KAREN DAVILA (KD): Joining us on Hotcopy this morning, we have Senator Francis ‘Chiz’ Escudero. Senator Escudero, good morning to you!
SENATOR CHIZ ESCUDERO (CHIZ): Karen good morning at sa ating televiewers magandang umaga po.
KD: And Happy New Year! It’s nice to have you back on Headstart. Let’s start with the Senate hearings. You described your initial assessment of the Maharlika Investment Fund is “shaky at best” and “not well-studied”. What made to say that?
CHIZ: Well, to begin Karen, I asked them the representative of the economic managers and the person of the National Treasurer Lea De Leon, what is the basic objective of the Maharlika Bill? What do you seek to accomplish? Why are we doing it? A very basic question. The answer I got was that 50 other countries are doing it. So? So what do we want to do with it? She mentioned primarily infrastructure. Those in the House pushing for this also mentioned investments and infrastructure and yet the bill filed in the Senate specifically excludes infrastructure. So I am now in the quandary, what is the purpose to establish this fund? Now Karen, this bill is being pushed by the administration. The President himself endorsed it, the Speaker endorsed it. I would presume they should have studied it, and refined it before it was proposed to the Senate and the House. But apparently, that is not the case.
KD: OK, Senator. Now I am confused because Congressman Joey Salceda on Headstart, when I asked what kind—will the fund invest on—he gave the example of dams. That’s infrastructure. That’s not included?
CHIZ: Well Karen, in the Senate version it is not included and now let’s pursue that logical conclusion. You got money from Land Bank and DBP, they are investing money to earn because they are banks. So Landbank will contribute Php50-B supposedly DBP will contribute Php25-B supposedly. Now you invest the Php50-B or Php25-B of Landbank or DBP, respectively. My question is will there be an ROI? Asan ‘yung ROI nila within the year, within the 2 years, within 3 years, within 5 years? How will Bangko Sentral look at that, insofar, as the balance sheet of both banks is concerned? Will they look the other way, that’s not in the bill and in the measure as well. If you invest it in a bridge and a road, where is the ROI? If the private sector comes in and invests, they would expect a return on their investment. Now when and how much and how will they quantify the return of investment if you spend that money a hundred billion supposedly for infrastructure? These questions need to be answered and explained by the economic managers pushing for this bill.
KD: OK. First, does it break or violate the Charter of the Land Bank or DBP to put funds specifically in the Maharlika Investment Fund for the long term?
CHIZ: It does not violate the Charter of the Landbank nor DBP however, it would violate the capital regulatory requirements imposed by the Bangko Sentral ng Pilipinas. For example, Karen, for the longest time we’ve been trying to amend the Charter of Landbank and DBP to tell them you should lend to agriculture and the agriculture sectors because it represents 60% of our economy. I mean the poorest of the poor Filipinos are in that sector. The basic argument of Bangko Sentral with us in the past 12 years that I’ve been in the Senate before has been no we cannot allow that. We cannot allow these banks to put 70% of their loanable money in agriculture because it’s like putting all of their eggs in one basket. If a typhoon hits, if a calamity hits, if disaster hits then the banks might collapse.
Now insofar as the Maharlika Investment Fund is concerned they are willing to look the other way. They are willing to say it’s okay to invest Php50-B —lock, stock, and barrel — in one company. Now, if we are doing that then why not look the other way with respect to lending to agriculture? The President seems to be giving significant importance to the agriculture sector given he has been retained as secretary of the Department of Agriculture. Then why not order Landbank and DBP to lend to the agri sector in order to modernize agri sector. Mas diretso pa ito Karen. Hindi iyong dadaan sa Maharlika Fund, invest pa kung saan ito diretsong loan-window na para sa agriculture to modernize agriculture, to alleviate the poverty sector in agriculture that farmers and fisherfolks have been suffering under for the past how many decades.
KD: So, you’re saying a double standard there of some sort?
