Statement by the European Commissioner on the Santiago Principles

Press Release No. 08/08
October 11, 2008

At the Ministerial Meeting of the International Working Group of Sovereign Wealth Funds (IWG), held on October 11, 2008, Mr. Joaquín Almunia, European Commissioner for Economic and Monetary Affairs, made the following statement:

"Let me first congratulate the International Working Group of Sovereign Wealth Funds and the IMF for the major effort they have made to complete the Generally Agreed Principles and Practices (GAPP).

"When the IMFC and the G7 last April asked the IMF and the OECD respectively to prepare a set of best practices for SWFs and principles for recipient countries, it was difficult to imagine that so much would be accomplished in less than one year.

"The principles and practices of the GAPP amount to a global public good that can help foster trust and confidence between sovereign wealth funds, their originating countries, and the recipient countries. This is what we need in these turbulent times: a strong commitment to enhance mutual trust and maintain and preserve an open investment environment.

"The European Commission has pleaded from the very beginning for a cooperative and multilateral solution. In February 2008, the Commission issued a Communication on a common European approach to sovereign wealth funds. There we stated that: "Europe must remain committed to its tradition of openness to capital investments, as they are a vital source of strength for the European economies in a globalised world."

"There we made the case for engaging SWFs in a cooperative effort to enhance their governance standards and the quality of information they provide to markets in the mutual interest of both recipient and sponsor countries.

"I am very pleased to see that this approach is now generally accepted by both originating and recipient countries of the funds, and it is part of the cooperative philosophy that has produced the GAPP.

"I believe that reaching an agreement on a common European approach to sovereign wealth funds at an early stage was particularly important for the success of the process that produced the GAPP. In fact: (1) it pre-empted uncoordinated national actions by European countries with respect to sovereign wealth funds, and (2) it provided to originating countries the reassurance that they would continue to find in the EU a clear, predictable, and reliable legal environment for their investments, with the European Commission playing its full role in enforcing the European Treaty provisions on free movement of capital and openness.

"I think that the GAPP rewards all those of us who recognised from the beginning that sovereign wealth funds represent a major source of investment for recipient economies and that, as long-term investors, they will continue to bring benefits to global financial markets.

"Sovereign wealth funds, that today are a powerful class of investors in global finance, also needed to dispel concerns in recipient countries, through commitments towards higher transparency, better governance and greater accountability. All the more so given that the growth of SWFs is often the result of persistent imbalances in the global economy. Such imbalances need to be addressed with appropriate policy actions by originating countries of the sovereign wealth funds.

"I believe that by individually implementing the set of generally accepted principles and practices voluntarily agreed, and that are presented here today, SWFs will prove that they are responsible and reliable players in the global financial system.

"The European Union acknowledged from the start that the process of confidence building should not be one-sided and that recipient countries have also to take firm commitments. This is why we support the work of the OECD aimed at identifying best practice guidelines for recipient countries. Such work is in progress and we expect that it will provide greater predictability for sovereign fund investors and reassure that foreign investments are welcomed in our economies.

"With regard to the follow up, we strongly support the proposal contained in the GAPP to create a standing group of Sovereign Wealth Funds that would keep the GAPP under review, monitor its implementation, and continue the dialogue with recipient countries. I see the usefulness and importance of this group, in particular if it will continue to operate in a multilateral framework and provide a platform for a strengthened dialogue with recipient countries. The Commission remains committed to support the work of this standing group, and to facilitate the debate and continue to promote a common European approach."