A closer look at the Maharlika fund

PHILIPPINES - In Brief 14 Dec 2022 by Romeo Bernardo

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Last Friday, after over a week of intense public debate about the rationale and sources of funds of a congressional initiative to set up a sovereign wealth fund, Finance Secretary Benjamin Diokno stepped up to own the proposal. In a press briefing, he read a statement signed by the core members of the economic team strongly endorsing the creation of the Maharlika Wealth Fund (MWF) as a vehicle to help achieve the medium-term economic objectives of the administration. But beyond showing legislative-executive cooperation in this particular instance, the finance secretary failed to provide what critics of the MWF have been looking for: a clear exposition of first principles, defining what the problem is, why current institutions are not up to the task and how the MWF will fill in the gap. Rather the statement was uncharacteristically vague, suggesting in part that the MWF would enhance fiscal space, increase investments in development projects while offering improved risk-reward trade-offs.[1] Following the economic managers’ embrace of the proposal, the draft bill was further tweaked with congressional proponents deciding to label it an investment rather than a wealth fund. The name change is noteworthy as it reflects the public’s rejection of the original concept of tapping the BSP’s foreign reserves and the two pension funds’ assets as sources of capital. It ought to be a recognition as well that the funds involved are not surplus monies in search of higher yields but are scarce resources that have competing uses in the short to medium-term. Sources of funds Under the latest draft bill, the major sources of capital for the Maharlika Investment Fund (MIF) are the two go...