Friday, May 28, 2010

You Said What?: No, Really You Did? The "Nonsense" of Transparency


Indeed you did as this extract from a BIS publication shows.
Cross-border investment flows should be welcomed by recipient countries and encouraged by source  countries, as many countries in our Area need to set rules to enable the establishment of large projects for  the purpose of creating jobs. That will also enhance peace and stability on the national level, which will certainly improve the prospects for the regions in this vast Area. Any help by the World Bank in improving and unifying investment laws in addition to watching their implementation, will go a long way in achieving this important regional objective.

Sovereign Wealth Fund source countries should also be interested in investing in mega projects in the region for three reasons, as follows:
1. The Global Financial Crisis proved that investments through Industrialized Advanced Countries’ investment banks are not totally risk free.
2. There is a need within SWF source countries to safe guard flow of food imports at reasonable prices, and the possibility for incorporating companies as direct investment projects in countries in the region is a realistic possibility, when investment laws are enacted and maintained at international standards.
3. SWF source countries should be interested in the maintenance of social order, peace and stability in the regions of this Area.

Another reason that makes me think that SWFs from our region might change the flow of their direct investments, is that once we see the proposed Regulations re Sovereign Wealth Funds in the Industrialized Advanced Economies start being implemented, when economies in the West start doing well, more questions will be asked and more forms will become necessary to fill and more disclosure and transparency will be demanded. This behavior will signal that there is no strong need for foreign capital in the West, and that the political mood has changed.

Therefore, we might see gradual tightening of the scrutiny on capital flows from SWF countries, at one stage, especially funds that are destined for direct investment in certain companies.

Faced with all this nonsense, SWFs will certainly come to the conclusion that it is time to change strategy. This could make SWFs avoid direct investment in certain companies, or even avoid direct investment in all companies, and become more of passive investment vehicles in the West. As, SWFs have large sums to  invest, this might make them direct part of their investments to existing or newly created companies in the region. This situation, if it happens soon, will lead to creating a new regional developmental cycle.

3 comments:

SellyDan said...

The transcript of that speech is available on the DIFC website, in case there's any doubt.

The toys that he threw out of the pram, however, are nowhere to be found.

Abu 'Arqala said...

SellyDan

I believe the money is the toys.

And he's not throwing it out, he's taking his "ball" home 'cause he doesn't like the way you want to play the game.

Abu 'Arqala said...

For All Readers

I would note that HE AlSuwaidi used the term "Global Financial Crisis".
As you know, we here at Suq Al Mal as a matter of style use the term "global" Financial Crisis and not Global Financial Crisis.