SOVEREIGN WEALTH FUNDS A great opportunity for the global financial world but a potential threat for both host country and home country By Thierry KAME BABILLA
Sovereign wealth funds are among the most important players in global financial market, because of their increasing size and number. Both the global financial crisis and oil price crisis have confirmed this prominent status due to the resilience of
sovereign wealth funds against these crises. Nevertheless, sovereign wealth funds recently caught the attention of many experts because of the shifting of their features from riskless assets and debts instrument to more risk-return profile assets.
Globally, the ship finance sector is facing one of the worst crises in terms of getting finances for their projects. Shipping companies are finding it tough to get conventional bank financing due to strained liquidity and tight credit conditions. The ship finance sector is facing one of its darkest times. Historically, ship finance was undertaken by International Conventional Banks and these banks have been hit so hard that a few of them may face bankruptcy. Despite the gloomy outlook for the global economy which has affected the entire industry and projections that depict the recovery of the global economy as an “L-shaped” rather than a “V-shaped” curve. The shipping sector has had seven huge years before “falling off a cliff” due to the global credit crisis. Banks in the region are still reluctant to lent money, and as long as banks don\'t start lending the shipping business is not going to go up. Banks are sitting on the debts of poor performing companies and have not been quick to enforce their rights. 2009 was a year when facilities were amended and defaults waived which is happening throughout the world. The question remains to be seen as to whether or not there is sufficient equity within the shipping sector to keep the ship owners going over the coming year or whether we are experiencing a \'W\' type of recessionary curve with the second downward part of the curve to hit the markets in 2010. Considering all above issues with the conventional banking system to support the shipping industry moving, Islamic finance is emerging as a credible alternative source of ship finance.
Islamic Finance and Economic Growth in the Kingdom of Saudi Arabia (KSA): An ...scmsnoida5
This paper examines the relationship between
the development of Islamic finance system and
economic growth in the Kingdom of Saudi
Arabia. The relationship between Islamic
banking and economic growth is done using
econometric analysis. In this analysis, we use
Islamic banks’ financing credited to private
sector through modes of financing as a proxy for
the development of Islamic finance system and
Gross Domestic Product (GDP), Gross Fixed
Capital Formation (GFCF) and Foreign Direct
Investment inflow (FDI) as proxies for real
economic growth. For the analysis, the unit root
test, co-integration test and Granger causality
tests were done. Based on the availability of data,
time series data from 1990 to 2010 is used to
examine the relationship between Islamic banks’
financing and GDP, FDI, and GFCF. Data for
all variables are stationary after first difference.
The co-integration results provide an evidence of
a unique cointegrating vector. In other words, there is a long-term stable relationship between
Islamic banks’ financing and economic growth
in the Kingdom of Saudi Arabia. That means
Islamic banks’ financing and economic growth
relationships are moving together in the longrun.
The results from causality tests show that causality
relation exist from the Islamic banks’ financing
to investment and Foreign Direct Investment
(FDI) of the Kingdom of Saudi Arabia. The
results indicate that Islamic finance is a suitable
environment for attracting FDI and FDI
reinforces economic growth.
Trust Fund: A Product Combining Waqf, Zakah and Sadaqah for Socio-Economic A...Islamic_Finance
This paper introduces Waqf, Zakah and Sadaqah, which are currently being mobilised by the non-Financial Institutions (non-FIs) such as charitable organisations and Non-Governmental Organisations (NGOs) as additional components of Islamic finance industry, to complement the efforts of financial intermediaries as a contributor to key socio-economic development. The paper presents various aspects of a case study regarding the use of Trust Fund Instrument by the Islamic Development Bank (IDB) for socio-economic development in its member countries including a project run with the co-operation of Bill & Melinda Gates Foundation (Gates Foundation) for polio eradication in Pakistan as part of the Global Polio Eradication Initiative (GPEI).
This SlideShare provides a brief overview of what are Sovereign Wealth Funds, classifications, and top SWFs globally. In recent years SWFs have shown interest in VC-backed deals, with a growing trend in technology and life sciences. SWFs can be a force for positive change: the amount of money in an SWF is usually substantial, allowing them to contribute towards a country’s long-term growth by means of long-term investments in life sciences innovations.
