Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/109336
Authors: 
Park, Donghyun
Estrada, Gemma
Year of Publication: 
2009
Series/Report no.: 
ADB Economics Working Paper Series 169
Abstract: 
Sovereign wealth funds (SWFs) have emerged in developing Asia as a policy response to an unprecedented accumulation of foreign exchange (FX) reserves since 2000. At the same time, developing countries have become an increasingly important source of outward foreign direct investment (FDI). The central objective of this paper is to evaluate the prospects for SWFs to serve as a major conduit for the region's outward FDI. In principle, FDI represents an attractive means of earning higher returns on FX reserves than traditional reserve assets. In practice, the limited institutional capacity and the political sensitivity of state-led FDI severely constrains the ability of developing Asia's SWFs to undertake FDI on a significant scale. Therefore, the potential for developing Asia's SWFs to become major sources of outward FDI is more apparent than real. This paper also explores the implications of the Santiago Principles and the global financial crisis on outward FDI by SWFs.
Subjects: 
Sovereign wealth fund
FDI
capital flows
foreign exchange reserves
Asia
JEL: 
F21
F23
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/igo
Document Type: 
Working Paper

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