Op-ed: Focus on Gazprom, Not Sovereign Wealth Funds - by Anders Aslund
Until recently, the world of finance appeared to move toward transparent, publicly traded private corporations, but recently an opposite trend is apparent. Nontransparent forms of investment, such as hedge funds, private equity funds, and sovereign wealth funds, are surging. Meanwhile, the global trend toward privatization has been somewhat impeded. Central banks have accumulated large international currency reserves, and they have prompted the creation of new sovereign wealth funds. A couple of countries, such as Venezuela and Russia, are even experiencing outright renationalization.
The natural conclusion in countries with large international reserves is to transfer some reserves to a national wealth fund—either a stabilization fund designed to safeguard against oil price fluctuations, as in Russia, or a fund for pensions or future generations, as in Norway, Singapore, and Kuwait. These funds are built up by state savings through budget surpluses. Russia’s stabilization fund is easy to defend as a cushion for great fluctuations of the prices of oil and gas, which comprise 63 percent of the country’s exports. A pension fund, like the one in Norway, also makes sense, as long as the state takes the main responsibility for pensions. The current Western concern is that sovereign wealth funds from oil-producing countries and China will buy up large swathes of Western economies. A similar worry arose with Arab investments in the late 1970s and with Japanese real estate investments in the late 1980s. But inexperienced foreign investors tended to lose money and they had amazingly little impact.Western policy should focus on the transparency and deregulation of state-dominated monopolies such as Gazprom and its counterparts in the West, rather than concentrating on the comparatively benign wealth funds.
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