MASIC Annual Investment Forum 2017

National Transformation Plans, Opportunities and Challenges

The current global pursuit of energy diversification and energy self-sufficiency has flooded the market with oil and depressed commodity prices, renewing the imperative for resource-dependent nations to consider more stable and long-term financial solutions. With an increasingly volatile market for natural resources given new production methods and a changing geopolitical landscape, the government investment vehicle industry, which has been on a rise over the past two decades, will play a crucial role in the coming years for resource-dependent nations.

For resource-rich countries like the GCC and countries in Africa and Latin America, extracting oil and other commodities will lead to capital depreciation unless the receipts are fully invested in financial, physical or human capital. The World Bank (2006) has shown that many oil exporting countries and other exporters of non-renewable resources have negative savings, while at the same time having the world’s largest government investment vehicles. This imbalance in addition to uneven drawing from national fiscal stabilization funds, although unsurprising, is risky and ultimately unsustainable. What is of interest now is the way these nations and their long-term savings funds will adapt to this new economic landscape and its projected future.

Government investment vehicles are established in order to cushion government revenues and provide a stable level of income against large fluctuations in oil prices, and/or be used as an instrument to accrue savings for future generations in the face of the eventual depletion of non-renewable resources. Other funds financed by natural resource exports are established with the aim of maximizing returns on the income from exports and diversifying the economy away from reliance on one source. With varying objectives catering to each country’s unique set of needs, there are significant differences across government investment vehicles, their asset allocation, source of financing, investment horizons and processes, institutional and legal structure, transparency, and risk tolerances. This makes it difficult to talk generally about relevant or helpful investment strategies.
It is in this context and economic climate that Norway’s withdrawal of 6.8 billion kroner from its Government Pension Fund Global in January is of great interest. The fund is the largest and one of the largest global investors. The government will probably withdraw as much as 80 billion kroner from the fund in 2016. However, withdrawals will be more than offset by the cash flow generated by its investments which in 2015 amounted to over 190 billion kroner. Government withdrawals will not bite into its capital base and reduce savings, but are covered by its profits. This is indeed a “significant shift in the fund’s history”, as Norway’s Central Bank Governor, Oeystein Olsen, observed.
For the first time in its short history, there is empirical evidence that the objective for which long-term savings funds were built -- benefiting current and future generations-- can be met. Current profits, not past savings, must fund government expenses, while the core of the fund, its capital base, remains untouched.

The Forum will take a closer look at individual cases such as Norway’s in order to study specific investment strategies that focus on the long-term management of wealth (in relation to the country’s economic development plan). The working hypothesis of long-term savings funds has been that finite wealth should be transformed into financial assets that would secure an infinite stream of income. Over time, financial returns would gain in significance in funding government expenditure whilst the importance of oil-related incomes would gradually contract. This thesis, admittedly a bold one, has been at the core of the dramatic rise of the government investment vehicles industry over the past two decades. Malaysia and Singapore have been similarly successful in investing in long-term financial assets and would offer an interesting diversity of strategy and perspective. We hope to investigate the unique set of obstacles, challenges, and successes these countries have experienced firsthand. Since the importance of oil as a global resource is still long-lasting, an expert in the field will be invited to give insight into its gradually changing role as the world readies itself for a dramatically different energy and economic landscape.


Joseph E. Stiglitz

Economist and a professor at Columbia University

Joesph is an American economist and a professor at Columbia University. He is also the co-chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and the Chief Economist of the Roosevelt Institute. A recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979), he is a former senior vice president and chief economist of the World Bank and a former member and chairman of the (US president's) Council of Economic Advisers. In 2000, Stiglitz founded the Initiative for Policy Dialogue, a think tank on international development based at Columbia University. He has been a member of the Columbia faculty since 2001 and received that university's highest academic rank (university professor) in 2003. Based on academic citations, Stiglitz is the 4th most influential economist in the world today, and in 2011 he was named by Time magazine as one of the 100 most influential people in the world. Known for his pioneering work on asymmetric information, Stiglitz's work focuses on income distribution, asset risk management, corporate governance, and international trade. He is the author of numerous books, and several bestsellers. His most recent titles are The Euro: How a Common Currency Threatens the Future of Europe, Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity and The Great Divide: Unequal Societies and What We Can Do About Them.

Mr. TEO Ming Kian

Chairman -Vertex Venture Holdings Ltd

Mr.Teo has been a board director and Chairman of Vertex Venture Holdings Ltd since May 2012. He served as Permanent Secretary in Ministry of Defense, Ministry of Communications, Ministry of Finance as well as Executive Chairman of the National Science and Technology Board (renamed later as Agency for Science, Technology and Research) and the Economic Development Board. Mr.Teo was conferred the Singapore Public Administration Medal(Gold) in1993, the Commander First Class—Royal Order of the Polar Star (Sweden) in1994. He holds a Bachelor of Engineering (First Class Honours) degree in Mechanical Engineering from Monash University in Australia, and Master of Science degree in Management Studies from MIT (Massachusetts Institute of Technology).

Sir Michael Barber

Managing Partner and Co-founder of Delivery Associates, and Chief Education Advisor at Pearson

Sir Michael is a world-leading authority on the effectiveness of government. He is the Managing Partner and Co-founder of Delivery Associates, and Chief Education Advisor at Pearson.

In 2001, he founded the Prime Minister’s Delivery Unit in No10, Downing Street, which he ran until 2005. In this role he was responsible for ensuring delivery of the government's domestic policy priorities across health, education, crime reduction, criminal justice, transport and immigration.

From 2005 to 2011 he was a partner at McKinsey and Company where he played a leading role in creating a public sector practice and founded the global education practice.
Since 2014 he has been Chair of the World Economic Forum Global Agenda

Council on Education.
He is a distinguished visiting scholar at Harvard School of Public Health and holds honorary doctorates from The University of Exeter, The University of Wales and The University of Warwick. In 2005, he was knighted for his services to improving government.

Fahad M. Alturki, Ph.D

Chief Economist and Head of Research, Jadwa Investment

Dr. Fahad M. Alturki is Chief Economist and Head of Research at Jadwa investment Company in Riyadh. He is also a member of its Executive Management Committee. He is responsible for managing the economic research department and publishes regularly on issues related to the Saudi and global economies and the world oil market. He appears frequently in the domestic and international media and is a regular public speaker.
Prior to joining Jadwa, Fahad led the Macroeconomics Research unit at Barclays Saudi Arabia with similar responsibilities. Previously, Fahad was an Economic Specialist at the Saudi Arabian Monetary Agency where he worked for eleven years in the Economic Research and Statistics Department. Between 2007-0, Fahad was an economist at the International Monetary Fund at the Middle East and Central Asia Department.
Fahad graduated with a BA in business administration (majoring accounting) from King Saud University in Saudi Arabia, and has a Master’s and Ph.D. degrees in economics from University of Oregon (Eugene, USA).

Adrian Wooldridge

“Schumpeter” Columnist and Management Editor, The Economist. Expert on global business, culture and politics

Long-time journalist for The Economist speaks on
a wide range of subjects revolving around global business: China and India, the search for talent, business history, management and entrepreneurship, globalization and the economy. Coauthor of five books. Adrian is the author of new book The Great Disruption: How Business is Coping with Turbulent Times.

Adrian has written Economist surveys on entrepreneurship, the global search for talent, as well as on telecommunications, education, multinational companies and management consultancy.

He’s also written public policy papers on education, on meritocracy and classless society, and a book on American politics.