The Politics of Ambiguity in Asia's Sovereign Wealth Funds

Abstract

Investments by Asian Sovereign Wealth Funds (SWFs) continue to be of concern in the global economy. A common perception is that they are managed by state-affiliated entities with geostrategic motives that could somehow prove detrimental to host countries. This paper demonstrates, however, that even the definition, let alone the establishment and investment targets, of Asian SWFs are embroiled in ambiguity within home country politics. Plainly put, ambiguity refers to the absence of clear-cut policy processes, means, and goals. How do we explain the ambiguity surrounding SWFs? Ambiguity is not a cover for deliberate, cohesive, and strategic actions, because SWFs are not under the control of any one set of actors. Rather, perhaps to the discomfort even of home country sovereigns, ambiguity is a messy domestic product of contending political forces that do not allow a marked trend toward any one single policy equilibrium on sovereign investments, whether domestic or foreign. While this reality is perhaps understandable in a democratic polity, it is also equally true of authoritarian ones in the region. In both types of cases, ambiguity is constructed inadvertently by the interactions of state, interstate, and intrastate actors, each with their own interests and expectations about the role of SWFs. Analyzing the cases in Singapore, China, Japan, and other Asian countries, from this unifying perspective suggests that while ambiguity may fuel external anxiety concerning home country intentions, it actually reflects far more domestically salient controversies about SWF activities than is typically appreciated.