Globally, the ship finance sector is facing one of the worst crises in terms of getting finances for their projects. Shipping companies are finding it tough to get conventional bank financing due to strained liquidity and tight credit conditions. The ship finance sector is facing one of its darkest times. Historically, ship finance was undertaken by International Conventional Banks and these banks have been hit so hard that a few of them may face bankruptcy. Despite the gloomy outlook for the global economy which has affected the entire industry and projections that depict the recovery of the global economy as an “L-shaped” rather than a “V-shaped” curve. The shipping sector has had seven huge years before “falling off a cliff” due to the global credit crisis. Banks in the region are still reluctant to lent money, and as long as banks don\'t start lending the shipping business is not going to go up. Banks are sitting on the debts of poor performing companies and have not been quick to enforce their rights. 2009 was a year when facilities were amended and defaults waived which is happening throughout the world. The question remains to be seen as to whether or not there is sufficient equity within the shipping sector to keep the ship owners going over the coming year or whether we are experiencing a \'W\' type of recessionary curve with the second downward part of the curve to hit the markets in 2010. Considering all above issues with the conventional banking system to support the shipping industry moving, Islamic finance is emerging as a credible alternative source of ship finance.
Islamic Finance and Economic Growth in the Kingdom of Saudi Arabia (KSA): An ...scmsnoida5
This paper examines the relationship between
the development of Islamic finance system and
economic growth in the Kingdom of Saudi
Arabia. The relationship between Islamic
banking and economic growth is done using
econometric analysis. In this analysis, we use
Islamic banks’ financing credited to private
sector through modes of financing as a proxy for
the development of Islamic finance system and
Gross Domestic Product (GDP), Gross Fixed
Capital Formation (GFCF) and Foreign Direct
Investment inflow (FDI) as proxies for real
economic growth. For the analysis, the unit root
test, co-integration test and Granger causality
tests were done. Based on the availability of data,
time series data from 1990 to 2010 is used to
examine the relationship between Islamic banks’
financing and GDP, FDI, and GFCF. Data for
all variables are stationary after first difference.
The co-integration results provide an evidence of
a unique cointegrating vector. In other words, there is a long-term stable relationship between
Islamic banks’ financing and economic growth
in the Kingdom of Saudi Arabia. That means
Islamic banks’ financing and economic growth
relationships are moving together in the longrun.
The results from causality tests show that causality
relation exist from the Islamic banks’ financing
to investment and Foreign Direct Investment
(FDI) of the Kingdom of Saudi Arabia. The
results indicate that Islamic finance is a suitable
environment for attracting FDI and FDI
reinforces economic growth.
Trust Fund: A Product Combining Waqf, Zakah and Sadaqah for Socio-Economic A...Islamic_Finance
This paper introduces Waqf, Zakah and Sadaqah, which are currently being mobilised by the non-Financial Institutions (non-FIs) such as charitable organisations and Non-Governmental Organisations (NGOs) as additional components of Islamic finance industry, to complement the efforts of financial intermediaries as a contributor to key socio-economic development. The paper presents various aspects of a case study regarding the use of Trust Fund Instrument by the Islamic Development Bank (IDB) for socio-economic development in its member countries including a project run with the co-operation of Bill & Melinda Gates Foundation (Gates Foundation) for polio eradication in Pakistan as part of the Global Polio Eradication Initiative (GPEI).
Similar to SOVEREIGN WEALTH FUNDS A great opportunity for the global financial world but a potential threat for both host country and home country By Thierry KAME BABILLA
This SlideShare provides a brief overview of what are Sovereign Wealth Funds, classifications, and top SWFs globally. In recent years SWFs have shown interest in VC-backed deals, with a growing trend in technology and life sciences. SWFs can be a force for positive change: the amount of money in an SWF is usually substantial, allowing them to contribute towards a country’s long-term growth by means of long-term investments in life sciences innovations.
The next paper, by Hany H. Makhlouf, provides a useful introduction and overview of sovereign wealth funds. These funds managed by 23 countries, mainly those with significant income from natural resources, for example, oil, have been of increasing interest in recent years and are expected to grow in the future if, as expected the price of crude oil triples in price over the next 20 years. However, the global economic meltdown had a major impact on their success and led many to a re-think of their strategic approach.
