As the battle shifts to the Senate after the House of Representatives overwhelmingly approved the bill creating the Maharlika Investment Fund (MIF), a former official of the Bangko Sentral ng Pilipinas (BSP) has called on the public to amplify its objections to the measure.
Diwa Guinigundo, BSP deputy governor until 2019, said that while the mandatory use of the Social Security System (SSS) and Government Service Insurance System (GSIS) funds had been scrapped in House Bill No. 6608, the respective boards of the pension funds may still “voluntarily” invest in the MIF.
Guinigundo noted that the heads of the SSS and GSIS were appointees of President Marcos Jr., who had certified the bill as urgent and acknowledged that the creation of a sovereign wealth fund was his idea. The first version of the bill was filed in the House on Nov. 28 and was quickly approved on third and final reading, on a vote of 279-6, on Dec. 15.
If the SSS and GSIS boards later decide to invest in the MIF, “then goodbye na tayo,’’ Guinigundo said at an online forum titled “What Now, Maharlika Investment Fund?’’ The forum held on Dec. 17 was sponsored by Seniors on the Move, an internet-based group advocating seniors’ rights.
The planned mandatory use of SSS and GSIS funds for the MIF was scrapped in the face of strong objections raised by various groups, which claimed that tapping the pension funds privately owned by workers and retirees would be unconstitutional. In the first version of the bill, the GSIS was to invest P125 billion and the SSS P50 billion in the MIF.
Against BSP mandate
Guinigundo said the bill was against the BSP’s constitutional mandate because it would sequester the central bank’s dividends. He explained that, as proposed, 100% of the BSP dividends would go to the MIF in the first two years, and 50% to the BSP and the other 50% to the MIF in the third year and beyond.
After the BSP’s capitalization to the tune of P250 billion, all its dividends would go to the MIF, he said.
The BSP is mandated not to take part in the ownership or management of private enterprise, according to Guinigundo. But under HB 6608, the BSP would be part of the advisory body of the MIF, which can invest in private companies.
These would amount to restoring the causes of the central bank’s downfall in 1983, he said.
‘Of the nature of gambling’
Guinigundo also said that under HB 6608, BSP contributions to the MIF would go on and on and that the central bank would co-fund the MIF with a gambling corporation. He was referring to Philippine Amusement and Gaming Corp., which is to invest 10% of its gaming proceeds in the MIF.
The arrangement “partakes of the nature of gambling,” said the former BSP official, who also noted that the MIF could make “highly speculative and very risky investments” in such assets as metals and foreign currencies.
Sequestering BSP dividends to fund the MIF would affect its work of maintaining the stability of the banking system, he warned, adding: “In times of danger, the BSP should be able to properly perform its job.”
Using resources of Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) could also destabilize these GFIs, from where the salaries of civil servants and cash transfers to the poor are drawn; where part of the government’s cash is deposited; and where taxes can be paid.
Landbank is to contribute P50 billion and DBP P25 billion to the MIF.
With fewer resources at these GFIs’ disposal, the risk of a “contagion” effect would rise if they are faced with problems, per Guinigundo.
Instead of the BSP and the GFIs helping to close the budget deficit, and finance social services like health and education, and even infrastructure, their resources would go to the MIF, he said. Instead of GFI funds being lent to small entrepreneurs and farmers, these would go to the MIF, he added.
HB 6608 allows withdrawal from the MIF only after five years. “But there is no guarantee that the MIF would return the investments of the BSP, Landbank and DBP,” Guinigundo said.
Surrender of power
The MIF would also encroach on Congress’ power of the purse. “Before, public funds can be spent only upon the go-signal of Congress. Instead, the allocation from the MIF will go straight to poverty and subsistence allowance equivalent to 25% [of its profits.],’’ the former BSP official said.
Adding the 2% as the MIF’s overhead to the 25%, investors would have no control over 27% of the Fund’s profit, he warned. “Congress, by this bill, surrenders its job to do the budget. It’s up to the MIF where to use its money.’’
Its proponents envision the MIF as promoting economic growth and social development in the Philippines. But Guinigundo urged the Congressional Research Office to conduct an independent study and not accept everything that economic managers are saying about the MIF.
No need for it
Is there a need for such a sovereign wealth fund?
None, Guinigundo said, because it would not address high inflation and unemployment rates, as well as the swelling national debt. In the first place, the country has no surplus, he said, adding that total debt rose from P7.7 trillion in 2019 to P13.6 trillion as of September 2022, largely due to the Covid-19 pandemic and issues like misgovernance and corruption.
In lieu of the MIF, “we just need to use the national budget, public-private partnerships and concessional loans to finance social services,’’ Guinigundo said. Unlike the MIF, “there is no risk investing in our people though social services like health and education,’’ he said.
Amendments to HB 6608 are to be introduced in the Senate, which is scheduled to tackle the measure on Jan. 23.
“This is an uphill battle because Congress is dominated by the administration. Let us continue repeating our points and establish networks to amplify our voice,” the former BSP deputy governor said.