COMMODITY  BASED  SOVEREIGN  WEALTH  FUNDS:     AN  ALTERNATIVE  PATH  TO  ECONOMIC  DEVELOPMENT       A  DISSERTATION  IN   Economics   and   Social  Science  Consortium     Presented  to  the  Faculty  of  the  University  of   Missouri-­‐Kansas  City  in  partial  fulfillment  of   the  requirements  for  the  degree     DOCTOR  OF  PHILOSOPHY       By   OMOSALEWA  OLUYINKA  OLAWOYE   B.A.,  Laurentian  University,  2009   M.A.,  University  of  Missouri,  Kansas  City,  2015       Kansas  City,  Missouri   2016 ©  2016   OMOSALEWA  OLUYINKA  OLAWOYE   ALL  RIGHTS  RESERVE   ii COMMODITY  BASED  SOVEREIGN  WEALTH  FUNDS:  AN  ALTERNATIVE  PATH  TO   ECONOMIC  DEVELOPMENT     Omosalewa  Oluyinka  Olawoye,  Candidate  for  the  Doctor  of  Philosophy  Degree   University  of  Missouri,  Kansas  City,  2016     ABSTRACT   Natural   resource   producing   countries   struggle   with   issues   about   how   to   make   use   of   their   natural   resources   properly,   allocate   the   funds   from   these   resources  and  how  to  ensure  continuity  of  these  resources  and  their  effects  through   the  years.  Commodity  based  sovereign  wealth  funds  offer  a  channel  through  which   these  can  be  achieved.  This  dissertation  studies  these  funds  with  respect  to  how   they  can  be  used  to  finance  development  in  resource  rich  countries.   Each   chapter   examines   natural   resource   funded   sovereign   wealth   funds   called  commodity  based  sovereign  wealth  funds  (CBSWF),  from  different  angles.   This  includes  analyses  of  what  these  funds  are,  how  they  are  currently  used,  the   dangers  in  the  current  savings-­‐like  investment  strategy  and  then  proposes  new  real   investment  strategies  that  can  encourage  growth  for  these  countries.  The  aim  of   these  analyses  is  to  suggest  these  funds  as  an  alternative  path  towards  growth  and   development  in  natural  resource  owning  economies.   To  achieve  this,  we  look  at  the  pre-­‐  and  post-­‐  CBSWF  era  of  some  CBSWF   owning  countries  except  for  Iraq,  Iran  and  Libya,  which  have  recently  experienced     iii wars  that  have  disrupted  these  economies  and  countries.  Some  of  the  countries   being  studied  have  recently  adopted  these  funds  or  have  not  done  anything  with   these   funds.   Thus,   it   is   difficult   to   analyze   the   effects   of   these   funds   in   these   countries.  We  compare  these  countries’  Gross  Development  Product  (GDP)  and  their   Human  Development  Indicators  (HDI).  We  analyze  these  data  before  and  after  these   funds  were  adopted  in  these  countries  to  see  how  effective  these  funds  have  been   with  respect  to  economic  growth  and  development.  We  take  a  look  at  the  failures  of   the  current  savings  led  investment  strategy  of  some  countries  that  have  adopted   these  funds.  Then  we  propose  alternative  real  sector  development  financing  that   ensures  sustainable  growth  in  these  countries.  This  is  done  in  order  to  advocate  for   a  real  investment  led  growth  in  natural  resource  owning  countries.                             iv APPPROVAL  PAGE   The  faculty  listed  below,  appointed  by  the  Dean  of  the  School  of  Graduate   Studies,  have  examined  a  dissertation  titled  “Commodity-­‐Based  Sovereign  Wealth   Funds:  An  Alternative  Path  to  Economic  Development,”  presented  by  Omosalewa   Oluyinka  Olawoye,  Candidate  for  the  Doctor  of  Philosophy  degree,  and  certify  that  in   their  opinion  it  is  worthy  of  acceptance.       