Several senators said they have misgivings on the proposed Maharlika Investment Fund (MIF) on the first day of the hearing on the proposed sovereign wealth which President Ferdinand “Bongbong” Marcos Jr. extolled at the World Economic Forum in Davos, Switzerland.
During the hearing, Senator Chiz Escudero said he found several loopholes in the MIF which he stressed the government needs to address.
Sen. Risa Hontiveros said that the MIF may instead become a liability fund that would balloon the nation’s already enormous foreign debt and make life harder for the present and future generations of taxpayers.
Sen. Win Gatchalian, chairperson of the Committee on Ways and Means, noted that those investors who would put their money in the MIF seem to enjoy too many tax exemptions compared to those who avail other mutual funds. “With this fund (MIF), number 1, they don’t pay any taxes and then, number 2, aren’t we skewing the returns also? “ he said.
He also aired concern that if the MIF failed, it would be the taxpayers who will bear the burden.
But Senate President Juan Miguel Zubiri said he already directed Sen. Mark Villar, chairperson of the Senate committee on banks and financial institutions to thoroughly study WIF and allocate more time to come up with a “very good measure.”
Villar guaranteed that the MIF, a priority measure of the Marcos administration, ensures that the country will attain economic transformation, growth, and sustainability.
The MIF, he said, will be used to invest in programs and projects which will help generate income and in attaining the government’s economic plans.
“Because a normal fund would pay all these taxes—income tax, document stamps, and so on. So, we have now the MIF which is highly attractive because it is not paying taxes, it is attracting private funds, and you have another set of funds that perform the same functions but pay a lot of taxes,” Villar said.
For his part, Senate Majority Leader Joel Villanueva pushed for safety nets to ensure that funds are protected. This was also the same concern raised by Hontiveros.
Meanwhile, Escudero reiterated that the proposed legislation in its current form needs further amendments to address the “many gaps and loopholes.”
Escudero said the administration should not rush the Senate into passing its own version of the MIF bill.
He said both versions of the House and the Senate that are endorsed by the Department of Finance, the National Economic and Development Authority and the Department of Budget and Management elicit more questions than answers.
House Bill 6608, authored by Speaker Martin Romualdez, was approved in the House of Representatives on December 15 after President Marcos certified the proposal as urgent.
Escudero also said unless the loopholes are addressed, the passage of the bill is bound to get delayed.
“I am telling you already, the bill will be delayed because there are so many gaps and loopholes in it,” Escudero told the representatives of the concerned government agencies at the hearing.
“They are obligating Land Bank and the Development Bank of the Philippines to put P50 billion and P25 billion, respectively, but no such provision in the law which said what can they gain from these banks,” he said.
He also disclosed that even the position papers submitted by these government financial institutions to the Senate panel expressed concern on the bill’s silence on their supposed return of investment or ROI.
The senator also questioned the provision in the bill that gives the proposed Maharlika Investment Corporation (MIC), which will manage the wealth fund, vast exemptions from Republic Act 9184 or the Government Procurement Reform Act.
Under Section 32 of SB 1670, the procurement or engagement of the professional or technical services needed in the selection of investments authorized under the MIF Act such as fund management, investment and analysis and advisory underwriting, securities brokerage and dealership, capital market and equity research analysis, and other similar services necessary in the selection of allowable investments shall be exempted from RA 9184 and its implementing rules and regulations. Further, the competitive selection process and guidelines for the foregoing procurement or engagement of the professional and technical services shall be approved by the MIC board.
At the same time, Escudero said he is worried over a slew of tax exemptions for investors who would put their money in the sovereign wealth fund compared to those who avail of other mutual funds.
“Why wreak havoc on the system by exempting this entity? And I think this is the first time, to my knowledge, na may isang entity na ganito kalawak ang exemption na binibigay natin,” Escudero said.
He also expressed concern over the composition of the MIC board of directors whose nominations will approved by an advisory board that will be created under the proposed MIC Act, instead of having them go through the Governance Commission for Government-Owned and Controlled Corporations.
Hontiveros said that Filipinos will have to take on bigger foreign debts to establish the MIF, since no new source of funds for the project—which are not already dedicated to debt servicing or financing the annual budget—have been identified.
“We should perhaps instead call the MIF the “Sovereign Liability Fund” as it will be effectively funded by liabilities. There is also no assurance that the cost of borrowing will be lower than the yield to be generated by the SWF,” Hontiveros said.
“The Philippines already has a high level of debt to finance government programs and no new sources of funds have come into consideration since the MIF discussions started. Instead of paying our debts, we are putting up an SWF, the effect of which is, the Philippines is borrowing more money for the SWF,” she added.
