🇵🇭 The sovereign wealth fund no one asked for

Hello friends!

Here’s my promised Maharlika Investment Fund update! Please note that I went out of my way to avoid finance electives in uni so this is new-ish ground for me (I have, of course, read a LOT about 1MDB which is perhaps coloured my view). Click through on the links for deeper coverage, but I hope this gives you the skeleton of an enormous development in the Philippines.

Below that, I have an update on the movements in Thailand ahead of parliament convening at the start of July. There’s little fresh news on the Pita Limjaroenrat investigation, but pre-convening manoeuvres are afoot.

Enjoy the weekend!Erin Cook

🇵🇭 Money and intrigue

The Philippines' political elite wants a sovereign wealth fund. First floated late last year, the Maharlika Wealth Fund “will help President Ferdinand Marcos Jr. keep the country on the high-growth path,” Speaker and principal author of the bill Martin G. Romualdez said after 90% of Congress backed it in December — just 17 days after it was first tabled. 

As economist James Guild put it succinctly for the Diplomat just days later: “Such funds are usually set up in smallish commodity exporting nations that run large current account surpluses. The Philippines is neither of these.” 

The move is in line with many of President Bongbong Marcos’ ambitious economic reforms, Guild noted at the time, but carries significant risk beyond the increased spending plans. 

So, why? That’s the question posed last year by a coalition of heavy-hitting business groups and economists. 

That’s according to the Foundation For Economic Freedom, Competitive Currency Forum, Filipina CEO Circle, Financial Executives Institute of The Philippines, Institute of Corporate Directors, Integrity Initiative, Inc., Makati Business Club, Management Association of The Philippines, Movement for Good Governance, Philippine Women’s Economic Network, UP School of Economics Alumni Association and Women’s Business Council Philippines, Inc.

It’s a point reiterated this week by the University of the Philippines economists. Assistant Professor JC Punongbayan and his colleagues slammed ‘vague’ computations on returns and said the fund would need to reap at least 10% to be viable.

“Economic returns won't be reaped anytime soon and are much more difficult to measure. But proponents keep saying that the expected returns will be 8.6% — where will this come from?” Punongbayan said, as reported by CNN Philippines. 

It’s not just the maths that stinks. Senate Minority Leader Aquilino Pimentel III has gotten a whiff of politicking garbage, he said this week after the bill hit President Marcos’ desk. “The enrolled bill being sent to the President is not the version properly and formally approved by Congress. There is a provision that was tampered with without plenary authority,” Pimentel told Philstar. 

The bill gives conflicting ‘​​prescriptions of crimes and offences,’ Philstar reports. This is a function of having merged two drafts but has given critics more ammunition in their arguments that the process has been rushed and shoddy. It’s since been fixed, but Pimentel warns that fixing a bill after it’s been voted on may make the entire endeavour unconstitutional: “The revisions made were not just a matter of style. It showed a flagrant violation of our rules and the Constitution.” 

Labour and workers' groups are also deeply worried. Funding for Maharlika was initially to come from pension funds before outcry saw that plan ditched. Still, Sen. Ronald dela Rosa earlier this month said Government Service Insurance System and the Social Security System may still be tapped to fund projects. 

Deputy Minority Leader France Castro warns it could go deeper: “As for taking away the power of the purse of Congress, the MIF can do this because by itself it can build roads, bridges, and projects that Congress should have the power to allocate and scrutinise … They would remove the power of Congress to scrutinize these projects and open up a huge opportunity of being a source of corruption,” she told the Inquirer earlier this month. 

President Marcos isn’t concerned. He plans to sign the bill ‘soon.’ In a weird quote obtained by the Inquirer, he concedes there are worries: “Certainly, sometimes I have been watching the discussions that have been going on with the Maharlika Fund and that is all true, that’s all true, you must worry about that.” 

The “secret to success” for the fund will be who is appointed to manage it. “What is their experience? What is their reputation? What is their success rate? And we have quite a few good money managers, financial managers there that we can call upon,” he said, also reported by the Inquirer. 

If this makes even the most casual of watchers, aware of the Philippines’ history of graft (and the Marcos’ family name) and having read Billion Dollar Whale, queasy, I’m with you. 1MDB, the extravagantly messy Malaysian sovereign wealth fund, casts a long shadow over the conversation. Spruikers have played down comparisons and fears, saying ‘safeguards’ will be in place and heightened transparency. A crucial difference is that unlike 1MDB, where former prime minister Najib Razak was the sole ‘safeguard’ many more will be involved in Maharlika — although who exactly, whether independent oversight or Marcos appointees, remains to be seen.

Time will tell. 

🇹🇭 Playing musical (speaker) chairs

The Pheu Thai-Move Forward split over which party will take the Speakership deepened this week after Pheu Thai stalwart Chalerm Yubumrung joined in. 

“It is wrong to say that a House speaker must only come from a party with the initial ‘M’, That party wants to take everything. If anyone has what it takes to be House speaker, there is no problem [in choosing that person],” he said, as per Bangkok Post. 

He also took a swipe at the notion that older parties (and lawmakers) must step aside for youthful upstarts: “Today's politics is strange. Some likened the old generation to old tyres with past expiry dates. They said the old generation must make way for the new. But if the old generation is more capable and knowledgeable than the new, where should the right place for them be? It is necessary to blend the old with the new. Don't look down on others.” 

Expect more argy-bargy in the coming week or so. Parliament is slated to open in early July and the Speaker and two deputies will be selected in the first few days. According to regulations, it must be opened within 15 days of the Election Commission certification, made last week, giving a deadline of July 4, Nikkei Asia reports.

That’s when the lobbying of Senators to back Move Forward’s Pita Limjaroenrat leadership will formalise. According to this great report from Patpicha Tanakasempipat at Bloomberg, the eight-party alliance led by Move Forward is feeling pretty good about their odds. “We’re gaining support from more and more senators and almost hitting the target,” Move Forward deputy leader Sirikanya Tansakun told media on Tuesday. 

Titipol Phakdeewanich, dean of political science at Ubon Ratchathani University, told Bloomberg Move Forward ought to be wary of senators who won’t pledge publicly just yet. “Nothing can be taken for granted at this stage,” he said. 

Big week ahead, so will meet you back here next Friday for all the updates.