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Creating a sovereign wealth fund in a corruption-riddled country: Energizing transparency and sound governance with direct benefit-sharing

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  • Sanchez, Emerson M.
  • Lamchek, Jayson S.

Abstract

Empirical studies suggest two opposing outcomes of natural resource wealth, namely, resource curse and resource blessing. While the former refers to the ill effects of wealth on resource-rich countries, the latter suggests positive outcomes. Resource blessing findings suggest that a sovereign wealth fund (SWF) is an appropriate tool to conserve and distribute revenues from resource-rich countries to benefit citizens. However, scholarship on SWFs also shows that political elites can corrupt the management of SWF so that SWF primarily benefits them and bolsters their authoritarian rule. Can an SWF escape elite capture in corruption-ridden countries with weak legal institutions? How should an SWF be designed in such countries so that it is more likely to have a positive impact for citizens? Exploring these questions using the Philippines as a case study, we underline that proponents of the establishment of an SWF in the Philippines should focus on ensuring effective constraints on executives. In this regard, we argue that transparency and sound governance principles should be supplemented with provision of direct benefit to citizens to incentivize and mobilize citizen participation in the governance of an SWF. Nevertheless, even an optimally designed SWF may not work if there are insufficient pre-existing constraints.

Suggested Citation

  • Sanchez, Emerson M. & Lamchek, Jayson S., 2023. "Creating a sovereign wealth fund in a corruption-riddled country: Energizing transparency and sound governance with direct benefit-sharing," Resources Policy, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:jrpoli:v:81:y:2023:i:c:s0301420722006870
    DOI: 10.1016/j.resourpol.2022.103244
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