Brown seeks billions to boost IMF reserves
British Prime Minister Gordon Brown said he is seeking "hundreds of billions of dollars" to top up the International Monetary Fund's reserves to bail out financially stricken countries.business Updated: Nov 10, 2008 18:05 IST
British Prime Minister Gordon Brown said he is seeking "hundreds of billions of dollars" to top up the International Monetary Fund's reserves to bail out financially stricken countries as he continued a tour of the Gulf on Sunday. Brown also stressed Britain's desire to attract investment from sovereign wealth funds in the region, just as a deal by Barclays PLC to receive up to US$11.8 billion from a trio of Middle Eastern investors _ rather than turning for help to the British government _ caused controversy in the UK.
Brown, who has taken the lead on a push to boost the IMF's $250 billion in reserves to prevent the spread of the global economic downturn, did not specify how much of the extra funds should come from oil-rich Middle Eastern countries.
But he suggested it should be a significant amount. "The oil producing countries, who have generated over $1 trillion from higher oil prices in recent years are in a position to contribute," said Brown, who met with King Abdullah late Saturday. Brown was strongly critical of OPEC's recent decision to cut the production of crude by 1.5 billion barrels a day to boost the oil price, which it says is necessary to encourage further investment. Brown's trip to Saudi Arabia, Qatar and the United Arab Emirates comes before a meeting of world leaders, including King Abdullah, in Washington, DC, on Nov. 15. Bolstering the resources of the IMF to help prevent the spread of the global financial crisis is expected to be high on the agenda.
The IMF has already dipped into its reserves fund to provide emergency loans to Iceland, Hungary and the Ukraine worth a total of $30 billion. Pakistan has said it may call on the international body for another $5 billion.
With Europe and the United States facing recession, Brown is looking to the Middle East and Asia, where countries have significant foreign exchange reserves.
Saudi Arabia has $33.3 billion on hand, while OPEC members, which produce about 40 percent of the world's crude oil, have $519 billion. The eurozone has less than half that, at around $213 billion.
Brown also said he is also keen to seek investment deals for Britain from sovereign wealth funds and has brought Business Secretary Peter Mandelson and more than 20 business executives on the four-day trip.
"Britain has always been an open economy and we have benefited substantially from our openness to trade and inward investment, which has led to the creation and protection of many jobs," Brown said.
"As long as they play by our rules and operate in a commercial manner, we welcome investment from sovereign wealth funds in the UK."
Several countries, including the United States, remain skittish about accepting investments from state funds in the Middle East and Asia, fearing interference from foreign governments in private companies.
U.S. lawmakers successfully killed part of a deal between DP World and British port operator P&O, last year after a furor in Congress led the United Arab Emirates company to sell the division that manages U.S. ports.
In Britain, the Barclays deal with the Qatar Investment Authority, the Challenger investment vehicle led by the Qatari royal family, and Sheik Mansour Bin Zayed Al Nahyan of the Abu Dhabi royal family has angered shareholders who have complained that it dilutes the value of their investments.
Barclays turned to the Middle Eastern trio after declining to take part in a 37 billion pound government bailout of its peers the Royal Bank of Scotland Group PLC, Lloyds TSB Group PLC and HBOS PLC. Shareholders can vote down the new deal, which could leave QIA, Challenger and Sheik Mansour owning almost a third of the bank as a result, but they could put the bank's solvency at risk by doing so. Mandelson said that sovereign wealth funds abided by a code of behavior that ensured independent dealings.
"They want to generate a good return, they are the first to steer clear of politics," he said.
"We would provide a good home in London for their operations in Europe," he added.
Brown is due to address the Saudi British Joint Business Council and visit King Saud University later Sunday, before continuing his tour.