Where are the billions? Saga of misisng GCC $542 billlions


The sums just don’t add up!

From 2002-06, the six countries of the Gulf Co-operation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) made about $1.5 trillion from oil exports, twice as much as they made during the preceding five years. Around $1 trillion of that cash was exhausted on imports. The rest—a snowballing current-account surplus of $542 billion—went abroad. Where?

China, Japan and GCC countries cumulatively cover America’s yawning saving deficit. A change in their craving for dollar possessions could dispatch the greenback tumbling and push up American interest rates.

The Economist of London posts a lead to missing billions of the GCC countries….

At its recent annual meeting in Athens, the Institute of International Finance (IIF), a global bankers’ group, tried its hand at such financial detective-work. Its analysts began with published statistics, such as those furnished by the American Treasury’s International Capital System (which provides information on foreign holdings of American securities); the Bank for International Settlements (which tallies figures on foreign-owned bank deposits); and Bloomberg’s database on global mergers and acquisitions.

These sources show some $260 billion of capital flows from Gulf states over the past five years, or about 48% of the group’s cumulative surplus. This half-picture points to several trends. Gulf investors have become less keen on bank deposits; they are big buyers of American shares and government bonds. And, increasingly, they are direct buyers of foreign companies, particularly European ones.

To find the remaining $280 billion, the IIF resorts to educated guesswork. It believes a large chunk is likely to be invested in America. The Treasury’s figures do not include bonds or shares bought through a foreign intermediary, such as a London-based investment bank. They therefore understate the Gulf states’ holdings, perhaps by as much as $100 billion over the past five years, the IIF conjectures. Some of the surplus is staying close to home in the fast-growing market for sukuk, debt-like instruments permitted under Islamic law, which does not allow the payment of interest. Some $21 billion in sukuk was issued in 2006, up 46% from the year before.

It is the highlighted $280 billion that IIF thinks are probably understated and held in US treasuries that raises some question marks.

I searched and looked for $280 billion and studied closely the pie chart of US national debt developed by skeptical optimist Steve Conover (http://www.optimist123.com/about.html) as of Jan 2007 the US Treasury figures does not show any big holdings under GCC head, although Japan and Chinese owns $649 billion and $ 354 billion respectively.

Hopefully someone will find that are consuming far bigger amounts in imports or may be GCC national reserves are understated. The gap remains unexplainable.

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