Table Of ContentCOMMODITY	
  BASED	
  SOVEREIGN	
  WEALTH	
  FUNDS:	
  	
  
AN	
  ALTERNATIVE	
  PATH	
  TO	
  ECONOMIC	
  DEVELOPMENT	
  
	
  
	
  
A	
  DISSERTATION	
  IN	
  
Economics	
  
and	
  
Social	
  Science	
  Consortium	
  
	
  
Presented	
  to	
  the	
  Faculty	
  of	
  the	
  University	
  of	
  
Missouri-‐Kansas	
  City	
  in	
  partial	
  fulfillment	
  of	
  
the	
  requirements	
  for	
  the	
  degree	
  
	
  
DOCTOR	
  OF	
  PHILOSOPHY	
  
	
  
	
  
By	
  
OMOSALEWA	
  OLUYINKA	
  OLAWOYE	
  
B.A.,	
  Laurentian	
  University,	
  2009	
  
M.A.,	
  University	
  of	
  Missouri,	
  Kansas	
  City,	
  2015	
  
	
  
	
  
Kansas	
  City,	
  Missouri	
  
2016
©	
  2016	
  
OMOSALEWA	
  OLUYINKA	
  OLAWOYE	
  
ALL	
  RIGHTS	
  RESERVE
	
   ii
COMMODITY	
  BASED	
  SOVEREIGN	
  WEALTH	
  FUNDS:	
  AN	
  ALTERNATIVE	
  PATH	
  TO	
  
ECONOMIC	
  DEVELOPMENT	
  
	
  
Omosalewa	
  Oluyinka	
  Olawoye,	
  Candidate	
  for	
  the	
  Doctor	
  of	
  Philosophy	
  Degree	
  
University	
  of	
  Missouri,	
  Kansas	
  City,	
  2016	
  
	
  
ABSTRACT	
  
Natural	
   resource	
   producing	
   countries	
   struggle	
   with	
   issues	
   about	
   how	
   to	
  
make	
   use	
   of	
   their	
   natural	
   resources	
   properly,	
   allocate	
   the	
   funds	
   from	
   these	
  
resources	
  and	
  how	
  to	
  ensure	
  continuity	
  of	
  these	
  resources	
  and	
  their	
  effects	
  through	
  
the	
  years.	
  Commodity	
  based	
  sovereign	
  wealth	
  funds	
  offer	
  a	
  channel	
  through	
  which	
  
these	
  can	
  be	
  achieved.	
  This	
  dissertation	
  studies	
  these	
  funds	
  with	
  respect	
  to	
  how	
  
they	
  can	
  be	
  used	
  to	
  finance	
  development	
  in	
  resource	
  rich	
  countries.	
  
Each	
   chapter	
   examines	
   natural	
   resource	
   funded	
   sovereign	
   wealth	
   funds	
  
called	
  commodity	
  based	
  sovereign	
  wealth	
  funds	
  (CBSWF),	
  from	
  different	
  angles.	
  
This	
  includes	
  analyses	
  of	
  what	
  these	
  funds	
  are,	
  how	
  they	
  are	
  currently	
  used,	
  the	
  
dangers	
  in	
  the	
  current	
  savings-‐like	
  investment	
  strategy	
  and	
  then	
  proposes	
  new	
  real	
  
investment	
  strategies	
  that	
  can	
  encourage	
  growth	
  for	
  these	
  countries.	
  The	
  aim	
  of	
  
these	
  analyses	
  is	
  to	
  suggest	
  these	
  funds	
  as	
  an	
  alternative	
  path	
  towards	
  growth	
  and	
  
development	
  in	
  natural	
  resource	
  owning	
  economies.	
  
To	
  achieve	
  this,	
  we	
  look	
  at	
  the	
  pre-‐	
  and	
  post-‐	
  CBSWF	
  era	
  of	
  some	
  CBSWF	
  
owning	
  countries	
  except	
  for	
  Iraq,	
  Iran	
  and	
  Libya,	
  which	
  have	
  recently	
  experienced	
  
	
   iii
wars	
  that	
  have	
  disrupted	
  these	
  economies	
  and	
  countries.	
  Some	
  of	
  the	
  countries	
  
being	
  studied	
  have	
  recently	
  adopted	
  these	
  funds	
  or	
  have	
  not	
  done	
  anything	
  with	
  
these	
   funds.	
   Thus,	
   it	
   is	
   difficult	
   to	
   analyze	
   the	
   effects	
   of	
   these	
   funds	
   in	
   these	
  
countries.	
  We	
  compare	
  these	
  countries’	
  Gross	
  Development	
  Product	
  (GDP)	
  and	
  their	
  
