The Philippines government has launched its first sovereign wealth fund.
The Maharlika Investment Fund was passed into law by President Ferdinand Marcos Jnr on July 18 with the expectation that it would boost the local economy.
However, the move has divided observers, with some worried about the timing of the launch and the governance of the fund.
The fund will be seeded with US$9.2 billion, channelled from state-owned banks and corporates, to be used for infrastructure projects and other investments.
The current finance secretary will serve as ex-officio chairperson, while the president will appoint the board members, including the CEO.
Fears of political interference and conflicts of interest have been heightened by the ongoing fallout from the collapse of the Malaysian sovereign wealth fund 1MDB.
Nor have these fears been eased by the speed at which the fund has been passed into law. President Marcos certified the fund launch as an urgent bill meaning that it would bypass the constitutional rule that bills must be subject to three readings on separate days before being passed.
The Philippine Stock Exchange has given its backing to the fund, which it believes will “facilitate the flow of capital into more productive and beneficial channels and, as a result, contribute to efficient capital formation for the country".
However, faculty members from the University of Philippines School of Economics have stated that the fund "violates fundamental principles of economics and finance and poses serious risks to the economy and the public sector – notwithstanding its proponents' good intentions”.
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