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What Is the Maharlika Wealth Fund and Why Is It So Controversial?

What Is the Maharlika Wealth Fund and Why Is It So Controversial?

Dec 9, 2022   •   Kyzia Maramara

Senators, analysts, economists, and even normal Filipinos online have been criticizing the proposed Maharlika Wealth Fund. Many are saying it will create more problems rather than solutions to solve the country’s financial crisis (P13.2 trillion debt as of September 2022). But what is the Maharlika Wealth Fund and how will it affect Filipinos?

 

What is the Maharlika Wealth Fund?

The Maharlika Wealth Fund (MWF) or House Bill No. 6398 is a proposed national fund that would draw P275 billion from different state-owned entities for investment.

President Ferdinand “Bongbong” Marcos Jr.’s cousin, House Speaker Ferdinand Martin Romualdez, and the President’s son, Ilocos Norte 1st District Representative Ferdinand Alexander “Sandro” Marcos III are the main authors of the bill.

Co-authors also include Romualdez’s wife, Tingog Party-list Representative Yedda Romualdez and fellow Rep. Jude Acidre, House Majority Leader Mannix Dalipe, and Marikina Rep. Stella Quimbo.

MWF takes inspiration from successful sovereign wealth funds (SWF) of countries like Singapore and Hong Kong. However, as many lawmakers and economists have said, these countries financed their SWFs from excess wealth and foreign reserves — something the Philippines does not have. In fact, the Philippines is in trillions of debt.

So how are we supposed to pool the money for this so-called Maharlika Wealth Fund?

 

Where will the money come from?

In the original proposal, the funding for the MWF would come from a combination of sources including the Government Service Insurance System (GSIS) and the Social Security System (SSS) and a few other government banks and institutions. The Bangko Sentral ng Pilipinas (BSP) and the Philippine Amusement and Gaming Corporation (PAGCOR) are also expected to shell out percentages of annual dividends and gaming revenue streams.

 

But due to strong public backlash against the proposal — many fearing that it would jeopardize pensioners’ benefits, the proposal was rewritten so that the MWF would no longer source funds from GSIS and SSS.

 

How will the Maharlika Wealth Fund be used?

According to the bill’s explanatory note, the MWF will be used to “improve investment opportunities, promote productivity-enhancing investments, and ensure that the Philippines becomes an investment destination.” Romualdez, the bill’s author, said that this proposal fits right into President Marcos’ eight-point socioeconomic roadmap.

However, the bill does not detail the specific projects and investments it intends to make with the money.

 

Who will manage the fund?

Under the bill, a new government corporation will be created called the Maharlika Wealth Fund Corporation (MWFC) where President Marcos would act as chairman. It would have a governing board composed of nominees of the contributing government financial institutions (GFI) to manage the fund. The GFI with the most contributions will be appointed vice chair.

The board and the President would also have the power to appoint two independent directors who will be coming from the private sector.

 

Are there safeguards in place?

Right off the bat, critics of the bill have pointed out the possibility of mishandling funds. But Romualdez assured everyone through the bill’s explanatory note that they intend to ensure transparency and accountability. The SWF “would adhere to the Santiago Principles,” he said.

Romualdez was referring to the 2008 Santiago Principles, a set of 24 principles and practices established by the International Forum of Sovereign Wealth Funds. Countries with SWFs — Singapore, South Korea, Malaysia, etc. — adhere to these principles.

“The stakeholders committed to observe that SWFs will comply with all applicable regulatory and disclosure requirements in countries in which SWFs invest and that the SWFs will have in place a transparent and sound governance structure that provides adequate operational controls, risk management, and accountability, among other commitments,” said the bill’s note.

 

What are the main concerns with the Maharlika Wealth Fund?

Many lawmakers were vocal about opposing the Maharlika Wealth Fund, saying it won’t help the Philippines’ economic goals. One of these is Senate minority deputy leader Risa Hontiveros.

“An SWF is meant to come from excess funds we just don’t have, as seen by our trillions-worth of debt. We don’t need an SWF and we clearly can’t afford it anyway,” she said. “Kakain lang itong SWF sa budget na kailangan natin para tugunan ang mga krisis. Dapat unahin ang mga urgent priorities natin.”

“How can we set something aside for the rainy days, when our national budget itself is deficit-funded?” Hontiveros asked. Instead, Hontiveros suggested that the government focus on projects that would attract idle domestic funds and foreign investors.

Senator Jinggoy Ejercito Estrada also questioned why proponents were in a rush to approve the proposed P275 billion sovereign wealth fund. He urged his colleagues to scrutinize the proposal so the Philippines won’t face the same fate as Malaysia when its former Prime Minister Najib Razak pocketed the nation’s hefty investment fund, 1MDB.

“That is my opinion right now. Kasi bakit naman minamadali? We only have two weeks to go and this entails a lot of funds, this amounts to P275 billion. ‘Yung budget nga ng Pilipinas tatlong linggo naming pinag-uusapan, pinag dedebatehan, ito pa kayang P275 billion? Madalian? That can wait naman,” said Estrada.

Even Senator Imee Marcos, the President’s sister, expressed misgivings over MWF saying that the Filipino’s retirement funds should be zero risk. She also said that “there must be transparency and accountability in the management of the proposed sovereign wealth fund.”

 

What are Pinoys saying about this?

The MWF has caused quite an uproar with many Filipinos sharing their sentiments online.

Political analyst and global columnist Richard Heydarian pointed out that before adopting “sosyal” programs from wealthier countries, the Philippines needs to address basic problems like high poverty rates.

Meanwhile, former Philippine Commission on Elections commissioner Rowena Guanzon voiced her worries that these investments will turn out to be failures.

Back in 2016, Senator Bam Aquino also proposed an SWF for the Philippines, but in contrast, this was when the country’s economy was much healthier. In Aquino’s proposal, the SWF would draw capital from the General Appropriations Act, not from public financial institutions.

Other critics of the bill also cited the Marcoses’ controversial history as a red flag.

 

Want to know more about the Maharlika Wealth Fund and how it will affect Filipinos?

Knowledge is power. Is the Maharlika Wealth Fund potentially dangerous? Whatever your opinion on this is, ensure that it is grounded in facts. Watch Christian Esguerra’s helpful explainer above or read through this helpful thread and share it with your followers:

 

What do you think of the Maharlika Wealth Fund? Share your thoughts with us in the comments!

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Kyzia spends most of her time capturing the world around her through photos, paragraphs, and playlists. She is constantly on the hunt for the perfect chocolate chip cookie, and a great paperback thriller to pair with it.

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