Trillions Lost: Why Canada Needs Sovereign Wealth Funds Now
April 2024. Updated March 2025, | Guest column by: Richard Pereira, opinions shared in this article are his own.
Canada lags behind jurisdictions that have pioneered the accumulation of common wealth into sovereign wealth funds (SWFs), representing large-scale savings accounts for their citizens. These accounts can be used as financial shock absorbers in a crisis, to invest in the nation, to finance public goods and to share the wealth with future generations. Most of these national or subnational savings accounts accumulate oil and gas windfall profits (or economic rents, which should be public property), but there are other types of underlying assets that could contribute to our common wealth.
The four most relevant types of SWFs that Canada could create and their associated underlying assets are detailed below, along with some working examples in different jurisdictions:
1) Oil and Gas (Alaska and Norway SWFs are prime working examples)
Established in 1990, Norway’s SWF is the largest in the world, while Alaska’s SWF, established in 1976, is the only one to pay out regular annual dividends to citizens. Comparisons have been made between the level of oil production in Canada and Norway to demonstrate the scale of foregone revenue in Canada from these natural resources, including by the Parkland Institute and CCPA.
2) Land Value Capture (Singapore)
Singapore has more than one SWF, which is highly significant for a small nation. It has a unique land management model that generates enormous long-term wealth for the country, its future citizens, as well as investment in public goods for the current generation. As described later in this report, some Singaporeans have criticised how those in political power do not sufficiently ensure this wealth is shared currently, including in the form of direct cash transfers. Canada has an equally potent real estate market and high land values that could do well to adopt the best practices found in Singapore, while sharing some of the wealth directly with Canadians as in Alaska with its SWF and dividend distributions.
3) Mineral wealth (Permanent Wyoming Mineral Trust Fund)
Established in 1975 by Governor Stan Hathaway, the Permanent Wyoming Mineral Trust Fund imposes a severance tax on extraction of state-owned minerals, and arbitrary withdrawals from the Fund’s principal are prohibited. The Western Australian Future Fund is another smaller example of a minerals-based SWF.
4) A new type of IP (Intellectual Property) and technology wealth fund
Canada’s most prominent IP entrepreneur and data-protection advocate, argues that poor IP stewardship costs the Canadian economy over $100 billion annually in lost revenue. While Jim Balsillie does not argue for an IP sovereign wealth fund, with ‘data as the new oil’ it is clearly something feasible and beneficial that Canada could pioneer as a way to share in the wealth of the digital commons.
These SWFs can all be guided by sustainable economics, ecological and energy conservation, and transition to renewable energy as guiding principles, similar to what one witnesses in the Norwegian economy and the investment decisions made by its SWF managers. For example, having a carbon price (pollution price) and dividend that rebates all carbon price revenue back to its citizens, is just one of many policies to complement the development of four such SWFs for Canada, to ensure they accumulate wealth for Canadians with a focus on sustainability and conservation.
Images: Sudbury nickel mining, urban land rent and LVC potential from uplift public investments, Petro Canada electric charging
For the greatest transparency it would be best to have separate funds for each distinct common wealth asset class. Several countries have more than one SWF for different common wealth assets.
Singapore land value capture model and SWFs
As a small nation, Singapore has managed its land wealth in a unique fashion to derive maximum benefit from this natural resource, much like Norway has done with its oil and gas sector and SWF. Currently, among the top Sovereign Wealth Funds in the world one finds Singapore with two – ranked numbers 7 and 10 – under the names GIC Private Limited (GIC), and Temasek Holdings. They hold assets of $770 billion and $492 billion respectively, or nearly $1.3 trillion combined (Sovereign Wealth Fund Institute 2024). In top spot globally is Norway with its SWF holding over $1.6 trillion. China, Abu Dhabi, Kuwait, Qatar, Hong Kong hold other top 10 SWF spots. Singapore’s population is about 6 million, or less than half the population of Ontario.
It is important to note that Ontario has no SWF, while it has an equally sought after real estate market with very high land values, as well as one of the most important mining sectors in the world. And Canada has no national level SWF, with a population of over 40 million. In addition, Canada has many other natural resources not available to Singapore, which fund SWFs in other jurisdictions globally.
Also noteworthy is that Singapore’s land management system is more of a land value capture rather than a land value tax model written about often on commonwealth.ca. “Singapore demonstrates how it is possible to operationalise a system of land value capture that provides a revenue stream…” (Loo 2017) The difference is that a LVT (land value tax) is applied across the board in a manner of a flat tax on all existing homes versus LVC (land value capture) which seeks to capture all or most of the economic rent, or land rent available from public investment and infrastructure projects.
When a property is developed, such as a parking lot into a shopping district, or a vacant lot into a subway station, surrounding land values increase. The numerous public investments that make these projects possible and the resulting increase in land values ought to be considered common wealth to be captured in the public interest, either in full or in part depending on the scope of public investment. In the case of the subway station it is a fully public investment. With the shopping development example, public investment in infrastructure that makes the shopping district possible includes; roads, sidewalks, water services and sewage-drainage, street lighting, police and fire services, etc.