WORKING PAPER (ESADEgeo): More Layers than an Onion: Looking For a Definition...ESADE
ABSTRACT
We analyze definitions used by researchers about a single concept: Sovereign Wealth Funds (SWF). It is still a matter of recent controversy and debate. We place these definitions into one of eleven categories. The results show full agreement (what we have called ‘the core’) for just two characteristics: SWFs are owned by governments and they are investment funds. Beyond the core, there are three layers commanding general consensus.
AUTHORS
Javier Capapé: PhD Candidate, ESADE Business School Researcher, ESADEgeo - Center for Global Economy and Geopolitics, ESADE Business School Research Affiliate, SovereigNET, The Fletcher School (Tufts University)
Tomás Guerrero Blanco: PhD Candidate, University Carlos III Madrid Researcher, ESADEgeo - Center for Global Economy and Geopolitics, ESADE Business School Research Affiliate, SovereigNET, The Fletcher School (Tufts University)
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Journal will bring together leading researchers, engineers and scientists in the domain of interest from around the world. Topics of interest for submission include, but are not limited to
A small airline recently sold to a private equity group for $145 m.docxannetnash8266
A small airline recently sold to a private equity group for $145 million. The airline has earned profits of $9 million last year. The new managers believe they can grow profits at 5% per year. The private equity group borrows money from wealthy individuals to invest in acquisitions. Because of the significant risk involved, lenders are promised a 12% return on their loans to the equity group. Is the purchase price of the new airline reasonable? Explain
ISSN 0143-6597 print/ISSN 1360-2241 online/02/040607-1 4 q 2002 Third World Quarterly
DOI: 10.1080 /014365902200000529 2 607
Third World Quarterly, Vol 23, No 4, pp 607–620, 2002
Eager to defend the feasibilit y, indeed desirability, of continued mobility of cross-
border financial flows, especially after the advent of the Asian crisis (1997–98),
the G-7 countries established a series of institutions and networks, encompassin g
both state and non-state actors, in the hope of strengthening the internationa l
financial system. This strategy has been referred to as the New Internationa l
Financial Architecture (NIFA). While there are many dimensions to the NIFA, we
can identify at least three important features: the Group of Twenty (G-20), the
Financial Stability Forum (FSF), and 11 standards and codes which are collec-
tively known as the Reports on Observances of Standards and Codes (ROSCs).
Briefly, the G-20 brings together, for the first time, finance ministers and central
bank governors not only of the G-7 and the European Union, but also their
counterparts of ‘systematically important’ emerging market economies. The FSF,
on the other hand, seeks to provide regular scheduled meetings involvi ng
important national authorities from G-7 countries in order to enhance discussion s
On the contradictions of the New
International Financial Architecture:
another procrustean bed for
emerging markets?
SUSANNE SOEDERBERG
ABSTRACT The New International Financial Architecture (NIFA) was created by
powerful G-7 countries in response to the growing volatility in the developing
world. Some key components of the NIFA include: the G-20, the Financial Stabilit y
Forum and the Reports on Observance of Standards and Codes, the latte r
involving areas such as corporate governanc e. The aim of this article is to
address some important yet largely neglected questions. Why the new building ?
Who benefits from this construct ion? Unlike most accounts of the NIFA, the
following analysis does not remain focused on its institutio nal terrain; but
instead draws linkages between these structures and the paradoxes inherent in
global capitalism. One such contradiction is the constant promotion of financia l
liberalisation in emerging markets by US-led international financial institution s
(IFIs), on the one hand, and the frequency of financial crises in the developing
world, on the other. The article suggests that the NIFA is an attempt to strengthe n
(stabilise and legitimate) the scaffolding of the existing imper.
CLASS PRESENTATION ON MANAGING THE GLOBAL ECONOMY SINCE WORLD WAR II.pptxGeorgeKabongah2
The Bretton Woods Conference
The World Bank Group
The IMF
African Development Bank
World Trade Organization
Similar to SOVEREIGN WEALTH FUNDS A great opportunity for the global financial world but a potential threat for both host country and home country By Thierry KAME BABILLA (20)
Yes of course, you can easily start mining pi network coin today and sell to legit pi vendors in the United States.
