CYIL vol. 11 (2020)

HALIL RAHMAN BASARAN CYIL 11 (2020) investor in a foreign market (or markets). However, the SWF, in contrast, turns the indirect sovereign investor into a direct one and it is this “directness”, or explicitness, that makes the country where the SWF investment is being made all the more cautious. Being the unmediated and “direct” arm of the government may not bother SWF managers as an SWF administration may be fully aware of the highly politicized nature of the job and may admit this openly. For instance, that is the case with the Turkish SWF manager who stated: “Every sovereign wealth fund is a political animal. Can someone say to me, for example, that GIC of Singapore, chaired by the prime minister of Singapore, has no political relationship … [or that] the Public Investment Fund in Saudi Arabia, chaired by [Saudi crown prince] Mohammed bin Salman … is not politically related?”  37 Still, this particular Turkish SWF had undergone an audit by an international accountancy firm – KPMG – and a credit rating agency – Fitch . 38 Through these audits and reviews, the Turkish authorities try to convey to the international community the image of an SWF with sound economic and commercial policies relatively free of political involvement or influence. Traditionally, when a central bank undertakes international investments thanks to a surplus of foreign exchange reserves, it opts for traditional and safer debt securities, such as U.S. Treasury Bonds (treasury securities). 39 Yet, nowadays, “there is an increasing willingness of governments to invest abroad in instruments other than the debt securities of other nations.” 40 For instance, governments make direct acquisitions of shares of foreign companies or facilities such as ports and airports in foreign territories, and, the most popular instrument for such foreign investment is the SWF. Thus, the difficulty with the SWF – as an extension of the investor government – stems from the fact that it is perceived as being too active and assertive in these transactions, which may involve the host countries’ strategic and vital sectors. It raises suspicions in recipient countries and becomes a matter for political debate. For instance, SWFs may acquire sensitive technology in the recipient state 41 and therefore endanger its national security. 42 Moreover, the lack of transparency in terms of most SWF’s investment objectives and asset allocations are a matter for concern for recipient countries. 43 37 PITEL, Laura, Turkey Wealth Fund Chief Rebuffs Criticism of Erdogan’s Role , The Financial Times , 17 February 2020. Accessible at https://www.ft.com/content/ecffb6d6-4f2c-11ea-95a0-43d18ec715f5?commentID=fab5d5d2- d44c-48e0-b7b2-fedc0b26ec9d (accessed on 23 February 2020). 38 Ibid. 39 SOWELL, Thomas, Basic Economics – A Common Sense Guide to the Economy, Basic Books, New York, 2015, p. 507. 40 CATA BACKER, Larry, Sovereign Wealth Funds as Regulatory Chameleons: The Norwegian Sovereign Wealth Funds and Public Global Governance Through Private Global Investment , Georgetown Journal of International Law , vol. 41, no. 2, 2010, p. 426. 41 LYONS, Gerard, State capitalism: The rise of sovereign wealth funds , Law and Business Review of the Americas, 14(1), 2008, p. 15. 42 ROSE, Paul, Sovereign Wealth Fund Investment in the Shadow of Regulation and Politics , Georgetown Journal of International Law , 40(4), 2009, p. 1209. 43 LANGLAND, Eric, Misplaced fears put to rest: financial crisis reveals the true motives of sovereign wealth funds , Tulane Journal of International & Comparative Law , vol.18, 2009, p. 272. LYONS, Gerard, State capitalism: The rise of sovereign wealth funds , Law and Business Review of the Americas , 14(1), 2008, p. 5-6. ROSE, Paul, SovereignWealth Fund Investment in the Shadow of Regulation and Politics , Georgetown Journal of International Law , 40(4), 2009, p. 1210. LIPPINCOTT, Meg, Depoliticizing Sovereign Wealth Funds Through International Arbitration , Chicago Journal of International Law , vol. 13, no. 2, 2013, p. 657. LEE, Yvonne C.L.,

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