Policy follows other oil-producing nations, aimed at financing major projects
In a press conference Monday morning, Prime Minister Mark Carney announced the creation of a Canadian sovereign wealth fund. Calling this the "Canada Strong Fund" the Prime Minister explained that its goal will be to finance projects of national interest in partnership with private sector entities.
"Today, Canada faces new challenges from a world that's changing, not gradually but suddenly," the Prime Minister said in a press conference. "Today we're proud to announce a new pillar of our plan... This will be a people's fund, this will be your fund."
The fund will be launched with an initial $25 billion. He says that asset base will grow through asset recycling, investment by Canadians, and returns on investments made.
When asked where the $25 billion will come from, the Prime Minister said there would be "good news" in tomorrow's scheduled spring economic update.
Carney described the fund as a 'national savings and investment account." He explained that the fund mirrors those used successfully by resource-rich countries like Norway. He stressed that Canada's new major projects will largely be built by private companies, and that Canada's government support will come in the form of loans, financing, and support.
The "Canada Strong fund" will be open to individual investments. The goal, as stated by the Prime Minister, will be for all Canadians to be able to participate in the investments made and returns generated by this fund. It will be professionally managed and operated as an arms-length crown corporation.
In a video posted before the announcement on Monday, the Prime Minister said that Canadians will be able to contribute to, and benefit from, this fund.
The projects that this fund aims to invest in have also been recently given certain approvals advantages. Legislation passed last June as part of Bill C-5 streamlines the approvals process for projects identified as "nation-building." The recent approval of a $4bn Enbridge pipeline expansion was the first use of this speedy approvals process.
What are sovereign wealth funds?
Sovereign wealth funds have been used to great success in other countries, notably in Norway which has used its oil and gas revenues to build a $2.1 trillion(USD) fund that finances roughly 20 per cent of the Norwegian state budget.
Funds maintained by oil-producing states in the Arabian gulf, such as the Saudi Arabia Public Investment Fund (PIF) and Abu Dhabi Investment Authority (ADIA) have worked to diversify those economies away from their high degree of reliance on fossil fuel production.
Alberta has long maintained one of the earliest examples of a sovereing wealth fund, the Albera Heritage Savings Trust Fund, which was initially aimed at using oil revenues to support future generations of Albertans. Political influence and frequent use of the fund to cover provincial budget deficits, however, reduced its overall effectivness in achieving its initial goal.
This is an evolving story, more to come.