CHIZ: Well, definitely, in fact in the own position paper of Landbank and DBP they specifically ask that they be exempted from the capital regulatory requirements of BSP otherwise they won’t be able to do this. Now, remember Karen, the Secretary of Finance sits on the monetary board. You also have to remember the Secretary of Finance sits as chairman of Landbank. Why were these not threshed out before reaching the Senate? It should have been clarified and thresh out before the bill was even filed or reached the Senate.
KD: All right. Other than Landbank and the DBP is this included in the Senate version that the BSP will remit 100% of its dividends for two years to the Maharlika Investment Fund and 50% in succeeding years. Is that correct, Senator?
CHIZ: Yes, it is Karen, but the problem is the authorized capital stock of the BSP hasn’t even been fully subscribed yet. Kulang pa ng pondo ang pamahalaan para i-fully subscribe ‘yung authorized capital stock ng BSP. And speaking of authorized capital stock, the bill is also completely silent with respect to how much the authorized capital stock of the Maharlika Investment Fund or corporation will be. Yet to understand two ways of creating a corporation, one is under the Corporation Code of the Philippines you go through the SEC. The other one is by law being specific as created by law, now this Maharlika Investment Fund will be created by law. But that does not negate the need and the requirement to have a specific amount in so far as the authorized capital stock of the company will be. This bill is silent with respect to how much. It only says Php50-B from Landbank, Php25-B from DBP, 10% of PAGCOR income is one-half of the net income of BSP, and probably contributions from the private sector that is simply not acceptable when you are forming a corporation especially if it is going to be by law.
KD: All right. Now so it seems to me that first, your concern is the capital seems to be adjustable that’s one.
CHIZ: Well, that’s not acceptable Karen. That’s not how you form a corporation.
KD: Yes, number two the source of the funds itself. Can you source the funds legally from Landbank, DBP, and the BSP? Given everything you’ve just mentioned?
CHIZ: Well, the loanable or investable funds of Landbank are about Php1.3-T. The loanable investable funds of DBP are about Php800-B so they do have the money.
KD: But it seems quite small, what are they asking for?
CHIZ: But to lend it quote and quote to a single entity in the amount of Php50-B which is roughly about 3% of total loanable funds of Landbank and which is roughly about 2% or 3% of the total loanable funds of DBP would still make a dent and would violate the capital regulatory requirements of the BSP which itself says. You cannot lend that big of amount to a single entity because it might affect the bank’s financial position. Number two Karen, they want to adopt corporate best practices. So, my question is, why not make the representation on the board proportional to the capital contribution of the entities forming the missed corporation? Landbank will be contributing Php50-B. One of the economic managers Lea de Leon said, “well we’re looking at a Php100-B.” I told her, but it’s not in the bill. “We will put it in the bill.” OK, now assuming that is the case you have a 15-man board then why does Landbank only have one representative? They’re contributing 50% of the capital they should have at least 50% of the board. If you’re looking at a Php100-B in capital if DBP will contribute Php25-B then you’re looking at least 1% of the board should come from DBP. You get the private sector representation five. Are they even investors?
KD: You mention the academe in the hearing.
CHIZ: Did the academe contribute? Now fine, the Secretary of Finance is part of the monetary board and is the chairman of Landbank but what gives in the right to sit there? The government did not appropriate any money for this fund. They’re getting it from government corporations so low and it’s owned by the government. And you have to look to the interlocking chairholders, stockholders, not only shareholders, stockholders of directors but the chairman even because the secretary of finance is the chairman of Landbank he is also the chairman as proposed of the Maharlika Investment Fund. So, there will clearly be possible conflicts later. I hope the economic managers will look into this, and study it more thoroughly. And instead of simply saying that’s why we’re here so that you can change it. No, that’s not the case. They should present it to us with adequate and sufficient studies behind to back it up and data to support their assertions as contained in the bill.
KD: OK. Now Senator, when it comes to the BSP, specifically ‘no, can the BSP — in concept — remit 100 percent of its dividends for two years to a fund and 50 percent in the succeeding years? Because you have several groups that came out with a statement, I believe the UP Economics, Management Association of the Philippines. They’ve already said this is fundamentally flawed and it does not promote monetary stability if the BSP does this and it may affect the autonomy and independence of the BSP.
