Philippines 'open for business' as Marcos Jnr says sovereign wealth fund will be run by professionals

The Philippines' first ever sovereign fund will be professionally run and operate without political interference, President Ferdinand Marcos Jnr has said in a conference of Asia's business elite, amid continued concerns of potential corruption akin to Malaysia's 1MDB scandal.

Addressing an audience of private investors, representatives of family offices, and other sovereign wealth managers at the Milken Institute's 10th Asia Summit in Singapore on Wednesday, Marcos Jnr again called for more foreign direct investments into his country in the sectors of infrastructure, power generation, agriculture and renewable energy, declaring his nation "open for business".

Last year, the Philippine leader said he secured investment pledges of US$14 billion from his visits to Indonesia and Singapore on his first overseas trip as president.

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"It will be run as a fund. It is not run by the government, it is run by professionals," Marcos Jnr said of the Maharlika Investment Fund on Wednesday. "That is one of the main assurances that I have to give ... because when the politicians get involved, then the financial decisions are no longer purely financial in nature, [and] that causes an inefficient management of the fund."

Marcos Jnr's comments come as Philippine lawmakers raise concerns the fund could fall victim to mismanagement, while his own sister Senator Imee Marcos has said she feared it could take the path of Malaysia's scandal-plagued state fund 1MDB, which was looted of billions.

Imee questioned the timing of the creation of a sovereign wealth fund given the government's large external debt, much of it a legacy of her and Marcos Jnr's father, the former dictator Ferdinand Marcos, who racked up borrowings to fund infrastructure projects in the 1970s and 1980s. The senior Marcos' 21-year rule was associated with large-scale corruption and crony capitalism.

President Marcos Jnr told the Singapore conference that the new fund was a way of using idle reserves to generate growth and jobs for the Philippines without borrowing further.

The fund would use government seed capital to invest in key projects, partnered by investments from both private and public moneys, he said.

According to Marcos Jnr, the Philippines has major projects it has to see through, for example the expansion of agricultural production, so it no longer relied solely on importation, a lesson learnt during the pandemic.

The Philippines also needed capital to rectify an inefficient power distribution system and its highly bureaucratic way of doing business, he added.

Marcos Jnr promoted a foreign investor-friendly scheme in renewable energy with projects allowed to be fully foreign owned as well as tax breaks, a robust legal framework that will safeguard foreign owner interests, and intellectual property rights.

All of these run counter to the sentiments of domestic economists and business leaders. Late last year, 12 groups of business leaders and economists issued a statement opposing the bill for the fund, which was later signed into law by Marcos Jnr in July.

They argued the Philippines does not have surplus funds and should prioritise the paying down of foreign debt, which has risen again by US$7.5 billion to reach nearly US$120 billion at the end of March according to the Philippine central bank.

Funds should be deployed into delivering public services, they added.

Marcos Jnr spoke on the opening day of Milken's Asia Summit, which also heard discussions about soft global economic conditions and China's stalling economy.

But the investment community was mostly sanguine about the downturn in the Chinese economy, saying that while traditional sectors like property were having a "cyclical" slowdown common to other economies from time to time, other parts of the economy such as engineering, particularly in the renewable and electric vehicle sectors, were buoyant.

"While people tend to look at the weaknesses in the traditional sectors, they [also] tend to overlook the emerging sectors," said Yibing Wu, the president of China at Temasek, Singapore's sovereign investment company.

"I think it's very important to know that China is actually in a different cycle [from] the United States or a developed market economy."

This article originally appeared on the South China Morning Post (SCMP).

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