Turkey hopes to lure in Gulf funds for liquidity

Hurriyet Daily News with wires

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In an environment where global external financing conditions are getting tougher by the minute, Turkey will focus on investment funds in the Gulf countries, estimated to be worth $2.5 trillion.

A committee formed by Turkey’s top-level officials in search of luring in investment and liquidity is planning to tour the Gulf countries, mainly Saudi Arabia, Kuwait and the United Arab Emirates. The committee will invite Saudi Arabia’s investment fund, which is considered to be the world’s largest sovereign wealth fund, as well as other investment funds in the Gulf to invest in Turkey. Besides the giant investment fund Saudi Arabia is expected to set up, Turkey also aims to lure in an annual investment of at least $10 billion to $15 billion.

Officials will highlight the fact that Turkey, a country that is implementing many structural reforms during its accession process to the European Union, is also a "corridor" in transporting energy sources to the West, reported Anatolia News Agency. The committee will also inform investment funds of the opportunities in Turkey and propose that Turkish firms, in collaboration with Gulf capital, can create new joint investment ventures in the area.

Meanwhile, Gulf investment funds have shown interest in the telecommunications, energy, retail and logistics sectors in Turkey. Asset-backed securities, or VDMK, are also an area of interest for Gulf investment funds seeking joint investment opportunities.

Liquidity needs
As the global economic crisis, which was borne from the U.S. mortgage crisis, continues to negatively affect liquidity all over the world, Gulf investment funds could provide a lot of benefit to Turkey in meeting its liquidity needs, said the officials.

A major part of Saudi Arabia’s income from crude oil goes to the Saudi Arabian Monetary Agency, or SAMA, and the remaining money is distributed among the members of the House of Saud, which is the royal family of the Kingdom of Saudi Arabia. The SAMA has been following a conservative path for its investments and purchasing U.S. Treasury bonds and shares from secure companies, while the members of the House of Saud made individual investments. However, the U.S.-born crisis hit the funds and caused them to pullout of all affected countries.

Saudi Arabia has $436 billion in foreign reserves, according to September data from SAMA. Meanwhile, Saudi Arabian funds, which are estimated to be worth around $1 trillion, are expected to be the biggest competitor for a number of Middle East and Asian funds that had acquired shares in mainly U.S.-based finance companies, and many others, which have been hit badly by the crisis. Abu Dhabi also has a strong investment fund, which is worth $875 billion.

Kuwait Investment Authority, or KIA, is an autonomous government body responsible for managing and administrating both local and overseas investments for and on behalf of the State of Kuwait. KIA is in charge of managing the fund, which is said to have reached $700 billion. The fund has mainly been generated from a portion of the country’s income from crude oil.

IMF funding
The International Monetary Fund also seeks to fortify its sources by obtaining further resources from Saudi Arabia. Saudi Arabia will probably contribute to an IMF bailout fund, reported Bloomberg, citing the vice governor of the Bank of England.

"I am sure our King and the other officials will have given the needed support to any global initiatives that needed to be done on a collaborative and multilateral basis," Mohammed Al-Jasser said in Athens on Nov. 3, following a speech at the Bank of Greece.

"We continue to participate in every facility that the World Bank or the IMF has set up," Al-Jasser said. "We have taken our global responsibilities very seriously."

British Prime Minister Gordon Brown said Nov. 2 he was expecting Gulf countries to respond to his call to support an IMF facility to help countries suffering from the global financial crisis. Brown was in the Gulf seeking to persuade oil-exporting nations that have benefited from high prices to boost the $250 billion IMF fund that draws on the currency reserves of countries.

Saudi Arabia would deserve a greater say in running the fund and other bodies if it participated in the initiative, Brown said. The IMF has already dipped into its $250 billion to provide emergency loans to Hungary, Ukraine and Iceland and risks running short of reserves. Brown is seeking "hundreds of billions" to add to those funds.