Wednesday, January 30, 2008
[IWS] CRS: SOVEREIGN WEALTH FUNDS: BACKGROUND & POLICY ISSUES FOR CONGRESS [28 January 2008]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL34336
Sovereign Wealth Funds: Background and Policy Issues for Congress
January 28, 2008
Martin A. Weiss, Analyst in International Trade and Finance, Foreign Affairs, Defense, and Trade Division
http://assets.opencrs.com/rpts/RL34336_20080128.pdf
[full-text, 24 pages]
Summary
Sovereign wealth funds (SWFs) are investment funds owned and managed by
national governments. Such funds currently manage between $1.9 and $2.9 trillion
and are expected to grow to over $12 trillion by 2015. This is due to the rapid growth
of commodity prices and large trade surpluses in several emerging market economies.
During the second half of 2007, interest in SWFs increased as Asian and Middle
Eastern SWFs, fueled by surging foreign exchange reserves, invested large sums of
capital in U.S. and other Western companies.
Policy makers in the United States have raised two broad policy concerns about
SWFs: (1) their lack of transparency and (2) their possible misuse for political or
other non-commercial goals. The Senate Banking Committee held hearings on SWFs
in November 2007. Additional congressional hearings are expected in 2008.
SWFs pose a complex challenge for policy makers. On one hand, SWFs are
long-term investment vehicles looking beyond quarterly results and therefore serve
as stable funding sources during financial turbulance. On the other hand, however,
there are operational concerns stemming from government control (i.e., lack of
transparency and possible non-commercial investment goals). Without transparency,
it is difficult to attain a clear picture of SWF investment activity. A lack of SWF
transparency can also obscure governance and risk-management problems within
SWFs.
Many are also concerned that countries will use SWFs to support what one
analyst has called "state capitalism," using government-controlled assets to secure
stakes around the world in strategic areas such as telecommunications, energy and
mineral resources, and financial services, among other sectors.
In response to these concerns, many analysts and policy makers are evaluating
the operations of existing SWFs and are looking to the international financial
institutions such as the International Monetary Fund, World Bank, and the
Organization for Economic Cooperation and Development to establish guidelines
for SWF operations. All of these institutions are currently developing proposals that
will be deliberated during 2008. This report will be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
What Are Sovereign Wealth Funds (SWFs)? . . . . . . . . . . . . . . . . . . . . . . . . 5
What Countries Operate SWFs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Size of SWFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Policy Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transparency and Governance-Related Concerns . . . . . . . . . . . . . . . . . . . . 13
Non-commercial Investment Motives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. and International Policy Responses to SWFs . . . . . . . . . . . . . . . . . . . . . . . 15
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Multilateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Figures
Figure 1. SWF Investments in Western Financial Institutions ($ billions) . . . . . . 3
Figure 2. Global Asset Volume Comparison 2005, $ Trillion . . . . . . . . . . . . . . . 10
Figure 3. Standard Chartered Ranking of SWFs,by Investment Approach and Transparency . . . . . . . . . . . . . 13
List of Tables
Table 1. Foreign Exchange Reserves and Current Account Balances . . . . . . . . . . 8
Table 2. Large Sovereign Wealth Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL34336
Sovereign Wealth Funds: Background and Policy Issues for Congress
January 28, 2008
Martin A. Weiss, Analyst in International Trade and Finance, Foreign Affairs, Defense, and Trade Division
http://assets.opencrs.com/rpts/RL34336_20080128.pdf
[full-text, 24 pages]
Summary
Sovereign wealth funds (SWFs) are investment funds owned and managed by
national governments. Such funds currently manage between $1.9 and $2.9 trillion
and are expected to grow to over $12 trillion by 2015. This is due to the rapid growth
of commodity prices and large trade surpluses in several emerging market economies.
During the second half of 2007, interest in SWFs increased as Asian and Middle
Eastern SWFs, fueled by surging foreign exchange reserves, invested large sums of
capital in U.S. and other Western companies.
Policy makers in the United States have raised two broad policy concerns about
SWFs: (1) their lack of transparency and (2) their possible misuse for political or
other non-commercial goals. The Senate Banking Committee held hearings on SWFs
in November 2007. Additional congressional hearings are expected in 2008.
SWFs pose a complex challenge for policy makers. On one hand, SWFs are
long-term investment vehicles looking beyond quarterly results and therefore serve
as stable funding sources during financial turbulance. On the other hand, however,
there are operational concerns stemming from government control (i.e., lack of
transparency and possible non-commercial investment goals). Without transparency,
it is difficult to attain a clear picture of SWF investment activity. A lack of SWF
transparency can also obscure governance and risk-management problems within
SWFs.
Many are also concerned that countries will use SWFs to support what one
analyst has called "state capitalism," using government-controlled assets to secure
stakes around the world in strategic areas such as telecommunications, energy and
mineral resources, and financial services, among other sectors.
In response to these concerns, many analysts and policy makers are evaluating
the operations of existing SWFs and are looking to the international financial
institutions such as the International Monetary Fund, World Bank, and the
Organization for Economic Cooperation and Development to establish guidelines
for SWF operations. All of these institutions are currently developing proposals that
will be deliberated during 2008. This report will be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
What Are Sovereign Wealth Funds (SWFs)? . . . . . . . . . . . . . . . . . . . . . . . . 5
What Countries Operate SWFs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Size of SWFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Policy Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transparency and Governance-Related Concerns . . . . . . . . . . . . . . . . . . . . 13
Non-commercial Investment Motives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. and International Policy Responses to SWFs . . . . . . . . . . . . . . . . . . . . . . . 15
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Multilateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Figures
Figure 1. SWF Investments in Western Financial Institutions ($ billions) . . . . . . 3
Figure 2. Global Asset Volume Comparison 2005, $ Trillion . . . . . . . . . . . . . . . 10
Figure 3. Standard Chartered Ranking of SWFs,by Investment Approach and Transparency . . . . . . . . . . . . . 13
List of Tables
Table 1. Foreign Exchange Reserves and Current Account Balances . . . . . . . . . . 8
Table 2. Large Sovereign Wealth Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 7:31 AM