In Singapore the system has been refined over decades, and can provide a model for other jurisdictions, even in a more simplified form. “For sites being re-developed, development uplift – in simple terms, the difference in value between the existing use and the proposed use - is taxed through two inter-related systems: the Development Charge and the Differential Premium [emphasis added].” (Loo 2017) The rates for these LVC development charges or tax “are set on a bi-annual basis by Singapore’s Chief Valuer through a table of rates and a sector map, which allows for the dynamics of the property market as well as differences in land values due to location and use to be taken into account. This tax currently stands at 70% of development uplift. Income from the Development Charge forms part of the government’s revenues…[emphasis added]” The differential premium income is placed within Singapore’s reserves, designed to assist the nation’s long-term prosperity. (Loo 2017).
In Citizens’ Wealth: Why (and How) Sovereign Funds Should be Managed by the People for the People, Angela Cummine (2016: 148-49) explains how Singapore’s transfer of sovereign wealth into its SWFs is constitutionally enshrined, but discretionary, meaning that “rendering Singaporeans’ benefit rights to sovereign returns [is] vulnerable to governmental whim.” Alaska’s constitutionally enshrined SWF and its people’s access to common wealth was specifically and uniquely designed to ensure the exclusion of such governmental whim, by directly transferring a cash dividend to Alaskans from a portion of the growth of its SWF. Former Governor Jay Hammond intended for this annual cash dividend (and growth rate of the SWF) to be much larger than it currently is, by seeking a higher royalty rate on oil extraction with a dual conservation purpose being served by a much higher royalty rate, discouraging accelerated depletion of such a vital resource.
Cummine (2016: 149) states that the principal portion of Singapore’s SWFs not available for present spending (50 percent) “ensures a balance between future and present citizens’ benefit rights.” Combining the best elements of Norway’s, Alaska’s and Singapore’s SWFs, and the latter’s LVC policies, could prove to be a potent combination for citizens’ wealth and universal financial security in Canada.
Too few extant sovereign funds are explicitly designed to be, or actually operate as, funds for citizens. – Angela Cummine (2016: 8)
Singapore’s 2015 general election also saw one of its newer political parties, SingFirst (Singaporeans First) demand direct cash payments directly to citizens from the returns of the main SWF – GIC Private Ltd. SingFirst does not oppose the intergenerational dimension of the country’s SWFs, however it argues that the government is “monopolizing the fund’s income at the expense of citizens” by exclusively managing too much of the returns at the government’s whim. “This is our money and must be returned to us” party leaders stated regarding surplus investment gains from GIC Private Ltd., of which the government kept the majority for discretionary spending (Cummine, 2016: 135-36). “If we stabilize the population growth, we need only maintain the infrastructure, but the rest of the money can be invested in people” SingFirst advocated (Ibid: 136).
Shifting specifically to land and housing management, Anne Haila (2016: 88) describes how Singapore offers suitable housing and commercial space that are not subject to “paying monopoly prices to speculative real estate developers.” While 81.6% of Singaporeans lived in public housing in 2013, they were not tenants but owners of their own flats, “thus contradicting common understandings of owner occupancy.” (Ibid: 86) The home ownership rate in Singapore was 90.1% in 2013, and in her book Urban Land Rent: Singapore as a Property State Haila describes the land institutions that make this high ownership and low/no speculation paradigm function. Land value capture combined with an alternative approach to real estate and land ownership, underpinned by strong land institutions to capture uplift gains from public investment, are key elements of this model.
As soon as the land of any country has all become private property, the landlords… love to reap where they never sowed – Adam Smith (1776) in Haila (2016: 64)
Haila’s comparative research of the land question globally, with specialized attention on Singapore, highlights that land is not only an economic issue, “but also a moral, social and political” issue in Singapore and is treated as such by the state and citizens. Some of the institutions involved in managing the model are the Singapore Land Authority (SLA), Jurong Town Corporation (JTC) as the public authority responsible for producing ‘public’ industrial space (Haila 2016: 88), the Housing Development Board (HDB), Singapore’s Chief Valuer mentioned earlier (responsible for setting land value capture and Differential Premium rates bi-annually to capture development uplift), among others. It is not a system that can be simply replicated by implementing an LVT, but requires institutions and differentiating premiums applied to development uplift to ensure people do not “reap where they never sowed.” Everyone should benefit from the full land value uplift and capture of public investment returns as they impact the real estate market. These benefits belong to all, and not to select individuals or corporate speculators.
