A document titled “Non-Interventional Investment by the National Development Fund” has been published on the Fund’s website. Additionally, some domestic investment models have been explained by the esteemed Director of Evaluation and Domestic Investment of the Fund, which can be viewed at the same source.
Moreover, the Fund’s investments in domestic monetary and financial markets are not authorized and stipulated in the legal statute of the Fund, specifically under Clause “Kh” of the statute titled “Utilization of the Fund.” Conducting such activities in any form or model requires amending Article 16 of the Law on Permanent Provisions of Development Plans of the country (serving as the legal statute of the National Development Fund). It seems that, given the necessity of complying with the country’s monetary and banking regulations in the financial operations of the Fund, determining the governing laws over contracts related to various innovative investment models of the Fund is necessary to ensure legal compliance, transparency in contract execution, clarity, safeguarding state ownership, application of tax systems, and adherence to rules and regulations in financial transactions. Therefore, examining these innovative models is essential.
It should be noted that despite the repeated emphasis on the innovative models and the insistence of the officials on “enterprise creation” rather than “enterprise management” within these innovative frameworks, it seems that the executive measures to achieve this goal and concept, which itself is ambiguous, have not been specified. Non-interference in the management of domestic investment projects (which perhaps is what is meant by enterprise management) is only emphasized through various conventional types of oversight, each of which has its own distinct goals, duties, and defined stakeholdeA document titled “Non-Interventional Investment by the National Development Fund” has been published on the Fund’s website. Additionally, some domestic investment models have been explained by the esteemed Director of Evaluation and Domestic Investment of the Fund, which can be viewed at the same source.
Moreover, the Fund’s investments in domestic monetary and financial markets are not authorized and stipulated in the legal statute of the Fund, specifically under Clause “Kh” of the statute titled “Utilization of the Fund.” Conducting such activities in any form or model requires amending Article 16 of the Law on Permanent Provisions of Development Plans of the country (serving as the legal statute of the National Development Fund). It seems that, given the necessity of complying with the country’s monetary and banking regulations in the financial operations of the Fund, determining the governing laws over contracts related to various innovative investment models of the Fund is necessary to ensure legal compliance, transparency in contract execution, clarity, safeguarding state ownership, application of tax systems, and adherence to rules and regulations in financial transactions. Therefore, examining these innovative models is essential.
It should be noted that despite the repeated emphasis on the innovative models and the insistence of the officials on “enterprise creation” rather than “enterprise management” within these innovative frameworks, it seems that the executive measures to achieve this goal and concept, which itself is ambiguous, have not been specified. Non-interference in the management of domestic investment projects (which perhaps is what is meant by enterprise management) is only emphasized through various conventional types of oversight, each of which has its own distinct goals, duties, and defined stakeholders, ranging from the oversight of the legal inspector (independent auditing), internal auditing oversight, financial performance oversight, to intelligent and effective oversight. However, there is no available information on how these types of oversight are implemented or what tools are used.
In any case, the models that have been outlined are as follows and are briefly reviewed in this document based on published and official information:Equity and Loan Hybrid Partnership Model
- In this model, the financing of the targeted projects is provided up to a maximum of 35% in the form of equity participation from the fund, along with a loan (which seems to refer to the financial facilities granted under banking agency contracts to applicants).
a) Equity Participation Up to 35%: The National Development Fund becomes a legal shareholder in the company owning the project or domestic investment plan, either directly or possibly through companies established under the Commercial Code with its own capital or more than 50% ownership. The method of equity participation by the fund, whose resources are entirely government-owned and considered a public institution under Article 3 of the Public Accounts Act of the country, is worthy of consideration and review.
If this equity participation does not have a legal prohibition in any of the aforementioned methods, it must be determined what type of shares can be provided by the fund.
If the shares are ordinary shares, a guaranteed return on them is not expected, and in the event of not achieving the expected rate of return or a potential investment loss related to the equity participation (or the project itself), the principal resources of the fund are at risk of being wasted.
