E. M. RUSAKOV

Candidate of Historical Sciences

sovereign wealth fund Keywords: emerging markets, China, Gulf countries, foreign investment

In the last two decades, a serious stratification has occurred among developing countries (the former "third world"), primarily due to the high growth rates of the economies of China, India and a number of other fast-growing countries. These dynamically developing countries are making significant adjustments to the balance of power in the global economic and financial arena. One of the manifestations of increasing their weight in the global economy was the transformation of welfare funds from insurance instruments to investment institutions.

The path of such transformation can be thorny, as it is shown in the article by V. V. Samartsev on the example of a Chinese investment corporation. But its final station, as a rule, is one - buying up foreign assets.

The " pot " becomes an investment lever. Such investments involve risks for both wealth funds and recipient countries. Still, it's worth the candle: they remain an important, even vital tool for those fast-growing countries that have the opportunity to create such a fund.

THIRD WORLD STRATIFICATION

The initial stratification of the " third world "was recorded by the United Nations Conference on Trade and Development (UNCTAD) several decades ago: it is reflected in the United Nations designation of" least developed countries " (LDCs). Sometimes they are called the "fourth world". The emergence of the term reflected the negative outcome of stratification in developing countries, some of which were most notably lagging behind in economic development, unable to break the cycle of poverty and stagnation. Back in 1981, the first conference on the problems of "less developed countries"was held.

The list of "least developed countries" includes the poorest countries with an annual per capita income of less than $750, a low human development index (HDI) and an underdeveloped economy. It currently has 50 Member States, including 33 in Sub-Saharan Africa, 16 in Asia and Oceania, and one in the Western Hemisphere, Haiti.¹

The positive consequence of the stratification of emerging economies is reflected in the concept of "emerging markets", or emerging market countries. These include States that have experienced the most dynamic economic development and profound social changes in recent years.

In China, this term is translated as "fast-growing markets". However, its translation into Russian sometimes introduces ambiguity in the analysis of processes occurring in countries that are not yet included in the category of economically developed countries. Emerging market is translated as" pop-up"," emerging", and" developing " market.

The first translation ("pop-up") is literal, i.e. linguistically correct (which cannot be said about the concept of "emerging"), but it is too poetic, and most importantly-it does not reflect its current widespread meaning. The translation of "emerging market" is generally inaccurate. It was customary to call the entire world outside the" golden billion "- the most economically developed and rich countries, i.e. the entire former" third world " - "Developing".

But the emerging markets cohort includes only a relatively small part of developing countries, as well as so - called transitional economies-countries with "socialist" centralized economies that have taken the market path. Along with the success of the countries of Eastern Europe and the People's Republic of China, which somehow manages to become a market economy naturally, without the cataclysms inherent in the former "socialist commonwealth", the concept of "transition economy" also gradually gives way to a more precise term - emerging market.

As a matter of fact, the term itself was originally coined to refer to countries that have already left the category of developing countries, but have not yet reached the stage of economically developed ones. The term emerging markets has consistently appeared in the G20 communiques since the first meeting of its leaders in ^{November 2008.2}

In the English-Russian dictionary of Banking and Financial terms prepared by the World Bank-

com (WB) together with the Moscow State Financial Academy3, emerging security markets were translated as "emerging securities markets". Over time, the more correct, in my opinion, translation of this concept in relation to all markets has prevailed - "emerging".

As time passes, the list of emerging market countries is rapidly updated to reflect the dramatic changes that have occurred and are taking place in the world economy in a historically short time due to the dynamic growth of economies that were once considered to be developing.

In the famous 1997 book " The Big Ten. Major Emerging Markets and How they are Changing Our Lives " J. Garten, who recently served as US Secretary of Commerce, ranked Mexico, Brazil, Argentina, South Africa, Turkey, Poland, South Korea, China (along with Taiwan), Indonesia and India among the "mighty ten" ^.4 When I asked him (I was working in New York at the time) why Russia was not included in this list, he answered evasively in the spirit of: "I haven't grown up yet." Ironically, he publicly buried his pessimistic attitude towards Russia by taking a seat next to Dmitry Medvedev on the presidium of the G20 Business Summit round table in Seoul in November 2010 (the Russian president presided over one of the sessions).

Criteria for the selection of large emerging markets (Big Emerging Markets, abbreviated as Big Emerging Markets). BEMs) were the following factors: a large population, large resources, a large domestic market and regional leadership, the role of disruptors of the status quo on the world stage, active participation in major political, economic and social processes on a global scale, a fast-growing domestic market and a significant contribution to the growth of world trade, a course towards an open economy, a balanced budget, etc. privatization of state-owned companies. In the overwhelming majority of BEMs, there is also a trend towards political liberalization5.

Now some rating agencies have returned Argentina back to the category of emerging markets, and the rank of emerging market economy, in addition to the aforementioned "top ten", includes Russia, some Eastern European and Latin American countries, and from Afrasian countries - Singapore, Thailand, Malaysia, the Philippines, Pakistan, Egypt, Sri Lanka, Morocco, Saudi Arabia, Kuwait, Oman, Bahrain, United Arab Emirates, Jordan ⁶.

