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It's not clear to me how making investments in companies not based in Saudi Arabia help them diversify their economy. They need to be investing in building dome

by harryh 10y ago

It's not clear to me how making investments in companies not based in Saudi Arabia help them diversify their economy. They need to be investing in building domestic companies not based on oil. This will require investments in infrastructure, education, health care, etc. And, as you said, social liberalization as well.

hinkley 10y ago
When all your assets are tied to your currency and your currency tanks life gets hard. Having foreign assets you can divest and spend is useful, and is one of the things (along with oil transactions) that props up the US dollar's value. Because everyone ends up buying T bills as a simple way to hold assets denominated in dollars. Japan in the 80's simply started buying up America (real estate, businesses) because of our recession, and a lot of people already worried about automobile manufacturing had a whole new set of worries. But then Japan had its own recession in the 90's and a lot of divestiture happened.
deleted 10y ago
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DashRattlesnake 10y ago
> It's not clear to me how making investments in companies not based in Saudi Arabia help them diversify their economy. Maybe they're not trying to diversity the economy as much as the economic position of the royal family? Saudi Arabia isn't a democracy, and it still has an actual sovereign.
vidarh 10y ago
Norway's wealth fund invest primarily abroad as well for the simple reason that while it is important to diversify the local economy, pouring vast amounts of money into the local economy drives inflation. The Saudi's are already pouring money into the local economy as well. But there's only so fast their economy can make efficient use of that money without overheating. Investing abroad is a way of creating a lasting income stream without those problems.
- awinter-py 10y ago
  This inflation argument sounds right to me. Can you point to an article which talks more about how SWFs balance their in-country out-country investment?
  - slv77 10y ago
    Search for the term Dutch disease and you'll turn up a lot of papers on the topic.
  - vidarh 10y ago
    I don't have any handy articles, I'm afraid. The Norwegian fund that generally gets discussed only invests out of country. There is another fund that invests in Norway (as well as a number of government development banks), but it is much smaller. There are more details about both the global and domestic funds here [1], which does contain some bits on how it splits its investments and has a decent number of references. [1] https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...

by harryh 10y ago

hinkley 10y ago

When all your assets are tied to your currency and your currency tanks life gets hard. Having foreign assets you can divest and spend is useful, and is one of the things (along with oil transactions) that props up the US dollar's value. Because everyone ends up buying T bills as a simple way to hold assets denominated in dollars. Japan in the 80's simply started buying up America (real estate, businesses) because of our recession, and a lot of people already worried about automobile manufacturing had a whole new set of worries. But then Japan had its own recession in the 90's and a lot of divestiture happened.

deleted 10y ago

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DashRattlesnake 10y ago

> It's not clear to me how making investments in companies not based in Saudi Arabia help them diversify their economy. Maybe they're not trying to diversity the economy as much as the economic position of the royal family? Saudi Arabia isn't a democracy, and it still has an actual sovereign.

vidarh 10y ago

Norway's wealth fund invest primarily abroad as well for the simple reason that while it is important to diversify the local economy, pouring vast amounts of money into the local economy drives inflation. The Saudi's are already pouring money into the local economy as well. But there's only so fast their economy can make efficient use of that money without overheating. Investing abroad is a way of creating a lasting income stream without those problems.

awinter-py 10y ago
This inflation argument sounds right to me. Can you point to an article which talks more about how SWFs balance their in-country out-country investment?
- slv77 10y ago
  Search for the term Dutch disease and you'll turn up a lot of papers on the topic.
- vidarh 10y ago
  I don't have any handy articles, I'm afraid. The Norwegian fund that generally gets discussed only invests out of country. There is another fund that invests in Norway (as well as a number of government development banks), but it is much smaller. There are more details about both the global and domestic funds here [1], which does contain some bits on how it splits its investments and has a decent number of references. [1] https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...