Commentary
Regulation, not embargo, allows Beijing to shape how other countries and firms adapt to its terms.
Alvin Camba
Source: Getty
Managing Arab Sovereign Wealth in Turbulent Times—and Beyond
Rethinking the wisdom of relying on unstable Western economies for growth, the Arab world is increasingly focused on the diversification of its own economies.
Published on Apr 30, 2009
Western political and economic leaders, seeking desperately needed capital for their faltering economies, have put aside many of their concerns over Arab sovereign wealth funds (SWFs). But the Arab world is questioning the wisdom of building its financial future on the shaky foundations of Western economies, and increasingly focusing on the development and diversification of its own economies.
In this Carnegie Paper, produced in cooperation with the Arab Reform Initiative, editors Sven Behrendt and Bassma Kodmani, and a group of Arab economists, discuss the economic, political, and social influences that will determine Arab funds’ investment behavior in the years to come.
Key points:
- Arab investment in strategic industries in Western countries will become increasingly cautious and selective.
- The Arab public is demanding more accountability and transparency from SWF managers, which will drive them also to invest in tune with the political sentiment in their countries.
- Arab foreign investments should complement domestic economic development and diversification agendas. They should develop a clear understanding of the markets that they seek to serve and adjust their foreign acquisition strategy accordingly.
- Arab fund managers should not scale back efforts to make their funds more transparent in light of reduced international pressure. As the G20 process indicates, all stakeholders in the global financial architecture would benefit from efficient and transparent global markets.
- Western political and economic leaders need a new sense of partnership and understanding for the development needs of the Arab world to attract Arab fund investments into their industries.
Behrendt concludes:
“Moving forward, the investment strategies of Arab SWFs will most likely be based on a more holistic approach. Ideally, this would include taking into account the long-term financial needs of their societies, the long-term development and diversification strategies of their economies, as well as the long-term opportunities of select industries to serve in global markets in transition.”
About the Authors
Sven Behrendt
Former Visiting Scholar, Middle East Center
Behrendt is an expert in global issues, international negotiations, conflict resolution, and corporate strategy. He previously served at the World Economic Forum in various management positions.
Bassma Kodmani
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie China
- Today’s Rare Earths Conflict Echoes the 1973 Oil Crisis — But It’s Not the Same
- How China’s Growth Model Determines Its Climate PerformanceCommentary
Rather than climate ambitions, compatibility with investment and exports is why China supports both green and high-emission technologies.
Mathias Larsen
- What’s New about Involution?Commentary
“Involution” is a new word for an old problem, and without a very different set of policies to rein it in, it is a problem that is likely to persist.
Michael Pettis
- The Chinese Investment Riddle: What Cities RevealCommentary
While China's investment story seems contradictory from the outside, the real answers to Beijing's high-quality growth ambitions are hiding in plain sight across the nation's cities.
Yuhan Zhang
- Using China’s Central Government Balance Sheet to “Clean up” Local Government Debt Is a Bad IdeaCommentary
China's stimulus addiction cannot go on forever. Beijing still has policy space to clean up the country's massive debt issue, but time is running short.
Michael Pettis