Human	
  Development	
  Indicators	
  (HDI).	
  We	
  analyze	
  these	
  data	
  before	
  and	
  after	
  these	
  
funds	
  were	
  adopted	
  in	
  these	
  countries	
  to	
  see	
  how	
  effective	
  these	
  funds	
  have	
  been	
  
with	
  respect	
  to	
  economic	
  growth	
  and	
  development.	
  We	
  take	
  a	
  look	
  at	
  the	
  failures	
  of	
  
the	
  current	
  savings	
  led	
  investment	
  strategy	
  of	
  some	
  countries	
  that	
  have	
  adopted	
  
these	
  funds.	
  Then	
  we	
  propose	
  alternative	
  real	
  sector	
  development	
  financing	
  that	
  
ensures	
  sustainable	
  growth	
  in	
  these	
  countries.	
  This	
  is	
  done	
  in	
  order	
  to	
  advocate	
  for	
  
a	
  real	
  investment	
  led	
  growth	
  in	
  natural	
  resource	
  owning	
  countries.	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   iv
APPPROVAL	
  PAGE	
  
The	
  faculty	
  listed	
  below,	
  appointed	
  by	
  the	
  Dean	
  of	
  the	
  School	
  of	
  Graduate	
  
Studies,	
  have	
  examined	
  a	
  dissertation	
  titled	
  “Commodity-‐Based	
  Sovereign	
  Wealth	
  
Funds:	
  An	
  Alternative	
  Path	
  to	
  Economic	
  Development,”	
  presented	
  by	
  Omosalewa	
  
Oluyinka	
  Olawoye,	
  Candidate	
  for	
  the	
  Doctor	
  of	
  Philosophy	
  degree,	
  and	
  certify	
  that	
  in	
  
their	
  opinion	
  it	
  is	
  worthy	
  of	
  acceptance.	
  
	
  
	
  
Supervisory	
  Committee	
  
Mathew	
  Forstater,	
  Ph.D.,	
  Committee	
  Chair	
  
Department	
  of	
  Economics	
  
	
  
Jimmy	
  Adegoke,	
  Ph.D.	
  
Department	
  of	
  Geosciences	
  
	
  
Douglas	
  Bowles,	
  Ph.D.	
  
Social	
  Science	
  Consortium	
  
	
  
Stephanie	
  Kelton,	
  Ph.D.	
  
Department	
  of	
  Economics	
  
	
  
Scott	
  Fullwiler,	
  Ph.D.	
  
Department	
  of	
  Economics	
  
	
  
	
  
	
  
	
  
	
  
	
   v
CONTENTS	
  
ABSTRACT………………………..……………………………………….……………………………………..iii	
  
LIST	
  OF	
  TABLES……………………………………………………….………………………………………vii	
  
LIST	
  OF	
  ILLUSTRATIONS………….…….……………………………..…………………………………	
  viii	
  
ACKNOWLEDGEMENTS………………………………………………………..………………….……….	
  ix	
  
Chapter	
  
1.  INTRODUCTION..…………………….……………………………….………………….	
  1	
  
2.  HOW	
  THESE	
  FUNDS	
  ARE	
  SPENT……………………………………….……..….	
  20	
  
3.  FINANCIALIZATION	
  AND	
  RISKS..…………………….…………….……………..	
  56	
  
4.  SUSTAINABLE	
  DEVELOPMENT	
  POLICY	
  OPTIONS……………..………….	
  85	
  
5.  VISION	
  2030	
  AND	
  DEVELOPMENT	
  PATHS	
  IN	
  
SUB-‐SAHARAN	
  AFRICA…………………………..…………….………………………………	
  118	
  
6.  CONCLUSION	
  AND	
  DIRECTIONS	
  FOR	
  FUTURE	
  RESEARCH………….	
  129	
  
REFERENCES…………………………………………………………………………………….…………...	
  132	
  
VITA……………………….………………………………………….…………………………………………..	
  147	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   vi
TABLES	
  
Table	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   Page	
  
1.	
  Qualitative	
  Comparative	
  Analysis	
  Truth	
  Table	
  of	
  
Commodity	
  Based	
  Sovereign	
  Wealth	
  Funds	
  Countries..…………..………..…..	
  54	
  
