As they say: “Don’t rush the process, good things take time”

Methinks Speaker Martin Romualdez has taken the many objections to his Maharlika Investment Fund (HB 6398, filed Nov. 28, 2022) as a test of his leadership.  He seems to have pulled out all the stops –including putting fear (for their jobs) in the hearts of the administration’s economic managers?  Because we have the first sign that when push comes to shove, they can be pushed and shoved.

Sudden endorsements

As a result they (the economic managers) put their signatures on a statement “strongly” supporting the bill, that arguably would have made their mentor, Dean Jose Encarnacion, turn over in his grave. But the brilliant, intellectual giant, full-speed-ahead-and-damn-the-torpedoes Dean has been dead for 24 years, so fear of what he would have said and thought has faded.  Nevertheless, the UP School of Economics can still hang its head in shame.

Then, Speaker Romualdez may have put fear in the hearts of his colleagues (for their pork barrels?), because in the blink of an eye, they became co-authors of the bill, crossing party lines if there are still any. At last count, the bill already had (said a news report) 280 co-authors  from the original 6 (Romualdez-Marcos family members and their three close followers).

And so, on Dec. 15, two days ago, the bill – now morphed into HB 6608 – is approved on third reading (it was approved on second reading earlier that day) by a vote of 279 Yes, 6 No, 0 Abstain.  The news report that said 280 co-authors must have been wrong, unless one of the co-authors decided to vote against the bill.

The passage of that bill must have broken records in the House. 18 days from filing to approval; 21 individual amendments accepted; second and third reading approvals on the same day; 279 or 280 co-authors (out of a 316-member House).

Whatever happened to “Don’t rush the process, good things take time”?  But then again, this is not a “good thing”.

The advocates of the bill say there were adequate public consultations, and point to the removal of SSS and GSIS from the list of initial capital contributors as evidence that there were.  Come on.  

How can there have been adequate public consultations when the whole process took 18 days?  We don’t even know what those 21 amendments are.  They could even be incompatible with each other.  

Whose Approval??

But even while the rush to approval was going on in the legislature, the campaign for public approval has not being let up, with the proponent this time being Budget Secretary Amenah Pangandaman , invoking the names of Asian Development Bank, International Monetary Fund, and even (good grief) the Milken’s Institute.  

It is unfair to make that statement, because ADB and IMF will never contradict a government official in public, except when they are attacked in public. So we will never know the real story. 

From the news report, this supposed support took (IMF, ADB) place during the Duterte Administration, about the time the Indonesian sovereign wealth fund (INA) was launched in February, 2021, when Ben Diokno, then BSP Governor, proposed a similar fund, financed by the BSP’s “surplus” reserves.  But even the report quoted Pangandaman as saying that both IMF and ADB had said that the government would have to “revise the mandate and the charter of the BSP” for that to happen.   That’s support?  As I see it, the IMF and the ADB had  just torpedoed the Diokno proposal!

And BTW, at that time (March, 2021), the reserves of the BSP were the equivalent of 11.9 months imports of goods and services and primary income. At the end of 2021, it was 10 months.  Now (end November, 2022), it is worth 7.5 months. That by no means indicates a “surplus” or “excess” reserves.  True, the rule of thumb is that a country’s reserves must be at least equal to three months worth of imports. But latest World Bank data on Total Reserves in months of imports (mostly 2021 data) shows that the world average is 11 months, East Asia and the Pacific is 11 months, East Asia and the Pacific excluding high income countries is 11 months, middle income countries (that’s us) is 11 months.  (see below)

I do not know why Sec. Pangandaman invoked the Milken Institute’s name in her move to assure the public.  How does Milken Instititute come in?  It’s founder is a man of less than upright reputation.  Google them, Reader.  

Finally, Pangandaman also said that Diokno met last week with the World Bank.  Well, the World Bank said that it would be “more than happy” to give advice on “best practices and design of sovereign wealth funds”.  That means the WB wasn’t in on it from the beginning. And is being asked after the fact. 

This is the way the government seems to be doing it.  Claiming support where none exists. Knowing they cannot be contradicted.  Hoping that invoking those names will deodorize the foul smell of the bill. 

An article entitled “Fashions and Fads in Finance:  The Political Foundations of Sovereign Wealth Fund Creation” (International Studies Quarterly, vol.58 Issue4), the author, Jeffrey Chwieroth, argues that  “policy “fashions” and “fads” play an important role in the creation of SWFs. Policy challenges associated with reserve accumulation and commodity-export specialization create uncertainty among decision makers. This uncertainty leads governments to search for solutions pursued by other countries that faced similar challenges. But rather than studying the efficacy of existing SWFs and learning from the experiences of other countries, the evidence suggests that governments emulated policies because they were fashionable among their peers—in other words, among groups of states that formed based on common structural economic characteristics. Indeed, many governments opted to create SWFs despite inconclusive or even negative evidence about their effectiveness.”

That sounds about right in describing the Philippines experience, except there is one more factor where we are concerned:  greed.