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Why the Philippines’ Plan for a Sovereign Wealth Fund is Controversial

As 2022 draws to a close, lawmakers in the Philippines are pushing for the establishment of a sovereign wealth fund to purportedly help the country finance future economic development.

President Ferdinand Marcos Jr. had called for the immediate enactment of the fund’s implementing bill, which was initially proposed on Nov. 28. A revised version of the bill was passed by the House of Representatives on Thursday, just before Congress goes on Christmas holiday break. It now awaits a legislative counterpart from the Senate.

Marcos Jr., who was elected in May, vouches for the fund’s creation, telling reporters on Dec. 12 that it will bring “added investment” to the Southeast Asian nation of 110 million people. His economic team, meanwhile, have cited similar state-owned funds in Singapore and Indonesia as a testament to the potential success the Philippines could reap.

But the proposal to establish the Maharlika Investment Fund (MIF), as it’s been named, is highly controversial. (“Maharlika” is a Filipino word meaning upper-class that was co-opted by Marcos Jr.’s father, the late Philippine dictator Ferdinand Marcos, who falsely claimed it was the name of a World War II guerilla unit he led.) State-owned investment funds in nearby countries have faced mismanagement and corruption, and it’s not clear the proposal for one in the Philippines has the safeguards to be different.

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Over the last few weeks, analysts and critics have raised concerns that the fund may become a hotbed for scandal, like the 1MDB corruption case in 2015 involving the Malaysian sovereign wealth fund that resulted in the country’s former prime minister, Najib Razak, going to prison.

In response to criticism, lawmakers in the Philippines revised their plan for MIF, no longer making the president chair of the fund’s managing board and changing the source of its seed money from pension funds to central bank dividends.

But many still question the establishment of a sovereign wealth fund in the Philippines, given the inherent risks of any public investment venture, especially as a global