Post by Sapphire Capital on Sept 5, 2008 4:06:45 GMT 4
IMF persists with pointless sovereign wealth "code"
Nicholas Pettifer, IFLR
The IMF has persuaded 26 sovereign wealth funds (SWFs) to agree to voluntary transparency guidelines. But doubts remain over the impact this will have.
"I just don't see the point of these guidelines," said bankers' counsel in London. "Protectionist governments will still block SWF activity in sensitive areas if it wants to regardless of whether a fund complies with the IMF or not."
The Generally Accepted Principles and Practices (not 'rules' or 'code' as SWFs don't want it to look like they need controlling) were discussed by funds and the IMF in Santiago, Chile earlier this week.
Although not published until next month, the principles are reported to advocate that funds should disclose their investment plans to foster trust and confidence.
But the principles will not be monitored. The IMF's proposal to monitor compliance was refused by funds led the Abu Dhabi Investment Authority and the Government of Singapore Investment Corporation in Chile.
Also, critics are still disappointed that the principles are voluntary.
"A strict, compulsory code would go a long way to relieving protectionist concern, but instead the IMF has come up with something half-hearted," said a private equity partner in London. "Personally, I wouldn't want a strict code, but I can't see the point of creating one at all if it has no impact."
Governments that worry about the intentions of SWFs will probably resort to their own methods to stop sensitive industries falling into foreign hands (for example, Cfius in the US and the recent German foreign investment bill). For this to change, SWFs would have to be forced to comply with extremely strict rules on accounting and disclosure.
But SWFs do not want to be controlled. This was evident in Chile by the SWFs refusal to be monitored and their reluctance to call the guidelines 'rules' or 'a code'.
A voluntary, unmonitored set of principles will not stop the inevitable protectionism that would surround a large SWF investment in a sensitive industry. And the completion of smaller purchases (or non-sensitive acquisitions) continues without the need for guidance.
"What exactly is the IMF trying to achieve here? I can't work it out," said the private equity partner.
Nicholas Pettifer, IFLR
The IMF has persuaded 26 sovereign wealth funds (SWFs) to agree to voluntary transparency guidelines. But doubts remain over the impact this will have.
"I just don't see the point of these guidelines," said bankers' counsel in London. "Protectionist governments will still block SWF activity in sensitive areas if it wants to regardless of whether a fund complies with the IMF or not."
The Generally Accepted Principles and Practices (not 'rules' or 'code' as SWFs don't want it to look like they need controlling) were discussed by funds and the IMF in Santiago, Chile earlier this week.
Although not published until next month, the principles are reported to advocate that funds should disclose their investment plans to foster trust and confidence.
But the principles will not be monitored. The IMF's proposal to monitor compliance was refused by funds led the Abu Dhabi Investment Authority and the Government of Singapore Investment Corporation in Chile.
Also, critics are still disappointed that the principles are voluntary.
"A strict, compulsory code would go a long way to relieving protectionist concern, but instead the IMF has come up with something half-hearted," said a private equity partner in London. "Personally, I wouldn't want a strict code, but I can't see the point of creating one at all if it has no impact."
Governments that worry about the intentions of SWFs will probably resort to their own methods to stop sensitive industries falling into foreign hands (for example, Cfius in the US and the recent German foreign investment bill). For this to change, SWFs would have to be forced to comply with extremely strict rules on accounting and disclosure.
But SWFs do not want to be controlled. This was evident in Chile by the SWFs refusal to be monitored and their reluctance to call the guidelines 'rules' or 'a code'.
A voluntary, unmonitored set of principles will not stop the inevitable protectionism that would surround a large SWF investment in a sensitive industry. And the completion of smaller purchases (or non-sensitive acquisitions) continues without the need for guidance.
"What exactly is the IMF trying to achieve here? I can't work it out," said the private equity partner.