Santiago Implementation Falls Short

Ashby Monk

The International Forum of SWFs kicked off its 2nd Annual meeting today in Sydney. According to the FT, the main topic of discussion will be SWFs’ interactions with foreign governments and investment regimes. This isn’t all that surprising, as difficulties in this domain are what drove the creation of the IWG and the Forum in the first place; i.e. SWFs came together to ensure that cross border investment regimes would remain open. Indeed, this was the impetus for the Santiago Principles. As an ‘unnamed SWF source’ explains in the FT today:

“That was the issue that gave rise to the whole thing…We responded by adopting the Santiago Principles and now we want to see what the rest of the world is doing about [providing] open, non-discriminatory investment markets.”

What? Hold your horses just a second, unnamed FT source. You are confusing the adoption of the Santiago Principles at the level of the IWG and the Forum with the implementation of the Principles at the level of the SWFs. The two are quite different.

While I think we’d all agree that developing and “adopting” the Principles was a remarkable feat of diplomacy and negotiation at the international level, their long-term success will depend on SWFs’ compliance with them. In other words, I don’t think you can claim to have “adopted” the Santiago Principles just because the IWG agreed on a framework. The funds themselves have to use this framework.

And, unfortunately, most aren’t. A new paper by Sven Behrendt of the Carnegie Endowment for International Peace offers some important insight into the level of compliance with the Principles. Sven came up with a “Santiago Compliance Index” that, in his words, “provides a snapshot of the compliance level to the Santiago Principles across its 26 signatories as of March 2010, based on publicly available data provided exclusively by official sources.”

So, what’s the verdict?

“Some eighteen months after the publication of the Santiago Principles, their implementation is highly uneven. A small group of SWFs, predominantly from democratic countries, shows a high degree of commitment to the principles. A second group shows partial implementation, and a third group, mainly from the Gulf Arab region, has yet to reach satisfactory implementation levels…the process appears to have lost some of its earlier momentum.”

In other words, there remains quite a bit of work to be done to move from “adoption” at the level of the IWG / Forum to “compliance” at the level of the SWFs. In fact, Sven finds that there are literally zero (!) SWFs that are 100% “Santiago Compliant” – i.e. not a single SWF has managed to implement all the principles and practices that they themselves crafted and agreed to adopt. While some funds are quite close (such as the New Zealand Superannuation Fund), most fall under the 60% compliance range. Remarkably, some signatories (e.g. Iran) are literally 0% compliant.

So, while Forum members convening in Sydney today might prefer to rejoice in the “adoption” of the principles and focus the discussion on the investment regimes of target countries, it is clear (to me at least) that a discussion on “compliance” and “implementation” is still necessary…

4 Responses to “Santiago Implementation Falls Short”


  1. 1 Rien Huizer May 6, 2010 at 3:39 pm

    Scandinavians have are reputation for impolite honesty (and imperial nudity) but that does not mean that one should pay attention. Most SWFs are instrumentalities of states under regimes operating under weak popular controls (to put it euphemistically) and why would anyone expect those things to be more virtuous than other instrumentalities of such states?

  2. 2 Ashby Monk May 6, 2010 at 3:44 pm

    Fair enough! It is borderline comedic to see a Santiago signatory like Iran — a country that is ostensibly working towards adoption of GAPP — at zero percent compliance. I guess they saw an opportunity get mileage out of a signature; after all, based on the above, the are “adopters”…


  1. 1 An Unsurprising ‘Sydney Statement’ « Oxford SWF Project Trackback on May 10, 2010 at 4:25 pm
  2. 2 Santiago Principles Vs. Truman Scoreboard « Oxford SWF Project Trackback on July 19, 2010 at 12:16 pm

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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