Capitalizing Economic Development Through Sovereign Investment: A 'Paradox of Scarcity'?
26 Pages Posted: 3 May 2017 Last revised: 7 Jun 2017
Date Written: May 1, 2017
Traditionally the creation of sovereign wealth funds (SWFs) was “supply-driven”, the result of excess reserves from natural resources (e.g. Norway, Qatar, Kuwait, etc.) or non-commodity capital flows (e.g. South Korea, China, Singapore, etc.). More recently we observe many newly established or announced funds to be “demand-driven”, motivated by domestic development objectives (including infrastructure development). This transition from supply-driven to demand-driven SWF creation is most starkly manifested in SWF capitalization. This paper outlines recent developments on SWF creation – especially by countries that are neither endowed with oil wealth nor possess sizeable export surpluses to create SWFs with a development mandate. While contextualizing this study in the broader SWF literature, the aim is to provide a comprehensive overview on how funding sources impact achieving long-term financial and socio-economic development objectives.
Keywords: Sovereign wealth, private equity, direct investment, co-investment
JEL Classification: E60, E61
Suggested Citation: Suggested Citation