SOVEREIGN WEALTH FUNDS AND CORRUPTION IN THEIR HOME STATES

Abstract

The proliferation of Sovereign Wealth Funds (SWFs) has attracted a great deal of attention over their investment motivations and perceived lack of transparency of their operations. Some scholars argue that the funds could be legitimately disguised as supporting domestic development when in reality it is used to deepen the pockets of the political leaders. This thesis, however, challenges the notion that SWFs breed corruption and makes the further step to propose that SWFs might be the very instrument for developing states looking to curb corruption. By taking away the direct control of excess funds from the hands of the politicians and putting them into the hands of professional funds managers, not only does this ensure that the funds are profit-maximizing to the long-run benefit of the citizens, it also reduces the political temptation for politicians to use the parliamentary budgetary process to channel the funds to projects for personal gains.