MANILA, Philippines – The House committee on banks and financial intermediaries has approved amended House Bill No. 6398 that seeks to establish the “Maharlika Wealth Fund,” and sets the Philippine president as chairperson of the government corporation that would manage the country’s proposed sovereign wealth fund.

In a meeting on Thursday, December 1, the panel discussed several amendments to the bill after it had passed through a technical working group.

One amendment that was agreed upon by the panel members is to designate the Philippine president as the chairperson of the Maharlika Wealth Fund Corporation (MWFC) – a provision patterned after the structure of Singapore’s sovereign wealth fund.

President Ferdinand Marcos Jr. heads the agriculture department in a concurrent capacity.

Albay 2nd District Representative Joey Salceda added the provision that the President can designate another chairperson.

Under the latest version of the bill, the MFWC will be vice chaired by the government financial institution with the most capital contribution. The vice chairperson will chair the executive committee, and will be in charge of the management of the MWFC.

Under the bill, the President will also have the power to appoint the two independent directors of the proposed MWFC board – positions designated for representatives of the general public.

Senior Deputy Minority Leader Paul Daza expressed concern over the independence of the directors to be appointed by the President.

“If the President himself is overbearing, if the personality is even more so, usually,’ pag appointee ka ng President, hindi ka makakapalag (if you’re an appointee of the President, you can’t go against him). So let’s put safeguards here,” Daza said. “A director appointed by the President is not independent.”

Under the amended bill, the number of MWFC board members was increased to 15, from nine in the initial version of the bill.

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Government guarantee

Under the proposed measure, the Maharlika fund would be seeded by contributions from government financial institutions.

Among the issues raised during the meeting were the wealth fund sourcing money from the national budget, the composition of the board of directors, and the well-being of pensioners and taxpayers from whom the start-up capital will come.

Daza raised concern that the bill compels the national government to contribute P25 billion from the annual budget – which is already debt-funded – into the wealth fund.

“What is the principle behind allowing funding the sovereign fund from the general appropriations act when the very spirit and essence of such a fund is really the excess wealth, the surplus, of the government?” Daza asked.

He added: “We essentially would be borrowing to fund the GAA. And then you’re going to allow putting money into the sovereign fund?”

However, Marikina 2nd District Representative Stella Quimbo and Salceda, both economists, confirmed that the wealth fund would have no impact on the budget deficit. 

“The whole idea is the President wanted a fund kasi ‘pag may GAA, ‘pag naglagay sila ng pera para sa dams, tinatanggal natin. ‘Pag naglagay tayo ng pera para sa NBN, tinatanggal natin. ‘Pag naglagay tayo ng pera para sa grid, tinatanggal natin. So this is really a presidential aspiration to finance grids, dams, national broadband which are always, by tradition of this Congress, is relocated to the other programs,” Salceda said.

(The whole idea is the President wanted a fund because in our GAA, whenever we’d set money for dams, we remove it. Whenever we set money for NBN, we remove it. Whenever we set money for a grid, we remove it.) 

Daza also raised concerns over the structure of the board of directors of the proposed MWFC, which would manage the fund.

House Deputy Minority Leader France Castro was also concerned that the fund would be using money from government and private sector employees through the contributions of the Government Service Insurance System (GSIS) and the Social Security System (SSS). In the event that the fund made poor investments, she worried that it would be the pensions and benefits of these individuals that would suffer.

Salceda, however, assured Castro that the funds would be government guaranteed. The participation of pension funds like SSS and GSIS would also allow them to place their money into investments that could give a higher return, rather than the traditionally secure treasury bills that they invest in. Further, he added that the tax exemptions that the fund enjoys would all go to the benefit of the contributing government financial institutions.

“Mas makikinabang po ang GSIS members dahil mas lalago ang pera niya, pero ‘yung mga capital na ilalagak niya sa MWF ay sinisiguro po ng national government,” Salceda said.

(GSIS members will benefit more because their money will grow, but the capital that they deposit into the MWF will be guaranteed by the national government.)

Castro also hoped that a penalty clause would be added to seek accountability for the fund’s administrators should it perform poorly. She cited the scandals surrounding Malaysia’s 1MDB sovereign wealth fund as an example of how a fund like this could fail. (READ: Malaysian prosecutors rest case against ex-PM Najib in final 1MDB appeal)

Next steps

The House will hold a public forum inviting various stakeholders on Monday. The bill would also still need to clear the House budget and tax committees, before it is brought to the House plenary.

Finance Secretary Benjamin Diokno had said that the Maharlika fund may be set up within six months of the bills’ passage into law.

“Depends on how fast the governing council can be constituted. I think give it another six months from the passage before it becomes operational,” Diokno said at the Kapihan sa Manila Bay forum on November 30.

He added that the creation of a sovereign wealth fund was being considered even when he was still in his previous position as Bangko Sentral ng Pilipinas governor. – Rappler.com