Finance's Diokno says Maharlika fund bill should not specify how much participants give

Warren de Guzman, ABS-CBN News

Posted at Dec 05 2022 08:46 PM

MANILA - Finance Secretary Benjamin Diokno on Monday cautioned against legislating the contributions of participants to the proposed sovereign wealth fund. 

Diokno said he hopes lawmakers will allow the boards of the participating entities, such as state-led pension funds, more freedom in deciding how much money to put into the proposed Maharlika Wealth Fund (MWF). 

Under the proposal of Presidential cousin and House Speaker Martin Romualdez, the GSIS will have to contribute P125 billion as seed money for the P275 billion start-up capital in the proposal. The Social Security System, Landbank, Development Bank of the Philippines, and the National Government will be splitting the difference.

But Diokno said the boards of the GSIS and SSS should be given more leeway to determine how much they will contribute.

"Yung investment decision nila will be governed by their respective boards. Di naman namin sila pinepwersa kung ayaw nila mag invest, eh,” he said.

(Their investment decision will be governed by their respective boards. We can’t force them if they don’t want to invest.)

However, Diokno said the MWF is an opportunity for GSIS, SSS, Landbank, and Development Bank to find better returns.

He noted that pension funds are restricted on where they can invest.

Economic managers on Monday underscored the benefits of MWF during the meeting of the Development Budget Coordination Committee (DBCC) which was attended by Diokno, Budget Secretary Amenah Pangandaman, Socioeconomic Planning Undersecretary Rosemarie Edillon, Bangko Sentral Monetary Board Member Bruce Tolentino, and GSIS President and General Manager Jose Arnulfo Veloso.

“The MWF is a sovereign wealth fund which will be used by the government to invest in a wide range of outlets such as foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects, among others,” the DBCC said. 

Veloso defended his agency’s proposed participation in the MWF and rejected criticism that it would be too risky and would unnecessarily jeopardize pensioners’ money.

The GSIS chief said he needs to take risks to find higher returns as the current income of the GSIS funds is not enough to keep up with the requirements of pensioners. 

“If you want your investment to be totally risk-free, don’t expect any return. I have an obligation to my members to be able to pay their benefits,” Veloso said. 

He said the GSIS needs “to have the same kind of investment techniques and strategies that the private sector is doing.” 

“Saan ho namin kukunin ang pera na ibibigay namin sa ating mga miyembro? Ilalagay ko ho sa deposito, 3 percent, 4 percent, ay mauubos po ang pondo natin at wala po tayong maibibigay,” Veloso said. 

(Where will we get the money that we’ll give to our members? I deposit it and it earns 3 percent, 4 percent, the fund will be depleted and we’ll have nothing to give.)

The DBCC said Veloso also allayed fears that the MWF would follow the same path as the 1Malaysia Development Berhad (1MdB) fund which was riddled with abuse. 

According to the DBCC the MWF will abide “by the Santiago Principles of the International Working Group of Sovereign Wealth Funds, and establishing a three-layer mechanism for checks and balances which feature internal audit, external audit, and finally, examination and audit by the Commission on Audit.”

There will be an executive department reportorial requirement which will be implemented together with congressional oversight, the DBCC added. 

Various sectors have criticized the MWF saying it puts pensioners’ money at risk, and that it is prone to corruption.

Even the President’s sister said she was “worried” over the proposal. A lawmaker also said the fund life of the SSS was not considered in the MWF.

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