Maharlike Fund: Borne by experience

POINT OF VIEW - Amado Valdez - The Philippine Star

Iris Gonzales made many eyes wide open with her provocative column about thieves and mafia in The Philippine STAR. At least, she disturbed the bliss of anonymity and retirement I presently enjoy.

The debate on the proposed Sovereign Wealth Fund, otherwise known in coffee circuits as Maharlika Fund, evokes the sound of spirited exchanges more than four years ago on the proposed increase in SSS pension rate at an elegant but crowded room at Malacañang Palace.

The scene: Cabinet meeting presided over by then president Rodrigo Duterte. Then secretary of Finance Sonny Dominguez, secretary of Budget Management Ben Diokno and NEDA secretary Ernie Pernia argued against the pension increase. As chairman of the Commission with the able support of Social Security System president Manny Dooc, I defended the SSS Commission’s resolution to grant the pension increase.

At two o’clock in the wee hours, one could feel the drama of emotions heating the air because each opinion, every reason and each forecast was backed by good intentions and justified passion. No darting eyes or body language hinting malice or thievery or irresponsibility or sophistry intended to hurt.

The increase in pension was granted and to date the fund returned to its actuarial health, safe and good for more decades. Credit is given to the men and women of the Social Security System who took the challenge and worked hard to nurture the system.

To keep a decent pension rate, the ideal ratio of pension and benefit payments must at least be 50 percent of contributions. To keep the ratio viable is to enlist more members, which was dependent on the growth of the economy, voluntary membership of those working in the informal sectors and the millions of Filipinos working overseas.

The biggest shock to me was that the bulk of the investments were divided among the big businesses and families enjoying cheap capital from the contributions of the working class. They were not to be blamed because they were the only ones easily qualified under the very conservative guidelines allowed by the SSS charter.

Consequently, the return of investments was very poor and even negative when inflation and exchange rates were taken into account, among others.

My eyes were always moist with regret for lost opportunity whenever I pay toll fees. Why didn’t the Social Security System place its investible funds in toll roads, airports, ports and other income generating infrastructures to earn 15 percent to 20 percent more than the 4 percent to 6 percent interest paid for the use of the pension funds?

Then, we stormed Congress to amend the SSS charter to have more flexibility and scale in making such investments with safety nets.

Here, democracy as a give and take between the people and its representatives worked at its best.

Earlier, the initiative to increase the rate of pension of SSS retirees came from the House of Representatives. But during the committee hearings, we argued that such increase cannot be legislated using SSS pension funds. If it has to be granted by legislative fiat, we threatened to challenge the law in court since it is a private fund. We, nonetheless, committed to increase the pension, as we have mentioned above, through a Social Security Commission resolution which president Rodrigo Duterte approved, while Congress subsequently passed the requested amendments to the SSS charter which now allow investments in a Maharlika fund.

There is one very indispensable caveat in the SSS joining the Marharlika Fund: That the SSS exercises due diligence in accordance with the guidelines provided in the amended charter before approving the release of some of its investible funds.

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Amado Valdez was former chairman of the Social Security Commission, former chairman of the Pamantasan ng Lungsod ng Maynila and former president and chairman, Philippine Association of Law Schools.


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