Creating a sovereign wealth fund
The existence of such an investible amount will also help ensure that the state pension system does not go bankrupt.
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Daily TribuneThe existence of such an investible amount will also help ensure that the state pension system does not go bankrupt.
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Speaker Martin Romualdez hit on the idea of creating a sovereign wealth fund that is well-timed as the country accumulates assets.
Romualdez filed a bill seeking the creation of a sovereign wealth fund called Maharlika.
A wealth fund is an opportunity for the government to maximize the income from the country's surplus income.
Instead of pooling government savings, for instance, into the Disbursement Acceleration Program, the money instead goes to the wealth fund that the government administers.
These types of investments made their mark during the global financial crisis from 2007 to 2014.
High oil prices spurred the growth of significant wealth funds at that time when nearly 60 percent of the assets for such funds were obtained from oil and gas revenues. The 2008 financial crisis barely slowed their growth.
House Bill 6398 proposes the establishment of the fund which would draw from the state-owned Government Service Insurance System, Social Security System, Land Bank of the Philippines, and Development Bank of the Philippines.
The fund is patterned after those of 49 countries including Singapore, China, Hong Kong, South Korea, Malaysia, Indonesia, Taiwan, Vietnam and East Timor.
A summary of the bill's objectives indicated that the SWF seeks to "improve investment opportunities, promote productivity-enhancing investments and ensure that the Philippines becomes an investment destination."
These funds are then invested and have strong leverage in terms of earning good returns as it is covered by a government guarantee making their use practically risk-free.
Neighbors in the region have long benefited from the use of surplus money primarily from pension funds.
The existence of such an investible amount will also help ensure that the state pension system does not go bankrupt. The SSS and the GSIS have been investing on their own but it would be different if all the excess resources are accumulated into a single package.
The biggest SWFs manage daunting amounts such as that of the biggest which is the China Investments Corp. which handles $1.35 trillion.
Also, a force to reckon with is the Norway Government Pension Fund Global, $1.114 trillion; Abu Dhabi Investment Authority, $790 billion; Kuwait Investment Authority, $750 billion; and Singapore's GIC Private Limited, $690 billion.
"Singapore's SWFs provide the financial means for the city-state to manage its foreign reserves, defend itself and protect its sovereignty without compromising its domestic program and augment its land-limited economic space with global investments," Romualdez explained.
Indonesia also attracted foreign investors to provide capital in bringing in much-needed investments in such sectors as transportation, including airports, supply chains, logistics, digital infrastructure, the green economy, health care services, the financial sector, technology, and tourism.
The reemerging economic boom gives the impetus for the immediate forming of the SWF.
Romualdez said his proposed measure will ensure that the fund would adhere to the Santiago Principles which are the 24 generally accepted guidelines and practices agreed to in October 2008 in Santiago, Chile, among countries with SWFs, investment recipient countries, and international organizations.
HB 6398 envisioned the sovereign fund to be under a governing board that will be made up of nominees of the contributing government financial institutions.