Here the telegram contact of my personal vendor.
@Pi_vendor_247
#pi network #pi coins #legit #passive income
#US
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
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Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
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how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
SOVEREIGN WEALTH FUNDS A great opportunity for the global financial world but a potential threat for both host country and home country By Thierry KAME BABILLA
1. 1
SOVEREIGN WEALTH FUNDS
A great opportunity for global financial world but a potential threat for both
host country and home country
By
Thierry KAME BABILLA
September 4th 2016
Sovereign wealth funds are among the most important players in global financial
market, because of their increasing size and number. Both the global financial crisis
and oil price crisis have confirmed this prominent status due to the resilience of
sovereign wealth funds against these crises. Nevertheless, sovereign wealth funds
recently caught the attention of many experts because of the shifting of their features
from riskless assets and debts instrument to more risk-return profile assets.
Sovereign wealth funds, in fact, are large pools of capital created by governments to
hold foreign assets in order to achieve long-term investments via a broad array of
vehicles such a private equity funds, infrastructure, real estate, hedge funds and direct
equity investments.
Specifically, sovereign wealth funds can be classified into five groups.1
First group represents the stabilization sovereign wealth fund. Stabilization funds’
role is to protect domestic economy against commodities prices swings and external
shocks. Stabilization funds are Kiribati Revenue Equalization Reserve Fund (1956),
Nauru Phosphate Royalties Trust (1968), Botswana Revenue Stabilization Fund
(1972), Tuvalu Trust Fund (1987), Colombia Oil Stabilization Fund (1995),
Venezuela Stabilization Fund (1998), Azerbaijan State Oil Fund (1999), Iran Oil
Stabilization Fund (1999), Peru Fiscal Stabilization Fund (1999), Algerian Revenue
Regulation Fund (2000), Mexico Oil Stabilization Fund (2000), Sudan Oil Revenue
Stabilization Account (2002), Russia Oil Stabilization Fund (2004), Timor Leste
Petroleum Fund (2005), Mauritania National Fund for Hydrocarbon Reserve (2006),
Chilean Economic and Social Stabilization Fund (2007), Trinidad and Tobago
Heritage and Stabilization Fund (2007), Chad Revenue Management Plan (2008),
Turkmenistan Stabilization Fund (2008) and Mongolia Fiscal Stability Fund (2011).
Second group stands for the savings sovereign wealth fund. Savings funds are
designed for natural resources’ income redistribution from current to future
generation. Effective savings funds are Kuwait Investment Authority (1953), New
Mexico State Investment Council (1958), Permanent Wyoming Mineral Trust Fund
(1974), Singapore Temasek Holdings (1974), Abu Dhabi’s Investment Corporation
(1976), USA Alaska Permanent Fund (1976), Canada Alberta’s Heritage Fund (1976),
Brunei Investment Authority (1983), Government Investment Corporation of
Singapore (1991), Botswana Pula Fund (1993), Malaysia Khazanah Nasional Berhad
(1993), Gabon Sovereign Fund (1998), Fund for Future Generation of Equatorial
1 The number into bracketis the creation date of the specific sovereign wealth funds.
2. 2
Guinea (2002), Qatar Investment Authority (2005), Bahrain Future Generations
Reserve Fund (2006), Libya Investment Authority (2007), Ghana Petroleum Fund
(2011) and Panama Sovereign Wealth Fund (2012).2
Third group outlooks for reserve investment sovereign wealth funds. Reserve
investment funds aim at managing foreign exchange reserves by allocating assets in
higher yields investments, such as, equities and alternative instruments. Operational
reserve investment funds are Kuweit General Reserve Fund (1960), Oman State
General Reserve Fund (1980), Government of Singapore Investment Corporation
(1981), International Petroleum Investment Company (1984), United States Alabama
Trust Fund (1985), Mubadala Investment Company (2002), Korea Investment
Corporation (2005), Ras Al Khaimah Investment Authority (2005), Investment
Corporation of Dubai (2006), Oman Investment Fund (2006), Indonesia Government
Investment Unit (2006), China Investment Corporation (2007), Emirates Investment
Authority (2007), Abu Dhabi Investment Council (2007), France Strategic Investment
Fund (2008), Russia Reserve Fund (2008), Italy Strategic Fund (2011), North Dakota
Legacy Fund (2011), Kazakhstan National Investment Corporation of National Bank
(2012) and Western Australian Future Fund (2012).
