House Deputy Minority Leader and Bagong Henerasyon party-list Rep. Bernadette Herrera on Monday urged the government not to lose sight of the benefits of public-private partnership (PPP) in big-ticket development projects once the proposed Maharlika Investment Fund (MIF) is established.
Meanwhile, Surigao del Sur Rep. Johnny Pimentel foresees the planned state-run Maharlika Investment Fund (MIF) venturing into infrastructure development solutions, instead of merely holding passive assets such as fixed-income instruments, equities, and bonds.
“Let us not forget PPP and the indispensable role of the private sector as the main engine for national growth and development,” Herrera said.
A brainchild of President Ferdinand Marcos Jr., the MIF can be used to finance big-ticket infrastructure projects, high-return green and blue projects, and countryside development. It is also expected to muster substantial investments and secure intergenerational benefits such as potential earnings from extracted natural resources.
President Marcos also cited as one of his legislative priorities during his first State of the Nation Address the measure strengthening PPP which, just like the MIF bill, was recently approved by the House of Representatives on third and final reading.
Being one of the authors of the PPP bill, Herrera wanted the government to prioritize PPP over the proposed sovereign wealth fund (SWF).
Herrera believed the intention of the proposed SWF can be achieved more effectively through established measures such as the PPP wherein substantial project risks are assumed by the private sector.
“I hope this (SWF) will not in any way affect the PPP because PPP is really an important vehicle para magtuloy-tuloy ang Build, Build, Build ng ating bansa,” Herrera said during her interpellation on HB 6608 earlier this week.
Proponents of the MIF bill initially planned to put up P275 billion for the MIF which will be derived from pension funds under the Government Service Insurance System (GSIS) and Social Security System (SSS), as well as funds of state-owned Land Bank of the Philippines and Development Bank of the Philippines (DBP).
Amid mounting protests, the proponents decided to drop the GSIS and SSS as contributors to the MIF and replaced it with Bangko Sentral ng Pilipinas (BSP). The proposed seed money was then cut by more than half to P110 billion.
Based on the latest version of the MIF bill, P50 billion from Landbank, P25 billion from DBP, and 100 percent of BSP’s dividends the year prior to the approval of the law, will go into the capitalization of MIF.
But Herrera expressed strong reservations against compelling BSP to place into the MIF its profits exceeding the required capitalization of P200 billion, warning it could negatively affect the financial health of the country’s central bank.
“It seems that we are putting a constraint on the BSP’s monetary policy especially if after the P200 billion cap we will put all dividends to the Maharlika fund. If the economy is growing, BSP’s balance sheet should be growing as well and not tied to P200 billion,” Herrera pointed out.
Herrera was also not in favor of using Landbank and DBP funds for the MIF as it is against the mandates of the two government financial institutions.
“Don’t you think our focus should be is to bring Landbank and DBP back to their Charters at i-fulfill nila ang kanilang obligasyon sa farmers at improvement of rural areas rather than put their funds into the SWF?” Herrera asked.
The partylist lawmaker said there was also no assurance that the SWF will be more profitable for Landbank and DBP.
“What is our assurance to the depositors of Landbank and DBP that investing in SWF will generate more yields than the present investment portfolio of these banks?” Herrera stressed.
Likewise, Herrera said the proposed SWF fails to establish a clear fundamental purpose or goal, which is important especially for Congress in terms of performing its oversight function.
“Gusto ba natin ng wealth management fund or developmental fund? Hindi pwedeng magkahalo because it’s hard to monitor,” Herrera pointed out.
She added: “If you want to put your investment there, kailangan malinaw ang fundamentals. Kaya nga tayo may oversight, ano ang babantayan natin?”
“If we look at Indonesia, they are actually using their newly established sovereign wealth fund to attract private partners that can co-invest in developing highly productive infrastructure assets,” Pimentel said.
“New railways, toll expressways and airports create more jobs that benefit low-income Filipino families. They also expand the markets for small and medium-sized enterprises that comprise 99 percent of all registered businesses in the country,” Pimentel said.
Besides improving the mobility of people and goods, these projects also provide recurring revenue streams from train fares, toll levies, terminal fees as well as leasing and retail opportunities, according to Pimentel.
“In fact, some of the largest Filipino private conglomerates have found it gainful to embark on tollways and rail transit systems, while others are going into aviation,” Pimentel said, referring to the likes of San Miguel Corp., Metro Pacific Investments Corp. and Aboitiz Equity Ventures Inc.
The House of Representatives in December passed on third and final reading the bill seeking to establish the MIF as the Philippines’ first sovereign wealth fund.
“We are confident the Senate will pass the bill after giving it a fair hearing and putting in further improvements,” Pimentel said.
Under House Bill No. 6608, the MIF may invest in a wide range of real and financial assets to generate long-term social wealth savings and to fuel national economic development.
The MIF’s permissible investments include joint ventures and infrastructure projects.
At least 20 percent of the net profits of the Maharlika Investment Corp. – the entity that would manage the MIF – would be remitted to the national treasury “to be earmarked for social welfare projects.”
Nearly 50 countries around the world have established sovereign wealth funds, many of which are funded by surplus government revenues or reserves.