A proposed legislation that has the charm of an earthquake is reportedly being railroaded at the House of Representatives. HB 6398 proposes to sequester pension funds under the Government Service Insurance System and Social Security System, as well as funds of state-owned Land Bank of the Philippines (LandBank) and Development Bank of the Philippines (DBP), as seed capital for the envisioned Maharlika Wealth Fund (MWF).
The start-up fund of P250 billion is just the appetizer for the ambitious sovereign wealth fund. Future annual infusions are planned from the national budget, Bangko Sentral ng Pilipinas, Philippine Amusement and Gaming Corporation, and other cash cows to be named.
In a press release issued by the House of Representatives, Speaker Martin Romualdez said: “Sovereign wealth funds are state-owned investment funds typically financed by a country’s surplus revenues or reserves. Governments invest these funds in an array of both real and financial assets to stabilize national budgets, create savings for their citizens, or promote economic development.”
The bill, however, embeds certain fatal flaws. For one, the country has no “surplus revenues or reserves” to finance the proposed MWF. It will get seed money from the Government Service Insurance System, P125 billion; the Social Security System, P50 billion; Land Bank of the Philippines, P50 billion; and Development Bank of the Philippines, P25 billion. This is what makes the measure objectionable.
The bill’s proponents certainly know that GSIS and SSS funds are not tax money but private contributions by members and their employers meant for emergency and retirement needs of those members. They say the funds intended for pensions and other benefits will not be impacted because they won’t be touched; only the investible portions will be tapped. But being in the nature of trust funds, those handling them know it’s their duty to minimize risks that could undermine the actuarial life of these funds, or their ability to grow their services to members in the future.
Section 34 of Republic Act 8291 states: “The funds of the GSIS shall not be used for purposes other than what are provided for under this Act. Moreover, no portion of the funds of the GSIS or income thereof shall accrue to the General Fund of the national government and its political subdivisions, instrumentalities and other agencies including government-owned and -controlled corporations except as may be allowed under this Act.”
The law is clear: GSIS funds can’t be used for purposes other than what are provided for under RA 8291.
The LandBank, the DBP and the BSP also have no business investing in the MWF. The Land Bank is supposed to serve the needs of farmers and fishermen, and the DBP, the commercial and industrial sectors. How does their investment in the sovereign wealth fund help further their mission?
The BSP is an independent body established to protect our financial system. As lender of last resort, why should it invest in the MWF?
The proposed MWF is an investment vehicle. And all investments carry some degree of risks. For example, stocks, bonds, mutual funds and exchange-traded funds can lose value if market conditions sour. If the MWF investments fail, the impact on retirees would be terrible. Both the GSIS and SSS are very careful in their investment decisions because they have to secure the future generations of Filipinos.
The MWF’s stated mission is “to reinvigorate job creation and reduce poverty.” We are all for this, and we want the MWF to push the country to grow. That’s why we are offering our two cents’ worth to help make it fly. But first, proponents need to address the objectionable and controversial provisions of the bill. They can do this by sourcing MWF funding from government assets. The Malampaya funds, privatization of government-owned and -controlled corporations, and sale of government lands are good starting points.
There’s no need to tap the private contributions of GSIS and SSS members. That money is for their retirement; it must not be exposed to any kind of risk.
The government has enough assets that can be used for the proposed sovereign wealth fund. MWF proponents can’t just sequester GSIS and SSS members’ contributions—that’s against the law. These politicians must be reminded that they are in power because of the votes of millions of GSIS and SSS members. If these powerful politicians want to offend these people, they do so at their own peril. As a wise man once said, “There are few things more powerful than people united.”