Another largely unknown potential peril to the long-term leasing and/or sale of the Pennsylvania Turnpike is the recent emergence of Sovereign Wealth Funds (SWFs). These are vast capital funds controlled by specific nations that have begun to flex their monetary muscles in world financial markets. SWFs have been created from the mammoth trade deficits that America has registered. For example, in 2006, the United States rang up a merchandise trade deficit of $836 billion and a current account deficit of $857 billion—6.5 percent of America’s entire GDP (gross domestic product). Numerous foreign countries that have accumulated large cash reserves from America’s trade deficits are creating these investment pools.
The U.S. Treasury Department estimates that there is anywhere from $1.5 to $2.5 trillion in these pools at present. SWFs, however, are only going to increase in size. Former Treasury Secretary Larry Summers expects total SWF funds across the globe to double to $5 trillion by 2010 and double once more by 2015 for a total sum of $12 trillion. At the present time, the United Arab Emirates has $500 billion in SWFs; Norway, $400 billion; Singapore, Saudi Arabia, and China, $200 billion.
Rather than keeping their cash in U.S. Treasury bonds that earn five percent yearly, a number of nations have created SWFs in order to pursue higher rates of interest and to acquire corporate assets to further their national interests. Certainly, the SWFs provide an attractive source of funding for transportation infrastructure acquisitions.
SWFs differ from conventional investments of the past in that all of these funds are owned by or answerable to a country. One or more of these countries may decide not to use their funds to produce the maximum income available but to secure the maximum strategic benefit for the nation. The transparency of these funds will continue to be a concern with these funds into the foreseeable future. Some of the funds are very murky, and no analyst can accurately predict if it will be ever become motivated primarily by politics rather than market conditions.
Who in America will decide what national assets and companies will not be allowed to fall under the control of a foreign country? Will the Pennsylvania General Assembly continue to protect the state’s Turnpike as an indispensable state asset for the Commonwealth’s future? How will Pennsylvania react if a SWF attempts to secure this invaluable chunk of the state’s economy?