Sovereign Wealth Funds:

Issues and Challenges 

Mukul Asher

Professor of Public Policy

National University of Singapore

Prepared for the seminar at National Graduate Institute for Policy Studies, Tokyo, July 2008.  

Organization 

• Defining Sovereign Wealth Funds (SWFs)
• Size of SWFs
• Benefits of SWFs
• Concerns
• Recent Developments
• Future Trajectory
• Concluding Remarks

Future Trajectory 

Concluding Remarks 

• SWFs are large, growing, and will continue to play an important role in global financial and capital markets.

• Their growth reflects relative increase in share of global wealth of resource-rich and some Asian exporters. The traditional industrial countries will need to accommodate those countries from which major SWFs originate.  

• International community has a stake in ensuring that SWFs Code of Governance is compatible with global stability; while SWFs have a stake in predictable behavior of the recipient countries.  

• While US may be able to manage the rise of the SWFs, some of the developing countries may feel more vulnerable. All countries, however have little choice but to strengthen their internal data gathering capabilities, and monitoring of FDI and portfolio flows.

• The global nature of the financial and capital markets has outpaced the patchwork of financial regulation which is still primarily domestic. 

• As world financial authority is not on the cards, there is little choice but to rely on committee-based international cooperation and code of conduct (Davies and Green, 2008).  

• The SWFs will also have a political impact. James (2008) has argued that “both the rise of the SWFs and the new importance of big countries as the last backstop of the financial system have changed the way electorates and politicians view globalization. The pendulum is indeed away from the marketplace, which has inherently democratic qualities, and toward big states and big power. And, in many parts of the world that means a new authoritarianism”