Israeli SWF “Not A Fantasy”

Ashby Monk

Earlier in the week, I noted that the IMF had asked Israel to begin the process of setting up a new SWF to house looming resource revenue from two recently discovered gas fields in the Mediterranean Sea. Well, the IMF apparently gets what the IMF wants: Israel will proceed with plans for a new SWF this year.

The news comes from Eugene Kandel, head of the National Economic Council, and was reported on Reuters and in the Wall Street Journal. The new fund apparently has the backing of Netanyahu and Finance Minister Yuval Steinitz, as well as broader support in government. So, as Kandel put it, the new Israeli SWF “is not a fantasy”.

Kandel seemed to justify the new SWF  on competitive grounds (i.e. to avoid Dutch Disease from the influx of unearned wealth) and on precautionary grounds (i.e. to have cash on hand in case of a catastrophic event, such as an earthquake). It should come as no surprise then that the economic team is already examining the experiences of Norway, which has adeptly used their SWF to combat Dutch Disease, and Chile, which has used its SWF to help rebuild after a devastating earthquake.

Whichever fund or funds end up serving as the blueprint for an Israeli fund, it’s pretty clear that Kandel already “gets it”:

“We’re going to set it up in such a way that it’s going to be invested abroad…It’s going to be run professionally without interference from current political needs, with an eye on long-term investment…We are working on implementation. We would like that to be set up within a year.”

That hits on the right governance themes, in my view.

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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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