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

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  • Patrick J. Schena
  • Juergen Braunstein
  • Asim Ali

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.

Suggested Citation

  • Patrick J. Schena & Juergen Braunstein & Asim Ali, 2018. "The Case for Economic Development Through Sovereign Investment: A Paradox of Scarcity?," Global Policy, London School of Economics and Political Science, vol. 9(3), pages 365-376, September.
    • Handle: RePEc:bla:glopol:v:9:y:2018:i:3:p:365-376
    DOI: 10.1111/1758-5899.12549
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    Cited by:

    1. Elvira Mami, 2023. "The role of sovereign wealth funds in natural resource-rich countries: A systematic meta-narrative review," Journal of International Business Policy, Palgrave Macmillan, vol. 6(3), pages 356-371, September.
    2. Narjess Boubakri & Veljko Fotak & Omrane Guedhami & Yukihiro Yasuda, 2023. "The heterogeneous and evolving roles of sovereign wealth funds: Issues, challenges, and research agenda," Journal of International Business Policy, Palgrave Macmillan, vol. 6(3), pages 241-252, September.

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