(MENAFN - The Peninsula) GCC Sovereign Wealth Funds (SWFs) have called up on the emerging economies and the Least Developed Countries (LDCs) to boost their financial markets ahead of wooing the large government funds or SWF into their respective countries.
In a dialogue between SWF executives and ministers at a round table conference held on the third day of Unctad XIII World Investment Forum, two key executives from the GCC region shared their concerns in investing in the LDC and in some emerging markets which according to them are very 'risky' for investing huge amounts.
"We love to invest in the emerging markets. But these markets need to create right investment environment. The governments have to come out with right projects and transparent policies", said Hussain Al Abdulla, Board Member Executive, Qatar Investment Authority.
To attract a share of the estimated 4-5 trillion fund, these countries need to change their legal environment and make their markets more flexible and mature. Reports of rampant corruption emerging from these countries are another deterrent. The LDCs and the emerging markets must also make sure their legal system is on par with the international standards.
To a specific question whether QIA is interested in some of the LDCs, Al Abdulla said: "We don't know much about the market. We just can't pump in 10-20bn dollar to a market that we don't have the 'know-how' ".
Sulayman Al Qudsi, Chief Economist, Gulf Investment Corporation, Kuwait said Kuwait is apprehensive of investing its SWF in Asian sector and some of the emerging economies because of the political instability. SWF has no institutional capability to decipher the rules and regulations. So the onus is on the international bodies like Unctad to change the norms and make attractive for the Sovereign Wealth Fund to invest in the emerging markets.
Corruption is one of the key problems in Asian economies. Dispute settlements are another worrying factor in these markets. On the question can SWFs promote responsible investment in sustainable development Al Qudsi said the SWF is quite insignificant in terms of its volume. The assets under SWFs is an estimated 4-5trillion compared to the 23trn Pension Fund.
Frederic Samama, Head of the Steering Committee, SWF Research Initiative, US called for a bigger role by the SWF in the agriculture sector. The traditional channels are providing just 9bn for the agriculture development. This is nothing. If you look at the entire value chain, at least 80bn a year is needed for the investment in this key sector. We need to look at long term investment in the agriculture sector. Food security is a matter of concern not only for the developing nations but also for the developed countries.
A note issued by UNCTAD World Investment Forum 2012 said SWFs are for the most part portfolio investors, with the bulk of their funds in relatively liquid financial assets based on its mature market economies. Only a small proportion of their value, an estimated 110bn, is directly invested in productive assets, around a quarter of which is in developing countries.
