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Praise for Capital Choices
“Capital Choices breaks new ground, providing a convincing
explanation for the wide variations we observe in the characteristics
of sovereign wealth funds around the world. Clearly written
and thoroughly researched, the book is a must read for anyone
interested in the domestic politics of international finance.”
— Benjamin Cohen, University of California, Santa Barbara
“This is a major work not just about the increasingly important
sovereign wealth funds but also about how non- Western states
pursue industrial policies. It combines theory, non- Western cases
and new empirical material to tell a story of why states create
sovereign wealth funds and their scope for choosing distinct paths
of economic development.”
— Mark Thatcher, London School of Economics and Political Science
“In Capital Choices, Juergen Braunstein provides an illuminating
original account of the emergence and divergence of sovereign
wealth funds. Explaining how different interests and coalitions
shape varying SWF paths, this compelling argument finally places
politics where it belongs— at the centre of analysis. A decisive
intervention in the debate.”
— Garry Rodan, Murdoch University
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Capital Choices
Sovereign wealth funds are state-c ontrolled pools of capital that hold
financial and real assets, including shares of state enterprises, and man-
age them to preserve and grow the nation’s base of sovereign wealth.
The dramatic rise of sovereign wealth funds (SWFs) in number and
size— the funds are now larger than the combined size of global private
equity and hedge funds— and that the majority of them are located in
non- OECD countries have raised concerns about the future direction
of capitalism. Yet SWFs are not a homogenous group of actors. Why
do some countries with large current account surpluses, notably China,
create SWFs while others, such as Switzerland and Germany, don’t?
Why do countries with no macroeconomic justification, such as Senegal
and Turkey, create SWFs? And why do countries with similar macro-
economic features, such as Kuwait and Qatar or Singapore and Hong
Kong, choose very different types of SWFs?
Capital Choices analyzes the struggles behind the creation of differ-
ent SWFs from a comparative political economy perspective. Examin-
ing small open economies, the book argues that different state-s ociety
structures at the sectoral level are the core drivers responsible for SWF
variation. Author Juergen Braunstein looks inside the “black box” of
SWF creation, focusing on the early formation period of SWFs, a criti-
cal but little understood area in the current debate, given the high lev-
els of political sensitivity and lack of transparency. Braunstein’s novel
analytical framework provides practical lessons for business and finance
organizations, as well as for policymakers of countries that have cre-
ated or are planning to create SWFs. This book illustrates the scope for
domestic politics and the strategies of small states in economic policy
despite strong transnational forces, notably international economic and
diffusion pressures.
Dr. Juergen Braunstein is a research fellow at the Harvard Kennedy
School’s Belfer Center for Science and International Affairs.
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CAPITAL CHOICES
Sectoral Politics and the Variation
of Sovereign Wealth
Juergen Braunstein
University of Michigan Press
Ann Arbor
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Copyright © 2019 by Juergen Braunstein
All rights reserved
This book may not be reproduced, in whole or in part, including illustrations, in any form
(beyond that copying permitted by Sections 107 and 108 of the U.S. Copyright Law and
except by reviewers for the public press), without written permission from the publisher.
Published in the United States of America by the
University of Michigan Press
Manufactured in the United States of America
Printed on acid- free paper
A CIP catalog record for this book is available from the British Library.
Library of Congress Cataloging- in- Publication data has been applied for.
First published July 2019
ISBN: 978- 0- 472- 13132- 7 (Hardcover : alk paper)
ISBN: 978- 0- 472- 12518- 0 (ebook)
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Contents
Abbreviations vii
Foreword ix
Acknowledgments xi
ONE Introduction 1
TWO Global Review 9
THREE Bringing Domestic Politics In: A Policy Network
Analysis of Sovereign Wealth Funds 26
FOUR Capital Choices in Industrial Policy:
Asian City- Economies and the Emergence of Temasek 36
FIVE Capital Choices in Savings and Financial Policy:
Asian City- States and the Emergence of the
Government Investment Corporation 79
SIX Capital Choices in Small Open Economies of the Middle East 103
SEVEN Capital Choices in OECD and BRIC Countries 124
EIGHT Conclusion: Domestic Politics and Capital Choices 137
Appendix 151
Notes 155
Bibliography 165
Index 193
Digital materials related to this title can be found on
the Fulcrum platform via the following citable URL:
https://doi.org/10.3998/mpub.9853048
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Abbreviations
ADIA Abu Dhabi Investment Corporation
ADNOC Abu Dhabi National Oil Corporation
APF Alaska Permanent Fund
AUM assets under management
BRIC Brazil, Russia, India, China
CMA Chinese Manufacturers’ Association
CPF Central Provident Fund
DBS Development Board of Singapore
DPM deputy prime minister’s office
DPMO Deputy Prime Ministers Office
EDB Economic Development Board
ExCo Executive Council
FHKI Federation of Hong Kong Industries
GCC Gulf Cooperation Council
GIC Government Investment Corporation
HK$ Hong Kong dollar
HKGCC Hong Kong General Chamber of Commerce
KIA Kuwait Investment Authority
LAC Labour Advisory Committee
LegCo Legislative Council
MAS Monetary Authority of Singapore
MFI Minister for Finance Incorporated
MNCs multinational corporations
OECD Organisation of Economic Co- operation and Development
