1. Sovereign Wealth Funds:
Evolution, Composition and Consequences for
Workers in the European Union
Restructuring Forum: The Impact of Financial Investors on Enterprises
European Commission Employment, Social Affairs & Equal
Opportunities
July 5-6, 2010, Brussels
Dr. Daniel Díaz-Fuentes & Dr. Judith Clifton
University of Cantabria
diazd@unican.es

2. Research background
Privatization in the EU
Kluwer 2003
Public enterprise Multinationals
Palgrave Macmilllan, 2007
FDI in EU Strategic Sectors
Palgrave Macmillan, 2010
Impact of Southern Multinationals on EU
Research Network Project 2010-2014
Public Sector of the Future
FP7 Project, 2010.. 2015

3. ISCH Action IS0905
The Emergence of Southern Multinationals and their Impact on Europe
Traditionally Foreign Direct Investment (FDI) has flowed from advanced
developed economies into developed and developing countries. More
recently a new trend has emerged in the pattern of FDI. Outward bound
FDI from emerging economies has begun to increase significantly and has
been growing at a faster pace than FDI from the advanced developed
world. The Action seeks to develop and sustain an international research
network to study the impact of this new phenomenon for Europe and its
stakeholders. The goal of the network is to implement a research agenda
that will be of value to all stakeholders and policy makers in Europe as they
grapple with this facet of globalisation.
http://www.cost.esf.org/domains_actions/isch/Actions/IS0905-The-Emergence-of-Southern-Multinationals-and-
their-Impact-on-Europe

4. Presentation
1) SWF: Why the controversy?
2) Background and significance
3) Definition, classification
3a) Sources of Wealth
3b) Objectives and Typologies
4) A profile of the world’s major SWF
4a) “Commodity SWF”
4b) “Non-commodity SWF”
5) Recent SWF activity by sector
6) Policy issues
6a) FDI protectionism-reciprocity.
6b) Transparency,

5. 1. SWF Controversy the controversy?
1. SWF: Why
SWF are now receiving significant attention from the media, policy-
makers, trade unions and scholars – but much remains unknown
On the positive side, SWF are welcomed especially when:
1). They are seen to “stabilise” financial markets – particularly
between 2007-8 during the financial crisis – though SWF to the
financial sector stabilised from 2008 to the present
2). They are perceived as being “patient capital” with long-term
objectives, good for employment prospects and growth (EC 2010)
On the negative side, there is concern when:
1). Investment targets “strategic” sectors (finance, infrastructure,
energy) as FDI in general
2). The financial entity, its operations and intentions are perceived as
not transparent and are owned by non-democratic governments
3). It is feared efficiency gains by privatization will be reversed, or
that non-economic objectives are being pursued by SWF
managers

6. 2. Background and Significance
Around since the 1950s but have grown dramatically since
late 1990s
Today, 35 countries have at least one SWF
There are around fifty SWF
Highly concentrated: 16 SWF from 8-10 countries make up
nearly 87-90% of total SWF
Largest SWF from: China, United Arab Emirates, Norway.
Saudi Arabia, Singapore, Kuwait, Russia, Qatar, Libya
and Algeria (in that order)

7. 3. Definition and Classification
“…special investment funds created or owned by governments to
hold foreign assets for long-term Purposes” (IMF, 2007)
“Government created (state-owned) special investment funds to
hold foreign assets for long term purposes..
There is no universally agreed-upon definition of such funds, but
their original objective was wealth preservation” (UNCTAD, 2008)
• SWF tend to be classified according to at least two
criteria:
(a) the sources of sovereign wealth
(b) their objectives

8. 3.A. Wealth sources: Hume v. Mercantilism
IMF (2007) emphasises “fiscal surplus”
“Some funds are byproducts of fiscal budget surpluses accumulated
due to a combination of revenues from exports and spending
restraint. Fiscal surpluses and public savings generated
domestically, such as privatization receipts, can also be sources for
SWFs”
UNCTAD (2008) and the Bank of Finland (Rautava 2008)
foreground “trade surpluses”
“SWFs are government investment vehicles that are funded by the
accumulation of foreign exchange assets and managed separately
from the official reserves of the monetary authorities”.

