Europe must welcome sovereign wealth funds, British business minister Peter Mandelson said on Saturday, as a high-level British delegation visited the Gulf to seek investment and help to stabilise the world economy.
Europe is divided over how to handle investment from sovereign wealth funds, with some fearing foreign investors could end up wielding too much power by owning big chunks of the continent's largest firms.
Others argue that European countries, suffering from the global credit crunch, need investment from cash-rich nations in the Gulf and Asia to help shore up their economies. "We shouldn't be pulling up the shutters and discouraging investment in Europe," Mandelson said. "We haven't had a problem with sovereign wealth funds in the past and I don't see why we should have a problem in the future."
One of Britain's biggest banks, Barclays, took an injection of funds from Abu Dhabi and Qatar this week to repair damage from the credit crisis as an alternative to the Labour government's recapitalisation rescue plan.
"What they (sovereign wealth funds) are doing is making an investment and looking for a return," Mandelson told reporters. "They would be the first ones to steer clear of politics."
Sovereign wealth funds, vehicles for investing a country's currency reserves, have ballooned in recent years and are estimated to hold assets worth as much as $3 trillion. Government aides insist Prime Minister Gordon Brown's trip to the Gulf States this weekend, with Mandelson, energy minister Ed Miliband and barons of industry leading firms such as Centrica, Shell and Rolls Royce, is not a begging mission for petrodollars to be invested in Britain's weakening economy.
Brown says he wants oil-rich Gulf States to contribute to a new International Monetary Fund facility so it has enough in its coffers to stop the financial crisis from sending smaller economies to the wall.