Hostname: page-component-76fb5796d-22dnz Total loading time: 0 Render date: 2024-04-27T00:57:09.551Z Has data issue: false hasContentIssue false
  • English
  • Français

The Politics of Ambiguity in Asia's Sovereign Wealth Funds

Published online by Cambridge University Press:  20 January 2017

Saadia M. Pekkanen  and
Kellee S. Tsai
Saadia M. Pekkanen
Affiliation:
University of Washington
Kellee S. Tsai
Affiliation:
Johns Hopkins University
Get access Rights & Permissions [Opens in a new window]

Abstract

Investments by Asian Sovereign Wealth Funds (SWFs) continue to be of concern in the global economy. A common perception is that they are managed by state-affiliated entities with geostrategic motives that could somehow prove detrimental to host countries. This paper demonstrates, however, that even the definition, let alone the establishment and investment targets, of Asian SWFs are embroiled in ambiguity within home country politics. Plainly put, ambiguity refers to the absence of clear-cut policy processes, means, and goals. How do we explain the ambiguity surrounding SWFs? Ambiguity is not a cover for deliberate, cohesive, and strategic actions, because SWFs are not under the control of any one set of actors. Rather, perhaps to the discomfort even of home country sovereigns, ambiguity is a messy domestic product of contending political forces that do not allow a marked trend toward any one single policy equilibrium on sovereign investments, whether domestic or foreign. While this reality is perhaps understandable in a democratic polity, it is also equally true of authoritarian ones in the region. In both types of cases, ambiguity is constructed inadvertently by the interactions of state, interstate, and intrastate actors, each with their own interests and expectations about the role of SWFs. Analyzing the cases in Singapore, China, Japan, and other Asian countries, from this unifying perspective suggests that while ambiguity may fuel external anxiety concerning home country intentions, it actually reflects far more domestically salient controversies about SWF activities than is typically appreciated.

Keywords

sovereign wealth fundsAsiaChinaSingaporeJapanambiguity
Type
Research Article
Information
Business and Politics , Volume 13 , Issue 2 , August 2011 , pp. 1 - 44
Copyright
Copyright © V.K. Aggarwal 2011 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aidt, Toke S. and Gassebner, Martin. 2010. “Do Autocratic States Trade Less?” World Bank Economic Review. Available from: <http://wber.oxfordjournals.org/cgi/reprint/lhp022v1>.Google Scholar
Avendano, Rolando and Santiso, Javier. 2009. “Are Sovereign Wealth Funds’ Inestments Politically Biased? A Comparison with Mutual Funds.” OECD Development Centre Working Paper. no. 293. (December).Google Scholar
Azuma, Yasushi. 2007. “Japan Mulls More Aggressive Approach to Forex Investment.” The Japan Times (29 December).Google Scholar
Back, Aaron and Gao, Eliot. “CIC Chairman: Support Greater Sovereign Wealth Fund Transparency, With Caveats.” Wall Street Journal (11 May). Available from: <http://online.wsj.com/article/article/SB10001424052702304584404576441993113237056.html>. Last accessed 15 July 2011..+Last+accessed+15+July+2011.>Google Scholar
Backer, Larry Cata. 2009. “Sovereign Investing in Times of Crisis: Global Regulation of Sovereign Wealth Funds, State Owned Enterprises and the Chinese Experience.” Journal of Transnational Law & Contemporary Problems 19: 101–162.Google Scholar
