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Why 6 lawmakers rejected Maharlika fund bill

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RG Cruz, ABS-CBN News

MANILA -- Congressmen who voted against the Maharlika Investment Fund in the House of Representatives questioned the wisdom behind the proposed sovereign investment fund, with one lawmaker warning his colleagues of potential public outrage.<ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/video/news/12/02/22/imee-says-proposed-sovereign-wealth-fund-risky-for-ph">Imee says proposed sovereign wealth fund &#x27;risky&#x27; for PH</a></li></ul>“Let us prudently avoid the people’s wrath,” Albay 1st District Rep. Edcel Lagman said in summing up his reasons for voting against the bill.The objectors to the Maharlika Investment Fund bill had very similar reasons for doing so, and they are listed below.<div>WISDOM BEHIND MIF</div>For Lagman, all the economic indicators don’t favor the creation of the SWF now.“The proposed Maharlika Investment Fund (MIF) is a good idea whose time has not yet come in the Philippines considering the current economic environment of the country. There is no urgency and necessity for the enactment of the Maharlika bill now,” Lagman said in his explanation.“While the Philippines does not have surplus revenues, as in fact it is suffering from a huge fiscal deficit, there is a surfeit of negative and ominous economic indicators which deter the creation of the MIF, like the following: Fiscal deficit: P1.1 trillion as of Oct 2022; deficit to GDP ratio: a high level of 6.5% as of October 2022; debt stock:P13.641 trillion as of October 2022; debt service: P1.196 trillion in 2021; inflation rate of 8.0% in November, 2022; balance of trade: $3.307 billion deficit in October 2022; human development index: Philippines ranked No. 116 in 2021, compared to No. 4 Hong Kong, No. 12 Singapore, No. 19 South Korea and Japan, No. 62 Malaysia and No. 66 Thailand. Poverty – the SWS says 49% of families in Q3 consider themselves poor; per capita income – the Philippines ranked number six at $3,549 in the ASEAN comparative per capita in 2021 according to the World Bank, compared to Singapore at $72,794; Malaysia at $11,371; Thailand $7,233; Indonesia $4,297; and Vietnam at $,3,694,” Lagman said.<ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/video/news/12/15/22/lawmakers-ok-maharlika-fund">Lawmakers give nod to Maharlika fund on 3rd and final reading</a></li></ul>House Deputy Minority Leader France Castro shared that sentiment as well.“Sa kasalukyang bersyon, tinawag na ngang &#x27;investment fund&#x27; ang Maharlika Wealth Fund dahil wala tayong &#x27;wealth&#x27; in the first place. Wala tayong surplus. Sa katunayan ay may probisyon pa nga sa panukalang batas na pwedeng gamitin ang royalties, kita sa pagbebenta ng government assets at public borrowings. Sabi ng GSIS at SSS na dapat turuan ng financial literacy ang mga Pilipino. Hindi raw dapat iasa sa GSIS at SSS lang ang retirement ng mga manggagawa. Pero ito tayo ngayon, pinapayagan ang isang bansang lubog sa utang na mangutang para ipangsugal ang inutang,” Castro said.Gabriela Rep. Arlene Brosas thinks the same.“Creating a sovereign wealth fund that is purely based on existing financial resources of GFIs rather than on surpluses amid widening fiscal deficit, record-high national debt and sham economic recovery dangerously puts Filipinos’ money on the track to a disaster. Wala tayong ipagmamalaki sa panukalang Maharlika Fund na ito – which, once approved, would be the smallest and least promising in the world. Worse, this is a poorly and hastily designed sovereign wealth fund that has all the indications of opening pathways to corruption and unscrupulous use of public funds, as this proposal institutes various regulatory exemptions to the Maharlika Investment Corporation. If we really need additional resources to fund social welfare programs, we need to run after big tax evaders. We need to tax the super-rich – those Filipino billionairies listed in the Forbes magazine – through our proposed wealth tax. We need to impose windfall tax on the multi-billion profits of oil companies. Hindi iyong gagawa tayo ng pakulo na Maharlika na bulnerable sa korapsyon at paglustay ng pondo ng bayan.&quot; Brosas said.Camarines Sur 3rd District Rep. Gabriel Bordado had similar sentiments.