If the shares are preferred shares, it is logically not expected that voting rights in the general and extraordinary assemblies to protect the fund’s resources and interests would be available for the holders. The risk associated with decision-making related to the project launch by its owner would affect the timely collection of the fund’s receivables in the form of preferred shares. Obviously, regardless of the priority in receiving dividends, any delay in the return of benefits from such shares could put the resources of the National Development Fund at risk.
It is worth mentioning that regarding the loan component in this model, the challenges, risks, and execution problems related to loan granting (read: granting facilities within the framework of banking contracts under the agency agreements between banks and the National Development Fund) still persist, and no measures have been proposed for their elimination or reduction. This issue remains crucial and vital in the implementation of projects, their returns, and the settlement of financing, which, with the fund’s equity participation, puts even more resources, in addition to those allocated as granted facilities, at risk of wastage.
b) Combined Equity and Loan Participation Model, If financing with the “Combined Equity and Loan Participation Model” is structured within a single partnership agreement, regardless of the arrangements for depositing partnership shares, the principle of participation is based on the mingling of the monetary and non-monetary partnership shares of both parties in a shared manner and for mutual benefit as per the contract. This type of partnership is currently established within the framework of agency contracts by banks with applicants, and there is no defined and articulated distinction between this innovative model and existing civil partnerships. In any case, the method of concluding such partnership agreements, in which the fund acts both as an investor/shareholder and as a partner, remains unspecified and unclear, especially given that the fund, by its very nature, is considered a partner.
-
Other Investment Models of the Fund
2-1) Combined Model: Product Partnership-Loan
It appears that the foundation of this financing model is based on loan granting and aims to maximize the benefits derived from project implementation and maintain the value of the National Development Fund’s assets. This partnership can be executed in one of the following two ways:
a) Partnership in Product Offtake: In this arrangement, the fund participates in a specified quantity of the product (or products, or just a specific product) in designated years. The applicant (project owner or borrower) is obligated to deliver the specified quantity to the fund on a FIFO basis during the target year of the planned program.
b) Partnership in a Percentage of Production (Product Sharing): In this arrangement, the fund benefits from a certain percentage of the project’s production.
2-2) Combined Model: Revenue Partnership-Loan
The foundation of this financing model is also based on loan granting. The fund, in order to derive more benefits from project implementation and maintain the value of its assets, engages in revenue sharing from the project’s income. This can be executed in two forms:
Revenue Sharing: The fund participates as a partner in a certain percentage of the revenue, which means sharing a percentage of the income.
Fixed Revenue Sharing: Participation involves a fixed amount of income.
Additionally, there can be participation in a percentage or portion of the price of specific product(s). It is evident that adopting any of the mentioned methods ultimately leads to greater returns for the fund from the loans disbursed and increases the effective rate of profit share payable by the investee (project owner), thereby raising the overall interest rate of the granted facilities for the investee.
2-3) Combined Model: Bonus Sharing-Loan
In this model, the fund provides financing for the project and, in return, engages in one of two forms of bonus sharing: either a fixed amount of bonus or a percentage of the bonus.
2-4) Combined Model: Profit Sharing-Loan
In this model, the fund participates by receiving either a fixed amount of profit or a percentage of the profits generated from the execution and operation of the project.
2-5) Currency Leasing Model
In this model, the fund acquires a portion of the company’s shares in exchange for financing and gradually transfers ownership back to the project owner through a leasing agreement.
2-6) Currency Project Fund
In this model, the fund purchases units of a currency project fund and facilitates its exit strategy by either withdrawing profits or selling on the stock exchange, allowing for domestic currency investments.
2-7) Specialized Currency Private Equity Fund
In this method, the fund creates specialized private equity funds and acts as a General Partner (GP), bearing responsibility for all debts and obligations of these funds. The fund operates to protect its interests and those of other investment partners (Limited Partners, LP).
