Sovereign funds welcome

Wayne Arnold

Last Updated: May 27. 2008

Arab sovereign wealth funds are welcome investors in the US, the leaders of a congressional delegation to the Gulf said yesterday. But with oil prices a major presidential campaign issue the UAE and its funds should build bridges to the leading candidates, demonstrate greater transparency and open further to reciprocal investment.

The congressmen Jim Moran and Tom Davis, who co-chair the Congressional Task Force on Sovereign Wealth Funds, were in Abu Dhabi this week leading a delegation including several members of the financial services committee of the US House of Representatives. They said their goal was to convince sceptical colleagues the UAE was an important and progressive Middle Eastern ally that did not deserve to be treated with the same suspicion as sovereign investments from China and Russia.

“This is our bridge to the peaceful, progressive Arab world, and if we don’t cross this bridge, and blow it up through excessive regulation or just simply anti-Arab or anti-Muslim bias, we miss a real opportunity,” said Mr Moran, a Democrat from Virginia.

The delegation’s visit comes amid a widening debate about what function sovereign wealth funds (SWFs) should play as economic actors, particularly because of their secrecy.

Some say they deserve thanks for having helped prop up the global financial system in the face of the worst credit crisis since the Great Depression. But others in the US worry the SWFs represent an unwelcome shift in power away from the US, and they are potentially financial tools for reconstructing the global order.

Mr Moran and Mr Davis, a Republican from Virginia, established their task force in February, at the height of the controversy over SWF purchases of iconic American financial institutions, such as the Abu Dhabi Investment Authority’s $7.5 billion (Dh27.5bn) purchase in November of a 4.9 per cent stake in Citigroup.

This week, the two men said they and their delegates sat down with officials from Adia, Mubadala Development and the governor of the UAE Central Bank, Sultan bin Nasser al Suwaidi. Plans to visit Saudi Arabia were stymied by inclement weather, they said, adding that the delegation was to travel today to Dubai to meet with Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, as well as executives from Dubai Holding and DP World.

It was a backlash by Congress, in 2006, to DP World’s purchase of British ports operator P&O – resulting in the forced sale by DP World of six major US seaports acquired as part of the £3.9bn (Dh28.3bn) deal – that Mr Moran and Mr Davis said they hoped to avoid by making visits such as this.

Still, Mr Davis warned in the current US political climate, additional regulations on foreign investments were very likely.

“There’s going to be some regulation. I think that’s clear,” he said. “That’s the political reality.”