Setting up a sovereign wealth fund and industrial cities is an imperative

[yota691]

{Sovereign wealth funds and their developmental role}

Sunday 17 March 2019 12

 

Baghdad / Al-Sabah

 

 

About the House of Wisdom in Baghdad The book "Sovereign Wealth Funds and its Developmental Role" was published by the authors Prof. Dr. Falah Hassan Thwaini and Dr. Khalid Shami Nashour.

As a result of their long experience in macroeconomic management, most oil countries have realized that there is a great need to adopt the idea of creating sovereign wealth funds to alleviate the problem associated with large fluctuations in oil prices, which is the most important source of their revenues. When oil revenues are high, In the form of financial assets with economic return through saving and investment, which enhances its role in achieving the desired economic and social development and guarantee the rights of future generations when oil revenues decline.

The recent economic crises have created many challenges and at the same time have produced important lessons on the need for stronger risk management, greater transparency and better oversight of all financial institutions. These crises have confirmed that the effectiveness of sovereign wealth funds is realized when integrated into the overall policies of the governments they sponsor Which sets clear and stated objectives For those funds. 

The Iraqi economy faces many problems caused by the political, security and legislative variables that have had direct repercussions in shaping the economy at the current stage, as well as the risk of external shocks caused by fluctuations in oil prices in the global market, which made the need for a sovereign wealth fund an urgent need Required by the Iraqi economy now and in the future.

The subject of the book is important in Iraq (in particular) because it relies mainly on oil to generate revenues and still suffers from many structural imbalances and is in dire need of establishing a sovereign wealth fund with efficient and independent management that works to achieve the objectives of the Fund and contribute to development, His recurrent crises.

The book includes three chapters and a special supplement: 

Chapter One: The Conceptual Framework for Sovereign Wealth Funds (Sovereign Wealth Funds) as an Introductory Approach to Sovereign Funds, and their Role in Economic Activity, Particularly in Economies Rent.

Chapter Two: Successful experiences of three countries in the management of SWFs, the experience of the Norwegian sovereign wealth fund, the experience of the Kuwait Fund for Arab Economic Development, the experience of the Abu Dhabi Fund Development. 

Chapter III: A detailed study on the Iraqi economy and the development track under the Development Fund for Iraq and the nature of the Iraqi economy and performance indicators, and dealt with a detailed study of DFI, which was aimed at the reconstruction of Iraq and meet the humanitarian needs and welfare of the Iraqi people, but did not achieve the desired development Despite the large sums of money spent by the Fund for this purpose and for many reasons, and also includes this chapter looking forward to a vision for the future establishment of a sovereign wealth fund in Iraq.

The book concludes with an annex to the sovereign wealth funds and the principles of Santiago: It contains the 24 principles signed by the members of the 26th International Forum of Wealth Funds (IFSWF) representing member countries with the largest sovereign wealth funds 

In the world.

[6ly410]

Is it time to establish an Iraqi sovereign fund?

https://annabaa.org/arabic/economicarticles/19073

 

 

 

 

Economy Economy Iraqi sovereign funds State rent

The Sovereign Fund is a collection of public financial surpluses and their investment in interest in foreign financial assets. Most of the sovereign wealth funds were originally created to diversify the sources of income in oil-producing countries with surplus funds. These funds existed in developed countries with surplus sources of income Need in the state budget.

The need for these funds to invest in them has been underscored to alleviate the crises experienced by countries to preserve the future of future generations that have the right to live in dignity. For example, Saudi Arabia and its Strategic Plan 2030 will depend on 30% of the sovereign fund's revenues without oil.

So we know what kind of funds we want to grow up we should know the purpose of the establishment of the fund, the objectives of sovereign funds are:

1. Protection of the national economy and the general budget of the State from the risk of external crises that result from fluctuations resulting from export earnings.

2. The principle of justice, which is achieved through the distribution of wealth between generations through the maximization of savings that goes to future generations.

