Group of Sovereign Wealth Funds 
Present ‘Santiago Principles’ to IMF

WASHINGTON — The International Working Group of Sovereign Wealth Funds (IWG) presented the ‘Santiago Principles’ to the International Monetary Fund’s (IMF) policy-guiding International Monetary and Financial Committee (IMFC), which met in Washington D.C. to consult about global economic developments and to take stock of the working group’s efforts.

By Staff Report

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Published: Sun 12 Oct 2008, 11:08 PM

Last updated: Sun 5 Apr 2015, 2:17 PM

Finance Ministers, IWG representatives, the OECD and the European Commission, also took the opportunity to discuss the Principles and SWF issues in a separate meeting, said a Press release on Saturday.

The IWG has made public the set of 24 voluntary Principles and related explanatory material and announced it has established a Formation Committee to explore the creation of a permanent international Sovereign Wealth Fund (SWF) body.

In presenting the Santiago Principles to the IMFC members, Hamad Al Suwaidi, Undersecretary of the Abu Dhabi Department of Finance and Director of the Abu Dhabi Investment Authority, said: “We believe that this document will in both home and recipient countries improve the understanding of the objectives, structures, and governance arrangements of SWFs; enhance the understanding of SWFs as economically and financially oriented entities; and help maintain an open and stable investment climate. Through the implementation of the Santiago Principles, we seek to ensure that the international investment environment will remain open and our capital can continue to be put to use when it is most needed.”

“Moreover, in the Santiago Principles, there are provisions confirming the IWG’s expectations that recipient countries will not subject the SWFs to discriminatory measures to which other foreign or domestic investors in similar circumstances are not subjected. We trust the recipient countries will support these provisions,” added Al Suwaidi.

A high-level ministerial meeting of countries with SWFs and recipients of SWF flows, hosted by the IMF Managing Director, Strauss-Kahn and attended by the OECD Secretary-General Gurría and Joaquin Almunia, EU Commissioner for Economic and Monetary Affairs of the European Commission, took place after the IMFC meeting. Strauss-Kahn noted that the development of the Santiago Principles by the IWG was an important achievement, and one that has been completed very quickly. Gurría and Almunia also commended the IWG for completing and agreeing on the Santiago Principles, and Gurría updated the Ministers on the OECD’s work on guidance for recipient countries.

Santiago Principles

The Santiago Principles represent generally accepted principles and practices that properly reflect SWFs’ investment practices and objectives.

The Principles are voluntary, which the members of the IWG support, and which they either have implemented or aspire to implement.

The following key areas are covered in the Principles: legal framework, objectives, and coordination with macroeconomic policies; institutional framework and governance structure; and investment and risk management framework.

The guiding purpose of these Principles is to have in place a transparent and sound governance structure that provides for adequate operational controls, risk management and accountability; ensure compliance with applicable regulatory and disclosure requirements in the countries in which SWFs invest; ensure SWFs invest on the basis of economic and financial risk and return-related considerations and help maintain a stable global financial system and free flow of capital and investment.

The work relating to the Principles has highlighted the importance for the group to remain together to keep the Santiago Principles under review and examination, including how they are being implemented, and to facilitate discussion with recipient countries, multilateral institutions, the private sector and others.

Al Suwaidi also noted that: “Going forward, the IWG members recognise that several aspects of the Santiago Principles could benefit from further study and work, such as those relating to the provision of information about past, present and future activities of the SWFs, and the potential risks to investment operations and their balance sheets.” IWG has decided to explore the creation of a Standing Group for SWFs.

A Formation Committee composed of 10 IWG members has been established to examine the Standing Group’s constitution and terms of reference, and is expected to present a proposal by year-end.

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