While various big business groups have aired their opposition to the government’s plan to establish a sovereign wealth fund (SWF) called the Maharlika Investment Fund (MIF), the Philippine Stock Exchange came out to voice its support for the proposal.
In a short statement, PSE President Ramon S. Monzon said the bourse supports the recently approved House Bill No. 6608 establishing the sovereign wealth fund.
“The PSE's primary mission is to facilitate the flow of capital into more productive and beneficial channels and as a result contribute to efficient capital formation for the country,” he said.
He noted that, “the MIF seeks to attract and invest capital for big-ticket infrastructure projects, sustainable green and blue infrastructures and countryside development.”
“We believe these investments will create a multiplier effect that would attract more fund-raising activities and portfolio investments and in turn contribute to the growth and development of our capital markets,” Monzon explained.
Business Bulletin earlier reported that various business groups and think tanks have strongly opposed the planned Philippine government version of a SWF, stating the proposal will not amount to wealth creation since the fund is filled with “infirmities.”
In a strongly-worded statement of concern, 12 business and think tank groups such as the Foundation for Economic Freedom (FEF), Competitive Currency Forum (CCF), Filipina CEO Circle (FCC), Financial Executives Institute of The Philippines (FINEX), Institute of Corporate Directors (ICD), Integrity Initiative, Inc. (II, INC.), Makati Business Club (MBC), Management Association of The Philippines (MAP), Movement for Good Governance (MGG), Philippine Women’s Economic Network (PHILWEN), UP School of Economics Alumni Association (UPSEAA), and Women’s Business Council Philippines, Inc. (WOMENBIZPH) have called for fiscal prudence as they rejected House Bill No. 6398 seeking for the creation of the SWF.
In a separate statement, the Philippine Chamber of Commerce and Industry (PCCI) also called for prudence and suggested to put the proposal in the back burner as financing has come under fire plus the uncertainty in the financial market due to geopolitical concern and the recent crypto currency fiasco.
“Our government must make due diligence that such action will not affect our presently good credit standing which provides us lower foreign loans,” PCCI President George Barcelon said.
In the joint statement, the 12 business groups and think tanks said: “We register our serious concerns and reservations against the proposed MWF on the principles of fiscal prudence, additionality... contingent liabilities, monetary independence of the Bangko Sentral ng Pilipinas (BSP), government in the economy, and transparency.”
Mainly, the groups explained that successful SWFs in other countries are either commodity-based or non-commodity based.
Commodity-based SWFs are designed to optimally manage the windfall from the appropriate disposition of their natural resources for the benefit of future generations.
Non-commodity-based SWFs are designed to manage the accumulated foreign assets from persistent external trade surpluses and surpluses of state-owned enterprises (SOEs) with the objectives of preserving the value of their capital and realizing returns on investments in order to keep the long-term sustainability of the fund.
In contrast, the groups said, the Philippines has neither commodity-based surpluses nor surpluses from external trade and SOEs.
The groups said requiring the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) to fund the SWF on the ground that they invest in government securities is in no way a creation of wealth.
The LBP and DBP deposits exist because of the requirement for GOCCs to deposit their funds in government financial institutions.
“Hence, there is no creation of wealth, or generation of new deposits, but mere round tripping, when funds of the LBP and DBP are diverted to the SWF,” the statement added.
The groups also question the bill’s provision requiring the Bangko Sentral ng Pilipinas to contribute 50 percent of its cash dividends to the national government is problematic in many aspects.
“This is a direct assault on the constitutional mandate of the BSP as an independent central bank in promoting price stability and managing exchange rate volatilities,” the statement added.