SWF means Stewardship of Wealth Fund

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Various civil society groups, professional and business associations, credible economists and non-economists, bankers, members of other sectors like agriculture and labor, and practicing academics, among others, have weighed in on the Maharlika Wealth Fund (MWF), also referred to as a sovereign wealth fund (SWF). While the intensity of discourse has not quite approached the vigor and duration of the debates triggered by landmark legislation like the Comprehensive Agrarian Reform Program (CARP) in 1987 or the termination of the 1947 Military Bases Agreement, there are enough substantive and informed insights that have been thrown into the marketplace of ideas to merit some other aspects of the proposal to create the MWF change.

These informed comments basically revolve around the questions: What problem is the proposed MWF supposed to solve? How much thought has been put into this concept? Doesn’t the country have more serious problems that need more attention? Problems like the dip in our foreign currency reserves and providing basic services that a State is expected to provide in its contract with taxpayers — education, healthcare, nutrition, food security? What about the huge national debt and fiscal deficit? Haven’t there been precedents during the Martial Law regime where government corporations like the National Development Corp. (NDC) invested in extractive and processing industries aimed at the export market? What were the results of these investments which are the same types of projects that the MWF is said to be targeting? What happened to these investments?

Among these investments was the Philippine Associated Smelting and Refining Corp. (PASAR), which was then to be the country’s only copper smelter and refinery. Its sulfuric waste was to be used in the manufacture of phosphate fertilizer by the adjacent Philippine Phosphate Fertilizer Corp. (PhilPhos) in Leyte. Both enterprises ended up with the Asset Privatization Trust (APT) as auctioned government assets, with former Finance Undersecretary Romeo Bernardo successfully serving as chief auctioneer.

The Philnico Nickel Processing Plant was another big ticket of the NDC, whose investment activities are eerily similar to the planned MWF. Government investment strategists had intended Philnico to be a major nickel and cobalt producer. Philnico resumed operations after it was auctioned off by the APT.

Proceeds of the sale of these privatized assets augmented the budget for CARP implementation.

Proponents of the MWF could very well perform a true service to the country by going over the history and results of these projects and learning from all these forays into these types of investments at a time of dire national need for basic services. The results of that analysis should be very instructive.

Various statements are being circulated in mainstream and social media platforms. Signatories to the statement simply called “Statement on the Maharlika Fund” include, among others, former Cabinet Secretaries Solita Monsod, Cielito Habito, Dante Canlas, Emmanuel Esguerra, Ernesto Pernia, Alberto Aldaba Lim, former Bangko Sentral Deputy Governor Diwa Guinigundo, former Finance Undersecretary Milwida Guevara, and Professor Emeriti and Professors from leading universities, namely, Edita Tan, Maria Serena Diokno, Michael Alba, Mario Lamberte, Mary Racelis, Cristina Montiel and Luis Dumlao. The signatories asked that the “Executive and Congress to scrap the Maharlika Wealth Fund bill or House Bill (HB) 6398.”

The signatories asserted that the MWF is a warped version of what an SWF should be. Sovereign wealth funds usually solve a problem of excess. Some examples of excess revenues include a situation of consistent large budget surpluses, windfall revenues from booming extractive industries, and excess foreign currency reserves from enduring balance of payments surpluses, which are invested abroad to help stem currency overvaluation.

“But the Philippines do not enjoy excess. Instead, the country has a heightened fiscal deficit, so-so export performance, and has not enabled the major commodity exports to better foreign currency reserves.

“Furthermore, the MWF’s stated intention to ‘create jobs, promote trade and investment, strengthen connectivity, expand infrastructure, achieve energy and food security’ can be achieved more effectively through other established measures.

“The administration’s goal of promoting infrastructure spending can be more efficiently facilitated through actual appropriations, concessional lending or public-private partnerships (PPP).”

In a separate statement, economist, professor emeritus, and national scientist Raul Fabella said, according to a Dec. 10 report in @philbizwatcher, that “no amount of tweaking could repair” the Maharlika Wealth Fund bill “because its flaws were fundamental: The moral hazard arising from unnecessary state intervention and the unjustified economic backdrop.”

Fabella stated that “at the heart of the bill was the consolidation of resources under one umbrella which would be wielded by a group of people who did not own them.” Fabella, continues, “Positive returns for Maharlika placements will mean hefty private returns (bonuses) for this select group, but negative returns will be socialized that is, charged to the nation.”

Fabella’s comment raises moral issues and reminds us of the Parable of the Steward. The steward was appointed to a position of trust. The steward then proceeded to protect his interest by negotiating side deals with people who owed his master sums of money. The asset did not belong to the steward, it was entrusted to him for safekeeping. Essentially, a SWF, and all government funds, and the budget, in the hands of government officials and under their control are funds kept in trust and to be utilized with utmost transparency, exercising principles of good governance. Fabella’s comments strike at the heart of stewardship.

The complexity of society’s needs and the sharp fluctuations in the political and economic situation that are in turn fueled by convertible and flexible values and loyalties, make sound stewardship and accountability necessary ingredients for governance. If one were to go farther and consider the spiritual context of stewardship, religious instruction will state that all goods belong to the creator and we are allowed to use them for good and to account for their use.

At the end of the day, the bottom line or the primordial concern with respect to the MWF is one’s record of stewardship and governance.

Philip Ella Juico’s areas of interest include the protection and promotion of democracy, free markets, sustainable development, social responsibility and sports as a tool for social development. He obtained his doctorate in business at De La Salle University. Dr. Juico served as secretary of Agrarian Reform during the Corazon C. Aquino administration.