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Sat 1 Mar 2008 02:33 PM

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Dubai fund threatens to turn back on EU

Further regulation could see funds take investment elsewhere, Dubai World Chairman bin Sulayem warns.

Dubai fund threatens to turn back on EU
INVEST ELSEWHERE: Bin Sulayem, pictured, said further regulation by the EU could see SWFs turn their back on Europe. (Getty Images)

Europe risks loosing out on billions of dollars in investment from sovereign wealth funds (SWFs) if the EU moves to tighten control over the state investment vehicles, the chairman of Dubai World warned on Friday.

Speaking to British Broadcaster the BBC, Sultan Ahmed bin Sulayem said further regulation of the SWF sector, worth over $2.5 trillion, could see funds turn their back on Europe and invest their money elsewhere.

"If somebody comes with regulations that make it difficult for someone from certain geographical locations to invest in Europe or the West, people will take their investment somewhere else," bin Sulayem told the World at One programme.

"I think it's dangerous when this money and liquidity is so badly needed - we are investors and we are free to go wherever we want. If you squeeze us, we will go elsewhere."

Bin Sulayem comments come just days after the EU's executive arm agreed a draft code of conduct SWFs should adhere to when investing in Europe, calling on funds to be more open about their motives and methods. The draft is expected to be approved by EU leaders when they meet this month.

Bin Sulayem said he was "surprised" that people were concerned about the motives of SWFs and denied the funds had too much political inference from their government owners.

"If you put a politician in charge of an investment, believe me, that investment fund will not last for a very long time," he was quoted as saying.

SWFs have been catapulted into the public eye over the last six months in part because of the credit crunch and global economic slowdown, which has forced companies in US and Europe, especially banks, to turn to wealth funds for much needed capital.

And SWFs, especially those in the Gulf, have been only too happy to help as governments look to invest a windfall of cash from record oil prices.

However, concerns have been expressed by governments - including the US, Germany and France - over the transparency and accountability of wealth funds. Some have cautioned that funds' intensions may not be purely commercial.

Dubai World itself sparked a firestorm in the US in 2006 when its subsidiary DP World acquired terminal operations at a number of US ports through its $6.85 billion purchase of UK-based P&O.

DP World was forced to sell its operations in six US ports after lawmakers raised security concerns over the deal.