US $4tn available for ME ventures

A new report conducted by management consulting firm AT Kearney has revealed that the potential of Middle Eastern capital available for investment, in both private and public sectors, is around US $4 trillion (AED14.7 trillion).

A new report conducted by management consulting firm AT Kearney has revealed that the potential of Middle Eastern capital available for investment, in both private and public sectors, is around US $4 trillion (AED14.7 trillion).

This high investment power is largely linked to Sovereign Wealth Funds (SWF). With the rapid growth of the assets, SWF are under growing pressure to invest. They have accomplished a strategic shift in the way the money is being invested.

Traditionally, countries turned their surpluses into risk-averse financial assets. China, for example, supported the US consumption economy by buying government bonds.

SWF are now favoring equity-type investments to benefit from higher revenues and to gain exposure to strategic companies with more know-how in industries that are crucial to their own economies.

With the world's biggest SWF the Abu Dhabi Investment Authority, the UAE is moving towards these private equity-style deals.

Because of this new way to invest, concern about the political purpose and influence of these funds, and developing countries' investors in general, has risen among Western countries.

The criticisms raised when Dubai Ports World planned to purchase operating rights to several US ports through the acquisition of P&O, or when the Chinese energy firm CNOOC tried to buy Unocal, are vivid examples.

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