The House of Representatives Committee on Banks and Financial Intermediaries on Thursday approved a proposed law creating the P275-billion Maharlika Wealth Fund (MWF).
Meanwhile, some members of the Joint Foreign Chamber which is composed of business groups from the United States, Canada, Australia, New Zealand, Europe, Japan, and Korea, said the MWF could work, but it might not be necessary to bring in foreign direct investments (FDI) at this time.
The panel chaired by Manila Rep. Irwin.Tieng adopted the amendments presented by a technical working group led by Albay Rep. Joey Sarte Salceda, chairman of the House Committee on Ways and Means.
Tieng’s panel ratified a motion to submit a committee report and refer House Bill (HB) 6398 to Salceda’s committee for its tax provision and the Committee on Appropriations for its budgetary aspect.
Salceda vowed to approve the measure on Monday.
HB 6393, authored by Speaker Martin Romualdez, proposes the creation of the MWF patterned after the sovereign wealth fund (SWF) of other countries, to maximize the profitability of investible government funds for the benefit of the Filipino people.
Other authors of the measure were House Majority Leader Manuel Jose Dalipe, senior Deputy Majority Leader Ferdinand Alexander Marcos, and Tingog party-list Reps. Yedda Marie Romualdez and Jude Acidre, and Marikina City Rep. Stella Luz Quimbo.
Under the original bill, four large government financial institutions (GFIs) were mandated to put up equity for a combined total of P250 billion to start up the fund.
The Government Service Insurance System (GSIS) will provide an initial investment of P125 billion, P50 billion for both the Social Security System (SSS) and Land Bank of the Philippines (LBP), and P25 billion from the Development Bank of the Philippines (DBP).
With amendments, it mandates the Treasury of the Philippines to chip in P25 billion as equity.
Quimbo stressed that the initial investment which the FGIs will raise for the MWF would not have any negative impact on the delivery of services or benefits to the members and stakeholders of these institutions.
“Their investible funds are separate from the funds earmarked for benefit payments,” Quimbo explained.
The measure also calls for the creation of “Maharlika Investment Corporation” (MIC), a government-owned and controlled corporation responsible for the overall governance and management of the MIF.
As part of the safeguards, the bill provides that the books and accounts of the MIF will be subject to the scrutiny of the Commission on Audit (CoA).
Likewise, the measure calls for the formation of a Joint Congressional Committee to oversee, monitor, and evaluate the implementation of the law creating the MIF.
In filing the bill, Romualdez said it would help achieve the objectives of the Agenda for Prosperity and the eight-point socioeconomic roadmap of President Ferdinand Marcos Jr.
The Speaker cited Singapore and Indonesia as countries that have successfully used their sovereign wealth funds.
“As the Philippines secures its place not only as the Rising Star of Asia, but as a real economic leader in the Asia Pacific, the creation of the MIF becomes imperative,” Romualdez had said.
To ensure transparency and accountability, the MWF would adhere to the Santiago Principles. These are the 24 generally accepted principles and practices agreed to in October 2008 in Santiago, Chile, among countries with SWFs, investment recipient countries, and international organizations.
Putting up a sovereign wealth fund was proven successful in other countries, members have said.
“We are following it with great interest. It might be something that would happen if not sooner than later, but there is very few details on the table right now, so for now we are monitoring the situation,” said Lars Wittig of the European Chamber of Commerce of the Philippines.
Scandinavia, particularly Norway, has been very successful with sovereign wealth funds and has often been used as a model for such investment endeavors.
Wittig said it isn’t a one size fits all type of deal, and the Philippines would have to find its own formula for success.
“It has taken years to implement that kind of system. These nations are very very small, and it is much easier to create control, and there is a very high degree of trust in government. When the maturity of this country is ready, then it will also be an area to pursue further here,” he added.
Ebb Hinchliffe of the American Chamber said they were quite confident that the Philippines would continue to attract foreign direct investment even without a sovereign wealth fund.
According to the group, the country’s FDI inflows could hit $128 billion by 2023 from its 2020 projection of just $50 billion.
The drivers of this optimism include multiple liberalization reforms opening up the Philippines to more foreign investment such as the amendments to Public Service Act, Retail Trade Liberalization Act, and the Foreign Investments Act.
“Other countries are doing this, it seems to have been successful. I just don’t know how necessary it is in the Philippines,” Hinchliffe said.
Meanwhile, Bradley Norman of the Australian-New Zealand Chamber of Commerce Philippines said they were eager to see what investment opportunities the fund would offer.
“From our point of view we are very supportive of mining and if the sovereign wealth fund being set up would assist to create further mining opportunities then it is something we would look at and certainly that would augur well for foreign direct investment,” Norman said.
House Speaker Martin Romualdez earlier led the filing of the bill seeking the establishment of a sovereign wealth fund.
Finance Secretary Benjamin Diokno said he supports the proposed measure. Diokno added the country has the money to back the fund.
However, an analyst said the success of a sovereign wealth fund largely depends on the check and balances as well as safeguards in place to eliminate corruption and prevent a financial crisis similar to the 1Malaysia Development Bhd.