IMF urges action on sovereign wealth (would-be loan-shark or not?)

FT ^ | 01/24/08 | John Burton and Chris Giles

[TigerLikesRooster]

IMF urges action on sovereign wealth

By John Burton in Singapore and Chris Giles in Davos

Published: January 24 2008 21:53 | Last updated: January 24 2008 21:53

Singapore, Norway and Abu Dhabi have been asked by the International Monetary Fund to take the lead in drawing up disclosure benchmarks for sovereign wealth funds, Lee Kuan Yew, the former Singapore prime minister and chairman of one of the world’s biggest sovereign funds, has said.

The IMF’s move comes as countries with sovereign wealth funds and recipient states skirmished at the World Economic Forum in Davos over the need for a code of conduct for such state-owned investment funds.

The US Treasury and other advanced nations insist on the need for guidelines to cover the transparency of the funds and to prohibit aggressive behaviour by the funds as investors.

Lawrence Summers, the former US Treasury secretary, recognised that sovereign wealth funds had so far proved model investors but was baffled why, if they intended to continue to behave well, there was reluctance to sign a code of ­conduct.

Speaking about a hypothetical and damaging piece of state-led pressure from a sovereign wealth fund, he said: “The argument, ‘We’ve never done x, but it would be the end of the world if we were to refuse to do x’ is not entirely reassuring for people concerned about x.”

But Mohamed Al-Jasser, vice-governor of the Saudi Arabian Monetary Agency, the country’s central bank, replied that such statements implied that “the sovereign wealth funds are guilty until proven innocent”.

Norway, Singapore and Abu Dhabi operate some of the largest and oldest sovereign funds, but their level of disclosure varies widely. Norway’s Government Pension Fund is seen as the “gold standard” in terms of transparency and Kristin Halvorsen, the Norwegian finance minister, said she thought a global standard would be helpful.

The Government of Singapore Investment Corp (GIC) and the Abu Dhabi Investment Authority are among the most secretive. Mr Lee said during a visit to Saudi Arabia that GIC, which he chairs, planned to become more transparent. Tony Tan, GIC deputy chairman and a former Singapore deputy prime minister, has been leading the discussions with the IMF, Mr Lee said.

GIC, which has up to an estimated $330bn in assets, has recently gained a high profile by taking stakes in UBS and Citigroup in the wake of the subprime credit crisis.

The IMF earlier urged GIC to make more disclosures about its operations in line with those adopted by Temasek Holdings, the Singapore state investment company, which publishes an annual report.

Singapore until now has refused to do so, saying that since GIC manages the city-state’s foreign reserves, any disclosure about the size of the fund and its annual performance could make it vulnerable to currency speculators.

“We will not disclose how much we invest in each particular sector because that’s sensitive financial information, which will affect our future purchases, but we’re prepared to say this is what we’re doing in this sector and that sector,” said Mr Lee.

[TigerLikesRooster]

So they are drawing up a loan-shark test.

[FortWorthPatriot]

At first I thought they were referring to the Impossible Missions Force.

[petro45acp]

“At first I thought they were referring to the Impossible Missions Force.”

Dang!

Had a whole Emily Litella riff sketched out....”never mind!”

[snowsislander]

The US Treasury and other advanced nations insist on the need for guidelines to cover the transparency of the funds and to prohibit aggressive behaviour by the funds as investors.

Our insistence is going to mean increasingly less to creditor nations if we continue to be the world's largest debtor nation.

[Oldexpat]

While our congress and president just doled out $150B for the public to buy X-Boxes, Singapore is investing their money in dividend paying growing companies. Who is wise and who is foolish?
Lots of these funds are Singapore’s individual SS type accounts. All of those individual accounts..up to a certain level must invest in these funds.
The DemocRats continue to block the same kind of accounts for US citizens. So our banks have to go begging for money.

[snowsislander]

While our congress and president just doled out $150B for the public to buy X-Boxes, Singapore is investing their money in dividend paying growing companies. Who is wise and who is foolish?
Lots of these funds are Singapore’s individual SS type accounts. All of those individual accounts..up to a certain level must invest in these funds.
The DemocRats continue to block the same kind of accounts for US citizens. So our banks have to go begging for money.

Yes, if we must accept Socialist Security as a political reality (I would gladly give up all of my "investment" into that Ponzi scheme if I could just see SS terminated), I would like to at least see it privatized as President Bush had pushed to do earlier on in his administration.

I have seen some discussion of this during the current race, so perhaps when we have a new Republican administration this privatization discussion can be put back on the table.