Straits Herald August 24, 2019

The European Union (EU) is considering plans to create their own sovereign wealth fund to build European champions to counter global corporate powers.

Reports have surfaced that the so-called EU sovereign wealth fund will be up to €100 billion (US$117 billion).

This entity would focus on strategic sectors where the Europeans traditionally do not have strong corporate foothold compared to American or Chinese companies.

Brussels is believed to build the necessary means to combat the capital superiority of the likes of Apple, Google, and Alibaba.

No EU member state boasts a comparable sovereign fund.

Norway, which is not in the EU, is often touted as a success story for sovereign funds across the world. Norway’s fund is the largest in the world. Beijing’s China Investment Corp has US$940 billion in assets.

The Financial Times have reported that EU civil servants have drafted plans to build a ‘European Future Fund’ financed by member countries to invest in strategic sectors where Europe is lagging behind global rivals.

The FT also reports that this blueprint, while still in its early stages, do contain several initiatives that EU officials have presented to Ursula von der Leyen, the incoming president of the European Commission.

It is reasonable to assume that von der Leyen is expected to pursue this aggressively during her five-year term in this role.

Previous calls by Germany and France to their fellow EU compatriots to develop aggressive policy mechanisms to protect Euro interests from unfair competition from mega corporations have yet to be met with concrete actions.

State-backed organisations, including corporates that are propped up by their respective states have been a major boon for the Europeans to contend with.

Plenty of laws, including the hugely talked about GDPR law on combating privacy issues are seen as one of the counter measures to curb the growth and encroachment of American and Chinese companies from gaining an already deep foothold in Europe.

Elsewhere, in Asia, continent-wide organisations have met with lukewarm support. This includes the once hyped about creation of an Asian sovereign fund is now nowhere to be seen.

Asia still relies on in-country sovereign fund to boost strategic sectors.

Selected sovereign wealth fund in Asia, measured in US$billion in assets under management (AUM) – source: various

Government of Singapore Investment Corporation330
China Investment Corporation200
Hong Kong Monetary Authority Investment Portfolio140
Temasek Holding108
Central Hujin Investment Corporation100
Brunei Investment Authority35
Korea Investment Corporation20
Khazanah Nasional18

Any move for the EU to take direct shareholdings in companies would be something interested to be observed. Europe has relied on co-financing public investment projects previously such as the Juncker Fund.