Is There a Real Threat to Australia’s National Security Posed by Sovereign Wealth Funds?
Is There a Real Threat to Australia’s National Security Posed by Sovereign Wealth Funds?
by Dr. David A. Anderson and Major Richard Mogg
Small Wars Journal
Sovereign Wealth Funds (SWFs) have existed since the 1950s. However, the size, quantity, and reach of SWFs have increased dramatically over the past 15 years. In 1990 sovereign funds held at most $500 billion, the current total of SWF investments is an estimated US$4.3 trillion , compared to a current global stock market capitalization of US$51 trillion . SWFs are expected to grow to US$12 trillion by 2015 , and are likely to be an enduring feature of global finance and geo-politics. Currently, more than 20 countries have SWFs, and half a dozen more have expressed an interest in establishing such a fund. The holdings remain quite concentrated, with the top five funds accounting for about 70 percent of total assets. Over half of these assets are in the hands of countries that export significant amounts of oil and gas. In the case of China and Singapore, these nations do not export oil or gas, but maintain massive trade surpluses from the export of manufactured goods. The top ten owners of SWFs listed in order of the size of funds include The United Arab Emirates (UAE), Norway, Singapore, Saudi Arabia, Kuwait, China, Libya, Qatar, Algeria, and the United States State (Alaska Permanent Fund Corporation). Many of these countries are not democracies, have unclear national strategic interests, and are not allies of Australia.
About one-third of the total assets of SWFs are invested in Asian and Pacific countries, including Australia. Investment in Australia has mainly come from China, Singapore, Dubai, Kuwait, and France and has been focused in energy, resources, infrastructure, utilities, and defense sectors. The risk raised by recent literature is that foreign ownership in such sectors may threaten national security. This paper investigates if SWFs pose a direct threat to Australia’s national security or an indirect threat through its immediate area of interest (the Asia Pacific region).
