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Keeping up with the Joneses?

By definition, a sovereign wealth fund (SWF) is a state-owned investment fund comprised of money generated by government, often derived from surplus reserves.

Funding for a SWF can come from a variety of sources, usually surplus reserves from state-owned natural resource revenues, trade surpluses, bank reserves that may accumulate from budgeting excesses, foreign currency operations, money from privatization, and government transfer payments.

The top SWFs in the world are those of Norway, China, the United Arab Emirates, Kuwait, Hong Kong and Saudi Arabia. A common thread of these top funds is that most are funded by their country’s very profitable oil and gas sectors.

In the case of the poor Philippines, it is currently attempting to put up its own SWF to be primarily funded by members’ contributions to the Government Service Insurance System and Social Security System, as well as funds from state-owned Development Bank of the Philippines and Land Bank of the Philippines, and possibly the national budget and the Bangko Sentral ng Pilipinas.

House Bill No. 6398, or the Maharlika Investments Fund Act, was filed only last week by Speaker Martin Romualdez and six other lawmakers, is a proposal that has the imprimatur of President Ferdinand Marcos Jr. himself that is giving the impression that is being railroaded through the legislative mill despite numerous red flags.

The biggest issue against Maharlika is funding, as government remains buried in debt, many agencies are short on funds, and sectors are crying out for support. Can the national budget afford a SWF when it can hardly cover for social, health and education expenditures of Filipinos? Are its proponents actually willing to risk the pension and retirement money of an entire nation just so they can have a SWF ala Norway and Singapore?

Aside from funding, there is also the nagging issue of corruption, which our government has not yet eliminated since the time of the Marcos Sr. presidency. Shouldn’t Malaysia’s experience with its 1MDB sovereign fund that was used in a multibillion dollar corruption scheme by its founder, former prime minister Najib Rajak, who was recently convicted of corruption and money laundering, encourage our public officials to act with more caution when it comes to a SWF we can hardly afford, especially when massive yet unpunished corruption scams continue to riddle our government?

A sovereign wealth fund is certainly a status symbol among governments, as it is typically created when governments have budgetary surplus and have little or no international debt.  As a country with no surplus and wallowing in debt, can the Philippines really afford to risk whatever meager funds it can scrounge up just to join the SWF club right now?*

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January 2023
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