President of the United States, Donald Trump, has signed an order to create a Sovereign Wealth Fund, expressing hope it could purchase the embattled short video app, TikTok.
According to the Guardian, Trump signed the executive order on Monday aiming at establishing the sovereign wealth fund as a tool for economic development, saying, “We have tremendous potential. I think in a short period of time, we’d have one of the biggest funds.”
While he did not explain how such a fund would work, the US President told journalists, “We’re going to create a lot of wealth for the fund. And I think it’s about time that this country had a sovereign wealth fund.”
Meanwhile, a sovereign wealth fund is an investment fund owned by the government through which the country’s financial assets are managed. Assets such as foreign exchange reserves, trade surpluses, and money from natural resources.
Here are things to know about Trump’s plan to establish a sovereign wealth fund.
1. The purchase of TikTok
The U.S. is set to partner with the social media platform, TikTok owned by ByteDance Ltd, for a stake in it. Recently, TikTok was taken down to address national security concerns that could emerge from apps that are owned by foreigners. However, Trump has signed an order for the platform to be restored for 75 days.
The reason for this step, however, is also to gain ownership of applications and platforms that are used in the U.S.
2. Economic development tools
The sovereign wealth fund is intended to serve as an economic development tool for infrastructure development, such as airports, strengthening the influence the U.S. has in other countries and unburdening families and small businesses in America from taxes.
3. Strict governance and openness
The fund has the potential to achieve many things such as the reduction of government debt, building infrastructure, and growth of the U.S. influence in Panama and Greenland, globally.
However, CNBC reported that critics opined that handling it requires transparency and disciplined governance because of the risk of corruption, a clash of interests, and political interference in investment matters.
4. Global comparison
The funds find their way to the global financial markets through stock investment, bond investment, and real estate investment while having stakes in private equity and infrastructure.
The nation with the largest sovereign wealth fund, according to SWFI is Norway with over $1.7 trillion in assets with China ranking second with about $1.3 trillion.
These countries have large budget surpluses and have productively managed sovereign wealth funds. U.S. on the other hand, the U.S. has been running on large deficits.
5. Impact of smaller nations
This is not the first time an idea regarding the U.S. fund will be brought up. However, they are commonly used by smaller nations that have a large array of natural resources and fiscal surpluses.
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