In response to political worries of sovereign wealth funds (SWFs), attendants of the annual conference of the Boao Forum for Asia generally held that so far no evidence has indicated political concerns of SWFs.
There has been a political backlash in the US and European countries against investments by the government-owned funds from Asia or the Middle East, because of the fear that they would use their financial power for political ends.
"SWFs are excellent investors in the market," said Kenneth Morgan, professor of economics at the University of Western Australia, adding the liquidity of SWFs enables them to diversify investments, and the rich capital resources enable them to care more about long-term returns.
According to Kenneth Morgan, hostility against SWFs has been diminishing since the breakout of the US sub-prime mortgage crisis, which caused capital shortage in the United States and other nations. It had been proven that SWFs were investing for economic benefits.
"SWFs represent an increasingly important investor class," said Leon Brittan, vice chairman of UBS Investment Bank, "To date, their actions suggest that they will continue to be reputable, stable and long-term investors."
SWFs can be seen as contributing to financial stability, especially during the US sub-prime mortgage crisis, because of their focus on well-diversified portfolios, long-term returns, with the virtual absence of leverage, he said, referring to one Singapore SWFs that holds an important but non-majority share of UBS.
In fact, members of the Organization for Economic Cooperation and Development (OECD) have just made a commitment, promising not to discriminate against the investments of SWFs.
The OECD commitment involves five basic principles including non-discrimination, transparency of investment rules, progressive liberalization of limits on foreign investment, and promises not to add new restrictions or insist on reciprocity as a condition for open investment.
(Xinhua News Agency April 14, 2008)