9. 3.b. Objectives and Typologies of SWF
Main categories (IMF 2007)
Stabilization
Funds
Contingent
Reserve
pension
Investment
Reserve
Co
Funds
SWF
Saving Funds Development
for future Industrial
generations Funds

10. 4. Profile of the world’s major SWF
SWF can roughly be divided into two main categories:
1). “Commodity” SWF, most of which are “oil surplus”
SWF. 55% total value of SWF assets based in oil
exporting countries (Gulf Cooperation Council 36%,
Norway 12.4%, Russia 3.8%, Libya 1.8% and Algeria
1.2%)
2). “Non-commodity” SWF, mostly Asian exporting SWF.
35% total value of SWF assets based on export surplus
(China 20.7%, China-Hong Kong 3.7% and Singapore
9.6%)

11. 4.a. Commodity SWF
Commodity SWF
– Profile: 26 SWF oil, 4 other commodities
– Highly concentrated: over 90% of commodity SWF in 8 oil exporting
countries: UAE (28.8%), Saudi Arabia (18.7%), Norway (20.3%), Kuwait
(8.7), Russia (6%), Libya (3%), Qatar (2.8%) and Algeria (2%)
• Strategy of Gulf Cooperation Council Countries: until 1990s risk-averse,
investing in US bonds (stabilization).
• From late 1990s, diversification of investment, more risk assumed
(stocks and real estate)
• With the oil boom, more pro-active through industrial partnerships
• 2007-8 investment in banks in distress but this has since levelled off

12. A Profile of the World's Major "Commodity SWF" 2009
Total
Country FX: Foreign Linaburg-
SWF
SWF Exchange SWF Maduell
Assets
Assets Reserves to FX Trans-
(USD
(USD (USD ratio parency
Billion)
Country Sovereign Wealth Fund Year Billion) Billion) Index
UAE 675.1 29.6 22.8
Abu Dhabi Abu Dhabi Investment Authority 1976 627.0 3
Abu Dhabi International Petroleum Investment Company 1984 14.0 ..
Abu Dhabi Mubadala Development Company 2002 13.3 10
Dubai Investment Corporation of Dubai 2006 19.6 4
Ras Al Khaimah RAK Investment Authority 2005 1.2 3
Norway Government Pension Fund – Global 1990 474.0 474.0 45.1 10.5 10
Saudi Arabia 437.3 395.5 1.1
SAMA Foreign Holdings 1950* 432.0 2
Public Investment Fund 2008 5.3 3
Kuwait Kuwait Investment Authority 1953 202.8 202.8 19.6 10.3 6
Russia National Welfare Fund 2008 142.5 142.5 435.4 0.3 5
Libya Libyan Investment Authority 2006 70.0 70.0 65.5 1.1 2
Qatar Qatar Investment Authority 2005 65.0 65.0 8.4 7.8 5
Algeria Revenue Regulation Fund 2000 47.0 47.0 126.9 0.4 1

13. 4.a. Evolutions Commodity SWF
• First established in the 1950s in Kuwait and in 1970s in
the Middle East region
• Also in developed economies: US (Wyoming 1974,
Alaska 1976), Canada (Alberta, 1976) and Norway
(1990).
• Followed by three ex-Soviet republics Azerbaijan (1999),
Kazakhstan (2000), and Russia (2004) and less-
developed countries: Venezuela (1998); Iran (1999);
Trinidad and Tobago (2000), Nigeria (2004), East Timor
(2005), Mauritania (2006) and Libya (2006)

