Senators point out loopholes in bill creating Maharlika Investment Fund
Senators on Wednesday pointed out loopholes in a bill that seeks to establish the country’s sovereign wealth fund.
During a hearing on the Maharlika Investment Fund bill, Senator Aquilino Pimentel III said that while the bill has a list of allowable investments, one provision lets the board choose all other investments.
He also said while there is a provision that puts a two percent limit on administration and operation expenses, there is another that allows additional expenses, which basically removes the limit.
“We hear news about the President’s report that the Japanese investors are excited to invest in the Maharlika fund. Where is the mechanism of the current bill? How do they invest? It is not stated there. This Maharlika Investment Corp. can directly give assistance. What is the meaning of directly? Another Department of Social Welfare and Development? What are we doing here?” Pimentel said.
“It’s a very disappointing administrative measure. The assumption is, if it is an administrative measure, it is backed up by all the best lawyers and bill drafters of the administration. And yet this is the result,” Pimentel said.
The Senate is holding its second hearing on this bill. The House of Representatives passed a bill creating the Maharlika Investment Fund.
For his part, Senator Sherwin Gatchalian also questioned the lack of details on how to invest in the proposed sovereign wealth fund, especially with the “risk-averse” Landbank of the Philippines (LBP) being directed to contribute P50 million to its initial capital.
Gatchalian stressed that the LBP’s funds were mostly from the agriculture sector, government employees, local government units, which is why “these funds are meant to be safeguarded by making wise investments”.
LBP President and Chief Executive Officer Cecilia Borromeo said they could invest in the Maharlika Investment Fund if it was part of the national government’s socio-economic agenda.
Senator Nancy Binay told the Bureau of Treasury (BTr) that they could be persuaded to pass the measure if the Maharlika Investment Fund had a business plan.
“How can you envision a return when you don’t even know what is the specific developmental plan?” Binay asked.
National Treasurer Rosalia De Leon replied that they will make an investment strategy and risk management strategy for the Maharlika Investment Fund.
Senator Francis Tolentino asked De Leon why the proposed sovereign wealth fund should be exempt from documentary stamp tax, saying much revenue will be lost.
"We will lose much (income). Assuming my figures are correct, how will you offset this?" he said.
In response, De Leon said the money saved from document stamp taxes could be used for other government projects which will be funded by the Maharlika Investment Fund and not from the national treasury.
Foundation for Economic Freedom President Calixto Chikiamco called the fund sources of the proposed sovereign wealth fund “problematic”.
He said that if the Banko Sentral ng Pilipinas (BSP) and other government financial institutions were to contribute to MaharIika, “it will put our banking system at risk”.
“It will become wobbly. The market will perceive that and create contagion and financial panic," Chikiamco told lawmakers.
Chikiamco suggested that initial funding for the sovereign wealth fund could come from “privatization proceeds” of the government and eventually come from the private sector and foreign investors.
He also said that the goal of the Maharlika Investment Fund should be clarified with no conflicts of interest arising.
According to Chikiamco, the playing field should not be tilted in favor of the sovereign wealth fund.
"We’re just arguing that the playing field should be level, under the bill, it is exempt from all taxes. It will have an unfair advantage over others,” Chikiamco said.
“It’s not so much where money will go but the playing field will be uneven,” he added.
Tolentino then asked the Senate Committee on Banks, Financial Institutions, and Currencies to require the Bureau of Internal Revenue (BIR) to attend the next hearing so they can respond to tax queries. Jaspearl Tan/DMS
