Press Release
February 27, 2023

TRANSCRIPT OF INTERPELLATION
Senator Risa Hontiveros during the Maharlika Wealth Fund hearing

RE: BSP's Independence

SRH: In the previous hearing, Sen Win Gatchalian asked the BSP why, when the Senate was deliberating on the increased capitalization of BSP, BSP officials even argued for a P400 billion capitalization instead of just P200 billion. Congress approved only P200 billion. Pero mula noon after global commodity prices gyrated wildly to where they are today and finances became volatile in the course of the pandemic and of the Russian aggression in Ukraine - our BSP Deputy Governor Dakila said that it's okay for the BSPs capital to be built up over a longer period.

My question Mr Chair, is it also the position of BSP Governor Felipe Medalla - that despite the global economic volatility it's alright to defer the build up of the BSP reserves to P200 Billion man lang to give way for financing a Maharlika Investment Company or Fund? And what do the members of the Monetary Board have to say?

BSP Illuminada Sicat: On the question of the good senator, at the time the BSP was negotiating for a capiutal increase, the BSP was incurring successive years of losses. It was I think the data sent then was 2016. During that time, the BSP was incurring five years of successive years of losses. Noe these losses emanated from BSP's initiative in order to address some of the volatilities in foreign exchange, but recently, based on official reports of the BSP, we have incurred, for the past 3 years, 2019-2021, BSP has recovered and posted income and was able to remit dividends to the national government. I am just giving you the information that at the time we were representing a capital increase, the BSP did not remit any dividends to the government at that time. So in answering to the question, can the BSP provide funds to the MIF at this time, looking at the performance of BSP, 2019-2021, the BSP can afford for two years, temporarily, provide dividends to the MIF. Of course, we are not sure whether the uncertainties that befall in 2012 to 2016 when we incurred crisis and we need we really reported losses, we are not sure whether these will happen again but given the timeframe of two years, given the time that we have recovered then establish the strength of the financial position of the BSP, we can afford to contribute to the dividends that goes to the national government and we recognize the fact that the congress has the power of the purse, make use of the remittance of the BSP for whatever purpose it wants it to be

SRH: Salamat ma'am and of course, Congress is __ by the inputs of institutions such as yourselves. Yung limang taon po ng successive losses, magkano cumulatively ang nawala sa Bangko Sentral? Kaya hindi kayo nakapagremit noon?

SICAT: In 2012, our loss was 59 billion, 2011 - 33.7 billion, 2012 - 95.4, 2013 - 25 billion and 2014 - 10 billion. 2015 - 4 billion, pababa po siya

SRH: So cumulatively?

SICAT: 226 billion

SRH: 226B cumulatively and nawala ng bangko sentral noong limang taon ng successive losses kayta hindi kayo nakapagremit. In the past 3 years, sabi nyo nakapagremit na kayo ulit. Magkano po ang recovered ng Bangko Snetral?

SICAT: Based on official release and it's also available on our website, the net income of the BSP in 2019 is 46.2 billion, 2020 31.7 billion 2021 is 34.7 billion po.

SRH: So mga 100?

SICAT: Over 100 B

SRH: So hindi pa po nababawi yung 226 B na nawala ng BSP noong limang taon pero nagsimula na kayong mag-remit ulit?

SICAT: Opo

SRH: May kulang pa po na mga 126 b para lang bawiin yung nawala sa atin noong limang taon pero sinasabi na ng Bangko Sentral na can afford na sa loob ng dalawang taon to invest in the Mharlika Investment Company and Fund. Ito po ba't posisyon na rin ni BSP Governor Medalla?

SICAT: This is the official position of the BSP. Ma'am I would also like to raise that when the BSP charter was amended, it also allowed the BSP to expand its policy toolkit. In other words po, there are other opportunities in the BSP to deliver its mandate for stability. In addition to the additional capital, we were also allowed to expand the policy toolkit. In other words, we are also allowed to issue our own instrument so that we can continuously perform our mandate of monetary stability.

SRH: Which is also why kahit po sa isang lay person tulad ko ma'am hindi naman ako banker, monetary stability ay mangangailangan ng kanina, narinig ko po ang sinabi ng DBP, usually ang mga bangko, you are more conservative mahirap din isipin in a way the risk you're taking to your own internal stability kung may babawiin pang higit 100 bilyong piso but you will use your expanded policy toolkit, you will use yung mga bagong instrumento na inissue nyo to afford the investment over two years sa Maharlika. Ito rin po yung monetary board position tungkol sa maharlika vis-a-vis ang initial na capitalization targets ng Bangko Sentral?

SICAT: It is.

SRH: Well, even at this point it would seem to me and perhaps to resource persons, halimbawa, from the Foundation for Economic Freedom, na baka Bangko Sentral is trying to please Malacanang baka it seemingly, ito yung pinaka-worrying sa mga mamamayan at mambabatas tulad ko, it seems there's been a b it of public wandering about this in the past several days, it seems na demonstrating a loss of BSP's independence and we're concerned about the institution at the expense precisely of Bangko Sentral's ability to maintain macroeconomic stability in the future. I hope I'll be proven wrong or I am wrong, and will be proven wrong about this kasi medyo irreplaceable ang isang institusyon katulad ninyo. Given our current economic status still emerging from a pandemic, a recession and then facing the possibility of having this proposal about a Maharlika Investment Company and Fund pero salamat po Ma'am at salamat, Mr Chair.

RE: Mining Fiscal Regimes

SRH: Sa DOF and then one last motion to the chair on quick observation lang doon sa inputs ng PAGCOR, yung PAGCOR mag-aambag sa Maharlika for 5 years, yung BSP kakayaning maghintay ng 17 years bago magfully-capitalized, parang nakakainggit naman ang PAGCOR.

Ang huling tanong ko po, in recent news reports DoF Secretary Ben Diokno says "If you exclude BSP, Landbank, and DBP where will we source it?" This was apparently a response to points raised by resource persons that the Committee heard during our second hearing. kalagitnaan ng Enero, Sec Diokno was also quoted in the media saying that mining revenues should be used to capitalize a Maharlika Wealth Fund. That would be an answer that the Secretary will probably not disagree with. We just need some information.

What is the Executive's revenue mobilization plan for the mining sector in terms of yearly revenues? and What will the aspired revenue in 2024, 2025 and 2026?

DOF USEC ZENO ABENOJA: Thank you, Mr Chair. In terms of funding for the MWF, a possible source will indeed be the revenues coming from the extractive industries, however, they may not be available immediately given that the fiscal regime over the sector is still being studied right now. A proposal is pending in Congress on the Mining fiscal regime but based on recent performance of the industry we could have some estimates of probably revenues that can be used by the national government for example, for the existing collection of mining industry, right now, the estimate is that the annual revenue could amount to more than 38 billion pesos there could be some incremental revenues depending on the proposed of the design proposed mining fiscal regime. Some estimates, for example if we look at revenues coming from the metallic mines, another an additional revenue of 9 billion can be generated annually that this is for the metallic mines. There are also proposals to include non-metallic segment of the sector. The range of additional revenues that could be raised would be about more than 200 million to as much as 3 and a half billion pesos. So these are some of the numbers that have been initially estimated, Mr. Chair, Madam Senator.

SRH: Maraming salamat, Mr Chair at salamat din Usec for mentioning the pending legislation here in Congress and in fact, bukod doon, mayroon ding long time pending case sa Korte Suprema to amend precisely the fiscal regime para bigyan ng mas malalaking shares compared lalo na sa foreign companies, bigyan ng mas malalaking shares yung mga local government units, mga mining affected communities at saka mga indigenous peoples kung saan, kung kaninong mga ancestral domains nakalocate yung pinka-highly mineralized na lupain natin dito sa Pilipinas. So since nabanggti na rin po, napag-usapan na rin natin, ano po ang status ng administration mining tax proposal na ipinasa noong August at the Committee level?

ABENOJA: Thank you, Mr. Chair. Unfortunately, Madam Senator, I don't have the update here but if I recall from the side of the government, we have already provided all the inputs that were requested from the government side.

SRH: That's right Usec, naprovide na ng executive lahat ng inputs pero totoo ba na sa House kung saan may mga key proponents din naman ang Maharlika, hindi pa nagkakaroon ng plenary deliberations on the new mining fiscal regimes mula noong maaprubahan ito sa committee level 5 months ago na almost half a year ago. Ano po ang nangyayari doon?

ABENOJA: Mr Chair, Madam Senator, unfortunately, I'm not familiar with po at this time, we can get back to you on that. Thank you.

SRH: Lastly, my request to the Chair, since we're trying to explore different points of view that the committee and our economic managers may hold and since we're not yet about to terminate the hearings,. may I respectfully move to request the Committee to invite the two additional resource persons or organization, one, the bankers association of the Philippines and secondly, the action for economic reforms.

SENATOR MARK VILLAR: I think the Bankers Association of the Philippines is here now if you want to ask questions for them

SRH: Thank you, Mr. Chair, kung ganoon, I was hoping kasi po that the BAP could weigh on the arguments we heard during the second committee hearing specifically on the possible effects on the financial system, if BSP, DBP and Landbank were to become the sources of funding for a Maharlika Fund. I think the Committee may also benefit from the BAP's comment of a proposition from one of their members who told me that a Maharlika fund will only undermine the glide back to a more manageable level of indebtedness projected in the government's medium term fiscal framework. Mr. Chair if they could be recognized.

SMV: Atty Moncupa from the BAP your recognized sir.

BAP MONCUPA: Good afternoon Mr. Chairman, Thank you Mr Chairman, your honors. I'm Antonio Moncupa, the president of the Bankers Association of the Philippines. Yeah you know our position paper commented on the proposal to include the BAP in the advisory board, now of course, we're hearing comments from our members and I tell you the bankers have separate comments on this spending bill in congress, n the Senate. One of the comments is that all the current contribution now coming from the Central Bank and may be PAGCOR have been generally part of the general fund so what we're saying is that if it goes to the sovereign wealth fund or the Maharlika fund it would mean that the either the government will be short of the funds that otherwise would have gone to the general funds or maybe the budget would need to be cut if the deficit should be maintained by way of cutting social services because right now it's been part and parcel of that, including that of the Central Bank, I think that what the good senator was commenting earlier.

SRH: And it was also a concern being pursued by Sen Binay with PAGCOR? If you have additional comments specific doon sa isang comment i heard from a BAP leader kapagka nagkaroon na nga nitong Maharlika parang maiinterupt yung sabi niya glideback to a manageable level of indebtedness

MONCUPA: Of course, when the deficit grows bigger then it's not good for the country because eventually the proportion of debt service becomes bigger relative to the social services which the government is supposed to provide, anything that enlarges the deficit that is not turn into a productive use by way of increasing the output, national output will be negative for future development of the country. If the funds would go otherwise the general funds will now be put to Sovereign wealth fund, the eventual effect will either be that, increase the deficit or we cut the services of the government.

SRH: Ang projection nyo po kapag nainlusad ang Maharlika it will actually be the deficit creating or deficit worsening and lead to cuts in social protection spending of our country? of our government?

MONCUPA: Actually it depends on where the funds be coming from. If the funds will be coming from sources that otherwise would have gone to the general fund and will be going to the general fund, the impact will be as mentioned. If there will be funds coming from other sources which are not part of the govermment funding at present then it would not cost a deficit to expand. I think that was also the last session that was mentioned by Mr Calixto Chikiamco that the funds are coming from other sources.

SRH: Intimately-linked yung dalawang punto nyo. So it would seem na yung advice sa Komite namin based sa inputs nyo, ni Mr. Chikiamco would really be to explore more of alternative sources of funding for a Mahralika, baka maisasama na yung maibubunga ng, kung maipasa na, yung bagong batas tungkol sa fiscal regime sa mining. Maraming Salamat, Mr. Moncupa. One last follow up, there's a plan to hire a manager to manage a fund. Kung totoo ito, magmaterialize, would you think this would be necessary?

MONCUPA: You know, I think the returns and risks are closely correlated. You get higher returns, if you take higher risks. and there's no shortcut about this. I think right now, Philippine fund managers are favorable as we've seen with DBP and Landbank. I was looking at their performance and I think through the years, they've shown the capacity to manage the funds by way if you look at the return equity that they've been registering. Now, in terms of investments, it's also some of the sad comments that we've been hearing, while we have not still in the position and I don't think I have also we should not take it a VP position, but maybe my opinion you should be asking, the investments that come in high return there is a of course no assurance that the returns are always there. Returns are computed based on historical performance. There is some mathematics involved but in general, those things happen but there's also it does not happen. The amount of returns that we get are commensurate to the risk we take. I think even Philippine managers if you give the risk parameters that you would give any other investors, there will be Filipino investors who will do the same thing.

SRH: Salamat Sir and I seem to recall that the point about there are no high returns without high risks if I remember correctly was also made by Sen Gatchalian in the very first hearing. Thank you for elaborating on that, Mr. Moncupa. Lastly, Mr Chair, I was requesting the Chair could invite the AER or Action for Economic Regorms kasi sila po they sought and they got the signatures of some of the countries leading economists including five former NEDA secretaries when they first publicized their opposition but to the earliest version of the Maharlika Investment Fund. There have been many refinements in that first draft to the draft that has been presented to this committee and I think it would be useful to hear any reassessment that the AER might have formulated in light of the changes to the earliest draft of the Maharlika Bill submitted to the Congress. If the Chair would like to request and move to invite also the Action for Economic Reforms to the next hearing, I so move Mr Chair.

SMV: We can invite them to the next we're scheduling a technical working group meeting already so we can invite them so that they could submit their paper and they can bring up their concerns.

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