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US hurdles force Dubai state fund to look to China

Istithmar among such funds seeking out less developed markets to avoid excessive scrutiny DUBAI government investment agency Istithmar is considering investments in China, after being rebuffed in the United States, The Wall Street Journal reported yesterday.

Istithmar comes under the umbrella of state-owned Dubai World, which also includes Dubai Ports World (DP World), a container port handler that was forced by US lawmakers to sell American assets over security concerns.

‘Everyone is aware of the backlash DP World faced in the US, and as a result, sovereign wealth funds are looking towards non-developed markets to avoid such a backlash,’ Istithmar chief executive officer David Jackson was quoted as saying on the Journal’s website.

‘Countries such as China, where we recently opened an office, are very welcoming to sovereign wealth funds, so more are looking to invest there.’

Asian and Middle Eastern sovereign funds have made headlines recently by acquiring stakes in major financial groups such as Merrill Lynch and Citigroup in the US and Switzerland’s UBS.

Merrill and Citigroup have received billions of dollars in cash infusions from sovereign wealth funds, including those of Singapore. And they are in talks to get even more capital from outside investors – raising eyebrows in Washington, where lawmakers have more closely scrutinised foreign investments in recent years, the Journal said.

DP World was forced to sell its US assets after agreeing to buy British ports and ferries group P&O for US$6.8 billion (S$9.7 billion) last year. P&O operated six terminals in the US.

Dubai World, whose businesses include property developer Nakheel Group, has a multibillion-dollar global portfolio, including P&O, US retailer Barney’s, a stake in British bank Standard Chartered and about US$20 billion in real estate assets around the world outside of Dubai.

‘There is a lack of trust in sovereign wealth funds and better initiatives are needed to curb such suspicions,’ Mr Jackson said. ‘Countries such as the US, Britain and Germany are very reluctant to allow sovereign wealth funds in.’


Source: REUTERS (The Straits Times 18 Jan 08)


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