By Joel Bowman
Leaders may use SWFs to fund infrastructure projects, create jobs for region's population, economist says.
Cash-rich sovereign wealth funds (SWFs) may look to redirect their sizable capital surpluses towards domestic markets in the future, according to a leading economist.
Antonina Antonova, economist with Societe Generale Asset Management, said Gulf leaders could use SWFs in order to fund much needed infrastructure projects and create enough jobs for the region's booming population, reported UAE daily Gulf News.
"The future volume of overseas investments [by SWFs] will depend on the amount GCC states would dedicate to domestic economies, which have consistently suffered from under-investment, lagging behind China, India and Brazil,” Antonova told the newspaper.
“In addition, regional leaders are also facing the urgent need to create four million jobs over the next decade for its growing population, 40% of whom are below 15 years old and need to be educated and employed."
Oil exporting states now control an estimated $2.5 to $3.8 trillion of foreign financial assets, with GCC countries accounting for a large portion of this, the newspaper said, adding that Gulf states' international reserves had grown from $90.5 billion in 2003 to $365 billion in 2007.
In the last year SWFs from the Gulf have begun to more aggressively target Western assets as government in the region look to diversify away from oil and gas.
SWFs came to the rescue of numerous US financial institutions in recent months as pressure from the wave of subprime loan defaults and foreclosures saw lenders post record losses.
State-run Kuwait Investment Authority (KIA) earlier this month agreed to invest $5 billion in Citigroup and Merrill Lynch & Company, both of which are struggling to cope with billions of dollars in writedowns from the subprime crisis.
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KIA joins the Abu Dhabi Investment Authority, which agreed in November to buy $7.5 billion of stock in Citigroup.