| |
| |
![]() |
| |
|
| |
|
| |
|
SINGAPORE: It did not make any dramatic declarations, but the agreement announced over the weekend between Singapore, Abu Dhabi and the US on sovereign wealth fund-related transactions is a timely one, said analysts.
Singapore's Finance Minister Tharman Shanmugaratnam and GIC Deputy Chairman Tony Tan, Secretary of the US Treasury Henry Paulson and Member of Abu Dhabi Executive Council, Hamad al Hurr al Suwaidi met in Washington last week to discuss this.
The agreement addresses how investments should be conducted to build trust and reduce uncertainty.
Singapore and Abu Dhabi are major players in the world of sovereign wealth funds.
As a nation on the receiving end of such foreign investment, the United States is trying to address concerns at home about the funds' dizzying growth.
Principles include making investment decisions on purely commercial considerations and that investee countries should not erect protectionist barriers.
Tai Hui, Regional Economic Research Head, SE Asia, Standard Chartered Bank, said: "There is a certain urgency to an agreement on this kind of principle partly because over the course of the next 12 months or longer, we continue to expect oil-producing countries to run a sizeable surplus and that will obviously add to the size of these funds; likewise for current account surplus countries such as China."
And amid the current turmoil, businesses in countries like the US or Europe will continue to remain attractive propositions for foreign investors, so an agreement like this sets the bar for expectations both ways.
But analysts said what is missing from this agreement are the gritty details that will draw clearer lines on specific actions for sovereign funds and the host countries.
Mr Tai said: "It does help to lay out what is expected by investors from sovereign wealth funds. Obviously, we need more details on what kind of transparency, metrics or objectives we expect from SWFs. This is a long-drawn process. The key issue is, what do investors want to know from these funds? We also have to benchmark against other investors in the market - for example, hedge funds because it's very easy for sovereign wealth funds to turn around and say, 'Look, we can disclose only so much vis-a-vis the hedge funds which have been somewhat opaque in their information disclosures."
Analysts also noted that more countries need to be in on the agreement.
"From the investor side, we would expect to see more oil-producing countries such as Middle Eastern countries as well as China participating in a dialogue on this framework. On the host country side, US is already participating in this dialogue and obviously the countries in Europe where sovereign wealth funds have been invested should also be part of it," added Mr Tai.
The International Monetary Fund is working on a code of conduct for all sovereign wealth fund transactions.
It expects these funds to grow from their current size of at least US$2 trillion to around US$6 trillion to US$10 trillion in five years.
- CNA/so
|
