RIYADH, May 6: Flushed with massive inflow of petrodollars, Saudi Arabia is eyeing investments abroad. The Saudi government announced on Tuesday setting up an investment agency, rather than a sovereign wealth fund, to look for opportunities abroad.

In recent days there have been reports that Saudi Arabia was about to float SR20 billion ($5.3 billion) fund. Countering the speculations in this regard, Saudi Finance Minister Ibrahim al-Assaf said, “We don’t have a sovereign fund but we have many investment funds”. The minister was speaking at a conference in Riyadh on Tuesday. “What we are setting up is an investment company, not a sovereign fund.”

According to estimates, sovereign wealth funds, many based in oil-producing countries as well as key Asian exporters such as China, control $2 to $3 trillion in assets.

Investments by the funds have raised concerns about their potential political motives among Western countries, some of which are considering restrictions on their activities.

The Saudi finance minister noted that the new agency would be smaller than other state-owned funds in the Gulf. “We would like to invest in profitable, low-risk assets,” he said, without being more specific.

“I reiterate the importance of avoiding restrictions on flows of capital ...whether these are coming from emerging countries or the opposite.”

Saudi Arabia reportedly also planned to invest in international agriculture and livestock projects, including acquiring farms, to help offset food shortages and curb inflation, the Saudi Press Agency said citing a statement by Minister of Information Iyad Madani. Leading businessmen in the Kingdom had earlier urged for Saudi investments in agriculture and food farms to ensure security of supplies.

As per the minister, the government now planned to establish a holding company to manage the investments. The Saudi Fund for Development will finance the kingdom’s agriculture investments abroad, Madani said here.

In order to increase food security, the Saudi government also plans to build warehouses to store food in ample quantities.

Due to the rising oil prices, the Saudi current account surplus was expected to touch an all-time high this year and economic growth and the budget surplus will also be exceptionally strong, analyst here say.

According to the Riyadh-based Jadwa Investment Group, oil export revenue of the Kingdom is expected to reach SR975 billion ($260 billion) in 2008.

This compares with an average of just SR161.25 billion ($43 billion) per year throughout the 1990s and is equivalent to around SR2.62 billion ($700 million) per day.

Non-oil export growth may slow modestly in response to lower global petrochemical prices. Nonetheless, total exports are now projected at SR1.09 trillion ($290 billion), compared with just SR146.25 billion ($39 billion) in 1998.

The current account surplus will also be reflected in a further jump in foreign assets. The holdings of foreign assets of Saudi Arabian Monetary Agency (Sama) have climbed by over $10 billion per month in each of the six months to February.

According to Jadwa, total foreign assets are expected to exceed $475 billion at the end of this year, up from just $73 billion at end-2002.

Higher oil revenues will also increase the budget surplus and are expected to reach SR260 billion ($69 billion) in 2008, the second largest ever.