Cablegate: Sovereign Wealth Funds Create Jobs Says Deputy Secretary
DE RUEHLO #0774 0741541
ZNR UUUUU ZZH
R 141541Z MAR 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 7811
INFO RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS LONDON 000774
E.O. 12958: N/A
TAGS: ECON EFIN UK
SUBJECT: SOVEREIGN WEALTH FUNDS CREATE JOBS SAYS DEPUTY SECRETARY
1. (SBU) Sovereign Wealth Funds (SWFs) and State-owned Enterprises
(SOEs) behave differently, said Treasury Deputy Secretary Robert
Kimmitt in a March 10 meeting with Michael Snyder, Chairman, City of
London Policy and Resources Committee. Kimmitt said SWFs have been
non-political in their instruments while SOEs like Gazprom result
from a political decision to retain government ownership. Foreign
direct investment in the U.S. has created ten million jobs. Kimmitt
stressed the need to tell the job creation story of foreign direct
investment including SWFs, to avoid unnecessary regulation. Kimmitt
also urged continued UK support for the Transatlantic Economic
Council (TEC). END SUMMARY
Sovereign Wealth Funds
2. (U) Sovereign Wealth Funds (SWFs) are run by finance experts;
they are generally not political, Kimmitt said. However, they now
face political pressures and criticisms. Current multilateral
efforts involving the IMF, OECD, and the G-7 will bring a necessary
political perspective to the dialog on SWFs.
SWFs Differ From State Owned Enterprises
3. (SBU) Kimmitt said that there has not been an example of an SWF
investing in the U.S. for other than commercial reasons. He said
also that it is important to make a distinction between SWFs
(traditionally non political) and state-owned enterprises (SOEs)
whose behavior could raise issues. Kimmitt said that SWFs have
indicated they want to avoid political problems in the U.S. and have
asked for guidance on how to structure deals to avoid problem.
4. (SBU) Snyder agreed with the distinction between SWFs and SOEs
and mentioned Gazprom as an example of a SOE that had clearly been
used for political ends. He added that Europeans do not
differentiate well between SWFs and SOEs so that the European view
of SWFs is tainted by the activities of SOEs like Gazprom.
5. (U) In addition to highlighting the behavioral differences
between SWFs and SOEs, Kimmitt said that it is important to stress
the job creation record of foreign direct investment (FDI) including
the FDI of SWFs. Kimmitt said that FDI in the U.S. has resulted in
the direct creation of five million new jobs and the indirect
creation of another five million. A greater proportion of jobs
resulting from FDI are also in the manufacturing sector.
6. (U) Snyder said that The City of London is sponsoring a London
conference on March 31 jointly with the Organization for Economic
Co-operation and Development (OECD) and the International Monetary
Fund (IMF). He said that it would be an international conference,
addressing the interests of both investor and recipient countries.
Kimmitt said the OECD was developing best practices for recipient
countries and the IMF was developing best practices for investor
countries. He said interim reports are expected at the February 5
G-7 meeting in Japan.
Transatlantic Economic Council
7. (U) In closing, Kimmitt highlighted the Transatlantic Economic
Council (TEC), saying that it had great potential to promote
substantive dialog on key issues like accounting. He stressed to
Snyder that TEC needs continuing UK involvement.
8. (U) USG: Richard LeBaron, DCM; Robert Kimmitt, Deputy Secretary,
Treasury; Eric Meyer, Director, Europe and Eurasia, Treasury; Rob
Saliterman, Spokesman, International Affairs, Treasury; Warren
Chane, Notetaker. UK: Michael Snyder, Chairman, City of London
Policy and Resources Committee; Paul Sizeland, Assistant Director,
Economic Development Office.
9. (U) Deputy Secretary Kimmitt has cleared this message.