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MANILA, Philippinnes – The Philippine Chamber of Commerce and Industry (PCCI) has joined other major business groups in criticizing the proposed Maharlika Wealth Fund (MWF).
PCCI president George Barcelon urged the government to take its time in studying the fund and assessing its benefits.
“Whether there’s a need for it and how much putting up such a fund will benefit us – that’s a question that the government should analyze. If it’s not going to give us that much advantage, might as well invest in our country. There are resources to be invested, and there are other sectors that can be looked into,” he said in an interview with CNN Philippines’ The Final Word on Tuesday, December 6.
“I would think after this being vetted, the government would take time. There’s no rush to go into this. Whether over a period of months or years, put it in the back burner and see how things would play out,” Barcelon added. (READ: ‘Why rush?’ Railroading allegations hound House’s Maharlika fund push)
The proposed Maharlika fund would pool P275 billion from government pension funds and banks, and the national budget for investments in big-ticket national development projects and other assets. However, several concerned groups and economists have criticized it for possibly endangering the welfare of pensioners, and for lacking enough safeguards.
Barcelon raised the concern that rushing to set up a sovereign wealth fund now may worsen the country’s economy, given the already-bleak market conditions and 14-year high inflation.
“If you look at what’s happening outside, the uncertainty, even some of the funds of other nations before have been doing very well, but lately have been suffering,” he said in an interview on ANC’s Market Edge on Monday, December 5.
Barcelon highlighted how even historically successful funds, such as Singapore’s Temasek, have taken a beating due to factors beyond their control: the war in Ukraine, high interest rates, and even the collapse of FTX. Recently, Temasek had lost its entire $275 million investment in FTX as the cryptocurrency platform declared bankruptcy.
“[T]here’s really an uncertainty in the financial world outside because of geopolitical issues, and recently the fiasco in the cryptocurrency,” Barcelon said in the CNN interview.
He reiterated the need for the government to put on hold the plan – should the Maharlika fund bill hurdle both houses of Congress – “and maybe study whether there’s more source of funds that would not affect our pension funds.”
In questioning the decision to use government pension funds, Barcelon compared the proposed local sovereign wealth fund with those of other countries.
“The issue at hand now is the sourcing of funds for the sovereign wealth fund. The other countries, normally their source comes from either resource-base, their trade surplus, like in the Middle East, they have oil. In other countries, they have trade surplus. So we have to ask ourselves: Where will the fund come from?” he said in the CNN interview.
Barcelon warned in a separate statement, “Pooling resources from the revenues of the national government, the Central Bank’s and government-owned financing institutions, may impact the sustainability of the country’s welfare system and financial standing.”
For Barcelon, the government should instead prioritize keeping its good credit standing rather than starting a new, potentially risky fund that could spark doubts internationally. A good credit standing allows the country to get more favorable interest rates on loans used for big development projects.
“With a good credit standing, we do get lower rates from foreign banks. That, I think, is more important for us. Maintain our good credit standing – not putting something that might give worldwide banks that entertain doubts whether this will really fly or not,” Barcelon said in the ANC interview.
Top groups reject Maharlika fund
The PCCI had previously supported the creation of the Maharlika fund.
The revised stance of the PCCI came after 12 top business and economic policy groups issued a joint statement of concern opposing the proposed fund, including the Makati Business Club, the Management Association of the Philippines, and the Financial Executives Institute of the Philippines.
“We register our serious concerns and reservations against the proposed MWF on the principles of fiscal prudence, additionality, solvency of social pension funds, contingent liabilities, monetary independence of the Bangko Sentral ng Pilipinas, government in the economy, and transparency,” the groups’ statement said.
Like the PCCI, the groups were concerned about the MWF’s funding sources.
“The country does not have a bonanza of commodity surpluses that need to be deployed. Instead of leaving a legacy of surplus funds to be managed for future generations, the current generation is leaving a legacy of heavy indebtedness which future generations need to pay or refinance,” the business groups said.
Rather than creating a new fund, the groups urged the government to focus its revenues towards managing debt and maintaining the Philippines’ credit rating.
“The existential priority of the government is the management of the fiscal deficit and the public debt in order to avoid a downgrade of the country’s credit rating. The priority for national government revenues and GOCCs’ revenues is to cover public expenditures to keep the fiscal deficit and public debt from increasing further and undermining the delivery of public services,” they said.
Senators have also voiced doubts on the need for a sovereign wealth fund, pledging to study the proposal further if and when it reaches the Senate. (READ: Imee Marcos, senators question P275-B Maharlika Wealth Fund proposal)
“I will be sure to bring these points up on the Senate floor at the proper time. For now, this so-called Maharlika fund is setting off many alarm bells. Long-term consequences will be felt if we establish a sovereign wealth fund prematurely,” Senator Risa Hontiveros said in a press release. – Rappler.com