WASHINGTON (Thomson Financial) - The world's 30 most developed nations today promised not to discriminate against Sovereign Wealth Fund (SWF) investments in their economies.
As members of the Paris-based Organization for Economic Cooperation and Development, the 30 countries are 'saying we are open for business,' OECD Secretary General Angel Gurria told reporters in a briefing on the sidelines of the IMF meeting.
'This is a positive development,' Gurria said. 'This is a way in which it is possible to recycle this huge accumulation of assets that have happened in these countries either because of the export of commodities or their trade surpluses.'
The OECD commitment involves five basic principles including non-discrimination, transparency of investment rules, progressive liberalization of limits on foreign investment, and promises not to add new restrictions or insist on reciprocity as a condition for open investment.
There has been a political backlash in the US and European countries against investments by the government owned funds in the Asia or the Middle East, based the fear that they would use their financial power for political ends.
The developed nations have asked the IMF to work on a set of 'best practices' for SWFs including transparency, governance and a commitment to business-only, non-political investment policies.
Oil exporting nations and Asian countries with huge trade surpluses have questioned, in turn, whether they would get fair treatment, especially after highly publicized incidents such as the attempt by Dubai Ports World to take over some US port operations.
The OECD countries have committed not to overuse national security as a barrier to the SWFs. Their investment rules 'should preserve the right to look hard at some cases where there may be security interests but at the same time preserve (the investment )flow naturally when security is not the case.'
While what constitutes a potential national security issue has clearly changed since September 11, 2001, the basic OECD investment agreement has been in place for fifty years and Gurria said the countries are at bottom, simply promising that they won't change the rules now. corbett.daly@thomson.com+tfn.newsdesk@thomson.com+dennis.moore@thomson.com dem/wash/wash COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.