ERF workshop on Sovereign Wealth Funds (SWFs): Stabilization, Investment Strategies and Lessons for The Arab Countries, September 2016

1. Sovereign Wealth Funds: GCC & Algeria
Abderrahim Chibi
Gawdat Bahgat

2. The Argument
• Sustained low oil prices & revenues mean that the
traditional model of large public spending is not a
valid option.
• No alternative to multifaceted structural reform.
• Financial buffers.
• National Plans.
• Successful implementation requires favorable
regional & international environments.

3. Low & Persistent Oil Prices: The Supply Side
• Horizontal drilling & fracturing.
• Nuclear Power & Renewable Energy.

4. SWFs
• Algeria: Revenue Regulation Fund (FRR) – 2000.
• Bahrain: Mumtalakat – 2006.
• Kuwait: KIA – 1953.
• Oman: State General Reserve Fund – 1980; Oman
Investment Fund – 2006.
• Qatar: QIA – 2005.
• KSA: Saudi Arabian Monetary Authority (SAMA) –
1952; Sanabil Al‐Saudi – 2008; Public Investment
Fund (PIF) – 1971.
• UAE: ADIA – 1976.

5. Conclusion
• Revenue, debt & capital spending are highly
correlated with fluctuation in oil prices.
• Financial reserves are at risk of being depleted.
• Fiscal vulnerability varies from one oil producer to
another.
• Pressure on governments to draw down on SWFs’
assets & to transfer less revenues than before.

6. The Way Forward
• SWFs are adopting professional management
approach.
• Common themes: asset diversification, partnerships,
& technology transfer.
• Rising interest in Islamic finance.
• Geographical distribution: strong presence in US &
Europe and growing interest in Asian market.
• Since 2014 less funding has been allocated & some
investments have been liquidated.

7. Low & Persistent Oil Prices: The demand side
• Energy efficiency: the delivery of more services for
the same energy input or the same services for less
energy input.
• Energy consumption: less in OECD, more in Asia &
ME.