Sovereign Wealth Funds: Threat or Salvation? [NOOK Book]

Overview

This study examines the role of sovereign wealth funds (SWFs) in the global economy and financial system. Sovereign wealth funds are not a new phenomenon in international finance. Governments of a few countries have used similar entities to manage their international financial assets for several decades. Moreover, countries have always held international reserves, and government-owned entities have made cross-border investments for many years.
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Sovereign Wealth Funds: Threat or Salvation?

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Overview

This study examines the role of sovereign wealth funds (SWFs) in the global economy and financial system. Sovereign wealth funds are not a new phenomenon in international finance. Governments of a few countries have used similar entities to manage their international financial assets for several decades. Moreover, countries have always held international reserves, and government-owned entities have made cross-border investments for many years.

Sovereign wealth funds or their equivalent pose profound issues for the countries that own them with respect to macroeconomic policy and the potential for corruption. They also raise issues for countries that receive SWF investments as well as for the international financial system as a whole because government ownership introduces potential political and economic power issues into the management of these cross-border assets.

This study traces the origins of SWFs. It describes the issues raised by these large governmental holdings of cross-border assets for the countries that own them, for the host countries, and for the international financial system. The study lays out what is known about the 50-plus SWFs of various countries. Some countries have more than one such entity, and a sample of government-managed pension funds is included in this analysis because they raise most of the same basic policy issues. Using publicly available information that is provided on a systematic basis, the author has previously developed a "scoreboard" for these funds involving a number of elements grouped in four categories: structure, governance, transparency and accountability, and behavioral rules. The 2008 edition contributed to the development of a set of generally accepted principles and practices, the Santiago Principles, for SWFs by the International Working Group operating under the auspices of the International Monetary Fund.

This publication presents an updated scoreboard for an expanded list of funds, evaluates the Santiago Principles, and examines current compliance with those principles. The study also examines the policies of recipient countries and the role of the Organization for Economic Cooperation and Development (OECD) investment codes. Finally, the study discusses the evolving role of SWFs in the context of the global economic and financial crisis and its aftermath and will make recommendations for the policies of countries both managing such funds and those that expect to receive investments from them in the future.
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Product Details

  • ISBN-13: 9780881325751
  • Publisher: Peterson Institute for International Economics
  • Publication date: 9/15/2010
  • Sold by: Barnes & Noble
  • Format: eBook
  • File size: 7 MB

Table of Contents

Preface

Acknowledgments

1 Sovereign Wealth Funds and the Global Economy 1

Sovereign Wealth Funds and the Global Financial Crisis 3

Response to Sovereign Wealth Funds 5

Structure of the Book 6

2 What Are Sovereign Wealth Funds? 9

What, When, and How? 9

Potential for Growth 23

Sovereign Wealth Funds and the International Financial System 30

3 Issues and Concerns 35

Mismanagement of Investments 36

Pursuit of Political or Economic Power Objectives 40

Financial Protectionism 44

Market Turmoil and Uncertainty 46

Conflicts of Interest 52

Concluding Comments 56

4 Possible Policy Responses to Sovereign Wealth Funds 57

Comprehensive Regulation 58

Prohibition of Specific Investments 61

Limitations on Investment Activities 63

Reciprocal Arrangements 65

5 Accountability and Transparency: The Sovereign Wealth Fund Scoreboard 69

The Scoreboard 71

Elements of the Scoreboard 78

Evidence of Progress 89

Comparison with Other Indices and Indicators 94

Arguments against the Scoreboard Approach 99

The Scoreboard and Concerns about Sovereign Wealth Funds 104

Appendix 5A Scoreboard for Sovereign Wealth Funds 106

6 The Santiago Principles 121

International Working Group 121

Assessment of the Santiago Principles 124

Discussion of the Santiago Principles 134

Next Steps 137

7 Host-Country Responses to Sovereign Wealth Funds 149

OECD Response 150

Assessment of Collective Actions 152

Actions by Individual Countries 154

Reciprocal Responsibility 159

8 The Future for Sovereign Wealth Funds 161

Upgrading the Santiago Principles 164

Augmented Reciprocal Responsibility 165

Improving Data Collection and Related Disclosures 166

A Comprehensive Framework as the Ultimate Goal 168

References 169

Index 179

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