Is it time to establish an Iraqi sovereign fund?
[You must be registered and logged in to see this image.]
Sunday , 28 April - 2019
32
[You must be registered and logged in to see this image.]
Sunday , 28 April - 2019
32
Dr.. Jawad Kazem al-Bakri
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: 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 comes 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.
* Prof. Dr. Jawad Kazem Bakri, University of Babylon - Faculty of Management and Economics
[You must be registered and logged in to see this link.]
Today at 8:27 am by Rocky
» utube 5/19/24 BRICS to Open a Central Bank Iraqs Relationship to BRICS Exchange Rate Up
Today at 7:30 am by Rocky
» utube 5/18/24 MM&C Iraq Dinar - Iraq Central Bank - IMF - UNAMI - World Bank - Key Votes Tabled -
Today at 7:15 am by Rocky
» Floating the Iraqi dinar A solution to fill the "gap" of its turbulent price against the dollar
Today at 7:08 am by wciappetta
» Kanna: The Constitutional Amendments Committee was completely marginalized for two reasons
Today at 7:06 am by Rocky
» The repercussions of the Ukrainian company continue.. Is Iraq facing a real economic disaster?
Today at 7:01 am by Rocky
» A government body sends an invitation to the Central Bank regarding the Hajj dollar
Today at 7:00 am by Rocky
» Pessimism surrounds the electricity situation during the summer: the suffering will be repeated and
Today at 6:58 am by Rocky
» Presidency of Parliament is Haqq Anbari.. Why does “Progress” stand against this entitlement? - Urge
Today at 6:55 am by Rocky
» Bloomberg: Iraq achieves sufficiency in diesel fuel and stops importing it
Today at 6:53 am by Rocky
» Hajj calls on the Central Bank to direct banks to open their doors to pilgrims to exchange dollars
Today at 6:50 am by Rocky
» In an extraordinary session...the Council of Ministers votes today on the budget schedules
Today at 6:49 am by Rocky
» Al-Khanjar: Parliament members presented a chaotic model that does not befit Iraq
Today at 6:47 am by Rocky
» The President of the Republic told NATO: The Iraqi army has the readiness to face security challenge
Today at 6:46 am by Rocky
» List of countries exporting most goods and services in the world.. What is Iraq’s rank?
Today at 6:44 am by Rocky
» The General Tax Authority initiates a package of reforms to achieve “two goals”
Today at 6:42 am by Rocky
» A Jordanian minister reveals "significant" coordination with Iraq and talks about smuggling operatio
Today at 6:41 am by Rocky
» The Sudanese confirms to his Kuwaiti counterpart the depth of the two countries’ relations and the s
Today at 6:38 am by Rocky
» With documents... Finance publishes controls that concern the segment of employees, including promot
Today at 6:35 am by Rocky
» A female representative explains the government’s ambition to reach the production of 8 million barr
Today at 5:31 am by Rocky
» Next month... a major conference to announce 8 cities as investment opportunities
Today at 5:30 am by Rocky
» The presence movement: Iran urged Barzani to participate in the region’s elections
Today at 5:28 am by Rocky
» In a strange incident, they disowned him because of Al-Halbousi’s anger at him
Today at 5:26 am by Rocky
» Race for the Presidency of Parliament.. The Sunni conflict is worsening
Today at 5:25 am by Rocky
» Responding to the challenge to the constitutionality of the seat distribution system in the provinci
Today at 5:25 am by Rocky
» Demanding an increase in the allocations for two ministries in the current year’s budget
Today at 5:24 am by Rocky
» Parliamentary Finance: Employee salaries amounted to 8 and a half trillion
Today at 5:23 am by Rocky
» In the amount of 10 million... an Iraqi government bank begins granting loans to married couples
Today at 5:20 am by Rocky
» Hajj and Umrah Authority: Iraqi banks refrain from receiving pilgrims
Today at 5:19 am by Rocky
» The Minister of Electricity calls for mobilizing energies in preparation for the upcoming summer sea
Today at 5:17 am by Rocky
» The United Nations Development Program approves the electronic payment services system in Iraq
Today at 5:16 am by Rocky
» Iraqi oil exports to America declined within a week
Today at 5:15 am by Rocky
» Parliamentary praise for the government’s plans to implement projects to solve the housing crisis
Today at 5:14 am by Rocky
» Has the government succeeded in controlling crowding by changing working hours?
