The Asian Development Bank (ADB), the International Monetary Fund (IMF) and the Milken Institute have given the thumbs up on the creation of a sovereign wealth fund (SWF), according to the Department of Budget and Management (DBM).
Discussions on SWF began during the previous administration while current Finance Secretary Benjamin Diokno was still the Bangko Sentral ng Pilipinas (BSP) governor, Budget Secretary Amenah Pangandaman said at the Kapihan sa Manila Bay forum yesterday.
“During the pandemic, it was also the same time when INA (Indonesia Investment Authority), the SWF of Indonesia, was established. It was all over the news during that time. Secretary Diokno, BSP governor then, asked us to review and check if the BSP can establish its own SWF,” the budget chief said.
Pangandaman said the ADB and IMF were “okay” with it, but adamant to use the BSP as primary vehicle for the creation of the SWF.
“During that time, we really had a surplus in our reserves. The IMF has said we should only have at least three months of our reserves, but during governor Diokno’s time, it was 10 months, it’s more than enough,” Pangandaman said.
“So, he (Diokno) said, let’s study how we can go about this. We did a research, TWG (technical working group). We even met with ADB, the IMF. Both development partners said it’s okay, but not from the central bank because it’s not part of its mandate. It’s possible, but you (government) need to revise the mandate and the charter of the BSP,” she added.
In the case of Milken Institute, Pangandaman said the US-based think tank was tapped during the TWG.
“Part of our TWG was a meeting with the Milken Institute of Singapore. They will release soon a report, and I think the report will say that the time is now. We don’t have to wait to start and create our own SWF,” Pangandaman said.
She, however, clarified that the Milken Institute report has not yet been released to the public.
“We also tapped them (Milken Institute) to help us when we were working on the type of SWF, because there are several types. Some are using it for their pension system, others are using it for their natural resources,” Pangandaman said.
“Ours is for development, to develop and to fund at least our infrastructure projects and programs,” she added.
She mentioned that Diokno also met last week with the World Bank to discuss the planned SWF.
ADB Philippines country director Kelly Bird was also sought for comment in a press conference yesterday, where he noted some good benefits of SWFs.
“A country’s decision to establish a SWF obviously is that country’s decision. The benefit of a SWF is that it can help deepen the domestic capital market, it creates a large institutional investor, and that allows mobilization of savings within the economy, foreign investments and so on. So it does have very good benefits,” Bird said.
“Many countries have them and they serve a very good purpose. Obviously, you want to have a good fund management of that SWF,” he added. – Angela Celis