2.	
  List	
  of	
  Countries	
  and	
  Their	
  Funds..………………………………….……………..…	
  79	
  
3.	
  Fuzzy	
  Qualitative	
  Comparative	
  Analysis	
  of	
  
Investment	
  Ingredients	
  and	
  Outcomes.…………………………………………….…	
  117	
  
4.	
  Development	
  Path	
  Table	
  for	
  Some	
  
Sub-‐Saharan	
  African	
  Countries…………………………………………………..………	
  125	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   vii
ILLUSTRATIONS	
  
Figure	
  	
   	
   	
   	
   	
   	
   	
   	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Page	
  
1.  GDP	
  Per	
  Capita:	
  Papua	
  New	
  Guinea.……………..…………………………….	
  40	
  
2.  Sovereign	
  Wealth	
  Funds	
  Financial	
  
Portfolio	
  Breakdown.……………………………………………………………………………	
  63	
  
3.  Financialization	
  Effects	
  on	
  the	
  
GDP	
  per	
  Capita	
  of	
  CBSWF	
  Countries…….…………………………..……………………	
  64	
  
4.  Exchange	
  Rate	
  Trends	
  from	
  
February	
  2006	
  to	
  March	
  2015..………………………………….…..………………………	
  68	
  
5.  Value	
  of	
  the	
  Top	
  15	
  CBSWF.………………………………………………………..	
  92	
  
6.  Percentage	
  Share	
  of	
  the	
  Top	
  15	
  CBSWF.………………………………………	
  92	
  
7.  Employment	
  Sector	
  in	
  Norway..……………………………………………….…	
  97	
  
8.  Sustainable	
  Paths	
  for	
  CBSWF	
  Developing	
  Countries.…………………..	
  102	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   viii
ACKNOWLEDGEMENTS	
  
A	
  popular	
  African	
  proverb	
  says,	
  “It	
  takes	
  a	
  village	
  to	
  raise	
  a	
  child.”	
  
My	
  family	
  and	
  academic	
  “village”	
  have	
  made	
  my	
  doctoral	
  degree	
  possible.	
  
I	
  would	
  like	
  to	
  specially	
  thank	
  my	
  advisor,	
  Professor	
  Mathew	
  Forstater	
  
for	
   his	
   support	
   throughout	
   my	
   years	
   in	
   Kansas	
   City	
   and	
   for	
   being	
  
someone	
  I	
  could	
  trust	
  and	
  run	
  to	
  whenever	
  I	
  got	
  stuck.	
  I	
  would	
  also	
  like	
  
to	
  thank	
  the	
  rest	
  of	
  my	
  committee	
  –	
  Professor	
  Jimmy	
  Adegoke,	
  Professor	
  
Stephanie	
  Kelton,	
  Dr	
  Scott	
  Fullwiler	
  and	
  Dr.	
  Douglas	
  Bowles	
  –	
  for	
  their	
  
input	
  and	
  direction.	
  My	
  sincere	
  gratitude	
  goes	
  to	
  Dr	
  Linwood	
  Tauheed	
  for	
  
his	
  help	
  during	
  the	
  development	
  of	
  this	
  dissertation.	
  A	
  special	
  thank	
  you	
  
is	
   extended	
   to	
   Dr.	
   Louis-‐Philippe	
   Rochon	
   for	
   his	
   support	
   since	
   my	
  
undergraduate	
  days	
  and	
  for	
  being	
  with	
  me	
  every	
  step	
  of	
  the	
  way	
  since	
  
then.	
  
Last	
  but	
  definitely	
  not	
  least,	
  I	
  would	
  like	
  to	
  thank	
  my	
  friends	
  and	
  
family	
  especially	
  my	
  mother,	
  Foyinsola	
  Olawoye	
  for	
  being	
  my	
  biggest	
  
cheerleader	
  and	
  encourager.	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   ix
DEDICATION	
  
Dedicated	
  to	
  the	
  memories	
  of	
  my	
  father,	
  Raphael	
  Iranola	
  Olawoye,	
  and	
  my	
  
brother,	
  Oreoluwa	
  Olawoye.	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   x
Description:However, the impacts of sovereign wealth funds depend on their size, .. 2.2.1 Algeria. Located in North Africa, the Democratic Republic of Algeria has a population of over 39.5 million people (CIA Handbook, 2015). This natural resource contributed to its economic diversification so much so that oil