The Case for Economic Development Through Sovereign Investment: A Paradox of Scarcity?

Abstract

Sovereign wealth funds (SWFs) have traditionally been created to recycle excess reserves from natural resource or non‐commodity revenues. However, in recent years funds are being established under conditions of capital scarcity with objectives to contribute domestic economic development, often through the buildout of national infrastructure programs. Such trends in new fund creation represent a fundamental shift in the sovereign wealth fund paradigm and raise serious questions about how these entities are to be capitalized and also the implications of capitalization models on their sustainability. This study examines the recent evolution of SWF models focused on economic development. Its analytic focus is drawn, in particular, to countries that are neither endowed with oil wealth, nor otherwise enjoy export surpluses to be used to capitalize a development‐oriented SWF. While this study is relevant to and expands the scope of the broad literature on SWFs, its specific contribution is as a focused analysis of how SWF funding sources impact achieving long‐term financial and socio‐economic development objectives.

The Sovereign Wealth Fund and Nigerian Economic Development

“…However, they generally share a mandate, whether explicitly stated or implicitly understood, of supporting the domestic economy (Schena et al, 2018). Initially, the literature on SWFs primarily focused on their impact on foreign firms, markets, and economies.…”

The Evolving Landscape of Sovereign Wealth Funds in a Changing World Economy: How Resilient Are the Santiago Principles?

“…While sovereign wealth funds are still firmly rooted in global (Western) financial markets, this earlier speculation on the future of sovereign wealth funds has some truth. Indeed, many sovereign wealth funds established in the last decade or so have mandates focused on national economic development priorities, often emulating other strategic-focused sovereign wealth funds, namely, Singapore's Temasek Holdings, Malaysia's Khazana Nasional Berhad, and Abu Dhabi's Mubadala Investment Company (Schena and Gouett 2022;Schena et al 2018;Halland et al 2016;Dixon 2022;Braunstein 2019). Examples include the Ireland Strategic Investment Fund, BpiFrance, Kazakhstan's Samruk-Kazyna, Rwanda's Agaciro Development Fund, Italy's CDP Equity, Senegal's Fonds souverain d'investissements stratégiques, Morocco's Ithmar Capital, The Sovereign Fund of Egypt, the Russia Direct Investment Fund, and the Türkiye Wealth Fund.…”

Waqf Institution and Management Cash Waqf During The Ottoman Period

“…If it is associated with today's era, this institution is an institution called the Overeign Wealth Fund (SWF). Schena, Braunstein, & Ali (2018) mention that the sovereign wealth fund (SWF) is an organically emerging fundraising model that is related to the accumulation of surplus from income commodities. SWF was originally created to manage the excess accumulation of commodity wealth.…”