Bates, Robert H. 1997. Open-Economy Politics: the Political Economy of the World Coffee Trade. Princeton: Princeton University Press.Google Scholar
Bernhard, William and Leblang, David. 1999. “Democratic Institutions and Exchange-rate Commitments.” International Organization 53 (1): 71–97.Google Scholar
Bernstein, Shai, Lerner, Josh, and Schoar, Antoinette. 2009. “The Investment Strategies of Sovereign Wealth Funds.” Harvard Business School Working Paper. no. 09-112. 17 April. Available from <http://www.hbs.edu/research/pdf/09-112.pdf>.Google Scholar
Berthelsen, John. 2008. “Asia Ponders Its Astounding Foreign Exchange Reserves.” Asia Sentinel, 14 January 2008. Available from: <www.asiasentinel.com> (accessed 1 September 2010).Google Scholar
Best, Jacqueline. 2005. The Limits of Transparency: Ambiguity and the History of International Finance. Ithaca: Cornell University Press.Google Scholar
Blanchard, Jean-Marc F. 2011. “China's Grand Strategy and Money Muscle: The Potentialities and Pratfalls of China's Sovereign Wealth Fund and Renminbi Policies.” The Chinese Journal of International Politics 4: 31–53.Google Scholar
Blyth, Mark. 2002. Great Transformations: The Rise and Decline of Embedded Liberalism. Cambridge: Cambridge University Press.Google Scholar
Bortolotti, Bernardo, Fotak, Veljko, Megginson, William, and Miracky, William. 2009. “Sovereign Wealth Fund Investment Patterns and Performance.” unpublished manuscript, The University of Oklahoma:1-48.Google Scholar
Broz, Lawrence J. 1998. “The Origins of Central Banking: Solutions to the Free-Rider Problem.” International Organization 56 (4): 861–887.Google Scholar
Burton, John. 2005. “Khazanah Chief Defends His Record at Driving Change.” Financial Times (3 June).Google Scholar
Burton, John. 2009a. “Malaysia Acts to Entice Investors.” Financial Times (5 July).Google Scholar
Burton, John. 2009b. “Malaysian State Plans Bond Sale to Finance SWF.” Financial Times (18 May).Google Scholar
CEFP. 2008. “Toward Reform of Public Pension Fund Management – Capitalizing on Global Economic Growth to Enhance People's Affluence (Summary).” The Second Report of the Expert Committee on Reforms Addressing Globalization (May). Available from <www5.cao.go.jp> (accessed 1 September 2010).+(accessed+1+September+2010).>Google Scholar
Chase, Kerry A. 2003. “Economic Interests and Regional Trading Arrangement The Case of NAFTA.” International Organization 57 (Winter): 137–174.Google Scholar
Clark, Gordon L. and Monk, Ashby. 2010. “Government of Singapore Investment Corporation (GIC): Insurer of the Last Resort and Bulwark of Nation-State Legitimacy.” The Pacific Review 23 (5): 419–451.Google Scholar
Cognato, Michael H. 2008. “China Investment Corporation: Threat or Opportunity?” NBR Analysis 19 (1) (July). Washington D.C. The National Bureau of Asian Research.Google Scholar
Cohen, Benjamin J. 2009. “Sovereign Wealth Funds and National Security: The Great Tradeoff.” UC Santa Barbara: Global and International Studies. Available from: <http://www.escholarship.org/uc/item/1k04g87d>.Google Scholar
Cowey, Peter F. 1993 “Domestic Institutions and the Credibility of International Commitments: Japan and the United States.” International Organization 47: 299–326.Google Scholar
Dadush, Uri. 2010. “Is a Sovereign Debt Crisis Looming? In Paradigm Lost: The Euro in Crisis (2 February). Available from <www.carnegieendowment.org>. (accessed 1 September 2010).Google Scholar
Dean, Jason. 2011. “China Fund Taps New CIO.” Wall Street Journal (13July).Google Scholar
