Senators resume their scrutiny of the proposed Maharlika Wealth Fund on Monday even as its staunch advocate in the House of Representatives assured fellow lawmakers and critics that the proposed P275-billion sovereign wealth fund would go through a congressional examination.
Senator Jinggoy Ejercito Estrada underscored the need to scrutinize and extensively debate the Maharlika fund that will come from contributions by state pension funds and state-owned lenders.
While he is not against the approval of the MWF, Estrada admitted he has many questions about it.
“First of all, where will they get the money? Second, is it safe or is it risky? If they’re going to get it from GSIS, SSS, are we going to risk the pensions of our pensioners?”
Estrada said he is also baffled why proponents of the fund are rushing its approval when senators have yet to iron out kinks and hold public debates to discuss it.
“Why are they rushing for its approval before going on vacation when we still have many questions about this MWF?” he said.
Estrada backed Senate President Juan Miguel Zubiri’s position to have the matter studied carefully by a select group of senators and provide the upper chamber feedback on the essence of the MWF.
He noted that this will determine the pros and cons of MWF.
Meanwhile, Albay Rep. Joey Salceda said Senator Imee Marcos’s proposals regarding the Maharlika fund would still go through deliberations in both the House and the Senate.
“I believe they have already constituted a study group on the matter,” he said.
“We can discuss the mix of assets that the fund will invest in, but some allocation for foreign securities is necessary. It diversifies the portfolio and allows the Fund to take positions in potentially higher return investments. A fund that grows faster due to some exposure to high-return foreign investments is better than a smaller and severely constrained Fund exclusively investing in domestic investments,” Salceda said.
“That said, I would welcome a proposal to ensure that a certain percentage, at the minimum, of the Fund should be invested in domestic investments,” he added.
“On specifying which investments are allowed per GFI (government financial institution), this might not be possible under the current configuration. Pooling of funds is a key feature and advantage of the current proposal since it maximizes the impact that GFIs can make compared to what they can achieve on their own,” he added.
Estrada urged his colleagues to exercise caution, citing the case of Malaysia when its state-owned investment fund 1MDB, which was supposed to promote development, was channeled into the personal bank account of former Prime Minister Najib Razak.
“I’m not saying this will happen in the Philippines. But we need additional safety nets or safeguards if this will be approved,” he said.
With only two weeks left before Congress goes on Christmas break and numerous questions that must be answered, Estrada expressed pessimism about whether the bill can be approved by the Senate.
“That is my opinion right now. Why the rush?”
If the Senate President will designate senators concerned, he said a timetable should be given to finish the study and scrutinize the MWF thoroughly.
The fund, Salceda said, could prioritize certain investments in agriculture, infrastructure, and health care.
On the demand for pension fund investments to be zero-risk, the government guarantee to GFI infusions in the form of preferred shares and convertible debts would make these investments zero-risk, Salceda said.
“Finally, on the concern about Bangko Sentral ng Pilipinas investments in the form of foreign reserves, we have already amended the provision so that the BSP’s required investments come from declared dividends, not foreign currency reserves from OFW and BPO remittances and income,” he said.
As House technical working group chairperson on the bill, he said he welcomed discussions on the bill.
“I am sure Senator Marcos will also be very active in discussions once the Senate begins hearings on the bill,” he said.
Former Supreme Court Justice Antonio Carpio had raised concerns about the fund’s constitutionality, saying since the SSS and GSIS funds are personal contributions of their respective members who own the funds, the income of SSS and GSIS investible funds must benefit only their respective members.
“The income of the Maharlika [SWF] is for the benefit of all Filipinos, including non-SSS and non-GSIS members. The law cannot give the income from SSS and GSIS funds to non-members who did not contribute to the funds,” Carpio said in a statement.
“This is taking of private property for a public purpose without just compensation, which is unconstitutional,” Carpio added.
Salceda, however, said Carpio’s observation was likely “an initial one.”
“That said, the GSIS and SSS’s contribution to the SWF is like any other minority position in any company. They are entitled to a share of the profits corresponding to their equity in the company. I made sure that such a provision regarding the distributions of profits as well as equity attribution is present in the draft substitute bill,” he said.
“So, the income of the wealth fund in proportion to the GSIS and SSS equity redound to the GSIS and the SSS. The purpose of the SWF is public, but the distribution of profits will operate like any other GSIS or SSS investment. Pensioners ultimately get the profits due them, and no reduction to such profits is made just because the SWF has a public purpose,” he said.