CHIZ: Well, let’s begin first Karen that there’s a PD that’s as 50 percent of the net income of government corporations should be turned over to the national government.
KD: All right.
CHIZ: Now depending on the seasons, our economy based in the past, the government either said no, you don’t have to, it’s okay keep it as retained earnings or they say no, remit it, we need it. So, there is a law stating that but in so far as the BSP is concerned, historically, they have not touched that. Simple because among others we have not fully subscribed and paid up the authorized capital stock of the Bangko Sentral.
I was the chairman of the Committee on Banks Karen when we passed the amendments to the BSP charter increasing its authorized capital stock but it is not been fully-paid and fully-subscribed as of this date. In fact, we have a provision in the 2023 Budget in the unprogrammed funds allocating, if I’m not mistaken, about Php50-B for the payment of the authorized capital stock of the BSP. So, to my mind, those concerns are valid because leading to an economic recession worldwide not necessarily in the Philippines but worldwide. We cannot hamper the instruments, the tools that the BSP can and should use in order to maintain a stable, constant, and consistent monetary policy in order to curve inflation and control prices.
KD: OK. But legally speaking, considering we have not yet subscribed to the capital stock of the BSP, they are not violating any laws?
CHIZ: No Karen because this is a law too. Whatever inconsistent laws are passed previously if we passed this law and so allow and provide for it. Then the later law, the more specific law will govern. It’s the basic principle in statutory construction.
KD: Now it seems to me listening to you Senator you thought about really the source of the funds. In other countries, the sovereign wealth funds or investment funds are surpluses or well, they mentioned Indonesia because Indonesia started with a small amount and essentially got funding from the private sector and offshore ‘no offshore funding. But the problem seems to be with it as the debate is where do we get the funds? So, in a concept-like and opportunity fund, an investment fund like this will, can we get the funds?
CHIZ: In the next couple of days Karen, we’re just finishing the research on it. We will be proposing where the money can come from. You have to bear in mind they started with GSIS, they started with SSS, with the pension funds. They now move to Landbank and DBP and even included the BSP. I don’t know where else they will go after this but we’re finishing up the research and we will be proposing a viable fund source that we live and exceed their Php100-B expectations.
KD: So, you are not against the fund per se. It seems to me.
CHIZ: I am not against the fund per se, Karen, but I want it clear to their minds what it is for. Again, they’ve been talking about infra yet the bill says except infra. They’re spending it on social services according to the bill now where is the ROI there?
KD: Oo.
CHIZ: If you are investing, now even if it’s on infra so when will the ROI be? If I’m a private corporation, foreign or local and I want to invest in this fund so where will my ROI come from?
KD: Oo.
CHIZ: Secretary of National Treasury De Leon said, “well we should provide in the bill how much Landbank and DBP will earn.” Now the benchmark can be the 6 percent rate for government securities. Then it’s like borrowing money from Landbank, DBP, and the private sector in guaranteeing them a 6 percent rate of return. What’s the difference? Now there is no potential for a biz if you simply issued government securities and let the private sector, Landbank, and DBP buy these government securities and spend it on whatever it is they want to spend on without even needing of passing this bill.
KD: In other words, you don’t need actually the Maharlika Investment Fund if you’re just guaranteed a 6% return. My next question is, in this version, well, Congressman Salceda said, “well, President Marcos, Jr corrected his suggestions of getting annual dividends from the GOCC.” Because it is mandated by law 50% goes to the National Budget but the fact that it will be IPO’d, is that discussed in the Senate?
CHIZ: No. that is not discussed but sufficient ways have been given to the board of directors to the board of the IMF, IMC whichever name they used to issue that instrument as well. But, even if we have the power to issue that instruments, Karen, how can they guarantee its payment? It’s not similar to government security which has a sovereign guarantee behind it.
KD: Yes.
CHIZ: So, they are using as a basis the fact that government securities through oversubscribe to a tune of about, if I am not mistaken, a thousand percent. But that is not a sufficient basis to say that any instruments issued by the IMF, or IMC will have the same backing, the same support, and the same oversubscription.
