To Manufacture Consent: The Maharlika Investment Fund

by: Sean Marcus V. David || Photo Credit: Rappler

One thing that the people tend to forget whenever discussing the State and the Government is that these figures derive their authority not simply from the trust of a higher power or the laws they wrote; this authority exists through a social contract between the State and its people. Whether to enforce its belief systems and moral principles, to facilitate economic interests, or simply to provide protection, the State and its institutions exist solely through the people’s consent to be governed—consent only given when the people trust the State to do its duties using its elevated positions of power.

The Maharlika Investment Fund, more commonly known as the Maharlika Wealth Fund, is a Sovereign Wealth Fund proposed by House Bill No. 6398. Like most institutions, it is supposed to take surplus funds—which arise when government revenue far surpasses budgetary expenditures—and invest it in stocks, bonds, and other security nets and provide the Government with recurring income. In addition to having a massive budgetary surplus, most nations that decide to establish sovereign wealth funds have little to no international debt to service, thereby freeing up funds that could be turned to maximizing long-term returns on investments by the Government. Due to its nature, the Maharlika Wealth Fund would have much greater risk-tolerance—the willingness to accept the risk inherent to the volatility of the investment’s value—compared to pension funds and the Central Bank, and, to much concern, greater lack of transparency.

It is with this context that we explore the concerns the Filipino people have with the Maharlika Wealth Fund, starting in particular with its source of funds. As originally envisioned, the Fund would have sourced its seed capital from the Government Service Insurance System (GSIS), the Social Security System (SSS), the Land Bank of the Philippines, and the Development Bank of the Philippines (DBP). These sources do not count as surplus funds, and in fact, the funds of the GSIS and the SSS aren’t even public funds. Pouring the funds of the GSIS and the SSS into a volatile investment fund like the MWF would be putting the hard-earned wealth of the people at great risk, which the people deemed to be unacceptable—leading to their removal as sources from the bill. Furthermore, the Landbank and the DBP are already required by law to pay 50% of their annual profits to the General Fund of the Government. Thus, further cutting into their funding would risk their ability to operate and the government programs they support. It should also be noted that the Philippines does not have any commodity-based surplus funds sourced from external trade conducted by state-owned enterprises.

The nation clearly lacks the surplus funds required to set up the Maharlika Wealth Fund, but what it does have is a massive budgetary deficit of ₱13.64 trillion, or $246.34 billion. This debt comprises a whopping 63.7% of the National GDP as of 2022–a massive jump from 39.4% at the start of the pandemic. This is on top of low growth projections by the Central Bank of the Philippines and the worries of the Filipino people, with over two-thirds of the people surveyed by TransUnion expecting an economic recession by the end of 2023. With the perfect storm of pandemic anxiety and lack of investor trust in President Ferdinand “Bongbong” Marcos Jr. due to his family’s association with grave government corruption, some doubt the state’s ability to keep the economy afloat. 

Between the lack of fiscal capital to set it up, the incredible debt garnered by the administration through its mishandling of the pandemic response, and the lack of trust from foreign investors and the Filipino people, it is no surprise that people are dubious of how the House of Representatives abruptly approved the House Bill No. 6398. 

Is it strongly imperative that a Sovereign Wealth Fund be created for the nation, even when it doesn’t have the funds to reliably service its foreign debts? Are there truly no better alternatives into pouring what little funds we do have into bouncing back from the damages brought by the pandemic? Are we even sure our funds are in safe hands, when the President still hasn’t braved the herculean hurdle of rising above the reputation his family name has? In what seems to be another issue to add to the pile of unpopular laws passed by the Administration, the MWF could only lead to further instability within the nation, either through gross mishandling of its funds, or worse. It is important for the Government to first prove itself capable of both building back the economy and placating the people’s concerns before it strives to pass laws that could impact the nation for decades to come. For in its current state, any controversy could be the straw that ultimately breaks the camel’s back.

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