How much has the recession cost the Gulf?

United Nations Headquarters

Following yesterday's article about the reported losses incurred by Kuwait as a result of the global financial crisis, Business Management now takes a closer look at the huge losses of four of the gulf's largest Sovereign wealth funds (SWF).

SWFs of four oil-exporting Gulf states lost around 350 billion dollars last year due to the global financial crisis, according to a UN report. However, the four states - Kuwait, Saudi Arabia, Qatar and Abu Dhabi - who were heavily impacted by the crisis due to the collapse of real estate and equity markets, almost maintained their total asset value at the end of 2008. This is largely down to the governments injecting huge amounts of capital earned from oil, into their economies.

The United Nations Conference on Trade and Development (UNCTAD) said, in The World Investment Report 2009, that assets held by the four Gulf funds dropped to 1.115 trillion dollars last year from 1.165 trillion dollars at the end of 2007 and that government injections of 300 billion dollars helped narrow their losses.

The Abu Dhabi Investment Authority (ADIA) was the worst effected, losing around 183 billion dollars from the 453 billion dollars it held in 2007. But in anticipation of the worsening crisis, the government pumped 57 billion dollars into the fund, helping it end last year at 329 billion dollars.

Kuwait Investment Authority (KIA), which owns stakes in Daimler and Citigroup, lost 94 billion dollars from 262 billion dollars it held at the end of 2007. The government, however, injected 59 billion dollars, helping the fund to stand at 228 billion dollars at the end of last year.

Qatar Investment Authority (QIA) lost 27 billion dollars and ended at 66 billion dollars in 2008, while Saudi assets, run by the Saudi Arabian Monetary Agency (SAMA), valued at 501 billion dollars at end-2008, shed around 46 billion dollars, the report said.

However, the fact that SWFs in the Gulf do not disclose the size of their assets or losses, make it hard to determine how accurate the figures are.

The UNCTAD said, "The recent collapse of real estate and equity markets has generated large losses for SWFs, but it also offers investment opportunities."

The four Gulf states pump more than 13 million barrels of oil per day, just under half of total OPEC production of around 29 million bpd.

Like this article? Get the RSS feed: