Escudero questions 'unfair' composition of Maharlika Fund governing board

Senator Francis "Chiz" Escudero on Wednesday flagged what he called the "unfair" composition of the board of directors that will manage the proposed Maharlika Investment Fund.

During the first Senate hearing on the bills creating the MIF, Escudero said that the board must be composed based on the contributions that each investor will put into the sovereign wealth fund.

Under the proposed MIF bills, P50 billion of the capitalization of the sovereign wealth fund will come from LandBank of the Philippines (LBP) and P25 billion from the Development Bank of the Philippines (DBP).

Both the House and Senate versions of the MIF bill proposed that the board of directors of the Maharlika Investment Corporation (MIC) be composed of:

• Secretary of Finance as chairperson;
• Chief Executive Officer of the Maharlika Investment Corporation;
• President of the LBP;
• President of the DBP;
• Six regular members representing the contributors to the fund, with the seats distributed in proportion to their corresponding investments; and
• Five independent directors from the private sector, the academe, business sector and investment sector

"If the capital contribution of Landbank is 50 percent, prudence and practice would dictate that 50 percent of the members of the board should come [from Landbank]…Ganu'n naman 'yung korporasyon, 'di ba (That's how it is in a corporation, right)? Twenty-five percent ng capital galing sa (from) DBP, 25 percent galing sa kanila (from them). Where did this formula come from?" Escudero asked.

"If you want proper corporate governance, hindi ba tama lang na (isn't it right that) Landbank should have the proportional representation of the board so that they can protect their investment?" he went on.

The same is true for other contributors such as Philippine Amusement and Gaming Corporation (PAGCOR), and private individuals, he added.

"You allocated already representation for future private investors na wala pa naman silang binibigay na pera (even if they have not yet given any money). Why would they have one vote similar to Landbank who contributed P50 billion. Isn’t that, to say the least, unfair? Isn't that going against basic governance and practice?" he asked.

National Treasurer Rosalia de Leon explained that the proportional contribution only applies to the six regular members of the board of directors, which Escudero also flagged.

"Sa six lang nag-a-apply 'yung proportional contribution nila, hindi sa 15? Unang beses ko ata nakarinig ng korporasyon na ganyan, na meron kang cap na kung saan lang maglalagay ng investments," Escudero said.

(The proportional contribution will only apply to six [members], not 15? I think this is the first time I have heard of a corporation with a setup like this, where there is a cap regarding investments.)

Further, Escudero was puzzled by the proposal to give a seat on the board to those from the private sector, academia, business sector, and investment sector..

"Ba’t may academe? Nagbigay ba si academe? Si private sector na pipiliin niyo, kung sino mang negosyante siya, nagbigay ba siya? Did he invest? There must be some rhyme and reason behind it why we are choosing people to sit there," he said.

(Why is there a representative from the academe? Did the academe give any investment? The private sector representative that you will choose, whoever businessman he may be, did he give any money?)

Commissioner Gideon Mortel of the Governance Commission for GOCCs (GCG), when asked about his position on this, said the composition of the board of directors depends on what kind of entity the MIC will be treated.

"I think the issue is cropping up because of the treatment of the kind of entity created. Here it would appear, because it is an MIC, it would appear that it is a corporation," he said.

"The question of Senator Escudero perhaps is on the reflection if it is treated as a stock corporation but if the entity is treated as a government entity with corporate body, then their submission could be perhaps be accommodated, but not if the creation is entirely on the treatment of the same being a corporation," he added.

Escudero said the presumption is that the MIC will operate as a private entity, which is why the proposed measures seek exemption from the salary standardization law, the GCG law, certain provisions of the procurement law, and certain taxes.

"This should, therefore, reflect to the corresponding interest and the stakeholding of the contributors to the fund. Otherwise, it would be just like the [Bangko Sentral ng Pilipinas], created by law, kami ang nagpangalan ng lahat, national government ang nagko-contribute (we are the ones who named the board members, national government contributes)," he added.

"You said in the proposed bill to treat this as an ordinary corporation where the rules of corporate governance would apply," he went on.

De Leon said the MIC will eventually become a GOCC and run on a commercial basis.

Her response apparently confused Escudero even more, prompting him to ask if the MIC would be a "hybrid" corporation.

In response, De Leon said: "Parang gano'n (it's almost like that)."

She added that this is the same structure applied by Singapore's Temasek and Indonesia Investment Authority.

