The head of the state pension agency on Tuesday defended the much-criticized Maharlika Investment Fund (MIF), saying it would contribute in the long run to the Marcos administration’s goal of nation-building.
“The Maharlika (fund) is a long-term investment,” said Government Service Insurance System (GSIS) President and General Manager Arnulfo Veloso, speaking to Radyo Pilipinas in Filipino. “Its goal is not only to have investments but also to help in national development.”
The MIF has come under heavy fire from business groups, the academe, and a former Supreme Court justice for drawing funds from the GSIS and the Social Security System (SSS), possibly to the disadvantage of its members.
But Veloso said the fund would not only allow the GSIS to get returns but also to contribute to nation-building.
The GSIS chief also allayed fears over the lack of transparency on the way the fund would be used, “Whatever investments we make here are going to accrue to the members of the Government Service Insurance System and we are there at the Maharlika Board to make sure the investments are protected while at the same time help in nation building,” Veloso said.
“There are various layers of transparency to make sure that the funds are protected and invested properly, and we are going to make sure the public is going to be made aware (of these),” the GSIS chief added.
As part of the safeguards, Veloso said there would be representation for the private sector through the participation of independent directors, congressional oversight, and an internationally accredited auditing firm.
On a separate TV program, Veloso said only excess funds would be invested in the proposed MIF.
The GSIS is supposed to provide P125 billion in seed money for the sovereign wealth fund.
“Our assets under management are P1.5 trillion and we collect P26 billion a month,” Veloso told ANC’s “Headstart”.
“After we fulfill our obligations to our members, we need to invest (funds) and we have a rigorous policy of investment,” he said.
Being part of the governing board of the sovereign wealth fund will allow GSIS to ensure the same credit standards are applied, he added.
Veloso said he has recommended inviting the Philippine Stock Exchange and Bankers Association of the Philippines to the board to ensure that the investments would be safe and secure.
House Bill No. 6398 defines MIF as an independent fund that adheres to the principles of good governance, transparency, and accountability.
The proposed measure states that the fund shall be used to invest on a strategic and commercial basis in a manner designed to promote fiscal stability for economic development and strengthen the top-performing government financial institutions (GFIs) through additional investment platforms that will help attain the national government’s priority plans.
Under the proposal, the MIF will get allocations from the following government financial institutions: P125 billion from the GSIS, P50 billion from SSS, P50 billion from the Land Bank of the Philippines, P25 billion from the Development Bank of the Philippines, and P25 billion from the National Treasury.
In a statement, the Makati Business Club, Management Association of the Philippines, UP School of Economics Alumni Association, and others said they do not support the proposed sovereign wealth fund on the principles of fiscal prudence, the solvency of social pension funds, and contingent liabilities.
They said the Philippines has neither commodity-based surplus funds nor surpluses from external trade and state-owned enterprises that need to be deployed.
The country is also experiencing large deficits reflected by the decline in international reserves, the group said.
The groups added GSIS and SSS funds belonged to members and should not be exposed to higher-risk investments.
The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business group, said the MIF might affect the country’s credit standing.
In a statement, PCCI President George Barcelon said the creation, as well as the timing of MIF, should be reconsidered.
“Pooling resources from the revenues of the national government, the central bank’s and government-owned financing institutions’ may impact the sustainability of the country’s welfare system and financial standing,” Barcelon said.
Earlier, 12 business associations and economic policy groups raised the alarm over the MIF, saying that the country did not have a “bonanza” of commodity surpluses that need to be deployed as provided in the proposed sovereign fund.
“Our government must make sure that no action will affect our presently good credit standing which provides us lower foreign loans,” Barcelon said, noting that the need for such loans in funding big-ticket infrastructure projects was crucial.
While acknowledging that having a sovereign wealth fund could serve as a conduit to further grow the local economy, Barcelon said the timing may not be right considering the uncertainty of the financial markets due to the geopolitical situation, and recent cryptocurrency fiasco.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla earlier said the fund may also have an impact on the country’s dollar reserves.
Senator Imee Marcos last week also expressed misgivings that the fund could suffer the same fate as the 1Malaysia Development Berhad (1MDB), which was dogged by graft issues.
Senator Risa Hontiveros also raised concerns about the proposal for the sovereign wealth fund, saying the funds could be better used responding to urgent needs such as education, health care, and agriculture.
“A sovereign wealth fund is meant to come from excess funds we just don’t have, as seen by our trillions-worth of debt. We don’t need an SWF and we clearly can’t afford it anyway,” she said. “We must first act on urgent priorities.”
“Just like the misplaced confidential funds, an SWF is an unnecessary and unjustified move,” she added.
Lawmakers in the House of Representatives filed a measure seeking to establish the wealth fund, which aims to allow the government to invest surplus reserves or revenues in real estate and financial assets.
Among the proposed measure’s principal authors were House Speaker Ferdinand Martin Romualdez and Ilocos Norte 1st District Representative Ferdinand Alexander Marcos III.