14. A Profile of other "Commodity SWF" 2009
Total
Country FX: Foreign Linaburg-
SWF
SWF Exchange SWF Maduell
Assets
Assets Reserves to FX Trans-
(USD
(USD (USD ratio parency
Billion)
Country Sovereign Wealth Fund Year Billion) Billion) Index
United States 39.1 69.7 0.6
Alaska Alaska Permanent Fund 1976 35.5 10
Wyoming Permanent Wyoming Mineral Trust Fund 1974 3.6 9
Kazakhstan Kazakhstan National Fund 2000 38.0 38.0 19.3 2.0 6
Brunei Brunei Investment Agency 1983 30.0 30.0 0.7 45.0 1
Iran Oil Stabilisation Fund 1999 23.0 23.0 70.0 0.3 1
Chile Social and Economic Stabilization Fund 1985 21.8 21.8 22.2 1.0 10
Azerbaijan State Oil Fund 1999 14.9 14.9 4.0 3.7 10
Bahrain Mumtalakat Holding Company 2006 14.0 14.0 3.5 4.0 8
Canada Alberta's Heritage Fund 1976 13.8 13.8 43.1 0.3 9
Nigeria Excess Crude Account 2004 9.4 9.4 59.7 0.2 1
Oman State General Reserve Fund 1980 8.2 8.2 7.0 1.2 1
Botswana Pula Fund 1996 6.9 6.9 10.0 0.7 1
East Timor Timor-Leste Petroleum Fund 2005 5.0 5.0 .. .. 6
Trinidad & Tobago Heritage and Stabilization Fund 2000 2.9 2.9 7.3 0.4 5
Venezuela FEM 1998 0.8 0.8 32.7 0.0 1
Kiribati Revenue Equalization Reserve Fund 1956 0.4 0.4 0.0 12.9 1
Mauritania National Fund for Hydrocarbon Reserves 2006 0.3 0.3 1.4 0.2 1
2342.2 1476.5 1.6 4.7

15. 4.b. Non-Commodity SWF
• Funds built on asset transfers from ballooning foreign
reserves (mostly in Asia)
• Temasek Holdings of Singapore, established in 1974,
became a model of “reserve investment holding” for
other Asian countries
• Asian SWF invest in Multinationals abroad that transfer
technology back home

16. A Profile of the World's Major "Non-Commodity SWF" 2009
Total Linaburg-
SWF FX: Foreign
Country SWF to Maduell
Assets Exchange
SWF FX Trans-
(USD Reserves
Assets ratio parency
Billion) (USD Billion)
(USD Index
Country Sovereign Wealth Fund Year Billion)
China 796.0 2131.6 0.37
SAFE Investment Company 1997 347.1 2
China Investment Corporation 2007 288.8 7
National Social Security Fund 2000 146.5 5
China-Hong Kong Hong Kong Monetary Authority Investment Portfolio 1993 139.7 139.7 160.7 0.87 8
Singapore 369.5 168.8 2.19
Government of Singapore Investment Corporation 1981 247.5 6
Temasek Holdings 1974 122.0 10
Australia Australian Future Fund 2006 59.1 59.1 33.4 1.77 9
Ireland National Pensions Reserve Fund 2001 30.6 30.6 0.8 36.34 10
France Strategic Investment Fund 2008 28.0 28.0 113.1 0.25 ..
South Korea Korea Investment Corporation 2005 27.0 27.0 264.3 0.10 9
Malaysia Khazanah Nasional 1993 25.0 25.0 122.0 0.20 4
4 Asian 1357.2 2847.4 0.48 6.4
Total 1500.0 2994.7 0.50 7

17. 5. Recent SWF activity by sector
Singapore SWF Activity 2005 to 2008
Value
(USD % of
SWF Target Company billion) Firm Industry
GIC
UBS 9.8 8.6 Finance 2007-08
Citigroup 6.9 4.4 Finance 2007-08
Merrill Lynch Financial Centre 1.0 100 Finance 2007-08
Myer Melbourne 1.0 100 Retail - stores 2007-08
Chapterhouse Holdings Ltd 1.0 100 Non res. building 2007
Capital Shopping Centres 0.8 40 Non res. building 2007
Hawks Town 0.8 100 Retail - stores 2007-08
WestQuay Shopping Centre 0.6 50 Non res. building 2007-08
Westfield Parramatta 0.6 50 Non res. building 2007
Bluewater Shopping Centre 0.6 18 Non res. building 2005
British Land 0.3 3 Non res. building 2007-08
Kungshuset 0.2 100 Non res. building 2007-08
Roma Est Shopping Centre 0.1 50 Non res. building 2007-08
Temasek
Merril Lynch 5.0 11.3 Finance 2007-08
China Eastern Air 2.8 8.3 Transport 2007-08
Barclays 2.0 1.8 Finance 2007-08
Standard Chartered 2.0 5.4 Finance 2007-08
Tokyo Westin 0.7 100 Hotel 2007-08
9You Online Games 0.1 9.4 Electronic 2007-08

