Back in December, Thai prime minister Abhisit Vejjajiva told attendees at a conference in Bangkok that the country’s central bank has been considering setting up a sovereign wealth fund.
According to a report in AsianInvestor, PM Vejjajiva believed a sovereign wealth fund would allow the Bank of Thailand to have “more flexible management of surplus reserves”:
“The issue is still being discussed,” added Abhisit. “Obviously we have to look at the legal and political implications and be mindful of the experiences of the various other such entities that have been set up in recent years.”
But FT Alphaville thinks the prime minister’s words should be taken with a very large pinch of salt. Consider the following recent and not-so-recent headlines:
Thailand mulls setting up sovereign wealth fund
The authorities are considering starting up the country’s own sovereign wealth fund to invest some of the US$100-billion (Bt3.15 trillion) foreign reserves in high-risk securities, beginning with $5 billion or $10 billion.
[March 2008]
Thailand not yet ready for sovereign wealth fund
The country’s $109 billion in reserves are best used to maintain financial stability, says finance minister and deputy prime minister Surapong Suebwonglee.
[May 2008]
Sovereign Wealth Fund for Thailand? (Speech by Thirachai Phuvanatnaranubala Secretary-General, Securities and Exchange Commission, Thailand)
The countries that still need sovereign wealth funds to do this job are limited only to the following conditions.
First, the country that has too few population, or the population that is particularly risk averse to investing abroad, or lack of knowledge to do so. Then, there is a case perhaps for the government to do the job on behalf of its citizen.
Second, the country in which wealth is highly concentrated in the hand of too few individuals. Or the country whose export revenues build up so fast, and the revenues mostly belong to the government, as in many oil exporting countries. Here there may also be a case for sovereign wealth funds.
These two conditions certainly do not apply to Thailand.
[May 2008]
Thailand says not ready for sovereign wealth fund
“I don’t it is the right time for Thailand to set up a sovereign wealth fund as we can’t be too confident that the foreign reserves we have now will be sustainable in the longer term,” Korn told Reuters in an interview.
“If we decide to tap the foreign reserves to set up a wealth fund to invest overseas, our current account surplus could turn into deficit, which could undermine investor confidence,” Korn said on the sidelines of an Asia-Pacific summit in Singapore.
Korn said Thailand still lacks “highly credible” financial institutions that could provide good corporate governance and capable fund managers to run such a fund.
[November 2009]
Talk about mixed messages.
Related links:
Bahrain sov wealth fund to move into bonds, stocks – Reuters
Kuwait Fund Made 40% Return on Blackrock, Chief Says – Bloomberg
China seeks new ways to use FX reserves – official – Reuters