Maharlika Fund needs to follow strict standards — IMF

By Keisha B. Ta-asan, Reporter

THE PROPOSED Maharlika Investment Fund (MIF) should adhere to high standards of governance and transparency, an International Monetary Fund (IMF) official said.

The House of Representatives is set to approve today (Dec. 15) House Bill No. 6608, which seeks to create the MIF.

IMF Representative to the Philippines Ragnar Gudmundsson said a sovereign wealth fund should have clear objectives from the start.

“Also, for a sovereign wealth fund to operate successfully, it should ensure its institutional setup is consistent with high standards of governance, transparency, and accountability to safeguard the country’s wealth,” Mr. Gudmundsson said in an e-mail interview.

Citing recent studies by the IMF, he noted the wealth fund should have a clear separation of responsibilities and authority and close coordination with macroeconomic policies and management of other assets and liabilities in the public sector.

Mr. Gudmundsson said there should be operational independence for the fund manager, and a supervisory system that includes the auditor general, an external and internal auditor, and a compliance unit.

The government should determine a risk-bearing capacity for investment strategies, and set up reporting requirements to strengthen accountability and oversight, he added.

“Many commodity-exporting countries set up such funds to (i) smoothen spending linked to volatile and often non-renewable revenue flows, (ii) achieve intergenerational equity, or (iii) both. At present, the Philippines is not a net commodity exporter,” Mr. Gudmundsson said.

He noted that if the Philippines plans to create a sovereign wealth fund for domestic development instead, like improving the country’s infrastructure, the government needs to consider a few factors.

“First, if the fund’s assets are sourced from foreign reserves, using them to pursue domestic investment is similar to using foreign reserves for domestic projects. This could ultimately reduce the adequacy of foreign reserves and pose difficulties for the central bank’s monetary and sterilization operations,” Mr. Gudmundsson said.

He noted that there may be concerns related to fiscal accounting and transparency “if the objective of the sovereign wealth fund is to invest in domestic assets and spending is allowed to take place outside the budget.”

The IMF official noted that to improve infrastructure in the country, “the priority should be to create fiscal space for public investment by implementing the government’s medium-term fiscal framework, which is geared at promoting productive investments through the budget while ensuring continued debt sustainability.”

HOUSE SET TO OK BILLMeanwhile, House Speaker Ferdinand Martin G. Romualdez said two-thirds of congressmen are now co-authors of the MIF bill.

“The Majority Floor Leader (Zamboanga Rep. Manuel Jose M. Dalipe) told me that we had over 220 [co-authors] and I think by the time I get back baka umabot na ng 250. So there will be over two-thirds of the House who will be co-authoring because there have been exhaustive briefings,” Mr. Romualdez said in a statement, which cited his remarks to reporters in Brussels, Belgium.

Mr. Romualdez, a cousin of President Ferdinand R. Marcos, Jr., filed the measure earlier this month. As of 1 p.m. on Wednesday, 246 lawmakers are now co-authors of HB 6608.

Northern Samar Rep. Paul R. Daza, who previously raised issues over the bill, said there is no need to rush the bill’s approval.

“I stand by my previous statements that we don’t need to rush, however, if my fellow House members see it fit to push the bill urgently, I offer no resistance because we already have a more acceptable and much improved version of the MIF bill,” he said in a Viber text message.

In a separate statement, Budget Secretary Amenah F. Pangandaman said concerns raised over the proposed MIF are being addressed by legislators.

“Our legislators listened and now, they are fine-tuning the bill. I’m sure that when it gets to the Senate, the economic team will be called. Everyone who wants to share their amendments will be considered, so let’s respect the process of legislation,” she said. — with Beatriz Marie D. Cruz