In all the models outlined in Section 2 of this document, except for models in rows 5-2 through 7-2, financing is fundamentally based on loans or facility grants. It appears that initially, the Fund’s resources will be provided to the project owner or developer in the form of bank loans. Ultimately, after the loan period ends and the project moves into the operational and product production phase, the Fund will engage in profit-sharing from the product (either in quantity or percentage), income-sharing, or a percentage of the sale price, or a bonus-sharing based on quantity or percentage, and finally, a specified amount or percentage of the profit. Therefore, a necessary and sufficient condition for achieving any of the specified profit-sharing arrangements is the initiation and operation of the project in question.
Since the documented regulations and conditions for the provision of facilities and investments from the resources of the National Development Fund through banks, within the framework of agency contracts (implementing the latest resolutions from the meeting dated 2022/12/24), include only a few points regarding commitments and collection conditions, no significant changes or new conditions have been implemented or announced in the framework of granting bank facilities from the fund’s resources. It seems that the fundamental conditions for granting foreign currency loans have not changed substantially, and the continuation of previous conditions, which have resulted in the failure to collect the fund’s resources on time, remains in effect, with its major challenges still persisting.
Therefore, the likelihood of realizing the announced profit-sharing schemes in the models of this section appears weak, considering the usual mechanism for granting foreign currency facilities. In fact, scenarios of participation in products, revenue, profit, or bonuses, which have been designed solely to benefit (read: benefit more) from the projects, are unlikely to succeed if the lending mechanisms continue under similar conditions as before. Furthermore, these mechanisms are ineffective in preserving the asset value of the National Development Fund, as the fund’s resources continue to be at risk of depletion and depreciation due to the governing loan-distribution mechanisms.
It is also important to note that facilities provided by the banking system under the framework of the Law on Usury-Free Banking Operations are generally granted in the form of civil partnership contracts. In these contracts, the bank and the project owner mix their monetary and non-monetary shares collectively and participate in a defined and specified purpose with the intent of profit. Once the participation ends, the partnership is dissolved and terminated (Article 4, Section 2 of Part 2 of the Executive Instructions of the Usury-Free Banking Operations Law, approved by the Monetary and Credit Council). On the other hand, the intended profit-sharing schemes should logically be implemented during the operation phase of the project and, in principle, after the termination of the partnership and the start of the repayment period. Thus, contracts regarding the purchase option of the project’s product (either by quantity or percentage) or pre-purchase of the project’s product must be separately concluded between the Fund and the project owner. It is obvious that in cases where profit-sharing from the product’s revenues (in the form of income sharing, profit, or a share of bonuses) is applied, the intended contract must be drafted on the basis of potential future hypothetical earnings, which are not realized at the time the contract is concluded.
In any case, it seems there is some ambiguity about whether such contracts can be concluded by the National Development Fund as a governmental institution and what legal requirements govern them. Only if clear regulations and legal documents for such contracts are announced within the framework of the bylaws and laws of public and governmental sector transactions can a more precise review be conducted. Nonetheless, it seems unlikely that such conditions can be incorporated into the civil partnership contract between the bank and the customer, or that separate contracts related to them can be attached or linked to the civil partnership contract in any manner. Therefore, the formal and structural separation of these conditions from the banking facility granting regulations is evident, and the Fund’s procedural transparency on this matter is not adequately addressed in the presented document.
Regarding Models 2-5 to 2-7, the following points are open for further examination:
In all three of these models, the purchase or acquisition of shares, units, or managerial shareholding has been presented.
These activities are generally considered direct or indirect domestic foreign currency investments by the Fund (through companies established with the Fund’s capital). According to the Fund’s articles of association, the establishment of such companies is not permitted, as the Fund is restricted from making domestic investments under the Commercial Code. It appears that engaging in any form of domestic foreign currency investment would first require an amendment to the Fund’s articles of association, specifically Section “Kh” of the articles of association.
