Philippines weighs casino, power plant sale to seed wealth fund

The Philippines’ finance secretary said the country can finance its planned sovereign wealth fund with revenue from the privatization of state-owned casinos and the sale of assets like power plants.

The country’s Senate next week will discuss the proposed law to establish the Maharlika Investment Fund, following its rapid passage by the House of Representatives last month.

Maharlika’s funding sources are contentious because unlike other sovereign wealth funds, which are created from commodity earnings and other revenues, the Philippines’ planned fund will be sourced mainly from central bank dividends and contributions from state-owned lenders.

Speaking on the sidelines of a Philippine investment briefing in London on Thursday, Finance Secretary Benjamin Diokno said revenue from the mining industry’s reopening, privatization of state-owned casinos and the sale of power plants can contribute to the fund.

“We have a lot of government assets that can be privatized. So, that will be the source,” Diokno told reporters.

While the finance chief did not say which specific assets could be sold, a government agency lists the 1,000-megawatt Agus-Pulangi hydropower complex in Mindanao as among those that are up for privatization.

Meanwhile, the Philippine Amusement and Gaming Corporation, which is also the industry regulator, runs 44 Casino Filipino sites, which generated 8.2 billion pesos ($150.6 million) in gross gaming revenue in 2021.

Diokno said Maharlika’s initial size is estimated at around $2 billion, adding that foreigners will also be able to invest “after awhile.”

“It’s modeled after the INA in Indonesia, where it was originally a government investment fund, and then they invited the investors,” Diokno said, referring to the Indonesia Investment Authority.

Philippine President Ferdinand Marcos Jr. talked up the fund during his recent appearance at the World Economic Forum in Davos.

The original proponents of the Maharlika fund bill include members of Marcos’ family in Congress — his son Ferdinand Alexander and his cousin, House Speaker Ferdinand Martin Romualdez.

Apart from financial risks, the planned fund has also stirred concerns over corruption, with critics citing the graft-laden Malaysian sovereign wealth fund 1MDB as an example of what can go wrong.

Marcos early this week sought to allay such fears, saying the fund would be used to finance big-ticket infrastructure projects via public-private partnerships or government-to-government deals. “We will only deploy funds when there is a very specific project to be paid for. So, money laundering just won’t come into it,” the president said.

Marcos also urged the Senate to scrutinize the Maharlika fund bill. He said the chamber could wrap up deliberations by April.

“To me, it is more important to be right than to be quick,” Marcos said.