Kuwait Plans for a Strategic Development SWF
Posted on 01/24/2016
Gulf petrostates are in the midst of retooling their strengths and finances in a world where a decade-long crude oil boom has collapsed. For example, the Kuwait government contemplates forming a third sovereign wealth fund; one that focuses on strategic development and luring foreign investors. Kuwait’s first two sovereign funds are managed by the Kuwait Investment Authority (KIA) whose purposes are fiscal stabilization and savings. This proposed strategic development sovereign wealth fund (SDSWF) could manage up to US$ 100 billion in domestic assets with the goal of selling them in a five to seven year plan. Some of those assets could come from the other two funds. The SDSWF will most likely be managed within the KIA framework. In addition, a portion of the assets would include water and power projects, where the probability of removing local energy subsidies is high to attract investors.
Saudi Arabia
Like Kuwait, Saudi Arabia hopes to double annual inflows of foreign direct investment (FDI) over the next decade. The Saudi Arabian General Investment Authority (SAGIA) plans to spend more time diversifying the Kingdom’s economy by focusing on healthcare, information technology and mining sectors. Historically, FDI in Saudi Arabia was heavily associated with the petrochemical industry. Mining may be the lowest hanging fruit for investors, as the country may have large deposits of base metals, bauxite, phosphate and gold. In December, Barrick Gold Corporation entered into a joint venture with Arabian Mining Co. to begin production on a copper mine close to Medina.
