The United Arab Emirates plans to increase its investment from surging oil income by buying more overseas assets and boosting infrastructure to attract foreign capital inflows, the country's economy and planning minister said.
In a rare interview, Sheikha Lubna al-Qassimi told Reuters that the global economy must stand ready to tackle rising inflation from the high oil prices to sustain growth.
The energy sector in the Opec-member UAE accounts for about a third of the economy, less than for many of its neighbours, but profits soaring from oil prices are pouring into stock and property markets, powering an economic boom and feeding inflation.
At the same time, the government is snapping up international assets, buying Tussauds Group, home to the famous waxwork museums, and acquiring a $1 billion stake in DaimlerChrysler AG earlier this year.
"Because of the influx of petrodollars at the moment, that has created much more strength in the economy especially in the financial markets," Al Qassimi said in the interview cleared for publication on Saturday. "Diversification and global investment is the way forward. You can't just invest in one area. You have to provide a balance between looking for opportunities overseas as well as locally."
When asked if the country will continue to look for overseas investment opportunities, she said: "Of course. In the US, sometimes you have great deals because opportunities are there and your money is viable to go for that kind of investment."
"Australia is also a great example of the UAE developing strong economic ties and investments, including real estates. Turkey, at the moment, is one of our focus areas; the governments of Dubai and Abu Dhabi are looking at several projects."
Earlier this month, Dubai's port operator DP World, one of the largest in the world, acquired a coastal side in Turkey for $105 million to build a $170 million new container terminal.
The oil-rich Middle Eastern countries in general saw a huge influx of petrodollars as the oil prices rallied earlier this year, hitting a record above $70 per barrel - up more than 60 percent from end-2004 - before coming off below $60 recently.
Traditionally these countries have recycled its dollar-based revenues in dollar-based assets, but in recent years they have been diversifing given the dollar's sharp fall and the booming of emerging markets. The world economy has shown resilience so far to the high oil prices, but the threat of inflation is rising and investors are bracing for tighter liquidity around the world.
"The whole world is facing a challenge at the moment. On the deman side there is a higher need for oil largely due to the new fast-growing economies such as India and China," Al Qassimi said.