Investment policy

Keeping markets open for sovereign wealth fund investment


Remarks by Angel Gurría, OECD Secretary-General, during a briefing with the United States Council for International Business (

Washington, D.C., 13 October 2008

Ladies and gentlemen, distinguished guests, good afternoon.

It’s a pleasure to be here among business executives and public policy specialists to speak on the issue of Sovereign Wealth Funds and keeping markets open. I congratulate the United States Council for having focused on an issue of long term significance at this particular juncture.

In these uncertain times when the wave of financial markets turmoil stimulates a discussion on every tenet of the market economy, it is essential to be able to think clearly on the issue of market openness, why we need it and how we can address legitimate security and other non-economic concerns.

Going straight into the subject, allow me to make three basic points:

First, OECD member countries have come out strongly in this debate in welcoming Sovereign Wealth Funds and have given us a mandate to develop guidance for recipient countries. And we came out first.

Second, in this area, we are absolutely complementary to the work of the International Working Group in which we participate.

Third, we will not let this subject slip through the cracks. We intend to continue to monitor observance and commitment to basic principles by recipient countries, just as we have been doing for international investment as a whole for the last 47 years.

I don’t need to dwell at length on the first two points. Basically, a year ago the IMFC and the OECD answered the call of the G7 to work on how sovereign wealth fund investments would fit into the global economy.

On Saturday,  the IMF welcomed the Generally Agreed Principles and Practices (GAPP) for SWFs  transparency and governance. These were developed by the SWFs themselves, with the IMF acting as Secretariat.

We can congratulate ourselves on an outcome where SWFs, working with the support of the IMF, and the OECD were able to create a positive interaction – a real synergy – that has delivered something important to the global economy: a set of principles for both SWFs and recipient governments that will enhance transparency, governance and ability to respond to each other’s legitimate concerns (e.g. about fair market access for sovereign wealth funds or national security for recipient countries) in an effective and open way. 

I am proud to report that we were able to help both SWFs and recipient countries build a solid policy foundation upon which mutual trust and confidence can grow.

On the OECD side, we have completed guidance for recipient country policies and this guidance was endorsed last June through a Ministerial-level Declaration on SWFs.

The OECD Guidance is based on the general investment policy principles of non-discrimination, transparency and liberalisation. It also recognises the right of governments to take actions they consider necessary to protect national security, but calls for restraint when applying security-related investment measures. It asks them to exercise these actions in conformity with fundamental principles of:

  • Non-discrimination
  • Transparency, which brings predictability
  • Regulatory proportionality - focus on adequate regulation
    and, last but not least
  • Accountability

OECD countries put these policy principles into practice in a variety of ways and the OECD respects their efforts to develop their own approaches to investment and national security within broad guidance provided by the OECD. Many countries, including especially, the northern rim of Europe, don’t use discriminatory investment policies at all to protect their essential security interests. Instead, policy specialists in such areas as national defence, competition and critical infrastructure act to safeguard national interests by imposing the same rules on both domestic and foreign investors. Here in the United States, the Committee on Foreign Investment in the United States process is narrowly focused on national security concerns and involves close cooperation among different parts of the executive branch (e.g. intelligence, defence and treasury). This approach has the advantage of bringing significant expertise from those departments to bear on the investment review process.

To move ahead, it is essential to implement the International Working Group’ Generally Accepted Principles and Practices (GAPP) for SWFs. The OECD has supported and participated as an observer in IWG’s work all along. 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 better than other investors. They have set and they will meet standards of transparency and governance to ensure that they are welcome everywhere they wish to invest.

How we intend to move ahead at the OECD?

The next step at the OECD is now to monitor observance by recipient countries of their commitment to preserve and expand an international investment environment for SWFs. To do that, we do not intend to reinvent the wheel. The OECD Investment Committee has for decades been the place where new and emerging investment issues have been analysed and debated, where governments have been helped to craft complementary approaches, panic reactions abated, and legitimate security concerns explained to trading partners.

We intend to broaden our existing methods to continue to shed light on this issue, and involve all relevant players in our discussions within and outside the OECD membership.

For this we have an instrument we call the Freedom of Investment Process, convened under the auspices of the OECD Investment Committee. This project was launched to help governments counter rising investment protectionism. It provides three key instruments:

  • Firstly, a multilateral forum for investment policy, which permits international cooperation on investment policy issues in which several key non-OECD countries (such ChinaIndiaRussia and South Africa) participate, on an equal footing, alongside all 30 member countries. This multilateral forum will continue to operate and it will work to reinforce an open investment environment in non-member countries.
  • The second key instrument is peer surveillance, which is the trademark of the OECD. Through “peer pressure” policy practitioners from different countries pool information, draw on data and analysis provided by the Secretariat and have an in-depth conversation about whether and how each participant is observing OECD principles. This process has, over a period of several decades, monitored and strengthened wide-ranging liberalisation, making it more difficult for OECD countries to backslide into protectionism. Now this process is being enhanced through requirements for more timely notification on policy changes by countries, more reporting to the public on the contents of these discussions and participation of a wider range of actors directly concerned by the discussions. To give an example of what is already being done, SWFs from Australia, Russia and Qatar participated in this week’s meetings finalising the OECD guidance on SWFs.
  • Last, but not least, the Freedom of Investment process includes a public international data base, which covers information about discriminatory investment policies in the 30 members countries and in the 11 non-member countries  that adhere to OECD investment instruments. Future work at the OECD will improve this data base and extend it to the growing number of countries that wish to participate in OECD investment dialogue.

We encourage the Sovereign Wealth Funds and their governments to participate actively in the Freedom of Investment process. This is an excellent way for them to make their voices heard by recipient countries and be sure that they keep the 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. 

Working side by side, OECD countries, the Sovereign Wealth Funds, and the IMF, have been able to build mutual confidence, a much appreciated asset in these times of global financial uncertainty. Let us continue to work together to reinforce this cooperation.

Thank you very much.