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WASHINGTON: The Government of Singapore Investment Corporation (GIC) has welcomed the release of a set of guidelines for sovereign wealth funds (SWFs).
The guidelines, which comprise generally-accepted principles and practices for SWFs, were presented to the International Monetary Fund by an international working group of SWFs over the weekend.
In a speech in Washington DC on Sunday, GIC deputy chairman and executive director, Dr Tony Tan, said the guidelines will help to improve understanding of SWFs as financially-oriented entities - at home and abroad.
The move will also allay protectionist fears and help keep the global investment climate open and stable.
He added that the GIC actively participated in the development of the guidelines and will implement them appropriately and consult the Government when necessary, in areas where they have the prerogative.
Dr Tan noted that there had been undertstandable concerns that SWFs may invest in assets with non-financial interests and could destabilize markets and financial systems.
However, he said there has been little evidence that SWFs have acted in a way to warrant such fears, pointing out that in their April 2008 Global Financial Stability Report (GFSR), the IMF tentatively concluded that SWFs had played a shock-absorbing role in the current global financial crisis through their investments in banks.
In his speech, Dr Tan emphasised that it is mutually beneficial for developed and emerging countries to maintain an international regime that allows for the free flow of capital.
Any restrictions on investments, he warned, would hurt investors as well as recipients who would have to pay a higher cost for capital. It could also threaten the fundamentals of global prosperity offered by globalisation itself.
Commenting on the current global financial crisis, Dr Tan said that state intervention will be needed to stabilise the troubled system.
But he warned that one risk of this could be over-regulation, which could stifle the healthy development of the financial sector.
He called instead for all stakeholders to work towards maintaining a stable global financial system and a free flow of trade, capital and investment while keeping in mind the lessons of the Great Depression of the 1930s - - that is to guard against over- regulation and protectionism and a retreat from globalisation.
- CNA/de/sf
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