Dean, Jason and Batson, Andrew. 2007. “Beijing to Take Passive Investment Approach.” Wall Street Journal (Europe). (10 September).Google Scholar
Drezner, Daniel W. 2008. “Sovereign Wealth Funds and the (In)security of Global Finance.” Journal of International Affairs 62 (1): 115–130.Google Scholar
EIU. 2009. “Mountains of Money? Asset Management in Japan.” The Economist, 2009.Google Scholar
Epstein, David and O’Halloran, Sharyn. 1996. “The Partisan Paradox and the U.S. Tariff, 1877-1934.” International Organization 50: 301–324.Google Scholar
Evans, Peter B., Rueschemeyer, Dietrich, and Skocpol, Theda, eds. 1985. Bringing the State Back In. New York: Cambridge University Press Google Scholar
Fordham, Benjamin O. 1988. “Economic Interests, Party, and Ideology in Early Cold War Era U.S. Foreign Policy.” International Organization 52 (2): 359–396.CrossRefGoogle Scholar
Frieden, Jeffry. 1991. Debt, Development, and Democracy: Modern Political Economy and Latin America, 1965-1985. Princeton: Princeton University Press.Google Scholar
Garrett, Geoffrey and Tsebelis, George. 1996. “An Institutionalist Critique of Intergovernmentalism.” International Organization 46 (2): 533–560.Google Scholar
Garten, Jeffrey. 2006. “Why China Should Marshall Its Reserves to Do Good.” Financial Times (March 4).Google Scholar
Garten, Jeffrey. 2007. “We Need Rules for Sovereign Funds.” Financial Times (8 August).Google Scholar
Gelpern, Anna. 2010. “Sovereignty, Accountability, and the Wealth Fund Governance Conundrum.” Asian Journal of International Law. Forthcoming.Google Scholar
Goldstein, Judith, and Martin, Lisa L. 2000. “Legalization, Trade Liberalization, and Domestic Politics: A Cautionary Note.” International Organization 54 (3): 603–32.Google Scholar
Grossman, Gene M. and Helpman, Elhanen. 1994. “Protection for Sale.” American Economic Review 84: 833–850.Google Scholar
Grossman, Gene M. and Helpman, Elhanen. 2002. Interest Groups and Trade Policy. Princeton: Princeton University Press.Google Scholar
Hammer, Cornelia, Kunzel, Peter, and Petrova, Iva. 2008. “Sovereign Wealth Funds: Current Institutional and Operational Practices.” IMF Working Paper 08/254. (November).Google Scholar
Helleiner, Eric. 1994. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.Google Scholar
Hiscox, Michael J. 2001. “Class Versus Industry Cleavages: Inter-Industry Factor Mobility and the Politics of Trade.” International Organization 55 (Winter): 1–46.Google Scholar
IMF (International Monetary Fund). 2008a. “IMF Intensifies Work on Sovereign Wealth Funds” IMF Survey Magazine (4 March). Available from <http://www.imf.org/external/pubs/ft/survey/so/2008/NEW090308B.htm>. (accessed 20 January 2010)..+(accessed+20+January+2010).>Google Scholar
IMF (International Monetary Fund). 2008b. “SWF Principles Will Help Cross-Border Investment - Lipsky.” IMF Survey Magazine (3 September). Available from: <http://www.imf.org/external/pubs/ft/survey/so/2008/NEW090308B.htm> (accessed 20 January 2010).+(accessed+20+January+2010).>Google Scholar
IWG, (International Working Group of Sovereign Wealth Funds). 2008. “Sovereign Wealth Funds: Generally Accepted Principles and Practices - ‘Santiago Principles’.” Available online at <http://www.ifswf.org/> (accessed 20 January 2010).+(accessed+20+January+2010).>Google Scholar
Jen, Stephen and Andreopoulos, Spyros. 2008. “SWFs: Growth Tempered - US$10 trillion by 2015.” Morgan Stanley Global Economic Forum (November 10). Available from: <http://www.morganstanley.com/views/gef/archive/2008/20081110-Mon.html> (accessed July 18, 2011).Google Scholar
