Budget chief says both int’l agencies see SWF benefits for country
The International Monetary Fund, the Asian Development Bank, and even the US-based think tank Milken Institute have recommended the creation of a sovereign wealth fund (SWF), Budget Secretary Amenah Pangandaman said Wednesday.
During the Kapihan sa Manila Bay forum, Pangandaman said the country’s two development partners and Milken Institute have endorsed the creation of the country’s own SWF.
The ADB also said on Wednesday that the establishment of a sovereign wealth fund would not only benefit the economy but could also deepen the domestic capital market.
Meanwhile, Speaker Martin G. Romualdez said he would leave it to President Ferdinand Marcos Jr. if the bill creating the Maharlika Investment Fund (MIF) would be certified as urgent.
In a press briefing Tuesday morning (Manila time) in Belgium with members of the Philippine media, Romualdez pointed out that despite initial concerns over the proposed measure, more lawmakers have expressed their desire to be included among the co-authors of the bill.
Pangandaman said discussions about such a fund began during the Duterte administration, when Finance Secretary Benjamin Diokno was still the Bangko Sentral ng Pilipinas governor.
“During the pandemic, it was also the same time when INA [Indonesia Investment Authority], the sovereign wealth fund of Indonesia, was established. It was all over the news during that time,” Pangandaman said.
“And then Secretary Ben Diokno, BSP governor then, asked us to review and check if the BSP can establish its own sovereign wealth fund,” she said.
Pangandaman said both the ADB and IMF were “okay” with Diokno’s proposal, but adamant that the BSP not be the primary vehicle for the creation of a sovereign wealth fund because that was not part of its mandate.
“During that time, we really had a surplus in our reserves. The IMF has said we should only have at least three months of our reserves, but during Governor Diokno’s time, it was 10 months — more than enough,” Pangadaman said.
“So, he [Diokno] said, let’s study how we can go about this. We did research, a TWG [technical working group], we even met with ADB [and] the IMF,” she said.
“Both development partners said it’s okay, but not from the central bank because it’s not part of its mandate. It’s possible, but you [the government] need to revise the mandate and the charter of the BSP,” she said.
Pangandaman also said the SWF was discussed at a Cabinet meeting during the time of President Rodrigo Duterte.
The DBM chief said they tapped the Milken Institute to help the technical working group, whose report about the SWF was released on Dec. 14.
She said the technical working group met with representatives of the Milken Institute of Singapore.
“They will release a report soon, and I think the report will say that the time is now. We don’t have to wait to start and create our own sovereign wealth fund,” Pangandaman said.
She said the Milken Institute report has not been released to the public yet.
Pangandaman added that Diokno also met last week with the World Bank to discuss the planned Maharlika Investment Fund.
ADB Philippines country director Kelly Bird said the sovereign wealth fund would create a lot of institutional investors.
Earlier, the country’s economic managers expressed their support for the creation of the Maharlika Investment Fund as a vehicle to move forward the agenda for prosperity and achieve the economic goals of the government.
Diokno, Pangandaman, Economic Planning Secretary Arsenio Balisacan, and Bangko Sentral ng Pilipinas Governor Felipe Medalla signed a joint statement saying that a sovereign wealth fund was a tried and tested investment vehicle used by governments in both developed and developing countries to achieve their economic objectives.
At Wednesday’s forum, Pangandaman said public concerns on the MIF were being addressed.
In response to the public’s concerns, the House committee on appropriations removed the Government Service Insurance System (GSIS) and Social Security System (SSS) as sources of funds for the MIF, she said.
“Our legislators listened and now, they are fine-tuning the bill. I’m sure that when it gets to the Senate, the economic team will be called. Everyone who wants to share their amendments will be considered, so let’s respect the process of legislation,” Pangandaman added.
She said the process of legislation will enable the public to express their suggestions to ensure that the law is created for the people. “It’s democracy at work,” she said.
In the House, “the Majority Floor Leader (Manuel Jose Dalipe) told me that we had over 220 [co-authors] and I think by the time I get back it might reach 250,” the Speaker said.
“So, there will be over two-thirds of the House who will be co-authoring [the bill] because there have been exhaustive briefings,” Romualdez, who is part of the official delegation of President Marcos in Brussels, said.
Despite having the numbers in the House to pass the MIF, Romualdez said it is still up to the President if he wants to certify the bill as urgent so it could be approved on third and final reading before the House adjourns for its Christmas break.
If the bill is certified as urgent, the House can dispense with the three-day rule—the requirement of the Constitution that no bill shall become a law unless it has passed three readings on separate days.
The House is set to adjourn this week.
On Sunday, President Marcos told reporters that the creation of the MIF was his idea, as he also expressed support for the measure in the House.
The President stressed that the country needs additional investments and creating the MIF is one way to achieve this goal.
Romualdez said the MIF could be tapped to address the power crisis and the country’s agricultural needs.
In an interview with the press on the sidelines of the Association of Southeast Asian Nations-European Union (ASEAN-EU) commemorative summit in Brussels, Belgium, Romualdez pointed out that the purpose of a sovereign wealth fund is to provide the capital and the vehicle for which “we can bring further development and benefits to the people.”
The House of Representatives opened the period of interpellations for the bill earlier this week.
House Bill No. 6608 proposes the creation of the MIF as an independent fund that adheres to the principles of good governance, transparency, and accountability.
Under the proposed measure, the fund shall be sourced from the investible funds of select government financial institutions (GFIs), from contributions of the national government, the Bangko Sentral ng Pilipinas (BSP), and other sources of funds.
The bill states that the fund shall be used to invest on a strategic and commercial basis in a manner designed to promote fiscal stability for economic development and strengthen the top-performing GFIs through additional investment platforms that will help attain the national government’s priority plans.
The initial capitalization of the fund will come from the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP) and the BSP.
The measure lists subsequent annual contributions to the fund, including dividends from the BSP and revenue streams from the Philippine Amusement and Gaming Corp.
