WASHINGTON: THE world's leading sovereign wealth funds (SWFs) have hammered out a voluntary code of conduct in a bid to dispel fears that these giant state-backed investment vehicles have political agendas.
The set of 24 principles, presented to the International Monetary Fund on Saturday, is aimed at getting people to view them as transparently-run, long-term investors that boost the stability of the global financial system.
It was cobbled together over the past five months by an international working group made up of 23 nations, including Singapore, the United Arab Emirates, Kuwait, Qatar, China, Russia and the United States.
Singapore is represented by the Ministry of Finance, and its two SWFs, the Government of Singapore Investment Corporation (GIC) and Temasek Holdings.
http://www.straitstimes.com/Breaking+News/Money/Story/STIStory_289137.html
The Generally Accepted Principles and Practices or GAPP, cover three main areas concerning SWFs:
# Their legal framework, including information on sources and uses of funds.
# Their institutional framework, that is, issues related to governance structure and accountability processes.
# Their investment and risk management framework, including how they manage risk and make investment decisions. One requirement is not to use privileged information from the government.
Mr Hamad al-Suwaidi, director of the Abu Dhabi Investment Authority and co-chair of the international working group, said the principles are 'an important step in clearing up any confusion with regard to the agenda of the SWFs'.
In recent years, US lawmakers have been voicing suspicion of political motivations behind SWFs, particularly those owned by China, Russia and Arab countries. Fears were also voiced in France and Germany.
The onset of the financial crisis has however led to calls for these wealthy funds to help capitalise troubled financial institutions.
SWFs from Singapore, Abu Dhabi, Qatar, Kuwait, and China proved to be stabilising forces when they provided capital injections for several major banks this year.
'As patient long-term investors, generally with little leverage in their funds, SWFs do already play a role in an otherwise unstable system,' said Mr David Murray, chairman of the drafting group and chief of the Australian SWF, the Future Fund.
Singapore's Finance Minister Tharman Shanmugaratnam, who attended Saturday's meeting of the working group, said the publication of 'meaningful and credible' principles was an 'important milestone'.
'Singapore supports the GAPP principles in full. GIC and Temasek Holdings adhere to these principles and practices, and will continue to do so in the future,' he said.
Concerns stemming from the fact that SWFs are government-owned are 'prospective in nature, rather than reflecting their actual conduct', he noted.
Commenting on one of the principles requiring adequate public disclosures, he said: 'Such disclosures have to be shaped by the SWF's characteristics as long-term investors, with the ability to take risks distinct from the global market benchmarks and to ride out cycles.
'A short-term focus in financial disclosures would be inconsistent with such strategies.'
He praised the code as striking an 'appropriate balance in the level and type of public disclosures'.
OECD countries are at the same time developing a set of principles for inward investments.
Mr Tharman noted that it was important for recipient countries to 'maintain an open investment regime towards SWFs and not discriminate against them'.
GIC deputy chairman Tony Tan also welcomed the release of the principles, noting in a speech in Washington that the GIC had played an active role in their development.
'Many of the principles and practices are in place in the daily operations of GIC,' he said, noting that GIC had on Sept 23 released its first annual report.
Singapore will participate in work on a proposed Standing Group of SWFs to facilitate dissemination and implementation of the principles, the Ministry of Finance told The Straits Times.
[email protected]
'Many of the principles and practices are in place in the daily operations of GIC.'
Dr Tony Tan, deputy chairman of GIC
The set of 24 principles, presented to the International Monetary Fund on Saturday, is aimed at getting people to view them as transparently-run, long-term investors that boost the stability of the global financial system.
It was cobbled together over the past five months by an international working group made up of 23 nations, including Singapore, the United Arab Emirates, Kuwait, Qatar, China, Russia and the United States.
Singapore is represented by the Ministry of Finance, and its two SWFs, the Government of Singapore Investment Corporation (GIC) and Temasek Holdings.
http://www.straitstimes.com/Breaking+News/Money/Story/STIStory_289137.html
The Generally Accepted Principles and Practices or GAPP, cover three main areas concerning SWFs:
# Their legal framework, including information on sources and uses of funds.
# Their institutional framework, that is, issues related to governance structure and accountability processes.
# Their investment and risk management framework, including how they manage risk and make investment decisions. One requirement is not to use privileged information from the government.
Mr Hamad al-Suwaidi, director of the Abu Dhabi Investment Authority and co-chair of the international working group, said the principles are 'an important step in clearing up any confusion with regard to the agenda of the SWFs'.
In recent years, US lawmakers have been voicing suspicion of political motivations behind SWFs, particularly those owned by China, Russia and Arab countries. Fears were also voiced in France and Germany.
The onset of the financial crisis has however led to calls for these wealthy funds to help capitalise troubled financial institutions.
SWFs from Singapore, Abu Dhabi, Qatar, Kuwait, and China proved to be stabilising forces when they provided capital injections for several major banks this year.
'As patient long-term investors, generally with little leverage in their funds, SWFs do already play a role in an otherwise unstable system,' said Mr David Murray, chairman of the drafting group and chief of the Australian SWF, the Future Fund.
Singapore's Finance Minister Tharman Shanmugaratnam, who attended Saturday's meeting of the working group, said the publication of 'meaningful and credible' principles was an 'important milestone'.
'Singapore supports the GAPP principles in full. GIC and Temasek Holdings adhere to these principles and practices, and will continue to do so in the future,' he said.
Concerns stemming from the fact that SWFs are government-owned are 'prospective in nature, rather than reflecting their actual conduct', he noted.
Commenting on one of the principles requiring adequate public disclosures, he said: 'Such disclosures have to be shaped by the SWF's characteristics as long-term investors, with the ability to take risks distinct from the global market benchmarks and to ride out cycles.
'A short-term focus in financial disclosures would be inconsistent with such strategies.'
He praised the code as striking an 'appropriate balance in the level and type of public disclosures'.
OECD countries are at the same time developing a set of principles for inward investments.
Mr Tharman noted that it was important for recipient countries to 'maintain an open investment regime towards SWFs and not discriminate against them'.
GIC deputy chairman Tony Tan also welcomed the release of the principles, noting in a speech in Washington that the GIC had played an active role in their development.
'Many of the principles and practices are in place in the daily operations of GIC,' he said, noting that GIC had on Sept 23 released its first annual report.
Singapore will participate in work on a proposed Standing Group of SWFs to facilitate dissemination and implementation of the principles, the Ministry of Finance told The Straits Times.
[email protected]
'Many of the principles and practices are in place in the daily operations of GIC.'
Dr Tony Tan, deputy chairman of GIC
