For the West, Gulf the saviour in this time of crisisNovember 1st, 2008 - 2:06 pm ICT by IANS
Dubai, Nov 1 (IANS) As the world grapples with a financial crisis and the word liquidity has entered the common man’s vocabulary, Western powers are increasingly looking to the Gulf to shore up their economies.Gulf countries are emerging as important contributors to the global financial system even as top American and European economic policymakers have started visiting this region in the wake of the crisis.
US Deputy Secretary of the Treasury Department Robert Kimmit, who came on a whirlwind five-country tour of the Gulf this week, said his country was looking for investments from sovereign wealth funds.
“I am taking the time to meet with sovereign wealth funds (SWFs) and other investors looking for opportunities in the United States to make clear we are open to investment that is done on a commercial not political basis and that does not raise security concerns,” Kimmitt said here this week.
Middle Eastern SWFs account for four of the top six commodity-based SWFs in the world with a combined value of $1.74 trillion.
Among the major SWFs in the Gulf are the Abu Dhabi Investment Authority and Dubai World in the United Arab Emirates (UAE), the Kuwait Investment Authority, the Qatar Investment Authority, Saudi Arabia Sovereign Wealth Fund and Bahrain’s Mumtalakat.
Kimmitt also went on to add that the US was more open to foreign investment now than before.
His comments assume significance given that in 2006, Dubai-based DP World, the world’s fourth largest port operator, had to abandon its bid to manage six ports in the US following immense political opposition.
“That controversy made clear to US policymakers the importance of reconfirming our commitment to open investment and of taking proactive steps to respond to the lessons learnt,” the US treasury deputy secretary said.
And he did not hold back statistics at this time of crisis to emphasise the importance of foreign investment for the US economy.
According to Kimmitt, foreign firms employ 5.3 million US workers. These workers generate 19 percent of American exports, 14 percent of spending in research and development, 11 percent of capital investment and 13 percent of corporate tax revenue.
Meanwhile, US Secretary of Treasury Henry Paulson, in an interview to the Oxford Business Group (OBG) for “The Report: Abu Dhabi 2008″, said that the Gulf nations, flooded with surging oil revenues, have a historic opportunity to make investments in foreign countries.
According to him, these revenues are helping the Gulf nations to “shore up their economic fundamentals…and make much-needed investments in human capital - steps that should help avoid the up-and-down cycles of the past and support significant sector-wide growth”.
“Nowhere is this more evident than in the UAE, where a vibrant, diversified economy is reflected through innovative construction and services growth,” Paulson said.
He also assured Gulf and Middle East leaders that their will to liberalise would be matched by an American attitude of openness.
“Some worry about growing protectionist sentiment in the US. My response is the same as that expressed by President Bush - as we seek to open new markets abroad, so the US will keep its markets open at home to diverse foreign investment.”
German Foreign Affairs Minister Frank Walter Steinmeier, who was also on a visit to the UAE this week, called on Gulf countries and emerging economies to become more involved in reforming markets.
Admitting that the G8 group of industrial nations could not end the crisis on its own, he said: “We hope we can ensure the support of the Gulf region countries. We need them if we are to establish an international system of rules.”
After the Americans and the Germans, it is now the turn of the British to come looking for funds in the Gulf.
British Prime Minister Gordon Brown will be embarking Saturday on a tour of Saudi Arabia, UAE and Qatar seeking support for his plan to have an expanded International Monetary Fund (IMF) as a bailout package.
“It’s countries that have got substantial reserves, the oil rich countries and others who are going to be the biggest contributor to the fund,” he was quoted as saying in reports published ahead of his visit.
Brown’s visit should be interesting given that he had touched some raw nerves in the Organisation of Petroleum Exporting Countries (OPEC) after he opposed OPEC’s decision to cut output from Nov 1 as oil prices touched $60 a barrel this week.
OPEC secretary general Abdalla Salem El Badri, at a conference in London this week, had expressed surprise that the world was looking at Opec countries to meet this crisis.
“This crisis created in the (United) States must be solved within the States,” he said.
However, UAE’s Foreign Minister Shaikh Abdullah Bin Zayed Al Nahyan has said that the UAE was ready to come to the world’s rescue at this time of crisis.
Following his meeting with Steinmeier in Abu Dhabi Thursday, he said: “The UAE will employ all means to head off the global financial crisis, be it through bilateral cooperation with the country’s friends and allies or through international financial institutions.”
Though he did not outline any bailout package, he said: “We are part of a global system and this entails obligations…We are also interested that the world witnesses auspicious growth to achieve the Millennium Development Goals (set by the UN).”
He added that the Gulf nations have entrusted Saudi Arabia’s King Abdullah Bin Abdulaziz to convey the region’s ideas for mitigating the crisis sparked by the credit crunch in the West.
Saudi Arabia is the only member from the Gulf in the Group of 20 nations, which will gather in Washington for an emergency meeting Nov 15.
Tags: abu dhabi investment authority, economic policymakers, kimmit, kuwait investment authority, political basis, political opposition, port operator, secretary of the treasury, secretary of the treasury department, united arab emirates