GCC Sovereign Wealth Funds and Their Role in the European and American Markets
Equilibri, Vol. 12, No. 3, pp. 335-354, 2008
17 Pages Posted: 7 Jan 2011
Date Written: 2008
This paper provides a glimpse of trends and developments in the SWFs of the Gulf countries. Their enormous financial power as expressed with their share of 42% in global SWF assets has disturbed some political as well as financial circles and financial regulators in the West regarding their ethicality and the political and national security risks they may pose towards the host countries. On the other hand, it cannot be denied that "SWFs represent a serious challenge to existing global governance structures" (Drazner, 2008: 4) and therefore among others, O’Neil (2007: 237) warned that "if Western policymakers were to think on a broader scale, the emergence of large SWFs would represent yet another reason why the current organizational structure of the G7, G8, IMF and World Bank needs an urgent overhaul". However, as Drezner (2008: 4) argues "established powers in the global financial governance… still retain considerable influence in determining global economic governance", and therefore, the fear of the power of SWFs is overemphasized. Also, as Seznec (2008: 97-98) indicates due to "fear of a xenophobic backlash… forcing the SWFs to be invested in other countries and in non-U.S. firms, thereby protecting and improving some other countries’ ‘way of life’ at the expense of [the U.S.’s]", will result in West not benefiting from these funds in such crucial times, as SWFs move into the more eager emergent economies, where they benefit from higher economic growth rates and welcoming investment environment.
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