Issues of Governance : Transparency and Accountability of Sovereign Wealth Funds in Muslim Countries

Abstract

Sovereign Wealth Funds (SWFs) have been growing in number and size over the years, in both Muslim and non-Muslim countries. Their importance in terms of potential impact on the economic, social and political fronts of both the home countries (managing the SWFs) and the host countries (receiving the investments of SWFs) has drawn increasing attention to the operations of these funds. The basic concerns about these funds are the issues of governance, transparency and accountability at a global level. This paper aims to highlight these issues with a specific focus on SWFs sponsored by the members of the Organisation of Islāmic Cooperation (OIC), or Muslim countries in short. It discusses the gaps arising in the governance, transparency and accountability of SWFs in Muslim Countries (SWF-MC) and proposes some recommendations to improve their practices with a view to enhance their impact on social and economic developments in Muslim countries. It also discusses the Santiago Principles which have been developed as a comprehensive set of voluntary codes to serve as a framework of international best practices in the area of governance for SWFs. It is found that SWF-MC such as Libya, Qatar, Sudan, Nigeria, Oman, Brunei and others are the least compliant funds with regard to the Santiago Principles based on the Truman scoreboard. Moreover, the overall level of transparency of SWF-MC, based on the Linaburg–Maduell Transparency Index (LMTI) is also very low. Based on these findings, it is deemed crucial that SWF-MC should be properly set up and governed by international best practices.