Cash-strapped West looks East in midst of financial turmoil

Western economies seem to have to no choice but to engage in an awkward marriage with cash-rich nations in the Middle East and the Asia-Pacific. The financial crisis has forged that necessity in the face of staggering losses among US and European financial institutions. The credit crunch, which has already brought some of the Western economies to their knees, has definitely tipped the balance of power towards the East. Cash is king in these economic conditions and the US and Europe do not have much of it these days.

Just yesterday, the word is out that Germany, Europe’s biggest economy, is now officially in recession and France just narrowly escaped with a tenth of a percent growth. Tomorrow, the G-20 nations will converge in Washington DC to discuss measures for collective action regarding the crisis, which has now swept almost all parts of the world. Almost, but not all it seems. In the same meeting, Japan is set to offer US$100 billion of its foreign reserves to the IMF to provide financial assistance most especially to needing emerging economies, such as the Argentina, Pakistan or even the Philippines.

Gulf states like the UAE and Saudi Arabia are also being wooed by Western economies, like the UK for example, to invest in some of their troubled industries such as in the banking sector. These countries have benefited tremendously in the oil bubble earlier this year and have loads of cash at their disposal at the moment. They even led the setting up of a so-called Sovereign Wealth Fund which through the IMF, would inject funds as investments into industries that were badly hit by the crisis but have huge potential of recovery and future financial returns. Now, the West are racing fast for those highly valuable investments just to keep some of their industries above water.