The Senate will examine the importance of the proposed Maharlika Investment Fund, also known as the Philippine Sovereign Wealth Fund, Senate President Juan Miguel Zubiri said Friday, stressing the need for full transparency and efficient use of taxpayers’ money should the government push for its creation.
Zubiri’s statement came as Senator Imee Marcos expressed fear the proposed Philippine fund might suffer the same fate as Malaysia’s 1Malaysia Development Berhad (1MDB), which was hounded by graft issues.
Marcos, the President’s older sister and vice chairperson of the Senate Committee on Economic Affairs, also questioned the timing of the creation of the sovereign wealth fund, given the current economic crisis and the government’s unpaid foreign debts and unfunded social services.
The senator agreed the government must consolidate the capital of government financial institutions and the government-owned and controlled corporations, but it should be used for projects such as dams, which she said, can be utilized for the irrigation of agricultural lands and the generation of power.
In a statement, Zubiri said he would ask Senators Sonny Angara, Sherwin Gatchalian, Grace Poe, Mark Villar, and Alan Cayetano, who chair the committees on Finance, Ways and Means, Economic Affairs, Banks and Financial Institutions and Government-Owned and -Controlled Corporations, respectively, to look into the proposal and give the Senate feedback on the essence of the fund.
“We must first ensure [that] the Sovereign Wealth Fund is necessary…If so, we need to ensure that it is managed properly and the safeguards are in place so that it would not be misused or prone to corruption,” Zubiri said.
“We must make sure there is full transparency and efficient utilization of this fund,” he added.
Gatchalian made a similar statement, saying full transparency and checks and balances must be in place if the Philippine government will push for the creation of a sovereign wealth fund.
In an interview with reporters, Gatchalian said the Philippines was “ready” for the creation of the fund and there were measures that could be established in law to address possible corruption.
“We are ready for something like this. For me it’s important to have safeguards and also investments. The fund will be wasted if it will not be properly invested,” said Gatchalian, vice chairman of the Senate Committee on Banks, Financial Institutions, and Currencies.
He added: “The corruption can be addressed by safeguards, that’s why it’s important to have safeguards. So, we’ll ensure that there will be safeguards in the law, as well as professional management and of course transparency.”
For Gatchalian, the fund manager would play an important role to protect the investments from corruption, adding in other countries there was a professional board and a professional manager handling the investments.
Another way of ensuring full transparency in the handling of funds is through periodic reports to Congress, Gatchalian said.
An oversight committee in the Senate can also be created to ensure that the funds invested are properly monitored, he added.
Although the funds that will be used to invest are not as huge as those from other countries with sovereign wealth funds, Gatchalian believes there are excess funds that the government can use for its investments.
On Thursday, a House panel approved a bill that seeks to establish billions of pesos worth of sovereign wealth dubbed as the Maharlika Investment Fund.
The bill aims to maximize investible state assets for the improvement of social services.
Under it, the MIF will get allocations from the following government financial institutions (GFIs):
• P125 billion from Government Service Insurance System
• P50 billion each from the Social Security System and Land Bank of the Philippines, and
• P25 billion each from the Development Bank of the Philippines, and the National Treasury.
The bill also mandates Bangko Sentral ng Pilipinas and Philippine Amusement and Gaming Corporation, among other government instrumentalities, to pitch in on the MIF.
The bill also authorizes the President to appoint two independent directors to the board of the Maharlika Investments Corporation, which will operationalize the disbursement and management of the MIF.
Last Wednesday, Finance Secretary Benjamin Diokno said the establishment of the MIF “has the imprimatur” of President Ferdinand Marcos Jr.
Meanwhile, a House legislator sought the inclusion of a penalty clause to make erring managers accountable in the proposed fund.
During the deliberation for the proposal at the House Committee on Banks and Financial Intermediaries, House Deputy Minority Leader France Castro cited cases of nepotism and corruption in other countries’ sovereign wealth funds such as the (1MDB).
Former Malaysian Prime Minister Najib Razak is serving a 12-year prison sentence over the 1MDB scandal that allegedly saw top officials loot billions from state coffers.
Castro also flagged a provision empowering the President of the Philippines to chair the governing board of the proposed Maharlika fund.
According to Government Service Insurance System (GSIS) President Wick Veloso, the agency has P1.49 trillion in assets under its management. The Social Security System, meanwhile, has P700 billion.
Castro said there were more urgent uses for the funds aside from risky investments.
But House Ways and Means Committee Chair and Albay Second District Rep. Joey Salceda said the government would issue a guarantee for all funds coming from the GSIS and other institutions.
Salceda said: “If this earns more than 7.7 or 14 percent, GSIS members would benefit because their money would grow, while the national government guarantees the capital that they put into the MWF. Your capital is protected but you have participation in the upside. And it seems that this MWF would earn.”