SENATE Minority Leader Aquilino Martin D. Pimentel III expressed doubts on Monday about private investment in the proposed sovereign wealth fund, saying that the interests of investors will take precedence over those of the public.
“We are just creating a protected corporation, a protected entity whose beneficiaries are investors,” Mr. Pimentel told TeleRadyo.
He added that sovereign wealth funds should only be established if a government has a windfall or surplus since it’s a new source of income. But there is none.
The wealth fund’s sources of financing have proved to be a key sticking point as the legislation setting up Maharlika has evolved. The original bill proposed that Maharlika be funded mainly by the two big government pension funds and the two big state-owned banks. The backlash to using pension funds led the bill’s authors to propose as a funder, alongside the two government banks, the Bangko Sentral ng Pilipinas (BSP), which was to contribute its profits.
Albay Rep. Jose Ma. Clemente S. Salceda, who chairs the House ways and means committee, has said that the bill has since been “reengineered” to designate as Maharlika’s source of initial capital the dividends generated by government-owned and -controlled corporations (GOCCs).
“Well, we already use (GOCC dividends) in the budget as well. So, what will happen is that we will reduce non-tax revenue,” Mr. Pimentel said. “If we reduce that then continue with our spending, our budget deficit will surely increase.”
He said such a set-up will inevitably increase government debt.
“Imagine the end of this, the proponents of the sovereign wealth fund (will cause) the debt of the National Government to become larger and larger,” he added.
President Ferdinand R. Marcos, Jr. has said the terms for setting up the Maharlika fund are being adjusted, including the sources of funding. Mr. Marcos recently pitched Maharlika to participants at the World Economic Forum in the Swiss mountain resort of Davos.
“The more we study it, the more it’s clear that although the sovereign wealth funds around the world have the same name, they’re all very different. They’re different in purpose, they’re different in methodology and of course, they operate in a different context of law,” he told reporters at the end of the Davos conference.
“We have to design it very specifically to Philippine conditions, and that’s what the legislators are trying to do now: to make sure that it is customized for us and it will be a good thing for us. So that’s the process that we’re undergoing now,” he added.
Mr. Pimentel objected to the corporate orientation of the fund, adding: “The sovereign wealth fund should be owned by the people, so if there is any dividend or benefit, it should go directly to the people.”
The Senate’s version of the Maharlika Investment Fund, Senate Bill 1670, filed by Sen. Mark A. Villar on Jan. 12, envisions Maharlika’s ownership structure as proportional to investors’ contributions.
The bill calls for the establishment of the Maharlika Investment Corp. (MIC) which will govern and manage the fund to ensure optimal returns while directing investment to projects that reinvigorate job creation and reduce poverty.
If passed, initial capital will be provided by the Land Bank of the Philippines (LANDBANK) (P50 billion) and Development Bank of the Philippines (DBP) (P25 billion).
The BSP, if retained as funder, was to remit all of its dividends to the fund in the first and second fiscal years after its establishment. In the succeeding years, BSP was to remit half of its dividends to the fund.
The Philippine Amusement and Gaming Corp. and other government-owned gaming operators must also contribute at least 10% of their gross gaming revenue. Other proposed sources were royalties and special assessments on natural resources, proceeds from privatization of government assets and debt incurred by Maharlika itself.
Such contributions will be subject to review by the Secretary of Finance every five years.
The Maharlika board will have 15 members, including the Secretary of Finance, the MIC chief executive officer, and the presidents of LANDBANK and the DBP.
Six regular members will represent other fund contributors and five independent directors from the private sector, academe, the business sector and the investment industry. — Alyssa Nicole O. Tan