Cartoon by Sharif Ryan Beldia
In a world full of stakes, risk is a defining variable that causes reward or loss at the end of every choice. What comes along in every decision-making process is the primordial function of risk-taking—how one manages his willingness to seize an opportunity with life’s volatility. The recent controversy over the investment ploy of the current administration captured the keen eye of the general public. Probing the provisions of House Bill 6608 exposed substantial loopholes that leave questions about the proponent’s capacity to manage the risks at hand. Given the present economic status quo in the Philippines, a risk-based project without adequate planning and management is like dancing with the devil.
In the light of the Maharlika Investment Fund (MIF), the model was initially framed on the idea of a sovereign wealth fund, a state-owned investment fund consisting of government-generated funds, typically drawn from a country's excess reserves. With this in mind, magnifying the administration’s aspiration to establish an investment-driven income radix laid bare some of the intriguing and vulnerable fundamentals that this pursuit stands on.
One is the "surplus" concept, which caused tumult on its first presentation in the House, Sen. Pimentel elucidated that it’s messy and yet it’s so basic since the Philippines is burdened by its towering debt accounting for P13.6 trillion, a record high level as per the Bureau of the National Treasury, increasing by 0.02% or ₱3.15 billion from October to November last year. On a bright spot, BSP recorded a BOP surplus of $612 million in December 2022, compared to a deficit of $756 million in November and a surplus of $991 million in December 2021 (GMA News). Yet, this is just the tip of the iceberg; the surplus cannot offset the outstanding deficits recorded in prior months, as the full-year BOP position was at a deficit of $7.263 billion, reversing the surplus of $1.345 billion reported in 2021. To put it simply, the risk is getting riskier. In investing, the golden rule suggests that invest only what you can afford to lose. Looking at the Philippines’ financial state, the motherland is billions away from paying its credit obligations, and the country's year-to-year debt pile is swelling further and bigger.
Despite the fact that we are still in the prologue of this massive undertaking, we are already sailing red. According to retired Justice Antonio Carpio, the Maharlika Investment Fund is a "losing proposition." The fund's annual return is anticipated to be between 7% and 8%, while the interest on its debt-funded equity, including operational expenditures, will be 8.9%. Moreover, Carpio pointed out that, before establishing the fund, he believes that it would be prudent for the government to lower the debt-to-GDP ratio from its current level of 64% to the pre-pandemic level of 40%. This means that the country is lagging behind in terms of improving its production forces; as a result, interventions and a sound economic framework should be preeminent in the government's prioritization matrix.
In the first outline of the investment fund, funding and capitalization are provided to be pooled from Government Owned and Controlled Corporations (GOCCS) and Government Financial Institutions (GFIs) such as GSIS and SSS. This stipulation rolled out the red carpet for media groups, economists, and political circles to scrutinize the proposition of the authors as to why such an extent of financing is necessitated in the capital derivation. Conversely, Article III, Section 9 of the Constitution states that private property shall not be taken for public use without just compensation, so the mandate of the Maharlika Wealth Fund simply overlooks the rights of every Filipino who continues to toil and forage for a just living. The provocation took a positive note among the implementers, thereby excluding the two institutions from the probable fund sources as per the latest revisions of the House Bill.
Accordingly, the public backlash dealt a heavy blow to the removal of the subjects, given that these state pension agencies are primarily reliant on premiums paid by their members. With this critical shortcoming emerging from the plan's framing, it should be obvious that the government's legislative body should take the pacing at the most resolute and decisive interventions, rather than hastening, because it would result in engendering multitudinal risks in monetary and fiscal policies.
Following the perplexity of this state-funded investment, there are also significant reversals that were identified to cause torsional effects on the Constitution. The attempt to utilize the gross international reserve of the BSP will override the established precedents and the central bank’s charter. At the same rate, the violation to the Dividend Law of 1993, the overturn of the one-fund concept, and moreover the lurches that will trigger the financial system of the country forcing the government to borrow to compensate for the loss in these times of volatile interest rates.
Clearly, MIF is an answer at the wrong time. Planning should be grounded in the needs of time, and leaders should be adaptive to the changes it brings. The ongoing economic distress: consumers are hurting from exorbitant prices; workers are losing ends to survive; the government is hampered by financial obligations; and, ultimately, Filipinos are living on the precipice of tomorrow's uncertainty. We cannot risk more than we can make.
Now is not the right time, and MIF is not the best for now.
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