ADB: Sovereign wealth fund can help deepen capital markets

Manila-based multilateral lender Asian Development Bank (ADB) on Wednesday said the establishment of a sovereign wealth fund could be beneficial to the economy amid the proposal to establish one —the Maharlika Wealth Fund.

At a press briefing in Mandaluyong City, ADB Philippines Country Director Kelly Bird said that setting up a sovereign wealth fund is a “country’s decision… A lot of countries have sovereign wealth funds.”

The creation of the Maharlika Wealth Fund is contained in the proposed House Bill 6398, filed by House Speaker Ferdinand Martin Romualdez, and Ilocos Norte 1st District Representative Ferdinand Alexander “Sandro” Marcos III.

The proposed  sovereign wealth fund seeks to maximize the profitability of government assets by investing the revenue surplus of state-run financial institutions.

“The benefit of a sovereign 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,” Bird said.

“They have a very good purpose… It can be one of the sources of funding… They have some very good benefits, particularly in deepening the capital market which is critically important in long-term investments in infrastructure,” he added.

Initially, under the proposal, government financial institutions such as the Government Service Insurance System (GSIS), Social Security System (SSS), and the Development Bank of the Philippines (DBP) would be allowed to invest their funds for higher returns.

However, the GSIS and SSS have been dropped as mandatory contributors to the sovereign wealth fund due to the fears of pensioners.

The President, himself, later on said he believes it would be advantageous for the Philippines amid apprehension from several groups. 

At least 12 business associations and economic policy groups have expressed concern over the fund, citing its lack of justification.

Senator Imee Marcos also expressed misgivings that the fund could suffer the same fate as the 1Malaysia Development Berhad that was hounded by graft issues.

Meanwhile, Finance Secretary Benjamin Diokno, Budget Secretary Amenah Pangandaman, Socioeconomic Planning Secretary Arsenio Balisacan, and BSP Governor Felipe Medalla expressed support for the Maharlika Wealth Fund. — RSJ, GMA Integrated News