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Gov't urged to create 'sovereign wealth fund'

MANILA, Philippines - Liberal Party senatorial candidate Ramon Magsaysay Jr. on Wednesday said the government should take risks in creating a Sovereign Wealth Fund (SWF) to sustain the country's strong financial standing.

In his press release, Magsaysay emphasized that the SWF will not only stabilize the country’s resilient economic growth but will also help expand and boost competition among small and medium enterprises (SMEs) that are said to be responsible for driving innovation in many economic sectors.

“In order for us to sustain our economic advances, we must make our entrepreneurs bigger. There are thousands of entrepreneurs and SMEs all over the countryside. Many of them are doing well but they lack necessary financial requirements to further improve their businesses,” Magsaysay said.

The SWF is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals, and other financial instruments and is mostly funded by foreign exchange assets.

Magsaysay said that some sovereign wealth funds may be held by the country’s central bank that takes course of the nation’s banking system while other sovereign wealth funds are simply state savings that are invested by various entities that may not have a role in fiscal management.

“It is about time that we get out of our comfort zones and make economic gambles. Singapore has established the Government of Singapore Investment Corp. and Temasek Holdings. It even allows foreigners to come in, give them special visa and give them capital if they have good and worthwhile ideas to pursue. We should look at various financial models so we can widen the playing field for our entrepreneurs,” Magsaysay said.

Finance Secretary Cesar Purisima and other monetary officials have begun a study on the merits and feasibility of creating an SWF. The review covers the Fund’s practicality and how to best structure the investment vehicle. Options include the sole running of the SWF by the Bangko Sentral ng Pilipinas or the national government or as a joint venture between the two.

Records from the Bangko Sentral ng Pilipinas show that the Philippines’ Gross International Reserves (GIR) as of February 2013 stood at $84 billion.

Amado Tetangco, BSP Governor, has said that the government’s high GIR is enough to cover the country’s import requirements. The $84 billion foreign reserve is also equivalent to 6.6 times the combined short-term foreign currency-dominated debts of private and government entities in the Philippines. Aicha Enriquez

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