DOHA: Absence of transparency in the Sovereign Wealth Fund (SWF) investments are posing problems for market analysts to fathom the real spillover effects of financial downturns on GCC economy. The reports that the GCC stock markets suffered a huge loss in 2011 were just a tip of the iceberg, believes a GCC market researcher.
Dr Jasim Husain, an independent researcher and a regular contributor to leading Arabic dailies, including the Al Sharq, told The Peninsula yesterday that Qatar's decision to constitute the anti-corruption watch dog , the Administrative Control and Transparency Authority, is a great initiative.
The euro crisis has taken on a global dimension even as its effects continue to unfold. The global financial markets have retreated to a 2008 scale. Financial and money markets have seen extreme volatility and corrections as countries, institutions and business have suffered huge losses. But lack of transparency in the SWF hinters the market analysts to measure the real impact on the regional economy whose assets are hugely exposed to the euro zone.
The sovereign wealth fund of GCC countries are hugely exposed to eurozone banks. But there is lack of transparency about the quality and nature of these investments. There is nothing available on public domain regarding the details of these investments that prevents market analysts from making an exact assessment of the impacts of the crisis on the GCC economy, said Dr Jasim.
The Gulf banks and financial institutions are heavily exposed to the bad loans of European banks. But we don't know really how serious the spillover effects are. Now EU seeks to write off half of the Greek debts. It would bring the share prices really down, a loss which will have to be borne by the Gulf financial institutions.
A possible collapse of Eurozone will hit the SWF in a big way. It will lead to a fall in their shares of European banks, meaning heavy loss to the Fund. There are fears that the GCC SWF has huge exposure to the non-performing loans of these banks .
Qatar's decision to launch the anti-corruption watchdog, the Administrative Control and Transparency Authority is a great initiative. The fact that a veteran like H E Abdullah bin Hamad Al Attiyah to head the panel shows how serious and committed Qatar is to bringing in transparency in dealing with its assets, he said.
On the possible impact of EU collapse on the Gulf economy, Dr Jasim said: "The EU is the largest trading partner for the GCC. Any problem in the euro zone will definitely reflect on GCC economy. It already has suffered huge loss in the stock market in 2011... Bahrain dropped 20 percent", he said.
Dr Jasim said the fact that Euro is in crisis must not deter the GCC countries from its ongoing efforts to create a GCC common currency. Unlike the European Union, the GCC has a common and shared market. But its immediate priority is not a common currency. It has more unfinished business- a common customs union and a common market. Currency comes on the latest stage. There is no point in rushing for currency.
© The Peninsula 2012
