The Long View: In the bag, ho ho ho!


In the bag, ho ho ho!

 / 05:07 AM December 21, 2022

The President kicked off Simbang Gabi season with an invitation to the public to hear Mass at the Palace, where one and all could enjoy puto bumbong afterward as a treat. He followed up boosting season’s feelings by signing an administrative order granting a one-time P25 kilo rice gift to civil servants, the military, and workers in government-owned corporations. The only sign that the executive office is still slightly slipshod and not in tip-top shape is a reference to Presidential Decree No. 1597 being a “series of 1987” when it was issued in 1978 (plus no decrees were issued after Feb. 25, 1986!). But while the new executive secretary still has to put his house in order, the House of Representatives, for its part, has shown it can follow orders.

The year-ender news, of course, is that the House, in a supreme act of self-organization, passed the Maharlika scheme, a measure reinstating the Reserve Officers’ Training Corps, in college under a new name, while both chambers achieved passing the 2023 national budget in record time. Abraham Lincoln, who spent an enormous amount of time on patronage, once exclaimed, in exasperation, “Too many piglets, too few teats!” But the Duterte administration showed that if you possess the only fiscal teat in town, every piglet will obediently make a beeline for you. Such was the case with ayuda for the public and for the ruling coalition (in the form of “Build, build, build,” the rhetorical ribbon tied around the biggest public works smorgasbord in living memory) and which he made permanent in the face of the effects of the Mandanas ruling by “devolving” so many things to local government units (LGUs), they now have to line up for Palace handouts because the devolutions have eaten up any expected bonanza from the ruling.

Note that this switcheroo pays a double political dividend: It keeps LGUs dependent on the Palace while giving congressmen, in particular, leverage by way of public works, keeping them relevant in local politics. The national budget, in turn, provides the President with the funds to use to fill the “shortfalls” in LGU expenses that it caused in the first place (through budgetary devolution, saddling LGUs with expenses the national government will no longer fund), with the added bonus of intelligence funds that can be freely used with hardly any scrutiny. There is, too, a larder in the form of appropriations for ayuda and other emergency needs to be determined and disbursed by the Palace.

Marcus Alonzo Hanna, a businessman-turned-senator famously said: “There are two things that are important in politics. The first is money and I can’t remember what the second one is.” The legislators merged party lines once the President made Maharlika’s passage a matter not just of priority, but of face. The blogger Heneral Lunacy, a retired investment banker, pointedly remarked that the Maharlika Investment Fund (MIF) “brings to mind failed financial adventures of the last 40 years.” He pointed out that “[o]nce fully formed the MIF could represent an institution ‘too big to fail,’ a systemic risk to our financial (and our political) foundation.” This was actually a point raised by Juan Ponce Enrile, who cautioned that the fund may be in good hands under the incumbent President, but if mismanaged in the future, it would leave him “historically damaged.”

Heneral Lunacy did a public service by breaking down, first of all, the capital contributions for the Maharlika scheme. Public opinion vetoed sourcing funds from the Social Security System and the Government Service Insurance System (for now). Land Bank of the Philippines will chip in P50 billion (25 percent of its capital) and Development Bank of the Philippines (DBP), P25 billion (36 percent of its capital) when (notes Heneral Lunacy) the Aquino administration had to shore up the finances of both institutions by “injecting … P53 billion into these two GFIs”; this requirement now allocates 28 percent of their combined capital or 1.5 times that previous injection, meant to enable the two institutions to serve farmers and small and medium-sized enterprises, to a fund “with no track record, no disclosed management, and an unconstrained playing field.” And there’s more: Heneral Lunacy pegs the required contribution by the BSP of 50-100 percent of its dividends at P30-75 billion per year for at least five years; while the Philippine Amusement and Gaming Corp. being made to chip in 10 percent of its gaming revenues means about P7.6 billion if one uses its pre-pandemic 2019 gaming revenues of P76 billion as an estimate. In other words, P100 billion a year is projected to be earmarked as mandated contributions.

Heneral Lunacy points out there is a five-year lock-up on contributions. So if the DBP and Landbank, for example, want out, “the next time the GFIs will see their money is by the end of this administration.” Nor do these big contributors have a big say in what happens: They are minority investors, only two votes out of 15 on the board. Then again, the blogger points out the so-called controls are just that: so-called because features of other failed funds. Enrile’s advice may have saved the current and future presidents from jail by substituting the secretary of finance as chair, but it will be an executive-dominated entity. And, it is “no small money.” A billion has been allocated for startup expenses alone; management fees for a P250-billion fund would amount to P5 billion; the fund, exempted from income tax, will be required to allocate what it would have paid in taxes for “social amelioration,” which Heneral Lunacy reads as “vote gathering and pork barrel” projects.

And if it risks being too big to fail, it risks being too big to resist: “The MIF will have the country’s largest war chest in history to do as it pleases, including hostile takeovers with favored partners or driving political business groups out of existence. The combination of regulatory powers, a willing Congress, judicial complacency, 31 million in political capital, an unsuspecting public, willing cronies, and a financial behemoth growing in perpetuity with allegiance principally to political sponsors, is a scary thought.”

Call it the nightmare before Christmas.

Manuel L. Quezon III.

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