KD: OK but then can they legally, actually offer it to the stock market? Can they have an initial public offering on a government fund? Can they do that?
CHIZ: No, Karen, a government fund in a form of a security cannot be listed on the stock exchange.
KD: Market? As long as—
CHIZ: —there is a separate exchange for government securities which is right now monopolized by a private company named PDEx.
KD: OK. Another issue is the tax exemptions in the bill of the MIF. The concern under the bill is those investing in the Maharlika Investment Fund won’t be paying any taxes. What are the penalties- in terms of taxation, what are they exempted from exactly?
CHIZ: All taxes, Karen.
KD: All taxes?
CHIZ: All taxes. National and local, under the National Internal Revenue Code, under the Tariff and Customs Code, and under the Local Government Code. But this is my question, Karen. The Secretary of Budget at Management was part of the previous administration. The Secretary of Finance was the Secretary of Budget at Management in the previous administration and the policy of the previous administration was not to provide or at the very least minimize because it is bad policy to have a lot of exemptions and very difficult to implement, if at all. So, I think they should continue with that policy. They should obligate the MIF and MIC to pay the taxes due and owing to the national government only from one pocket to another, anyway. And if the government wants to, they can funnel it back to the MIC, MIF by way of the TEF (Tax Expenditure Fund). There is such a fund, Karen, in the General Appropriations Act that basically says “government can return whatever taxes paid by the GOCC to the same GOCC using that facility” and without proving a gaping loophole so far as a huge exemption for the MIC or the MIF or anyone dealing with MIC, MIF. Bear in mind, Karen, Landbank and DBP do not enjoy these exemptions. So, why give it to MIC, MIF?
KD: But then, could they be modeling for another country to attract foreign investors?
CHIZ: OK lang naman, Karen, mangopya pero kopyahin naman natin iyong makabubuti rin sa atin. Hindi porke’t ginawa ng iba gagawin din natin. Again, the basic reason given to me why they are doing it is because other countries are doing it. That is a poor excuse to pass a law from my point of view. And so far as I am concerned, fine, others are doing it but we should be clear about why we are doing it, what is for, and who will benefit from it. I would like to thank President Marcos, early on in his term should already be in legacy mode. So, what is he want to be remembered for? Now, if the funds from the Maharlika Investment Fund, a hundred billion will be poured into social services, it’s never going to be enough. If it will be poured into infrastructures, and roads, it’s never going to be enough. I presumed he would want to make a dent and leave a dent- not only a dent but something monumental from the use of this fund.
KD: But he wants to make the fund grow ideally, right?
CHIZ: But it will take time Karen. Temasek was established in the mid-late 70s. It is known to be one of the most solid, reliable, and consistent funds in the world. But it took them three decades to set up the credibility, the integrity of the sovereign wealth fund. And we’re just starting so I doubt it will see the fruits of this fund in the five years remaining five and a half years of this administration.
KD: OK. I want to ask you I mean this administration, of course, wants more foreign direct investments we want to spend more in terms of infrastructure right? I believe the last administration spent was it 5% of GDP, tama ba Senator?
CHIZ: Yes, 5.4%
KD: And I think China wants to spend 12% GDP, I don’t know if my figures are correct and yet Vietnam getting $20-B investment a year. Would the fund itself just by concept help in terms of investment or could the PPP solve that? Could just having a better investment climate solve that? Are there other ways or is this fund the only solution? Kasi it has to be what can be this fund do that others cannot.
CHIZ: Well Karen it must begin with Php100-B is too small to make it end. Insofar as really sporing the economy with the use of this fund. Now it must be a gamut of things, Karen. This one we can help but you also have to look at the internet connection you should also look at the broadband speed. You should also look at roads, airports, and ports and you should also look at the labor regime in the country. I’ll give you an example Karen, do you know the number of holidays we have both national and local number about 30 days in a year? So that’s one month that people pay double—the company’s pay double pay which will hurt definitely BPOs by making them less competitive because they work at night. You pay them overtime, night shift differential, and we pay them on holidays. Because it’s not a holiday.