GIC (Government of Singapore Investment Corporation). 2009. Report on the Management of the Government's Portfolio for the Year 2008/09. Singapore.Google Scholar
GPIF. n.d.(a). “Investment Results for the First Quarter of Fiscal 2010.” Available from: <www.gpif.go.jp> (accessed 1 September 2010).+(accessed+1+September+2010).>Google Scholar
GPIF. n.d.(b). “Review of Operations in Fiscal 2009.” Available from: <www.gpif.go.jp> (accessed 1 September 2010).+(accessed+1+September+2010).>Google Scholar
GPIF. 2002. “Review of Fund Investment Operations in Fiscal 2001: Executive Summary.” (July). Available from: <www.gpif.go.jp> (accessed 1 September 2010).+(accessed+1+September+2010).>Google Scholar
Jabko, Nicholas. 2006. Playing the Market: A Political Strategy for Uniting Europe, 1985-2005. Ithaca: Cornell University Press.Google Scholar
Jin, Ngiam Kee. 2000. “Coping with the Asian Financial Crisis: The Singapore Experience.” Institute of Souteast Asian Studies. Visiting Researchers Series No. 8.Google Scholar
Kagawa, Yoichiro. 2008. “Sovereign Wealth Fund for Japan?” Daily Yomiuri and The Yomiuri Shinbun (4 March).Google Scholar
Kawase, Takahiro. 2008. “Opening Keynote Speech – Investment of Public Pension Reserve: Objectives and Strategy.” In “The Japanese Government as Portfolio Manager: Managing the Nation's Wealth.” Columbia Business School, New York, NY, (21 October).Google Scholar
Keohane, Robert O. ed. 1986. Neorealism and its Critics. New York: Columbia University Press.Google Scholar
Keohane, Robert O. 2009. “The Old IPE and the New.” Review of International Political Economy 16 (1): 34–46.Google Scholar
Keefer, Philip and Stasavage, David. 2003. “The Limits of Delegation: Veto Players, Central Bank Independence, and the Credibility of Monetary Policy.” American Political Science Review 97 (3): 407–423.Google Scholar
Kimmitt, Robert. 2008. “Public Footprints in Private Markets: Sovereign Wealth Funds and the World Economy.” Foreign Affairs 87 (1).Google Scholar
Koremenos, Barbara, Lipson, Charles, and Snidal, Duncan. 2001. “The Rational Design of International Institutions.” International Organization 55 (4): 761–99.Google Scholar
Krasner, Stephen. 1978. Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy. Princeton: Princeton University Press.Google Scholar
Kubota, Keiko and Milner, Helen V. 2005. “Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries.” International Organization 59: 107–143.Google Scholar
Lake, David. 2009. “Open Economy Politics: A Critical Review.” Review of International Organization 4: 219–244.Google Scholar
Lee, Hyo-sik, 2007. “Korea Times: KIC Missing Chances for High Returns.” Korea Times (Seoul) (26 December).Google Scholar
Kevin, Lim. 2008. “Singapore GIC Says Turned Down UBS Board Seat Offer.” Reuters. (27 January). Available from: <www.reuters.com/article/etfNews/idUSSIN9630520080128>.Google Scholar
Lopez, Leslie. 2008. “Terengganu Plans Fund for Oil Revenue.” Straits Times (Singapore) (12 December).Google Scholar
LS Global Advisory Group. 2011. “Chinese and Korean Sovereign Wealth Funds Boost Global Equity Investments Through External Advisers; Engagement of Fundamental Managers Suggests SWFs Not Activists.” Digital Journal (July 12). Available from: <http://www.digital.journal.com/pr/359573> (accessed 13 July 2011).+(accessed+13+July+2011).>Google Scholar
MacIntyre, Andrew. 2001. “Institutions and Investors: The Politics of Economic Crisis in Southeast Asia.” International Organization 55: 81–122.Google Scholar