3. Diversify the country's income and thus reduce dependency on non-renewable audio exports.

4. Increase the returns of reserves for foreign exchange.

5. Help the monetary authority to withdraw unwanted liquidity.

6. Provide a tool to finance economic development programs.

7. Achieve sustainable long-term growth in the countries that own the Fund.

8. Achieve political, economic and strategic goals

9. The treatment of negative effects due to financial flows resulting from natural wealth, which is known as (Dutch disease) The Dutch disease, which causes undesirable effects in the productive sectors, especially the industrial result of oil discoveries that created a state of laziness and laxity in the job that hit the people The Netherlands from 1900-1950 after the discovery of oil and gas in the north as they went to luxury and comfort, until they reached the stage of depletion of the natural resource from the wells, which depleted by the consumption of unfair and unproductive.

The majority of public institutions take the form of a commercial company and are subject to commercial law. This is different for sovereign wealth funds, which are investment funds. The main function of the company is to produce goods and services. This is different for sovereign wealth funds.

• Types of sovereign wealth funds based on the purpose of:

1. Stability funds: The first objective is to protect the budget and the economy from the fluctuations in the prices of the most necessary commodities.

2. Provident funds: the transfer of non-renewable assets into portfolios of diversified assets and the basis for the operation of these funds is to increase the return of reserves.

3. Investment institutions: their assets are calculated as reserves and the reason for the construction is to increase the return of reserves.

4. Development funds: to encourage the financing of economic and social projects and to strengthen industrial policies to increase the supposed production of the state.

5. Emergency funds: are pension reserves that are not associated with pension obligations and are in the state's general budget.

• Types of sovereign wealth funds based on income source:

1. Reserves of raw materials: Oil is one of the main sources of the countries that depend on it, but keeping oil reserves in the wells as a kind of generations rights, but created the idea of sovereign funds as a good opinion to preserve the rights of future generations.

2. Surplus funds of current payments: Many countries, especially in South America, have achieved non-oil financial surpluses as a result of export competitiveness at the level of international markets, which exceeds the need for domestic investment, which drives these countries to turn this surplus into a sovereign fund.

3. Special funds for the proceeds of privatization: Many countries privatized the government sector and received large financial returns. These countries differed in the use of these revenues. Some direct them to finance the general budget, while others financed programs to restructure the economy and repay debts. But the high returns from privatization have scared these countries to expand government spending and the economy is out of absorptive capacity and eventually inflation out of control, and as the institutions allocated to the public domain for all generations will turn the proceeds allocated to sovereign wealth funds.

4. Funds from the surplus budget: Some countries go to a surplus in the state budget to convert excess investment in financial assets to achieve positive returns and to guide economic data for the long run, which these surpluses and high level will lead to the establishment of a sovereign fund.

• Types of sovereign wealth funds on the basis of the work of the Fund:

1. Local sovereign funds: Funds whose investment and savings activities are concentrated in the country.

2. International sovereign funds: Funds whose investment and savings activities are concentrated outside the country.

3. Mutual sovereign funds: Funds whose investment and savings activities are concentrated both outside the country and within the country.

• Types of sovereign wealth funds based on the degree of independence:

1. Non-independent sovereign funds: These funds are directly managed by the government and do not enjoy the independence of decision. Most of these funds are not subject to independent monitoring, accountability and disclosure.

2. Sovereign sovereign funds: They are directly managed by government. Others, like central banks and independent bodies, are involved in their management. What distinguishes them is that they have a relatively independent decision-making and are subject to independent oversight, accountability and disclosure.

• The difference between the sovereign fund and the central bank reserve:

The picture is clear in this comparison between the sovereign fund and the reserves of the central bank when considering how to finance and build each.

1. Reserves of the Central Bank (SAMA), these reserves accumulate and fall from one year to another through the differences between oil income and government spending.

2. The funds or reserves directed to the sovereign fund come from a government decision to save for the future and to find another source of income. A national savings program for the future that is parallel and complementary to oil income.

3. It is applicable in this area when establishing sovereign funds in the world to issue a government decision:

Firstly. To transfer part of the reserves available to the Central Bank for the establishment and financing of the sovereign fund.

Second. A savings mechanism that includes the transfer of a portion of the state's income to the sovereign fund. For example, the sovereign fund in Kuwait is financed by transferring 25% of the oil income directly to the sovereign fund.

Third. It is also necessary to establish a mechanism to control government spending, so that the state budget (government spending annually) is consistent with the long-term potential of the state.

