There’s so much news reported these days about investments being made in western companies, especially financial institutions, by sovereign funds from China, Singapore and the Middle East. Recent examples include stakes in Citigroup by Abu Dhabi Investment Authority, Morgan Stanley by China Investment Corporation and Barclays by China Development Bank and Temasek of Singapore.
It’s easy to shrug these off as mere strategic or tactical investments in a globalized world except for the fact that these funds are owned by their respective governments.
Alarm bells are ringing in the USA and UK: For one, these sovereign funds lack transparency. For another, after keeping out their own governments from the “business of business” and achieving laissez faire (or free trade) status, there’s the worry whether their leading corporations will eventually come under the influence of foreign funds and indirectly foreign governments. It doesn’t help the situation to realize that these corporations are selling sizeable stakes at fire sale prices, given the battering their stocks have taken in the latter half of this year owing to the current credit crunch. Admittedly, these funds have expressed no interest in actually running these corporations and have not received any seats on their boards – at least not so far.
But, if the present trend continues, it would be interesting to keep a close watch on the course that laissez faire will take in these countries.