The lists may vary depending on the rating source, and you can agree or disagree with them. But they draw a clear distinction between emerging and emerging market countries. For example, all countries of Sub-Saharan Africa, with the exception of the Republic of South Africa, are not included in the lists of emerging countries. They remained ranked as least developed or developing economies. At the same time, at the G20 summit in Seoul, the proposal to join South Africa to the BRIC group was positively met, as stated by Dmitry Medvedev.

The latest World Economic and Financial Survey (October 2010), prepared by the International Monetary Fund (IMF), provides tables of emerging and developing countries for a number of indicators. In addition to Russia and some Latin American and Eastern European countries, emerging economies include: in Asia - China (as well as Taiwan), India, Pakistan, South Korea, Malaysia, Indonesia, the Philippines, Thailand, Turkey, Israel and Jordan, in Africa-Egypt, Morocco and South Africa.⁷

It is no coincidence that the G20 includes only those countries in Asia and Africa that are consistently classified as emerging markets - China, India, Indonesia, Saudi Arabia, South Africa, South Korea, and Turkey. The leader of emerging market economies is generally recognized as the" four " BRIC countries (Brazil, Russia, India, and China), although, of course, Brazil and especially Russia are still lagging behind China and India in terms of growth rates. At the same time, Russia ranks second in terms of gold and foreign exchange reserves among the BRIC countries after China and third in the world (Japan is second). With the discovery of large oil deposits on the continental shelf of Brazil, there is a prospect of large accumulations in this country.

The concept of emerging is quite successfully implemented in everyday life and in international relations. Delivering a keynote speech on the Obama Administration's foreign policy at the Council on Foreign Relations, U.S. Secretary of State H. E. Bush Clinton called China, India, Russia, Turkey, Mexico, Brazil, Indonesia, and South Africa "emerging centers of influence" in world politics and" emerging powers " of global significance. ⁸

TRAILBLAZERS

Rapid growth of economies and gold and foreign exchange reserves of cereals-

The world's largest emerging markets, primarily the BRIC countries and some others, in particular the countries of the Cooperation Council for the Arab States of the Persian Gulf (GCC)*, have changed the global financial order in the last decade. This conclusion was made in the study "Sovereign Wealth Funds and the new era of BRIC wealth", published in July 2010 by the Moscow School of Management SKOLKOVO and the Beijing Institute for the Study of Fast-growing Markets SKOLKOVO ⁹.

The most significant feature of the economic nature of a sovereign wealth fund, a financial institution that manages significant amounts of public funds, is the investment of these funds in assets with higher than risk - free returns.

Initially, wealth funds were created by oil-producing countries as a kind of" pot", which they tried to protect from" drying up " by investing its funds in securities considered reliable, primarily in long-term bonds of the US Treasury Department. But the global financial and economic crisis, as noted above, has shaken confidence in both the dollar and US Treasuries.

The first sovereign wealth fund was established in Kuwait in 1953. As noted above, it is still among the top ten largest state institutions of this kind.

The largest and most active and at the same time the most mysterious, opaque was created in 1973. Abu Dhabi Investment Authority (ADIA).

It was the one that made Wall Street wince, investing $7.5 billion. to the largest American bank City Group¹⁰. However, the timing was extremely unfortunate: the deal took place in November 2007, and soon the financial crisis broke out, many American banks, including City Group, were on the verge of bankruptcy, they were saved by the state. Nevertheless, foreign investment activity in the GCC countries, including their sovereign wealth funds, continued in 2008-2009, and their investment potential is expected to grow further in the post-crisis period**.

BRIC: DIFFERENT PERSPECTIVES

As in many other indicators, China overtakes Russia, Brazil and India in terms of active use of investment funds.

So far, the financial and economic situation in India is such that it does not have enough funds to create a welfare fund. As noted in the SKOLKOVO analytical review, " the Indian economy simply does not meet the structural and resource requirements to accumulate a surplus of capital." Its ability to export raw materials, as well as its gold and foreign exchange reserves (approximately $280 billion), ^are small11.

With the discovery of the large Tupi oil field in the coastal waters of Brazil in 2006, the prospect of large savings for this country and a serious increase in the funds of its sovereign fund Fundo Soberano do Brasil, which so far has only $9 billion ¹².

Thus, Russia ranks second among the BRIC countries in terms of sovereign wealth funds.

The Ministry of Finance of the Russian Federation, which manages them, is still investing in assets that are considered almost risk-free.

Calls to invest in the Russian economy do not fit well with financial and economic realities.

It's not just that the " pot " was very useful when the global financial and economic crisis broke out. The question is how to most effectively solve the problem of risk distribution in the modern economy.

On the one hand, investing money in risk-free assets, such as ordinary insurance or a bank deposit, threatens serious losses, which was the case in China before the creation of the China Investment Corporation and other similar institutions-

* The GCC, established in 1981, includes the Kingdom of Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Oman, Qatar and Bahrain.

