THE Senate committee on banks yesterday opened its discussions on the proposed establishment of the Maharlika Investment Fund (MIF), zeroing in on what Sen. Chiz Escudero said were “flaws” in the Palace-backed measure that need to be improved.
Escudero questioned the “unfair” composition of the 15-man Board of Directors (BOD) who will manage the MIF, saying that investors should have a proportionate seat in the board, not only six regular members who will represent the private contributors as proposed under Senate Bill No. 1670.
Section 19 of SB 1670 proposes that the MIC will have a 15-member of BOD, which will be composed of the secretary of the Department of Finance (DOF) as its chairperson, with members including the president of the Land Bank of the Philippines, president of the Development Bank of the Philippines, six regular members which will represent the contributors to the fund, with seats distributed in proportion to their corresponding investments; and five independent directors from the private sector, the academe, business sector, and investment sector.
The independent directors will be chosen by an Advisory Body the members of which will be named by the President.
National Treasurer Rosalia de Leon said the proportional contribution applies only to the six regular members of the BOD.
But Escudero said those who would pour in investments should have a seat in the BOD and not only be represented by the six regular members.
“Saan nanggaling ‘yung hindi natin sinunod sa isang korporasyon ‘yung capital contributions nung investors? And since we do not know yet how much the 10 percent of Pagcor (Philippine Amusement and Gaming Corporation) will be, bibigyan mo pa sila ng share doon sa anim? And the private sector will be given five? Sige may independent director, bakit may academe? Nagbigay ba si academe? (Why did we not follow the capital contributions of investors? And since we do not know yet how much the 10 percent of Pagcor, why include give it a seat in the six regular members? Then the private sector will be given five seats? Okay, there is an independent director, but why include someone from the academe? Will the academe also contribute?)” Escudero asked.
“Si private sector na pipiliin niyo, kung sino mang negosyante siya, nagbigay ba siya? Did he invest? There must be rhyme and reason why we are choosing people to sit there. The secretary of finance as a chairperson, may contribution ba ang national government, or counted na ‘yung contribution ng LandBank which he chairs? (The businessman who will be part of the private sector, will he also contribute? Will he also invest? There must be rhyme and reason why we are choosing people to sit there. The secretary of finance will sit as chairperson, will the national government have a contribution? Or will the contribution of the LandBank, which the DOF secretary chairs, be counted as contribution of the national government?)” he said.
Escudero said there should be a proportionate composition of the BOD depending on the percent of shares an investor will pour in “so that they can protect their investments.”
“If the capital contribution of LandBank is 50 percent, prudence and practice will dictate that 50 percent members of the Board should come (from it). Twenty-five percent of the capital will come from the DBP, so 25 percent (of the BOD) should come from it,” he said.
He added in mixed Filipino and English: “Now if you want proper corporate governance, isn’t it right to give LandBank proportional representation in the Board so it can protect its investments? It is true for DBP, same is true for Pagcor, same is true for private individuals.
In fact, you already allocated representation for future private investors even if they have not made any investments yet. Why should they have 1 vote similar to LandBank who contributed P50 billion? Isn’t that to say the least, unfair? Isn’t that going against basic governance and practice?”
‘ENTITY’
Commissioner Gideon Mortel of the Governance Commission for GOCCs (GCG) said the composition of the BOD will depend on what kind of entity the MIF will be treated.
“I think the issue is cropping up because of the treatment of the kind of entity created.
Here, it would appear, because it is an (MIF), it would appear that this is a corporation…The question of Senator Escudero, perhaps, is on the reflection if it is treated as a stock corporation. But if the entity is treated as a government entity with corporate body, then their submission could perhaps be accommodated, but not if the creation is entirely on the treatment of the same being a corporation,” Mortel said.
Escudero said the presumption is that the MIF will be a private entity, noting that it will be exempted from the Salary Standardization Law, the GCG law, certain provisions of the procurement law, and the payment of certain taxes.
“You said in the proposed bill to treat this as an ordinary corporation where the rules of corporation governance would apply,” he said.
Senate minority leader Risa Hontiveros said the executive branch should determine what kind of entity the MIF will be, adding this is the same reason why Senate minority leader Aquilino Pimentel III has earlier moved to refer the proposed measure to the Senate committee on government corporations and public enterprises.
Escudero also asked why appointments of the MIF board members will not pass through the GCG, pointing out the provision on the creation of the Advisory Board which will screen and vet appointments for the BOD.
De Leon said it would be “time consuming” if the appointments will go through the GCG since the body has a heavy workload.
Besides, she said, the Advisory Board, which will be composed of the secretaries of budget, and socioeconomic planning, among others, are in the best position to determine who should sit as board members.
To this, Escudero countered that the Advisory Board members would be coterminous and would serve at the pleasure of the President, unlike the GCG which is an independent body created to provide a different and separate perspective.
“If it’s only the delay that you are afraid of, I’m telling you already, the bill will be delayed because there are many gaps and loopholes in the bill. So, the GCG will have time. You can already start processing some of the names as soon as it is approved,” he said.
Sen. Sherwin Gatchalian complained investors who would put money in the MIF will enjoy too many tax exemptions compared to investors of other mutual funds.
“With this fund, number one, they don’t pay any taxes and then number two, aren’t we skewing the returns also? Because a normal fund would pay all these taxes — income tax, document stamps, and so on. So, we have now an MIF which is highly attractive because it is not paying taxes, it is attracting private funds and you have another set of fund s which perform the same functions but pay a lot of taxes,” Gatchalian said.
De Leon said the MIF will eventually be transformed into a GOCC which will run on a commercial basis, adding it will have the same structure as Singapore’s Temasek and Indonesia’s Investment Authority.
‘UNCLEAR’
Escudero, in an interview with the media after the hearing, said he is not against the creation of the MIF but said the measure should be studied well because it has many cracks, and not just be compared to the sovereign wealth fund of other countries.
He warned that anything that is “unclear” is prone to “mismanagement and abuse.”
Hontiveros likewise questioned the “ridiculously” low punishments for violators of the MIF policies.
Under the Senate version of the proposed measure, the penalties range from P10,000 to P5 million, and/or an imprisonment of six to 20 years.
The House’ version seeks to penalize violators P50,000 to P2 million, and an imprisonment of one year to five years.
“There is no forfeiture of ill-gotten wealth in favor of the government. There is no perpetual disqualification from public office for offenses committed by government officials who are part of the MIF,” Hontiveros said in a mix of Filipino and English.
Finance Secretary Benjamin Diokno said it is up to the lawmakers to propose amendments to the measure “if you feel that a higher penalty is called for.”
Hontiveros asked if the implementation of big-ticket infrastructure projects will speed up due to the MIF, to which Diokno replied that it is seen to expedite the implementation “kung dedicated po ang Maharlika fund for huge projects (If the MIF will be dedicated for huge projects)” since the projects will have their separate source of funds which will not pass through deliberations during the budget season.
“Kasi for example nag-a-allocate po halimbawa kami ng P1 billion for this project, pagdating po sa Congress, kina-cut po ng Congress. Nadi-disrupt po ‘yung mga right of way na dapat nabili na ng ano, kina-cut ng Congress, eh hindi po magagawa ka agad (For example, we allocate P1 billion for a certain project, but when it is deliberated in Congress, Congress cuts its allocation. Compensations for the right-of-way problems are disrupted, because Congress cut the budget that’s why they [projects] are not implemented immediately),” Diokno said.
