Kuwait Fund for Future Generations

In 1976 the government established the Reserve Fund for Future Generations, into which it placed an initial US$7 billion. It resolved to invest 10 percent of its revenues annually in the reserve fund. Money from the fund, along with other government revenues, was invested in overseas property and industry. In the 1970s, most of these funds were invested in the United States and in Western Europe: in German firms (such as Hoechst and DaimlerBenz , in each of which Kuwait owned 25 percent), in property, and in most of the United States Fortune Five Hundred firms. In the 1980s, Kuwait began diversifying its overseas investments, placing more investments in Japanese firms. By the late 1980s, Kuwait was earning more from these overseas investments than it was from the direct sale of oil: in 1987 foreign investments generated US$6.3 billion, oil US$5.4 billion. The Financial Times of London estimated Kuwait’s overseas investments in early 1990 at more than US$100 billion, most of it in the Reserve Fund for Future Generations.

The Iraqi invasion proved the importance of these investment revenues. With oil revenues suspended, the government and population in exile relied exclusively on investment revenues, including sales of investments for sustenance, for their share of ongoing coalition expenses and for postwar reconstruction and repair of the vital oil industry. While these funds were depleted to $40-$50 billion after the war, they currently are estimated around $80 billion.