DOF chief to take post instead to keep wealth fund mgt. non-politicized
Lawmakers on Friday said they would remove the President as chairman of the board of the Maharlika Wealth Fund (MWF) as the proposed sovereign wealth fund continued to draw criticism from business groups and academics.
Earlier this week, lawmakers had already removed the Government Service Insurance Service (GSIS) and the Social Security System (SSS) as mandatory contributors to the fund, after their members and critics questioned the wisdom and constitutionality of investing workers’ pensions in what could be high-risk ventures.
On Friday, proponents of the bill took one step further after Senior Deputy Minority Leader Paul Daza said during a House hearing that the investment fund would be politicized if the President would chair the board of directors.
“It’s a no-win for the President to chair such a board,” Daza said.
Responding to Daza’s point, House banks and financial intermediaries committee chairman Irwin Tieng said the authors of the Maharlika Investment Fund (MIF) bill would remove the President as chairman of the board and replace him with the secretary of Finance.
Tieng added that there would now be four independent directors rather than two in the 15-person board.
But Daza also said members of the board should not be appointed by the President.
“I think it would be better governance in particular considering the political culture in the country, I would even be as bold to propose that the majority of the board should be independent directors and not be appointed by the President,” Daza said.
In her opening statement, House appropriations panel senior vice chairperson Stella Quimbo said they have learned lessons from Malaysia’s 1Malaysia Development Berhad (1MDB), which was mired in a corruption scandal, and cited a number of safeguards in the MIF bill.
These include the engagement of an internal and an external auditor aside from the Commission on Audit, the creation of a joint congressional oversight committee, regular reports to the President on the fund’s investment performance, setting up a risk management unit to ensure a “prudent balance” between risk and rewards, and setting a cap on administrative and operating expenses at 2 percent of its initial capitalization.
“This investment vehicle will ensure that the government is able to maximize returns to investments of funds that are not currently needed by GFIs and GOCCs,” she said, referring to government financial institutions and government owned and controlled corporations.
“These additional investment returns can be used to augment the national budget to fund our ever-growing needs as a nation.”
Meanwhile, the Bangko Sentral ng Pilipinas (BSP) on Friday expressed readiness to provide P30 billion to P35 billion for the proposed MIF.
During a hearing of the House committee on appropriations on the proposed MIF Act, BSP Deputy Governor Francisco Dakila Jr. said the amount will come from BSP’s dividends.
After providing the initial contribution, Dakila said the BSP will only give 50 percent of its dividends to the MWF because the other 50 percent will be allocated for the capitalization of the BSP.
He said the BSP is still building up its target capital in compliance with its amended charter.
Once the BSP is fully capitalized, Dakila said it will again provide 100 percent of its dividend for the MIF.
He added BSP’s international reserves would not be affected by its contribution to the MIF.
On Thursday, Quimbo said the initial funding for MWF could reach around P150 billion.
According to the House bill, the MIF will also be funded by state-run banks Land Bank of the Philippines with P50 billion and the Development Bank of the Philippines with P25 billion.
The House panel later amended the bill to raise DBP’s contribution to P50 billion.
The Philippine Amusement and Gaming Corporation (PAGCOR) and other government-owned gaming operations shall also contribute at least 10 percent of their gross revenues.
Other government financial institutions and government-owned and-controlled corporations may be authorized to contribute to the MIF based on their respective investment and risk management strategies.
The country’s economic managers on Friday expressed their strong support for the creation of the MIF as a vehicle to move forward the agenda for prosperity and achieve the economic goals of the government.
Finance Secretary Benjamin Diokno, Budget Secretary Amenah Pangandaman, Economic Planning Secretary Arsenio Balisacan, and Bangko Sentral ng Pilipinas Governor Felipe Medalla signed a joint statement released to the media.
“The establishment of a sovereign wealth fund is a tried and tested investment vehicle that has been used by governments in both first world and developing countries to achieve their economic objectives,” they said.
Most recently, they said the model of the Indonesia Investment Authority has been a successful model of a sovereign wealth fund that was used to fund the country’s big-ticket infrastructure projects even amidst the COVID-19 pandemic.
For Singapore, the investment gains from GIC, the central bank and state investor Temasek Holdings Pte have been the biggest contributors to the national budget since 2018, they said.
They added that the fund would help the government achieve its agenda for prosperity and inclusive and sustainable economic growth.
They said direct benefits of the MIF include increased investments in and funding of big-ticket infrastructure projects, high-return green and blue projects, and countryside development, including agriculture.
Intergenerational benefits include increased access of future generations to income from investments, such as potential earnings from extracted natural resources such as in mining.
Diokno on Friday said the GSIS and SSS, which were removed as funding sources for the Maharlika Fund, may opt to contribute in the future.
In a televised briefing, Diokno said the two agencies could still contribute to the fund in the future if they want bigger returns.
“They are looking for higher returns because right now most of their money is invested in treasury bills, they don’t earn that much,” the Finance chief said.
“If they want higher return, they may decide to contribute but that is up to their respective boards of GSIS and SSS,” he added.
During the House Committee on Appropriations hearing, MIF proponents formally removed the GSIS and the SSS as fund sources.
This was finalized when the panel led by chairman Ako Bicol Party-list Rep. Elizaldy Co approved the funding provision of the still unnumbered bill on the MIF.
Quimbo, one of the authors of the MIF bill, made the motion to amend the funding provision as contained in Section 9.
Opposition lawmakers welcomed the amendment to replace the President as chairman of the board that would serve to insulate the MIF from politics.
Meanwhile, the appropriations panel approved Quimbo’s proposal to exclude the General Appropriations Act (GAA) as one of the mandatory sources of funding for the MIF.
“The provision shall be deleted in toto,” said Quimbo.
Quimbo, in her sponsorship speech before the panel, reiterated the importance of the MIF amid the current socio-economic landscape.
She noted that instead of imposing an additional tax burden to the people, the establishment of the MIF provides an alternative source of revenue that can be used to fund critical government projects.
“That is precisely the goal of a sovereign wealth fund. The bill creates an investment vehicle that will pool surplus funds of the government and ensures that it will be managed professionally and transparently,” Quimbo said.
Quimbo also reiterated that the bill has sufficient safeguards to ensure the viability of the fund and prevent abuse.
The main authors of the unnumbered bill are House Speaker and Leyte 1st District Rep. Martin G. Romualdez, Majority Leader and Zamboanga City 2nd district Rep. Mannix Dalipe, committee on accounts chairperson and Tingog Party-list Rep. Yedda Marie K. Romualdez, Deputy Majority Leader and Tingog Party-list Rep. Jude Acidre, committee on banks and financial intermediaries chairman and Manila 5th district Rep. Irwin Tieng, committee on ways and means chairman and Albay 2nd District Rep. Joey Salceda, and Quimbo.