MAHARLIKA VIOLATES BSP CHARTER–GUINIGUNDO
A former high-ranking official of the country’s central bank on Friday warned that the Maharlika Investment Fund (MIF) could affect the independence and autonomy of the Bangko Sentral ng Pilipinas (BSP), and that the sovereign wealth fund’s provisions violated the BSP Charter.
Diwa Guinigundo, former BSP deputy governor, said the MIF bill approved by the House of Representatives on Thursday could threaten the BSP’s constitutional and statutory responsibilities.
Guinigundo cited the proposed measure’s provision mandating the BSP to remit 100 percent of its declared dividends to the MIF’s pool of funds for the first and the second fiscal year.
For the third and succeeding years, only 50 percent of the BSP’s dividends will be remitted to the MIF while the remainder will stay with the central bank until such time that its capitalization of P200 billion is completed.
“This is a direct assault on the independence and autonomy of Bangko Sentral,” Guinigundo said during a virtual forum hosted by the opposition umbrella 1Sambayan.
He said that the provision mandating the BSP to directly contribute its dividends to the MIF already violated the BSP’s Charter.
Guinigundo said Section 28 of the BSP’s Charter also provides that it will not acquire shares of any kind or will not participate in the management of any enterprise directly or indirectly.
“It further violates the prohibition against development banking or financing. What our laws say are very clear,” he said, stressing that the BSP dividends amount to billions of pesos annually.
The BSP Charter also provides for the recapitalization of the central bank of up to P200 billion from the current P50 billion by earmarking all its declared dividends to infuse additional equity, he pointed out.
Gambling regulators like the Philippine Gaming Corp., are mandated to contribute only 10 percent of their gross gambling revenues.
Another concern
“I don’t have to detail what could happen to the economy when serious shocks hit us again with the central bank, which to me, may be less independent or may be less autonomous,” Guinigundo said. “It could have been stronger and more robust until this Maharlika came around.”
Under the bill, P50 billion of the MIF will be sourced from Land Bank of the Philippines and P25 billion from the Development Bank of the Philippines, which is another concern for Guinigundo.
The proposed law mandates the BSP to extend “prudential and other regulatory reliefs” to both banks in order to “promote financial soundness of these financial institutions while contributing to the overall objective of the Maharlika.”
He said that “should this scheme go downhill” this could pose threats to the two banks.
“If that happens, if it fails, the bill mandates the BSP to help them out, or in short, bail them out with public money,” Guinigundo said.
He also said that sovereign wealth funds of other nations are sourced from surplus funds, which the Philippines did not have, unlike Singapore, which is often referred to by the MIF supporters.
I don’t have to detail what could happen to the economy when serious shocks hit us again with the central bank, which to me, may be less independent or may be less autonomous
Carpio’s take
Retired Supreme Court Senior Associate Justice Antonio Carpio said the MIF would be sourced from the country’s borrowings since the Philippines lacked surplus revenues.
Under the “one-fund concept” of the government, all revenues of the state from all sources, including taxes, duties, fees and dividends from government-owned and -controlled corporations (GOCCs), including the BSP, form part of the general fund under the national treasury, Carpio said.
He said that the bill’s authors themselves have changed the name from “Maharlika Wealth Fund” to “Maharlika Investment Fund,” conceding that the fund was not a wealth fund after all.
“It is funded from debt and not from surplus revenues,” Carpio said in the same forum.
He also noted that the country’s revenues accumulated yearly had always been less than the expenditures for the corresponding year “for several decades now.”
Diwa Guinigundo Former Deputy Governor, Bangko Sentral ng Pilipinas
“In short, the national government has always been in deficit,” Carpio said. “Expenditures have always exceeded revenues every year. To fund the shortfall, the government has been borrowing every year in what is called deficit spending.”
Senate need not rush
After the speed with which the bill was approved by the House of Representatives, the Senate should not rush its discussions on the proposed investment fund, House Bill No. 6608, Senate Minority Leader Aquilino Pimentel III said.
Commenting on President Marcos’ certification of the bill as urgent, Pimentel said that it gave the “impression that we need to ‘speed up things.’”
“I hope this will not be the feeling in the Senate. The Maharlika Investment Fund will have extensive effects and ramifications not only to our generation but potentially to future generations of Filipinos,” he said in a statement.
What is more urgent is lowering the prices of food for Filipinos preparing for the Christmas and New Year holidays, and to raise the salaries of workers, teachers, health-care workers and provide aid to indigent elderly, solo parents and persons with disabilities, according to Senate Deputy Minority Leader Risa Hontiveros.
“This Maharlika wealth fund is premature, and a misplaced priority,” she said.
Senate President Juan Miguel Zubiri assured the public that the Senate will thoroughly study the bill once Congress resumes sessions in January.
The MIF bill will be referred to the Senate banks committee as the lead panel, and to the committees of government-owned and -controlled corporations, ways and means, and finance as secondary panels.
They may begin deliberations on the measure by mid-February of 2023, Zubiri said.
He said the Senate will study the proposal “with a fine-tooth comb” and the speed of the passage would depend on the ability of the committee chair and quality of work put in the hearings and debates.