Sarawak bets on its sovereign wealth fund to regain greater autonomy

Sarawak bets on its sovereign wealth fund to regain greater autonomy


The Malaysian state of Sarawak's new sovereign wealth fund may be small by global standards, but its ambitions are anything but. Guanie Lim argues that sovereign wealth funds are often viewed as tools of fiscal prudence, when in reality they are "instruments of domestic ambition dressed in the language of fiscal prudence."

The fund was created to tackle a challenge familiar across the developing world: how to turn finite natural resources into lasting prosperity. As Lim notes, "What matters is the issue the fund was created to solve, because that problem is shared, in some form, by dozens of resource-dependent economies stretching from the Pacific islands to Central Asia." Beyond economics, the fund also reflects Sarawak's efforts to reclaim greater autonomy after decades of disputes over resource revenues with Malaysia's federal government.

While skeptics may see its conservative investment strategy as overly cautious, Lim writes that "the bond-first approach will strike some as timid. It should not." The real test will come later, as political pressure grows and hydrocarbon revenues eventually decline. If the fund works, "then it will be a more instructive model for developing Asia than anything Norway or Singapore has built."