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Need to rename State General Reserve Fund


Ali Al Matani  - - The recent economic slowdown owing to the collapse of oil prices has put the oil-dependent nations under stress to liquidate their sovereign reserve fund, most of which were guarded zealously by these nations.

All nations across the world have their own reserve funds or wealth funds known by various names, for Oman its State General Reserve Fund (SGRF).

The sovereign reserve funds are managed and administered separately from each country’s official funds and financial transactions. As the name implies, they are treated as reserve pools of funds kept aside and invested to improve the economic reserve funds. Mainly treated as a buffer in times of economic volatility, they serve a supporting role.

The fund was established in 1980 pursuant to Royal Decree No 1/80 and the subsequent amendments to this decree which include S.D 39/1992, S.D 84/2002 and 47/2005. The fund has a separate juristic entity which has complete independence in managing its administrative and financial affairs.

It is supervised by the Ministry of Finance in accordance with the decisions issued by the Financial Affairs and Energy Resources Council (FAERC).

It is the sovereign wealth fund of the state that undertakes investment of financial surplus forwarded to it. It is also the main investment arm of the country which acts on behalf of Oman government in managing and investing the surplus achieved from oil and gas revenues.

The State General Reserve Fund invests mainly outside the Sultanate as is the case with most sovereign wealth funds around the world. It plays a major role in investing inside the country directly through its subsidiaries (companies or establishments) and indirectly via the ownership of shareholding through its subsidiaries in other companies.

The presence of reserve funds and its efficient management is also an indication of the confidence and strength of the government which, in turn, boosts the morale of the nation to tide over economic crisis.

The title of ‘Reserve’ gives an indication of funds maintained to meet any deficit or financial exigencies.

This may make us reconsider the name of State General Reserve Fund for many reasons and justifications that have to cope with international developments and changes, as well as future of this fund that has to gather all investment stakeholders in the State under its wing in order to justify its name.

From the psychological aspect, calling it ‘Reserve’ refers to the amounts of money we spend to cover deficits. Covering any State budget deficit means withdrawing from the State Reserve Fund as one of the means of funding.

No one can question the fact that efforts are being exerted to diversify income resources and investments in many sectors. However, these investments are scattered across many sectors which may not grow as expected; maybe because the present level of efficiency is not enough for the growth we aspire for or it may be because of incompetency of those who manage it.

It may also be the result of failures to envisage the outcome according to the existing parameters or the existence of administrative failures in the organisation in which the fund is being invested. It could also be the result of diversified investment instruments instead of a single investment avenue. The variety and diversification of economic sectors may lead to faulty management, weakening all efforts to achieve the desired growth.

In conclusion, bringing all sectors under a single body or fund would help realise the goals of investment in a way, which we hope, would speed up economic growth.

Hopefully, such purposeful thoughts into enhancing investments by renaming the State General Reserve Fund as Oman’s Fund for Investment will make it a source of investment, development and sustainability. Names have an impact most of the time.

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