Middle East poised for dramatic growth

May 27th, 2008 - 3:47 pm ICT by admin  

Dubai, May 27 (IANS) The Middle Eastern economy is poised for remarkable growth with potential investment capacity, in both private and public sectors, reaching approximately $4 trillion, according to a global management consultant firm, WAM news agency reported Tuesday. Noting that the high investment power is largely linked to Sovereign Wealth Funds (SWF), a survey by A.T. Kearney strategic management consultant firm said the SWF assets has risen by 18 percent between 2006 and 2007 to reach $3.3 trillion and could well be a great help in tackling the western economic slowdown.

“In the short term, the SWF can help to absorb the liquidity crisis. In the long run, they will be valuable partners for Western companies to back their growth and to finance innovation” said Cyril Garbois of the firm..

Middle East SWF accounts for half the total amount, the report noted and added that the funds are expected to reach $5 trillion in 2010 and between $10 and $15 trillion in 2015.

This dramatic growth is supported by rising oil revenues and by increasing foreign exchange reserves of some Asian countries that could come handy in the wake of an economic slowdown in the West, the report said.

The objectives of these funds are to protect the budget and the economy from excess volatility in exports and/or to diversify from non renewable commodity exports.

Early this year, SWF from Asia and Middle East injected billions of dollars of new capital into troubled financial institutions in the West and contributed to stabilising an imminent economic collapse.

The A.T. Kearney report points out that investors from developing countries typically promise to make significant capital investment to grow the business. This approach usually offers a more attractive value proposition for the management team of the targeted firm.

“With $4 trillion available in the Middle East for investment and very healthy sovereign wealth funds, the outlook for economic development in the region is very positive,” said Alexander von Pock, manager of financial services, A.T. Kearney Middle East.

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