Some of the Gulf’s most powerful businessmen have called on the private sector to take over sovereign wealth funds (SWF) to improve their investment performance and increase transparency.

In a rare display of public criticism, Arab businessmen at the World Economic Forum (WEF) in Sharm el-Sheikh said that private-sector control of the multi-billion dollar oil funds would help reduce criticism from Western governments.

SWFs have become depositories for the vast wealth that Middle Eastern and other governments are gaining from rising oil and commodity prices.

An estimated $2.7 trillion (£1.36 triilion) is held by these funds, most of which is in the Gulf, and they have invested $60 billion in the western banking system in the past six months. This has helped to bail out institutions, such as Citigroup and UBS, after they suffered from sub-prime mortgage losses and helped to prevent a crisis in the banking sector.

However, Western governments are concerned that SWFs are being used as an extension of national interests and have demanded more transparency.

Saad Al Barrak, chief executive of Zain, the Kuwaiti mobile phone operator, said: "I don’t trust governments to get quality investments. Governments are the lousiest people in the world to make investment decisions or economic decisions and I have a big issue with sovereign funds for that fact. Oil revenue has to be owned by everyone. It is public wealth but it has to be managed by private companies. A lot of people in competition will make the best out of this wealth."

The criticism of SWFs by Zain, one of the fastest growing companies in the region, comes amid a growing feeling among leading Arabs that oil wealth should be used locally, rather than to bail out western banks.

Shafik Gabr, chairman of the Artoc Group, an Egyptian investment firm, said: "There is concern about the behaviour of SWFs. I am sure the recipients of the wealth are happy but there is concern about the motivation of Gulf countries and that will remain. The solution is to put it into the private sector and give it maximum transparency."

The Abu Dhabi Investment Authority, which is the world’s largest SWF with assets estimated at about $700 billion, is working with the International Monetary Fund to draw up guidelines on making funds more transparent.

Western politicians are concerned that the funds are buying strategic assets to shift intellectual property or jobs to the Middle East but the IMF plan has not been welcomed by all SWFs and it may not be adopted voluntarily.

Fouad Alaeddin, managing partner of Ernst & Young in the Middle East, said: "When SWFs were investing in bonds nobody cared but when they invest in equities everyone cares. Strategic clarity is very important. These funds have to show they have proper governance for their own sake."

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