Progress toward establishing a national sovereign wealth fund has so far proved elusive, with policymakers still divided over its purpose, legal framework, and political implications.

Ten months after President Lai Ching-te announced plans to establish a sovereign wealth fund (SWF) in 2025, the initiative has yet to move forward. The Executive Yuan and the National Development Council, the agency designated to lead the effort on an interim basis, have issued no guidelines. No draft legislation has been introduced.

SWFs are government-owned investment vehicles that allocate capital across a range of assets to generate financial returns or advance strategic objectives. More than 160 such funds operate in at least 65 countries. Among the largest are Norway’s Government Pension Fund Global, the People’s Republic of China’s China Investment Corporation, and the United Arab Emirates’ Abu Dhabi Investment Authority.

Taiwan’s SWF project — which Lai said aims to expand Taiwan’s global investments and strengthen its international presence, particularly in the AI era — appears to be stuck in a preliminary stage. “As relevant agencies such as Taiwan’s National Development Council are still conducting information gathering and resource mapping to assess the feasibility of establishing a sovereign wealth fund, it is difficult to provide a definitive answer” to the question of a project timeline, says Chang Kai-jiun, director of the Financial Research Institute at the semi-governmental Taiwan Academy of Banking and Finance (TABF).

Calls to establish a Taiwanese sovereign wealth fund date back more than a decade. In November 2012, Chang Sheng-ford, then finance minister, proposed creating one to better manage the nation’s assets and confront mounting fiscal pressures, including concerns about the long-term sustainability of pension funds. He also suggested that such a vehicle could support long-term investments in infrastructure and technological development.

Lai’s proposal envisions the SWF as more of a geopolitical and techno-industrial tool to bolster Taiwan’s global standing. In the proposed fund’s unveiling last May, Lai said it would make full use of Taiwan’s industrial advantages, with the government taking the lead and working with private-sector enterprises to expand global reach and link with major target markets.

“In terms of opportunities, such a fund would allow Taiwan to invest strategically, as other SWFs like Norway’s do when they tie their investment to goals for initiatives such as ESG,” says Chris Cottorone, president of TriOrient Investments and co-chair of AmCham Taiwan’s Private Equity Committee.

Another aspect that Cottorone says is critically important is that “an SWF would allow the people of Taiwan to have a seat and voice in boardrooms at major corporations around the world.” He notes that, given the island’s importance as an AI hardware manufacturer and its central role in the technology’s development, “Taiwan has to have a seat at the table of AI development, not be off to the side and voicing its ideas and concerns via others.”

An SWF could also help Taiwan accumulate national wealth, says TABF’s Chang. “One of the fund’s original purposes is to build up national assets by providing a vehicle to store wealth for future use, while seeking to maximize investment returns under appropriate risk controls,” he notes.

Further, there could be direct benefits for Taiwan’s growing financial services sector. “If a sovereign wealth fund’s investment operating model and governance framework are properly designed, it may significantly enhance the development and retention of asset management talent,” Chang says.

Significant challenges

Compared to when Taiwan first mulled the creation of an SWF, the challenges today are arguably tougher. While Former President Ma Ying-jeou’s government held a majority in the Legislative Yuan in the early 2010s, Lai Ching-te’s does not. The current split between the presidency and the Legislative Yuan further complicates the prospects of an already difficult project.

Ross Feingold, a Taipei-based lawyer and political risk consultant, says the political obstacles facing a Taiwanese sovereign wealth fund may prove more formidable than the financial ones. Taiwan, he notes, has no shortage of potential funding sources among the non–natural resource revenues typically used to capitalize such funds, including contributions to mandatory insurance and pension systems, central government budget surpluses in years when tax revenues exceed projections, and foreign exchange reserves.

“The challenge for Taiwan is not finding the funding source,” says Feingold. “The challenges for Taiwan are to reach a consensus between the executive and legislative branches about the text of the law to create the sovereign wealth fund and, similarly, a consensus about the operations of the sovereign wealth fund, including a willingness to let the fund operate with a minimum of political interference.”