Markheim, Daniella. 2008. “Sovereign Wealth Funds and U.S. National Security.” Heritage Lectures, No. 1063 (6 March).Google Scholar
Martin, Michael F. 2008. “China's Sovereign Wealth Fund.” CRS Report for Congress. Washington D.C.: Congressional Research Service. (22 January).Google Scholar
McNamara, Kathleen. 1998. The Currency of Ideas: Monetary Politics in the European Union. Ithaca: Cornell University Press.Google Scholar
Milner, Helen. 1988. Resisting Protectionism: Global Industries and the Politics of International Trade. Princeton: Princeton University Press.Google Scholar
Moravcsik, Andrew. 1997. “Taking Preferences Seriously: A Liberal Theory of International Politics.” International Organization 51: 513–553.Google Scholar
Moravcsik, Andrew. 1998. The Choice for Europe: Social Purpose and State Power from Messina to Maastricht. Ithaca: Cornell University Press.Google Scholar
Nakamoto, Michiyo. 2007. “Push for Japanese Sovereign Fund.” Financial Times (6 December).Google Scholar
Nakamoto, Michiyo. 2008a. “Japan State Fund Idea Rebuffed.” Financial Times (2 February).Google Scholar
Nakamoto, Michiyo. 2008b. “Idea of Japan Fund Rebuffed.” Financial Times (2 February).Google Scholar
Nakamoto, Michiyo. 2008c. “Sovereign Fund Idea to Boost Japan's Pensions.” Financial Times (4 July).Google Scholar
Noland, Marcus. 1997. “Chasing Phantoms: The Political Economy of USTR.” International Organization 51 (3): 365–87.Google Scholar
Ogawa, Alicia. 2008. “Opening Remarks.” In “The Japanese Government as Portfolio Manager: Managing the Nation's Wealth.” Columbia Business School, New York, NY (21 October).Google Scholar
Oatley, Thomas. 2009. “The Reductionist Gamble: Open Economy Politics in a Global Economy.” unpublished paper. Department of Political Science, University of North Carolina at Chapel Hill.Google Scholar
OECD (Organization for Economic Cooperation and Development). 1995. “A Multilateral Agreement on Investment - Report by the Committee on International Investment and Multinational Enterprises (CIME)/and the Committee on Capital Movements and Invisible Transactions (CMIT).” DAFFE/CMIT/CIME(95)13/FINAL (5 May).Google Scholar
Park, Donghyun. 2008. “Developing Asia's New Sovereign Wealth Funds and Global Financial Stability.” ADB Briefs 1: 1–4.Google Scholar
Pekkanen, Saadia M. 2011. “Investment Regionalism in Asia: New Directions in Law and Policy?” Manuscript. University of Washington.Google Scholar
Pollack, Mark A. 2003. The Engines of Integration. Oxford: Oxford University Press.Google Scholar
Reed, Brendan J. 2009. “Sovereign Wealth Funds: The New Barbarians at the Gate? An Analysis of the Legal and Business Implications of their Ascendancy.” Virginia Law & Business Review 4 (1): 97–138.Google Scholar
Reich, Robert. 1990. “Who Is Us?” Harvard Business Review (January-February): 53–64.Google Scholar
Richardson, Michael. 2009. “Former Saviors Racking up Losses.” The Japan Times (17 February).Google Scholar
Rogowski, Ronald. 1989. Commerce and Coalitions: How Trade Affects Domestic Political Alignments. Princeton: Princeton University Press.Google Scholar
Rogowski, Ronald. 1999. “Institutions as Constraints on Strategic Choice.” In Strategic Choice and International Relations, edited by Lake, David A. and Powell, Robert. Princeton: Princeton University Press.Google Scholar
Rowley, Anthony. 2008. “Japan Sets Out to Create Wealth Fund.” The Business Times (Singapore) (3 July).Google Scholar
Rozanov, Andrew. 2005. “Who Holds the Wealth of Nations.” Central Banking 15 (4): 52–7.Google Scholar
