Davos, Asharq Al-Awsat- Dr. Muhammad al-Jasir, deputy governor of the Saudi Arabian Monetary Agency “SAMA”, has stressed that the issue of establishing a Saudi “investment company” has not been decided yet, saying the statements attributed to him yesterday that Saudi Arabia was moving toward establishing a sovereign fund “were not accurate.”
Al-Jasir told Asharq Al-Awsat in an interview on the sidelines of his participation in the “World Economic Forum” in the Swiss resort of Davos that the talk about “a sovereign fund or an investment company is a matter of difference over appellations but the idea itself is still understudy.” It is recalled that the issue of sovereign funds was discussed extensively at the Davos forum and fears of political exploitation by the countries owning the funds were expressed as well as questions about their transparencies.
Al-Jasir said “what was raised in Davos was unhealthy and some suspicions were voiced about countries owning sovereign funds, particularly as they are developing ones.” He added that such suspicions are misplaced “because the funds’ record shows they act responsibly for good development and help developed countries avoid any deep economic crises.” Referring to the demands by some Western parties “to organize the sovereign funds” so as to ensure their transparency, he said: “It is noticeable in matter of security that many reserve funds suffered from problems but were not put under supervision and they continued their work and overcame the problems.” He added: “In any case, the matter is under control. All the sovereign and investment funds are subject to controls which reveal their owners according to the rules of the countries where the investment is done and there is no shortage of information.” He went on to say that “if there are fears concerning national security, then there is no objection for these countries to draw up the controls that suit them. These controls do in fact exist.”
Al-Jasir, who took part in several discussions about the world economy, said the “issue of focusing on transparency raises questions about the motives for such questions. But it is hoped that the discussions raised at the forum during the past days will avoid these suspicions so that the financial markets will not be affected by them.”
On the reasons why the Kingdom of Saudi Arabia has not established a sovereign fund, Al-Jasir explained: “The Saudi economy is huge. The kingdom’s area equals that of Europe. Much of the wealth coming from the oil revenues is spent on internal investment and there is no need for such funds at present because there are opportunities for local investments, such as mining, railroads, and so on.” It is recalled that the talk about sovereign funds at the forums was quite often associated with the talk about the slump in the American economy and fears of a recession in the markets which these funds are helping to avoid.
Regarding the fears of a slump in the world’s economy in the wake of the troubles in the American economy Al-Jasir said: “The American economy is the biggest one in the world and the other economies are bound to be affected. The credit market’s problems have affected the American economy’s growth and this raised the fears of recession. What is worrying for us is that we do not know so far how big the problem is.” He added: “The US Federal Reserve’s moves point to this worry.” This was a reference to the 0.75 percent interest rates cut on Monday. But he added that the Gulf markets, and in particular the Saudi one, were not affected and said: “Our companies were not involved in these matters and we have not been affected so far.” He pointed out that apprehensions about this are limited at present because the economies of “other countries, especially in Asia, the Middle East, Africa, and Europe remains good” and stressed that the “world economy does not depend on the American one alone” despite the latter’s importance.
On linking the Saudi currency to the dollar, the Saudi official said: “The question is this: Is it in the Saudi economy’s interest to be linked to a strong currency or not.” He added: “The dollar remains the most important currency reserve in the world. Most countries price goods in dollars and exports are also valued in dollars. Linking our currency served us in the past and nothing much has changed to warrant changing the link to the dollar at present.” He went on to say however that “this does not mean that the drop in the dollar does not have an effect but the issue needs to be deal twith without losing confidence in the world economy.”
Al-Jasir concluded his remarks by referring to the question of good citizenship in the matter of companies, a focal point in the Davos forum’s meetings and said: “The question of good citizenship has become important in developed economies. For example, we in the communications companies are working to establish health centers, now totally 26, in addition to supporting the handicap centers and sponsoring many activities.” He concluded by saying that “all companies must lay down specific policies for their social contribution and identify the positive value of this from their work and reputation in society.”