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GCC reserves likely to touch $3 trillion

3/21/2007 5:17:26
Source ::: The Peninsula
From left: Mohsen Fahmi, COO, Moore Capital Management; George Hall, President and Co-Founder, the Clinton Group; Hani Findakly, Vice Chairman and Director, Clinton Group; Caio Koch Weser, former Deputy Minister of Finance of Germany and current Vice Chairman, Deutsche Bank; and John Borer, Clinton Group at the panel discussion “The Need”. (Salim Matramkot)

DOHA • The most formidable challenge facing the GCC states is dynamic management of their reserves, which are likely to soar to an astronomical $3 trillion by the end of the decade.

Thanks to the huge inflow of cash due to higher crude prices in the global markets, the current account surplus of the oil-rich Gulf countries will soon touch the $3 trillion mark, a financial expert said here yesterday.

However, handling the massive wealth in a prudent way poses a big challenge, said Mohsen Fahmi, from the US-based Moore Capital Management.

He was one of the panelists at the Conference on 'Enriching the Middle East's Economic Future' being held at the Ritz-Carlton here. The three-day event began on Monday.

Other panelists included Caio Koch-Weser, a former German deputy finance minister and presently vice-chairman of Deutsche Bank; George Hall, President and Co-founder of Clinton Group, USA; and John Borer, an investment banker, also from the US. Hani Findakly, Vice-Chairman and Director of Clinton Group, was the moderator.

The panel discussion was devoted to 'Investments/Government Reserves: a discussion of the nearly $3tr in reserves held by the Middle East countries, larger than all of Asia. How would these reserves be used productively in a country, in the region and globally? What are the problems?'

"To invest this much money ($3tr), you have to be a leader…So, try and invest in avenues like education," Fahmi said.

Citing an International Monetary Fund (IMF) report on the region, he said with the oil income of the GCC states increasing due to higher crude prices, their spending also increases.

However, before you invest in setting up centers of higher learning like a university, invest in primary and secondary education, since universities would be requiring qualified teachers and quality students, he said.

Making a comparison between the earlier oil booms in the 1970s and 80s and the current one, Koch-Weser said that the former did not have any lasting impact on the region since they were short-lived.

The current boom is radically different in the sense that the GCC states are investing in crucial assets like social, financial and physical infrastructure and creating a social safety net.

And a noticeable shift in investment is being witnessed and it is flowing eastwards and not westwards, as has been the case earlier.

Koch-Weser said that it is expected that over the next five years, Gulf investors will pump close to $250bn worth of investments in Asian nations. Nevertheless, challenges like fighting unemployment, training youth skills and lack of transparency will have to be ably confronted.

 
   
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