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01 October 2023

Singapore backs joint principles for wealth funds

By Agencies



Singapore underlined its support on Friday for a set of voluntary principles aimed at regulating sovereign wealth funds by saying that an open investment environment is critical in a globalised economy.


The US Treasury said on Thursday it had agreed to a set of voluntary principles with Singapore and Abu Dhabi  aimed at regulating sovereign wealth fund (SWF) investments.


Investments by these funds on US banks, including from Singapore and Abu Dhabi, have sparked concerns in the West that foreign governments might be investing for political rather than financial gain and one day may use the stakes to advance their national interests.


But a statement from Singapore's Ministry of Finance said the principles it had agreed called on sovereign wealth funds to state formally as part of their management policies that investments should be based solely on commercial grounds, rather than to advance geopolitical goals of the controlling government.


"SWFs will continue to grow in significance. As long term players with little or no leverage, they play a constructive and stabilising role in global financial markets," Singapore's Ministry of Finance said.


"Singapore believes that an open investment environment is critical in a globalised economy and is in the interests of all parties."


The policies were meant to contribute to work by the International Monetary Fund and Organisation for Economic Co-operation and Development to develop voluntary best practices for such funds, it said.


Singapore's Ministry of Finance is the sole stakeholder in the island's $110 billion (Dh404 billion) Temasek investment fund.


Temasek, sister fund the Government of Singapore Investment Corp (GIC) and other sovereign funds from the Middle East, have made investments in Western banks such as Merrill Lynch and Citigroup that were hit by losses from the troubled US subprime housing market.


The principles said greater information disclosure by such funds in areas such as purpose, investment objectives and financial information, particularly asset allocation and rates of return, could help reduce financial market uncertainty and build trust in recipient countries.


Funds should have in place strong governance structures, internal controls and risk management systems, the statement said. They should compete fairly with the private sector and respect host country regulatory and disclosure requirements, it said.


"Countries receiving SWF investment should not erect protectionist barriers to portfolio or foreign direct investment," the statement said.


Countries should not discriminate among investors and should respect investor decisions be being as unintrusive as possible, it said. Any restrictions imposed on investments for national security reasons should be proportional to genuine security risks posed, the statement added. (Reuters)

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