Philippines creates controversial sovereign wealth fund to boost development

Manila, July 18 (EFE).- Philippines’ President Ferdinand Marcos Jr. on Tuesday signed into law the creation of the country’s first sovereign wealth fund amid warnings of the risk it poses and skepticism about its transparency.

“For the first time in the history of the Philippines, we now have a sovereign wealth fund designed to drive economic development,” Marcos Jr. said after signing the bill establishing the Maharlika Investment Fund (MIF) in Manila.

The idea of establishing a fund was put on the table in November 2022 and was passed by the country’s parliament at the end of May.

Maharlika will be financed with some 150 billion Philippine pesos ($2.76 billion) from dividends from the central bank and the state-owned Land Bank and Development Bank, and will invest in a wide range of national and international assets.

“Through the fund, we will leverage a small fraction of the considerable but underutilized investible funds in government and stimulate the economy without the disadvantage of adding additional fiscal and debt burden,” Marcos Jr. added.

The objective of the fund is to increase the State’s capacity to finance development and infrastructure projects by increasing the profitability of the public funds it absorbs initially, according to the president’s economic team.

However, some economists and experts have opposed the establishment of Maharlika saying that the public funds will inevitably be exposed to the risks of financial markets in a nation that does not have the trade surplus that often encourages countries to create sovereign wealth funds.

Public debt in the Philippines has increased in recent years from 39.6 percent of the gross domestic product in 2019 to 60.9 percent in 2022, according to the finance ministry’s data.

There is also skepticism surrounding the fund due to the history of the Marcos family at the head of the country.

The democratic government and subsequent dictatorship of the current president’s father, Ferdinand Marcos, (1965-1986) was plagued by corruption and tainted by the massive plundering of public funds. EFE

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