It should be noted that in the document titled “Internal Investment Policy Statement of the National Development Fund,” document number NDFI/INV/140211/0, reference is made to the drafting and implementation of guidelines for the conditions and regulations of the Fund’s internal investments based on the resolution of the Fund’s Board of Trustees dated 2021/12/27, and citing Clause 2, Section B, Article 16 (of the Fund’s articles of association).
In this clause, the Board of Trustees, as the highest authority of the Fund, is given the duties and authority to “approve the conditions and methods for granting facilities for production and investment to the private, cooperative, and non-governmental public sectors.”
The verb in this section is “to approve the conditions and methods for granting facilities for production and investment.” It is not a correct interpretation to assume that the Board of Trustees has the duty and authority to independently approve the conditions and methods of investment in the specified sectors. As stated in Section 1 of Paragraph (Kh) of the articles of association, which deals with the expenditures of the Fund, the granting of facilities is specified as the permissible action for the purpose of production and investment development in the prescribed sectors, and “investment development” is the objective of granting facilities, not that direct investment itself is mandated. Furthermore, according to Section 4 of Paragraph Kh, it is specifically mentioned that investing in foreign monetary and financial markets is part of the Fund’s expenditures, while investing in domestic monetary and financial markets is fundamentally not included.
In any case, referencing other sections of the articles of association, such as Section 2 of Paragraph T regarding the duties and powers of the Executive Board of the Fund, which mentions “proposing investment opportunities in international and domestic monetary and financial markets to the Board of Trustees of the Fund,” logically should pertain to presenting investment proposals in the permissible areas outlined in Paragraph Kh, which are the expenditures of the Fund. In other words, based on Section 1 of Paragraph Kh, proposing the granting of facilities for production and investment in productive and service sub-sectors with appropriate returns, to develop investment and production in these sub-sectors, falls under the duties of the Executive Board. This does not essentially mean direct domestic investment by the Fund. In fact, direct investment by the Fund is only permitted in foreign monetary and financial markets according to Section 4 of Paragraph Kh, and making direct investment proposals by the Fund in these areas is also within the duties of the Executive Board. Essentially, the proposal for investment by the Executive Board is in the direction of implementing Sections 1 and 4 of Paragraph Kh of the articles of association, and interpreting and extending the phrase “investment opportunities in monetary and financial markets” to domestic markets without considering the two sections of Paragraph Kh of the articles of association and previous clear definitions is incorrect.
Nevertheless, according to Paragraph J of the articles of association of the Fund, “To ensure the achievement of the Fund’s objectives and continuous supervision of its current operations and to prevent any possible deviation from the provisions of the articles of association and …,” a Supervisory Board has been established as part of the Fund’s structure, comprising the head of the Court of Audit, the head of the country’s Auditing Organization, and the head of the General Inspection Organization.
It seems that the issue of domestic investment by the National Development Fund, considering its legal articles of association, requires supervision by the internal supervisory body. It is evident that, according to Note 1 under Paragraph J, the supervision of the Fund’s Supervisory Board does not negate the legal duties of supervisory bodies like the Court of Audit and the General Inspection Organization. The entirety of the legal and prescribed supervision can be effective in determining the validity and permissibility of the issue of domestic investment by the Fund and can also assess and provide direction regarding any potential deviation from the legal articles of association concerning the internal policies and strategies approved by the Board of Trustees of the Fund.rs, ranging from the oversight of the legal inspector (independent auditing), internal auditing oversight, financial performance oversight, to intelligent and effective oversight. However, there is no available information on how these types of oversight are implemented or what tools are used.
In any case, the models that have been outlined are as follows and are briefly reviewed in this document based on published and official information:
1. Equity and Loan Hybrid Partnership Model
In this model, the financing of the targeted projects is provided up to a maximum of 35% in the form of equity participation from the fund, along with a loan (which seems to refer to the financial facilities granted under banking agency contracts to applicants).
a) Equity Participation Up to 35%: The National Development Fund becomes a legal shareholder in the company owning the project or domestic investment plan, either directly or possibly through companies established under the Commercial Code with its own capital or more than 50% ownership. The method of equity participation by the fund, whose resources are entirely government-owned and considered a public institution under Article 3 of the Public Accounts Act of the country, is worthy of consideration and review.
