MANILA, Philippines - A former lawmaker is urging the Aquino administration to set up a sovereign wealth fund (SWF) patterned after Singapore and China to help small and medium enterprises (SMEs) expand and boost the country’s resilient economic growth.
Ramon Magsaysay Jr. said in a round table discussion with editors and reporters of The STAR that the establishment of a SWF by the government would help the Philippines boost the competitiveness of SMEs.
From being number two in the 1950s and 1960s, he pointed out that the Philippines is now in the lower part among its peers like Singapore, Thailand and Indonesia.
“We are in a global society so the Philippines can only look at countries like Singapore, Thailand, and even Indonesia. These countries have long gone ahead of us. So from number two in the 50s and 60s we are now in the lower part,” he said.
A SWF is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally.
Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation’s banking system. This type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings that are invested by various entities for the purposes of investment return, and that may not have a significant role in fiscal management.
Magsaysay said the fund is simply taxpayers’ money set aside capital fund and is sometimes called fund for creative enterprise (FCE) for SMEs.
He pointed out that Singapore has established the Government of Singapore Investment Corp. and Temasek Holdings.
“Singapore even allows foreigners to come in give them special visa and give them capital if they have good and worthwhile ideas to pursue. For me we should look at that and start that to help our entrepreneurs become bigger,” he explained.
He stressed the need for the government to help SMEs improve their business models to be more competitive.
“Many of these entrepreneurs and SMEs are all over. Many of them are doing well but they just don’t have enough capital,” he lamented.
The Cabinet-level Development Budget Coordination Committee (DBCC) sees the country’s gross domestic product (GDP) expanding between five percent and six percent this year.
The GDP grew 6.1 percent in the first half of the year on the back of recovering exports as well as higher government spending.