Supervisory  Committee   Mathew  Forstater,  Ph.D.,  Committee  Chair   Department  of  Economics     Jimmy  Adegoke,  Ph.D.   Department  of  Geosciences     Douglas  Bowles,  Ph.D.   Social  Science  Consortium     Stephanie  Kelton,  Ph.D.   Department  of  Economics     Scott  Fullwiler,  Ph.D.   Department  of  Economics               v CONTENTS   ABSTRACT………………………..……………………………………….……………………………………..iii   LIST  OF  TABLES……………………………………………………….………………………………………vii   LIST  OF  ILLUSTRATIONS………….…….……………………………..…………………………………  viii   ACKNOWLEDGEMENTS………………………………………………………..………………….……….  ix   Chapter   1. INTRODUCTION..…………………….……………………………….………………….  1   2. HOW  THESE  FUNDS  ARE  SPENT……………………………………….……..….  20   3. FINANCIALIZATION  AND  RISKS..…………………….…………….……………..  56   4. SUSTAINABLE  DEVELOPMENT  POLICY  OPTIONS……………..………….  85   5. VISION  2030  AND  DEVELOPMENT  PATHS  IN   SUB-­‐SAHARAN  AFRICA…………………………..…………….………………………………  118   6. CONCLUSION  AND  DIRECTIONS  FOR  FUTURE  RESEARCH………….  129   REFERENCES…………………………………………………………………………………….…………...  132   VITA……………………….………………………………………….…………………………………………..  147                     vi TABLES   Table                     Page   1.  Qualitative  Comparative  Analysis  Truth  Table  of   Commodity  Based  Sovereign  Wealth  Funds  Countries..…………..………..…..  54   2.  List  of  Countries  and  Their  Funds..………………………………….……………..…  79   3.  Fuzzy  Qualitative  Comparative  Analysis  of   Investment  Ingredients  and  Outcomes.…………………………………………….…  117   4.  Development  Path  Table  for  Some   Sub-­‐Saharan  African  Countries…………………………………………………..………  125                                 vii ILLUSTRATIONS   Figure                                                Page   1. GDP  Per  Capita:  Papua  New  Guinea.……………..…………………………….  40   2. Sovereign  Wealth  Funds  Financial   Portfolio  Breakdown.……………………………………………………………………………  63   3. Financialization  Effects  on  the   GDP  per  Capita  of  CBSWF  Countries…….…………………………..……………………  64   4. Exchange  Rate  Trends  from   February  2006  to  March  2015..………………………………….…..………………………  68   5. Value  of  the  Top  15  CBSWF.………………………………………………………..  92   6. Percentage  Share  of  the  Top  15  CBSWF.………………………………………  92   7. Employment  Sector  in  Norway..……………………………………………….…  97   8. Sustainable  Paths  for  CBSWF  Developing  Countries.…………………..  102                         viii ACKNOWLEDGEMENTS   A  popular  African  proverb  says,  “It  takes  a  village  to  raise  a  child.”   My  family  and  academic  “village”  have  made  my  doctoral  degree  possible.   I  would  like  to  specially  thank  my  advisor,  Professor  Mathew  Forstater   for   his   support   throughout   my   years   in   Kansas   City   and   for   being   someone  I  could  trust  and  run  to  whenever  I  got  stuck.  I  would  also  like   to  thank  the  rest  of  my  committee  –  Professor  Jimmy  Adegoke,  Professor   Stephanie  Kelton,  Dr  Scott  Fullwiler  and  Dr.  Douglas  Bowles  –  for  their   input  and  direction.  My  sincere  gratitude  goes  to  Dr  Linwood  Tauheed  for   his  help  during  the  development  of  this  dissertation.  A  special  thank  you   is   extended   to   Dr.   Louis-­‐Philippe   Rochon   for   his   support   since   my   undergraduate  days  and  for  being  with  me  every  step  of  the  way  since   then.   Last  but  definitely  not  least,  I  would  like  to  thank  my  friends  and   family  especially  my  mother,  Foyinsola  Olawoye  for  being  my  biggest   cheerleader  and  encourager.                   ix DEDICATION   Dedicated  to  the  memories  of  my  father,  Raphael  Iranola  Olawoye,  and  my   brother,  Oreoluwa  Olawoye.                 x