Wednesday, October 24, 2007
Sovereign Wealth Funds
Last week Russian Finance Minister Kudrin was asked about Russian plans for its sovereign wealth funds.
It's clear that there is unease about the prospect of large investments being made in the U.S. and European economies by funds that would be controlled by the state--would the Kremlin be a passive investor, seeking mainly to receive returns, or would it want to utilize its financial clout for political purposes?
Kudrin told the Wall Street Journal reporter at the lunch that new rules and codes of conduct were necessary, mostly to reassure the public in the US and Europe. "The US administration is saying that it will restrict the movement of capital [and investment] if they're not happy with the rules," he said.
But later he also made it clear, "Sovereign wealth funds should be subject to the general rules of the free movement of capital"--meaning that Russia would not accept any sort of two-tiered system which would disadvantage Russian investment.
It's clear we need to start thinking about what we mean when we say an investor has a right to a return--and whether that is measured only in terms of dividends but also in terms of influence and control over a company.
It's clear that there is unease about the prospect of large investments being made in the U.S. and European economies by funds that would be controlled by the state--would the Kremlin be a passive investor, seeking mainly to receive returns, or would it want to utilize its financial clout for political purposes?
Kudrin told the Wall Street Journal reporter at the lunch that new rules and codes of conduct were necessary, mostly to reassure the public in the US and Europe. "The US administration is saying that it will restrict the movement of capital [and investment] if they're not happy with the rules," he said.
But later he also made it clear, "Sovereign wealth funds should be subject to the general rules of the free movement of capital"--meaning that Russia would not accept any sort of two-tiered system which would disadvantage Russian investment.
It's clear we need to start thinking about what we mean when we say an investor has a right to a return--and whether that is measured only in terms of dividends but also in terms of influence and control over a company.
Comments:
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As Dani Rodrik has noted on his blog, the Chinese and Russians are already heavily invested in short-term government securities markets. If their interest is in gaining a strategic financial foothold in order to perpetrate mischeif, well, they already have that.
The fuss over sovereign wealth funds points to a more interesting phenomenon. Namely, how do we treat nations when they start acting like firms.
The fuss over sovereign wealth funds points to a more interesting phenomenon. Namely, how do we treat nations when they start acting like firms.
# posted by 
: 11:26 AM
: 11:26 AM
That's a great question, matthew, and perhaps National Interest should do an issue on that subject. WHen does national interest become corporate interest.
# posted by : 12:38 PM
: 12:38 PM
You misunderstand me, Anonymous. I wasn't speaking to the conflation of national and coroporate interests. I am not a conspiricist. Rather, I was musing on the possibility that national interest, while already inclusive of economic interests, can or should be expanded to include traditionally firm-related motives such as profit maximization. If it can be, it opens the door to international regulatory regimes that some would bristle at.
I suspect that some nations view sovereign wealth funds as vehicles for expressing national interest. Others, however, are just looking for a return. Should we encourage one form of behavior at the expense of the other?
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I suspect that some nations view sovereign wealth funds as vehicles for expressing national interest. Others, however, are just looking for a return. Should we encourage one form of behavior at the expense of the other?
# posted by : 1:42 PM
: 1:42 PM << Home
