Elites from across Egypt would welcome investment from sovereign wealth funds in Abu Dhabi (100% approval); China (99%); Dubai (96%) and Bahrain (91%) ahead of Norway (50%) and Singapore (43%), the funds which received the highest overall ratings in the Sovereign Brands Survey 2010, the most extensive study into the attitudes of global broad elites to sovereign wealth as a concept, the reputation of host nations and sovereign wealth funds (SWFs).
Conducted by Hill & Knowlton and Penn Schoen Berland, two of the world’s pre-eminent research and communications strategy consultants, the study interviewed elites in 7 markets[i] including Egypt on their views of 19 host countries and their SWFs[ii].
The factors influencing decisions about taking investment were clear. The overwhelming majority (94%) of elites in Egypt rated country reputation to be “very important” in determining their view of sovereign wealth funds (SWFs). Of the individual factors, transparency was ranked as the most important factor when approving or disapproving of a SWF at 84%, followed closely by accountability at 80%. The global results mirrored these findings, ranking transparency and accountability at 72% and 68%, respectively.
Stephen Davie, Hill & Knowlton’s Head of Financial Communications, ME, commented: “Despite being considered one of the least volatile forms of investment compared to other sources of capital, the survey found that low familiarity still drives low favourability towards this type of funding. A higher percentage (72%) of Egyptian elites were familiar with SWFs as a source of investment compared to the overall average of 57%. However, only 23% of the respondents questioned favoured investment from SWFs compared with 71% from investment banks.”
It would appear that lack of transparency may be fuelling mistrust that SWF investment could be used to exert political influence and acquire strategic assets. Despite the voluntary Santiago Principles introduced by the IMF in September 2008[iii], poor adoption by the industry may be deterring consideration of this asset class amongst the elites interviewed. Nevertheless, whilst only 37% of interviewees in Egypt would approve of investment in the country’s defence sector, there was high approval for investment in the automotive industry (96%) and energy sector (85%).
Joel Levy, Chief Executive Officer, Penn Schoen Berland, EMEA commented: “The economic downturn has created a real opportunity for sovereign wealth funds. SWF’s images are largely determined by country reputation, and despite low familiarity and concerns over transparency, broad elites see SWFs as least likely to have contributed to recent market turmoil. This puts sovereign wealth funds in a prime position to consider their positioning and reputation in contrast to other funds and asset classes.”
“SWFs have a vital role to play as economies start to pick up. To take advantage of this they need to look closely at the way their image interacts with, and is influenced by, the national brand and fully understand which messages work in which market. If this happens I think we will hear more about the positive role this important investment stream has to play.” concluded Mr Davie.
[i] Reference table under notes to editor
[ii] Reference table under notes to editor
[iii] The Santiago Principles are a set of 24 voluntary guidelines that assign "best practices" for the operations of Sovereign Wealth Funds (SWFs) through a joint effort between the International Monetary Fund (IMF) and the International Working Group of Sovereign Wealth Funds (IWG)
