Sovereign wealth fund mulled before
The hysteria that accompanied the establishment of a sovereign wealth fund, now just awaiting the approval from the Senate, should not have arisen if the government had bared the provenance for such a bill seeking for the creation of a Maharlika Wealth Fund (MWF).
For there was such a proposal made two years ago for such a fund to be established with the Bangko Sentral ng Pilipinas (BSP) early on identified to be the proponent for such sovereign wealth fund. In fact, a technical working group (TWG) was specifically created for such a fund that would be made to earn substantial sums for the government much like the other such funds such as that of Norway and Singapore, among others.
Budget Secretary Amenah Pangandaman, then BSP assistant governor, revealed in a recent news forum that two years ago, the Bangko Sentral created a technical working group to look into the feasibility of creating a sovereign wealth fund. She said that she became part of that TWG and they consulted with the World Bank, the International Monetary Fund (IMF), the Asian Development Bank (ADB) and Singapore’s Milken Institute to learn the best practices in putting up a sovereign wealth fund.
“It’s not rocket science,” she told the forum. “Sovereign funds have been in existence for around 200 years, and more than 100 countries have them.”
The budget chief also said that during their feasibility study, they saw a good model in the structure of the Indonesia Investment Authority or INA, which was established in 2020 at the height of the pandemic.
“When they created that fund, it was in the middle of the pandemic in 2020,” she said. “They started with only $5 billion. Now, it’s already $22.5 billion.” She further explained that, during those consultations, the ADB and the IMF both said establishing a sovereign wealth fund is okay, but they said the central bank should not do it because it’s not within the BSP’S mandate.
Thus, the bill that the House has now passed establishing a Maharlika Wealth Fund arose from the tied hands of the BSP due to its charter. And what the Fund’s proponents did was to ensure that there are governance and transparency issues included so as to forestall the possibility of putting the Fund’s money into questionable transactions, the main reason for the hysteria that accompanied the proposed fund.
Finance Secretary Benjamin Diokno, Neda Secretary General Arsenio Balisacan, and other topnotch investment professionals from the private sector have lent their voices
With the passage of the bill at the House on Thursday, we now only need a counterpart bill in the Senate to create the MWF for good. And while its chances of passing the Senate also look good, one thing is for sure: We have enough expertise and research done on the MWF, and we have people like Budget Secretary Pangandaman to turn to when we need some sober and expert voice on the matter.
to those pushing for the fund to allow the country to make better use of its money. In fact, proponents also took out the possible funding from the Social Security System to counter the hysteria over the Fund’s establishment.
Also, the proponents of the Fund saw to it that the bill contained governance and transparency issues to preclude possible investments that are deemed unworthy of the Fund’s investment. There was also the oversight committee from the vehicle plus at least five prior steps before the Fund can make its investments.
Imagine if that Fund had been established during the pandemic, the country could now be looking at least a three hundred percent rise in investments. So the government should be allowed to go on with the Fund’s establishment, as it is an idea that was long ago thought of. Two years ago, a TWG had thought of such a fund. But there was an issue in the proposal to have the BSP spearhead its creation.
Secretary Pangandaman said: “They told us we could, but we need to revise the mandate and the charter of the Bangko Sentral ng Pilipinas.” The sovereign fund idea was thus abandoned by the BSP due to restrictions in its charter.
The idea only resurfaced when a bill was filed at the House of Representatives in November proposing the MWF. With the passage of the bill at the House on Thursday, we now only need a counterpart bill in the Senate to create the MWF for good. And while its chances of passing the Senate also look good, one thing is for sure: We have enough expertise and research done on the MWF, and we have people like Budget Secretary Pangandaman to turn to when we need some sober and expert voice on the matter.