Developing Asia's Sovereign Wealth Funds and Outward Foreign Direct Investment
Park, Donghyun; Estrada, Gemma B. | August 2009
Abstract
Sovereign wealth funds (SWFs) have emerged in developing Asia as a policy response to an unprecedented accumulation of foreign exchange (FX) reserves since 2000. At the same time, developing countries have become an increasingly important source of outward foreign direct investment (FDI). The central objective of this paper is to evaluate the prospects for SWFs to serve as a major conduit for the region’s outward FDI. In principle, FDI represents an attractive means of earning higher returns on FX reserves than traditional reserve assets. In practice, the limited institutional capacity and the political sensitivity of state-led FDI severely constrains the ability of developing Asia’s SWFs to undertake FDI on a significant scale. Therefore, the potential for developing Asia’s SWFs to become major sources of outward FDI is more apparent than real. This paper also explores the implications of the Santiago Principles and the global financial crisis on outward FDI by SWFs.
Citation
Park, Donghyun; Estrada, Gemma B.. 2009. Developing Asia's Sovereign Wealth Funds and Outward Foreign Direct Investment. © Asian Development Bank. http://hdl.handle.net/11540/1821. License: CC BY 3.0 IGO.ISSN
1655-5252
Keywords
Financial Stability
Financial Management System
Financial Restructuring
Capital Market Development
Erosion
Market Development
Economics
Erosion
International Economics
International Financial Market
Multilateral Financial Institutions
Economic Recession
Market
Crisis
Business recessions
Multilateral development banks
Regulatory reform
Capital
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Citable URI
http://hdl.handle.net/11540/1821Metadata
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