We, concerned citizens from the civil society, academe, and private sector, ask the Executive and Congress to scrap the Maharlika Wealth Fund (MWF) bill or House Bill (HB) 6398.
Establishing a Sovereign Wealth Fund (SWF) is not novel. Given the right conditions, institutions, and governance, it is a relevant investment fund.
Unfortunately, HB 6398 distorts the core concept of a sovereign wealth fund, and it is an ineffective measure to address the bill’s stated intentions.
The MWF is a warped version of what the SWF should be. Sovereign wealth funds usually solve a problem of excess. Some examples: excess revenues in a situation of consistent large budget surpluses, windfall revenues from booming extractive industries, and excess foreign currency reserves from enduring balance of payments surpluses, which are invested abroad to help stem currency overvaluation. But the Philippines does not enjoy such excess. Instead, the country has a heightened fiscal deficit, has a so-so export performance, and has not enabled the major commodity exports to bolster foreign currency reserves.
Furthermore, the MWF’s stated intention to “create jobs, promote trade and investments, strengthen connectivity, expand infrastructure, achieve energy and food security” can be achieved more effectively through other established measures.
The administration’s goal of promoting infrastructure spending can be more efficiently facilitated through annual appropriations, concessional lending, or public-private partnerships (PPP).
House Bill 6398 establishes a Maharlika Investment Corporation and a corresponding Maharlika Investment Fund, but it fails to establish a clear operationalization of its principles; lacks proper safeguards and disciplining mechanisms; and only pays lip service to the “Santiago Principles.” It is also alarming that the Fund pulls primarily from the pension funds of the Government Service Insurance System (GSIS) and Social Security System (SSS), exposing contributors’ savings to unnecessary, unmitigated risk.
The Maharlika scheme is essentially a “behest” transfer by ordering entities like the GSIS, SSS, Development Bank of the Philippines (DBP), Land Bank of the Philippines (LBP), and the Banko Sentral ng Pilipinas (BSP) to participate by quota when there is no inherent reason for these to do so. It undermines the autonomy of their investment decisions and pre-empts their portfolio choices, not necessarily in an optimal fashion. In other words, the Maharlika Wealth Fund Corporation usurps the investment decision-making of independent institutions, thus weakening them and undermining their credibility.
For instance, a provision in the MWF bill deprives the BSP of 50% of what it should be receiving in dividends to be counted as equity infusion, undermining its independence and ability to stabilize prices and the exchange rate.
A sovereign wealth fund should mitigate the impact of volatility and unpredictability while enabling a nation to achieve its long-term macroeconomic objectives. The rules of the game—the institutions, governance, and incentives—that define HB 6938 run counter to principles of prudential regulation and risk management, conflict-of-interest avoidance, transparency, and accountability. This muddled, inconsistent, and redundant bill is only setting the MWF up for failure, and will only enable cronyism, rent seeking, and corruption.
While the Philippines may someday see the windfall revenues to sustainably fund its sovereign investments, this current proposal misses the mark by far. We are better off pursuing the necessary fiscal reforms to achieve our socioeconomic objectives; enacting an inclusive and sustainable budget that prioritizes health, social protection, and infrastructure; reforming our pension system; and improving the country’s governance and institutions to enhance our prospects for investment.
Thus, we call for the scrapping of House Bill 6398.
Signatories:
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??Florencio Abad
Kenneth Isaiah Ibasco Abante
Carmel V. Abao
Mark Anthony D. Abenir
Maria Joy Abrenica
Patrick Acupan
Ladylyn Erica Adarve
Nathalie Africa-Verceles
Eirene Jhone E. Aguila
Arjan Aguirre
Nadine Agustin
Michael Alba
Fernando Aldaba
Joseph Edward Alegado
Arsenio Sze Alianan Jr.
