in in that infamous deal, everybody opposed. It is our time to say no. No money for you..You created this mess, fix it!

Jeremey Morahan 11 years ago

Will the GCC countries help those in need that aren't from the West? There are many other countries in financial difficulty currently e.g Afghanistan, Turkey and Pakistan. If they want to be seen as world leaders they should act like it.

S AHMED 11 years ago

The original story of Dubai buying US ports 02/17/nyregion/17ports.html