The UAE's encouragement of foreign investment increases its sensitivity to the global downturn, says US official.
America beckons more Gulf investors
Although the UAE's encouragement of foreign investment has left the country more vulnerable to the global financial crisis, openness, transparency and continued willingness to participate in the global economy also create new opportunities, a senior US official said today in Dubai. "The UAE's openness has brought exposure to global economic turmoil, and changes in global credit markets are affecting both the Emirates and the Gulf more broadly," said Robert M Kimmitt, the deputy secretary of the US Treasury Department.
"The US and the UAE need to continue to work together during this difficult period." While acknowledging that the UAE's openness to foreign investments was partly to blame for increased exposure to global financial turbulence, Mr Kimmitt is an advocate of increased investment between the US and Gulf nations through Sovereign Wealth Funds (SWFs) following defined guidelines of transparency, predictability, proportionality, accountability and non-discrimination among investors.
"The US was an early advocate for the OECD to identify a broadly accepted set of principles that underpin open investment policies for countries that receive sovereign wealth fund investments; these principles add the needed structure to the concept of open investment... and encourage greater openness to cross-border investment," Mr Kimmitt said. He said the US would welcome investments from SWFs as it grappled with the impact of the global financial crisis on its economy. "Neither the US, the UAE, nor the rest of the world can afford to turn inward. Instead, we must rely on increased interaction with each other to help drive our economies forward and make the benefits of foreign investment available to all countries," the US official said at an event hosted by the Dubai International Financial Centre (DIFC) as part of his five-day tour of Gulf nations. He noted that the value of foreign direct investment in the US from the Middle East and North Africa was more than US$7 billion (Dh25.7bn) last year, an increase of more than 130 per cent from 2001. "I lay out this important track record because investment from the Gulf region is playing a growing role in the success of the US economy."
As a testament to US investment in the region, Mr Kimmitt said his government's committee on foreign investment in the United States (CFIUS) has reviewed or is in the process of reviewing 30 cases pertaining to countries in the Middle East, 20 of which involve foreign government control. The CFIUS reviews the national security implications of foreign investments by US companies or operations. SWFs such as the Abu Dhabi Investment Authority, the world's largest, have come under increased media and political scrutiny in the past two years as investors have sought to better understand their practices and also their commitment to global financial stability and the free flow of capital across borders.
This recently resulted in the creation of the Santiago Principles, which called for more transparency and highlighted that long-term investors needed to make decisions on commercial, rather than political, grounds. Dr Omar bin Sulaiman, the governor of the DIFC and vice chairman of the Central Bank, attended the conference. "This region in general, and the GCC in particular, is the hope for global companies for growth; we need to take advantage of this opportunity instead of being driven by the negative global sentiment that is taking place," said Dr Sulaiman on the sidelines of the event. @Email:email@example.com