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Thu 22 May 2008 04:00 AM

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Sharm charm

George Bush set a conciliatory tone in Sharm El Sheikh, with assurances the US will continue to welcome foreign investment and trade.

US president George Bush set a conciliatory tone in Sharm El Sheikh last week, peppering his speech to the World Economic Forum with assurances that the US will continue to welcome foreign investment and trade.

Nothing much wrong with that sentence apart from the word 'continue'. It may have provoked a few quizzical expressions from his audience - at least from those with memories that stretch back as far as 2006 when Dubai ceded control of six US ports under pressure from a Congress fearful of compromised national security.

Or even for those with memories that stretch back to last month, when his administration published some 90 pages of new controls on deals involving acquisitions by foreign government-owned entities of strategic assets.

Bush assured delegates that he would firmly reject calls for protectionism and that the US will remain open for business.

Such assurances may be seen as too little and too late for some SWF's from the Middle East that remain non-plussed by the recent attempts at a charm offensive.

Even Prince Andrew, whose ability to charm is well documented, was on hand at the WEF to add his royal seal of approval for the much-maligned funds.

"Why should they be treated differently to any other investors?" he asked, stopping short of adding that some of his best friends are sovereign wealth funds.

Yet beyond the rhetoric that was in copious supply at this year's gathering of regional and global business leaders in Egypt, it seems clear that the funds are indeed being treated differently and despite the change in tone emerging from West in recent weeks.

This month the IMF started to draw new 'best practice' guidelines for the state-owned funds with the working group responsible for their delivery being chaired by a director of the Abu Dhabi Investment Authority.

A draft document is expected to be ready by October and should contain guidance on improving the transparency of state-owned funds.

The US may indeed remain open for business, however many businesses in the US may not remain open for very long without the kind of cash injections that sovereign wealth funds are in the increasingly unique position of providing.

Back in 2006 when congressmen were huffing and puffing over national security concerns, few people would even have heard of the word subprime let alone understood what it described.

Since then, Sovereign Wealth Funds have baled out a succession of institutions and in doing so stabilised otherwise turbulent financial markets.

No wonder then that attitudes are softening in the West. The question is whether the big funds of the region remain interested in pursuing investments in an increasingly regulated environment.

The ports fiasco may now be two years old, but its political legacy remains. Sean Cronin is the editor of Arabian Business English.

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