If this equity participation does not have a legal prohibition in any of the aforementioned methods, it must be determined what type of shares can be provided by the fund.
If the shares are ordinary shares, a guaranteed return on them is not expected, and in the event of not achieving the expected rate of return or a potential investment loss related to the equity participation (or the project itself), the principal resources of the fund are at risk of being wasted.
If the shares are preferred shares, it is logically not expected that voting rights in the general and extraordinary assemblies to protect the fund’s resources and interests would be available for the holders. The risk associated with decision-making related to the project launch by its owner would affect the timely collection of the fund’s receivables in the form of preferred shares. Obviously, regardless of the priority in receiving dividends, any delay in the return of benefits from such shares could put the resources of the National Development Fund at risk.
It is worth mentioning that regarding the loan component in this model, the challenges, risks, and execution problems related to loan granting (read: granting facilities within the framework of banking contracts under the agency agreements between banks and the National Development Fund) still persist, and no measures have been proposed for their elimination or reduction. This issue remains crucial and vital in the implementation of projects, their returns, and the settlement of financing, which, with the fund’s equity participation, puts even more resources, in addition to those allocated as granted facilities, at risk of wastage.
b) Combined Equity and Loan Participation Model, If financing with the “Combined Equity and Loan Participation Model” is structured within a single partnership agreement, regardless of the arrangements for depositing partnership shares, the principle of participation is based on the mingling of the monetary and non-monetary partnership shares of both parties in a shared manner and for mutual benefit as per the contract. This type of partnership is currently established within the framework of agency contracts by banks with applicants, and there is no defined and articulated distinction between this innovative model and existing civil partnerships. In any case, the method of concluding such partnership agreements, in which the fund acts both as an investor/shareholder and as a partner, remains unspecified and unclear, especially given that the fund, by its very nature, is considered a partner.
2. Other Investment Models of the Fund
2-1) Combined Model: Product Partnership-Loan
It appears that the foundation of this financing model is based on loan granting and aims to maximize the benefits derived from project implementation and maintain the value of the National Development Fund’s assets. This partnership can be executed in one of the following two ways:
a) Partnership in Product Offtake: In this arrangement, the fund participates in a specified quantity of the product (or products, or just a specific product) in designated years. The applicant (project owner or borrower) is obligated to deliver the specified quantity to the fund on a FIFO basis during the target year of the planned program.
b) Partnership in a Percentage of Production (Product Sharing): In this arrangement, the fund benefits from a certain percentage of the project’s production.
2-2) Combined Model: Revenue Partnership-Loan
The foundation of this financing model is also based on loan granting. The fund, in order to derive more benefits from project implementation and maintain the value of its assets, engages in revenue sharing from the project’s income. This can be executed in two forms:
- Revenue Sharing: The fund participates as a partner in a certain percentage of the revenue, which means sharing a percentage of the income.
- Fixed Revenue Sharing: Participation involves a fixed amount of income.
Additionally, there can be participation in a percentage or portion of the price of specific product(s). It is evident that adopting any of the mentioned methods ultimately leads to greater returns for the fund from the loans disbursed and increases the effective rate of profit share payable by the investee (project owner), thereby raising the overall interest rate of the granted facilities for the investee.
2-3) Combined Model: Bonus Sharing-Loan
In this model, the fund provides financing for the project and, in return, engages in one of two forms of bonus sharing: either a fixed amount of bonus or a percentage of the bonus.
2-4) Combined Model: Profit Sharing-Loan
In this model, the fund participates by receiving either a fixed amount of profit or a percentage of the profits generated from the execution and operation of the project.
