Herald Tribune: OECD sees no need for sovereign wealth fund rules

25 March 2008

New laws or regulations to govern sovereign wealth funds are not needed as long as the funds are transparent and invest on commercial rather than political grounds, the head of the OECD said on Tuesday.

 

Angel Gurria, secretary-general of the Organisation for Economic Cooperation and Development, said the Paris-based forum had not come across an example of a sovereign wealth fund (SWF) acting for any reason other than the pursuit of profit.

 

"And therefore, we believe that there should not be any legislation or any regulation or any code applied that unduly restricts the freedom of investment, because we would be doing ourselves a disservice," Gurria told reporters after several days of meetings with senior Chinese officials.

 

"As you can imagine, our hosts agree," he added.

 

Last October, finance ministers from the Group of Seven rich countries asked the OECD and the International Monetary Fund to examine best practices for SWFs amid growing concern in the West that their investments could give them too much influence over politically sensitive or economically strategic sectors.

 

Sovereign wealth funds now have assets between $1.9 trillion (953 billion pounds) to $2.9 trillion and this could grow to $15 trillion in the next eight years, according to U.S. Treasury estimates.

 

Gurria said investments by SWFs should not be subject to restrictions as long as the funds meet certain criteria:

- they are motivated by the pursuit of profit and business

- they are professionally led and managed

- they regularly divulge results and information in keeping with other financial institutions

 

The IMF is approaching the issue from the perspective of countries that have wealth funds, including Norway, Abu Dhabi and China; the OECD, a club of 30 industrial democracies, is looking at the question from the point of view of recipient countries.

 

"And very frankly, what we're discovering is that we don't have to apply too many original measures," Gurria said.

 

"We have a bunch of codes and guidelines that we have approved over the years which, if applied today, could perfectly well be the context in which these investments should be received," he said.

 

The U.S. Treasury said last Thursday that it agreed with Abu Dhabi and Singapore on a set of principles for SWFs that specifies that politics should not influence their decisions.

 

The latest investment by China's fund, the $200 billion China Investment Corp, is a stake of more than $100 million in Visa, the credit card company that went public last week.

 

The purchase was disclosed on Tuesday by Caijing, a business magazine

 

By Alan Wheatley; Ken Wills

© Graham Bishop