A bill seeking to create the Maharlika Wealth Fund (MWF) has been met with much criticism left, right, and center.
For tax-paying and premium-contributing citizens, finance experts, analysts, economy professors, politicians, even the president's very own appointee and sister, the proposed bill raises more questions and concerns.
But why is that? Here's what you need to know about it.
What is the MWF?
The MWF, or House Bill No. 6398, intends to draw money from state-owned pension funds and banks for investments. It will be used as a P250-billion sovereign wealth fund (SWF) meant to raise government revenues.
It was filed by lawmakers led by presidential cousin Speaker Martin Romualdez and presidential son Senior Deputy Majority Leader Sandro Marcos. Their co-authors are House Majority Leader Mannix Dalipe, Tingog Party-list Reps. Yedda Romualdez and Jude Acidre, and Marikina Rep. Stella Quimbo.
"Maharlika," meanwhile, is likely a reference to the buzzword (in)famously used by Marcos' father and namesake, the late dictator Ferdinand E. Marcos.
Under the proposal, funds for the MWF will come from the following institutions:
- P125 billion – Government Service Insurance System (GSIS)
- P50 billion – Social Security System (SSS)
- P50 billion – Land Bank of the Philippines
- P25 billion – Development Bank of the Philippines
The national government would also be required to provide an initial P25 billion, as with the Bangko Sentral ng Pilipinas (BSP), which would chip in using remittances from overseas Filipino workers or OFWs and annual contribution of business process outsourcing or BPO companies. Additionally, the Philippine Amusement and Gaming Corp. or PAGCOR will also share a percentage of its gambling proceeds.
Department of Finance Sec. Ben Diokno said the bill already has the "imprimatur" of Marcos. Lawmakers are pushing for the MWF bill's approval by Dec. 12.
It could be enacted into law by mid-2023, Diokno said, if not before the submission of the 2024 budget.
How will the MWF be used?
The bill aims to “improve investment opportunities, promote productivity-enhancing investments, and ensure that the Philippines becomes an investment destination," which, Romualdez said, is in line with the eight-point socioeconomic roadmap of Marcos administration.
The lawmaker also noted that the MWF could be used to manage the country's foreign reserves, as well as create more jobs for Filipinos.
Romualdez cited as inspiration 49 countries with SWFs, including Singapore, China, Hong Kong, South Korea, Indonesia, and Taiwan.
In particular, he gave a special mention to Singapore and Indonesia as to how their respective SWFs boosted their economic development.
Why is it raising concern among critics?
One of the main reasons for concerns over the SWF is the prevailing economic conditions like budget deficit, mounting debts, and high inflation rate.
Filomeno Sta. Ana III, Action for Economic Reforms coordinator, in a Dec. 4 BusinessWorld column says an SWF works when the country has a huge surplus.
Citing Norway as an example, Sta. Ana points out that the surplus from its extractive industries has been accumulated over the long term. Norway has the largest SWF in the world, providing about $250,000 per Norwegian citizen thanks to its oil and gas profits.
Other countries, especially from East Asia, also have big trade surpluses according to Sta. Ana.
"The Philippines does not have the surplus generated from our extractive industries nor from our (underperforming) exports," he writes.
No less than Sen. Imee Marcos, the president's own sister, also rejected the idea of the MWF due to the economic turmoil. “Is now the right time to invest? It’s quite high-risk as the global economy is so bad,” she told reporters.
Sen. Marcos said foreign models, particularly that of Norway, may not also be applicable to the Philippines.
Another reason, and perhaps the most striking of them all, is the cautionary tale that is the 1Malaysia Development Berhad (1MDB) corruption scandal. In 2020, former Malaysian Prime Minister Najib Razak was found guilty of pocketing billions from their SWF. Razak, his wife, and other officials are serving time in prison.
BSP Gov. Felipe Medalla told Bloomberg TV that the experience of 1MDB is the "biggest risk."
"Even if the current guys are okay," Medalla said, "will the guys five years from now still be okay? It’s a governance issue.”
On Twitter, Enrico Patiga Villanueva, senior lecturer of economics at the University of the Philippines Los Baños, brought up the issue on some PhilHealth officials who allegedly pocketed P15 billion through anomalous transactions.
Villanueva said it's better to work toward unifying the GSIS and SSS instead, as there are already fund managers in the two institutions.
We have lost money na nga sa Philhealth. Bati ba naman pension natin sa SSS at GSIS pakikialaman at babawasan? Why do we need a SWF fund manager when there are GSIS or SSS fund managers? The better idea is actually to work towards unifying GSIS and SSS, not build another fund.— Enrico Patiga Villanueva (@EnricoPatiga) November 30, 2022
For senators, the MWF needs further study. Senate President Juan Miguel Zubiri said it must first be ensured that the bill is necessary. Senate Minority Leader Koko Pimentel and Sen. Chiz Escudero also want further clarification about certain provisions. Sen. Win Gathchalian is also looking for safeguards so as to prevent a 1MDB-like situation.
Does MWF have safeguards?
Following concerns from several groups, Albay 2nd District Rep. Joey Salceda, who chairs the technical working group refining the MWF, said there are enough safeguards in place to avoid a 1MDB redux. Salceda released the proposed bill's revised provisions to allay people's fears.
Under the revised bill, President Marcos would act as the chairman of Maharlika Wealth Fund Corp. (MWFC), the government-owned company managing the MWF. Marcos, who's also the agriculture secretary, may designate another chairman.
The government financial institution with the most capital contribution, meanwhile, would sit as MWFC vice president, as well as the chairman of its executive committee.
Marcos would also have the power to appoint two independent directors of the MWFC board, according to the revised bill.
The MWF, Salceda said, will also be overseen by Congress and an advisory board of economic managers. Regulations from the BSP are also in place, as well as probes from the Commission on Audit.
Former president Gloria Macapagal Arroyo also noted that the SWF is a "valuable resource" that the country can count on.
"Once the Fund is operational, the President will also be able to count on advice from the Department of Finance," Arroyo noted, adding that "historically," the country has a good track record insofar as finance secretaries as concerned.
She also said that the MWF will have an established mechanism for future contributions, as well as benefit from a centralized, specialized, and accountable management. She also noted that as a "special purpose vehicle," operations of the MWF "can more transparently be observed, tracked, and monitored" here and abroad.
Questions continue to be raised, however, against these safeguards. Senior Deputy Minority Leader Paul Daza wants to know whether the appointed MWFC officials will become independent.
House Deputy Minority Leader France Castro, on the other hand, says there should be a "penalty clause" for erring fund managers.
Lars Wittig, president of the European Chamber of Commerce of the Philippines, told the media during the Arangkada Philippines Forum last Dec. 1 that though he's "neutral for now" due to the bill's lack of details, they're following the issue "with great interest."
Meanwhile, a Change.org petition titled “Hands off our SSS and GSIS contributions, NO TO House Bill 6398!" launched by netizens has also garnered thousands of signatures. The petition already surpassed its original target of 15,000 signatories, and is approaching its new 25,000 target fast.