“Unusual”… A government advisor proposes the idea of ​​establishing a sovereign wealth fund

“Unusual”… A government advisor proposes the idea of ​​establishing a sovereign wealth fund

06/12/2024

Unusual... A government advisor proposes the idea of ​​establishing a sovereign wealth fundThe economic and financial advisor to the Prime Minister, Mazhar Muhammad Saleh, proposed an “unusual” idea to establish a sovereign wealth fund.

Saleh said {to Al-Furat News} that: “The SWF sovereign wealth funds, which Kuwait started with the Generations Fund since the 1950s, were followed by surplus countries exporting raw materials in general and oil in particular, on the basis of diversifying the investment of those financial surpluses in financial and real investment opportunities in major economies.” Outside their countries through a fund called the Sovereign Wealth Fund (SWF) whose function is to manage the investment of surpluses in financial and real assets outside their countries, and the reason is due to an issue called “weak absorption capacity.”

He explained, “that is, the weakness of the ability to convert those surplus savings from revenues from exporting natural resources into investments within the state itself due to many internal structural factors (because the surplus saving resources resulting from a surplus in the current accounts of its balance of payments exceed its available capabilities for spending or spending on internal development projects or investment) Those revenues from exports are immediately invested in operations within the economy, noting that those surpluses are capital assets that can be reinvested and generate value-added chains that multiply the national income of their countries many times over.

Saleh added, “Based on the above, sovereign funds have emerged in the world (which today are governed by standard operating rules called the Santiago Principles (which are principles established by the International Monetary Fund to evaluate and govern the work of these funds),” noting that “Iraq (unfortunately) has exhausted Its balance of payments surpluses were consumed by wars and conflicts during the same period, 1980-2003, in which the world’s sovereign wealth funds increased, while during those arduous decades our country turned into a group of “deficit” countries and fell into the trap of foreign debt, specifically since the year 1980 and the escalation of the Iran-Iraq war. “.

He went on to say, “So far, our country is not considered one of the countries of financial surplus, and the reserves of the Central Bank of Iraq supporting the stability of the Iraqi dinar, which currently amount to more than 100 billion dollars, are invested in a very specific portifolio investment portfolio, which is a semi-sovereign wealth fund, and foreign reserves are assets.” Financial instruments are always semi-liquid and do not involve long-term investments, such as shares in factories or real estate, as other sovereign wealth funds do. Rather, reserves are invested in short-term, low-interest financial instruments, such as US Treasury bonds and others with a high credit rating of Aaa, and they tend to be always semi-liquid and low-risk. Through safe investments, but usually with low or fixed returns.

Saleh said, “However, the foreign reserves of central banks are not considered among the sovereign wealth funds (such as the Norwegian, Saudi, Chinese, and other funds currently),” stressing, “We must think from outside the box, as it is said, by establishing a sovereign wealth fund for Iraq.” Although our country is not classified as a group of surplus countries.”

Waad, Iraq is “the ninth country in terms of its natural wealth currently, and it is among the countries in the world that exceed approximately 188 countries, and the natural wealth of the race in the ground is estimated at approximately 16 trillion US dollars,” explaining, “If we exclude oil and gas, it is possible to establish an effectiveness to manage a sovereign wealth fund.” As follows:
A- Establishing an Iraqi government holding company with global partnerships that will help invest these natural resources.
B- The holding company will reinvest the revenues from natural resources (i.e., which are in the possession of the holding company) and direct them to various internal investments, directing their profits towards accumulation. Assets of a *sovereign wealth fund* The holding company undertakes reinvestment activities for the benefit of the internal sovereign wealth fund itself, that is, directing the fund’s returns to reinvest in investment opportunities to diversify the national economy. That is, through (managing an internal sovereign wealth fund for reinvestment, but within the economy itself). An internal sovereign wealth fund).

Saleh concluded by saying, “This is the summary of my idea that I am defending in establishing an Iraqi sovereign wealth fund, but within the national economy, and it is responsible for reinvesting the proceeds of the fund itself in development projects, with two parts, a part that remains for the benefit of the fund itself and a part that goes for the benefit of the national economy within the development program. Also, The method of managing investments through a joint public holding company affiliated with the internal sovereign fund itself is the mechanism used to invest the fund’s resources by diversifying some aspects of the national economy into agriculture, industry, services, and available economic opportunities.”

alforatnews.iq