THE newly approved Maharlika Investment Fund (MIF) will likely struggle to attract talent from the private sector, a former central bank governor said.
“It’s going to be difficult to get people from the private sector to work in government, when they know that there are so many limitations,” former Bangko Sentral ng Pilipinas (BSP) Governor Jose Cuisia, Jr. told OneNews Channel.
President Ferdinand R. Marcos, Jr. signed into law the MIF bill on Tuesday, creating a sovereign wealth fund that will issue P500 billion worth of preferred and common shares to the National Government (NG), state-run corporations, and financial institutions.
The Maharlika Investment Corp., which will control the fund, will have a board of nine members, including the Secretary of Finance.
It will also include the presidents of the Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP), two regular directors, and three independent directors from the private sector.
Mr. Cuisia also cited the controversy surrounding other sovereign wealth funds such as 1Malaysia Development Bhd., which has been under scrutiny since 2015 over suspicious transactions.
“I don’t blame the Senate if they say, ‘Well, we need to put all of these safeguards.’ Look at what happened in Malaysia, the 1MDB fund.” Mr. Cuisia said. “I wouldn’t want to be in that situation, in other words, if they ask me, ‘Can you come in and be the one of the invest?’ I would politely decline.”
“It’s going to be tough getting the right people,” he said, “but that’s important — getting the right kind of people for the Maharlika fund.”
The Philippines ranked 166th out of 180 countries in the 2022 Corruption Perceptions Index prepared by Transparency International.
After the legislation was signed on Tuesday, opponents who organized into an alliance known as the Taumbayan Ayaw sa Maharlika Fund Network (Citizens Opposed to Maharlika Network) raised concerns about the plunder of public funds or investments being directed to favored corporations.
Leonardo A. Lanzona, an economics professor at the Ateneo de Manila, said the wealth fund is creating a “large pool of money,” placing the MIF in a “domestic monopoly” position.
He cited the coconut levy from the days of the first President Marcos, which collected funds from coconut farmers to develop the industry. Instead, the money was diverted by associates of the senior Mr. Marcos, who built private business empires that took decades to unwind, with the proceeds eventually returned to the government only recently.
A 2012 Supreme Court ruling recognized the government’s ownership of the funds.
“All of these large government schemes open themselves up to corruption and elite capture,” Mr. Lanzona said.
The P125 billion in initial funding for the MIF is to be sourced from LANDBANK (P50 billion), the DBP (P25 billion), and the National Government (NG) (P50 billion).
The NG’s contribution will come from the dividends of the central bank, its share of the earnings of the Philippine Amusement and Gaming Corp. (PAGCOR) and other government-owned gaming operators, income generated by regulators privatization proceeds and transfer of assets, and other sources such as royalties and special assessments.
Filomena Sta. Ana, coordinator of Action for Economic Reforms, said the administration’s argument that the Maharlika fund will help reduce the debt burden is unfounded.
“In fact, Maharlika is diverting resources from government financial institutions, resources which could have been used for the government’s development spending,” he said via chat. “That contributes to the fiscal problem.”
In his speech upon signing the bill, Mr. Marcos Jr. said the fund “will leverage a small fraction of the considerable but underutilized investible funds of the government and stimulate the economy without the disadvantage of having additional fiscal and debt burden.”
“But these funds — say from LANDBANK or DBP or dividends from the BSP — are already investible without Maharlika,” Mr. Sta. Ana said. “So Maharlika will be just grabbing these funds that otherwise can be used for existing development programs.”
Public opposition to the measure was initially sparked by a previous version of the legislation proposing to generate seed money from the two major government pension funds — the Government Service and Insurance System (GSIS) and Social Security System (SSS).
The removal of the proposal requiring GSIS and SSS to invest in the Maharlika fund “should be considered a partial win for the public,” Emy Ruth S. Gianan, who teaches economics at the Polytechnic University of the Philippines, said via chat.
“Moving forward, since it would be impossible to prevent Maharlika from getting implemented, we need to be vigilant,” she said, “Of particular concern would be the person heading the agency in charge of MIF, as well as the implementation of its promised security/accountability measures.” — Kyle Aristophere T. Atienza