Recognizing the far-reaching implications of the highly contentious Maharlika Investment Fund bill, Senate Minority Leader Koko Pimentel III is leaving no stone unturned in exposing deep-rooted flaws of the proposed measure in a bid to sway his colleagues to vote against the bill.
“Truth is, this bill is unsalvageable and beyond repair,” Pimentel declared a few days away from the final vote on the highly contentious measure.
“After thorough analysis and careful review of Senate Bill No. 2020, I have come to the conclusion that the overall risk is too great that it outweighs whatever the potential benefits of the measure are, if there is any at all,” the veteran legislator stressed.
“Creating an investment fund – with a price tag of P500 billion – would require the government to divert resources away from more immediate priorities.”
The seasoned lawmaker said creating an investment fund – with a price tag of P500 billion – would require the government to divert resources away from more immediate priorities such as addressing poverty, hunger, education gaps, joblessness, healthcare deficiencies, and the country’s ballooning debt.
The senator pointed out how other similar fund mechanisms, such as sovereign wealth funds (SWFs), were established and funded through budget surplus, trade surplus, and income from in-demand commodities such as oil.
In the case of MIF, the country’s own version of a sovereign wealth fund, he said there is no new source of fund as the Philippines has no surplus in trade nor budget.
The country’s trade in goods deficit is around $40 to $60 billion a year, Pimentel noted.
Likewise, according to the Senate Economic Planning Office (SEPO), the government has been in a perennial budget deficit.
In the past 10 years, the average annual fiscal deficit amounted to P652.7 billion, or an average fiscal deficit-to-GDP ratio of 3.6 percent. To date, the highest deficit-to-GDP ratio was incurred in 2021, equivalent to 8.6 percent, no doubt made worse by the COVID-19 pandemic.
“With no surplus from oil discovery or from trade activities and no windfall profit of any kind, the Philippines has no justifiable reason to form and enter into the world of SWFs and investment funds,” he insisted.
“Our national debt now stands at P13.75 trillion as of end-February 2023,” Pimentel added.
The Maharlika Investment Corporation (MIC), according to him, will be vested with the power to incur more debt.
“The implications of the proposed Maharlika Investment Fund Act are simply too grave for us not to do anything to stop it.”
Pimentel said “the implications of the proposed Maharlika Investment Fund Act are simply too grave for us not to do anything to stop it.”
“These are difficult economic times,” he said, citing not less than three US banks that have failed recently such as the First Republic Bank, Silicon Valley Bank, and Signature Bank. And the contagion reached the banking safe-haven of Switzerland, leading to the collapse of Credit Suisse.
Even the Norway Sovereign Wealth Fund, the “gold standard” of SFWs, suffered $164 billion losses in 2022, Pimentel pointed out.
“We need to avoid making hasty decisions that could have long-term consequences,” he said.
In addition, the Senate chief fiscalizer lamented how transparency and accountability are compromised in the MIF.
With a country replete with a history of corruption and mismanagement of public funds, he said the bill’s lack of transparency safeguards can open the funds to all kinds of abuses.
“What I have learned from the few days the bill is on the floor, it has become increasingly evident that MIF’s shortcomings are insurmountable. There’s a reason why it took Norway 12 years to pass its own sovereign wealth fund,” Pimentel concluded.
