Philippine lawmakers have dropped plans to tap two pension funds for 70% of the seed money to set up the Southeast Asian country’s first sovereign wealth fund after public backlash and governance concerns raised by the central bank governor.
Stella Quimbo, senior vice chair of the appropriations committee of the House of Representatives, told a media briefing the money will now come from the central bank’s profits.
The original legislation to set up the Maharlika Investment Fund (MIF) called for the Government Service Insurance System (GSIS) and Social Security System (SSS) to provide 175 billion pesos (US$3.16 billion) of the total 250 billion pesos, with the balance coming from Land Bank of the Philippines and Development Bank of the Philippines.
“At the end of the day, the purpose of the MIF is to be an investment vehicle where existing surplus capital of the government can grow and reap benefits. As we table the [MIF] bill, we will put in place safety nets that will lead to the success of the fund,” Quimbo said at the briefing on December 8.
Many members of GSIS and SSS, the largest pension funds in the Philippines, had objected to the original proposal, arguing that the pension money belong to them, and voicing concern about potential mismanagement.
Filipe Medalla, governor of the central bank, also expressed concern in an interview with Bloomberg TV, pointing to the global scandal over multi-billion-dollar losses from money laundering at Malaysian sovereign wealth fund 1MDB.
“To me, the experience of 1MDB Malaysia is the biggest risk, right? Even if the current guys [at MIF] are OK, will the guys five years from now still be OK? To me, it is a governance issue,” Medalla said in the interview.
According to Quimbo, the decision to drop GSIS and SSS as funders came from the primary authors of the legislation, which was introduced in the House of Representatives by Speaker Martin Romualdez, a cousin of Philippine President Ferdinand Marcos Jr. and Representative Sandro Marcos, the president’s eldest son.
“There are concerns raised about the nature of the investment to be undertaken by the GSIS and SSS in the Maharlika Wealth Fund, so we thought it better not to compel the GSIS and SSS to contribute initially to the fund,” Quimbo said.
Asked whether lawmakers are conceding that GSIS and SSS are private funds, Quimbo said it “was not the main motivation why we are amending the fund sources”.