** For more information, see: Shkvarya L. V., Aidrus I. A. Investment potential of the Arab countries of the Persian Gulf / / Asia and Africa Today, 2010, N 7.

mulberry trees. On the other hand, it is necessary to find such assets with a higher risk-free yield, which are not associated with excessive risks. In the early stages of its activity, the CFC did not avoid mistakes in this matter, as did the funds of the GCC countries.

Investing in the Russian economy in some cases still remains too risky due to a number of reasons, ranging from the lack of clear investment projects and ending with the "skill" in "burying" money (a vivid example is the construction of new highways that need to be repaired in a few years).

For some countries, including Russia, the "pot" also plays a significant role as a macroeconomic stabilizer: the injection of foreign currency into the economy, which is converted into local monetary units, is fraught with increased inflation and an increase in the national currency exchange rate. It is especially important for China: the fixed exchange rate of the yuan with a large foreign trade surplus forces the PBOC to buy large amounts of excess dollars in order to maintain the yuan's peg to the dollar.

Stabilization Fund of the Russian Federation (SFRF) it has not yet emerged from the state of a "pot": unlike the sovereign wealth fund, it was created to smooth public spending. The law required investing only in fixed-income securities that are rated AAA, i.e. practically (almost) risk-free.

In 2008, the SFRF was divided into two separate funds: the Reserve Fund, which was assigned the role of a stabilization fund, and the National Welfare Fund, which was supposed to invest in assets with higher risks and returns, but in fact it also continues the cautious course of the SFRF ¹³.

However, the logic of the development of sovereign wealth funds around the world should lead to the fact that the Russian National Welfare Fund, probably sooner or later, will become an important investment lever.

* * *

Even before the crisis, emerging market countries, especially the GCC and China, were increasingly interested in more profitable, if riskier, assets than US government debt.

Moreover, as far as China is concerned, investments in foreign raw materials, high-tech, financial and other corporations contribute both to the peaceful strengthening of its position in the global economy and to solving the country's tasks of modernizing the economy and providing it with raw materials.

Most experts believe that the global investment famine is a guarantee of rapid growth in the size and influence of emerging market sovereign wealth funds in the global economy and finance in the coming years. According to US analysts, in 2015, the capital of sovereign funds (and all of them, with the exception of Norway, belong to emerging market countries) will reach $¹⁵ trln14.

Thus, the performance of sovereign funds becomes an important indicator of further changes in the balance of power in the global economy in favor of the most dynamically developing economies of the former "third world", primarily the BRIC countries.

¹ Сайт ЮНКТАД - The Criteria for the identification of the LDCs http://www.un.org/special-rep/ohrlls/ldc/ldc%20criteria.htm

² Republic of Korea 2010. Communiques. Declaration. Summit on Financial Markets and the World Economy, 15.11.2008 - http://www.g20.org/pub_communiques.aspx

³ Glossary Banking and Finance. English-Russian/Russian-English. Dictionary of banking and financial terms. English-Russian/Russian-English, part 2. Economic Development Institute of the World Bank. State Financial Academy, Moscow. The World Bank, Washington, D.C. 1993, p. 98.

^{Garten Jeffrey E.} 4 The Big Ten. The Big Emerging Markets and How They Will Change Our Lives. BasicBooks. A Division of Harper Collins Publishers, N.Y., 1997, p. 4 - 12.

⁵ Ibid., p. 13 - 14.

^{Chandra Jain Subhash.} 6 Emerging Economies and the Transformation of International Business. Edward Elgar Publishing, 2006, p. 384; Country Classification in FTSE Global Benchmarks - http://www.ftse.com/Indices/Country_Classification/index.jsp; MSCI International Equity Studies - http://www.mscibarra.com/products/indices/internationalequityindices/

⁷ The IMF website. Global Financial Stability Report. Sovereigns, Funding, and Systemic Liquidity. October 2010. Statistical Appendix, p. 29 - http://www.imf.org/external/pubs/ft/gfsr/2010/02/index.htm

⁸ US State Department website. Remarks on United States Foreign Policy. Hillary Rodham Clinton Secretary of State. Council on Foreign Relations. Washington, DC. 8.09.2010 - http://www.state.gov/secretary/rm/2010/09/146917.htm

⁹ Moscow School of Management SKOLKOVO. SKOLKOVO Institute for the Study of Fast-Growing Markets, July 2010. Sovereign wealth funds and the new era of BRIC wealth http://www.skolkovo.ru/media/documents/research/SIEMS_Monthly_Briefing_2010 -07_rus. pdf

^{London Thomas.} 10 Cash-Rich, Publicity-Shy, Abu Dhabi Fund Draws Scrutiny // New York Times, 20.02.2008.

¹¹ Moscow School of Management SKOLKOVO, p. 19.

¹² Ibid., p. 10.

¹³ Ibid., pp. 14-15.

^{Landon Thomas.} 14 Op. cit.

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