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Saudi Arabia Looking at Buying Opportunities: FinMin

Reported by Louisa Bojesen, written by Catherine Boyle, CNBC.com
Friday, 14 Oct 2011 | 8:57 AM ET

Saudi Arabia's sovereign wealth funds are examining acquisitions around the world, but are waiting for greater economic stability before making any definite moves, Dr. Ibrahim Al-Assaf, the country's finance minister, told CNBC Thursday.

Main roads in Riyadh are decorated with national flags and portraits of King Abdullah bin Abdul Aziz of Saudi Arabia on February 21, 2011 amid preparations to welcome the Saudi royal back as he is expected to return home later this week after convalescing in Morocco from operations in New York, according to a source close to the oil-rich Gulf monarchy. AFP PHOTO/FAYEZ NURELDINE (Photo credit should read FAYEZ NURELDINE/AFP/Getty Images)
Fayez Nureldine
Main roads in Riyadh are decorated with national flags and portraits of King Abdullah bin Abdul Aziz of Saudi Arabia on February 21, 2011 amid preparations to welcome the Saudi royal back as he is expected to return home later this week after convalescing in Morocco from operations in New York, according to a source close to the oil-rich Gulf monarchy. AFP PHOTO/FAYEZ NURELDINE (Photo credit should read FAYEZ NURELDINE/AFP/Getty Images)

"Obviously, the current period would offer opportunities from all over the world" Al-Assaf, who is also on the board of Saudi Aramco, the state-backed oil company, said. "We are constantly reviewing opportunities now and in the future."

He added that he hopes the upcoming G20 meetings, which he is attending, will help "stabilize the world economy" and "regain sustainable growth."

The Saudi government has a substantial war chest to spend, and, according to the International Monetary Fund, no official external debt.

Saudi Arabia's economy has rebounded strongly from the global economic crisis as the price of oil rose in 2010-11, and is set for gross domestic product growth of 6.5 percent in 2011.

The signs for its short-term future are good despite recent dips in the oil price, and it was one of only three major emerging market economies which saw advance export orders risein the third quarter, according to HSBC research.

Al-Assaf, who was speaking on the sidelines of the Saudi Finance Forum in London, declined to comment on whether the country's sovereign wealth funds would prefer assets in Europe or the US.

"The government funds but also the private sector are waiting to see when they will jump in," he said. "When the signals are that the world economy has started stabilizing, and perhaps moving upwards, that would be a very good time."

Stimulus Package

Not all of Saudi Arabia's investments in the West have gone well. Abu Dhabi's $7.5 billion investment in Citigroup in 2007 famously ended in an arbitration claim against the US bank, alleging “fraudulent misrepresentations.”

Prince Alwaleed bin Talal al Saud is the largest individual shareholder in the US bank.

The government is spending substantially this year on measures designed to ensure that Arab Spring-style protests do not spread to Saudi Arabia.

In the wake of protests in Egypt and Libya, among other countries in the region, it announced a package aimed at creating jobs for younger Saudis, strengthening the social safety net, improving education and resolving the housing shortage. It has increased the mortgage lending power of Saudi banks and changed legislation relating to mortgages to make it easier to buy property.

"We are happy about our position," Al-Assaf said. "This is not just about working on the stability of the macro-economic situation. We have been through experiences in the past and we have benefited from these experiences."

The government is also investing heavily in the minerals industry, and other sectors such as services, as it tries to decrease Saudi Arabia's dependence on oil. Its oil-based economy is vulnerable to slowdowns in other emerging markets such as China.

Saudi Arabia, which is OPEC's top exporter, has cut production to 9.39 million barrels per day from 9.8 million bpd in August

The price of oil, which has fallen in the past couple of months over worries about the future of the global economy and a slowdown in China in particular, has rallied this week.

The price is also being affected by the expected return of Libya to production after the political unrest of this year.

Eugen Weinberg, Head of Commodity Research at Commerzbank, told CNBC that he sees more weakness in the price of oil.

"I'm worried about short-to-medium term dangers," he said. "The most bullish arguments assume economic decoupling of the Asian and emerging countries from what is going on in the Western countries."

"Saudi Arabia and the other OPEC countries need more financing as their spending has expanded this year," he added.

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