How to manage the nation's assets

A sovereign wealth fund may help Thailand cushion against economic crises and act as a mechanism to preserve natural resource revenues

- WICHIT CHANTANUSORNSIRI

The creation of a Thai sovereign wealth fund (SWF) has been debated in the country for several years.

Most recently, Supavud Saicheua, chairman of the National Economic and Social Development Council, reiterated his support for the proposal, pointing to Singapore's success as a model. Established in 1981, Singapore's SWF has grown to manage assets of roughly US$1.2 trillion, contributing returns equivalent to 20% of government revenue.

The Joint Standing Committee on Commerce, Industry and Banking also voiced its backing, viewing an SWF as an additional tool to manage capital flows and foreign exchange.

Payong Srivanich, chairman of the Thai Bankers' Association, said such a fund could help raise demand for US dollars, giving the central bank another instrument to stabilise the baht and manage currency fluctuations.

He also urged the regulator to develop new instruments to maintain financial stability in a rapidly changing global environment.

WHAT IS A SOVEREIGN WEALTH FUND?

These funds are set up by a government to manage the nation's assets. The key features of SWFs are state ownership and financing by sources such as international reserves, revenue from oil exports (in the case of oil-producing countries), fiscal surpluses (with a portion allocated for the fund), or returns from state investments.

An SWF can invest in various asset classes such as equities, bonds, real estate and foreign funds.

The returns from SWFs can be used to cushion against future economic crises and serve as a mechanism to save natural resource revenues (such as Norway's oil income) for future generations. Many countries operate SWFs, including Norway, the United Arab Emirates, China and Singapore.

WHAT IS THE DIFFERENCE BETWEEN INTERNATIONAL RESERVES AND AN SWF?