More than two weeks have passed since both houses of Congress passed the final version of the Maharlika bill. But until now, it has not been sent to the President yet, ostensibly due to last-minute corrections that are, by themselves, proving quite controversial. (To what extent can congressional staff still edit the bill without flouting legislative processes and stepping on the powers of lawmakers?)

Meanwhile, apparently in response to the discussion paper penned by UP School of Economics faculty members (myself included), Marcos Jr.’s economic team came out on June 13 with a new, short statement affirming their support for Maharlika, calling it a “necessary” “vehicle for growth.”

But instead of being a point-by-point answer to the issues raised in the UPSE paper, the new statement is more of a reiteration of the support of the economic managers, using assertions that are not really data- or evidence-based. 

Let us examine their statements here.

Afterthought

In the UPSE paper, we said that the MIF bill has “amorphous developmental goals and speaks of development only in the broadest possible terms.” Also, “it does not even make any reference to the Philippine Development Plan (PDP) 2023-2028.”

In reply, the economic managers said that Maharlika “operationalizes” the PDP, citing a part of the document that says the government will “diversify and explore alternative sources of financing,” and that “new instrument formats will also be explored to reach new markets and investors.”

The PDP doesn’t even mention anything about a sovereign wealth fund. If Maharlika were truly necessary, one would think it should be embedded in the PDP itself, which is the development plan that the government ought to follow from 2023 to 2028. 

Instead, Maharlika seems to be an afterthought.

The economic managers also claimed that MIF is “aligned” with the 2022-2028 Medium-Term Fiscal Framework (MTFF). But the MTFF mentions nothing about Maharlika – a pretty big omission considering the huge impact Maharlika will have on the public coffers, as well as the risks it will pose on the government’s deficit and debt. 

For instance, the government wishes to reduce the debt-to-GDP ratio from 61.8% in 2022 to 51.1% in 2028. But does this projection already include the possible macroeconomic impacts of Maharlika? Who knows? Again, Maharlika is an afterthought here.

Identity crisis

The UPSE paper also explained that Maharlika has “confused goals” because, in the first place, it does not know if it’s a sovereign wealth fund in the traditional sense (which seeks only financial returns) or a strategic investment fund (which seeks both financial as well as economic returns).

The economic managers replied that, “The objectives [of Maharlika] are clear: to invest funds that are available in government instrumentalities and utilize them for investment purposes on the basis of their individual mandates.” 

But the objectives aren’t clear. Maharlika will “invest funds” and “utilize them for investment purposes.” What does that mean? 

They also cited a World Bank publication (“Strategic Investment Funds: Establishment and Operations” by Shanthi Divakaran et al. 2022), specifically this passage: “Unlike public capital Specialized Investments Funds (SIFs), mixed capital SIFs are typically insulated from macrofiscal interdependence, especially when their anchor is a quasi-sovereign entity, because they are not considered part of the sovereign balance sheet and are usually not directly responsible for economic policy.”

So is Maharlika now a “mixed capital strategic investment fund,” and not a sovereign wealth fund? What is it, really? (Note that this is the first time they cited the relevant World Bank publication, after we mentioned it several times in the UPSE paper.)

Wishful thinking

The economic managers also said that, “The purpose of the MIC’s investments is to generate high returns so that national wealth is expanded and profitable socio-economic projects are financed and implemented.” 

So will Maharlika invest first in financial instruments, wait for returns (possibly after many years), and use earnings to invest in economic projects like infrastructure? Or will it invest in infrastructure from the get-go? 

Later in their statement, they attempted to clarify: “In principle, even if the MIC initially focuses on capital market investments which emphasize financial returns, this still has a tangible benefit through generation of financial income to the National Government which would ultimately redound to the benefit of the nation’s future socio-economic agenda.” 

But when might Maharlika earn from its financial investments: 5 or 8 years from now? Possibly near the end of the term of the President? And how large will be the returns? When will those be translated into tangible, useful public projects? 

The economic managers reiterated in their statement that “the expected return of Maharlika is estimated to be around 8.6% on average,” supposedly higher than the 10-year average return from Land Bank’s investments (4.23%) and the Development Bank of the Philippines’ investments (3.59%). 

Till now, the 8.6% return on Maharlika is just wishful thinking. Where did this magical figure come from? Nobody really knows.

Redundant

The UPSE paper also pointed out that Maharlika’s proponents failed to prove its “additionality” or value-added vis-à-vis other financing schemes and existing agencies of government. 

