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Report: QIA Fails To Live Up To Good Governance Principles


Posted: March 26th, 2018


QIA is the only fund with a non-compliant D Grade

The journalistic transparency group WikiLeaks has publically disclosed millions of internal diplomatic documents and cables leaked from the U.S. Government. The documents reveal the realities of international diplomacy—often with unvarnished candor. In particular, the diplomatic communications reveal much about Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA).

One U.S. Government document from June 2008 reveals the QIA’s difficulties with the International Monetary Fund’s principles of good governance and financial disclosure standards, called the Santiago Principles.


Santiago Principles & QIA

The document reveals that the Qatari government expressed concern to then-U.S. Treasury Secretary Henry Paulson about guidelines for sovereign wealth funds then being developed by the International Monetary Fund (IMF). The IMF exists to foster global monetary cooperation and secure financial stability. As such, in 2008 the IMF developed best practices to guide the governance and investment practices of sovereign wealth funds as well as to ensure their transparency. As the IMF was attempting to persuade sovereign wealth funds—especially from developing nations—to agree to the 24 voluntary principles, Qatar resisted. According to the cable, the Qatari Finance Minister Yousef Hussein Kamal (Al Emadi) “expressed concern about [the] IMF-developed guidelines”.

Kamal said he believes the IMF-proposed rules are “not for everyone.” According to the cable, “He singled out transparency requirements as a particular concern for the Qatar Investment Authority.” The QIA, Kamal said, cannot disclose its asset allocation because this is against Qatari government regulations.


“Only Five Or Six People In Qatar Know” About QIA Asset Allocation

Kamal was right. Despite its juggernaut size, relatively little is known about the QIA’s investments because the QIA is not required by Qatari law to publish an annual report or submit its books to an independent audit.

The cable continued: “Only five or six people in Qatar know this [asset allocation] information, [Kamal] explained, and even to the IMF, it is only ‘whispered.’”

In light of the finance minister’s distaste for the IMF guidelines—which the Qataris ultimately did agree to in late 2008 in the Chilean city of Santiago—it should not come as a surprise that Qatar did not follow them well.

Six years after agreeing to the guidelines, in October 2014, a Geneva-based political risk consultancy called GeoEconomica ranked 25 sovereign wealth funds against the IMF’s principles of good governance and financial disclosure standards. The QIA ranked last in its compliance with the Santiago Principles.


"D" Rating For QIA

The 2014 report deemed the QIA “non-compliant” with the Santiago Principles and gave it a D rating. The QIA was the lone non-compliant fund. The 2013 version of the same GeoEconomica report tried to quantify the QIA’s compliance and estimated that QIA complied with a mere 31% of the Santiago Principles.

The 2013 report claimed that the QIA “fails to provide conclusive information about its mandate, finances, accountability and governance arrangements.” The 2014 report explains that funds were deemed non-compliant “if their governance, transparency, accountability arrangements and disclosure practice in our view are deficient across most areas covered by the Principles.” GeoEconomica urged “that a stronger commitment by QIA to a proactive disclosure policy would enhance the overall legitimacy of the Principles.” The 2014 report continued by noting that the four Arab funds “lag behind in their public disclosure policies. This should be a major concern, as their conservative commitment erodes the Principles’ legitimacy”.

A fund-specific appendix to the 2014 report noted that in light of “QIA’s exposed position in the international financial system and beyond,” the fund exhibited “a substantial discrepancy between that position and QIA’s commitment to the Santiago Principles.”

The fund-specific appendix continued: “The fund does not make publicly accessible relevant legislation, a charter, other constitutive documents or management agreements. It has one of the most restrictive disclosure policies with regard to financial information. In addition, it does not disclose robust information about its governance arrangements. The independence of operational fund management from the Government, a core ambition of the Santiago Principles, cannot be ascertained based on existing official documentation.”

By contrast, GeoEconomica noted that QIA’s “network-based investment policy” seemed instead to focus on “build[ing] strong political alliances with key international actors.”

According to the Financial Times, reviewing the 2014 report, “GeoEconomica’s conclusion underscores the opaque nature of some funds […] even as they pervade the corporate world by expanding abroad and ramping up their direct investments in companies and infrastructure projects.” The QIA declined to comment.

Sven Behrendt, managing director at GeoEconomica and author of the 2014 report, told the Financial Times: “The fact that some of the most active of those investors make so little case of transparency should be a big concern… They are transforming the investment scene by taking direct stakes but they reveal little information about themselves.”

Behrendt continued, “Many of the sovereign wealth funds thought that by simply signing the principles, the international community would believe they would implement them. This implementation needs to be disclosed so that it can be verified by third parties.”

A more current version of GeoEconomica’s report is not available. But GeoEconomica’s Sven Behrendt wrote in 2016 that “We assume that our compliance ratings, documented in GeoEconomica’s Santiago Compliance Index 2014, would remain largely unchanged today if we updated it based on more rigorous evaluations.”

Behrendt went on to quote remarks from the Chair of an IMF entity called the International Forum of Sovereign Wealth Funds (IFSWF). At the IFSWF’s 2015 annual meeting, the Chair of the IFSWF reportedly warned the funds not to fall short of making the Santiago Principles meaningful. The Chair stated that “IFSWF is not an acronym for poor practice to hide behind.” (SOURCE)

Sheikh Abdullah bin Mohammed bin Saud Al Thani
Sheikh Abdullah bin Mohammed bin Saud Al Thani, CEO of Qatar Investment Authority, 2014 to present