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SINGAPORE: Sovereign wealth funds (SWFs) can play a constructive role in global economic recovery but governments must keep their capital markets open.
The Government of Singapore Investment Corporation (GIC) deputy chairman Tony Tan said this at the APEC CEO Summit on Saturday.
While global economic recovery will continue into next year and will be stronger in Asian and Latin American countries that have lower debt levels, the outlook for the medium term looks uncertain, with risks of stagnation and higher inflation.
And over the next decade, Dr Tan said, economic, political and market risks are going to be higher than the last 20 years before the current financial crisis.
Amid an increasingly uncertain and potentially volatile financial environment, Dr Tan said sovereign wealth funds (SWFs) will become important suppliers of global capital.
Their long-term investment horizons and stakes in the health of the global economy will help SWFs play important roles in rebuilding the world economy.
He said: "SWFs are stakeholders with a strong interest in ensuring the global economy and financial system recovers and grows in a vigorous and sustainable manner.
"SWFs can thus provide credible insights and analysis of developments in financial markets and economies, particularly on issues concerning the restructuring of the global financial architecture.
"SWFs want to be responsible market participants and are not out to make quick returns by cutting corners or seeking to contravene legal and regulatory regulations.
"As a reputable investor, GIC interacts regularly with policymakers and regulators. These include those in the developed world such as the US Administration and the Fed, and those in the developing world, such as central bankers in Asia.
"We hope that these views can help to shape policies that lead to better outcomes. Since the future economic environment is likely to be riskier, there is likely to be a premium on good analysis and advice, including from SWFs."
But Dr Tan emphasised that global capital markets must remain open.
He said: "If governments closed their capital markets to SWFs, recipient countries will face higher capital costs, while SWFs will see their opportunity set decrease."
Other panel speakers agreed that financial protectionism is one of the main challenges preventing SWFs from contributing more effectively.
Jin Liqun, chairman of China Investment Corporation's board of supervisors, said: "SWFs will be playing a big role in rebalancing the process but we need cooperation from the recipient countries. There's nothing we can do if we are barred from doing our job in your countries or when hurdles are very high for us to overcome."
The speakers urged countries to work with SWFs in rebuilding the global economy.
- CNA/ir
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