In their rebuttal, the economic managers merely asserted that Maharlika “does not overlap with the mandate of the [National Development Corporation]” – without any elaboration whatsoever.

They added that Maharlika “reduces heavy reliance on local funds and development assistance as the main financing mechanisms for infrastructure projects. By providing an alternative source to public infrastructure spending, there would be a bigger budgetary allowance for other priority expenditures.”

But until now they haven’t proven that infrastructure and other developmental projects will proceed faster and more efficiently with Maharlika than with, say, public-private partnerships or concessional loans. 

Incidentally, on June 14, the President certified as urgent a bill that will strengthen PPPs. If this can be done, what’s the point of Maharlika?

Also, the Palace is quite proud of the fact that President Marcos was able to get P3.48 trillion worth of investment pledges from his multiple foreign trips. Why not just work to follow up all those pledges? Or is that number just for show?

Threat to public coffers

The UPSE paper said that the preoccupation with Maharlika has “diverted attention from more vital and urgent national agenda,” including the reform of the military and uniformed personnel (MUP) pension system. 

In reply, the economic managers said MUP pension reform and Maharlika both “symbolize the Administration’s recognition that nations should begin finding ways to gradually close the gap in the budget deficit, and reflect the concerted efforts to promote continued fiscal sustainability.”

But will Maharlika indeed close the gap in the budget deficit and promote fiscal sustainability? There’s no assurance at all. In fact, it poses huge risks to the public coffers by endangering the health of state-owned banks and even the integrity of the Bangko Sentral ng Pilipinas (BSP).

The economic managers said that “The public can remain confident in the stability of the LBP and the DBP even given their investment in the MIC. Limitations have also been established, i.e. investments should not exceed 25% of their net worth.” 

But forcibly taking P75 billion of seed capital from these banks already endangers these banks’ capitalization and financial health, as pointed out by UP Los Baños economics senior lecturer Enrico Villanueva.

The lack of Maharlika’s bankruptcy provisions also means that the government will implicitly shoulder any losses from, say, risky investments. This will not “improve the country’s fiscal resilience” – as claimed by the economic managers.

Maharlika also stands to eat away budget allocations from education, health, etc. by taking P50 billion directly from the Treasury as seed capital – more so if the government ends up shouldering Maharlika’s losses later on. 

The economic managers tried to allay fears by saying that “the founding GFIs, the National Government, and the BSP were consulted on their financial viability to support the capitalization of the MIC in its initial years.”

However, this is no assurance at all that the heads of these agencies are acting in the public’s best interest. 

According to Senator Risa Hontiveros, Government Service Insurance System (GSIS) President Wick Veloso is allegedly the mastermind behind Maharlika, the one who pitched this to President Marcos Jr. in the first place. Meanwhile, the use of BSP’s declared dividends for Maharlika will invariably delay the BSP’s own capital-raising efforts.

Little to no safeguards

The economic managers assert that the Maharlika bill “imposes enough safeguards to minimize risks” and cited some provisions like putative adherence to the Santiago Principles, the risk management committee, and accountability, transparency, and oversight measures. 

On the contrary, fatal flaws and omissions in the bill betray the fact that safeguards are sorely lacking. 

For example, how can Maharlika abide by the Santiago Principles if the Board of the Maharlika Investment Corporation is not insulated from political interference (note: all its members are presidential appointees)? 

How can accountability be ensured if the politically susceptible Board is overpowered (having the authority to oversee Maharliks’ investment processes, asset allocation, monitoring, and even risk management)? 

How can accountability be ensured if there are there are no repercussions for bad investment decisions, and if oversight is relegated to the Advisory Body (which also comprises presidential appointees) and Congress (most members of which also tend to be allied to the President)?

The economic managers mentioned that another safeguard is the Senate provision “absolutely prohibiting pension and social funds from contributing to the MIC and MIF.” 

But note that this is more of an afterthought. Recall that the original bill intended to rope in pension funds from the GSIS and the Social Security System or SSS.

Also, even Finance Secretary Benjamin Diokno himself said that GSIS and SSS can still choose to “subscribe” to Maharlika’s projects. So they’re not totally off the hook. The President also broached this possibility: “If the pension fund decides the Maharlika Fund is a good investment, it’s up to them if they want to invest in it.”

Mere assertions

Many of the economic managers’ counterarguments are just assertions.

