Sovereign Funds Agree to Shun ‘Geopolitical’ Investing

WASHINGTON — The Bush administration won a commitment Thursday from two prominent foreign government investment funds to disavow “geopolitical goals” in their investments in the United States and elsewhere, a step the administration hoped would set an example for other funds.

The commitment came from the so-called sovereign wealth funds controlled by the governments of Singapore and Abu Dhabi, which is part of the United Arab Emirates. Both funds have stepped up their American investments in the last year and played a major role in purchasing stakes in Citigroup.

Treasury Secretary Henry M. Paulson Jr. praised the two funds for embracing a set of principles that not only disavowed political motives in investing but also made commitments to maximum disclosure of investment activities and to strong internal controls, including management of risk in investments.

“Singapore and U.A.E. have long-established, well-respected funds and are showing real leadership by joining with us today,” Mr. Paulson said in a statement.

Mr. Paulson reiterated the administration’s position that the United States welcomed foreign investments, but his comment came at a time of rising concern in the administration about political opposition to such activities, especially after several government funds bought stakes in major American companies this year.

At the same time, representatives of the funds have hired lobbyists and public relations firms and have gone out of their way to proclaim their intention to invest in the United States based on commercial principles and not out of political motivations.

The United States has enlisted the International Monetary Fund, which has 185 country members, and the Organization for Economic Cooperation and Development, a voluntary group of wealthy countries, to develop a code of “best practices” to guide cross-border investments by government funds.

The International Monetary Fund’s board is to meet in Washington on Friday to push its study forward with a goal of adopting best practices in the fall.

One goal of these two group efforts is to make both funds and the countries that receive investments more comfortable with each other’s motives. “It’s a process of mutual self-reassurance,” said an official involved in the process, speaking anonymously to describe the motives of the players candidly.

The drive by the United States and Europe to draw up the code of best practices, including a renunciation of political motives, has stirred resentment among some of the investing funds, particularly in China and some in the Persian Gulf.

At the World Economic Forum, representatives of some of the funds in the Persian Gulf said such a code was unnecessary and an intrusion, since they said the investment funds had never done anything to arouse suspicions. Some Chinese officials have also been quoted as saying the best practices idea was unnecessary.

Bush administration officials say that they are pleased with the level of cooperation from foreign governments, however.

“The general impression I have is that there is an openness to discussing this,” said Clay Lowery, an assistant Treasury secretary for international affairs, referring to a best practices code. “Some funds think this is a really good idea. Some are saying, ‘Let’s do a little bit of wait-and-see.’ ”

A leading Senate proponent of more openness by sovereign wealth funds, Senator Charles E. Schumer, the New York Democrat, praised Mr. Paulson on Thursday for agreeing to a set of principles but called on the principles to be adopted by others.

“Now it is up to other sovereign wealth funds to follow this lead,” Mr. Schumer said. “I hope the administration, the I.M.F. and other governments will encourage them to do so.”