“For a country struggling to recover a robust economy such as the Philippines, the creation of our own sovereign wealth fund merits thorough consideration. After all, we are still reeling from the ill effects of the COVID-19 pandemic to our economy, and generating additional proceeds that could fortify our efforts in nation building is a welcome idea. Through a sovereign wealth fund, we might be better protected against ongoing and future economic crises and uncertainties. This would allow us to secure a stable, sustainable, and thriving economy for present and future Filipino generations,” Brodado said/“However, it is for these same reasons that we should be very careful in considering its immediate creation. According to the Bureau of Treasury, the Philippines’ national outstanding debt stood at an PHP 13.641 trillion as of October 2022. Inflation also hit a 14-year high of 8% as of November 2022. The Philippine Statistics Authority found that 19.99 million Filipinos, or 18.1% of the population, are living below the poverty threshold in 2021. This number could have worsened in 2022 as prices of commodities continue to skyrocket. Moreover, we still have huge trade deficits. If we are to look at the current state of the Philippines’ economy, then we could surmise that none of these factors and numbers translate to “wealth” and “surplus”. Therefore, by its very definition, we do not meet the fundamental “requirement” in establishing a strong sovereign wealth fund: excess revenues.”Basilan Rep. Mujiv Hataman simply does not see the logic behind having the fund now.“Pangalawa, mismong mga opisyal ng administrasyong ito ay nagpahayag ng pangamba sa panukala. Si BSP Gov. Felipe Medalla, noong una, ay nagsalita na baka matulad ang Maharlika Investment Fund sa nangyari sa sovereign wealth fund ng Malaysia na nasangkot sa isa sa pinakamalaking iskandalo ng katiwalian sa buong mundo,“ Hataman said.<ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/news/12/16/22/lawmaker-denies-maharlika-fund-bill-railroaded">Lawmaker denies Maharlika Investment Fund bill railroaded</a></li></ul>“Pati na rin si Socio-Economic Planning Secretary Arsenio Balisacan ay nangamba sa pag-invest ng pondo ng Landbank at DBP sa Maharlika Investment Fund. Hindi daw ito magandang idea, or kung gagawin daw ito, dapat ay hindi ma-overexpose ang pondo ng dalawang bangko,” Hataman noted.“Marami ring tanong sa isipan ng mga mamamayan ang hindi pa nasasagot ng maayos ng mga proponents ng panukalang ito: Una, kailangan nga ba talaga natin ng isang Maharlika Investment Fund gayong kumikita naman ang mga indibidwal na ahensiyang bubuo sa pondong ito? Ano ang magagawa ng Maharlika Investment Fund na hindi kayang gawin individually ng mga government financial institutions na ito at ng BSP, which have also been investing their funds using their own strategies?” Hataman asked.Kabataan Rep. Raoul Manuel believes it shouldn’t be a priority now.“Ito ay dahil sa paniniwala naming hindi dapat priority ang pagtatatag ng isang sovereign investment fund gamit ang pondo ng bayan kung, sa gitna ng krisis pangkabuhayan na di pa natutugunan nang maayos ng pambansang gobyerno, ay mas nararapat na maglaan tayo ng pondo direkta sa mga patakarang magtitiyak ng pangangailangan ng mamamayan,” Manuel said.“Batay na din sa mga basic financial literacy concepts, kapag ang isang pamilya ay lubog pa sa utang, mas mabuting wag na muna sumugal. Hindi rin lapat sa basic economics and actual experiences ang plano sa pagtatag ng pondo na ito. Nagsalita ang mga ekonomista at kanilang mga organisasyon laban sa esensya nitong investment fund na tinatalakay natin kahit na dumaan pa ito sa mga amyenda dahil may mga isyu pa rin kaugnay ng pagkakabuo ng konsepto nito,” Manuel said.“Batay sa kasaysayan ng mga matagumpay na sovereign investment funds sa ibang bansa, sourced ang kanilang pondo mula sa government surplus at mga kita mula sa exports. Ang ginagawa natin ay isalin lang natin ang pera mula sa mga government financial institutionsdahil minamandato sila nitong panukalang batas na maglaan ng pera dito. Iniikutan ang nasa charter ng Landbank, DBP at BSP, that investible funds are supposed to be invested depending on the mandate of the GFI,“ Manuel said.<div>RISKY VENTURE</div>Two lawmakers think it is risky.“Bakit natin iri-risk ang viability ng mga financial institutions sa mga investments na kahit na malaki ang returns ay malaki din naman ang risk? May feasibility study ba tayong pinanghahawakan to back the establishment of a Maharlika Investment Fund? Bukod pa ito sa tanong kung sino ang mga bubuo ng korporasyon na magma-manage ng Maharlika Investment Fund. In these kinds of investments, we need people with impeccable integrity and proven competence. Trust will be an important issue here,” Hataman asked.