EDITORIAL - Maharlika

The country is buried in a record high P13.52 trillion debt, and the global investment climate is currently risky, with the International Monetary Fund warning that “the worst is yet to come” for the global economy in 2023. The country has gross international reserves, but Bangko Sentral ng Pilipinas Governor Felipe Medalla said the GIR is needed to stabilize the peso amid continuing volatility in the currency market.

Medalla is strongly opposing any attempt to use the GIR for the proposed creation of a sovereign wealth fund to be called Maharlika. Such funds, set up by countries with surplus money, are common among oil-exporting states and wealthy economies. Apart from the GIR and surplus wealth from oil and other natural resource exports, such funds can be sourced from bank reserves as well as trade and government budgeting surpluses.

Proponents of the creation of the fund cite countries such as Singapore and Norway as examples. But even Norway, with its strong rule of law and good governance, has not been spared from controversies involving its massive $1.3-trillion sovereign wealth fund. In the first half of this year, the fund also posted its biggest loss of 14.4 percent – a whopping $174 billion – amid surging inflation and Russia’s invasion of Ukraine.

Members of the Social Security System and Government Service Insurance System are worried that the pension funds, which are being eyed among the sources of the Maharlika fund, would be depleted and end up being used as a private piggy bank.

Notably omitted by Maharlika proponents is mention of Malaysia, whose former prime minister Najib Razak began serving last August a 12-year prison sentence for siphoning $9.4 million from that country’s sovereign wealth fund – 1Malaysia Development Berhad or 1MDB – into his private accounts.

Prosecutors alleged that over $4.5 billion was looted from the fund and laundered by Najib’s cronies through layers of bank accounts in several countries including the US. The funds were believed used to finance the purchase of hotels, pricey art works, jewelry and a luxury yacht as well as the production of a Hollywood movie.

Najib still faces four more cases relating to 1MDB. A week after he was convicted, his wife Rosmah Mansor was also found guilty of soliciting and receiving bribes during her husband’s administration and sentenced to 10 years and a fine of $217 million. When Najib fell from power, police raids on the family’s residences led to the seizure of pricey Hermes Birkin handbags, jewelry including 14 tiaras, 423 wristwatches and cash of about $246 million.

This story should be frighteningly familiar to many Filipinos. Among the concerns raised by opponents of the Maharlika fund are the weakness of the rule of law in this country, entrenched corruption, the current heavy indebtedness as well as the global economic climate and geopolitical headwinds. Such concerns cannot just be brushed aside.