Sovereign Wealth Fund (SWF)

SWF is surplus money that accrues overtime mainly from a nation’s foreign reserves (dollars). The SWF’s purposes are: 1. Stabilize national budgets, 2. Create savings for the people, 3. Promote economic development.

The monthly family expenses are: 1. Electricity, 2. Water, 3. Food, 4. Gasoline (for cars), tuition fees and baon of children going to school. If the business or salaries of the parents can pay for the family expenses, the excess is called surplus. The family have two banks deposits. One is used to pay for the daily/monthly expenses called ordinary deposit you can withdraw money from it anytime. The bank pays interest for the money but the interest is low because the deposit goes up and down depending on when you withdraw money. The other is called time deposit. You cannot withdraw anytime but only when the period has expired. The bank pays more interest because the bank can use or lend your money without fear that you might get it back anytime. The keyword is surplus or extra or sobrang pera.

It is dangerous to create SWF if the money of the SWF comes from other government offices or agencies. If it comes from government owned banks or agencies, the banks/agencies will have less money to lend to the people. The greatest danger is if the SWF loses money. The SWF will use their money (taken from government agencies like DBP, Land Bank, Central Bank) to invest international blue chip cords (EXXON, Shell, Microsoft, IBM etc. ) or hire blue chip investment companies (Golden Sachs, J.P Morgan, Citi Trust. ) who will decide where/when to invest in total assets.

Norway’s SWF is no. 1 with 1,370 trillion dollars. Norway’s SWF lost 6.3 billion dollars during the 2008 depression/recession. In 2022, Norway’s SWF lost 16.4 billion dollars due to COVID, depression/recession/bad investment. Norway is still solvent because SWF funds come from trillions of dollars worth gas and oil it has sold since 1980’s from its oil fields.

In 2009 Prime Minister Najib Razak, created the Malaysia Development Berhard using the surplus money from Malaysia’s big oil and gas fields. In 2022, Najib Razak was convicted and is serving 12 years in Kajang Prison for pocketing 1 billion dollars. His wife Rosamer Mansor was also convicted for mishandling of the funds. The US federal goverment returned to Malaysia 1.25 billion dollars which was discovered from the hidden Razak deposits in America. Malaysia’s SWF financial adviser gold man sach paid the US government a 2.9 million dollar fine for its role in the scandal. This is not the time to create a SWF. First, we don’t have surplus funds. Our foreign reserves (dollars) with the Central Bank are just enough for paying for the much needed imports: rice, sugar, onions, medicine, oil, electronics. Second using LB, DBP and Central Bank money as the seed money of the SWF would mean less money LB, DBP can give subsidized loans to the farmers, retailers, etc. and less dollars Central Bank can use to pay for our importations.