Representatives of the world's sovereign wealth funds met in the Azerbaijan capital Baku on Thursday to discuss policy and prospects in the post-crisis environment, amid calls for greater transparency in SWF dealings, and use of their huge wealth to promote alternative energy projects. SWF leaders reiterated their commitment to the Santiago principles, agreed under the auspices of the International Monetary Fund, for openness and accountability in SWF dealings. These had come under fire in the wake of investments by Middle East and Asian funds in western financial institutions before the onset of the global financial crisis.
The Baku meetings - held under the banner "Global prospects and local challenges" - also heard calls for greater use of SWF resources to promote investment in renewable energy sources. "I would like to see more investment in renewable energy," said Alastair Newton of Nomura International on the eve of the Baku meetings. "SWFs could make concrete contributons in moving to a low carbon economy," he told a Qatari newspaper.
Baku might seem an unlikely venue for either initiative. The Azeri government - which routinely censors its media and imprisons journalists - is not known for its transparency; and the country's environmental record - largely a legacy of 70 years of Soviet exploitation - is so poor that it regularly features on lists of the most polluted places on earth. On the other hand, Baku might lay claim to be the home of the original SWF. A century ago, Azerbaijan produced roughly half of the world's crude oil, and its riches generated an extravaganza of development in the Caspian port's downtown area. The palaces that once belonged to Nobels and Rothschilds are still there, renovated after Soviet neglect and turned into public buildings.
Azerbaijan also has its own SWF, the State Oil Fund of the Republic of Azerbaijan, or Sofaz, with some $12 billion (Dh44bn) of assets at its disposal. Oil revenue has flowed into Azerbaijan since the country signed the "contract of the century" in 1994 to bring western oil giants to redevelop the obsolete oil industry left by the Soviets. Day one of the Baku conference heard discussions of the role of SWFs in solving the problems of the post-crisis world economy. "There is an urgent need during the crisis to use funds to solve problems in the domestic economies," said Ingilab Akhmadov, head of the Azeri public finance monitoring centre. He added that many funds, from Norway to the Gulf, had lost value during the financial crisis.
But Israfil Mammadov, chief investment officer of Sofaz, said the total value of all SWFs still amounted to some $3 trillion. The representatives of the IMF's international working roup of sovereign wealth funds are expected to issue a joint communiqué following the end of the Baku discussions today[fri]. fkane@thenational.ae