18. China SWF activity 2005 to 2008
Value
(USD % of
SWF Target Company billion) Firm Industry
SAFE
Total 2.8 1.6 Oil 2007-08
BP 2 1 Oil 2007-08
Australia and New Zealand Bankin 0.2 0.3 Finance 2007-08
National Australia Bank 0.2 0.3 Finance 2007-08
Commonwealth Bank of Australia 0.2 0.3 Finance 2007-08
China Investment Co Morgan Stanley 5 9.9 Finance 2007-08
China Citic Securities Bear Stems 1 6 Finance 2007-08
China Development Bank Barclays 3 3.1 Finance 2007-08
China Investment Co Blackstone 3 10 Finance 2007-08
Korea SWF activity 2005 to 2008
Value
(USD % of
SWF Target Company billion) Firm Industry
KIC Merril Lynch 2.0 4.3 Finance 2007-08

19. 5. Recent SWF activity by sector
UAE SWF Activity 2005 to 2008
Value % of
(USD Firm
Acquiring UAE SWF Acquired company billion) Value Industry
Abu Dhabi Investment Council Citigroup 6.9 4.9 Finance
Investment Corporation of Dubai MGM Mirage 5.1 9.5 Amusement-Hotel
Investment Corporation of Dubai London Stock Exchange 3.0 28 Finance
International Petroleum Inv. Co Kuokwang Petrochemical 2.4 20 Industrial chemicals,
Investment Corporation of Dubai Tunisie-Telecoms 2.3 35 Telecom
Abu Dhabi Investment Authority Borealis A/S 1.7 50 Industrial Plastic
Dubai International Capital LLC Tussauds Group Ltd 1.5 100 Amusement
Abu Dhabi Investment Council Carlyle Group 1.4 7.5 Finance
Investment Corporation of Dubai Och-Ziff Capital Management 1.3 9.9 Finance
Dubai International Capital LLC Travelodge Hotels Ltd 1.3 100 Hotels
Dubai International Capital LLC Doncasters PLC 1.2 100 Aircraft
Dubai Ports International CSX World Terminals LLC 1.2 100 Transport Marine
Istithmar PJSC 280 Park Ave,New York 1.2 100 Non res. building
Investment Corporation of Dubai Mauser Group 1.2 100 Foam
Investment Corporation of Dubai Alliance Medical 1.2 100 Health
Borse Dubai Nasdaq 1.0 19.9 Finance
Investment Corporation of Dubai Almatis 1.0 100 Alumina
Investment Corporation of Dubai Standard Chartered 1.0 2.7 Finance
Investment Corporation of Dubai Barney's New York 0.9 100 Retail - Clothes
Investment Corporation of Dubai EADS 0.8 3.1 Aircraft
Investment Corporation of Dubai ICICI Bank Ltd 0.8 2.9 Finance
Dubai Financial LLC Bank Muscat Oman Banks 0.6 15 Finance
Mubadala Development Co. Advanced Micro Devices 0.6 8 Electronic
Istithmar PJSC Adelphi 0.6 100 Non res. building
Investment Corporation of Dubai Sony 0.5 1 Electronic
Investment Corporation of Dubai Metropole Hotel 0.3 100 Hotel
41.0

20. Other GCC SWF Activity 2005 to 2008
Value % of
(USD Firm
Acquiring GCC SWF Acquired company billion) Value Industry
Saudi Arabia SWF Mediaset SpA(Fininvest) 1.1 18 Broadcasting 1995 1995
KIA (Kuwait) Merril Lynch 3.4 7 Finance 2007-08
Qatar Investment Authority Sainsbury 3.7 25 Retail 2007-08
Qatar Investment Authority London Stock Exchange 2.0 20 Finance 2007-08
Qatar Investment Authority OMX 0.5 10 Finance 2007-08

