Financializing Development: Toward a Sympathetic Critique of Sovereign Development Funds

Abstract

In this paper we unpack the scope and possibilities of sovereign development funds in different forms and under different political-cum-institutional conditions as a policy tool supporting economic growth and development, particularly in developing countries. Defining what that purpose should be and what is possible is complicated by a number of factors. The form of government of the sovereign sponsor and the significance of public legitimacy may help or hinder different types of investment mandates. Moreover, different investment mandates and their relative sophistication require organizational capabilities and expertise that are often not available locally or are insufficiently developed, such that the implementation of certain investment mandates is constrained and/or too costly. The purpose and the design possibilities of a sovereign development fund are, ultimately, contingent on local conditions, resources, and the essential developmental needs of the country and its population.

Keywords: Sovereign Development Funds, Sovereign Wealth Funds, Resource Revenue Management, Development, Institutional Investors

JEL Classification: G29, O16, O23, Q32