State assets should finance Philippine sovereign wealth fund

At the BusinessWorld Economic Forum on Nov. 29 at the Grand Hyatt Manila in Bonifacio Global City in Taguig, Finance Secretary Benjamin Diokno outlined in his keynote speech an optimistic growth trajectory for the Philippines, the overall fiscal resources and debt reduction needed, and investment liberalization policies that have been institutionalized. He also briefly mentioned the establishment of a state-owned sovereign wealth fund (SWF).

THE MAHARLIKA INVESTMENT FUND (MIF)The MIF, the Philippines’ SWF as proposed by the House leadership under House Bill 6398, ‘has attracted mostly negative reactions from researchers and corporate players in the country. See for instance these reports and columns in BusinessWorld:

“Medalla voices caution over plans to create $4.9B sovereign fund” (Dec. 2),

“PHL not ready for sovereign wealth fund — analysts” (Dec. 5),

“The Maharlika Wealth Fund,” Yellow Pad by Filomeno S. Sta. Ana III (Dec. 4),

“Some leadership gaps and uncertainties,” Introspective by Romeo L. Bernardo (Dec. 4).

What makes the proposed MIF controversial is that it will get funds from these four government agencies: the Government Service Insurance System (GSIS), P125 billion; the Social Security System (SSS), P50 billion; Land Bank of the Philippines (LBP), P50 billion; and Development Bank of the Philippines (DBP), P25 billion. The initial investment totals P250 billion.

Then it will get P25 billion from the National Government, plus foreign currency reserves from the Bangko Sentral ng Pilipinas (BSP) equivalent to 10% of OFW remittances and 10% of contributions from the Business Processing Outsourcing (BPO) sector.

These are indeed objectionable because GSIS and SSS funds are not tax money but private contributions by members and their employers meant for emergency and retirement needs of those members. The BSP also needs to keep a high level of gross international reserves (GIR) so that anytime external financial shocks occur, it will have sufficient foreign currency for companies to buy important imported commodities for several months.

To address these objectionable provisions, SWF should be sourced from government assets. In particular (a) Malampaya royalties, currently around P16 billion/year, (b) privatization of some wide government lands, and (c) privatization of many government-owned and -controlled corporations (GOCCs).

I propose five GOCCs and their assets as priorities for quick privatization, and about 20 others for long-term privatization (Table 1).

To avoid further public suspicion, this should not be rushed. Have the Malampaya royalties remain intact for at least 2023–2024, hasten the privatization of hydro power plants in Mindanao managed by PSALM, and fast track the privatization of PAGCOR and PCSO.

It is possible that by 2024–2025, the P275 billion initial investment target can be raised without compromising private funds like SSS and GSIS, taxes from the public, and GIR of the BSP.

This column has advocated large-scale privatization of GOCCs and other government assets mainly to pay and reduce public debt, not earmarked for whatever programs or agencies. And spare the taxpayers of higher and/or new taxes. Now should be the time to have wider public discussion on this subject.

THE UP PRESIDENCYOn Dec. 9, the University of the Philippines (UP) Board of Regents (BoR), the university’s policy-making body, will elect the next UP President.

Last week, 58 National Artists, National Scientists, and Emeritus Professors of UP — high caliber and well-respected minds — signed a joint statement outlining important characteristics of the next UP President.

One, he must be an exemplary scholar with a lengthy teaching experience, a deep-thinking intellectual, a competent administrator and committed public servant. Two, he must have an unblemished track record and proven experience in running a university and a full understanding of the needs of the UP community. Three, he must appreciate and treasure the intellectual and sociopolitical responsibilities of defending UP’s singular status as a safe haven and secure refuge for the pursuit of nurturing of critical thinking. Four, he must have access to an extensive regional and global network as a means for UP to collaborate with its counterparts in Asia and the world. And five, he must have an intricate grasp of data and analytics overlayed with the ability to link and apply these to the hard sciences, the social sciences, humanities, and others.

With these five clear, categorical characteristics of a university leader, the 58 academics and scientists have endorsed the current UP Diliman Chancellor Fidel Nemenzo, a noted mathematician who has done research and taught in universities outside UP, including educational institutions in Singapore, Phnom Penh, Tokyo, Amsterdam, and Munich.

I congratulate these brilliant minds for the clarity of their criteria and choice of a leader. Six of them were my former teachers at the UP School of Economics (undergrad and graduate): Drs. Raul Fabella, Florian Alburo, Dante Canlas, Epictetus Patalinghug, Gerardo Sicat, and Rolando Danao.

Esteemed BoR members should heed the advice of these brilliant minds and elect Dr. Fidel Nemenzo as the next UP President.

STATE UNIVERSITIES BUDGETRelated to the issue of UP Presidency is the rising budget of state universities from P66.9 billion in 2019, P77.4 billion in 2020, P81.4 billion in 2021, P108.4 billion in 2022, to P97.7 billion in 2023.

Below are the biggest state universities in the country. I chose only those whose budget has touched at least P1 billion in 2022 or 2023. UP has the biggest budget partly because funding for the Philippine General Hospital is shouldered entirely by UP (Table 2).

Many of these state universities have wide lands, the use of which should be optimized through long-term leases that will reduce their dependence on taxpayers. This is not happening except maybe with the UP–Ayala Land TechnoHub long-term lease. The establishment of MIF perhaps will force some state universities to sell part of their wide lands, proceeds to go to MIF.

Finally, as public debt continues to rise in the Philippines and many countries around the world, people should go back to assuming more personal responsibility in running their own lives. To say that their children’s healthcare and education from elementary to university is not personal and parental responsibility, only state responsibility, is wrong. This is a formula for endless state dependence instead of self-reliance — a formula for endless tax-gouging instead of tax cuts and more individual freedom.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

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