Philippines: It's high time to build its sovereign wealth fund on mineral resources — what Congress must do

The Philippines has vast mineral resources that could be harnessed to create a sovereign wealth fund. Instead of treating mining taxes and royalties as annual government revenues, a designated portion should be allocated to this long-term financial asset. This approach would convert finite natural resources into perpetual financial benefits for future generations of Filipinos.

Norway and Gulf nations have successfully established massive sovereign wealth funds that benefit their citizens. The Philippines can emulate this model. The country possesses billions in mineral wealth, and it's time for lawmakers to seize this opportunity.

To establish a sovereign wealth fund, the government should earmark a portion of the taxes, royalties, and windfall profits generated from extracting finite mineral resources. This task falls within the jurisdiction of Philippine lawmakers who can enact legislation to bring about this change.

The Philippine Fund Code 151 underscores the potential of such a fund. It states that a wealth fund for the Filipino people should be created, specifically referring to the Malampaya money and its utilization. Currently, the country has not implemented a systematic mechanism to convert mineral extraction revenues into intergenerational financial wealth.

The Maharlika Investment Fund (MIF), established under Republic Act 11954 in July 2023, marked the beginning of the nation's first sovereign wealth fund. Its initial capital subscription of ₱125 billion comprised contributions from various government entities. The fund's intended funding sources include dividends from the Bangko Sentral ng Pilipinas, a portion of PAGCOR earnings, government asset privatization proceeds, and other sources.

The Philippines' untapped metallic and hydrocarbon potential is estimated at over $1 trillion. Recent discoveries, such as the natural gas find in Malampaya East-1, confirm the promising economic gains that can be harnessed for the country.

The recent amendments to the tax framework for large-scale metallic mining (Republic Act No. 12253) create fresh opportunities for generating returns from invested capital. The law introduces a progressive royalty system and windfall profits tax, which can be leveraged to bolster the sovereign wealth fund.

With an additional ₱25.08 billion in government revenues projected from 2026 to 2029, and mining taxes, fees, and royalties amounting to ₱32.97 billion in 2024, there is ample potential to establish a dedicated mineral-wealth contribution to the Maharlika Investment Fund.