WASHINGTON: The Bush administration said it had reached agreement with Abu Dhabi and Singapore that they will not use their huge government investment funds to further their political goals. The funds have raised concerns about the potential threats that large amounts of foreign investment could pose to the US economy and other industrial countries. A set of policy principles was released after Treasury Secretary Henry Paulson met with officials from Abu Dhabi, home to the world s largest government investment fund, and Singapore, which also controls a sizable investment fund. We had a good discussion today on the issues surrounding sovereign wealth funds, Paulson said in a statement. He said the principles that had been agreed to would further efforts to develop a set of best practices to govern how the funds operate. The International Monetary Fund and the Paris-based Organization for Economic Cooperation and Development are working to develop a voluntary set of best practices to address issues that have been raised. Sen. Charles Schumer praised the administration effort and urged other countries to follow the example of Abu Dhabi and Singapore. Transparency is what we are asking for from sovereign wealth funds, Schumer said in statement. Now it is up to other sovereign wealth funds to follow this lead. I hope the administration, the IMF and other governments will encourage them to do so. Paulson s meeting followed a letter released earlier this week that Abu Dhabi sent to the administration and other Western governments in which it spelled out the principles it said guides its investment procedures. The first of nine principles released Thursday says that sovereign wealth fund investment decisions should be based solely on commercial grounds, rather than to advance, directly or indirectly, the geopolitical goals of the government that controls the fund. The principles also endorse greater disclosure of information concerning the funds, saying this disclosure can help reduce uncertainty in financial markets and build trust in recipient countries. These funds, in many cases bulging with revenues earned through the sale of oil, have raised concerns among members of Congress and officials in Europe regarding their intentions in making investments in the United States and Europe. The administration has sought to walk a fine line on the issue, reflecting the fact that the United States must depend on foreign investment to finance its huge trade deficits. Paulson, in his statement, said that the United States welcomes sovereign wealth fund investment and looks forward to continuing to work with these two countries and others to support the initiatives under way at the IMF and the OECD to develop best practices for the funds and countries where the funds are making investments. One of the principles for countries receiving the investment was that they should not erect protectionist barriers to portfolio or direct investment. Officials from Abu Dhabi, Singapore and their two large investment funds attended the meeting with Paulson. The Abu Dhabi Investment Authority is estimated to have holdings of as much as $900 billion (583 billion euros), making it the largest sovereign wealth fund in the world. This fund, which was set up more than 30 years ago to invest the Persian Gulf emirates oil wealth, late last year invested $7.5 billion (4.86 billion euros) in Citigroup Inc., giving it a 4.9 percent stake in America s biggest bank. In a statement, the Abu Dhabi investment group said that it welcomed the opportunity to have voluntarily participated in the development of the policy principles proposed by the US Department of the Treasury. Critics, including some in Congress, have expressed concerns that the investments could be influenced by politics or that US businesses could lose their ability to control their operations to foreign governments.
