Press Release
September 12, 2010

Invest GSIS funds in RP, not abroad

State pension fund Government Service Insurance System (GSIS) should first explore viable investment options in the country before taking out another tranche of pension cash off-shore.

Sen. Ralph G. Recto yesterday said the planned additional $400 million investment overseas of the GSIS as reported in the media is better kept inside the country.

He said the GSIS funds could be invested to bankroll the government's slew of big-ticket projects under its Public-Private Partnerships (PPPs) program.

"The government is mightily trying to identify sources of funding for its PPP projects and we have the GSIS raring to invest more pension money abroad. I just don't get it," Recto, Senate ways and means chair, said.

"I strongly urge President Aquino to issue a 'hold departure order' on these funds," he added.

Recto said the GSIS could roll out the $400 million investment as long-term fixed rate cheap loans to PPP project proponents for a respectable return of investment (ROI) or interest.

"Every GSIS member would stand proud seeing highways and railways funded from their own pension contributions," he said.

He stressed it is already baffling that $600 million of GSIS money invested abroad only earns a mediocre seven percent ROI, sending away another $400 million would, therefore, be "utterly vulgar, to say the least."

"The first off-shore placement is forgivable but a second overseas foray would be high treason amid the difficulty in looking for funds to bankroll new highways, tollroads, airports, irrigation facilities and more MRT/LRT lines," Recto said.

Recto said the government should even consider repatriating a sizeable chunk of the $600 million already invested abroad to boost the financing pool for the big ticket infrastructure projects of the new administration.

"As the new government lays down the blueprint of its PPP program, the GSIS could assume an active role by sending back home its overseas investments," he said.

The GSIS has $600 million currently parked in foreign shores, which are earning a yearly interest of seven percent as disclosed by its officials before the Senate finance panel.

Senators including Recto pooh-poohed the annual ROI as small and considering that it was pegged in peso and not in dollars.

The GSIS's off-shore investments are managed by Amondi of France amounting to $400 million while the $200 million is handled by Pimco Equity of California , USA .

"It's time to do a 'Western Union' on these funds and wire transfer them to Juan de la Cruz," he said.

Recto noted that the ROI or income from these investments is pegged in peso terms and could be much lower if measured in dollar terms.

"If we can't get respectable returns from these investments abroad, we should rather use it here to serve as a funding catalyst for the PPPs," he said.

He stressed the pension funds that would be invested should have a government guarantee to protect its members and should have no adverse impact on the agency's actuarial life.

"The local earnings may not match or surpass the seven percent per annum ROI derived by GSIS from its overseas investments but these could be money worth invested for a national cause," Recto said.

"After drawing flak for the fat paychecks and bonuses of its top executives, this could be GSIS' fresh shot at redemption," the senator added.

Last week, the GSIS announced plans to invest another $400 million of pension money in the overseas market.

Lorenzo Sixto Lichauco, GSIS senior vice-president for asset management, has told lawmakers that the planned additional investment will be on top of the $600 million it had already invested abroad.

President Aquino has made a policy statement that most of the major projects of his government would be undertaken with the private sector, which he packaged as the PPP program.

At least 10 PPP projects are lined up next year from an original list of 70, which would include airport projects in Panglao Island off Bohol and in Daraga, Albay.

The short list also included the improvement of the Laguindingan airport in Misamis Oriental as well as an irrigation facility in Sultan Kudarat and additional lines of the Light Rail Transit system.

The new management of GSIS said that the controversial state-owned institution was in good shape with over P500 billion in net assets.

At end-June this year, GSIS had a reserve of P541 billion plus an unassigned surplus of P38 billion.

In the first-four months of 2010, GSIS registered a 10 percent growth in net income to P18.5 billion, boosted by extra-ordinary gains from the sale of some of its major stock investments.

GSIS has been able to rebuild its fund in the past nine years, starting from P18 billion to P572.4 billion as of the end of 2009.

Of the amount, about P280 billion is invested in fixed income securities while the rest is in other investments such as real estate and P10 billion in local stocks as well as $600 million in offshore placements.

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