Investment policy

IMF Ministerial-level Roundtable on the “Santiago Principles” for Sovereign Wealth Funds, remarks by OECD Secretary-General


Washington, 11 October 2008

Ladies and Gentlemen,

I am very pleased to be with you today. The financial context in which this session takes place is one of the most difficult we have experienced in a long time. It is therefore a pleasure to gather around an encouraging outcome.

A year ago, the G7 called on the IMF and the OECD to explore how sovereign wealth fund investments fit into the global economy. Following that call,  in April of this year, the OECD Investment Committee sent the message that recipient countries welcome investment from SWFs, and that they will treat such investments the same as any other foreign investment. Today, the Sovereign Wealth Funds and the IMF have delivered a set of Agreed Principles and Practices about their own transparency and governance. 

This can only reinforce OECD countries’ commitment to be open for investment by SWFs.

This is also a good example of effective coordination among international organisations. Our two institutions – the IMF with governments holding SWFs, and the OECD with its members, who are the main recipients of sovereign wealth investment – created a positive interaction, a real synergy, in our work. And we have delivered something of critical importance to the global economy: confidence. 

We have been able to turn around a situation dominated by concern and suspicion – on both sides and especially in the public and press – into one of much better mutual understanding and confidence.

The Generally Agreed Principles and Practices are a message to markets around the world that Sovereign Wealth Funds intend to behave like other investors – maybe even better than other investors. They have committed to a set standards of transparency and governance, and this must be acknowledged. It will help ensure that they are welcome wherever they wish to invest. 

To emphasise their commitment as recipients of SWF investment, Ministers from the 30 OECD member countries, along with three countries seeking to join the OECD, issued a Declaration on Sovereign Wealth Funds and Recipient Country Policies. Ministers welcomed the constructive contribution that Sovereign Wealth Funds make to the economic development of home and host countries. They acknowledged that, to date, SWFs have been reliable, long-term, commercially driven investors and a force for global financial stability.

Ministers also endorsed policy principles for countries receiving Sovereign Wealth Fund investments, in line with our member countries’ longstanding commitment to open markets. They also underlined the need to avoid erecting protectionist barriers to foreign investment, or to discriminate among investors in like circumstances. 

At the same time, the Ministers did not avoid the difficult questions, and they recognised that if an investment by a Sovereign Wealth Fund was politically motivated, it could be a source of concern and raise legitimate national security issues. In such cases, it was agreed that any additional investment restrictions should only be considered if existing policies –  applicable to both foreign and domestic investors – were not adequate. 

And where such national security concerns do arise, the Ministers emphasised that investment safeguards by recipient countries should be transparent and predictable.  They should be proportionate to clearly-identified national security risks. And they should be subject to accountability.

OECD countries will hold themselves to a high standard of openness. They will not be protectionist. They will not discriminate against Sovereign Wealth Funds.  If they have a national security concern, they will deal with it in the least intrusive and fairest way possible. 

I might add that this Ministerial Declaration was part of a wider OECD project on “Freedom of Investment” that was launched two years ago to head off the risk of more investment protectionism. The key aims of the project are to analyse national security and investment restrictions, and to create stronger disciplines – focusing first and foremost on themselves.  

The OECD has a strong tradition of peer review.  It is like the old saying, “To trust is good; to check is better”.  Three times a year, as part of the Freedom of Investment project, countries check to see whether they are meeting their commitments to keep an open investment environment.  They hold a “Tour d’Horizon” where countries can challenge the investment decisions or possible new polices of other countries – their peers. And I can assure you that the questions that countries ask each other are tough and challenging.  

I would like to emphasise that from the start of this project, we have invited non-OECD countries to participate on an equal footing.  Fourteen non-OECD countries have participated so far.  And we have consulted with Sovereign Wealth Funds as well as with business and social partners.

We are inviting Sovereign Wealth Funds to participate in this work. Two representatives from Sovereign Wealth Funds attended the meeting of the Roundtable on Freedom of Investment earlier this week, and I encourage other SWFs to join this process. This is an excellent way to make your voices heard by recipient countries and be sure that they keep their promises of openness.

The global economy looks set to go through some rough times in the months ahead. An important part of weathering the storm is to keep trade and capital moving.  

I am glad that working side by side, OECD countries and Sovereign Wealth Funds, with the IMF and OECD, have been able to build mutual confidence. Let us continue to work together to maintain this positive momentum.

Thank you.