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GSIS to provide P125 billion to sovereign wealth fund

The Government Service Insurance System headquarters in Pasay, Philippines. May 28, 2012. — BW FILE PHOTO

THE government financial institutions (GFIs) that will be tapped to provide capital and help manage a P250-billion sovereign wealth fund have disclosed their proposed contributions, with the pension fund for civil servants providing half the required initial funding.

At an online hearing of the House banking committee, which is evaluating the banking-related provisions of House Bill 6398 creating the Maharlika Investment Fund (MIF), the Government Service Insurance System (GSIS) committed P125 billion, the Social Security System P50 billion, the Land Bank of the Philippines P50 billion, and the Development Bank of the Philippines (DBP) P25 billion.

Further annual contributions are expected from the Bangko Sentral ng Pilipinas and the Philippine Amusement and Gaming Corp.

The sovereign wealth fund will also be supported out of the national budget, or the General Appropriations Act.

Sovereign wealth funds are typically supported by proceeds from commodity exports such as oil, as is the practice in energy-rich countries, or other foreign exchange surpluses.

The proposal to effectively fund the MIF with pension money and bank deposits is an unusual feature of the Philippine set-up. MIF supporters have said that the wealth fund will “optimize” the investment strategies of GFIs and direct funding to government priority projects.

At the hearing, the four GFIs said that in supplying the capital to startup the MIF, they will require accommodations in how they are supervised by their regulator.

By law, government-owned and -controlled corporations (GOCCs) must remit 50% of their profits to the Treasury as dividends.

GOCCs answer to the Governance Commission for GOCCs (GCG), which ensures that GOCCs are self-sufficient and not a drain on public funds. The GCG also rules on what measures to take if a GOCC is not capable of remitting dividends.

“If we want a responsive wealth fund, fewer restrictions will be better,” DBP President and Chief Executive Officer Emmanuel G. Herbosa said at the hearing.

Manila Rep. Irwin C. Tieng, the banking committee chairman, approved the creation of a technical working group to refine the bill, and proposed to solicit further comment from finance industry professionals.

The next committee hearing is scheduled for Thursday.

Parts of the bill are also being evaluated by the House committees on appropriations and ways and means. — Beatriz Marie D. Cruz

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