Economic team pushes for approval of Maharlika Wealth Fund

Economic team pushes for approval of Maharlika Wealth Fund

A Philippines peso note is seen in this illustration on June 2, 2017. — REUTERS/THOMAS WHITE/ILLUSTRATION

Economic managers said they “strongly support” the creation of the Maharlika Wealth Fund (MWF), after lawmakers agreed to remove a provision in the bill that would have sourced its funding from state-run pension funds.

“We, the economic managers of the Marcos Jr. administration, strongly support the creation of the Maharlika Wealth Fund as a vehicle to move forward the Agenda for Prosperity and achieve the economic goals of the administration,” economic managers said in a statement.

The statement was signed by Finance Secretary Benjamin E. Diokno, Budget Secretary Amenah F. Pangandaman, Socioeconomic Planning Secretary Arsenio M. Balisacan and Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla.

In a press briefing on Friday, Mr. Diokno called for the immediate enactment of the bill creating the MWF.

“The establishment of a Sovereign Wealth Fund is a tried and tested investment vehicle that has been used by governments in both first world and developing countries to achieve their economic objectives,” he said.

Instead of using pension funds, the Finance chief said the proposed measure is being revised by lawmakers to require the BSP to contribute 100% of its annual dividends into the sovereign wealth fund for the first two years.

“On the succeeding fiscal years, the central bank shall remit 50% of its declared dividend to the fund and remaining 50% to the National Government (NG). The funding increased capitalization of the BSP so we will transfer 50% to the NG and it will go back to BSP. Thereafter, the BSP shall remit 100% of its declared dividend to the funds,” Mr. Diokno said.

In 2019, the BSP recorded a net income of P46.1 billion, declaring dividends of P23.05 billion. Its net income stood at P31.79 billion in 2020 with its declared dividend at around P15.89 billion. 

Last year, the BSP recorded a net income of P34.81 billion, while its dividends amounted to P17.41 billion. 

“The investible funds will be channeled through diversified asset and development projects, this will complement the NG budget and infrastructure programs. Instead of reducing revenues, the BSP investing a portion to the fund will have the effect of magnifying the return on investments,” he said. 

Several lawmakers led by House Speaker Ferdinand Martin G. Romualdez, a cousin of President Ferdinand R. Marcos, Jr., and Deputy Majority Leader Ferdinand Alexander Marcos, the President’s son, recently filed a bill seeking to create a sovereign wealth fund.

However, several business associations, economic policy groups, civil society organizations and labor groups have opposed the measure, citing concerns over lack of transparency, possible corruption and misuse of pension funds.

On Wednesday, House committee on appropriations senior vice chair and Marikina Rep. Stella Luz A. Quimbo said that the Government Service Insurance System (GSIS) and Social Security System (SSS) will be removed as sources of funding for the MWF.

However, Mr. Diokno said that the pension funds may still contribute to the fund eventually. 

“We are not mandating them to contribute, but if they’re looking for higher returns, because most their money is invested in Treasury bills, they don’t earn that much. If they want higher returns, they can contribute but that is up to the respective boards of GSIS and SSS,” he said. 

Apart from the BSP, initial capitalization of the fund shall be sourced from Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP), Mr. Diokno said. 

Other sources of funds are the Philippine Amusement and Gaming Corporation (PAGCOR), which will provide at least 10% of gross gaining revenue streams. The National Government will also provide contributions, as authorized in the General Appropriations Act (GAA). 

“Other sources include royalties and special assessment from natural resources based on the fiscal regime to be implemented by NG. Also included are proceeds of privation of government assets,” Mr. Diokno added. 

Mr. Diokno said the wealth fund can boost investment and funding of big-ticket infrastructure projects, and high-return “green” and “blue projects, as well as countryside development.

“A Sovereign Wealth Fund will enhance our fiscal space and reduce fiscal pressures as the fund pursues public infrastructure projects, as well as reduce uncertainties in cases when fund resources are channeled to high-yielding financial undertakings and assets that are underinvested in today’s environment of high global inflation and the lingering effects of the COVID-19 pandemic,” he said.

“Ultimately, this will redound to growth and help us achieve our economic transformation towards inclusivity and sustainability.” — Luisa Maria Jacinta C. Jocson