For instance, the UPSE paper said that Maharlika “violates fundamental principles of economics and finance and poses serious risks to the economy and the public sector.” 

The economic managers replied that, “The legal framework provided by Senate Bill No. 2020…follows fundamental principles of economic policy and financial market participation in favor of and for the ultimate benefit of the Philippine economy and the Filipino people.” How exactly? There’s no elaboration.

Finally, the economic managers said, “The MIF is not only beneficial but necessary at this point in time… It is an ideal vehicle and well-positioned to bring in investments as the Philippine economic outlook remains robust amid the global economic slowdown.”

“Necessary,” “ideal,” and “well-positioned” are strong words, especially since they still haven’t proven the additionality or value-added of Maharlika. The global economic environment is not so promising either.

Most importantly, the extremely poor governance structure of Maharlika means that instead of being a “vehicle of growth,” as repeatedly touted by the economic managers, the fund could very well be a “vehicle for corruption.” 

Just look at what happened to Malaysia’s 1MDB, from which at least $4.5 billion was embezzled and channeled through shell companies and offshore accounts.

What’s the surname again of the former president who infamously used shell companies and offshore accounts to spirit away several billions of dollars of ill-gotten wealth? – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. JC’s views are independent of his affiliations. Follow him on Twitter (@jcpunongbayan) and Usapang Econ Podcast. 

The results of the studies all came to the conclusion that entry or market timing is not critically as important as exit. Success and failure of one’s trade depended more on when to sell. Those who made the studies also claimed that taking a position in the market can be as good as anytime, like by random entry. This was possible due to the mean-revertive character of the market.

Mean reversion, as they say, isa financial theory which postulates “that asset prices and historical returns eventually revert to their long-term mean or average level.”  

One of those who made a good deal of study on the matter is Van K. Tharp, whose story was that he lost all his account twice when he was starting to trade and who subsequently became the author of four acclaimed books, one of which is Trade Your Way to Financial Freedom. Tharp strongly attested that “Entry only plays a small part of the game of making money in the market.” 

Begging the question

Yet, efforts in finding ways to improve entry techniques cannot be neglected. Investors still have to watch out for the need “to minimize investment risk and remove the play of emotions” in the act of entry. Thus, while entry may not be essentially as important as exit, it remains to have a good role to make in the trading equation. Tharp has a nice term to it.  He calls it as “trading to beat random entry.”

For example, even experienced investors are stopped out of a good trading idea just because they entered early. The way the market has been moving in the last two months, I’m sure this has happened and continues to happen to many of us. We may have abandoned or thinking of abandoning a good stock pick because the direction of its market price is just unclear as of late.

We are also stopped out sometimes in our eagerness to enter too soon because of the “fear of missing out” or what is called FOMO in the market. This is a classic example of allowing emotional decisions to play in one’s entry.  

These are the common problems faced by beginners. However, these are also situations that are not uncommon to hound experienced investors.  

Just on these two examples, I believe they are good enough to serve as a sufficient basis to assume why a good entry still matters.  

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[ANALYSIS] How much ‘entry plays’ you need to succeed in your trade

Before we leave the subject, however, let me reiterate that even the proponents of good entry admit that the following are more contributory to a successful trade. These are exit strategy, risk management, and position sizing, to mention the three most critical factors.

We are told that there are only two reasons you should get out or exit a trade. These are when you take a loss or when you take a profit.  

There are many books available on these two subject matters. But let me add that in taking a loss, you may just go back to the recovery risk table I presented in my article on March 10. The said table shows the exponential return you need to recover.  It also shows you the level of loss you can reasonably play before you need to fold.  

Based on the table, you should not incur a loss of more than 20%. Otherwise, you’ll be like Tharp when he first started to trade.  

In taking a profit, there are qualitative and quantitative methods recommended. We’ll explore them sometime.   

Position sizing

Risk management is about “minimizing potential losses without sacrificing upside potential.” The principle behind it is based on analyzing the expected returns of an investment compared to the amount of risk taken on to earn those returns. This is a subject Tharp sufficiently addressed in his book in what he calls the R Multiple – a form of measurement of risk versus reward. To illustrate, if you buy a stock for P10 (risk) and sell it for P15 (reward) your R would be (P15 – P10) divided by P10] is equal to 0.5 or 50%.  Thus, enter a trade only where the R is high.

