Diokno says PH has money to back proposed Maharlika Sovereign Wealth Fund

Warren De Guzman, ABS-CBN News

Posted at Nov 30 2022 11:32 AM

The San Juan -Mandaluyong skyline in this photo taken on November 8, 2022. Gigie Cruz
The San Juan -Mandaluyong skyline in this photo taken on November 8, 2022. Gigie Cruz

MANILA - Finance Secretary Benjamin Diokno said on Wednesday the Philippines has funds for sovereign wealth funds despite its tight fiscal conditions including a budget deficit and elevated debt. 

House Speaker Martin Romualdez led the filing of House Bill 6398 which seeks to create a sovereign wealth fund to replicate the success of such instruments used in other countries like Singapore.

"There is already a commitment from GSIS, SSS, DBP, Landbank and National Government. We have the money for it," DIokno said. 

"The President will appoint people, there will be a governing body & it will be entirely separate from the government. There will be an advisory council where some cabinet members will be there but it will be independent," Diokno said. 

The Finance chief said the fund could be as much as P250 billion.

"We believe some of our GIR (gross international reserves) can be mobilized and we will look to find a way to funnel dollar inflows from remittances, BPO receipts, etc into the fund," he said.

According to lawmakers who are supporting the bills, the fund will be patterned after sovereign wealth funds of 49 other countries including the GIC and Temasek of Singapore and the same instrument used by Malaysia despite its controversial 1Malaysia Development Berhad, which was plagued by corruption.

But Diokno said he is also confident that the proposed Maharlika Investment Fund would be well-managed and independent from the government. 

Political economist Calixto Chikiamco, meanwhile, said it may not be the right time yet to put up a sovereign wealth fund. He pointed out that "given the government's tight fiscal position, it can't afford to be seeding money for the sovereign wealth fund.”

"It will be funded from state pension funds and government funds. The risk is that investment decisions may be politicized as it was in Malaysia. We can't rely on the country's poor rule of law to expect accountability from management," he said. 

Chikiamco said "no amount of good governance principles or number of independent directors" can protect the fund from mismanagement if there is no "rule of law" in the country.

"There can be no accountability if management or the board believe they can get away with it. Heck, in this country, even convicted criminals enjoy the high life in Bilibid. Yes, let's set up a sovereign wealth fund when we already have a rule of law in this country, but not before," he said. 

Based on data from the Bureau of Treasury, the national government’s budget deficit hit P99.1 billion in October, up 54.08 percent. 

The year-to-date total of P1.1 trillion, however, is lower than the P1.2 trillion shortfall from the 10-month period in 2021. It is also only 67 percent of the P1.7 trillion full-year target for 2022, data showed.

When asked for comments on the sovereign wealth fund, Bangko Sentral ng Pilipinas Governor Felipe Medalla said he hasn't seen the bill yet but that he is confident of growth and in reducing the budget deficit. 

"If deficits are falling, which will be the case If the economy is growing very fast. If the economy is growing very fast, revenue will grow faster than expenditures," Medalla said.


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