IMF, ADB, Milken Institute endorse sovereign wealth fund—DBM


Two development partners of the Philippines and a US-based think tank have recommended the establishment of a sovereign wealth fund (SWF), the Department of Budget and Management (DBM) said.

Budget Secretary Amenah F. Pangandaman said the Asian Development Bank (ADB), the International Monetary Fund (IMF) and the Milken Institute of Singapore have endorsed the creation of the country’s own SWF.

According to Pangandaman, discussions about SWF began during the Duterte administration, or when Finance Secretary Benjamin E. Diokno was still with the Bangko Sentral ng Pilipinas (BSP) as governor.

“During the pandemic, it was also the same time when INA , the sovereign wealth fund of Indonesia, was established. It was all over the news during that time,” Pangandaman said during the Kapihan sa Manila Bay forum.

“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 initial plan, Pangandaman said was to tap the BSP’s foreign reserves to fund the capital requirement of the SWF. However, this scheme was rejected by the ADB and IMF during their technical working group (TWG) meetings.

Pangandaman said the IMF and ADB were adamant in using the gross international reserves of BSP because it was not part of its mandate.

“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 need to revise the mandate and the charter of the BSP,” the DBM chief explained.

Pangandaman also disclosed that SWF was discussed during a Cabinet meeting of former President Duterte.

In the case of the Milken Institute, Pangandaman said they tapped the US-based think tank during the TWG, whose report about the SWF was released only on Wednesday, Dec. 14.

“Part of our TWG was a meeting with the Milken Institute of Singapore. They will release soon a report, and I think the report will say that the time is now. We don't have to wait to start and create our own sovereign wealth fund,” Pangandaman said.

She, however, clarified that the Milken Institute report has not yet been released to the public.

“We also tapped them 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, other are using it for their natural resources,” Pangandaman said.

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

The budget chief added that Diokno also met last week with the World Bank to discuss the planned Maharlika Wealth Fund.

Meanwhile, Kelly Bird, ADB Philippines country director said an established SWF would  help deepen the local capital market and has a very good purpose.

“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 some very good benefits, particularly in deepening the capital market which is critically important in long-term investments in infrastructure,” he added.