Sovereign wealth funds (SWFs) can be effective tools for managing natural resource revenues. However, as their numbers continue to grow, with the largest funds managing hundreds of billions or even a trillion dollars in assets, researchers are paying more attention to how well these funds are governed.
A 10-year boom in the prices of many commodities drew to a close last year. During previous booms, governments in developing countries have often squandered wealth accumulated through oil, gas and minerals, directing little of the proceeds toward effective investment or saving. When boom turned to bust, resource-rich countries were caught out, forced into debt spirals.
There are local innovations to reverse or prevent the resource curse in localities. But in a unitary state like Indonesia, the role of the central government is indispensable in supporting policy innovations and providing guidance to make sure that extractive resources are turned into sustainable development.