G20 Magazine: The Global Economic Security Significance of Sovereign Wealth Funds

Alexander Mirtchev, Seoul Summit 2010, November 12, 2010

In the G20 Magazine for the Korea Summit in November 2010, Dr. Mirtchev, Vice-President of the Royal United Services Institute for Defense and Security Studies, London, and President of Krull Corp., analyses SWFs’ strategic repositioning in the wake of the worldwide financial and economic crisis. He assesses the rising economic security relevance of SWFs, rooted in their historical underpinnings – the VOC (Dutch East India Company), the British East India Company and others, and manifested in their contemporary role as economic power projection tools. Emerging from the single-country focus of Temasek and the Kuwait Investment Authority, and the broader “trophy assets” sprees of the Abu Dhabi Investment Authority and China’s CIC, among others, SWFs are rechanneling their resources towards production and asset-based investments, becoming a significant source of financing, prepared for broader strategic cooperation among themselves and other market players. The ability of SWFs to take an inherently longer-term outlook and their stabilizing influence should be balanced against their potential to be a disruptive force in international investment flows and the intrinsic concerns about the balance between political and economic objectives of SWFs. They are subject to continuous transformation in their own right as they become a more intrinsic part of the market, and the market will inevitably have its say. At the same time, the growing relevance and projected significance of SWFs has made them a focal point for more intense scrutiny, and has in turn driven them to increase the level of transparency and accountability that surrounds their investment and operational activities.

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