&quot;Nagkukulumpon lang tayo ng pera na dapat ay may ibang paglalaanan, and where are we putting it? Profits from the fund can then be placed in programs like major infrastructure projects vulnerable to corruption. Moreover, the fund is also vulnerable to the interests of big private investors who can jump into the fund. Ayaw nating magkaroon ng Money Heist Philippines sa porma ng Maharlika Investment Fund,” Manuel said.<div>SPEND FUNDS ELSEWHERE</div>For Lagman, precious government funds should be spent in other programs and services instead of being invested in the fund.“Whatever investible resources the government and the GOCCs have, must not be parked in long-term contingent investments. They must be invested today for human development and sufficient allocations for education, health, employment, food security, and basic infrastructure. We must bail out our people today from poverty, inflation and the dire prospects of recession, rather than investing in long-term ventures while our people may perish ahead without enjoying the promised fruits of Maharlika. Help our people survive in the short term so that they can relish the benefits in the long-term,” Lagman said.Bordado felt the same way.“But considering our current economic problems, we cannot afford to take our sparse resources and gamble on the hope that the Maharlika Investment Fund would be profitable and provide immediate favorable results. It is not just the nation’s money we are risking if we rush into the establishment of our own sovereign wealth fund, but the well-being of the Filipinos as well. Therefore, I vote no to the creation of the Maharlika Investment Fund,” Bordado said.Manuel shared the same sentiments.“Hindi mawawala sa ating mga kababayan ang mga tanong, lalo na at sila ang pumapasan ng bigat ng economic crisis. Kung gusto nating tiyakin ang pangmatagalang kaunlaran at kinabukasan ng kabataan, hindi sa kaduda-dudang investments at sa Maharlika Wealth Fund umaasa ang mga kabataan. Dapat magpatupad tayo ng patakaran para isulong ang tunay na reporma sa lupa, tungo sa pambansang industriyalisasyon upang maging tunay na nagsasarili ang ating ekonomiya na kayang magbigay ng nakabubuhay na trabaho dito sa bansa para sa mga kabataan. Maraming mga nakahaing panukalang batas para sa pro-people development, pro-people budgeting and economic relief. Ang mga ito ang dapat unang tugunan ng pamahalaan. Kongkretong programa ang kailangan, hindi ang pagsugal sa kaban ng bayan,” Manuel said.<div> INADEQUATE AMENDMENTS</div>Lagman also downplayed the amendments made on the bill before it was approved.“No avalanche of accepted amendments could perfect the Maharlika bill which was introduced and deliberated with inherent substantial and chronic defects. With the emasculated initial capital or assets of only P75-B, P50-B from Land Bank of the Philippines and 25B from the Development Bank of the Philippines, the MIF will be launched as the tiniest sovereign wealth fund in the world. How can we compete globally for investors given that the MIF is embarrassingly miniscule since we cannot afford a more substantial and comparable start-up capital,“ Lagman said.Bordado also downplayed the amendments.“There has been a lot of changes in the proposed Maharlika Investment Fund Bill since its recent introduction, particularly on how the SWF would be initially funded. It is a welcome development that the GSIS and the SSS have been removed as sources of funding for the establishment of the Maharlika Investment Fund. As the Supreme Court repeatedly reiterated in its rulings, money pooled in pension funds such as GSIS and SSS should be used for the benefits of its members alone,“ Bordado said.House Deputy Minority Leader France Castro too is unhappy with the changes to the bill, particularly the involvements of the DBP, Landbank and the BSP.“Una. Sa capitalization ng Maharlika Investment Fund, nilalaanan ito ng at least P105 billion. Kukunin ang pondo mula sa pondo ng Landbank of the Philippines (P50 billion), Development Bank of the Philippines (P25 billion) at dividends ng Bangko Sentral ng Pilipinas (P30-35 billion). Hindi lang nito inilalagay sa peligro ang mga dibidendo ng BSP na para sana maitaas ang kapital nito mula sa P50 billion patungong P200 billion, as mandated ng Republic Act 11211, magbubunga pa ito ng conflict of interest. Supposedly ang BSP ang magreregularisa sa mga bangko at financial intermediaries. Pero ang GFIs tulad ng Landbank at Development Bank ay kabilang sa Board members ng MIFC. Dagdag pa rito, ang mismong dibidendo ng BSP ay at stake sa MIFC kung sakaling malugi ito. Paano masasabing walang conflict of interest sa sitwasyong ito. Dagdag pa rito, ang mandato ng Landbank at Development Bank ay para tulungan ang mga