Position sizing is referred to as the method of determining the size of the shareholdings to be held by an investor. It is also referred to as the amount of money being traded in a given stock or asset.  Its application will help investors earn maximum returns and at minimal risk.

For proper position sizing, there are three factors to be properly weighed.  First is the account risk.  Typically, account risk is expressed as a percentage of the investor’s total capital.  As a rule of thumb, individual investors should not risk more than 2% of their investment capital on any given trade.  (Fund managers risk less than this amount.) With a P500k total capital, the investor is limited to risk P10k per trade only. The rationale behind this is that even if the investor loses 10 consecutive trades in a row, the impact is equivalent to only 20% of investment capital.  

Next is the trade risk. This involves determining where to place the stop-loss order for the specific trade.  For example, if an investor intends to buy SMC at P105 and place a stop-loss order at P185, the trade risk is P20 per share.

To derive the proper position size of the above information, divide the account risk of P10k per trade and the trade risk of P20 per share. This means the investor should only buy 500 shares (P10k/ P20) of SMC to achieve maximum returns at minimal risk.

So, what is a good entry point? We’ll take up this question next time as we analyze what is happening in the market as we usually do.  We devoted the whole article today just to raise the point that entry is an important part of the trading cycle, too.

Don’t miss the discussion on the different methods and/or techniques for finding good entry points. It will be next. – Rappler.com

(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity.  You may reach “Thin Slicing” at densomera@yahoo.com.) 

While still in the car, an immediate check at the earthquake app that locates recent tremors detected by citizen scientists that maintain seismometers connected to the University of the Philippines (UP) Diliman seismic network reported a magnitude 6.2 earthquake with the epicenter plotting off the east coast of Calatagan Peninsula in Balayan Bay, Batangas. The Philippine Institute of Volcanology and Seismology (Phivolcs) posted in its earthquake bulletin an offshore epicentral location to the southwest of the peninsula, magnitude 6.3, and felt intensity of IV in Quezon City.

Depth is significant

Posts on social media immediately followed, showing photos and videos of occupants evacuating high-rise buildings as well as shaking experienced along elevated highways captured by CCTV. Fortunately, there have been no reports of infrastructure damage (at least, none yet), although Phivolcs warned of potential damage to infrastructure and the possibility of aftershocks.

On April 22, 2019, a magnitude 6.1 earthquake – which was weaker by almost three times in energy released than the earthquake today at magnitude 6.3 – struck the provinces of Bataan, Zambales, and Pampanga and caused extensive damage to infrastructure, including collapsed commercial establishments, fallen church facades, damaged residential buildings due to liquefaction, and earthquake-induced landslides on the southern mountain slopes of Mt. Pinatubo.

Similarly, on February 15, 2003, an earthquake of the same magnitude 6.3 struck the island of Masbate in the central Philippines and caused significant infrastructure damage and ground deformation, including a surface ground rupture that left a coconut tree sliced into two about its axis. Interestingly, this same coconut tree was sliced anew after 17 years by the same fault during the magnitude 6.6 Masbate earthquake of August 18, 2020, which is quite a rarity in earthquake dynamics.

So why is there no infrastructure damage in Batangas, similar to what has been experienced in Zambales in 2019 and in Masbate in 2003?

The Batangas earthquake was generated by the rupturing of a fault located more than 100 kilometers deep into the asthenosphere, while the Zambales and Masbate earthquakes were generated by a fault source located at much shallower depths (less than 30 kilometers) within the crust. Two earthquakes of the same magnitude can cause varying degrees of damage to infrastructure. A deep focal source is expected to inflict less damage than a shallow one because the energy released at the source dissipates (loses strength) as it travels over distance.

Why is Batangas frequented by earthquakes? Where else?

Initial earthquake modeling by my graduate student Sandra using the concept of stress transfer indicates that today’s earthquake was likely generated by the same fault system that generated the sequence of earthquakes that struck the same area in the latter half of 2021. From July 24 to December 13, 2021, the offshore area to the southwest of Batangas was struck by at least six earthquakes with magnitudes ranging from 5.2 to 6.6. This area is prone to earthquakes because of the presence of the Manila Trench, a tectonic feature that marks the subduction of the South China Sea plate underneath Luzon.

In subduction, a slab of crust slides underneath another. The interaction between the two slabs initiates movements along faults that eventually generate earthquakes. Fortunately for today’s earthquake, the seismic waves originated from a deep source, thus the minimal to nil report on damage to infrastructure.

