The US said on Thursday it had reached an agreement with Abu Dhabi and Singapore that they should not use their huge government investment funds to further their political goals.
The funds have raised concerns about the potential threats that large amounts of foreign investment could pose to the US economy and other industrial countries.
A set of policy principles was released after US Treasury Secretary Henry Paulson met with officials from Abu Dhabi, home to the world's largest government investment fund, and Singapore, which also controls a sizable investment fund.
"We had a good discussion today on the issues surrounding sovereign wealth funds," Paulson said in a statement.
He said the principles that had been agreed on would further efforts to develop a set of best practices to govern how the funds operate.
The IMF and the Organization for Economic Cooperation and Development (OECD) are working to develop a voluntary set of best practices to address issues that have been raised.
Paulson's meeting followed a letter released earlier this week that Abu Dhabi sent to the administration and other Western governments in which it spelled out the principles it said guides its investment procedures.
The first of nine principles released on Thursday says that sovereign wealth fund investment decisions "should be based solely on commercial grounds, rather than to advance, directly or indirectly, the geopolitical goals" of the government that controls the fund.
The principles also endorse greater disclosure of information concerning the funds, saying this disclosure "can help reduce uncertainty in financial markets and build trust in recipient countries."
These funds, in many cases bulging with revenues earned through the sale of oil, have raised concerns among members of Congress and officials in Europe regarding their intentions in making investments in the US and Europe.
The administration has sought to walk a fine line on the issue, reflecting the fact that the US must depend on foreign investment to finance its huge trade deficits.
Paulson, in his statement, said that the US "welcomes sovereign wealth fund investment and looks forward to continuing to work with these two countries and others to support the initiatives under way at the IMF and the OECD to develop best practices" for the funds and countries where the funds are making investments.
One of the principles for countries receiving the investment was that they "should not erect protectionist barriers to portfolio or direct investment."
Abu Dhabi is the capital of the United Arab Emirates. Officials from Abu Dhabi, Singapore and their two large investment funds attended the meeting with Paulson.
The Abu Dhabi Investment Authority is estimated to have holdings of US$900 billion, making it the largest sovereign wealth fund in the world. The fund -- set up more than 30 years ago to invest the Persian Gulf emirates oil wealth -- last year invested US$7.5 billion in Citigroup Inc, giving it a 4.9 percent stake in the US' biggest bank.
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