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The wealth of nations: SWFs and their impact on economic growth

June 03, 3:06 UTC+3
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KEY CONCLUSIONS:

  • SWF efforts should be focused on international cooperation

“54 SWFs existing today in the world represent USD 7.3 trillion of capital, which is the same amount of capital as the three top pension funds. If these funds cooperate <...> that can help to reconnect this multipolar world <...> and for Europe, build an open society, open trade, open free flow of capital,” said Laurent Vigier, Chairman, Chief Executive Officer,  CDC International Capital.

“One of the best hedges <...> is having great partners <...> that have been there for years and years <...> We always look at whether the rules of the game change – and there have been many periods in history whether it is in the US, whether it is in China, whether it is in Russia, where the rules are in flux, but that does not necessarily mean that you ultimately close the tab. All you do is decide, you qualify that risk and then, you decide what risk-adjusted return is acceptable to you <...> And if you are able to find projects that satisfy that together with good partners <...> in many ways, that characterises the way we look at the US and frankly, everywhere else,” said Waleed Al Mokarrab Al Muhairi, Deputy Group Chief Executive Officer, Chief Executive Officer, Alternative Investments and Infrastructure, Mubadala Investment Company.

“... It calls for that sort of partnership. For the better world, it calls that people shall work in partnerships across nations, across countries,” said Mahmood H. Alkooheji, Chief Executive Officer, Bahrain Mumtalakat Holding Company.

“It think this is the general policy of co-investment: having investors from China, the Middle East, all at the same project makes the project more stable, makes the project more secure <...> We understand that the world is becoming less predictable <...> but if we have good partners, and if the underline economics of the project is good, it will probably be successful,” said Kirill Dmitriev, Chief Executive Officer, Russian Direct Investment Fund (RDIF).

  • SWFs are seen as an important development factor for national economies

“SWFs could be a good stable player in the market principle. This is <...> a collaboration between the state player and the market player, the same standards, the same practices, which are market makers,” said Tadashi Maeda, Chief Executive Officer, Executive Managing Director, Japan Bank for International Cooperation (JBIC).

  • SWFs alter their investment strategies

“I do not believe we need to invest in equities. I think we need to make real investments to reach people. That would create jobs and opportunities,” said Mahmood H. Alkooheji.

“We are now shifting not only to exports, and we are going to deploy investment. We encourage the transfer of technologies,” said Tadashi Maeda.

“Mubadala was created for a very specific purpose, i.e. to diversify the economy of Abu Dhabi by establishing partnerships and creating businesses on the ground that would help do that. <...> We have healthcare businesses, oil and gas businesses that exist outside of the UAE. <...> When we deploy capital, <...> it is about furthering partnership whether it is in the North America, Asia, here in Russia or other places,” said Waleed Al Mokarrab Al Muhairi.

“We are looking at French SMEs who want to go global, because we think there is potential in innovation, in smart cities in French SMEs. They have the same type of potential as the German Mittelstand, but they are lagging behind in terms of going global. <...> We can help them going global and unlock their potential for growth,” said Laurent Vigier.

CHALLENGES:

  • Lack of SWF transparency sets back cooperation

“... Many years ago, there was a lot of criticism of SWFs. The cause of that was the lack of transparency. I believe that we have to be very transparent,” said Mahmood H. Alkooheji.

SOLUTION:

  • Auditing SFWs and public reporting

“We need to be audited, we need to publish our accounts, we need to publish [financial] statements. Everybody needs to know what we are doing. It is building trust across nations and within a nation,” said Mahmood H. Alkooheji.

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