2-5) Currency Leasing Model
In this model, the fund acquires a portion of the company’s shares in exchange for financing and gradually transfers ownership back to the project owner through a leasing agreement.
2-6) Currency Project Fund
In this model, the fund purchases units of a currency project fund and facilitates its exit strategy by either withdrawing profits or selling on the stock exchange, allowing for domestic currency investments.
2-7) Specialized Currency Private Equity Fund
In this method, the fund creates specialized private equity funds and acts as a General Partner (GP), bearing responsibility for all debts and obligations of these funds. The fund operates to protect its interests and those of other investment partners (Limited Partners, LP).
In all the models outlined in Section 2 of this document, except for models in rows 5-2 through 7-2, financing is fundamentally based on loans or facility grants. It appears that initially, the Fund’s resources will be provided to the project owner or developer in the form of bank loans. Ultimately, after the loan period ends and the project moves into the operational and product production phase, the Fund will engage in profit-sharing from the product (either in quantity or percentage), income-sharing, or a percentage of the sale price, or a bonus-sharing based on quantity or percentage, and finally, a specified amount or percentage of the profit. Therefore, a necessary and sufficient condition for achieving any of the specified profit-sharing arrangements is the initiation and operation of the project in question.
Since the documented regulations and conditions for the provision of facilities and investments from the resources of the National Development Fund through banks, within the framework of agency contracts (implementing the latest resolutions from the meeting dated 2022/12/24), include only a few points regarding commitments and collection conditions, no significant changes or new conditions have been implemented or announced in the framework of granting bank facilities from the fund’s resources. It seems that the fundamental conditions for granting foreign currency loans have not changed substantially, and the continuation of previous conditions, which have resulted in the failure to collect the fund’s resources on time, remains in effect, with its major challenges still persisting.
Therefore, the likelihood of realizing the announced profit-sharing schemes in the models of this section appears weak, considering the usual mechanism for granting foreign currency facilities. In fact, scenarios of participation in products, revenue, profit, or bonuses, which have been designed solely to benefit (read: benefit more) from the projects, are unlikely to succeed if the lending mechanisms continue under similar conditions as before. Furthermore, these mechanisms are ineffective in preserving the asset value of the National Development Fund, as the fund’s resources continue to be at risk of depletion and depreciation due to the governing loan-distribution mechanisms.
It is also important to note that facilities provided by the banking system under the framework of the Law on Usury-Free Banking Operations are generally granted in the form of civil partnership contracts. In these contracts, the bank and the project owner mix their monetary and non-monetary shares collectively and participate in a defined and specified purpose with the intent of profit. Once the participation ends, the partnership is dissolved and terminated (Article 4, Section 2 of Part 2 of the Executive Instructions of the Usury-Free Banking Operations Law, approved by the Monetary and Credit Council). On the other hand, the intended profit-sharing schemes should logically be implemented during the operation phase of the project and, in principle, after the termination of the partnership and the start of the repayment period. Thus, contracts regarding the purchase option of the project’s product (either by quantity or percentage) or pre-purchase of the project’s product must be separately concluded between the Fund and the project owner. It is obvious that in cases where profit-sharing from the product’s revenues (in the form of income sharing, profit, or a share of bonuses) is applied, the intended contract must be drafted on the basis of potential future hypothetical earnings, which are not realized at the time the contract is concluded.
In any case, it seems there is some ambiguity about whether such contracts can be concluded by the National Development Fund as a governmental institution and what legal requirements govern them. Only if clear regulations and legal documents for such contracts are announced within the framework of the bylaws and laws of public and governmental sector transactions can a more precise review be conducted. Nonetheless, it seems unlikely that such conditions can be incorporated into the civil partnership contract between the bank and the customer, or that separate contracts related to them can be attached or linked to the civil partnership contract in any manner. Therefore, the formal and structural separation of these conditions from the banking facility granting regulations is evident, and the Fund’s procedural transparency on this matter is not adequately addressed in the presented document.