Senator Risa Hontiveros then manifested that the executive branch has yet to determine what kind of entity the MIC would be. That is why Senate Minority Leader Aquilino "Koko" Pimentel III moved to refer the bills creating the MIF to the Senate Committee on Government Corporations and Public Enterprises.

"Kung 'di rin malinaw ang executive [department] kung anong animal itong Maharlika, nakakalito pati dito sa Senado," Hontiveros said.

(If it is not clear to the executive [department] what kind of animal this Maharlika is, it is also confusing here at the Senate.)

Further, Escudero asked why the appointments of the MIC board members will not go through the GCG.

The senator said the bills propose to create an advisory board that will vet the appointments of the board of directors.

"Anong problema ba ng GCG na ayaw niyong padaan sa kanila (What is the problem with GCG that you don't want this to go through them)? What will be hindered if it goes through GCG?" he asked.

De Leon said that it would be "time-consuming" if the appointments went through the GCG, considering the body's workload.

She said the advisory board, which will be composed of the secretaries of the Department of Budget and Management and the National Economic and Development Authority, among others, has the disposition to determine who should sit on the board of directors.

But Escudero pointed out that the advisory board members are coterminous and serve at the pleasure of the Philippine president, unlike the GCG, which is an independent body that was created to provide a different and separate perspective.

"If you really want this MIF to succeed, the more heads that are participating in crafting policies and being a part of it, I think, it would be better and best than simply all coming from one and the same group, all obeying the command and will of the president because they are all coterminous with the president and serve at his pleasure unlike the GCG," he said.

"If it's only the delay that you are afraid [of], I'm telling you already, the bill will be delayed because there are so many gaps and loopholes in the bill. So the GCG will have time. You can already start processing some of the names as soon as it is approved," he added. 

Before ending his interpellation, Escudero demanded Finance Secretary Benjamin Diokno's presence after the top economic manager missed the first part of the hearing.

De Leon was addressing all the senators' questions while Diokno was not around. An assistant secretary attended the hearing to represent the DOF.

"Next time, may I request, can the committee and the chairman require that the Secretary of Finance himself attend [the hearing]?" Escudero said.

Senator Mark Villar, who was presiding over the hearing, said the DOF officials had an emergency meeting and would rush to the Senate to attend the deliberations.

"Hahabol pa raw sila (They will follow). They just had an emergency meeting and they begged [for] our indulgence but I understand they will be coming," Villar said.

But Escudero said that Diokno must also give importance to the hearing on the MIF bills, as he emphasized that the finance secretary will be the future chairman of the board of directors that will manage the MIF.

"Kindly convey to Secretary Diokno. I thought this was important to them and they wanted us to rush this, they wanted us to do this and facilitate its passage. The least we would require would be their presence," Escudero said.

"Kung anumang emergency 'yon siguro naman mahalaga din naman 'to (Whatever emergency that is, I think this is also important) so that questions can be answered and not simply passed on and he will be the chairman of the MIF," he added.

Villar said he shared Escudero's sentiment and that the committee would remind Diokno to attend the hearings.

"We share your opinion and we expressed this to them. That's why they said, immediately after their meeting, they'll be rushing here. So we expect them soon and we will continue to emphasize that point for future meetings that we will require them to show [up] so that we can expedite also the bill," Villar said.

Escudero later told reporters that he prefers a professional manager to head the MIC board because the finance secretary already has a lot of responsibilities. 

The senator likewise questioned Landbank and DBP's stakes in MIF, even though the available funds of these government financial institutions were not allowed to be loaned to farmers.

He said that the Landbank and DBP are required to make investments in the agriculture sector under the Agri-Agra Law.

"Lumulusot lamang ang Landbank at DBP dahil ayaw pumayag ng Bangko Sentral na mag-invest ang Landbank at DBP sa iisang sektor lamang dahil baka delikado raw yung magiging fiscal position nung bangko halimbawa magka bagyo o baha ‘di lugi ang bangko pero sa kaso ng Maharlika Investment Company o Fund wala silang pakialam at willing silang talikuran ito, kalimutan ito," he said.

"Ang tanong ko bakit hindi nila gawin sa sektor ng agrikultura na maliwanag na kailangan naman pala na maliwanag na gusto nating mangyari, maliwanag sa intensyon mismo ni Pangulong [Bongbong Marcos] dahil siya hanggang ngayon ang kalihim ng Kagawaran ng Agrikultura sa ating bansa," he added. —KG/VBL, GMA Integrated News