Mongolia’s Bright Idea

Ashby Monk

Despite the financial crisis and some setbacks for certain SWFs, 2009 remains a banner year. In a previous post, I managed to list off eight new SWFs that are being (or have already been) created in 2009 alone. Let’s add Mongolia to this list.

Mongolia’s Finance Minister Sangajav Bayartsogt said on Friday that the government would set up a SWF derived from Oyu Tolgoi copper-gold mine revenues. Over a 50 year time horizon, the expectation is that this fund could reach $30 billion.

The idea would be to diversify the economy and provide annual income to every Mongolian (once the fund comes on line in 2013). Indeed, by siphoning off these revenues, the government is hoping to avoid Dutch disease and alleviate poverty. The Mongolians are looking specifically at the Alaska Permanent Fund for inspiration, which pays qualified Alaskan citizens a yearly dividend.

I’m intrigued; a developing country has apparently decided to set up a SWF so as facilitate the return of national wealth to its citizens rather than keep it from them. Time will tell if the governance procedures are set up appropriately, but the concept is compelling.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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