• Santiago Principles

Following the annual meeting of the World Bank and the World Bank in Washington in 2008 and at the Santiago meeting in Chile, a group of countries reached an agreement on customary practices and principles called GAPP (Generally Accepted Principles and Practices)

• Details of the principles of Santiago: It is divided into three axes:

First: It includes the objectives, the legal framework and the quantitative economic policies. This pillar is the cornerstone of a strong institutional framework and a stable governance structure. The process of formulating appropriate investment strategies is coordinated with declared political objectives.

Second: It includes the structure of governance and the institutional framework that separates the functions of the owner, the governing body and the management team, leading to autonomy in managing the sovereign wealth fund to ensure investment decisions are taken without political interference. The investment policy shows the commitment of the Fund to a disciplined investment plan and investment practices.

Third: It includes risk management and the investment framework, which is a core of principles aimed at promoting the integrity of the investment process of sovereign wealth funds.

• The negative effects of sovereign wealth funds on the sovereign countries:

1. Lost employment opportunities: which can be created for young citizens of the countries that own these funds instead of investing them abroad, providing job opportunities for foreigners (the host countries of those investments).

2. Lost Domestic Product: Any lost opportunities in the form of lost GDP, especially the petroleum product, which could be generated if these funds were invested locally in real productive assets.

3. Risks of the opportunity to invest real assets in favor of financial assets: any risk of low returns achieved by these investments, which are limited to a fixed rate of interest, there is a difference between the investment of funds in financial assets in real assets.

• Some facts about global sovereign funds:

1. The largest sovereign fund in the world is the State Pension Fund in Norway, with assets of up to $ 825 billion. It was established in 1990 to support the Norwegian economy after the oil period. The Fund's investments (50%) in the United States, In Europe, the assets in which the Fund invests are distributed as follows: 60% in shares, 35% on fixed debt, 5% on real estate. The Norwegian government pension fund has shares in Apple, Microsoft and Google.

2. The world's second-largest sovereign fund is the Abu Dhabi Investment Authority (ADIA) with assets of US $ 773 billion, the fund's investments (35% -50%) in the US and the rest in Europe and emerging markets.

3. The third largest sovereign fund is China Investment Corporation with assets of US $ 747 billion, 5% of which are in the United States and the rest in developed markets.

4. The fourth largest sovereign fund is the Kuwait Investment Authority (KIA) with assets of $ 592 billion, which includes two funds, the General Reserve Fund and the Future Generations Fund.

5. According to Vision 2030, Saudi Arabia intends to establish a sovereign fund with assets of $ 2 trillion, half of which is for domestic investments and half for foreign investments.

• The reasons for establishing an Iraqi sovereign fund:

The Iraqi economy today desperately need a sovereign fund for development to encourage the financing of economic and social projects and strengthen industrial policies to increase real production within the Iraqi economy. This type of funds will bring a number of positive effects of the Iraqi economy, the most important of which are the reduction of unemployment rates and the development of productive sectors, Industrial and agricultural, and improving services.

1. Internal causes:

A) Oil is a depleted and unreliable resource, whether it is long-term or near-term in terms of depletion.

B - Oil is a financial asset after it is converted from in-kind assets.

Reducing reliance on oil makes Iraq prepare for the post-oil period, as Saudi Arabia does in its Strategic Plan 2030, which is to rely on 30% of fund revenues for the budget without oil.

2. External causes:

A - Unstable oil prices globally: the instability of oil prices globally and fluctuating randomly and as a result of a range of political and economic factors and it is natural for Iraq to rely on a fund coming from oil surpluses if they exist.

B - Withdrawal of surpluses: This fund withdraws surplus funds derived from the export of oil to overcome the volatile world oil prices and can take advantage of the negative oil shocks and the process of any collapse may occur at world oil prices.

• Foundations for establishing an Iraqi sovereign fund:

A - The legislative and legal system: This element is the basis for the establishment of a sovereign wealth fund for Iraq through the legislation of the Iraqi parliament and is the element is the first element in terms of importance and without this legislation no project already proposed.

B- Fund financing: The Iraqi Ministry of Finance initially finances this fund and is responsible for this fund for a few years.

C - Management of the Fund: The Central Bank of Iraq direct management of the Fund and provide cadre of experienced management and specialized in the field of investment (direct and portfolio) in particular can benefit from the experiences in foreign financial institutions and therefore the lack of experts in this area as the Iraqi stock market narrow market and lack Private financial institution as insurance funds and investment funds.

