We continue and conclude today on what is known as Sovereign Wealth Funds, essentially special purpose state-owned investment funds to achieve financial objectives using investment strategies, tools and instruments. We noted last week that there is no single model of SWF’s and that each is determined by the objectives which the relevant government seeks to achieve. As would be obvious from last week’s column I find the Singapore model particularly attractive and one which Guyana will do well to consider as a model, modified of course by Guyana’s national objectives and its state of development.
A reason for my preference for Singapore’s two SWF’s is that they had their origin in an era when that country’s economy was not significantly dissimilar to that of Guyana. Importantly too, while Singapore is somewhere about No. 40 in the world measured by size of the economy, and it is clearly not blessed with natural resources, it ranks way above many of the world’s richest countries that have chosen to invest in sovereign wealth funds. In fact, when its two funds are added together, it has the third largest SWF in the world.
Unlike most of the countries with SWF’s, Singapore, recognising the open nature of that country’s economy subject to the vagaries of international trade, began its fund as an instrument of savings to provide a cushion for a rainy day, should the economy fall into a period of prolonged difficulties. Interestingly enough, while most former colonies complain about the social, infrastructural and economic deficit of colonial rule, Singapore saw the very small sum of foreign reserves at Independence as an inheritance from British colonial rule…..