Fourth group denotes development sovereign wealth funds. Development funds are
organized to achieve various domestic or foreign socioeconomic objectives namely
infrastructures. Among development funds are Louisiana Education Quality Trust
Fund (1986), Kazakhstan National Oil Fund (2000), Iraq Development Fund (2003),
Vietnam State Capital Investment Corporation (2005), China-Africa Development
Fund (2007), Saudi Arabia Public Investment Fund (2008), Iran National
Development Fund (2011), Nigeria Sovereign Investment Authority (2011), Papua
New Guinea Sovereign Wealth Fund (2011), Russian Direct Investment Fund (2011)
and Fund Soberanu de Angola (2012).
Last Group concerns contingent pension reserve sovereign wealth funds. Pension
reserve funds objective is to cover upcoming pensions cost or to finance government
pension funds. Pension reserve funds include Korea National Pension Service (1988),
Norway Government Pension Fund (1990), China National Social Security Fund
(2000), Ireland Oil Stabilization Fund (2001), New Zealand Superannuation Fund
(2003), Australian Future Fund (2006), Chilean Pension Reservation Fund (2006),
Japan Government Pension Investment Fund (2006), Kazakhstan Samruk-Kazyna
JSC (2008) and Russia Welfare Fund (2008).
Sovereign Wealth Funds, even if resources’ rich countries mostly own them, provide
significant benefits in advanced economies, emerging market economies, as well as in
developing economies.
In the United States, their principal host country, sovereign wealth funds have helped
keep long-term interest rates low, for so long, and improve access to capital for
corporations, by their huge acquisition of United States treasury bonds. With a share
of more than 90% invested, sovereign wealth funds remain the largest single investors
2 Kuwait Investment Authority was one of the first sovereign wealth funds created in 1953.
3. 3
in its financial institutions. United States economy benefited thus for more efficient
risks diversification and resources allocation by the investments of sovereign wealth
funds in their capital markets. Investments in banks, private equities and housing also
help as sources of large inflow of liquidity in the economy. Consequently, during the
global financial crisis, sovereign funds demonstrate their lead role in mitigating the
adverse effects of a liquidity or credit crisis, by strengthening the vulnerable balance
sheets of some of the world’s largest financial institutions, and appearing as
countercyclical providers of capital in the United States. Moreover, the real estate
industry and the technology industry are respectively, the second and third most
targeted investment sectors in the investments portfolios of sovereign wealth funds
with sound macroeconomic outcomes. By investing in the United States real estate
industries and technology sector, sovereign wealth funds help in creating and
preserving employment, but also in enhancing economic growth.
In emerging market economies, the global financial crisis offered an opportunity to
sovereign wealth funds to raise their participation and invest more in these economies.
In the second half of 2010, more than half of publicly reported direct investments by
sovereign wealth funds occurred in the Asia Pacific region, Brazil, Russia and India.
Furthermore, as several new wealth funds have emerged in these regions, domestic
investments have constituted increasing portions of their portfolios, leading to
increased total investment. The key benefit of sovereign wealth funds in emerging
market economies is thus the increasing reduction of infrastructures gap. The match
between sovereign wealth funds’ long-term investment horizons and the long-term
nature of infrastructure investments supports their substantial investment in
infrastructures projects in these regions. In this regards, some sovereign wealth funds
are now considering development of domestic infrastructures as part of their core
mandate.
In developing economies, sovereign wealth funds’ benefits are three-fold. Primarily,
sovereign wealth funds enable developing economies, most of which heavily relied on
commodities exports, to diversify their income sources. Diversification allows the
minimization of risk and does not leave developing economies completely exposed to
the volatilities of commodities prices. As shown recently, when sovereign wealth
funds offset the adverse effects of the collapse of international commodities prices in
many developing economies. Secondly, the fundamental benefit of sovereign wealth
funds in developing economies is the resolution of Dutch Diseases syndrome.
