The ‘Gänseliesel’ (Goose Girlis), a historical fountain erected in 1901, represents the most well-known landmark of the city of Goettingen.

Pride and Prejudice: How the Financial Crisis Made Us Reconsider SWFs

Luca Schicho



The article analyzes the interrelation of the financial crisis and the regulation of state-owned investors: For a number of years, Western states raised protectionist fears by publicly debating an increasingly “tough” line on state-owned investors, in particular SWFs from the Middle East and East Asia. But after the dawning of the crisis in summer 2007, SWFs made a series of substantial and urgently needed investments in the Western financial sector. This development necessitated a process of reconsideration of these protectionist tendencies and is gradually leading to a new consensus where legitimate concerns of states are fairly balanced with the indispensable freedom of investment. The article first outlines the pre-crisis situation and its protectionist tendencies, then describes the development of selected national regulatory frameworks and finally dwells on the current situation and the challenges facing states and SWFs in the future: States will have to create clear rules for regulating such investments, while state-owned investors will need to improve their transparency and independence to alloy public concerns over their activities.


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