The Government Service Insurance System (GSIS) has expressed support to the proposed sovereign wealth fund, defending as an opportunity to reap more from the investment while supporting nation- building.
Jose Arnulfo Veloso, GSIS president and general manager, said in a press conference yesterday the pension fund needs to have the same kind of investment techniques and strategies that the private sector has, to be able to benefit government employees.
“Our job is to put the fund in an investment where it can grow,” Veloso said.
House Bill (HB) No. 6398 proposes to establish a sovereign wealth fund, which would draw resources primarily from contributions from the GSIS, Social Security System (SSS), Land Bank of the Philippines (LBP) and Development Bank of the Philippines.
The proposed Maharlika Wealth Fund (MWF) is patterned after the sovereign wealth fund of 49 countries.
Finance Secretary Benjamin Diokno said the proposed fund is intended for future generations of Filipinos and will have the necessary safeguards.
“We should have had the sovereign wealth fund a long time ago. This time, we should have a sovereign wealth fund like other Asean countries,” Diokno said.
He said investible funds which are not earning as much could can be invested in some projects with significant rates of return.
“Countries like the Philippines have huge amounts of industrial requirements that have high capital expenditure. And that’s the reason why a number of our industries can’t move forward because we don’t have the capital,” Veloso said.
“We have the money, what we need is to put it together, us GFIs (government financial institutions), so it can be allocated to high capital expenditure businesses. These capital expenditures, when we are able to support this (and achieve the developmental projects), we can improve employment, tax (generation) and economic activity,” he added.
Veloso also said the 1Malaysia Development Berhad scandal will not happen in the Philippines, as the controversial sovereign wealth fund in Malaysia had its prime minister as head and sole signatory to all business transactions.
“We won’t do that. The sovereign wealth fund will have a board, there is suggestion to include an independent director, from the private sector,” Veloso said.
He also said there will be safeguards such as an internal audit, international audit, auditing by the Commission on Audit, congressional oversight and a public reporting.
Diokno noted a number of successful sovereign wealth funds in various countries, adding there was just one failure since only one person was handling it.
The finance chief said such scenario is “not going to happen here.”
“Funds like Maharlika, we can invest local or abroad for diversification. The objective is safety and return, and if we find the opportunity domestically, because it helps nation building, then we prioritize local opportunities,” Veloso said.
“We’d like to shoot two birds with one stone: invest with good return and help in nation building,” he added.
Meanwhile, House senior deputy majority leader Sandro Marcos, son of President Ferdinand Marcos Jr.,m yesterday defended the decision of the House leadership to push for the enactment of the Philippine sovereign wealth fund, particularly the proposed P275-billion MWF, saying it was also proposed under the Aquino and Duterte administrations.
“It became apparent that the President was in support of creating a sovereign wealth fund but the idea did not come from him per se because this is something that has been in the works or something that’s been pushed by not even this administration but past administrations,” Marcos told House reporters at the Manila Golf and Country Club in Makati City following the bicameral conference committee meeting on the P5.268 trillion proposed 2023 national budget.
“If I’m not mistaken, former Sen. (Paolo Benigno) Bam Aquino filed a bill in 2016 trying to do the same thing. My guess is it wasn’t passed because the administration of former president PNoy (the late president Benigno Simeon Aquino III) was already wrapping up. I believe senator JV (Ejercito) also filed a bill so it’s not a new idea,” Rep. Marcos said.
The four GFIs which shall be known as the founding GFIs are mandated to invest equity with a combined total of P250 billion to start up the fund.
GSIS will provide an initial investment of P125 billion, P50 billion for both SSS and LBP and P25 billion from DBP.
The measure mandates the Treasury of the Philippines to provide P25 billion as investment.
The Makabayan bloc led by Rep. France Castro (PL, ACT) earlier vowed to opposed the measure and question the legality, pointing out the bill was only discussed last Monday and was immediately approved last Thursday by the committee on banks and financial intermediaries.
Castro raised the possibility that the administration is just trying to save the “bankrupt businesses of friends and cronies” which she said was the same thing that happened in the past.
The measure also calls for the creation of Maharlika Investment Corp. (MIC), a GOCC responsible for the overall governance and management of the fund.
The measure’s tax provision was approved yesterday by the House committee on ways and means chaired by Rep. Joey Salceda, who said the tax provisions “ensure that the benefits of the tax savings go purely towards the investment fund, increasing potential returns for the SSS and the GSIS.”
“Some P680 million in tax savings will inure to the fund every year as a result of this exemption. That goes towards making the SSS and GSIS funds more robust. That means more funds for pensions,” he said.
Salceda also reassured members of the minority in the House tax committee that all concerns raised on the provision will be considered, as the House technical working group version “is still evolving.”
Under the provision which Salceda proposed in the TWG meetings, a safeguard ensures “that the exemptions granted herein shall be utilized actually, directly, exclusively and solely for the transactions of or involving the MWFC and MWF, and not for the purposes of MWFC executives and/or employees, third parties, and other distinct taxable entities.”