Basically, sharp surge in prices of commodities exported tend to result in a boom in
aggregate demand and a sudden upward swings in wealth, which induce a large
inflow of foreign currency and thus a real exchange rate appreciation. The real
appreciation via the spending effect weakens the competitiveness of non-commodity
sectors in international markets. In addition, the resource movement effect leads to a
shift of capital and labor in commodity sector experiencing an increase in demand.
Sovereign wealth funds help thus developing economies experiencing boom in the
commodity sector to maintain external stability over the long-term, by augmenting
their net external asset position in a way consistent with their economy features. In
addition, sovereign wealth funds dampen the loss of competiveness of non-
commodity sectors and mitigate the macroeconomic risk associated with the real
exchange rate appreciation, by accumulating more foreign assets proportionately to
4. 4
changes in commodity exports. Thirdly, by investing in foreign advanced economies
like the United States, sovereign wealth funds give developing economies the
opportunity to access new skills, knowledge, and technology transfer to supplement
their developments needs. That explained why, even sub-Saharan Africa markets that
have historically struggled to manage natural resources’ wealth are seeing the creation
of various sovereign wealth funds.
Notwithstanding theses numerous benefits of sovereign wealth funds across the
globe, they can potentially be made into threats both in host states and owned states.
In the host countries, namely, United States, many concerns are arising regarding the
growing nature of sovereign wealth funds and the rebalancing of their structures of
investments. In fact, sovereign wealth funds are deemed for opaqueness and limited
disclosure in its key aspects including, objectives, holdings, governance and
performance. Importantly, non-democratic resources’ rich countries mostly own them.
Hence it becomes obvious that, threats can be either political or related to security. In
the political point of view, owned states with political ambitions such as accessing
military technology, controlling strategic markets, or influencing public opinion, may
direct their sovereign wealth funds toward protected and strategic stakes in some
sectors within the host country, such as, military corporations, natural resource
industries, or other politically sensitive sectors. In the security point of view,
sovereign wealth funds with multiple investment objectives may take investment
decisions in a fashion involving national security concerns.
In the owned countries, such as, resource rich-countries, sovereign wealth funds face
many challenges. Mismanagement of sovereign wealth funds yields may sometimes
lead to problems of severe economic distortions, endemic corruption, and rampant
embezzlement. In some cases, large sudden payments into a domestic economy may
trigger corruption and expropriation of wealth in countries with less developed legal
and economic systems. Because of lacks in transparency on natural resource wealth
that is unexpected, political interests may create internal pressures on sovereign
wealth funds and may tend to crowd out spending from national interest into personal
interests, and reduce the incentives to create employment and economic growth. The
worst outcome of sovereign wealth funds threat may be that a select few elite in
power, spends the country’s wealth bouncily, disregarding future generations. These
potential adverse effects of sovereign wealth funds can explain the impediments to the
development of many African resources’ rich nations.
To overcome these sovereign wealth fund threats, regulations for greatest operations
of sovereign wealth funds have been developed. The International Monetary Fund has
convened the International Forum of Sovereign Wealth Funds and its predecessor, the
International Working Group of Sovereign Wealth Funds. The IMF thus unveiled the
Santiago Principles designed to safeguard independence, transparency, accountability,
and enhance governance of sovereign wealth funds. However, the Santiago Principles
face some intrinsic inadequacies on their ability in fostering sovereign wealth funds.
The good news above all is that sovereign wealth funds still have a significant role in
global financial stability and macroeconomic prospects throughout the world. To
preserve and expand its benefits this thought brought four key recommendations.
5. 5
First, permanent and close collaboration between the IMF, the host countries and the
owned countries are compulsory in the governance of sovereign wealth funds.
Second, strengthen regulations of sovereign wealth funds by enforcing the Santiago
Principles and adding mandatory rules. Third, a coordination of sovereign wealth
funds objectives and economic interests of host countries is needed. Fourth, sovereign
wealth funds should operate in each host country, consistently with their national laws
and national securities strategies.