The US has reached an agreement with Abu Dhabi and Singapore on a set of principles for investment by sovereign wealth funds.
Washington hopes the move will help assuage concerns about such funds' transparency, while encouraging them to continue investing. It wants the agreement to serve as a stepping stone for wider-ranging efforts by the International Monetary Fund and Organisation for Economic Co-operation and Development.
The code of conduct could soon gain other adherents in the Middle East. The Qatar Investment Authority has signalled a willingness to sign up. Dubai International Capital also says it would consider adopting the code.
The agreement says sovereign wealth fund investment decisions "should be based solely on commercial grounds, rather than to advance directly or indirectly the geopolitical goals of the controlling government". It also stresses the need for "strong governance structures" for the funds, and respect for host country regulatory disclosure rules.
The US agreed that recipient countries "should not erect protectionist barriers", and "should ensure predictable investment frameworks" and "not discriminate among investors".
Clay Lowery, the US Treasury's assistant secretary for international affairs, told the Financial Times: "It's the first time to my knowledge that there's been a set of principles on this type of issue that include both sovereign wealth funds and a recipient country.
"In terms of transparency and disclosure what you saw today was two funds that are basically willing to step up and say, 'We believe there should be greater information and disclosure.'" He emphasised commitments in institutional arrangements and decision-making structures and financial information, notably asset allocation and benchmarks.
Abu Dhabi officials say the guidelines will simply formalise the oil-rich emirate's investment practices. The capital of the United Arab Emirates - a key US ally - has been embarrassed by rising hostility to such funds, fearing entanglement in wider concerns about more politically motivated Russian and Chinese funds.
One Abu Dhabi official says the US Treasury has pushed for the code of conduct as a means to assuage domestic concerns about sovereign wealth funds and to prevent the introduction of punitive legislation against these funds, which have traditionally held hundreds of billions of dollars in US T-bills and other US assets. Middle East funds are already diversifying away from the US to lower exposure to the weakening dollar and to seek higher returns from Asian markets.
The White House is keen to ensure continued investment at a time when US officials are seeking to prevent the credit squeeze from further damaging the economy. "We can protect our people against investments that jeopardise our national security, but it makes no sense to deny capital, including sovereign wealth funds, from access to the US markets," President George W. Bush said last week.
But some US Congress members worry about the economic power that could be accumulated by sovereign wealth funds from Arab states, Russia and China.
The 32-year-old Abu Dhabi Investment Authority is the world's largest, with between $500bn and $875bn (€324bn-€566bn, £252bn-£441bn) in assets, according to US Congressional Research Service estimates this year.
Singapore's sovereign wealth fund ranks second globally, with the Government of Singapore Investment Corp having estimated assets of between $100bn and $330bn and Singapore-based Temasek Holdings assets of more than $100bn. Source
Washington hopes the move will help assuage concerns about such funds' transparency, while encouraging them to continue investing. It wants the agreement to serve as a stepping stone for wider-ranging efforts by the International Monetary Fund and Organisation for Economic Co-operation and Development.
The code of conduct could soon gain other adherents in the Middle East. The Qatar Investment Authority has signalled a willingness to sign up. Dubai International Capital also says it would consider adopting the code.
The agreement says sovereign wealth fund investment decisions "should be based solely on commercial grounds, rather than to advance directly or indirectly the geopolitical goals of the controlling government". It also stresses the need for "strong governance structures" for the funds, and respect for host country regulatory disclosure rules.
The US agreed that recipient countries "should not erect protectionist barriers", and "should ensure predictable investment frameworks" and "not discriminate among investors".
Clay Lowery, the US Treasury's assistant secretary for international affairs, told the Financial Times: "It's the first time to my knowledge that there's been a set of principles on this type of issue that include both sovereign wealth funds and a recipient country.
"In terms of transparency and disclosure what you saw today was two funds that are basically willing to step up and say, 'We believe there should be greater information and disclosure.'" He emphasised commitments in institutional arrangements and decision-making structures and financial information, notably asset allocation and benchmarks.
Abu Dhabi officials say the guidelines will simply formalise the oil-rich emirate's investment practices. The capital of the United Arab Emirates - a key US ally - has been embarrassed by rising hostility to such funds, fearing entanglement in wider concerns about more politically motivated Russian and Chinese funds.
One Abu Dhabi official says the US Treasury has pushed for the code of conduct as a means to assuage domestic concerns about sovereign wealth funds and to prevent the introduction of punitive legislation against these funds, which have traditionally held hundreds of billions of dollars in US T-bills and other US assets. Middle East funds are already diversifying away from the US to lower exposure to the weakening dollar and to seek higher returns from Asian markets.
The White House is keen to ensure continued investment at a time when US officials are seeking to prevent the credit squeeze from further damaging the economy. "We can protect our people against investments that jeopardise our national security, but it makes no sense to deny capital, including sovereign wealth funds, from access to the US markets," President George W. Bush said last week.
But some US Congress members worry about the economic power that could be accumulated by sovereign wealth funds from Arab states, Russia and China.
The 32-year-old Abu Dhabi Investment Authority is the world's largest, with between $500bn and $875bn (€324bn-€566bn, £252bn-£441bn) in assets, according to US Congressional Research Service estimates this year.
Singapore's sovereign wealth fund ranks second globally, with the Government of Singapore Investment Corp having estimated assets of between $100bn and $330bn and Singapore-based Temasek Holdings assets of more than $100bn. Source
No comments:
Post a Comment