PAGBABAGO
I start this piece with thoughts of needed caution and watchfulness by every Filipino citizen. The big news this week was the approval by the joint congressional committee of the Maharlika Investment Fund or Sovereign Wealth Fund, which was introduced as a bill six months ago.
With 279-6 votes at the House of Representatives and 19-5 (1-no, 1-abstention, and 3-no vote) at the Senate, the bill, certified as urgent by the President, was passed.
We have heard the pros and cons – that it would help stabilize the economy and preserve intergenerational income from the politicians, as well as the cons – that this is not the right time for investment as we are in a state of economic crisis and that there are more urgent needs –upgrade of education, address hunger and wage hike, etc. from some economists like the Foundation for Economic Freedom (FEF) and local NGOs. In fact, the Alliance of Concerned Teachers (ACT) had noted that it should not be a priority at this time.
Also, “the elite capture” in the country, known to be corruption-ridden with weak legal institutions makes many wary of potential opportunities for graft. Thus, an argument sounded by concerned economists is to keep politicians from active participation, and leave implementation to trained development implementors.
Senator Francis Escudero, one of the three who did not vote, pointed out Section 16 of the 1987 Constitution which states that “the Maharlika Investment Fund lacked the constitutional requirement on the creation of a government-owned and controlled corporation (GOCC). This is in the interest of the common good or economic viability.”
Although transparency safeguards and accountability measures established by the House had been retained, according to Rep. Joey Salceda, and amendments such as exclusion of pension of welfare funds, and prohibition against the appointment in the corporation of persons with a “hint of corruption” (according to Sen. Risa Hontiveros), there may be need to further convince a large percentage of the skeptics that we may not fall into the same quagmire like the “Qatar Investment Authority” and a majority of the world’s largest Sovereign Wealth Fund investors that lacked transparency and adequate governance.
Among countries which have been ranked partially compliant in transparency and governance principles are China, Kuwait, Abu Dhabi, and Singapore. The most notable, compliant, and successful thus far is the Norwegian Fund, which is worth $1.2 trillion.
Dr. Massimiliano Castelli, head of UBS Asset Management, suggests that a SWF must develop a framework to incorporate megatrends so as to reduce risks and capture opportunities. Among these trends are climate change, technology, and population aging. In the framework, he suggests utilizing passive investments and must consider that as we enter a new phase of globalization, certain trends affect investment opportunities. These include anti-immigration policies, weakening global governance, higher barriers to global capital flow, and regionalism. There is also the need for a regional rather than a global approach. And, the rise of a middle class in Asia.
The first sovereign wealth fund originated in Kuwait in the ’50s. They were established as a solution for a country with a budgetary surplus. Almost 50 of 195 countries have established SWF. In the ASEAN, it would only be Myanmar, Cambodia, and Laos which do not have SWF. My email, [email protected]