March 21, 2008
| Public Affairs | Media Relations | |||
|---|---|---|---|---|
| E-mail: | publicaffairs@imf.org | E-mail: | media@imf.org | |
| Fax: | 202-623-6220 | Phone: | 202-623-7100 | |
MS. GAVIRIA: Hello. I'm Angela Gaviria with the External Relations Department at the IMF. Welcome to this Conference Call on the Sovereign Wealth Fund paper. Here with me are Jaime Caruana, Counsellor and Director of the Monetary and Capital Markets Department; Adnan Mazarei, Assistant Director in the Policy Development and Review Department; and Udaibir Das, Division Chief in the Monetary and Capital Markets Department. Jaime Caruana will start with some brief remarks and then they'll be happy to take your questions.
MR. CARUANA: Thank you. Good afternoon. I would like to say that today we had the opportunity to discuss with the Board a paper where we deal with our plan to work in close partnership with Sovereign Wealth Funds and to facilitate the development of best practices. We discussed with the Board the different issues around Sovereign Wealth Funds. Our work program was endorsed. We will start to work with the Sovereign Wealth Funds on the best practices and have a meeting probably in late April where we will discuss the details of the program on how to best develop these principles and these best practices. I think I will stop here and take your questions.
QUESTIONER: Yesterday the United States Treasury actually came up with its own principles and I was wondering how this in any way will affect your work. Does it complicate it in some way or does it just mean that it might help it in some way?
MR. CARUANA: If you read the communiqué that was issued after this agreement, you will realize that there was an endorsement of the work that the Fund is going to have with these Sovereign Wealth Funds. So I think that it is a very interesting input for our work and we really welcome this endorsement of the Sovereign Wealth Funds and the Treasury of our work. And also we welcome the different points that they agree that will be valuable inputs for the work that we have to do with Sovereign Wealth Funds.
QUESTIONER: Do you actually expect more countries to work out principles with the wealth funds separately?
MR. CARUANA: What we expect is that we are going to start this dialogue with the Sovereign Wealth Funds to facilitate this development of best practices. That's what we expect and, again, we are thankful that we have received the endorsement of the Board and that also it was mentioned and supported by these two Sovereign Wealth Funds and by the Treasury. So I think we are all moving basically in the same direction and the direction is that we think that a better understanding of the role and the practices of the Sovereign Wealth Funds and the development of this set of best practices will be mutually beneficial for all the parties, and that's what the Fund wants to contribute to.
QUESTIONER: Is there much point in you guys coming up with a set of ideas if powerful nations like the U.S. were do it by themselves and maybe give you an endorsement to add to the process? And, is there a danger that basically you'll come up with something in six months' time after everyone else has pretty much reached a consensus about what the best practices are anyway?
MR. CARUANA: If at the end there is a consensus on this, we will be very happy. What we are trying is to contribute to this consensus and we will do our best to work with the Sovereign Wealth Funds to develop best practices. If, before we conclude our work, there are other practices that everybody agrees on, we will be the happiest in the world. So it's not a problem. We regard these as very good inputs to the work mandated to us, and we will be cooperating with many parties. We will be talking with all Sovereign Wealth Funds. We will be discussing with them. We want to work with them. Again, if the work is facilitated by other contributions, we don't have any problem. On the contrary, we will be extremely happy.
QUESTIONER: You mentioned that it doesn't seem so far that there's been much political interference from the governments who are guiding Sovereign Wealth Funds, and I know that Lipsky has mentioned in the past that they could contribute to financial stability. It sounds like you think that many or most of them are behaving pretty well, anyway.
MR. CARUANA: If you follow our different publications, what we are saying basically is that certainly Sovereign Wealth Funds can contribute to financial stability. They are important in their own countries. They can contribute to the global financial market. They are adding liquidity. All of that is important. But there has been some concern that has been expressed and we think that this set of best practices and principles that we are trying to contribute will help to mitigate some of these concerns. That's as simple as that.
MR. MAZAREI: Let me add to what to what Mr. Caruana said on your penultimate question.
The U.S. and ADIA and the Singaporean authorities in their announcement yesterday, and in the discussions that they've had, have made it very clear that the statement they put out was not a parallel effort to the one being done at the Fund, but it was a dialogue about some elements that will hopefully and eventually, be an input into what the Fund does. They all recognize that the effort that is being done through the Fund will be the vehicle for reaching these best practices.
QUESTIONER: Have you kind of already mapped out what you already think should be part of those guidelines? You do say that you've already got existing Fund guidance on other issues. But have you already mapped out what you think would be the most important ones to address in this sort of best practice guidelines?
MR. CARUANA: Let me remind you that we had already a discussion with the Sovereign Wealth Funds a few months ago. We had our first discussion about that issue and we decided that it was necessary to continue to develop what would be the scope of this exercise. So let me then ask Udaibir Das to tell you a little bit of the elements that we discussed then and we considered that are part of this exercise.
MR. DAS: If you read the paper or when you get time to read the paper, you will find several paragraphs there that give a fairly good sense of what potentially could constitute the elements that the Sovereign Wealth Funds will have to look at, and come up with some guidance or principles or practices.
