Think outside the box: Time for a national wealth fund
The common conception is that only rich countries have the capacity to build a sovereign fund — a pool of monies from current surplus that is invested to prepare for the future. This is like individuals saving for rainy days or corporations retaining earnings for next projects.
Since the Philippines is not rich and even poor, we cannot afford such a trust when the existing needs of our people are urgent. Any savings or surplus must be immediately expended.
We see countries like Saudi Arabia and Norway with their state funds from oil and gas; the list of top 10 includes small Middle Eastern states with similar energy reserves. China has two such funds, not surprising with its size and years of trade surplus. Surprising or not, Singapore without any natural resource, also has two. Hong Kong has one. What is the common denominator?
The challenge, therefore, is first of the mind. Arguing against ourselves is the surest way to lose — can’t, shan’t, wouldn’t. What if we think out of the box and see in what ways we can start a national wealth fund?
What we have in abundance as a resource is people — a surplus of young and eager citizens that are ready and willing to work and to prosper. This is recognized by experts and lay alike. The large number of growing families is driving our domestic consumption that contributes about 70 percent of our gross national product is proof. This makes up the phenomenon of demographic dividend where a majority of our population is of working age.
Without doing anything transformational, the country will grow at 3 to 5 percent per annum just because. Imagine the uptick if we collectively pursued a policy of common sense in all things we do specially in governance.
It may be true that the pandemic has wrecked many lives and businesses but, as a nation, we must quickly accept what happened, adapt, and adjust to the realities—whatever situation that we face, including the war in Ukraine, global inflation, weakening currency, scarred MSMEs.
For the second half of 2022, the target growth rate is 5.3 percent to reach the whole year target of 6.5 to 7.5 percent—the first full year post-COVID-19. With a whole-of-government approach to tackling systemic constraints that stifle competition and growth, adding 2 to 3 percent every year for the next few years is achievable. This even possibly considers the yearly increasing economic costs for worsening disasters.
There are tasks that can be collectively discussed and agreed upon such as adjusting the age of retirement. Worldwide, this is already happening with the greater resistance from older populations. Now is good timing to debate and to act. It will also spur growth to remove all sorts of exemptions in our administrative and regulatory landscape that distorts policies and makes compliance and monitoring difficult.
Any percentage growth over 10 percent can be contributed to a national wealth. I leave it to the academicians to provide the working details. The point is we have the resource that is unique globally with a pattern of steep birth declines and longer lives in developed countries, a pandemic of obesity and related health problems that is hitting almost all countries. These factors are subtracting from the productive labor force.
Even with machines and AI, the primary element of any endeavor is still the human personality. Health advocacy, then, in the workplace and in our homes, becomes a key economic driver. There is a host of initiatives that can be done—less salt and sugar in our food and drinks, less white rice in every meal, and staying active. These are very cheap things that can be preached and practiced until a new mindset drives our development.
Many years ago, we were constantly at the mercy of the International Monetary Fund to cover our perennial budget shortfalls. That is until December 2006, when we finally paid off our loan and are now a positive contributor to the fund. Growing up, it was always an alarm to hear that our dollar reserves were only enough to pay for three months of imports. No,w our gross international reserves of more than $100 billion is three times the buffer even at today’s economy.
We only need to get our act together under a new government with a new situation to face a new world that is resetting and reopening to new opportunities and dimensions.
GERONIMO L. SY
[email protected]
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