- Regarding Models 2-5 to 2-7, the following points are open for further examination:
In all three of these models, the purchase or acquisition of shares, units, or managerial shareholding has been presented.
These activities are generally considered direct or indirect domestic foreign currency investments by the Fund (through companies established with the Fund’s capital). According to the Fund’s articles of association, the establishment of such companies is not permitted, as the Fund is restricted from making domestic investments under the Commercial Code. It appears that engaging in any form of domestic foreign currency investment would first require an amendment to the Fund’s articles of association, specifically Section “Kh” of the articles of association.
It should be noted that in the document titled “Internal Investment Policy Statement of the National Development Fund,” document number NDFI/INV/140211/0, reference is made to the drafting and implementation of guidelines for the conditions and regulations of the Fund’s internal investments based on the resolution of the Fund’s Board of Trustees dated 2021/12/27, and citing Clause 2, Section B, Article 16 (of the Fund’s articles of association).
In this clause, the Board of Trustees, as the highest authority of the Fund, is given the duties and authority to “approve the conditions and methods for granting facilities for production and investment to the private, cooperative, and non-governmental public sectors.”
The verb in this section is “to approve the conditions and methods for granting facilities for production and investment.” It is not a correct interpretation to assume that the Board of Trustees has the duty and authority to independently approve the conditions and methods of investment in the specified sectors. As stated in Section 1 of Paragraph (Kh) of the articles of association, which deals with the expenditures of the Fund, the granting of facilities is specified as the permissible action for the purpose of production and investment development in the prescribed sectors, and “investment development” is the objective of granting facilities, not that direct investment itself is mandated. Furthermore, according to Section 4 of Paragraph Kh, it is specifically mentioned that investing in foreign monetary and financial markets is part of the Fund’s expenditures, while investing in domestic monetary and financial markets is fundamentally not included.
In any case, referencing other sections of the articles of association, such as Section 2 of Paragraph T regarding the duties and powers of the Executive Board of the Fund, which mentions “proposing investment opportunities in international and domestic monetary and financial markets to the Board of Trustees of the Fund,” logically should pertain to presenting investment proposals in the permissible areas outlined in Paragraph Kh, which are the expenditures of the Fund. In other words, based on Section 1 of Paragraph Kh, proposing the granting of facilities for production and investment in productive and service sub-sectors with appropriate returns, to develop investment and production in these sub-sectors, falls under the duties of the Executive Board. This does not essentially mean direct domestic investment by the Fund. In fact, direct investment by the Fund is only permitted in foreign monetary and financial markets according to Section 4 of Paragraph Kh, and making direct investment proposals by the Fund in these areas is also within the duties of the Executive Board. Essentially, the proposal for investment by the Executive Board is in the direction of implementing Sections 1 and 4 of Paragraph Kh of the articles of association, and interpreting and extending the phrase “investment opportunities in monetary and financial markets” to domestic markets without considering the two sections of Paragraph Kh of the articles of association and previous clear definitions is incorrect.
Nevertheless, according to Paragraph J of the articles of association of the Fund, “To ensure the achievement of the Fund’s objectives and continuous supervision of its current operations and to prevent any possible deviation from the provisions of the articles of association and …,” a Supervisory Board has been established as part of the Fund’s structure, comprising the head of the Court of Audit, the head of the country’s Auditing Organization, and the head of the General Inspection Organization.
It seems that the issue of domestic investment by the National Development Fund, considering its legal articles of association, requires supervision by the internal supervisory body. It is evident that, according to Note 1 under Paragraph J, the supervision of the Fund’s Supervisory Board does not negate the legal duties of supervisory bodies like the Court of Audit and the General Inspection Organization. The entirety of the legal and prescribed supervision can be effective in determining the validity and permissibility of the issue of domestic investment by the Fund and can also assess and provide direction regarding any potential deviation from the legal articles of association concerning the internal policies and strategies approved by the Board of Trustees of the Fund.