Much like the carbon tax is better situated as a ‘pollution price’ or ‘carbon price’ (with an accompanying carbon dividend-rebate) to more clearly identify the harm we are trying minimize along with the associated return, the language of LVC explains the intent, and how rising land values caused by public investment and public infrastructure are captured for public benefit. The network of policies, institutions and vocabulary to address the land question in Singapore, in combination with more than one SWF, is part of a sophisticated approach that can achieve near optimal financial results for citizens.
As stated by Loo (2017) earlier in this paper, and by Cummine (2016: 148-49), the differential premium income from development uplift (the difference in value between the existing use and the proposed use) is placed within Singapore’s reserves, designed to assist the nation’s long-term prosperity. These reserves are transferred to and held in 3 major funds: GIC, MAS (Monetary Authority of Singapore) and Temasek. These transfers can be unnecessarily complex and opaque as described in Citizens’ Wealth, and Cummine (2016) does label Singapore a “flawed democracy” in contrast to Norway and Alaska’s SWFs operating at higher levels of transparency within “full democracies”. Therefore, 3 SWFs and separate investment entities are holding LVC, differential land value and uplift premiums together with other forms of national reserves (also see: GIC 2024). This represents economic or land rents and windfall profits for people, rather than primarily for speculators and developers.
Conclusion: Canada foregoing trillions in lost land value capture, and ought to establish at least four Sovereign Wealth Funds
There are several important lessons to be learned and policy recommendations to be made in reviewing the Singaporean land value capture and SWF model, and in contrasting it with some of its SWF peers.
First, is that a jurisdiction can have several SWFs, even within the same asset class. However, it is ideal to maximize transparency and democratic accountability of sovereign funds and not spread these funds out over too many entities, thereby lending itself to a situation in which governmental whim and opaqueness create too much discretionary spending opportunity for those in power. As SingFirst has stated, a better balance between direct cash transfers (or dividends) to citizens and long-term savings and investments created by Singapore’s SWFs needs to be established. Singapore ought to increase democratic transparency and accountability in its SWFs, as demonstrated in the Norwegian and Alaskan SWF models and as demanded by SingFirst, and it could pay out some of the growth from these LVC SWF gains directly to citizens like Alaska does with some of its common wealth.
Cummine (2016) has labelled Singapore’s political system as “flawed democracy” in contrast to Norway and Alaska as “full democracy” (the other category she uses is “authoritarian regime” for many other SWF jurisdictions). Singapore would likely do best by narrowing its land rent revenues and investment focus into two SWFs, reducing some of the opaqueness and complexity of revenue transfers through its current system as described by Cummine (2016: 148-50) and criticized by SingFirst.
In the Canadian context it suggests Canada could easily justify at least one or two SWFs for LVC and development uplift premiums (of 70% or higher), to ensure our land and real estate are likewise treated as a source of homes, homeownership and common wealth, rather than as a speculative market or business segment with privatized windfall profits from public investments, and socialized costs. Public investments and infrastructure that lead to high land and real estate values needs to be regarded as more of a common asset or common good, or as a “moral, social and political” issue as it is in Singapore, rather than simply another commodified business opportunity. In other asset classes Canada could support multiple SWFs, but should urgently start with at least one in each major common wealth asset class in which it lags decades behind other jurisdictions. A national oil and gas-based SWF[1], a national mineral wealth SWF and a national IP (intellectual property) and data or technology windfall profit based SWF could complement provincial initiatives, which are currently absent or insufficient.
Too much Canadian common wealth is leaving the country each day or otherwise being removed from public ownership, in contrast to how jurisdictions like Singapore, Norway and Alaska both manage and capture this windfall wealth for the benefit of citizens. Trillions of dollars of foregone common wealth from minerals, oil and gas, IP and land value uplift could be in Canadian SWFs for current and future generations if best practices from these jurisdictions were adopted.
Richard Pereira
Author of Financing Basic Income (Palgrave 2017, 2023)
Associate - GLRC (Global Labour Research Centre), York University, Toronto
April/May 2024
Footnote
[1] Decades of federal government funding, subsidies, tax and other exemptions and infrastructure spending have helped develop the oil and gas sector across Canada, contributing to windfall profits in the sector. This does not negate the provinces’ ability to have their own SWFs to collect royalties and other revenue they deem appropriate from natural resources.
Sources
Cummine, A. (2016) Citizens’ Wealth: Why (and How) Sovereign Funds Should be Managed by the People for the People. Yale University Press.
Haila, A. (2016) Urban land rent: Singapore as a property state. Wiley Blackwell.
Loo, E. (2017) “Lessons from Singapore about land value capture.” RTPI. 3 Apr. https://www.rtpi.org.uk/blog/2017/april/lessons-from-singapore-about-land-value-capture/
Pereira, R. (2023) Financing Basic Income: A Dual Income Proposal. Palgrave.
Sovereign Wealth Fund Institute, Top 100 Largest Sovereign Wealth Fund Rankings by Total Assets, April 5, 2024: https://www.swfinstitute.org/fund-rankings/sovereign-wealth-fund
