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Opinion

Imploding

FIRST PERSON - Alex Magno - The Philippine Star

The proposed Maharlika Wealth Fund (MWF) is imploding as we speak. The legislators tasked to get this passed into law did not do their homework and are improvising as we go along.

This week, the congressional proponents of this fund decided to take out contributions from the GSIS and SSS as sources of investible money. That shrinks the size of the proposed fund – and takes out “volume” of investments as a justification for it.

Nevertheless, the congressional proponents continue to gaslight the people.

I heard Rep. Stella Quimbo speak of “windfall profits” earned by the BSP due to the realignment of currency exchange rates. There is no such thing. The peso equivalent of our gross international reserves (GIR) ballooned because our currency depreciated relative to the dollar. When the peso begins appreciating, that evaporates.

The peso equivalent of the dollar holdings is nothing more than a ledger entry. We are not about to sell our foreign currency reserves – which is, as it stands, not even sufficient to cover all our outstanding debts. If we sell down our GIR, our risk rating falls through the floor. Therefore, the ledger entry does not convert to “windfall profit.”

The proposed MWF, as of today, relies almost entirely on forced contributions from the two government banks: the LBP and the DBP. This will shrink the lending portfolio of the two banks, leading to diminution of their profitability and thus the dividends paid to the treasury.

Under the Bayanihan Act, national government boosted the capital of these two banks to enable them to lend more to help our post-pandemic recovery. Now the MWF wants to take away those funds, managed rather well by a staff of talented and well-paid officers.

The two are both universal banks. They can invest in stocks and equities. They could underwrite financial deals. The MWF does not add to the range of investments they are allowed to make. All it adds is a layer of untested but highly paid executives plus a commission on earnings.

The two banks will be impoverished by this. It will merely speed up the “capital decay” already happening, where the two government banks are losing competitiveness to the other big banks that do not have to pay half their earnings as dividends to the treasury every year. The private banks, by contrast, invest their earnings to build up their portfolio and grow their assets.

Transferring the funds from the two GFIs will diminish their development role and render idle their highly paid financial talent, just so that new hired and highly paid investment officers of the MWF will play around with their money in exchange for a commission.

In a word, the proposed MWF subtracts from our development efforts.

Fiefdom

Even by the standards of greedy local government units, San Simon in Pampanga has been behaving shockingly. It converted itself into a toll company collecting P300 per truck on what are national roads.

April last year, the DILG, the DOF and the Anti-Red Tape Authority (ARTA) issued Joint Memorandum Circular 2021-01 calling the toll collection illegal and ordering the local government of San Simon to desist from continuing with the practice. The mayor has defied the circular, claiming the Local Government Code allowed them to do so. The Regional Trial Court in Macabebe denied San Simon’s claim and ruled the toll collection should be stopped.

Last Nov. 24, the Sangguniang Bayan of San Simon itself passed an ordinance suspending the collection of tolls from truckers and haulers passing through the municipality. The mayor refused to issue an executive order implementing its council’s own ordinance. He defies not only national government agencies and the courts but also his own council.

It is estimated that San Simon has collected about P100 million from imposing this arbitrary toll. There is little explanation about how this money was used.

It used to be that mulcting from truckers was petty corruption committed by bribe-taking traffic enforcers. In San Simon, the practice was elevated into official norm.

Recently, President Ferdinand Marcos Jr. called on the local governments to help in building farm-to-market roads to ease the delivery of vital foodstuff to the market in the face of sharp price increases. The mayor of San Simon is doing the opposite: raising the costs of transporting goods by mulcting from trucks passing through the town. This looks like a revival of old-style fiefdoms earning revenues by collecting toll from all passing through them.

If all local governments began behaving like San Simon, our inflation rate will be many times higher. It is the height of inefficiency.

Ironically, the toll collection undermines San Simon’s own efforts to transform into a hub for manufacturing. Over the past few years, the town has been building four industrial parks. So enthusiastic has the town been for hosting manufactures, they allowed obsolete dirty steel plants scrapped in China to relocate there, causing acid rain and poisoned air to pester the locals. With the toll, the town is shooting its own development efforts in the foot each day.

The manufacturing firms in the area led in opposing the toll. This adds to their costs and undermines their competitiveness. They have filed suits in court and petitioned national agencies.

Local governments Secretary Benhur Abalos should not allow this sort of banditry to persist. It simply encourages other localities to engage in acts inimical to the national interest.

MAHARLIKA WEALTH FUND

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