magsasaka at mga MSME hindi ang mga malalaking at dayuhang mga kompanya.”Albay 1st District Rep. Joey Salceda however said in a separate statement that the amended bill clarified that what will come from the BSP is “declared dividends” to prevent the use of funds needed for operations and that “the provisions of Republic Act No. 8799 or Securities Regulation Code, Republic Act No. 8791 or the general banking law, Republic Act No. 2629 or the investment company act, their respective implementing rules and regulations, and other relevant laws, rules, regulations, and issuances by regulating authorities governing transactions with and among directors, officers, stockholders and related interests shall apply to the MIC.” They also deleted the provision allowing the BSP to invest part of its surplus.Castro maintained that the SSS and GSIS could still invest in the MIF in the future.“Hindi rin totoo na tinanggal ang SSS at GSIS sa mga maaaring mag-invest sa seed fund ng Maharlika Investment Fund. Nakalagay sa panukalang batas, “Other GFIs and GOCCs may be authorized to contribute to the MIF.” Narinig na natin sa Boards ng SSS at GSIS na wiling silang isugal ang P125 billion at P50 billion na pera ng mga manggagawa nang hindi man lang kinukunsulta ang contributors at pensioners. Hindi malayong gawin pa rin nila ito matapos maipasa ang panukalang batas na ito. Dagdag pa rito, pwedeng maging at risk din ang hinuhulog na kontribusyon ng mga manggagawa sa PhilHealth at PAGIBIG,” Castro said.Salceda separately however said that pension funds are xplicitly excluded from GFIs that may invest in the Fund.Section 11 states: Under no circumstance shall the GOCCs providing for the social security of government employees, private sectors, workers and employees, and other sectors and subsectors, such as but not limited to the Government Service Insurance System, Social Security System, and Home Development Mutual Fund, be requested or required to contribute to the MIF. To protect the retirement and other social security benefits of their members, no part of the funds of said GOCCs shall accrue to the MIF.Castro also doubted the independence of the board of directors.“Pangalawa. Walang independent sa Board of Directors. Ang sinasabing apat na &#x27;independent directors&#x27; ay pipiliin ng Advisory Body. Sino ba ang bumubuo sa Advisory Body? DBM Secretary, NEDA Director General at Treasurer of the Philippines, na pawang appointees din ng Pangulo,” Castro said.Among the changes however was that the advisory body would no longer include the Treasurer of the Philippines to make way for the Presidents of the Philippine Stock Exchange and the Bankers Association of the Philippines.Castro was also unhappy with the exemptions given to the MIC, such as exemptions from the Salary Standardization Law, national and local taxes, Government Procurement Reform Act, Existing laws and regulations on the disposal of government assets and GOCC Governance Act of 2011.“Paano mapapanatag ang taong-bayan kung in-exempt ang MIFC sa mga batas para sa good governance. Dagdag pa rito, buti pa ang Maharlika Investment Fund Corporation exempted sa buwis pero ang mahihirap pasan-pasan ang nagsisilakihang mga buwis.”While the bill does give tax exemptions, it also earmarks profits for social welfare.Salceda also explained that while professional and technical services are exempt from the Procurement Law, they inserted a qualifier that the procurement of such shall still undergo competitive selection.The bill shows there are limited exemptions under the bill.<div>SPEAKER STAYS THE COURSE</div>Speaker Martin Romualdez, one of the prime movers of the measure in the House, however stands behind the bill, citing the example of other countries who went into SWFs despite their own circumstances.“Leading economic managers likewise support the creation of the fund that has been tried and tested in both first world and developing economies. Singapore’s state investor Temasek Holdings Pte has been its biggest contributor to the national budget since 2018. Indonesia has likewise been a successful model of a sovereign wealth fund that was used to fund major infrastructure programs, despite the limited financial sources brought about by the COVID-19 pandemic,” Romualdez said in his adjournment speech.

Rep France Castro also doubted the independence of the board of directors.

Why 6 lawmakers rejected Maharlika fund bill

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Why 6 lawmakers rejected Maharlika fund bill

RG Cruz,

ABS-CBN News

Published December 16, 2022 05:29 PM PHT

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