Former Socioeconomic Planning Secretary Ernesto M. Pernia categorically said that the planned Maharlika Wealth Fund is “not wise.”
In a radio interview, Pernia said that before proceeding with the Maharlika, there must be clear assessment as to where the economy stands at present.
He urged the evaluation of the country’s economic situation before even thinking of investing in a sovereign wealth fund (SWF). “It is not wise,” he reiterated.
Pernia, who served as director-general of the National Economic and Development Authority (NEDA) during the administration of former President Rodrigo Duterte, noted that the Philippines lagged behind other countries in the original 7 ASEAN economies.
He pointed out that the Philippines has the highest poverty incidence, lowest per capita income, highest debt, and highest fiscal deficit among ASEAN countries.
Instead of investing the money in the risky SWF, Pernia said the government should use the fund to alleviate the poor. He said that Indonesia has sovereign wealth fund because it has oil reserves, which is a sovereign wealth of a country. In contrast, the Philippines has no sovereign wealth, but plenty of debt. He also noted that Malaysia’s sovereign fund was lost to corruption.
Other countries like Thailand and Vietnam have no sovereign wealth fund, but they are growing ahead of the Philippines, he pointed out.
He agreed with other economists in the country on investing in SWF using government surplus money. But, there can no surplus as the government is deep in debt.
He then urged President Ferdinand Marcos Jr. to invest the alleged P203 billion unpaid Marcos estate tax in the planned SWF.
“If he is really sincere,” he said, the president must use that unpaid estate tax in the planned Maharlika.
Nonetheless, Finance Secretary Benjamin Diokno, the government’s chief economic manager wants to fast-track the deliberations on House Bill No. 6608 to create the country’s own SWF.
“This is to respectfully request His Excellency to certify as urgent House Bill (HB) No. 6608, establishing the Maharlika Investment Fund (MIF or “Fund”), filed as Committee Report No. 237 by the Committees on Bank and Financial Intermediaries, Appropriations, and Way and Means,” said Diokno in n a letter addressed to the President on Dec. 13, 2022.
Diokno told the President about the urgency of the measure, saying it will shore up government’s effort to create jobs, promote trade and investments, strengthen connectivity, expand infrastructure, and achieve energy and food security.
To maximize investment returns, the finance chief said MIF should be an independent entity, professional managed and administered by the Maharlika Investment Corp. (MIC).
“The MIF and the MIC comply with the ‘Santiago’ Principles, which pertain to the set of Generally Accepted Principles and Practices voluntarily endorsed by the International Forum of SWF members,” Diokno said.
“This represents best practices for operations of SWFs,” he pointed out.
Diokno added that MIF will be subject to strict investment and risk management guidelines, and is authorized to invest only in financial instruments and development projects approved by its board of directors.
“Investments in real estate, infrastructure, and other development projects, however, shall be limited to National Economic and Development Authority (NEDA) Board — approved major capital projects to ensure that these are in line with the socio-economic development program of the government,” Diokno said.