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SWF CONCERNS: Americans fear impact of foreign funds on economy

Voters do not want them to buy stakes in high-tech firms, key sectors: poll

(BOSTON) The majority of Americans fear that the US economy and national security could be hurt if sovereign wealth funds, the investment arms of foreign governments, put more money into US companies, new data show.

US voters do not want these funds, which manage between US$1.9 trillion and US$2.9 trillion, to buy stakes in high-tech firms, banks, oil and gas companies and ports, a study by the business advisory group Public Strategies said.

The opinion poll, released on Thursday, found that 55 per cent feel the funds would hurt national security and 49 per cent said the funds would have a negative impact on an already slowing US economy.

While Americans know little about these types of funds, their gut reaction is negative, said Dan Bartlett, a senior strategist at Public Strategies.

The public’s fear stands in sharp contrast with Washington and Wall Street’s more positive views as government officials and company executives agree that foreign investments can help American companies compete better. Financial giant Citigroup, for example, raised US$12.5 billion from foreign funds this year alone after posting heavy losses last year.

Roughly 68 per cent of the 1,000 registered US voters who were surveyed last week worry that foreign governments would gain too much control over the market if they kept making more investments here. The survey had a margin of error of plus-or-minus 3.1 percentage points.

‘Americans are becoming increasingly isolationist in their thinking in these issues,’ Mr Bartlett, a former counsellor to President George W Bush, said, adding: ‘The more they learn about sovereign wealth funds, they worse they feel.’

Nearly three in four voters of the respondents said they think that the foreign governments are too secretive with their investments and do not say enough about their strategies or portfolios, the survey found.

State-run investment funds, in which governments invest windfall revenue abroad, will quadruple in size to US$7.9 trillion by 2011, Merrill Lynch has predicted.

Critics in the US and Western Europe are concerned that secretive management under government sponsorship might allow funds to target strategic industries or roil markets with unexpected gluts of cash.

More than 60 per cent of those polled oppose investments from China, Russia, Saudi Arabia or Abu Dhabi. Saudi Arabia garnered the most negative response, with 68 per cent saying they opposed any purchases of US companies by that country.

The unease about government investment comes amid a larger sense of protectionism and isolationist feelings among voters, Mr Bartlett said.

Source: Reuters, Bloomberg (Business Times 23 Feb 08)

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