We believe that creating such a fund reflects the current generation's recognition and recognition of the right of future generations to the equal distribution of wealth from the oil resource that belongs to all Iraqis, To achieve justice in its distribution between the present generation and future generations.

[Jaygo]

Bump

[ChuckFinley]

 that, but i would like to see a currency with real value. 

[10 YEARS LATER]

3 hours ago, ChuckFinley said:

 that, but i would like to see a currency with real value. 

 

Folks might call me " Mr. Cloudy Day " for this, but; Knowing the Top Notch Criminal element in Iraq, this could become a great big slush fund.

I can hear the greasy wheels inside their minds turning furiously with all sorts of ideas as to how to manipulate this. Prove me wrong Iraq, so far that's not happened.

[ChuckFinley]

Could work in the dinar's favor then. RV then everyone is happy and find a new play ground to manipulate. 

[DinarThug]

Economic Highlights

Saturday 25 May

 

Baghdad / Shukran al-Fatlawi

 

 

Dr. Bassem Abdul Hadi Hassan, the character of the press articles in a simplified and understandable language in the author of his book "economic lightings" without prejudice to scientific constants; In order to clarify the economic concepts and presentation in a soft language understood by the general reader away from the use of dry terms and equations, to deliver economic information in a manner Palatable.

The author wondered at the beginning of the book about the possibility of establishing a sovereign fund, saying when will be the creation of a sovereign wealth fund in Iraq?

He explained that international experience shows that the creation of a sovereign wealth fund in the country can contribute to the strengthening of the public budget in the face of failures in annual revenues and face unexpected deviations between revenues and public expenditures, And the average balance is determined from the budget surplus constantly and invested financially as a sovereign investment portfolio, In the sense that a certain percentage of revenue is deducted annually to be placed in the Fund, and then managed in accordance with a special law to ensure transparency 

 

Waiting

The key role that the Sovereign Fund can play in Iraq is to isolate the general and macroeconomic balance from the external shocks that occasionally occur in world oil prices, Thus leading to a state of stability, as well as working to preserve the rights of future generations, As well as being an important platform for initiating economic and social priority projects on the road to success in the Economic development process . 

"The partnership with the private sector is optimal," he said, pointing out that the EU countries have held about 1400 partnership agreements over the past two decades, as well as the establishment of an international center for partnership contracts, that.

The author also explained the concept of "investment areas" within the concepts addressed by the book, explaining that it is a modern concepts in the framework of attracting foreign investment, which may be compatible with some of the terms nearby free zones, industrial cities, Because of the common denominator between them, Is to focus economic activities in a specific place in order to create a state of integration between them and provide the elements of activities in the said but the convergence does not express the same content of those names, noting the importance of establishing these areas to determine the uses and nature of projects that can be held with The need for the State to commit itself to linking its services with services The President.

The writer concluded the way to address unemployment, wondering: what China has done on a basis to reach the private sector to what it is Today?

 Pointing out that the answer is simply that it has worked on the development of infrastructure, which is one of the main keys to the process of economic growth and investment movement, According to the latest international reports. China's total government spending in the field of infrastructure in recent years amounted to nearly eight trillion Dollars.

The book also contains several articles in different names, notably education and reform, Banking density

, The relationship between theory and reality and the tourism industry and other topics that review economic problems and methods Processed. 

The author was born in Baghdad 1971 and holds a doctorate in economics, Is currently the spokesman for the Iraqi Central Bank and lecturer at many universities and study centers has four books published in the economy and many articles And research.

link

[yota691]

4 Gulf countries occupy a quarter of the world's wealth

 Economic development  16/06/2019  169

 

Gulf countries have huge sovereign wealth around the world, according to global economic reports.

Media reports said he said four Gulf states had more than 25 percent of the world's $ 8 trillion sovereign wealth funds.

The four Gulf states are Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. Kuwait was the first sovereign wealth fund in the world, investing in bonds and blue chips.

Saudi Arabia has the largest sovereign wealth fund with a risk appetite, although the Saudi central bank still manages $ 500 billion of assets, but it is underwritten by the Public Investment Fund, whose managed assets rose from $ 84 billion five years ago to $ 320 billion at the moment.

