Suwaidi critical of IMF attempt to monitor SWF investments in West

(DENNIS B MALLARI)

 

The UAE has criticised the International Monetary Fund (IMF) for its decision to interfere in the activities of the sovereign wealth funds (SWFs), branding it a politically motivated move.

Central Bank Governor Sultan bin Nassir Al Suwaidi said the IMF lacks sufficient experience in such issues and its involvement following Western pressure could discourage further SWF investment in the United States.

"We reiterate our misgivings regarding the Fund's involvement in setting best practices for Sovereign Wealth Funds… the IMF does not have the requisite expertise in the areas of governance and transparency to take the lead in producing a set of best practices for SWFs," Al Suwaidi said at a meeting of the IMF and its Financial Committee in Washington.

"We are also concerned that the treatment of SWFs, to the exclusion of other types of institutional investors with proven track record of excessive risk taking and destabilising behaviour, would introduce a severe element of bias and lack of evenhandedness in financial surveillance."

According to an IMF statement, Al Suwaidi's address was on behalf of the UAE and other Arab central bank governors representing their countries at the meeting.

The states he represented included Bahrain, Egypt, Qatar, Jordan, Kuwait, Iraq, Lebanon, Libya, Oman, Syria, and Yemen.

"The timing of this exercise and its political dimensions could inadvertently disrupt the flow of much-needed long-term capital from SWFs to groups in the United States and elsewhere that face both liquidity and capital shortage issues."

Following contacts for several months, the Washington-based IMF and 25 SWFs from the UAE and other countries announced last week the creation of a working group to draft the first practice guidelines for the state-owned funds.

The group will set up committees to hold periodical meetings this year to set guidelines in governance and transparency, which the IMF said were aimed at helping ease concerns in many Western countries about the sovereign wealth funds' growing size and influence, since many reveal little about their investments.

The move followed warnings in some Western nations that wealth funds could pose a national security threat should they seek to obtain sensitive information or destabilise markets through their investments. The IMF has said there is no clear evidence to support such fears.

The funds, many based in major oil producing countries as well as key Asian exporters such as China, control between $2 trillion (Dh7.34trn) and $3trn in assets. The SWFs are concerned about restrictions on their investments, which could hamper the international flow of capital.

The Abu Dhabi Investment Authority (Adia), which was created in early 1970s, is believed to be the world's largest SWF, with an estimated $875 billion.

 

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