US open for business, says Paulson

PROTECTIONISM REJECTED: Paulson (pictured) said the US welcomed investment from SWFs and foreign companies. (Getty Images)

The US is open to investment from sovereign wealth funds (SWFs) and private foreign companies and rejects measures that would isolate it from the world economy, the US Treasury secretary said on Monday.

Writing in UAE daily The National, Henry Paulson said the US was not looking to restrict investment from the Middle East in an editorial aimed at allaying concerns over the increasingly protectionist rhetoric coming out of the US.

SWFs, many of which come from oil-rich Gulf states and Asian countries with large trade surpluses, are thought to control assets worth an estimated $3 trillion, which could grow to grow to $12 trillion by 2015, according to some analysts.

Their growing influence has raised concerns in the West over transparency and accountability, with some claiming foreign governments may harbour political motivation.

"...many in the Middle East ask if we genuinely welcome foreign investment now. Some worry about a general, growing protectionist sentiment in America. They may also worry that US sentiment toward Middle East investment was permanently affected by the Dubai Ports World (DP World) case," Paulson wrote.

"My response is the same as that expressed by President [George W. Bush] during his Middle East visit two weeks ago - as America seeks to open new markets abroad, we will keep our markets open to investment from private firms and sovereign wealth funds. We reject measures that would isolate us from the world economy."

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.

Paulson, currently on a tour of the Gulf, also said a proposed investment code of conduct for SWFs was designed to appease those in the US calling for greater restrictions and was not designed to be a restriction on investment in itself.

"Some sovereign wealth fund managers have raised concerns that there will be limitations on activities or release of privileged information," he wrote.

"In fact, our purpose is just the opposite. We are trying to quell calls for restrictions by urging the funds to endorse best practices, to help allay concerns about opacity and systemic risks and create a dynamic rise to the top."

The International Monetary Fund (IMF) has set up a working group with 25 wealth funds, including heavyweights such as the Abu Dhabi Investment Authority (Adia) and Kuwait Investment Authority (KIA), to draft the first ever best practice guidelines.

However, wealth funds have resisted calls for increased regulation, stating that restrictions on investment will see them take their money elsewhere.

In addition to stressing the openness of the US, Paulson also urged Gulf states to open up their economies to more foreign investment, especially in the energy and real estate sectors.

"Further investment in the Gulf will bring innovation, create new jobs, improve services and widen the economic base. Opening oil markets to foreign investment would also support faster and more efficient growth," he wrote.

"...in the long run, openness to trade and investment will not only bring prosperity, it will also improve stability by better enabling economies to manage external shocks and smooth out business cycles.

"Remaining closed to investment will have the opposite effect, by inhibiting growth and exacerbating domestic economic vulnerabilities."

Gulf investments in US
Arabian Business looks at the recent history of Gulf investments in the US and the reaction to them.

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