TriOrient Investments’ Cottorone notes that there are concerns over a lack of local talent to invest globally. While Taiwan has many skilled investment professionals, a significant number of them are working overseas in other financial centers, where they are offered higher salaries. “Attracting them could be difficult,” he says. “And hiring foreign firms or professionals may also face some challenges.”

At the same time, Taiwan’s Central Bank, known for its conservatism and caution, has rejected a legislative proposal to tap its foreign exchange reserves to finance the initiative, citing the bank’s mandate to prioritize safety and liquidity. That legislation, discussed in May 2023 during proposed amendments to the Central Bank Act, would have required the bank to allocate about 10% of its roughly US$561 billion in reserves to the initiative.

The Central Bank “places safety and liquidity above other concerns when managing foreign exchange reserves,” according to a statement cited by the Taipei Times.

“It is inappropriate to place the Central Bank in charge of a sovereign wealth fund because wealth creation is not its mandate or part of its operations,” the bank said, adding that legal revisions to change its duty would be unsuccessful because “a sovereign wealth fund would require its own organizational structure, budget, staff, and specialty to carry out its operations.”

Exploring best practices

As Taiwan weighs whether to proceed with the proposed fund, analysts say several countries offer useful points of comparison. Singapore, a resource-poor economy that operates the sovereign wealth funds GIC Private and Temasek Holdings, is frequently cited as a model.

If the primary objective is to pursue strategic investments using government capital, Temasek offers a model worth studying, says TABF’s Chang. Although wholly owned by the Singapore government, Temasek operates without direct political intervention in its commercial decisions. Instead, the government exercises oversight through the company’s board of directors, which submits an annual performance report to the Ministry of Finance and pays dividends to the state.

Temasek was established to take controlling stakes in and manage Singapore’s strategic industries, with the goal of strengthening the profitability and long-term competitiveness of domestic firms. From 1974 to 2001, its portfolio saw relatively limited change. A turning point came in 2002, when Temasek began expanding its investment footprint across Asia. Today, its investments span key sectors including financial services, telecommunications, media, technology, transportation, and industrials.

The results have generally been within government expectations. As of the fiscal year ended March 31, 2025, Temasek reported a record net portfolio value of S$434 billion (US$343 billion), with a 10-year total shareholder return of 5% and a 20-year total return of 7%.

However, if Taiwan’s primary objective is to accumulate national wealth, Norway’s sovereign wealth fund, the Government Pension Fund Global (GPFG), is widely regarded as a leading example, Chang says. The fund is affiliated with Norway’s central bank, Norges Bank, and is operated by its dedicated investment arm, Norges Bank Investment Management.

Beginning in 1998, the Norwegian government eased restrictions on equity investment, allowing the fund to allocate roughly half of its portfolio to global stock markets. Since then, it has expanded into a broad range of asset classes, including bonds, equities, fixed income, real estate, private equity, and derivatives. The fund generated an annualized return of 6.64% from 1998 through the end of 2025.

In 2025, GPFG achieved a record annual return of 15.1%, equivalent to US$247 billion. Driving the record results were strong performances in technology, financials, and basic materials stocks.

Yet for an SWF to become a reality in Taiwan, its citizens would have to be comfortable with the possibility of the completed project losing money. A May 2025 United Daily News editorial noted that even the high-performing GPFG lost more than 23% during the 2008-09 global financial crisis. “Thus, Taiwan must approach this with the correct mindset: profits are not guaranteed,” the article said.

Feingold says the proposal could prove a difficult sell within Taiwan’s political system. While Singapore’s sovereign wealth funds have not always delivered optimal performance, he notes, the ruling People’s Action Party faces relatively limited political or civil society opposition. Taiwan’s political environment, by contrast, is far more contested.

“Regardless of which party controls the executive branch, opposition legislators and unfriendly media will of course try to make the executive branch pay a severe political price the moment Taiwan’s sovereign wealth funds lose a dollar, their returns are below a benchmark during a specific period, or they are below their peer SWFs during a specific period,” he says.