The Institute of International Finance reported this week that the net foreign assets of the Gulf states stood at $1,800 billion at the end of last year and will almost certainly exceed $2 trillion by January of next year.
Wealth on this scale carries great leverage, and it is being used more wisely now than it was in the 1970s oil boom. Massive investments are being made in education, infrastructure and local industry, wisely when 80 million young people, out of a total of just over 300 million Arabs, are seeking work.
But even the Arab world’s hunger for investment would be overwhelmed by inflation if all the Gulf wealth went into local ventures. So the way in which Arab funds are coming to the rescue of the troubled American banks is not only profitable (witness the 11 percent interest being paid by Citicorp on its $11 billion from Abu Dhabi), but rational. The Gulf states have a stake in the U.S. economy. …
The varying approach of the Gulf states to this political question is symbolized by three Gulf leaders. Sheik Maktoum, the ruler of Dubai, says he learned from last year’s revolt in the U.S. Congress against U.S. ports falling into Arab ownership when Dubai Ports bought P&O.
"We analyzed our experiences and we now approach our international investments in a much more holistic manner," the sheik noted last week. "We take the time to analyze the social, political and economic landscape, identify the stakeholders and then carefully prepare the way by ensuring that the concerns of all parties are properly addressed."
Sheika Lubna al-Qasimi, minister of economics and planning for the United Arab Emirates and a shrewd and successful businesswoman in her own right, takes a tougher approach. In private meetings with American and European officials and with Western CEOs, she has made it bluntly clear that if Gulf investors meet more Dubai Ports-style opposition, they have plenty of opportunities to invest in India, China and elsewhere.
The third approach is that of Saudi Prince Alaweed bin Talal, who speaks softly but carries a big and profitable stick. He bought 15 percent of Citibank 15 years ago, when the Savings and Loan crisis plunged the United States into its last recession, and has more than quadrupled his money. He has now bought some more of Citigroup, along with the $7.5 billion stake Abu Dhabi bought six weeks ago. Access the full article>>