Today at 5:12 am by Rocky
» “Ali is not compensated with money, but I demand my rights.” An Iraqi sues a British oil company for
Today at 5:11 am by Rocky
» Planning: The pilot census will start on the 26th of this month
Today at 5:09 am by Rocky
» A project to develop a climate investment plan in Iraq
Today at 5:07 am by Rocky
» Parliament awaits “budget schedules”
Today at 5:06 am by Rocky
» Parliament: Infrastructure is the most important challenge of the housing crisis
Today at 5:05 am by Rocky
» Announcing 8 cities as investment opportunities
Today at 5:04 am by Rocky
» Minister of Health: We are proceeding with a project to manage modern hospitals by specialized compa
Today at 5:02 am by Rocky
» An Iraqi initiative to ban the political exploitation of religions
Today at 5:01 am by Rocky
» 70% completion of the Kompsan Dam in Erbil
Today at 5:00 am by Rocky
» Paying off external debt is a step to promote stability and recovery
Today at 4:59 am by Rocky
» An economic forum discusses business opportunities with Islamic countries
Today at 4:57 am by Rocky
» More than one billion dollars in sales from the Central Bank of Iraq within a week
Today at 4:56 am by Rocky
» Pakistan and its economic challenges
Today at 4:55 am by Rocky
» Economic researchers emphasize promoting the culture of electronic payment
Today at 4:54 am by Rocky
» The events in Parliament were “intended”... A politician accuses “Taqaddum” of preventing a figure f
Today at 4:51 am by Rocky
» The Federal Court rejects the challenge to the constitutionality of a text in the seat distribution
Today at 4:50 am by Rocky
» Primitive management of waste and medical waste in Baghdad... another danger threatening the populat
Today at 4:49 am by Rocky
» Discrimination in projects and allocations.. The National Union complains of the injustice of Sulaym
Today at 4:46 am by Rocky
» Parliament “claims confusion” despite the clarity of the interpretation of federalism.. What is the
Today at 4:45 am by Rocky
» Khashan demands that Parliament terminate Haibat Al-Halbousi’s membership after he disrupted the pre
Today at 4:44 am by Rocky
» Al-Sudani will visit Doha tomorrow to participate in the World Security Forum
Today at 4:42 am by Rocky
» Al-Halbousi’s fears and ambitions waste the entitlement of the Sunni component: Parliament events ar
Today at 4:41 am by Rocky
» Transition to modern agriculture.. Parliament reveals financial allocations to purchase 11,000 “spri
Today at 4:40 am by Rocky
» Iraq “negotiates” Erbil over the passage of the Al-Faw train and awaits a meeting with Turkey and th
Today at 4:38 am by Rocky
» Türkiye builds the “carrot” and Iran diverts the rivers.. An Iraqi expert discusses “the weakness of
Today at 4:37 am by Rocky
» To facilitate the movement of goods transport.. Al-Dakhil directs the opening of Mosul - Dohuk contr
Today at 4:35 am by Rocky
» “Siemens will keep pace with Iraqi electricity.” The Ambassador: Iraqis requested bribes from German
Today at 4:34 am by Rocky
» Services will enter 13 areas.. Al-Zubair will convert heavy sewage into fertilizers.. and infrastruc
Today at 4:33 am by Rocky
» Representative regarding what happened during today’s session: an insult to the legislative institut
Today at 4:31 am by Rocky
» Parliament is “perplexed” and will take a month with the tables: the budget has increased and the op
Today at 4:29 am by Rocky
» Where has the legal battle between the Iraqi "Jaloud" and the British company "BP" reached?
