House cuts out state pension agencies’ share of P175B from MIF
Speaker Martin G. Romualdez and other leaders of the House of Representatives on Wednesday decided to remove the Social Security System (SSS) and Government Service Insurance System (GSIS) as contributors to the proposed Maharlika Investment Fund (MIF).
Marikina City Rep. Stella Quimbo, a co-author of Romualdez of the MIF bill, said lawmakers made the decision to cut out P175 billion in proposed contributions from the state welfare funds after meeting with the administration’s economic managers, who drafted the measure.
Without the proposed P125-billion allocation from GSIS and P50 billion from SSS, the Maharlika Fund would get a P50-billion contribution from Land Bank of the Philippines, P25 billion from the Development Bank of the Philippines, and P25 billion from the National Treasury.
“Based on our assessment of the proposed changes put forward by the economic team, we are amending the bill to change the fund sources, removing GSIS and SSS as fund contributors and instead utilize profits of the Bangko Sentral ng Pilipinas,” Quimbo said in a press conference last night.
Upon the Speaker’s instructions, Quimbo said the changes would be introduced into the bill by the committee on appropriations in a meeting on Friday.
“It is good that we made a series of consultations about the proposal; it validated the misgivings of our countrymen, especially our industrious Filipino workers who give their contributions to the GSIS and SSS monthly,” she added.
Quimbo pointed out that the purpose of the proposed Philippine sovereign wealth fund “is to become an investment vehicle where existing surplus capital of the government can grow and reap benefits.”
The Marikina solon said any excess capital of the government would be put to good use in projects with high returns. The earnings from the Maharlika investments would then go back to Filipinos, who would feel and see an increased budget from the government that would meet their needs, she added.
As the bill goes through the deliberation and approval process, Quimbo said the House “will put in place safety nets to ensure the success of the project.”
“We should ensure that the law creating the Maharlika Fund will have the pertinent provisions that would secure the public’s funds,” Quimbo said.
Meanwhile, the proposed Maharlika Wealth Fund bill is likely to pass its second reading before the end of the month, House Majority Leader and Zamboanga City Representative Manuel Jose “Mannix” Dalipe, one of the authors of House Bill 6398, said in a chance interview.
“We don’t have a definite timeline but my estimate, probably second reading by this December. Hanggang doon lang [That is all I can say],” Dalipe said.
The bill, which seeks to create a sovereign wealth fund sourced mainly from government institutions, was also authored by Speaker Romualdez of Leyte, Ilocos Norte Rep. Sandro Marcos, House accounts panel chairperson Rep. Yedda Romualdez, fellow Tingog party-list Rep. Jude Acidre, and Quimbo, the House appropriations panel senior vice chairperson.
Dalipe said he could not say if the House will approve the Maharlika Wealth Fund bill on third and final reading this year.
“In so far as the Committee of Rules is concerned, it will reach second reading this December. There are no specific instructions from the Speaker,” he added.
Under House Rules, a measure approved on second reading can be approved on third reading after three session days. Congress only holds session days on Mondays, Tuesdays, and Wednesdays.
In the event the bill is certified urgent by the President, Congress can pass the measure on second and third and final reading on the same session day.
Earlier, for the second day running, GSIS president and general manager Jose Arnulfo Veloso defended the MIF, saying it would bolster economic activity and provide funding for critical infrastructure projects.
The MIF has stirred concern from business groups that questioned the wisdom of using state pension funds, but Veloso again said there were enough safeguards to ensure transparency and accountability.
House Bill No. 6398 defines MIF as an independent fund that adheres to the principles of good governance, transparency, and accountability.
The proposed measure states that the fund shall be used to invest on a strategic and commercial basis in a manner designed to promote fiscal stability for economic development and strengthen the top-performing government financial institutions (GFIs) through additional investment platforms that will help attain the national government’s priority plans.
The Bureau of Treasury also said there are at least eight measures in place to ensure the integrity of the MIF.
“We support the calls to study the bill to ensure that risk management is in place,” National Treasurer Rosalia de Leon said. “Upon reading the bill, we note that there are already eight measures that will safeguard the integrity of the Fund.”
The National Treasurer enumerated the eight safety measures:
First, the MWF will strictly adhere to the Santiago Principles.
Second, all financial transactions shall be governed by the applicable government laws, rules, and regulations.
Third, there will be an internal audit. There will be financial reporting and audit of records wherein the financial statements and reports shall be prepared, upon the advice of the Advisory Body, in accordance with pertinent provisions of the Act and its Implementing Rules and Regulations (IRR), as well as International Financial Reporting Standards (IFRS) and principles. The Board shall appoint an Internal Auditor who shall provide written interim financial and management reports as requested by the Advisory Body.
Fourth, there will be an internationally recognized auditing firm that will be the external auditor of the fund to audit its financial statements.
Fifth, the Fund will be under the scrutiny of no less than the Commission on Audit. The books and accounts of the MIF shall be subject to the examination and audit of the Commission on Audit pursuant to Article IX of the 1987 Philippine Constitution.
Sixth, there is an Advisory Body that will assist the Board of Directors in the formulation of general policies related to investment and risk management. The Advisory Board will be sought for consultation in case of transactions that will affect Balance of Payments and monetary aggregates, especially those which impact domestic liquidity and reserve money.
The Advisory Body is composed of the Secretary of Finance, the Secretary of Budget and Management, the Treasurer of the Philippines, and the Socioeconomic Planning Secretary and Director-General of the National Economic and Development Authority (NEDA).
Seventh, there will be a Joint Congressional Oversight Committee (JCOC) tasked to oversee, monitor, and evaluate the implementation of the Maharlika Wealth Fund Act. This will be composed of five members each from the House of Representatives and the Senate.
Finally, there is a specific provision to prevent unnecessary withdrawals from the Fund. Section 15 of the bill states that no withdrawals of equity shall be made before 2028 and that, thereafter, equity withdrawals shall be made in accordance with the guidelines prescribed by the Board or the implementing rules and regulations of the Act.
The President will chair the government corporation that would handle the fund.
In other developments:
• Senator Juan Edgardo Angara said he wants limitations on how the government may use the proposed sovereign wealth fund that will be needed from pension funds and government banks. In an ANC interview on Wednesday, the senator noted that investing pension funds is a “high-risk, high-reward activity.”
• A congressional leader on Wednesday defended the MIF, saying that the Philippines must ‘dream big’ to be a robust emerging country. “For the Philippines to become a high income and fully developed economy, we must dream of things that have yet to be and not just see things as they are now. The proposed Maharlika Investment Fund allows us to dream of a brighter future for our country,” said Rep. Teodorico Haresco Jr., chair of the House Committee on Banks and Financial Intermediaries.