At least 12 business associations and economic policy groups on Monday expressed concern over the proposed Maharlika Wealth Fund (MWF), citing the lack of justification for the fund.
In a joint statement, the group called for fiscal prudence and said the country does not have a “bonanza” of commodity surpluses that need to be deployed, as provided in the proposed sovereign fund.
“We register our serious concerns and reservations against the proposed MWF on the principles of fiscal prudence, additionality, solvency of social pension funds, contingent liabilities, monetary independence of the Bangko Sentral ng Pilipinas (BSP), government in the economy, and transparency,” the statement read.
The statement was released by the Foundation for Economic Freedom (FEF), and signed by the Competitive Currency Form (CCF), the Filipina CEO Circle (FCC), the Financial Executives of the Philippines (FINEX), and the Institute of Corporate Directors (ICD).
Other signatories include the Integrity Initiative Inc., the Makati Business Club (MBC), the Management Association of the Philippines (MAP), the Movement for Good Governance (MGG), the Philippine Women’s Economic Network (PHILWEN), the UP School of Economics Alumni Association (UPSEAA) and the Women’s Business Council Philippine Inc.
The groups echoed similar concerns voiced by Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla who flagged the potential impact on the dollar reserves.
Senator Maria Imelda “Imee” Marcos last week also expressed misgivings that the fund could suffer the same fate as the 1Malaysia Development Berhad (1MDB) which was hounded by graft issues.
The statement comes as lawmakers in the House of Representatives filed a measure seeking to establish the wealth fund, which aims to allow the government to invest surplus reserves or revenues in real estate and financial assets.
Among the principal authors of the proposed measure are House Speaker Ferdinand Martin Romualdez, and Ilocos Norte 1st District Representative Ferdinand Alexander “Sandro” Marcos III, both relatives of President Ferdinand “Bongbong” Marcos Jr.
'Legacy of indebtedness'
Under the proposal, government financial institutions (GFIs) such as the GSIS, the Social Security System (SSS), the Land Bank of the Philippines (LandBank), and the Development Bank of the Philippines (DBP) will be allowed to invest their funds for higher returns.
“Instead of leaving a legacy of surplus funds to be managed for future generations, the current generation is leaving a legacy of heavy indebtedness which future generations need to pay or refinance,” the statement read.
“There is no need, or even justification, to pool the reserves of government financial institutions and pension funds into larger amounts in order to earn higher returns,” it added.
The groups also cited the low actuarial life of the Government Service Insurance System (GSIS) and the Social Security System (SSS) at around 40 to 43 years, below the international standard of 70 years.
“Should a portion of their investment funds be diverted into an SWF, their actuarial lives will likely be shortened further, because the funds will be invested in higher risk assets,” the statement read.
Moving forward, the groups said the executive and legislative branches instead continue to implement initiatives on transportation, public health, education and infrastructure, especially digital and agriculture that can boost productivity and lower inflation.
“These initiatives can be executed within existing legal framework, without resorting to an untested approach with many potential infirmities,” the statement read.
Members of the government’s economic cluster earlier in the day defended the Maharlika Wealth Fund, as they said the government could reap higher returns from it rather than parking funds in facilities with lower interest rates.
According to Finance Secretary Benjamin Diokno, criticisms on the measure come from those who have yet to read the measure, as safeguards will be put in place to ensure transparency.
“Maraming mga ganon, nagko-comment na hindi pa nababasa ata ‘yung bill eh, so out of ignorance nagko-comment,” he said, but added that he was not pertaining to Medalla.
“Maraming projects dito na ang return is 20%. Sana nagamit namin ‘yung ‘pagka may welfare fund,” he added.
[There are a lot of projects here with a return of 20%. We could have used that if there was a welfare fund
There are a lot like this, making comments without reading the bill, so they are commenting out of ignorance.]
Diokno also said critics should not be looking at one negative experience seen overseas, with the Philippine counterpart having the necessary precautions.
For his part, GSIS president and general manager Jose Arnulfo “Wick” Veloso defended the MWF, saying the additional funds are needed to provide benefits to members.
Too much reserves
Earlier in the day, Finance Secretary Benjamin Diokno said the Bangko Sentral ng Pilipinas (BSP) had “too much” gross international reserves (GIR) and some could be used for the proposed wealth.
According to Diokno, the country's current GIR was enough for 7.5 months of imports, surpassing the preferred 3 months' worth.
“Sobra sobra pa rin ‘yun,” he told reporters in Manila City, adding that at the current GIR level, “that’s too much ammunition.”
Latest data from the BSP shows that the GIR — a measure of the country’s ability to settle import payments and service foreign debt — stood at $94.074 billion as of end-October.—LDF, GMA Integrated News