These are drawing off on our existing work, which we have also indicated in the Board paper, and some work that already exists from other agencies, like the OECD. The focus will be on issues of governance, risk management, accountability, disclosure. Those are sort of the broad chapters, as you might call it, that we would have to discuss with them. But as Mr. Caruana said, the idea here is that there is no ex-ante position that we have taken because this has to be done in consultation and partnership with the Sovereign Wealth Funds. So indeed when we meet with them, we will share with them what already exists in the corpus of other work and issues that we have raised in the paper in terms of the pros and cons.
For example, one issue that a lot of people are writing about is transparency which is a catch all term. It can mean many things. But as the paper also points out to the reader that there are different levels and grades of transparency, and some are relevant to some types of funds and not.
So I think those things need to be discussed with the Wealth Funds and hopefully we'll agree on what is a right sort of principles of practices for them.
QUESTIONER: Is it correct that there should be a draft of these guidelines ready in October for the Annual Meetings?
MR. CARUANA: Yes, this is what we envisage. Still we have to discuss that with the Sovereign Wealth Funds, but we think this is feasible and this is what we have been discussing today as our baseline plan.
QUESTIONER: You said at the beginning that the Board endorsed your work program. It seems like you were saying that by August the first draft would be ready, before the Annual Meetings. Is that correct?
MR. CARUANA: Yes. That's correct. Again, in the first meeting that we will have with the Sovereign Wealth Funds, we will be discussing this project. But, yes, this is our plan and this is what is in the paper that we have discussed today at the Board. You are right.
QUESTIONER: So by August you would have the first draft of the code ready or the best practices?
MR. CARUANA: That we then could explore and discuss and then be able to have the first set of principles for the next Annual Meetings.
QUESTIONER: Could you just sketch out maybe a little bit more how much transparency you are actually looking for? Would you like to see more disclosure on which countries some of these funds are investing in and which companies or sectors? Could you maybe just sort of sketch it out a little bit more please?
MR. CARUANA: Before we move forward in what is our expectation in each of the items of the best practices, I think it is important to discuss it with the Sovereign Wealth Funds. So I think that would be a question that we would like to answer when we have the first discussion with them. Again, it will happen at the end of April, that's our expectation. So, there are obvious elements there of transparency, and there are elements of limits to transparency in the sense that nobody is going to ask something that is so market sensitive that is going to put the Sovereign Wealth Funds at a competitive disadvantage, as nobody's asking these kinds of questions to other funds. So, there are obvious limits, but the extent and how we are going to approach it in this case, I think needs to be discussed with the Sovereign Wealth Funds. As we have been insisting from the beginning, what we have tried to do is to cooperate with them, to work in close partnership with them. We want to facilitate the development of these practices with them.
QUESTIONER: Have you found that the funds and representatives that you've spoken with so far have been cooperative, generally speaking?
MR. DAS: I think that, as Mr. Caruana mentioned earlier, the dialogue is going on. We met them officially here in Washington a few months back, and since then we have been in active engagement with several of them. So, the answer is yes.
And Mr. Lipsky has done a press interview in which he mentioned that we've also sent out a survey to several of them so that we can collect some information from them. That exercise is also progressing fairly smoothly.
QUESTIONER: I see you've done different simulations and different scenarios from page 30. Is there anything in the simulations and different scenarios and analysis that you've done that kind of surprises you a little bit about what the impact of these Sovereign Wealth Funds are going to have? Is there anything that you can point out?
MR. MAZAREI: The analysis there wasn't very surprising to us. Essentially, the bottom line is the following: As the Sovereign Wealth Funds become more prominent and their resources increase, they will naturally move into different types of asset classes such as equities, so there will be a movement in the price of equities relative to other financial assets. At the same time, right now many of the central banks in the oil exporting countries and in Asia invest their reserves in U.S. dollars. As some of these reserves are shifted to Sovereign Wealth Funds and they follow more diversified portfolios with more diversified currencies, we will also naturally expect their exchange rates to change. But there was nothing surprising in there. I mean, they are very intuitive. The scenarios, the numbers per se should not be taken as forecasts of anything, but it's just an illustrative scenario.
MR. DAS: If I can just add, in the annex the staff has said very clearly that whatever results are there, they have several caveats. That's all stemming from the fact that we are in the process of trying to pull in the right set of data. Even if you have different scenarios and assumptions, you must have the right information, and there, the paper acknowledges that as far as data is concerned on Sovereign Wealth Funds, we still have work too do. So some of the results therefore are conditioned by the fact that data limitations constrain anything more deterministic that can be said at this moment.
QUESTIONER: I saw in the paper that there were some Sovereign Wealth Funds that you couldn't cover. Am I understanding that right?
MR. MAZAREI: You probably are referring to the issue of what we define as Sovereign Wealth Funds. It's not that we are defining away some from Sovereign Wealth funds. But we're being very clear about what we mean by Sovereign Wealth Funds because there are, for instance, public enterprises owned, naturally, by governments in various countries that invest in, for instance, the U.S. or Europe. Not all these companies will be covered by the Sovereign Wealth Fund, and they will need to be covered by best practices and codes in existence or under preparation by the OECD.
MS. GAVIRIA: There are no more questions, so we end the conference call here. Thank you.
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