House to remove PH president as chairman of the board of proposed Maharlika Wealth Fund

Proponents of the bill seeking to create the Maharlika Wealth Fund will remove the president as chairman of the board of directors that will manage the sovereign wealth fund, House banks and financial intermediaries committee chairperson Irwin Tieng said Friday.

Tieng disclosed this after Senior Deputy Minority Leader Paul Daza raised at a House hearing that the investment fund will be politicized if the president will chair the board of directors.

"It's a no-win for the president to chair such board," Daza said.

Daza asked the resource persons to provide studies and accepted international practices on the chairmanship of the board managing sovereign wealth funds.

Responding to Daza's query, Tieng said the authors of the MWF will remove the president as chairman of the board.

"With regards to the chairman, we basically amended the [one] proposed by our author, Congresswoman Stella Quimbo, to remove the president as chairman and to replace it with the Secretary of Finance," Tieng said.

"With regards to the composition of the 15-man board, instead of the two independent directors, it will be made into four independent directors," he added.

The latest approved version of the MWF bill designates the president of the Philippines as the chairman of its governing board.

Daza reiterated his point that the members of the board should not be appointed by the president.

"I think it would be better governance in particular considering the political culture in the country, I would be even be as bold to propose that the majority of the board should be independent directors and not be appointed by the president," Daza said.

Apart from the Finance secretary and the four independent directors, the following will compose the Board of Directors as proposed by Quimbo and other proponents:

• chief executive officer of the MWF
• president of LandBank
• president of the Development Bank of the Philippines
• seven regular members representing the contributors to the MWF

According to Tieng, Quimbo's proposed amendments will be adopted in the next hearing.

In her opening statement, House appropriations panel senior vice chairperson Stella Quimbo allayed fears that the Philippines will follow Malaysia's 1Malaysia Development Berhad (1MDB).

"In a situation where high rewards are likely, we also need to manage risks. Ito naman ang dahilan kaya maraming safeguards sa batas. Natuto na tayo sa Malaysia kung saan isa lang ang signatory at sisiguraduhin natin na hindi tayo matutulad sa kanila [This is why we have many safeguards. We've learned from Malaysia which only had one signatory and we will make sure we won't go the same route]," the House leader said.

Among the safeguards that they will include in the measure are:

• Tasking the Boards of Directors to engage an internal and an external auditor
• The books and accounts of the fund are within the ambit of the powers of the Commission on Audit
• Creation of Joint Congressional Oversight Committee to monitor the implementation
• Report to the president on the investment performance
• Members of the board should be an expert of corporate governance or investments

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• Setting of a risk management unit to ensure that the corporation is achieving a prudent balance between risk and rewards
• Setting of cap on administrative and operating expenses at two percent of its initial capitalization

"This investment vehicle will ensure that government is able to maximize returns to investments of funds that are not currently needed by GFIs and GOCCs. These additional investment returns can be used to augment the national budget to fund our ever growing needs as a nation," she said.

Last week, Senator Imee Marcos, sister of President Ferdinand "Bongbong" Marcos Jr. expressed fear that the proposed Philippine sovereign wealth fund might suffer the same fate as Malaysia's 1MDB which was hounded by graft issues.

Simple explanation

Meanwhile, to ease public worries, political analyst Professor Antonio Contreras said lawmakers needed to ensure safety measures and explain the Maharlika fund in a simple manner.

“Kailangan ipaliwanag talaga sa tao sa simpleng salita, sa simpleng paliwanag," said Contreras at the public briefing. "Kasi hindi natin maalis sa mga Pilipino yung hindi naiintindihan. Hindi pa nga nababasa yung bill may comment na. Kailangan muna natin ipaintindi sa mga tao kung ano yung konsepto para mas magkaroon ng paglilinaw.”

(It really needs to be explained to people in simple words, in a simple explanation. It's understandable that Filipinos will have doubts, especially with something they don't understand. As it is, the bill hasn't even been read, and already there's a lot said. We first need to make the people understand the concept so there can be more clarification.)

“Pangalawa, siguraduhing talaga na palalakasin yung kasiguraduhan ng proseso may kinatawan dapat ang mga sektor na involved like yung mga pensioners o depositors o mga OFWs (Overseas Filipino Workers) doon sa board,” he added.

(Second, to really strengthen the certainty of the process, the sectors involved should have a representative like the pensioners or depositors or OFWs on the board.)

Contreras said the lawmakers needed to ensure “transparency, accountability, and participation of governance” in the fund.

“Siguraduhin talaga na matutupad ang checks may tatlong auditing points yung internal, external, at COA (Commission on Audit) at talagang may transparency, accountability, and participation ng governance ng fund yun ang siguraduhin kasi syempre pera yan eh, syempre sensitive issue yan ayaw ng mga tao na malagay sa panganib yung mga deposito nila o yung kanilang contribution sa pensioning,” he said.

(Make sure that there are checks, there are three auditing points — the internal, external, and COA. And that there is transparency, accountability, and participation in the governance of the fund. It must be ensured because, of course, it's money and it is a sensitive issue. People do not want their deposits or pension contributions to be at risk.)

The political analyst said it is also the responsibility of the government and the legislators to explain the bill to the public.

“At trabaho dapat ng gobyerno at ng mga mambabatas na mas paigtingin pa natin ang pagpapaliwanag sa bayan para maibsan yung mga agam agam sapagkat tama rin naman na may mga issue na dapat tugunan lalo na pagdating sa paano mapapangalagaan yung pondo at hindi mapariwara,” he said.

(And it should be the government's and legislators' job to improve the way this is explained to people to alleviate their doubts. It is true that there are issues that must be addressed, especially when it comes to protecting the fund and not having it squandered.)

Last week, lawmakers in the House of Representatives filed House Bill 6398, which seeks to establish the Maharlika Wealth Fund that targets to allow the government to invest surplus reserves in real estate and financial assets.

The authors of the proposed measure include House Speaker Ferdinand Martin Romualdez and Ilocos Norte 1st District Representative Ferdinand Alexander “Sandro” Marcos III, the cousin and son of President Ferdinand “Bongbong” Marcos Jr. respectively.

The initial funding for the proposed Maharlika Wealth Fund (MWF), which seeks to grow excess funds of state-run financial institutions via investments, could reach around P150 billion, House appropriations panel senior vice chairperson Stella Quimbo said Thursday.

Quimbo earlier announced that with GSIS and SSS out of the picture, the MWF would be funded by state-run banks LandBank of the Philippines (P50 billion), the Development Bank of the Philippines (P25 billion), and the dividends/profits of the Bangko Sentral ng Pilipinas.

The MWF initially eyed P250 billion seed funding from state-run financial institutions and P25 billion from the National Treasury. Of the P275 billion, P175 billion would have been sourced from the GSIS and SSS. This amount has earned flak from the GSIS and SSS members, economists, and even business groups.

But the change of heart, Quimbo said, showed that Congress was committed to addressing the public's concerns. —Richa Noriega and Hana Bordey/KBK/DVM/RSJ/AOL, GMA Integrated News