Saudi Arabia has become an unexpected sponsor of the Silicon Valley, with large stakes in companies such as Tesla and Lucid Motors, for the manufacture of electric cars, as well as Virgin Galactic and Magic Lip and others.

Qatar, on the other hand, says it uses its fund as a diplomatic helper. In contrast to its small population, it has the third largest gas reserves in the world, so it does not feel much concerned about short-term investment returns.

[yota691]

Setting up a sovereign wealth fund and industrial cities is an imperative

Saturday 09 November 2019 55

 

Baghdad / Hussein Thaghab

Economic specialists have put forward a number of steps that can reform the national economy and overcome the problems that limit the implementation of developmental trends.There have been proposals for the establishment of industrial cities in strategic areas, the establishment of a sovereign wealth fund, and the support of stock market activities to attract regional and international capital.

Bassem Brahimi renewed his call for the establishment of a sovereign wealth fund whose aim is to isolate the public budget and the macroeconomic economy from external shocks to the global economy, as well as world oil prices, to contribute to move away from instability due to external shocks and guarantee the rights of future generations. In addition, it is an important basis for initiating projects of economic and social priority on the road to success in the process of economic development.

 

Multiple Goals

He added that "many countries have adopted this approach and worked to establish this type of funds to achieve different objectives from one country to another, and there are countries called the generational reserve fund, including Kuwait, and others called the government reserve fund as in Oman, each of which aims to achieve stability Economic or future savings or a combination of the two as in Norway. "

It is noteworthy that Abdul Hadi had stressed in this regard that "after we missed many great opportunities to diversify the Iraqi economy during (the fat years) some see that we have no more left to us today and we are living economic problems only pray for oil prices to recover, is that true? I think that we still have many solutions and sovereign wealth funds one of them, through international experiences we believe that the creation of a sovereign wealth fund in Iraq can contribute to strengthening the public budget to face cases of failures in annual revenues And faced Unexpected deviations between revenues and public expenditures, with an average balance to be determined from the budget surplus continuously and invested financially as a sovereign investment portfolio, ie a certain percentage of revenues deducted annually to be placed in this fund and managed according to its own law includes transparency to ensure the success of its work ".

 

Economic sectors

Financial specialist Mohammed Ali Jaber said: "The current economic situation in Iraq suffers from many problems, including the decline of the basic economic sectors of production and service, in light of the continuing demands for multiple financial revenues and away from the rentier character of the national economy, as oil revenues tend to operating expenses and import their needs, accompanied This is a decline in allocations directed to important investment operations that can address a range of economic problems. "

 

Engaging banks

Jaber warned that "the need to activate and support the activities of the Iraqi market for securities and support the attempts of the market to cover the shortage of liquidity, the adoption of internationally adopted methods contribute to attract capital from investors in regional and foreign countries, and the involvement of private banks and the Association of Iraqi banks as well as government banks in this conference and take advantage of "The banking system represents the cornerstone of the success of the national economy and its transfer to a better stage that puts it in the right position on the international regulations."

He stressed that "funding is the rapid engine to face the current situation, which needs real cooperation between the ministries and all government institutions, especially the Central Bank of Iraq and the Ministry of Finance in order to enable the national economy to enter into this crisis."

 

A real role

"The most important requirements for the activation of industrial production is the establishment of advanced industrial cities, where land is allocated to each industrial that has the necessary infrastructure, and must be near the main roads and in safe areas, with a real role in the selection of sites So 

Cities. "

On the challenges facing the Iraqi industrial, he said: "The Iraqi market is wide and can accommodate large industries and there is a desire in this aspect by many international companies, but it requires to overcome the routine that confuses the process of completion of completion of projects, the step completed within two days outside the country needs In our circles for more than four months.

[screwball]

On 4/28/2019 at 1:51 PM, 10 YEARS LATER said:

 

Folks might call me " Mr. Cloudy Day " for this, but; Knowing the Top Notch Criminal element in Iraq, this could become a great big slush fund.

I can hear the greasy wheels inside their minds turning furiously with all sorts of ideas as to how to manipulate this. Prove me wrong Iraq, so far that's not happened.

possibly....norway has over 1 trillion in their oil sovereign wealth fund.