The Philippine House of Representatives passed a bill creating a sovereign wealth fund despite concerns raised by some economists and political analysts that it is unnecessary and will be prone to mismanagement.
It took lawmakers just 17 days to pass the bill after it was brought up for deliberation due to the priority certification issued by President Ferdinand Marcos Jr. The Senate is expected to take up the bill in January or February.
Marcos said in an interview with the media that the bill, which will create the Maharlika Investment Fund (FOMIN), was his. ideaand is intended to be an innovative approach to raising capital for your infrastructure projects.
His cousin, the president of the Chamber Martín Romualdez, described the measure as an “effective vehicle to execute and sustain high-impact infrastructure projects, urban and rural development, support for agriculture, and other programs that would generate more income and economic activity in the country.”
But the proposal was initially widely rejected by various interested parties. Critics pointed out that the country does not have surplus funds and that the government should use its revenues to prioritize poverty alleviation programs. Legal academics and labor groups also expressed concern about the plan to tap workers’ pension funds as a source of investment for the MIF.
Even the president’s sister, Senator Imee Marcos, criticized the proposal. “I think creating a sovereign wealth fund at this time of gigantic debt and a looming global recession seems careless and extremely risky,” she said. said in a sentence.
For opposition senator Risa Hontiveros, the MIF is “prematureand a misplaced priority.”
To appease critics, advocates reviewed the bill eliminating the use of workers’ pension funds in the MIF. The bill also assigns 25 percent of profits for social welfare programs. The fund body is also forbidden to invest in activities or entities linked to human rights violations, production of weapons of war and environmental degradation.
Permitted investments include currencies, metals, fixed income instruments, domestic and foreign corporate bonds, stocks, real estate, infrastructure projects, loans and guarantees, and joint ventures or co-investments.
The President’s Economic Team Welcome approval of the bill and highlighted how the creation of a sovereign wealth fund can help achieve the government’s development objectives.
“Intergenerational benefits include greater access for future generations to income from investments, such as potential profits from extracted natural resources, such as mining,” they said.
“They will be able to ensure the availability of a high-yield alternative investment platform, get the absolute best return for the funds, find additional sources of liquidity as the need arises, and perform better risk management, with additional layers of checks and balances. in the use of investable funds”, added the economic managers.
But for the national economist and scientist Raúl Fabella, the amendments and the new safeguards added to the bill are not enough since the concept in itself is deficient.
“Positive returns for Maharlika placements will mean strong private returns (bonuses) for these select groups, but negative returns will be socialized i.e. charged to the nation,” he wrote in a report, also warning that “ no other layer of the firewall will correct the concept”.
“In the Philippines, the concentration of funds tends to disappear due to our weak rule of law,” he said. additional. “The fact is that under a weak rule of law, the MIF bill is wrong in principle and therefore cannot be fixed.”
Defenders cited the experience of Indonesia and Singapore in running a sovereign wealth fund, but were silent on the corruption mess that plagued Malaysia’s 1MDB fund. Fabella also reminded them and the public of the Philippines’ experience under the Marcos dictatorship in the 1980s, when state funds were used to pay off “loans at the behest” of government cronies.
The passage of the bill in the House of Representatives does not mark the end of the campaign against him. The opposition can still lobby for more amendments or the complete withdrawal of the measure in the Senate. Marcos demonstrated how his allies in Congress will support his priority bills, but the spontaneous protests that broke out against the MIF showed the potential broader reaction this proposal may generate next year.