The domestic drivers of state finance institutions: evidence from sovereign wealth funds

ABSTRACT

Sovereign wealth funds – large state-owned investment funds – are key players in international finance, but little is known about their underlying political drivers. Why do some states with surpluses choose to create sovereign wealth funds, while others advocate private finance institutions instead? This article speaks directly to this question by investigating the variation in sovereign wealth fund choices across nations with excess reserves. Thereby it contributes to an emerging stream of social network analysis within the international political economy literature. It develops an argument in least likely cases (i.e. Hong Kong and Singapore) about how the structure of domestic state-society relations – in form of policy networks – explains variation in sovereign wealth fund choices, which benefits some actors over others. By analysing primary archival material and through interviews with former policy-makers, this article opens the black box of policy-making behind the choices of state finance institutions.

KEYWORDS:

• Sovereign wealth funds
• financial institutions
• policy networks
• policy-making
• inclusion
• exclusion
• socio-economic actors

Acknowledgments

The author would like to thank Mark Thatcher and the anonymous referees for helpful and insightful comments on earlier versions of this paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. See e.g. Bloomberg, 14 October 2013; Times of India, 16 June 2016; Haartz, 15 April 2013; The Financial Times, 20 April 2014; Schena, Braunstein, and Ali (forthcoming 2017).

Additional information

Notes on contributors

Juergen Braunstein

Juergen Braunstein is a post-doctoral fellow at the Harvard Kennedy School leading the Geopolitics of Renewable Energy Project at the Belfer Center. His areas of expertise include geopolitics of renewable energy, green infrastructure financing, geo-finance and sovereign wealth funds (SWFs). His current project examines the impact of changes in the global energy mix on inter-state relations.