Senate vows: No railroading of Maharlika fund proposal

DESPITE the fast-paced passage in the House of Representatives of the Maharlika Investment Fund (MIF) bill, majority and minority senators have agreed to go over the controversial measure with a finetoothed comb when it reaches the Senate.

“I’m not convinced we need to do this [set up an MIF] now,” Minority Leader Aquilino “Koko” Pimentel Jr. said on Sunday, adding that he and some senators will still push for dropping the measure altogether. However, even if it hurdles a Senate vote, Pimentel said they will make sure it goes through the strictest deliberations.

Asked what particular parts of the measure—formerly named the Maharlika Wealth Fund and billed as the country’s sovereign wealth fund—need attention, Pimentel said in a radio interview: “we need to focus on everything about the MIF when the House sends it to the Senate.”

Pimentel added that “they must

look at its form, how it was substituted, and even its legislative history,” noting that from a Sovereign Wealth Fund (SWF) concept, “it has evolved into an investment fund,” pointing out that this was obviously done because the proponents were faced with criticism that the original bill did not fit the traditional concept and grounds for creating a sovereign wealth fund.

“First of all, the concept and reason for setting up—the SWF is a right concept [under certain circumstances]; its seed money is the surplus or windfall of a country.” However, it had been pointed out that the Philippines had neither, and the original version dipped into pensions funds.

“Maybe when they realized [we don’t meet the basic concept of a SWF, i.e., we have no budget surplus or windfall], the proponents started changing the measure,” Pimentel recalled.

Besides not having any budget surplus, the Philippines also has no “windfall.”

He cited as an example Norway’s windfall when it discovered oil which swelled its cash flow.

Turning the SWF into an investment fund poses serious risks, said Pimentel, noting that not only will the country resort to borrowings to partly kick off the fund, worse, it will put such borrowed funds into the hands of “unelected” people who will “behave like government” in the sense that they can decide priorities for spending.

Unlike the elected Congress, members of the board are not chosen by the people, have no accountability and will work “behind closed doors” in contrast to the “transparent” budget process, according to Pimentel. Entrusting to the MIF board the discretion to determine priorities is akin to usurping congressional authority to craft the budget, he added.

As it is, he said, “we’re borrowing for the national budget; and now, we have to borrow again for an investment fund.”

Given all these, Pimentel said, “there is need to examine the original versions of the bill to track the changes.”

Asked if setting up the MIF with partly borrowed funds risks deepening the national debt, Pimentel said yes, and drew an illustration, likening the exercise to “adding a second drain” through which scarce resources are allowed to flow out.

Playing fast and loose with billions of borrowed money is very risky because the global market is not conducive to making huge investments. Pimentel said that even big, established global players are treading cautiously now, so they will definitely “welcome a new player” like the Philippines which seems eager to parlay investible funds that it borrowed.

Nonetheless, Pimentel is banking on a firm, prompt assurance given by Senate President Juan Miguel Zubiri that there will be “no railroading” of the MIF bill in the Senate. In fact, Pimentel noted that Zubiri has directed several committees to undertake their respective thorough examination of various aspects of the measure even during the Christmas holidays.

The first line of their defense, he said, is to move to scuttle an MIF that some economists had described as a concept “damaged beyond repair.”