Sovereign wealth fund will recalibrate US’ global influence

Two of the major decisions announced by US President Donald Trump last week I believe are linked. The first was the executive order creating a US sovereign wealth fund and the second was the decision to shut down the US Agency for International Development. They are linked because only one of these can define and be the conduit for American cooperation domestically and internationally. The shift from a grant or “charity” instrument to an investment one is the headline that comes from the two decisions.

I will be candid. When reading about some of the international projects that USAID had been financing, I was offended. I was not offended as a citizen by the fact that the programs were an interference in domestic affairs. I was offended as a media owner who never knew that millions of dollars were granted to such irrelevant projects. Jokes aside, it is clear that USAID had drifted from its original goal. It had broadened its mandate of development assistance to push a political or even ideological agenda. It was already the case in the 1990s with the push for freedom and democracy, but in the last decade it had begun pushing a progressive Western agenda.

There is no doubt that today’s world is very different to that of 1961, when USAID was established. It is even very different than it was just a decade ago. And so, countries need to adapt the tools they use. The US needs this transformation.

If we focus on sovereign wealth funds, there is no doubt that the success achieved by the Gulf Cooperation Council states can be used as a good example. Whether it is the Kuwait Investment Authority, Saudi Arabia’s Public Investment Fund, the Abu Dhabi Investment Authority, Mubadala, Lunate or the Qatar Investment Authority, they have all been engines of growth domestically and internationally. As always in investments there is the good and the bad, but it is clear they have fulfilled their mandate of preserving and increasing wealth for future generations and developing strong domestic growth, while diversifying from hydrocarbon revenues.

Their achievements have been guided by visions and strategies. For example, PIF, which has several mandates, has successfully unlocked new sectors in Saudi Arabia that could never have developed through the private sector or any other public entity or aid. Such investment in infrastructure, both material and intangible, could only be done with patient capital and a long-term vision. Hence, only via a sovereign wealth fund.

I will not dig too much into the different types of sovereign wealth funds, but they can either invest domestically or internationally. Examples of the former include Kazakhstan’s Samruk-Kazyna and the Sovereign Fund of Egypt. They hold key national assets and work on partnerships with international investors to facilitate domestic investments and partnerships.

Sovereign wealth fund will recalibrate US’ global influence

Khaled Abou Zahr

Then there is international investment, which aims to build and preserve the wealth of future generations. This is the goal of the Kuwait Investment Authority, which in 1953 became the world’s first sovereign wealth fund. The delineation of goals between domestic and international investments has permitted the success of such funds.

The other major element is partnerships. The approximately 90 sovereign wealth funds globally collectively manage about $13 trillion in assets and have gained a leading role in global finance. This also means influence and power. Clearly, the US could not afford to stay out of this club much longer.

Moreover, many of the projects to rebuild US infrastructure have stalled, having failed to bring in the proper partners. The California High-Speed Rail project and the Gateway Program come to mind. Yet, more importantly, there is the infrastructure for the new digital economy that the US cannot afford to miss out on. Hence, a sovereign wealth fund is needed on this front — a public entity that has clear financial targets.

On the international level, aid in developing countries has reached its limits. Here too, the GCC countries provide a good example. They have shifted from “blind aid” to investments in direct projects, leaving the aid for specific humanitarian goals. This has been a successful strategy in Africa and Asia. Moreover, it has created stronger bonds of cooperation and collaboration, with tangible results for citizens.

The US has not been able to achieve the same results. Those who mention the US International Development Finance Corporation are mistaken as it is a development finance institution, such as the Saudi Fund for Development or the Abu Dhabi Fund for Development.

The key accomplishment that has been achieved by most sovereign wealth funds is their focus on financial targets and not ideological programs. Their goal is not to influence. However, by selecting good investments that serve their mandates, they are then able to achieve an undeniable influence on global business. It is the cherry on top of the cake. Seeking to use a sovereign wealth fund for influence would defeat its purpose. This is why the Gulf funds have the most acute, high-level investment professionals and follow a strict process on investment decisions.

In his executive order, Trump stated: “It is the policy of the United States to maximize the stewardship of our national wealth for the sole benefit of American citizens.” This is indeed a much-needed goal for Washington. The combined 2025 budget request of $58.8 billion for the Department of State and USAID can quickly build up an American sovereign wealth fund. If domestic projects are also added, there is no doubt that this fund will not only achieve better financial results, but also recalibrate and modernize the US’ global influence. It is nevertheless important to keep a well-managed window of generosity domestically and internationally, as this is in the nature of the American citizen.

• Khaled Abou Zahr is the founder of SpaceQuest Ventures, a space-focused investment platform. He is CEO of EurabiaMedia and editor of Al-Watan Al-Arabi.