Shih, Victor. 2009. “Tools of Surival: Sovereign Wealth Funds in Singapore and China.” Geopolitics 14 (2): 328–344.Google Scholar
Schnietz, Karen E. 2003. “The Reaction of Private Interests to the 1934 Reciprocal Trade Agreements Act.” International Organization 57 (1): 213–233.Google Scholar
Seabrooke, Leonard. 2007. “Varieties of Economic Constructivism in Political Economy: Uncertain Times Call for Disparate Measures.” Review of International Political Economy 14 (2): 371–385.Google Scholar
Simmons, Beth. 1994. Who Adjusts? Domestic Sources of Foreign Economic Policy During the Interwar Years. Princeton: Princeton University Press.Google Scholar
Simmons, Beth, Dobbin, Frank, and Garrett, Geoffrey. 2006. “The Institutional Diffusion of Liberalism.” International Organization 60 (4): 781–810.Google Scholar
Singh, Kavaljit. 2010. “Should India Set Up a Sovereign Wealth Fund?” Business Line (India) (4 August).Google Scholar
Skocpol, Theda. 1985. “Bringing the State Back In: Strategies of Analysis in Current Research.” In Bringing the State Back In, edited by Evans, Peter B., Rueschemeyer, Dietrich, and Skocpol, Theda. New York: Cambridge University Press.Google Scholar
Summers Lawrence, H. 2006. “Reflections on Global Account Imbalances and Emerging Markets Resere Accumulation.” Speech presented at the L.K. Jha Memorial Lecture, Reserve Bank of India, Mumbai, March 26. Available from: <http://www.president.harvard.edu/speeches/2006/0324_rbi.html>..>Google Scholar
Summers, Lawrence H. 2007. “Sovereign Funds Shake the Logic of Capitalism.” Financial Times. (30 July)Google Scholar
Takeuchi, Yo. 2008. “The Japanese Government as Portfolio Manager: Managing the Nation's Wealth.” Columbia Business School, New York, NY (21 October).Google Scholar
Terada, Shinichi. 2008. “LDP Studying Creation of Sovereign Wealth Fund.” The Japan Times (4 April).Google Scholar
Truman, Edwin W. 2008. “Sovereign Wealth Funds: The Challenge for Japan.” Speech delivered at the Japan Society (1 May). Available from: <www.iie.com> (accessed 1 September 2010).Google Scholar
Truman, Edwin M. 2010. “The Case for an Indian Sovereign Wealth Fund.” Business Standard (New Delhi) (5 September).Google Scholar
Ujikane, Keiko. 2010. “Japan Pension Fund Becomes Net Bond Seller in Risk for Government Finance.” Bloomberg News (13 July). Available from: <www.bloomberg.com> (accessed 1 September 2010).Google Scholar
UNCTAD (United Nations Conference on Trade and Development). 2008c. World Investment Report: Transnational Corporations and the Infrastructure Challenge. New York and Geneva: United Nations.Google Scholar
USDOT (United States Department of the Treasury). Various Years. Semiannual Report on International Economic and Exchange Rate Policies. Appendices. Available from: <http://www.ustreas.gov/offices/international-affairs/economic-exchangerates/> (2007a (June), 2007b (December), 2008a (May), 2008b (December)).+(2007a+(June),+2007b+(December),+2008a+(May),+2008b+(December)).>Google Scholar
Usuki, Masaharu. 2002. “The New Investment Management Scheme for Japan's Public Pension Fund.” NLI Research, No. 163 (April).Google Scholar
Wachman, Richard. 2009. “Temasek Abandons Plan to Install Chip Goodyear as Chief Executive.” The Guardian (21 July). Available from: <http://www.guardian.co.uk/business/2009/jul/21/temasek-chip-goodyearresignation>.Google Scholar
Zhang, Ming and He, Fan. 2009. “China's Sovereign Wealth Fund: Weaknesses and Challenges.” China & World Economy 71 (1): 101–116.Google Scholar