More than a Second Glance

Lawmakers are pushing to have the Maharlika Investments Fund (MIF) Act approved by December 12. With the green light from President Marcos, it seems that the passage of House Bill No. 6398 is well and truly underway. But why the haste? More importantly, why should the Philippines risk the contributions of its citizens?

At the outset, the MIF is a Sovereign Wealth Fund (SWF). The bill defines said fund as “state-owned investment funds typically financed by a country's surplus revenues or reserves.” Governments use these funds to invest in any venture anywhere in the world, be it in real estate, bonds, or stock markets, among others. Investments are made to “stabilize national budgets, create savings for their citizens, or promote economic development.”

Almost 100 countries worldwide have created SWFs. Five countries in Southeast Asia have six SWFs, with the two biggest hailing from Singapore, and each coming from Brunei, Timor Leste, Vietnam, and Indonesia. A common denominator is that SWFs are made by countries that have surplus revenues and practically zero international debt – both of which the Philippines does not have.

The MIF’s initial fund will be backed by four government financial institutions (GFIs), i.e. the Government Service Insurance System (GSIS), which is set to invest PHP 125 billion; the Social Security System (SSS) – PHP 50 billion; the Land Bank of the Philippines (LBP) – PHP 50 billion; and the Development Bank of the Philippines (DBP) – PHP 25 billion, amounting to a whopping PHP 250 billion. Another PHP 25 billion will come from the national government budget, thus totaling PHP 275 billion.

Given the amount of money involved, concerns emerged regarding the creation of the fund. Last December 1, David Michael San Juan, a professor from De La Salle University, launched an online petition to prevent its creation, mainly because the bill does not provide for ample representation of employees. This, considering that the bulk of the MIF will come from contributions of members of GSIS and SSS. The petition has reached more than 10,000 signatures.

The MIF will be managed by the proposed Maharlika Investments Corporation (MIC), which is essentially a government-owned and controlled corporation (GOCC). The bill expressly provides for exemptions from the GOCC Governance Act, Civil Service Act, and Salary Standardization Act. In addition, it is also exempt from “any and all forms and kinds of direct or indirect taxes” and “no tax measure of whatever nature enacted shall apply.” Said exemptions would seemingly breed opportunities for corruption.

Proponents of the bill guaranteed that there are enough safeguards to prevent anomalies concerning the fund. President Marcos has been appointed by the House committee on banks and financial intermediaries as chairperson of the MIC. The state-owned corporation will also have an advisory board and will be subject to three kinds of audits.

This notwithstanding, oppositors of the bill remain reluctant. Sen. Risa Hontiveros stressed that the funds are merely held in trust by the government for its members. Sen. Imee Marcos also branded the sovereign fund as “worrisome.” Experts from the academe emphasized that despite the established safeguards, the success of the MIF mainly depends on the people managing the fund.

The House is set to conduct a public forum on December 5 with various stakeholders to discuss the bill. With the pressing issues surrounding its creation, the Maharlika Investments Fund calls for more than a second glance from our legislators.