Terror attacks take toll on Gulf investments abroad
Arab Gulf investors incurred losses in excess of $40 billion on dollar investments in Western markets as a result of the devaluation of the American currency in the aftermath of the September 11 terrorist attacks, a recently published report by the London-based research organization Gulf Center for Strategic Studies asserts.
Saudi investments alone have lost $28 billion since mid-September, particularity in the mutual funds and the insurance sector, where considerable Saudi investments have been made, experts told Al-Iqtisadeya.
In response to a global market weakness, Gulf investors are expected to withdraw at least a part of their capital holdings in the West. So far an estimated one billion dollars’ worth of Gulf investments has been withdrawn, mainly from the United States, Gulf bankers told Reuters.
GCC nationals, largely from Saudi Arabia and Kuwait, hold some $800 billion in long-term investments in Western markets, nearly half of that total in the US alone. Such investors are likely to repatriate some of the funds, in view of US market uncertainty, lower interest rates and fears of an asset freeze, asserted National Bank of Abu Dhabi Executive Terrence Allen, quoted by the Gulf News . “Besides, local stock markets are improving in the Gulf, luring investments back," he added.
Generally inundated with liquidity, GCC local investment banks are mainly preoccupied with placing surplus funds outside the region. However, in recent years, the region faces a need for massive cash flow to develop infrastructures in line with high population growth. Most GCC states have thus recently moved to slowly open up and deregulate their investment environment, expecting to attract more FDI inflow and at the same time encourage the repatriation Gulf capital invested abroad.
American investments in the Gulf States are estimated at $6.5 billion, a mere 1.6 percent of the GCC capital invested in the US. Most of the American funds are injected to Saudi Arabia. Over 700 US companies have established presence in the six Gulf Cooperation Council (GCC) members—Saudi Arabia, Kuwait, the United Arab Emirates (UAE), Bahrain, Qatar and Oman. These joint GCC-US business operations employ some 25,000 US nationals and further support 950,000 jobs in the US.
But the investment environment in the Gulf is likely to change in light of recent events. In the 18 months prior to the September 11 attacks, Saudi Arabia attracted a total of nine billion dollars in investment, 16 percent of which came from abroad, said Prince Abdullah bin Faisal bin Turki al-Saud, chairman of the kingdom's General Investment Authority (SAGIA). Since the attacks SAGIA "has continued to register new projects, but not a single investor came from abroad," he added, according to AFP. — (menareport.com)
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