The Saudi sovereign wealth funds (SWFs) could be used to underpin the Kingdom's further economic development by investing a part of it in selected European companies, primarily technology-based companies, under the technology-transfer arrangement of sort, a Saudi economist told the Saudi Gazette Saturday. Omar Al-Juraifani, who is also the co-founder and member of the Asharqia Chamber Young Businessmen Executive Council, said business opportunities and funds are both available in the Kingdom – key elements of economic growth sustainability - but the third component, which is experience, is lacking. Hence the only way for young Saudis to acquire the required knowledge and skills is through technology transfer which can be achieved by investing SR500 million or at least 5 percent of SWFs in gas-and oil-related European companies under the condition that Saudis would learn the required trade know-how, he added. SWFs can be characterized as maximizing long-term return, with foreign exchange reserves serving short-term currency stabilization and liquidity management. According to the SWFs ranking in 2010, Saudi Arabia came in the third at about $436.3 billion, with Abu Dhabi Investment Authority topping the list of the 10 largest global funds with assets estimated at $738.9 billion, while Kuwait came seventh with its fund's estimated value is $202.8 billion and Qatar came in the 10th place with its fund valued at $62 billion. Norway's Government Pension Fund-Global took the second place at $443 billion. The figures showed that the GCC countries have about 45 percent of the total value of the 10 largest global sovereign funds which stood at $3,180 billion. "We in the GCC countries have a chance to amend the path of SWF investments and shift it to knowledge-based industrial investment. The euro zone is currently passing through a crisis, and many industries suffer from a significant lack of liquidity and accumulated debts – a situation that gives us a great chance to acquire industrial companies that have patents and huge knowledge, apart from accumulated experiences in the industrial sector in European countries," Al-Juraifani further said. The obvious poor performance of European companies makes the issue of acquiring some companies much easier, or at least having big stakes in these companies, in order to transfer the production lines or administrations of these companies to the Gulf region, he added. "This mechanism will offer job opportunities for our citizens and help us achieve high incomes from oil-reliant industries due to low costs, as well as circulate capital in our countries, instead of exporting them abroad through various investments," Al-Juraifani said. GCC SWFs are expected to be a key player in the Gulf region's overall development plans so as to activate the current economic climate, motivate development and recover the momentum of investment which has been affected largely by the credit crisis that hit world economies since mid- 2008. These expected options seem to outweigh any others, especially that the GCC countries have achieved record surpluses in their budgets for 2011 due to high oil prices globally. “The state of confusion in sovereign fund investments is because that 31 percent of SWF direct investments go to the real estate sector, and 19 percent in form of indirect investments also go to the real estate sector.” A recent report said that about 50 percent of the value of sovereign wealth funds is invested in the real estate sector, which does not generate jobs.
