As the authors themselves tell us, SWFs are state-owned investment funds typically financed by a country's surplus revenues or reserves.
Second of a seriesDO we need a sovereign wealth fund ?This has to be our sovereign decision alone. The 49 countries with SWFs include the most populous in the world — China with 1.3 billion people and an SWF worth $1,744 billion, as well as one of the least populous Can we afford an SWF?This is the more difficult question.
As the authors themselves tell us, SWFs are state-owned investment funds typically financed by a country's surplus revenues or reserves. This is why of the 193 member states of the United Nations, only 49 with bonanza funds from oil, gas and minerals, or from external trade and state-owned enterprises, have an SWF.Norway, with a population of 5,425,270 and two SWFs — the $ 1,388-billion Oil Fund of Norway and a much smaller and older Government Pension Fund managed by the Oslo Stock Exchange — has the world's largest SWF per capita, with $250,000 for every Norwegian citizen. This year Japan's pension fund of $1.464 billion was reported to have outperformed Norway's, but given Japan's larger population , Norway's SWF remains the largest on a per capita basis.In Southeast Asia, Singapore's Temasek, the global investment company, is the largest, with $703 billion for the island-nation's 5,866,139 population.Among the world's wealthiest countries, Switzerland has accumulated 1 trillion Swiss francs in the Swiss National Bank, but Wikipedia does not list it among the 49 countries with an SWF. This means that having all the money in the world does not automatically create for the country an SWF.Does the Philippines have any surplus revenues or reserves to put into the proposed MIF? I think we have an unspoken consensus on this.Yet in the bill's self-congratulatory explanatory note, the authors call the Philippines 'the — — Rising Star of Asia' and 'a real leader in the Asia Pacific.' They also refer to Singapore's and Indonesia's successful SWF experiences. They talk of the success of GIC Private Ltd. in providing Singapore 'the financial means 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.'They also speak of the success of the Indonesian Investment Authority in attracting foreign direct investments. 'By attracting foreign co-investors to capitalize the fund rather than rely on commodity revenues in bringing in much-needed investments in infrastructure and emerging industries, ultimately spurring growth in Indonesia, such as investments in transportation, including airports, supply chains, logistics, digital infrastructure, the green economy, health care services, the financial sector, technology and tourism,' they said.Ironically, the authors fail to mention the 1 Malaysia Development Bhd scandal, in which Malaysia's sovereign wealth was systematically looted, with assets diverted globally in what the US Department of Justice in 2016 called 'the largest kleptocracy case to date.'The 1MDB was established as a $1-billion SWF by Prime Minister Najib Razak in 2009 to make strategic investments and alleviate poverty. Najib exercised the sole authority to sign off investments and manage personnel on its board and management team. Jho Low, a Malaysian businessman and financier from Penang, helped Najib run 1MDB because of their close personal relationship, even though he was not officially connected to the SWF. Najib gave Low unlimited access to the fund.In August of 2009, Najib and Low were reported to have met with a representative of PetroSaudi, a private oil company, on board a yacht in Monaco to discuss 1MDB's first important investment. In a subsequent visit to Saudi Arabia, Najib reportedly signed a $2.5-billion joint venture agreement with PetroSaudi. According to the US Department of Justice, Najib used this deal as a cover to move $1 billion into a Swiss bank account.Goldman Sachs, the US multinational investment bank, raised an additional $1.4 billion which 1MDB reportedly quickly misappropriated into a Swiss bank account. Former Malaysian prime minister Mahathir Mohamad took a direct hand in going after Najib for corruption, and succeeded in sending him to 12 years in jail.A belated proposal to make President Marcos Jr. chairman of the board and CEO of the MIF would modify Section 10 of the bill which seeks to create a nine-man board chaired by the representative of the GFI with the largest investment in the fund. This raises the issue of trust in the minds of many people.Former president Gloria Macapagal Arroyo, who sits in the House as senior deputy speaker, welcomed the idea as 'a powerful statement that the highest official of the land will hold himself ultimately accountable to the Filipino people for the performance of the fund.' Many share this sentiment, but some people fear that what happened to 1MDB in Malaysia could also happen to the MIF in the Philippines.Still, many more seem to hope that BBM might do the exact opposite of what Najib Razak did in Malaysia — use the MIF as a legal vehicle to repatriate Filipino-owned assets that are locked in foreign banks in various parts of the world. How the law finally shapes up will probably tell us if this hope is worth entertaining.To be continued on Friday, Dec. 16, 2022.
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