Sarawak’s sovereign fund Bill passed
The Sarawak Sovereign Wealth Future Fund Board Bill 2022, which seeks to establish a state fund in order to maximise returns from the state’s surplus capital reserves through investments, was passed at the State Legislative Assembly (DUN) si ing yesterday.
Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg, when tabling the Bill, said that the Sarawak Sovereign Wealth Fund will be placed under the management and custodianship of a body corporate established under this Bill to be called the Sarawak Sovereign Wealth Future Fund Board.
He said the fund will be managed in a professional and transparent manner by members of the Board of Guardians — comprising experts and professionals in the field of finance and investment.
“The ownership of all monies in the Fund and all investments, income and returns from investment is vested in the state. The Board of Guardians will only be the custodians of the monies in the Fund.
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“In addition, it is imperative that the Fund and the people managing the Fund be independent of any political interference. Therefore, a person will not be eligible to be appointed as a Guardian if he is, at the time of his appointment, a member of a political party or Member of Parliament or the Legislature or local authority of any state in Malaysia,” he said.
Abang Johari added an independent investment advisory panel will also be established to advise on the Fund’s management and administration.
He said the money for the Fund will come from the State Consolidated Fund (SCF) through appropriations approved via resolutions passed by this august House and would comprise an initial, and subsequently, annual appropriations from the SCF.
“The amount of each annual appropriation would therefore be subject to the approval of this august House.
“The initial appropriation to the Fund will be at RM8 billion with subsequent annual appropriations of RM300 million annually from year two to year five; RM550 million annually from year six to year 10; and RM650.0 million annually from year 11 to year 20,” he said.
He explained further that these appropriations to the Fund will be disbursed into the Fund’s Investment Fund Account and be managed strictly in accordance with the Investment Mandate stated in Second Schedule of the bill.
“With this appropriation, the Fund is expected to grow sustainably with no withdrawals except in the case of critical events which might arise within this 20-year period or when the Fund performs be er than targeted.
“This bill institutionalises strict requirements for withdrawal of monies from the Fund. Specific provisions regulating withdrawals of monies are found in Clause 8 of the bill. There are also provisions for the re-investment of income or monies from the investments,” he said.
Abang Johari said the sovereign wealth fund will sustain the financial fiscal position of the state via revenue diversification and creation of reserves replacing oil and gas revenue in years to come.
He said that the establishment of a sovereign wealth fund will meet the purposes of converting non-renewable assets to financial assets; investing for the future through forced saving; and securing the continued growth of financial reserves through diversified investments.
“Over the years, we have enjoyed commodity-based revenue, particularly from oil and gas. This revenue source, however, is depletable and if the revenue is not managed and invested wisely, future generations will be deprived of the same economic benefits.
“Hence, it is critical to convert these non-renewable assets into financial assets so as to preserve and grow the state’s current wealth. Ultimately, this will create an endowment to generate sustainable sources of income for future generations,” he said.
Abang Johari noted that the establishment of sovereign wealth funds worldwide has gained popularity in the last decade, and the value of assets under management under sovereign wealth funds has almost doubled from US$4.8 trillion in 2010 to US$9.1 trillion in 2020.
“Sovereign wealth funds are special purpose investment funds owned by governments (including central and subnational governments) to create sustainable financial and economic returns.
“Based on our study of the global sovereign wealth fund landscape, sovereign wealth funds can be categorised based on their mandates or objectives for establishment, and can be broadly classified into three categories namely, (i) capital maximisation, (ii) stabilisation, and (iii) strategic development,” he said.
Abang Johari said countries that have established sovereign wealth funds like Norway, Singapore and England are also members of the International Forum of Sovereign Wealth Funds.
He said as members of this Forum, these countries are required to adhere to international best practices including the Generally Accepted Principles and Practices for Sovereign Wealth Funds.
“With the establishment of our own sovereign wealth fund, the state intends to apply to be a member of the Forum as there is a need to ensure that we apply the highest standard of governance and transparency in managing our sovereign wealth fund,” he added.
The bill was passed after the third reading.
Elected representatives who participated in the debate of this bill were Daro assemblyman Safiee Ahmad, Tebedu assemblyman Dr Simon Sinang, Lingga assemblywoman Dayang Noorazah Awang Sohor, Balingian assemblyman Abdul Yakub Arbi, Bawang Assan assemblyman Dato Sri Wong Soon Koh, Pelagus assemblyman Wilson Nyabong Ijang, Katibas assemblyman Lidam Assan, Bukit Begunan Datuk Mong Dagang, Ba Kelalan assemblyman Baru Bian, and Kota Sentosa assemblyman Wilfred Yap.