Duke of York slams protectionism toward wealth funds

PROTECTIONISM UNFOUNDED: Prince Andrew (pictured) said there was no reason for countries to restrict investment by SWFs. (Getty Images)

The Duke of York has taken the West to task for its protectionist response to the growing influence of sovereign wealth funds (SWFs), claiming the funds have done nothing to deserve their shadowy reputation.

Speaking to magazine Arabian Business on the sidelines of the World Economic Forum (WEF) in Sharm El Sheikh, Prince Andrew said he did not see any problem with the way SWFs were run and that there was no reason for countries to restrict investment by wealth funds.

“I do not believe there is a problem with the way that SWFs are managed or run," Prince Andrew, the UK's Special Representative for International Trade and Investment, said in an interview.

"They all comply with the regulations that are in place in every country they operate in, they are not subject to any different regulation, and nor should they be...

"There is no difference [between SWFs and other investors], so why should they [the SWFs] be treated any differently to any other investor?"

Government-backed wealth funds from oil-rich Gulf states and Asian countries with large trade surpluses have hit international headlines in the last 12 months after stepping in to bail out a number of US and European banks in the wake of the subprime mortgage crisis and ensuing credit crunch.

The value of assets controlled by SWFs is estimated at around $3 trillion and could grow to $12 trillion by 2015 - roughly the size of the US economy's gross domestic product (GDP) - according to some analysts.

The growing influence of SWFs has raised concerns in the West over transparency and accountability, with some claiming foreign governments may harbour political motivations when investing in the US and Europe.

The US and EU have both drawn up codes of conduct for SWFs, and earlier this month the International Monetary Fund (IMF) and 25 SWFs established an international working group to draft the first ever best practice guidelines for the state-owned funds.

However, the West's response has come in for criticism, with wealth funds claiming restrictions on investment will see them take their money elsewhere.

In easily the biggest confrontation between a SWF and the West, Dubai-owned DP World was forced to sell US port terminal operations it acquired through its takeover of UK-based P&O amid a political firestorm that the deal posed a threat to American national security.

Prince Andrew said the US reaction was a "mistake".

“I think you’ll find now that most congressmen that were a part of that now recognize that it [the DP World debate] was a mistake - a storm in a teacup that should never have taken place.”

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