Don’t rush MIF passage

Is there a valid reason for President Marcos to certify as urgent the proposed Maharlika Investment Fund (MIF) in the Senate? As Sen. Kiko Pimentel decries, certifying Senate Bill 2020 as high priority is already unconstitutional because “you can only certify a necessary proposal if there is a public emergency of calamity….”

Pimentel’s opposition could be regarded as a last stand in a Senate that is overwhelmingly supportive of the President. Even if we add Francis Escudero, Sonny Angara, and Win Gatchalian to the list of senators who have called for cautionary measures, the prospect of the Senate waiving bicameral talks on SB 2020 in favor of a swift passage before sessions end this Friday is very likely.

Finance Secretary Benjamin Diokno has already thanked the President for certifying the bill as urgent. He says, “This is the best possible time to establish the fund.” He adds that the time is “especially pertinent now” given the possible slowdown in the world economy as per the International Monetary Fund’s calculations. Secondly, he says, “this is an opportune time” to use the excess monies of the country’s government financial institutions (GFIs).

Should we believe him?

Obligated

Diokno is obligated, as the man behind this persistent move to establish the country’s sovereign wealth fund (SWF), to explain just what he means by “especially pertinent now.”

In the same breath, he needs to elucidate why “this is an opportune time” to pull out funds that GFIs like the Lank Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) have been earning from quite satisfactorily in the past decades into a new, untested investment fund.

As Pimental reminds his fellow lawmakers, any benefits coming from the MIF will take years to materialize, which simply show that the fund is not for “any public emergency or calamity.”

Clearly, from the Executive department’s position, the reasons to certify the MIF bill as urgent have not been adequately established and communicated. On such grounds, SB 2020 deserves to be subjected to additional public scrutiny to safeguard the Filipino’s money.

Diokno may have a string of degrees from the state university no less, plus diplomas in higher studies from the John Hopkins University and Syracuse University, but he is still a public servant who has a responsibility to state clearly how the MIF is to the country’s best interest.

Past attempts

It should be noteworthy to add that Diokno has been working on the concept of a SWF for the Philippines even during former president Gloria Macapagal-Arroyo’s term, and had even revived the initiative when he was included in the Cabinet of past president Rodrigo Duterte.

The idea of a SWF during Arroyo’s term did not materialize, according to sources, because there had been some major reservations as to the use of the state’s investible funds. In the end, when “kinks” were ironed out, Arroyo’s term was about to end.

It would have been extremely difficult to give wings to a Philippine SWF during past president Benigno Aquino III’s term given his overall reluctance to dive into anything that could potentially be controversial. During Duterte’s term, Sonny Dominguez as the chief economic adviser had other priorities, and the SWF was certainly not one.

This time around, the 75-year-old Diokno may be seeing the push for a SWF as a last ditch effort to make something out of the previous studies he did, regardless of whether the timing is indeed right or off. A compliant House as well as the obsession of the current President to leave a legacy behind somehow offers the chance to put in place all the pieces of this dream.

Questionable provisions

Our lawmakers must remember that their allegiance is to the whole nation, past, present, and future, and not just to the President even if he had been elected with an overwhelming majority of the population. As has been pointed out by many, the proposed law still contains many questionable provisions.

When the first draft of the MIF was bared, funds from the Government Service Insurance System (GSIS) and the Social Security System (SSS) were listed as seed capital sources. As expected, given government’s track record and credibility, members and pensioners of both the GSIS and SSS vehemently opposed.

A supposedly “watered-down” version was prepared in the Senate that explicitly left out any mention of the SSS and GSIS. However, another section in the proposed law stretches the MIF scope by allowing any GFI or government-owned and controlled corporation to invest in the fund “subject only to their investment and risk management strategies, and approval of their respective boards.”

When the tenure of board members of SSS and GSIS are “dependent” on our politicians, it would not be difficult to imagine how they would respond under pressure. Diwa Guinigundo, former deputy governor for the Monetary and Economics Sector at the Bangko Sentral ng Pilipinas (BSP), has come up with more reasons in his BusinessWorld column that should be read by our illustrious senators this week before going for the vote.

Escudero is strongly batting for investment guarantees that would provide a return that is equal or higher than what LBP and DBP are currently receiving. While this does not exactly address Guinigundo’s other concerns about lack of controls, dangerous concentration of power over state funds, and a potential drag on government earnings, Escudero’s call for investment guarantees only demonstrates the need for more studies.

Will Escudero’s concern be heard?

Facebook and Twitter

We are actively using two social networking websites to reach out more often and even interact with and engage our readers, friends and colleagues in the various areas of interest that I tackle in my column. Please like us on www.facebook.com/ReyGamboa and follow us on www.twitter.com/ReyGamboa.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.