Groups renew Maharlika objections

MANILA, Philippines — The Foundation for Economic Freedom (FEF), Management Association of the Philippines (MAP) and University of the Philippines School of Economics Alumni Association (UPSEAA) aired their opposition anew to the proposed Maharlika Investment Fund (MIF), calling on the Senate to consider its impact on the independence of the Bangko Sentral ng Pilipinas (BSP) and government intervention in the economy.

“As the Senate begins deliberations on the MIF, we maintain our view that such is fundamentally flawed and does not achieve the stated economic activities cited in its formation,” the groups said in a joint statement released yesterday.

The groups said they would want the Senate to consider the MIF’s adverse impact on fiscal prudence, additionality, solvency of pension funds, contingent liabilities, BSP’s independence and government intervention in the economy.

While state-managed pension funds such as the Government Service Insurance System and Social Security System have been dropped as funding sources in House Bill 6608 or the MIF Act, the groups said it is now the BSP, government financial institutions (GFIs) and the national government (NG) that would be at risk.

Under the bill, the MIF will source significant funding from BSP’s declared dividends. In particular, 100 percent of the central bank’s dividends would be remitted to the fund for the first and second fiscal year upon effectivity of the MIF Act.

The groups said the proposal would compromise the BSP’s ability to deliver its mandate to provide price and financial stability. They added that the BSP has been consistently considered among the most effective and trusted institutions, and has been playing an important role in the country’s economic stability.

“The MIF could put such effectiveness and trust at risk,” they said.

On the provision that the security or debt instruments to be issued by the Maharlika Investment Corp. to GFIs shall be guaranteed by the NG, the groups said these would create additional contingent liabilities at a time when there are serious concerns about the size of the government’s debt, contingent liabilities in infrastructure projects and pension funds, and increasing unfunded liabilities in the retirement program for the armed forces.

To protect the country’s credit ratings, they said it is important to manage debt and contingent liabilities.

The groups also said the provision would make available without limit the full resources of the Land Bank of the Philippines and the Development Bank of the Philippines, that will consider such guaranteed lendings to the MIF as “risk-free assets,” without requiring any due diligence – a highly questionable strategy according to the FEF, MAP and UPSEAA.

Infrastructure investment

In the Senate, Sen. Alan Peter Cayetano urged the government to kickstart an infrastructure investment fund as an alternative to the controversial Maharlika fund.

Cayetano added that he is interested in making more opportunities for Filipinos to invest in the country’s infrastructure projects. “So far I haven’t seen anyone lose money in projects like that,” he said, adding the government can choose to invest in these rather than in overseas opportunities.

“Why not have a platform for Juan dela Cruz where they can invest in these projects and get a board seat? With that, you have the same result as the Maharlika Investment Fund with safeguards,” Cayetano said as the Senate began deliberations on the proposed MIF bills on Wednesday.

With multiple criticisms lodged against the MIF, Cayetano pointed out the importance that the Senate deliberations consider the people’s sentiments on the controversial bill. “In the long term, let’s just try to make more opportunities for all Filipinos and the private sector,” Cayetano said.

For Senate Minority Leader Aquilino Pimentel III, the first Senate hearing of the proposal to establish the MIF only exposed the measure’s defects.

“It showed what we already knew, the measure passed by the House (of Representatives) that was passed to the Senate, is defective. Many things are not clear, were not written,” Pimentel said. “There is no justification, there is no reason to build a MIF, when they realized that there was no reason and basis to build a sovereign wealth fund, then they twisted and pushed the MIF. They opted to push the investment fund.”

“Why build a mixed development investment fund with commercial interest investment? In other countries that is separate. And foreign and domestic investment are also separate,” Pimentel added.

“We don’t know what they want to do. Because initially they wanted to build a sovereign wealth fund, but when they realized the fact that there was no soft cash windfall, no excess money and income, there was no reason, they remain insistent,” he said. – Cecille Suerte Felipe