Numbers of Sovereign Financial Institutions increased to as many as 40 worldwide since 1950s
Sovereign Financial Institutions potential growth expected to range between US$6 and US$10 trillion by 2013
The global landscape for Sovereign Financial Institutions (SFI) connected with their structure, safeguarding their sovereign tax exemptions and their compliance requirements have remained key issues for the state-owned funds. In that light, Deloitte hosted an SFI Tax Forum in Abu Dhabi on February 27, 2012, bringing together an international team of experts, along with investment authorities from the Middle East to discuss the latest developments in these fields.
“The benefits and uses of sovereign investments are indisputable, be it from stabilizing state economies, ensuring long-term sustainable growth and diversifying a country’s investments,” said Francis Dubas, Global Leader of Sovereign Financial Institutions at Deloitte. “Since the 1950s, the numbers of SFI has increased, and their sizes have drastically grown, with as many as 40 SFI worldwide. Governments are eyeing the possibilities which their state-owned funds provide now more than ever,” he continued.
“Potential growth of SFI is expected to range between US$6 and US$10 trillion by 2013, as calculated by the International Monetary Fund. In addition, it was disclosed by the US-based Sovereign Wealth Fund Institute that by the end of 2011, over half of total sovereign investment funding, estimated at US$4.8 trillion worldwide, was driven by oil and gas revenues, most of which was generated by the Middle Eastern region,” he added.
Discussions at the SFI Tax Forum were centered on the wider landscape in which these organizations operate, including developments and issues related to their sovereign exemptions. In addition, discussions ranged across structuring investments, tax implications, and compliance obligations. Deloitte also focused on the approach that its auditors take when dealing with SFIs, with the issue of transparency featuring strongly.
Participants in the SFI Tax Forum from Deloitte included: Francis Dubas, global managing partner of SFI, John Whitehead, UK tax partner, Jeff Rubin, US tax partner; and from Deloitte Middle East, Wissam Moukahal, UAE Financial Services leader and audit partner, Ali Kazimi, International Tax Services leader, and James Babb, Middle East Clients and Markets leader.
Strategic investments in foreign firms, from financial institutions and real estate, to global energy and resource companies, are being eyed by Middle Eastern governments, and will continue to grow in the coming years. The landscape for sovereign investors is evolving and SFIs will need to keep pace with those changes.