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Opinion

Use funds from ‘reputational risks’

COMMONSENSE - Marichu A. Villanueva - The Philippine Star

The sovereign wealth fund (SWF) being eyed by the House of Representatives is now coming out as a long-standing proposed bill that never got off the ground. In fact, it was first conceptualized early on during the administration of former president Rodrigo Duterte. But obviously it did not get traction when an opposition Senator first proposed to create this under Senate Bill (SB) 1212.

Authored by former Senator Bam Aquino, SB 1212 filed at the 17th Congress in October, 2016 sought: “An Act Establishing a Philippine Sovereign Fund, Providing for the Management, Investment, And Use of Proceeds of Its Assets, Appropriating Funds Therefor and For Other Purposes.”

While SB 1212 was languishing at the legislative mills, Sen. JV Ejercito similarly filed his own version of the SWF. With the same title, it was filed in March, 2018 under SB 1764. But that, too, did not prosper even if Sen. JV was allied with the so-called “super majority” during the same Congress.

In both Senate bills, the proposed initial funding of P200 billion will come from the government’s national budget as approved by Congress and surplus revenues or savings.

The two lawmakers, however, failed to push their respective bills after both lost their re-election bids for a second term at the Senate.

However, then Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno saw the virtues of putting up the SWF. As the BSP earlier crafted the proposed SWF, Diokno recalled, it was to be named as the Philippine Assets Fund to precisely highlight investing for the future generation of Filipinos from those exploiting our country’s natural wealth.

Now as the Secretary of the Department of Finance (DOF), Diokno revealed in our Kapihan sa Manila Bay last week that their original SWF proposal was to set aside national earnings from the exploitation of natural gas deposits, telecommunications bandwidths, and mineral resources as well as savings from foreign exchange remittances of overseas Filipino workers (OFWs).

At that time, however, Diokno agreed with subsequent suggestions to change the branding “to sound more exotic” and bigger than the Philippines. This would entice more interests of the foreign and local investors and other big international financial companies. So when this proposed creation of the SWF was revived, Diokno welcomed the idea of calling it instead “Maharlika” Investment Fund (MIF).

House Speaker Martin Romualdez filed last week House Bill (HB) 6398 which seeks to create this now controversial MIF patterned from the sovereign wealth funds existing in Singapore, Malaysia, Indonesia, Australia, and Norway. As envisioned in HB 6398, the SWF aims to allow the government to invest its surplus reserves, or revenues in an array of both real estate and financial assets “to stabilize national budgets, create savings for their citizens, or promote economic development.” A corporate body called as the Maharlika Investments Corp. (MIC) would manage the fund and investments.

After the first reading of HB 6398 and referral to the House committee on banking and financial intermediaries last Nov.28, it quickly breezed through the panel the next day. Albay Rep. Joey Salceda, who chaired the technical working group that vetted the draft bill, endorsed this for plenary debate. This was after the P250 billion “seed capital” to the proposed MIF got the four major government financial institutions (GFIs) to provide the funds needed.

At this pace of legislation, Diokno is confident the proposed MIF bill could be passed into law within the next six months and take off by the middle of next year. But the adverse reactions by influential groups from local and foreign business communities against the MIF bill might stall its projected speedy approval into law.

As the head of the socio-economic cluster of the Cabinet, Diokno admitted he raised the same concerns. In particular, he cautioned against “riders” that the four GFIs have included in endorsing their contribution to the “seed capital” of the MFI. One of which is to exempt them from the salary standardization law for all government personnel.

The Finance chief sternly warned on these “red flags” that might lead to presidential veto of the proposed MIF.

Since President Ferdinand “Bongbong” Marcos took office at Malacanang last June 30, he vetoed at least five enrolled bills approved during the past 18th Congress.

Two of the GFIs, namely, the Government Service Insurance System (GSIS) and the Social Service System (SSS) have respective Charters that limit their investment options to secured government-issued Treasury Bills but give low-yielding interest earnings. But by allowing them to finance the MIF, in effect, would be to go around such statutory limits. From the many arguments against the proposed MIF, the common concern was the proposed tapping of the State-managed pension funds to bankroll it.

Methinks there are more ingenious ways to fund this proposed MIF. There are other veritable sources of surplus revenues that Filipinos would not mind getting the funds from. One of them could come from the Philippine Online Gaming Operations, or the POGOs. But Diokno frowns upon the POGOs.

The Finance Department marked POGOs as “reputational risks” for the Philippines due to reported Chinese POGO workers being kidnapped by fellow Chinese nationals, and other crimes. But according to them, POGOs generate as much as P150 billion a year. That’s half of the P250 billion funds needed to set up the MIF.

Another source could be the equally controversial “e-sabong” where one major operator admitted to the Senate hearing could rake in P1.5 billion a day. Like the POGOs, it’s another “reputational risk” for the Philippine image abroad as far as our technocrats view them.

Instead of these monies going into corruption, such legalized gambling could be the more practical sources of surplus funds for the MIF. Why not make these “reputational risks” into win-win proposition instead? The socio-economic realities on the grounds should prevail over concerns on the image of the country.

SOVEREIGN WEALTH FUND

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