Through their sovereign wealth funds, the Gulf States have sought sectorial and geographical diversification, often making eye-catching investments, be it in landmark property projects in western capitals, or in some of the world s biggest financial institutions. On the other hand, governments have also been keen to develop and diversify their domestic economies, and some sovereign wealth funds have either invested directly in domestic projects or ensured that global investments are combined with an element of skills transfer or operational expansion in the Gulf.
The development of the region s sovereign wealth funds began in 1953, with the creation of the Kuwait Investment Authority (KIA), established by the Kuwait government to preserve the country s wealth for future generations3. Several other sovereign wealth funds were to follow as the Gulf States increased their revenues from hydrocarbons.
The Abu Dhabi Investment Authority (ADIA) was established in 1976, and has grown into one of the world s largest sovereign wealth funds, investing globally in order to diversify the emirate s holdings4. More recently, the emirate has established other sovereign wealth funds and government entities, with differing mandates. For example, Mubadala Development Company invests in projects5 that will diversify Abu Dhabi s economy, the International Petroleum Investment Company (IPIC) invests in energy resources6 and the Abu Dhabi Investment Council serves to broaden Abu Dhabi s economic base and facilitate the international development of local companies7.
Meanwhile, Dubai s investment fund conglomerate, the Investment Corporation of Dubai, has played a major role in the emirate s development8 in the industrial, retail and financial landscape, through strategic investments in companies that have achieved global excellence.
Elsewhere, the Qatar Investment Authority (QIA) was established in 2005, also with the aim of strengthening the country s economy by diversifying into new asset classes9.
The outlook for the Gulf States
The Gulf region is expected to experience high levels of growth both in terms of population and in wealth creation. The population of the Gulf States is predicted to reach 53.5 million in 2020, a 30 percent increase on 2000, while GDP is forecast to grow on average by 5.6 percent annually.
3. Source: http://www.kia.gov.kw/En/About_KIA/Overview_of_KIA/Pages/OverviewofKIA.aspx
4. Source: http://www.adia.ae/En/pr/Annual_Review_Website_2012.pdf and http://www.swfinstitute.org/fund-rankings/
5. Source: http://www.mubadala.com/
6. Source: http://www.ipic.ae/english/about-ipic/ipic-and-our-history
7. Source: http://www.adcouncil.ae/AboutUs/History/tabid/92/Default.aspx
8. Source: http://www.icd.gov.ae/
9. Source: http://www.qia.qa/
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