21. 6. Policy issues
Policy issues
• Return of the State in business – political or economic motivation?
prejudice against state-owned or public enterprise?
• Rise of FDI protectionism?
- US Committee on Foreign Investment in the US – CFIUS) Dubai & China
- EU reciprocity or “Gazprom” clause
• Regulatory issues: transparency ie Santiago principles (voluntary),
reciprocity, tighter regulation required?
• SWF not the only instrument: states also use FDI as an investment vehicle

22. 6. FDI Protectionism and Reciprocity
Openness” to FDI and, in particular, Fixed Telephony, Electricity and General
(OECD 2007)

24. 6. Transparency
Groups of SWF by Linaburg-Maduell Transparency Index
Number of Number Assets % on
Country - SWF SWF in the of SWF (Billion total
group by score USD) Assets
8=10,
High 8-10 Norway, Singapore-Tamasek, United States, Ireland, Chile, 15 5=9, 993.6 26.2
Azerbaijan, UAE-Abu Dhabi Mubadala DC, New Zealand, 2=8
Australia, Canada, South Korea, Bahrain, China-Hong Kong
China Investment Corporation, Singapore-GIC, Kuwait, 5=6,
Medium 5-6 Kazakhstan, East Timor, China-NSSF, Russia, Qatar, Trinidad & 9 1139 30.0
4=5
Tobago
4=4,
UAE-Abu Dhabi, Algeria, Brunei, Iran, Nigeria, Oman, 2=3,
Low 1-4 19 1658.7 43.8
Botswana, Venezuela, Kribti, China-SAFE, Libya, Saudi Arabia, 3=2,
Malaysia, China ADB 10=1

25. 6. Policy issues - conclusion
• Effects on employment – systemic and specific (case by
case). Financial and Shopping centres (rent-seekers)
• SWF as FDI (ownership vs control)
• SWF diversity: source of wealth, home country, strategy
pursued. Reciprocity (BRIC – Asia - GCC).
• Two case studies in EC (2010) did not reveal major
negative consequences for employment, indeed, SWF
often welcomed when perceived as “patient” capital

26. References
BECK, R. & FIDORA, M. 2008 The Impact Of Sovereign Wealth Funds On Global Financial
Markets, No 91, European Central Bank, Frankfurt.
DEUTSCHE BANK RESEARCH (2007). SWF state investment on the rise, September 10
ECB. 2006. The Accumulation of Reserves. Occasional Paper Series No. 43, European Central
Bank, Frankfurt.
EESC’s Consultative Commission on Industrial Change (CCMI) on the impact of private equity,
hedge and sovereign wealth funds on industrial change in Europe
EL-ERIAN, M (2010) Sovereign Wealth Funds in the New Normal, Finance and Development.
IMF (2007): Global Financial Stability Report, October, Annex 1.2 SWF This annex was prepared
by a Monetary and Capital Markets Department staff team led by Udaibir S. Das, with inputs
from the Fiscal Affairs and Statistics Departments
http://www.imf.org/external/pubs/ft/survey/so/2008/pol03408a.htm
OECD (2008): OECD Declaration On Sovereign Wealth Funds And Recipient Country Policies.
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RAUTAVA, Jouko (2008): Sovereign wealth funds arouse political passions, Bank of Finland •
Institute for Economies in Transition, BOFIT 2/2008 • 14.04.2008
SAUVANT, K. 2006. “A Backlash Against Foreign Direct Investment?” In World Investment
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TRUMAN, E. 2007. Sovereign Wealth Funds: The Need for Greater Transparency and
Accountability. Policy Brief No. 07-6, Peterson Institute for International Economics,
Washington, DC.
UNCTAD (2007-2008): World Investment Report 2007..2009, Various Years..United Nations
Conference on Trade and Development, New York and Geneva.
VOSS, Eckhard; VITOLS, Sig, WILKE, Peter & HAVES, Jakob (2009): Data collection study on the
impact of private equity, hedge and sovereign funds on industrial change in Europe Final Report
for the European Economic and Social Committee Consultative Commission on Industrial
Change Project Ref. CCMI/CFT 2/2008, Hamburg, June – Wilke Maack Und Partner, Tel : +49
40 43 27 87 43 – Fax : ++49 40 43 27 87 44 www wilke-maack de