Maharlika Fund gets backing of global lenders, US-based think tank — DBM’s Pangandaman

The proposed creation of Maharlika Wealth Fund has secured the backing of two multilateral lenders and a US-based think tank, the Department of Budget and Management (DBM) said Wednesday.

During the Kapihan sa Manila Bay forum, Budget Secretary Amenah Pangandaman recalled how then Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, who is now the Finance secretary, came up with the idea of creating the country’s sovereign wealth fund.

“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.

“And then Secretary Ben Diokno, BSP governor then, asked us to review and check if the BSP can establish its own sovereign wealth fund,” she shared.

The Budget chief said a technical working group (TWG) was formed and met with the Asian Development Bank (ADB) and International Monetary Fund (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.

ADB Philippines Country Director Kelly Bird said the establishment of a sovereign wealth fund “could help deepen the domestic capital market, which could increase capital resources for long-term investments in infrastructure."

Bird said setting up a sovereign wealth fund is a “country’s decision” as he pointed out that several countries already have their own sovereign wealth funds.

"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,” she added.

Diokno earlier said that the BSP had “too much” gross international reserves (GIR) and some could be used for the proposed Maharlika Wealth Fund.

BSP Governor Felipe Medalla also expressed concern about the Maharlika fund’s potential impact on the dollar reserves, along with the central bank’s independence.

The proposal was later amended to exclude pension funds Social Security System (SSS) and Government Service Insurance System (GSIS) as mandatory contributors to the proposed sovereign wealth fund’s initial capitalization.

The seed money will come from state-run banks LandBank of the Philippines,  Development Bank of the Philippines, and the dividends/profits of the BSP.

Medalla, who was initially opposed to the Maharlika fund, has been "reassured" that the sovereign wealth fund would only tap BSP’s profits.

Meanwhile, Pangandaman said the government also tapped the US-based think tank Milken Institute, which said the country "don't have to wait to start and create our own sovereign wealth fund."

“We also tapped them [Milken Institute] to help us when we were working on the type of sovereign wealth fund, because there are several types— some are using it for their pension system, others are using it for their natural resources,” she said.

“Ours is for development, to develop and to fund at least our infrastructure projects and programs,” she added.

The Budget chief further said that Diokno also met last week with the World Bank to discuss the planned Maharlika Wealth Fund.

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 President, himself, later on said he believes it would be advantageous for the Philippines amid apprehension from several groups.—AOL, GMA Integrated News