Philippines’ proposed sovereign wealth fund faces bumpy road in the Senate
THE Maharlika Investment Fund (MIF) – the proposed sovereign wealth fund of the Philippines – continues to face plenty of resistance in the Senate, as lawmakers butt heads over its feasibility and implementation.
Philippines President Ferdinand Marcos Jr is doing his best to get the 275-billion peso (S$6.7 billion) fund established, as he believes it will be advantageous for the heavily-indebted country.
He has gone so far as to deem the MIF Bill as urgent and is seeking the Senate’s approval before its regular session closes in June.
His administration has been drumbeating the MIF around the world to attract supporters and potential partners from the private sector.
It was recently reported in The Philippine Star newspaper that Singapore’s Temasek Holdings is among those that have expressed interest in investing in the MIF.
The report dated Mar 16 said that Department of Budget and Management Secretary Amenah Pangandaman met senior Temasek executives and they gave their input on how to effectively manage and operate a sovereign wealth fund.
“(Temasek is) looking at South-east Asia for their future investments including the Philippines. So we are trying to pitch,” Pangandaman was quoted as saying in the report.
Mark Villar, a senator who is backing the MIF, said that the fund is designed to “catalyse economic development” by mobilising government financial assets that are otherwise limited in use by current legal frameworks.
Speaking at a Senate plenary on Mar 20, he gave his assurance that the Maharlika Investment Corporation – the manager of the MIF – would be run “professionally and on a commercial basis” like other government-owned corporations.
The MIF drew significant backlash when it was introduced towards the end of last year. Some of the contentious provisions such as sourcing funds from social security have since been removed.
However, some senators warned that the MIF is too prone to mismanagement and the government might be too hasty in its implementation.
Senate minority leader Aquilino Pimentel has already declared that he would vote against the setting up of the MIF, citing an unhealthy and uncertain investment climate.
Another senator, Win Gatchalian, wants the country’s central bank – Bangko Sentral ng Pilipinas (BSP) – to be removed from the MIF’s capitalisation, arguing that it would take the bank as long as 17 years to reach its capitalisation requirements if it was mandated to fill up the MIF.
“By approving the proposal to include BSP as a source of MIF, we will be exposing our financial system to uncertainties. We will be hindering the BSP from enabling itself to meet the challenges to the economy since anything can happen in a span of 17 years,” said Gatchalian.
Inevitably, the mention of high-profile failures of other sovereign wealth funds like that of Malaysia’s 1MDB made headway in the Senate’s discussions.
The Philippines currently ranks 116th out of 180 countries on Transparency International’s latest Corruption Perception Index. According to one survey, 86 per cent of Filipinos believe corruption is a major problem in the country that needs to be dealt with.
Last month, Senator Alan Peter Cayetano suggested that government-owned and state-controlled corporations be encouraged to invest in infrastructure projects with public-private partnership contracts, rather than with the MIF.
He argued that this would be more transparent than forming a new separate entity and that Filipinos would be more accepting if they could see a familiar institution doing the job.
On the whole, the majority of Filipinos say they support the MIF, according to the results of a new survey conducted by Manila-based political consultancy firm Publicus Asia.
About 62 per cent of the respondents believe that the fund is vital to improve the economy, particularly the agriculture and health sectors.
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