EDITORIAL
FOR JUNE 4, 2023
A leap of faith to the great unknown
Senator Chiz Escudero described the act of Congress
in passing Senate Bill No. 2020 on its third reading as “a
leap of faith to the great unknown”. Just before Congress
adjourns, the final version of the bill that creates the
Maharlika Investment Fund (MIF) was approved by both
the House of Representatives and the Senate.
It’s only a matter of a stroke of the President’s pen
that the Philippines will join the ranks of countries with
sovereign wealth funds, such as France, Norway, China,
the United Arab Emirates, the United States, Singapore,
etc.
Having a sovereign wealth fund is like buying a
Ferrari. To the rich and famous, it is like scratching the
itch to spend money without making a dent in savings.
But to the financially challenged, it is a perfect cover-up if
you are drowning in debt. As this develops, the National
Treasury reported that the national government’s total
outstanding debt reached P13.91 trillion as of the end of
April 2023.
One of the vehement objections against establishing
the MIF is that the country does not have surplus money
to invest. After the controversial proposal to tinker with
the pension funds managed by the GSIS and the SSS, the
final version mandates the Land Bank, DBP, and the
national government to be the major investors in the
Maharlika Investment Corporation (MIC), with the two
government banks transferring funds of P50 billion and
P25 billion, respectively, as their investment in the shares
of the MIC.
Over the years, several banks collapsed due to
problems with capital adequacy. Transferring P75 billion
from the two government banks will undoubtedly not
positively affect these banks’ capital adequacy ratio. In
the case of the Land Bank, the investment in the MIC will
diminish about one-fourth of its capitalization, and the
capital diminution for DBP is even more relative to its total
assets.
A prudent investor typically places his money in safe
havens when economic conditions are highly uncertain.
Some experts have warned that the threat of global
recession still lingers. This should serve as a sufficient red
flag against too much risk-taking.
Congress ignored all the warnings and proceeded to
take a leap of faith. Kenny Rogers describes this act in the
song The Gambler in this wise: the secret to surviving is
knowing what to throw away and knowing what to keep.
Cause every hand’s a winner, and every hand’s a loser,
and the best you can hope for is to die in your sleep.