(Bloomberg) -- The Philippines’ Congress has approved the creation of the Southeast Asian nation’s first sovereign wealth fund, a measure pushed by President Ferdinand Marcos Jr. who now needs to sign it into law.
The House of Representatives adopted the version of the Senate, hours after the latter passed a bill creating the Maharlika Investment Fund which proponents say will help prop up the economy following a crippling pandemic. Some critics say the measure was ill-timed and its swift passage had political undertones.
“We need to pump prime our economy,” Senator Mark Villar, who authored the Senate bill, said in a briefing on Wednesday. Earlier in the day, the sovereign wealth fund measure was passed with 19 senators voting in favor, one against, one abstaining while three were absent.
Marcos last week said there’s an “urgent need for a sustainable national investment fund” that should help finance large-scale infrastructure projects to spur economic activity. The House approved the bill, which aims to tap and securitize dividends from state-owned companies, in December.
House Speaker Martin Romualdez said both chambers of Congress “agreed on a version of the Maharlika Fund” aimed at boosting the economy by “making strategic and profitable investments.” Finance Secretary Benjamin Diokno said the fund will be invested in a wide range of assets, including foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, joint ventures, mergers and acquisitions, real estate and infrastructure projects.
The economic team is committed “to ensure that the entity created will be able to generate returns that will redound to inclusive and sustainable economic growth,” Diokno said in a statement.
A corporate body, Maharlika Investment Corporation, will be set up to manage the fund and will have an authorized capital stock of 500 billion pesos ($8.9 billion), according to the Senate version of the measure. An initial 125 billion pesos worth of common stocks would be subscribed by the government, with 50 billion pesos coming from Land Bank of the Philippines and 25 billion pesos from the Development Bank of the Philippines.
It also identifies central bank dividends, gaming agency income and proceeds from privatization of government assets as other sources of funding. But the final version of the bill “explicity prohibits” state companies providing social security and public health insurance from contributing to and investing in the fund, Diokno said in the statement. That includes state pension funds Social Security System and Government Service Insurance System, Philippine Health Insurance Corporation and Home Development Mutual Fund.
Marcos said money from pension funds will not be used as seed fund, but “if the pension fund decides the Maharlika Fund is a good investment, it’s up to them if they want to invest in it.”
Opposition Senator Risa Hontiveros, who voted against the bill, said a sovereign wealth fund “will make sense sometime in the medium term, perhaps when we have the surpluses,” adding it would be better to inject capital into state-run companies so they can invest in areas shunned by the private sector like modernizing public transport.
The quick passage of the bill was a “political move,” former Economic Planning Secretary Winnie Monsod said. “They passed it in such a hurry...the public never had a chance to look at it. And that scares me,” Monsod told ABS-CBN News Channel.
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