The financial interdependence that sovereign wealth funds (SWFs) created between the West and the Arab world could help stabilize multilateral relations and promote economic development and political stability in the Middle East, concludes a new paper from the Carnegie Middle East Center.
Sven Behrendt studies the rise of Arab SWFs, assesses their investment strategy, and evaluates the policies of Arab investors and Western nations.
- An international framework between investing and recipients nations is needed and should reflect the changing nature of the global market. A fragmented system of national policies is inefficient and in no one’s interest.
- Arab investment managers need to adjust their strategies and take broader responsibility for the stability of the global financial markets. They can no longer play the role of quiet investors.
- Arab public opinion, media, and civil society should take an interest in their countries’ SWFs and demand a more transparent accounting of how the funds are being invested.
- Western governments should acknowledge the increased bargaining power of the Gulf countries and reach out in a constructive manner. They must also avoid policy decisions based on misplaced fear of foreign domination and populist sentiments.