Much has already been written about government’s intention to establish a sovereign wealth fund. I purposely held off sharing my comments last week as I knew House Bill 6398 would still be revised, given its contentious nature and pushback from civil society. True enough, the SSS and GSIS were removed from among the contributors to the fund and in its place, the profits of the BSP and other sources still undefined would comprise the P250-billion investment kitty.
With important parts of the bill still undefined, it is reckless to rush the bill’s passage. We’re talking about the people’s money here. The totality of the plan must be clearly understood and its implications carefully deliberated on. Congress is doing us a disservice by conspiring to railroad the bill’s passage. They are obviously acting according to political interest, not the interest of their constituents. It’s disgraceful!
The proposal to establish a sovereign wealth fund to maximize investment yields of excess liquidity is problematic on many levels.
Let me start with the basic premise of it all – that the country has excess liquidity. Not true. Fact is, we have been operating on a current account deficit, which is expected to reach a record high of US$20.6 billion this year. Government has been borrowing to fill the gap. This has brought government’s debt to P13.52 trillion; representing 63.7 percent of GDP, well above the 60 percent threshold.
To extract funds from government financial institutions, the BSP and cash-cows like Pagcor only diminishes the state’s ability to combat economic shocks. It will also deprive the BSP of funds to defend the peso. We expect a global recession next year and the impact on the Philippines will be significant. We need our liquidity. To wipe it out, at this point, will leave us no choice but to borrow more, consigning the country deeper into debt.
The proponents of the bill claim that the sovereign fund will bring in job generating investments.
If indeed the intention is to promote new investments and create jobs, perhaps a better course of action would be to mandate the Landbank and DBP to allocate a larger portion of their loan portfolio towards the agricultural and industrial sectors, respectively. After all, these are their mandates. The sovereign fund duplicates and overrides these mandates. It is redundant.
What the sovereign fund does, in reality, is centralize investment decisions (using the country’s wealth) to the president and a narrow elite. Remember, the fund is exempt from government investment protocols. Hence, those who control the fund can channel it as they deem fit. It will be as if the fund is owned by monarchy.
Depositors of Landbank and DBP (including myself) have come to trust the conservative investment strategies of both institutions. To channel the deposits to the sovereign fund exposes depositors to a new kind of risk – risks we are not ready to assume.
Even if the authors of the bill assure us that government financial institutions will bear “no risk” since its investments will be guaranteed by government, we must realize that government funds emanate from taxpayers money. So it is still our taxes that guarantee losses.
I speak for millions of Filipinos who’ve been burnt by corrupt politicians and a justice system too slow and too ineffective to right the wrongs. We all felt the pangs of loss when P15 billion of our PhilHealth contributions vanished to corruption while those who benefited from the heist went scot free. We taxpayers could only grit our teeth in anger when government misused our hard earned taxes for the Pharmally scam. Again, none of the real enablers were incarcerated. Worse, they roam about town as if innocent.
The checks and balances of our laws are no match to the sway of powerful politicians. This is our reality. So even while the authors of the bill claim that there will be layers of controls and oversight, we all know that this means nothing when orders come from the top. This is especially true since the heads of the Commission on Audit, Sandiganbayan, Department of Justice and Supreme Court are all Marcos-Duterte appointees.
We have gone down this road before. Government managed funds have always been a source of runaway corruption for those in power. Recall how coconut farmers were duped when the Coconut Investment Fund was used by a crony to buy shares of San Miguel Corporation for himself. Recall how road users were duped when the P61 billion vanished from the National Road Fund. Recall how another crony absconded with US$50 million in kickbacks and broke the banking system in the process.
We have seen it many times before. When public funds are lost, politicians use the web of the law combined with their political gravitas to evade accountability. In the end, no one is accountable, no one is punished. The guilty go scot free and the taxpayers are left to pay the price. Acerbic as it sounds, this has been the story of the Filipinos since impunity became part of government’s culture.
Without a credible justice system and political leaders without a track record of honesty, let us not even consider another government-managed fund, let alone one on this scale.
If this administration really wants to improve our finances, might I suggest they channel their energies towards our flagging manufacturing sector and gaping import dependence, which is a ticking timebomb. Our trade deficit (exports minus imports) was already at US$41.11 billion as of end-August. Unless our import dependence is addressed, our current account deficit will continue to grow and our debt levels will continue to rise. A manufacturing resurgence must be made the priority and Malacañang will do well to expend its political capital towards this end.
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Email: andrew_rs6@yahoo.com. Follow him on Twitter @aj_masigan