Maharlika: Consolidating 'kurakot' into one fund

Maharlika: Consolidating 'kurakot' into one fund Featured

SO, what's the fuss over this Maharlika Sovereign Wealth Fund that people who know nothing about investments are bitching about? As staunch apologist Secretary Ben Diokno declared: Maraming ... nagko-comment na hindi pa nababasa ata 'yung bill eh, so out of ignorance ..." In short, read the bill before you whine!

Dismiss the detail that the fund is named after Maharlika, the ostensible guerrilla group led by war hero Ferdinand E. Marcos Sr. that the US Army has debunked, and the National Historical Commission has said was "fraught with myths, factual inconsistencies and lies"!

Sen. Risa Hontiveros had to remind everyone: "I get heebie-jeebies whenever I hear the word 'maharlika.' It's part of the legacy of the martial law dictatorship, the mythmaking, to really milk it." Although it is a non sequitur, she could be right, considering this bill is proposed in Congress by Sandro and Martin, son and cousin, respectively, of BBM.

After six months in the political doldrums, and after the "kapalpakan" of his ex-executive secretary and accusations of a lazy president causing countless unfilled positions in the Cabinet and the bureaucracy, reportedly awaiting a vetting committee of one; he has caused them to file "... a bill seeking to create the fund — one of his administration's boldest economic plans to date." Bold! My eye!

Opposition to the fund has since swollen with some critics warning it could wind up as the motherload of all "kurakot schemes" eclipsing the NBN-ZTE broadband, the Napoles pork-barrel kickback scam, the Disbursement Acceleration Program (DAP), the Pharmally pandemic scams — combined. Admittedly, stretching a little bit too far with this comparison, one can't blame the Filipino for being so jaded on new initiatives from any administration involving congressmen and money — an oxymoron! But first, let's put things in proper perspective.

Sovereign wealth fund

This is a state-owned fund that is used to invest mostly globally in a variety of asset classes such as stocks, bonds, real estate, private equity or even in exotics as in metals, objets d'art, hedge funds, bitcoins, etc. Its main characteristic is using excess funds for maximizing long-term returns and thus not funds used by governments or their central banks for short-term "currency stabilization" and liquidity management. More importantly, in our case, these investments are intended to enhance the wealth of all Filipinos, particularly for the next generations.

There are also funds which are privately run with even bigger assets under management (AUM) than the whole GDP of the Philippines. The Blackstone Group has $881 billion in AUM.

The International Monetary Fund monitoring the 100 or so SWFs has listed some of those successful ones. Temasek, headquartered in Singapore, is the savings or generational investment fund that has the future of Singapore and its people in mind. Its long-term sustainable returns have been phenomenal since its establishment in 1974, running at 14 percent compounded annually.

One SWF of note is Norway's ($1.136 trillion) established in 1969 after the country discovered oil in the North Sea. Safeguarding the country's economic future with its excess funds, it has investments in 9,300 companies globally. Yet its investment lost $174 billion in the first half of 2022, principally due to inflation, the war in Ukraine and the fear of global recessions. But with enormous assets, this loss is just a mosquito bite.

Notorious SWF

But there are also SWFs that lost big not so much because of the exigencies of the world economy but because of the corruption of those that ran the funds. Foremost of these is the 1 Malaysia Development Bhd (1MDB) of Malaysia, described as one of the world's greatest financial scandals involving corruption, bribery and money laundering conspiracy in which the fund was systematically embezzled, with assets diverted globally by the perpetrators of the scheme. Reportedly Malaysia's then-prime minister Najib Razak had channeled over RM2.67 billion (approximately $700 million) into his personal bank accounts.

Another horror story closer to home is the Brunei Investment Agency (BIA). "This SWF was to accumulate savings for future generations, as energy resources are considered depleting assets that shrink to zero over time" (1MDB brochure). Founded in 1983 ($71 billion), the BIA was run by Prince Jefri, finance minister and chairman of the fund from 1986 to 1997. After an external audit, he was found to have embezzled $14.8 billion. The prince was exiled for a certain period from Brunei by his brother Sultan Bolkiah for losses/anomalies and the dissipation of BIA's assets.

GSIS-SSS

At present the Philippines already has investment funds — not strictly sovereign — as "sovereign" has a special global connotation. What is controversial in the shaping of the law is the diversion of assets of the GSIS and the SSS to the Maharlika. Congress in creating the Maharlika will siphon off P125 billion from GSIS and P50 billion from SSS (a total of roughly $3 billion).

These are contributions and savings of government and private sector employees, respectively — with counterparts from their employers. These institutions have for years been run by their own boards with their funds invested and returns accruing to the members. SWF is just a duplication. But as in anything that government handles, there are critical flaws.

Years ago, then GSIS president Winston Garcia filed plunder charges against four GSIS officials before the Office of the Ombudsman for their alleged involvement in a housing loan scam that defrauded the GSIS of P413 million. This was part of a large real estate investment portfolio of GSIS invested locally. Such funds "... has apparently stirred up a hornet's nest of racketeers who want to exploit the GSIS as their milking cow for as long as possible." One can't blame Hontiveros therefore for being scared, declaring in a television interview "... and speaking of plunder... they are saying that the money of the members of SSS, GSIS, Pag-IBIG will be mobilized for this sovereign wealth fund."

Transparency and safeguards

Strictly speaking, the Philippines doesn't really have excess funds to create our own SWF, in the manner of Brunei and Norway which set up theirs from their oil/gas windfall and surpluses. The Philippines' track record in running pension funds leaves much to be desired, let alone a global SWF.

In the Philippines, when you have Congress and administration allies painstakingly concocting ways to source funds for another dubious venture — which Maharlika is — cuidado! This is another monumental scam in the making! I'd rather listen to the better Marcos, Imee, expressing fears that the proposed Philippine sovereign wealth fund might suffer the same fate as Malaysia's 1MDB, which was hounded by corruption issues.

With graft and corruption so endemic in our country, ask any Filipino in the street if he really is assured of the pronouncements of our political leaders like Zubiri and Gatchalian declaring "... the need for full transparency and efficient utilization of taxpayers' money should the government push for its (Maharlika's) creation... corruption can be addressed by safeguards. An oversight committee in the Senate can also be created to ensure that the funds invested are properly monitored."

Once you have an oversight committee over the application of funds, the Philippine experience shows that over time, this becomes highly politicized and their dirty little fingers groping all over the place.

Maharlika is another scheme in consolidating 'kurakot' into one fund.

And God/Allah help us!

 

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Read 486 times Last modified on Wednesday, 14 December 2022 18:19
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