Economy: New development fund may become Macau SWF

Reported by the Times last week, the Chief Executive has decided to set up a new Development and Investment Fund, which may constitute a sovereign wealth fund (SWF).

As its name suggests, such funds are usually made and held by respective governments. However, investments may be operated by entities separate from the government.

In Macau, the government will establish the fund in a bid to improve the returns of Macau’s financial reserves. The fund will run with market-led and commercial principles and will be managed by an entity outside of the existing government branches.

As of the end of January, there were a total of 732.79 billion patacas of financial reserves.

According to the Sovereign Wealth Fund Institute, a global corporation analyzing public asset owners such as sovereign wealth funds, there are a number of reasons that make the fund an SWF. One of them is due to the fact that profits from the fund are to be used for social improvement and the promotion of education and scientific advancement.

The Institute also claimed that the mainland government is increasing “its surveillance of gambling activities, [and this] may also explain some of the local government’s interest in diversifying revenues.”

SWFs focus on long-term profits more than exploiting short-term market fluctuations. Initial capital usually comes from a government’s foreign currency reserves.

Several large SWF holders in the world include the United Arab Emirates, Norway, Saudi Arabia, the People’s Republic of China, Kuwait, Russia, and Singapore. Staff reporter