KD: Do we have to pay for holidays? We do?
CHIZ: I was in the Senate, Karen, I was the one handling it because I was the chair of the Committee on Education in the approval of the holidays, I didn’t approve a lot of holidays. I was voted out sometimes like the Immaculate Concepcion Day, I voted against it but I lost the vote became a holiday. So now, Christians want their Bible Day, and the different religious sects want their respective holidays. But it’s making us less competitive. These things are to be looked at too. The industrial piece is also a significant part. The amount or rate of taxes being paid by foreign investors should be looked at too. In many things, Karen, can help contribute to the improvement of the economy.
KD: OK last question on the Maharlika Investment Fund. Clearly, this is urgent for the President. The President wants this passed. Senate President Miguel Zubiri, I believed, said unless he promised it to the President that it will be passed in the Senate by April. Looking at the proposal now, will it be passed? When and how?
CHIZ: I doubt it, Karen, unless economic managers get their acts together and come out with a common and unified stand. In fact, during the hearing, I said how many presentations will there be. I told the chairman, Senator Villar there should there be one presentation. Originally, BSP wanted to present, Land Bank want to present, DBM wanted to present, and DBP wanted to present. I said no. There should only be a singular presentation. So that we know the government took up a position with respect to the bill. Second Karen, what I can guarantee perhaps on my end would be if it will pass whether in April, in March, or sometime thereafter it will not be in the shapes, size, color, or form that it is right now.
KD: OK, now there is going to be another hearing so I’ll be speaking to you about it. But before we go, your first time on Headstart, I can’t let this pass, OK? So, it was out all over the news and I’m going to run a clip right now of your comeback in the Senate. We have it on ANC. I mean, it’s just I can’t let this pass. You have your colleagues, Senator Grace Poe even issuing I think there was a privilege speech about it. So, let’s run this clip.
KD: All right well you know, on Headstart anything goes not really anything goes but this is in the news. So, Senator I mean you’ve been quiet about it for some time now but Heart posted recently that you were together in Paris and that was all over the news as well. Would you want to share, I mean just what you can? What is it that you went through together as a couple that it seems that you have no less than your colleagues that the Senate’s celebrating and singing “love is worth fighting for”.
CHIZ: I don’t know where are they coming from Karen. Ang puwede ko lang ma-comment sa sinabi ni Senator Grace, ni Senator Migz, ni Senator Joel at ng iba ay patawarin na lang natin sila dahil hindi rin nalalaman ang kanilang sinasabi bagaman hindi ako si Hesus.
KD: Baka naman you are just in denial ayaw mo lang i-share.
CHIZ: Number two, my public life has always been separated from my private life. And if I did not speak about my private life before I will not be breaking that by doing so now. Thank you for asking, Karen.
KD: All right, but is everything good on the home front?
CHIZ: Yes, with God’s grace even before again ‘yung mga kasamahan ko sa Senado nangangantiyaw at nang-aalaska lang mga ‘yan dahil matagal kaming hindi nagkita. But it shows that our relationship in the Senate is good and we’re friends outside of our working with Senate.
KD: You are not going to answer this? I swear not even until now. What about challenges, did you go through certain challenges?
CHIZ: Well, we face daily challenges, Karen, whether with family, with marriage, with work, or even your own personal health. But you should look at challenges positively because without challenges you cannot and will not improve nor will you increase whether in faith or in the ability to face the people.
KD: But what was all that Senator, “love is worth fighting for?” There’s going to be something there.
CHIZ: Sabi ko nga sa iyo, patawarin natin sila dahil hindi nila nalalaman ang kanilang sinasabi.
KD: All right. I’m going to end it with this on a light note because this is the first time you’ve come back to Headstart after a few months. So, we’re going to focus on the Maharlika Investment Fund. We’ll have you back for that. Thank you very much, Sir.
CHIZ: Thank you, Karen. Thank you to all our televiewers. A pleasant morning to all.