Zoraida Amelia C. Alonso
Ma. Angelica P. America
Corazon S. Apostol
Agustin Arcenas
Ro-Ann A. Bacal
Carlos C. Bautista
Cristina M. Bautista
Cynthia B. Bautista
Germelino Bautista
Maria Socorro G. Bautista, Professor Emeritus, University of the Philippines
Maricor Baytion
Reycel Hyacenth Nacario Bendaña
Menandro Berana
Eric Boras
Floyd Buenavente
Felipe Buencamino
Alvin Cabalquinto
Dante Canlas, Professor Emeritus, University of the Philippines
Erik Paolo Capistrano
Janet Carandang
Jenina Joy Chavez
Lisandro Claudio
Jeans Claveria-De Los Reyes
Solita Collas-Monsod, Professor Emeritus, University of the Philippines
Carlo Angelo Z. Cordero
Jerchiella B. Corpuz
Jan Fredrick P. Cruz
Jayson Cruz
Deborah Cruz
Jerik Cruz
Prince Cruz
Buenaventura Dargantes
Maria Helen Dayo
Fabian Dayrit
Emmanuel de Dios, Professor Emeritus, University of the Philippines
Loreli C. de Dios
Maria Serena I. Diokno
Jo-Ann Diosana
Eddie Dorotan
Luis F. Dumlao
Melissa F. Encarnacion
Emmanuel Esguerra
Jude Esguerra
Joshua Arsenio V. Espiritu III
Edna P. Franco
Feric Gaius L. Galvez
Dan Gatmaytan, Professor, UP College of Law
Kevin Christopher L. Go
Laurence Go
Michael Gonzalez
Rowena Guanzon
Milwida Guevara
Diwa Guinigundo
Debbie Gundaya
Anatoly Gusto
Dinah B. Gusto
Ma. Teresa Habitan
Cielito Habito
Mylene Hega
Arturo Hilado
Emmanuella Iellamo
Maria Paz Jaranilla
Estelle Marie M. Ladrido
Cecilia D. Laison
Mario Lamberte
Francisco Lara, Senior Peace and Conflict Adviser
Enrique Niño P. Leviste
Cristina Liamzon
Alberto Aldaba Lim
Fides Lim
Gilbert Llanto
Leslie A. Lopez
Jojo T. Macua
Odette Magtibay
Nepomuceno Malaluan
Wondielyn Manalo-Macua
Kit Melgar
Lara Katrina Tajonera Mendoza
Meynardo P. Mendoza
Arjay Mercado
Norkaya Mohamad
Sittie Nur Dayhanna Mohamad
Toby Melissa C. Monsod, Professor, UP School of Economics
Adolfo Jose Montesa
Cristina J. Montiel
Christina Novera
Rhio F. Nuylan
Michael Ocampo
Bernard Ong
Ernesto Ordoñez
Rafael Paredes
Janella Paris
Ernesto M. Pernia
Emma Porio
JC Punongbayan
Victoria Viterbo Quimbo
Aliza Racelis
Mary Racelis
Maria Lourdes L. Ramos
Rene Raya
Jessica Reyes-Cantos
Isabel Rodrigo
Nancy Pe Rodrigo
Sofia Rodrigo
Jasmine Rombaoa
Edwin Salonga
Florabelle Santos-Madrid
Joyce Enriquez Sierra
Filomeno Sta. Ana III
Elirine Siwa-Yaneza
Carolyn F. Sobritchea
Rodelio Subade
Maya A. Tamayo
Edita Tan, Professor Emeritus, University of the Philippines
Elizabeth Tan
Mark Remington Tan
Lyonel Tanganco
Paula Mae Tanquieng
Lota Teh
Mendiola Teng-Calleja
Conrad S. Tolentino
Benjamin T. Tolosa Jr., Professor, Political Science Department, Ateneo de Manila University
Randy Tuaño, Associate Professor, Economics Department, Ateneo de Manila University
Cyd Tuaño-Amador, former BSP Deputy Governor
Jofel D. Umandap
Caryl Valdez
Gina Grace Villanueva
Jeshamar C. Villasis
Georgina Hernandez Yang
Niza Zuñiga-Salinas