January 30, 2023

Dropping the use of Social Security System and Government Service Insurance System funds from House Bill 6398 or the Maharlika Investment Fund (MIF) bill by its proponents in Congress does not assure members’ monies will not be tapped if the proposed law is passed.
This and other reasons surfaced during a forum on the controversial proposed law, organized by the office of Baguio Councilor Jose Molintas in cooperation with groups led by the Center for Development Programs in the Cordillera, to help the public understand the proposal and its implications, and in deciding whether to support or oppose it.
The proposed fund seeks to promote economic development by making strategic and profitable investments in key sectors and will have a P275 billion seed capital from government banks and the Bangko Sentral ng Pilipinas.
The bill, which was amended to remove the SSS and GSIS from the list of fund sources after receiving criticisms, has been approved in Congress in 17 days, a process also described as un-consultative for railroading the same sans standard procedures.
Former Bayan Muna Rep. Neri Colmenares and a panel of reactors composed of two professors from Saint Louis University and the University of the Philippines Baguio discussed the proposal and shared their opinions on why it should be carefully reviewed when it reaches Senate next year.
Colmenares said the proposal should be scrapped because it targets to use public funds that will be redirected to a corporation that is insufficiently regulated, as well as exempt from taxes, customs duties, the Good Governance Act, procurement, dividends laws, and other laws.
“Even if they amended the bill to take out the GSIS and SSS, Maharlika is still inherently anti-people and must be scrapped, because it still uses public funds. It will also divert funds from the farmers, SMEs, ayuda, and other social services. It will be subjected massive corruption because Maharlika is exempted from many regulatory laws while corruption impunity continues to rage in the Philippines,” Colmenares said.
He said the country has no excess funds, therefore the Maharlika fund will increase the country’s debts and national deficit, which ballooned under the previous administration to cover the country’s Covid-19 pandemic response and the Build, build, build program.
He added the nature of the fund creates a conflict of interest, because private investors and big businesses can form part of the fund, which will invest in mining, real estate, dams, and other industries that could conflict with the interest of communities against mining firms, farmers against land conversion, and indigenous peoples against dams.
He said people may protest against a company in which the Marcos government is an investor, a clear sign of conflict of interest. Additionally, BSP, the regulator, will also be an investor in companies it regulates.
“Mahirap ang check and balance. It is an abuse of Presidential discretion. It was certified urgent, but only by Congress, without the Senate, and passed in a matter of days. For that, among others, the bill has a very defective procedure. Dapat itong ibasura. It is an anti-people bill,” he said.
Prof. Gerry Gatawa, a faculty member of the SLU School of Accountancy, Management, Computing, and Information Studies, said there is a need to follow the proper procedure on any form of investment.
“I am not stating whether I am pro or against the proposal, but I’m requesting the government to carefully evaluate the risks and expected utilities such as the revenues and income, which are the things that need to be guaranteed, because we are utilizing public funds, or at least there must be a promise or expected return on investments. While investors take risks, they expect a so-called return,” Gatawa said.
Among the things he wants clarified is whether the plan has socio-economic benefits and whether it will be pro-people and render better public services.
“It’s not only about the political risks involved, but also specific project risks, like is the initial funding enough or baka mamaya kukulangin and eventually the project will fail; the expected cash flows. The government is already planning cash disbursements or outflow, is there guaranteed cash inflow? Baka ma-disburse lang and then wala na. Ito po ang kailangang intindihin nating mga mamamayan,” he said.
He added revenues must be forecasted – it should not be a total risk.
In terms of risks, he pointed out the need to have proper and transparent systems or procedures and there should also be no conflict of interest.
He asked: “How will the funds from private investors be managed? Who will manage it, is it proper that the national government will be managing it, is it its mandate to manage the fund or should it be the government financial institutions? What are the governance systems to be followed to ensure accountability and to guide ethical behaviors? As a private citizen, mahirap magtiwala based on what we see or watch.”
Prof. Renz Venielle Lamayo, UPB assistant professor of Economics, said that in principle, the maharlika fund can be a vehicle for economic growth and development and it can expand the resources of a nation used for priority projects that could provide the future generations with the benefits of surplus that it currently has.
But he said there is a need to carefully think about its establishment, where the fund will come from and where it will go, and consider the people who will manage the funds because in the country’s case it will be dealing with public funds.
One of his concerns is the economic environment.
“Normally we would like to do business in an environment where the economy has the potential to grow, but that’s not something that we expect to see in the coming years, after the pandemic and all,” Lamayo said, stressing that the world economy outlook is also actually gloomy according to the International Monetary Fund and Asian Development Bank which forecasted an economic slowdown based on data.
He said for businesspeople or investors, it’s not ideal to do business when the world is not in a good shape and in an environment that shows a bleak future.
He added the inflation rate in the country is also concerning. The World Bank, he said, has also cautioned interest rate hikes may result in output slowdown.
“The point is that we are not expecting a really good 2023 based on the data, and based on that creating a sovereign wealth fund against this backdrop is really concerning. The question is, is this really the best time to create the maharlika investment fund? With these projections, we really need to think hard,” Lamayo said.
He pointed out Norway, which has one of the best and largest sovereign funds in the world, is suffering a losing streak due to inflation and the war in Europe, losing $174 billion in the first half of the year alone.
Another concern is related to its source of the funding. Lamayo said sovereign funds’ sources of funding are normally founded from national resources and excess revenues, while some countries use bank reserves.
“These are wealth funds in the strictest sense of the word, since these are surpluses of the state which are not immediately used for the economy and therefore can be used for investments purposes,” he said.
The problem, Lamayo said, the Philippines has neither of these resources. “We have national resources but we don’t have surplus from these resources. We also don’t have trade surpluses. We import more than we export. That means we are buying more than we are selling abroad. We also don’t have government budget surplus, we have a budget deficit and large debts,” he said.
The country plans to source it from government financial institutions, but while the bill proponents removed SSS and GSIS as its sources, Lamayo said the bill provides these two agencies can invest, which means basically there is no prohibition for them to bring these back as funding sources.
Lamayo said the greatest concern is corruption, which is still rampant in the country, a persistent problem that makes the wealth fund dangerous and could amount to disaster.
“Any sovereign fund requires transparency, credibility, and independence of the governing body. Now do we have these? My answer and opinion, supported by data, is no,” he said.
Molintas said the filing of the maharlika wealth fund bill needs to be understood by everyone so that in the end they will have an informed decision on whether to oppose or support it in light of the many problems the country is encountering. – Hanna C. Lacsamana