International Working Group of Sovereign Wealth Funds Reaches a Preliminary Agreement on Draft Set Generally Accepted Principles and Practices-"Santiago Principles"

Press Release No. 08/04
September 02, 2008

The members of the International Working Group of Sovereign Wealth Funds (IWG), which met on September 1-2, 2008 in Santiago, Chile, reached today a preliminary agreement on a draft set of principles and practices for recommendation to their respective governments.

The Generally Accepted Principles and Practices for Sovereign Wealth Funds (GAPP) is a voluntary framework that would guide the appropriate governance and accountability arrangements, as well as the conduct of appropriate investment practices by SWFs. In response to the call from the International Monetary Fund's policy-guiding International Monetary and Financial Committee (IMFC), the IWG expects to present the GAPP to the IMFC at its October 11 meeting in Washington DC. The IWG intends to publish the GAPP thereafter.

The IWG members also decided to explore the establishment of a standing group of sovereign wealth funds (SWFs). This is in recognition of the need to carry forward the work relating to the GAPP, as necessary, and to facilitate dialogue with official institutions and recipient countries on developments that impact SWF operations.

The Santiago meeting, which was the third full-scale IWG working session since the groups establishment (see Press Release No. 08/01 at http://www.iwg-swf.org/pr/swfpr0801.htm), included a session with representatives of select recipient countries and the European Commission. An OECD representative updated the IWG on the progress and next steps with the guidelines for the recipient countries, which are intended to complement the GAPP and preserve and expand an open international investment environment for SWFs.

At the conclusion of the meeting, the IWG co-chairs, Mr. Hamad al Suwaidi, Undersecretary of the Abu Dhabi Department of Finance and a Director of the Abu Dhabi Investment Authority, and Mr. Jaime Caruana, Counselor and Director of the International Monetary Funds Monetary and Capital Markets Department, issued the following statement:
"We have taken a significant step in Santiago. Within a short span of four months, and through a strong consultative spirit, the IWG has reached a preliminary agreement on a set of voluntary Generally Accepted Principles and Practices. We expect to present the GAPP framework to the IMFC next month so that the IMF's 185 member countries have an opportunity to review the voluntary principles and practices.

"The outcome of our intensive deliberations, since May 2008, including three rounds of discussions with recipient countries, reflects a cooperative and consultative spirit among all IWG members. We thank all participants of the IWG for this spirit and commitment to consensus building. We would also like to publicly acknowledge the important role of Norway, Singapore, and Chile in hosting the IWG meetings, and to the representatives from recipient countries for their input and feedback.

"These principles and practices will promote a clearer understanding of the institutional framework, governance, and investment operations of SWFs, thereby fostering trust and confidence in the international financial system. The IWG also intends to publish on its web site a brief aggregated survey of the current "Institutional and Operational Practices" based on responses to a voluntary SWF survey conducted by the IMF. The IWG took these practices into account in its preparation of the GAPP.

"The work relating to the GAPP has highlighted the importance of the need for a regular consultative mechanism for SWFs to facilitate discussion both amongst themselves, as well as with recipient countries, multilateral institutions, the private sector and others. A decision was taken therefore in Santiago to explore the establishment of a standing group for SWFs. An SWF formation committee is being established to examine its constitution and terms of reference. We hope that this will allow all SWFs, on a voluntary basis, to continue to ensure that the GAPP is kept under review as macroeconomic, financial market, and cross-border investment regimes evolve. The group will seek to reinforce the role of SWFs as a positive and stabilizing part of the global economic and financial system."

Notes

The IWG member countries are: Australia, Azerbaijan, Bahrain, Botswana, Canada, Chile, China, Equatorial Guinea, Iran, Ireland, South Korea, Kuwait, Libya, Mexico, New Zealand, Norway, Qatar, Russia, Singapore, Timor-Leste, Trinidad & Tobago, the United Arab Emirates, and the United States. Oman, Saudi Arabia, Vietnam, the OECD, and the World Bank, participate as permanent observers. The IMF helped to facilitate and coordinate the work of the IWG by providing a secretariat for the IWG.

For additional information see: http://www.iwg-swf.org/index.htm