Today at 4:27 am by Rocky
» A government plan to raise the price of refining oil.. Will the refineries lose, or will the price o
Today at 4:25 am by Rocky
» The Hajj Authority calls on the Central Bank to direct banks to open their doors to pilgrims
Today at 4:24 am by Rocky
» Martyrs Foundation: Thousands of mass graves in Iraq will not be opened yet
Today at 4:21 am by Rocky
» Sadiqoun is betting on resolving the parliamentary presidency issue today...a fourth and fifth round
Today at 4:19 am by Rocky
» The House of Representatives adjourns its session until further notice
Today at 4:18 am by Rocky
» utube 5/16/24 MM&C Al-Sudani - Political Week - Progress Internationally
Yesterday at 7:59 am by Rocky
» Calls to include local oil and electricity sales in the general budget
Yesterday at 7:50 am by Rocky
» Al Rasheed Bank issues instructions to facilitate the issuance of replacement cards for bank card ho
Yesterday at 7:47 am by Rocky
» Internal debt rises to 79 trillion in 2024.. What is the relationship between spending and loans?
Yesterday at 7:44 am by Rocky
» Members of Parliament head to the Great Hall to initiate procedures for electing the president
Yesterday at 7:38 am by Rocky
» The House of Representatives concludes the report and discussion of the draft law on public holidays
Yesterday at 7:37 am by Rocky
» The House of Representatives votes to extend its legislative term for 30 days
Yesterday at 7:36 am by Rocky
» A Canadian company is “unable” to dismiss its director authorized to protect Baghdad Airport: Iraq i
Yesterday at 7:34 am by Rocky
» Economic Institution: The value of China's exports to Iraq increased by 93% in 10 years
Yesterday at 7:31 am by Rocky
» The Presidency of Parliament decided to devote today’s session to electing the president only
Yesterday at 7:29 am by Rocky
» In the presence of 183 deputies...the House of Representatives holds its session
Yesterday at 7:28 am by Rocky
» Al-Kadhimi hints at the possibility of postponing the session to elect the Speaker of Parliament
Yesterday at 5:09 am by Rocky
» The regional government announces the payment of employees' salaries via “My Account”
Yesterday at 5:07 am by Rocky
» The Minister of Transport reviews the details of the development road and Al-Faw Grand Port projects
Yesterday at 5:05 am by Rocky
» Istanbul will host expanded Turkish/Arab economic meetings at the beginning of next month
Yesterday at 5:03 am by Rocky
» Customs sets the date for collecting tax amounts electronically and sets a condition
Yesterday at 5:02 am by Rocky
» Sudanese agrees to support pilgrims with an amount of 39 billion dinars to reduce the cost of Hajj
Yesterday at 5:00 am by Rocky
» The Sudanese advisor clarifies the discussion of budget schedules in the extraordinary session of th
Yesterday at 4:59 am by Rocky
» Most of the framework and the Kurdistan Democratic Party will vote for Al-Mashhadani as Speaker of P
Yesterday at 4:55 am by Rocky
» A deputy considers the movement of Turkish forces inside Iraqi territory an occupation
Yesterday at 4:53 am by Rocky
» Directing the Ministry of Finance to spend drug law implementation budgets
Yesterday at 4:52 am by Rocky
» A parliamentary movement to resolve the fate of holding private wards
Yesterday at 4:51 am by Rocky
» A member of a legal movement calling for accelerating the amendment of Article 57
Yesterday at 4:49 am by Rocky
» A parliamentary effort to gain ownership of the trespassers and slum owners
Yesterday at 4:48 am by Rocky
» There is a consensus on deciding the presidency of Parliament today, and the balance is tilted towar
Yesterday at 4:47 am by Rocky
» The price of the dollar is witnessing a slight increase in Baghdad, Basra and Erbil
Yesterday at 4:46 am by Rocky
» Behind the scenes of electronic blackmail in Iraq... “A good hacker,” “blackmailing spouses,” and se
Yesterday at 4:44 am by Rocky
» The coordination framework supports Al-Sadr: We will pass the “Eid Al-Ghadir” holiday today
Yesterday at 4:42 am by Rocky
» The session to elect the Speaker of Parliament... intense meetings and fears of its failure due to “
Yesterday at 4:41 am by Rocky