While setting up a sovereign wealth fund is a country’s prerogative, the Asian Development Bank said on Wednesday that establishing the Maharlika Wealth Fund could be advantageous for the Philippine economy.
“The benefit of a sovereign (Maharlika) wealth fund is it can help deepen the domestic capital market. It creates a lot of institutional investors and then the mobilization of savings within the economy for investments and so on,” said Kelly Bird, ADB Country Director for the Philippines.
Speaking during a press briefing at the ADB headquarters in Mandaluyong City, Bird added: “They have a very good purpose: It can be one of the sources of funding, and they have some very good benefits, particularly in deepening the capital market, which is critically important in long-term investments in infrastructure.”
House Bill 6398 or the creation of the Maharlika Wealth Fund was principally authored by House Speaker Ferdinand Martin G. Romualdez.
President Ferdinand “Bongbong” Marcos Jr. admitted earlier this week that he was the one who first broached the idea of establishing the MWF to maximize the profitability of government assets by investing the revenue surplus of state-run financial institutions.
The country’s economic managers supported the establishment of the MWF, confident in the sovereign fund’s short- and long-term advantages. But the concept has drawn criticism from several business associations and economic policy groups.
SWF talks started during Duterte admin
“The discussions about SWF began during the Duterte administration, or when Finance Secretary Benjamin Diokno was still the Bangko Sentral ng Pilipinas governor,” Budget Secretary Amenah Pangandaman said during yesterday’s Kapihan sa Manila Bay.
She said: “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.”
She said Secretary Ben Diokno, who was then BSP governor, requested them to review and check if the BSP can establish its own sovereign wealth fund.
Pangandaman added that the ADB and International Monetary Fund were “okay” with Diokno’s proposal, but adamant to use the BSP as the primary vehicle for the creation of a sovereign wealth fund.
“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, it’s more than enough,” Pangandaman said.
She added: “So, he (Diokno) said, let’s study how we can go about this. We did research, TWG (technical working group), we even met with ADB, the IMF.”
“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.
In the case of the Milken Institute, Pangandaman said they tapped the US-based think tank during the TWG, whose report about the SWF was released only on Wednesday.
“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,” she said.
She, however, clarified that the Milken Institute report has not yet been released to the public.
Diokno, she said, also met last week with the World Bank to discuss the planned MWF.