In the Philippines, there are six subduction trenches that are capable of generating earthquakes of similar or even greater magnitudes. Surrounding the entire archipelago with the exception of Palawan Island, these trenches are found west of Luzon (Manila Trench), west of Negros Island (Negros Trench), west of Zamboanga Peninsula (Sulu Trench), west of Mindanao (Cotabato Trench), east of Bicol to Mindanao (Philippine Trench), and east of Luzon (East Luzon Trough).

Earthquake drills paying off

Today’s earthquake disrupted school activities, including the exams taken by my class of graduating geology students, who obediently followed protocol in emergency evacuation. Other classes – some also taking exams (today is UP Diliman’s last day of classes for school year 2022-23) – and other offices and research laboratories were likewise interrupted. But because our institute participated in the National Earthquake Simultaneous Drill exercise held on June 8, 2023, the evacuation of the UP National Institute of Geological Sciences was carried out smoothly and successfully.

We hear from other sources that evacuation procedures in other parts of the metropolis and nearby provinces also were carried out successfully. This is a good indication that the simulated earthquake drills are paying off and will hopefully lead to a culture of earthquake resilience, where safety consciousness will become second nature to all Filipinos. – Rappler.com

The author, Mario A. Aurelio, PhD, is a professor at the University of the Philippines‘ National Institute of Geological Sciences (UP NIGS), interested in the study of earthquakes. He is listed in the 2023 Asian Scientist 100, together with 14 other Filipino scientists. Sandra Catugas is a master’s student at UP NIGS under the tutelage of Aurelio.

We are republishing this from marengwinniemonsod.ph with permission from the author. 

So far, I have pointed out seven inconvenient truths (all evidence-based) about the Philippine socio-economic situation, on the premise that we all have to know what we are up against so we can do something about it, rather than be fed by glowing reports that assure us that all is well. These inconvenient truths are:

Among the ASEAN-5, the Philippines has…

#1 – the lowest GDP per capita: a Filipino has the least income among the ASEAN-5. 

#2 – the most unequal distribution of income

#3 – the highest poverty headcount ratio

#4 – the highest learning poverty rate of 90.9%, meaning among 10-year olds, 9 out of 10 cannot understand what they are reading

#5 – the lowest Human Capital Index score of 0.52: A child born today will have 52% of the expected productivity she would have had if she had complete education and full health. 

#6 – in some international large-scale assessments, the lowest performance among all countries assessed. 

#7 – the highest infant mortality, the highest child mortality, the second-to-the lowest life expectancy. 

The next (and last) two inconvenient truths we must contend with are actually foundational, i.e., they are a major reason why the previous seven came to be in the first place.  

They have to do with good governance, which “is considered key to achieving sustainable development and human well-being. After all, sustainable development requires that those in power have respect for human rights and work towards eradicating poverty, addressing hunger, securing good health care and high quality education for their citizens, guaranteeing gender equality, reducing inequality, and so on.”

Let us proceed.

Inconvenient Truth #8

The eighth inconvenient truth concerns the rule of law in the Philippines. Rule of Law is “a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation in decision-making, legal certainty, avoidance of arbitrariness and procedural and legal transparency (United Nations)”.  

A very important distinction is made (Fukuyama) between “rule of law” and “rule by law”. “Rule by law” refers to the executive’s (aka the President’s) use of law and bureaucracy as an instrument of power, while “Rule of Law” is when the executive itself is constrained by the same laws that apply to everyone else.  

Reader, I am afraid that we are under the rule by law, masquerading as the rule of law.  

The World Justice Project’s Rule of Law Index 2022 is the basis of Inconvenient Truth #8: The Philippines has the lowest score, and the lowest rank, among the ASEAN-5 as far as the Rule of Law is concerned. Our score is 0.47 (out of a possible 1.00), compared to Malaysia’s 0.57, Indonesia’s 0.53, Thailand’s 0.50, and Vietnam’s (0.49). These scores place the Philippines as ranking 97th out of 140 countries, compared to Malaysia’s 55th, Indonesia’s 64th, Thailand’s 80th, and Vietnam’s 84th .

What is so galling is that eight years ago, in 2015, the Philippines had a score (0.53) higher than everyone else, except Malaysia (0.57). As you can see, Reader, the Duterte administration really brought down the Philippines’ Rule of Law score and ranking – from 0.53 to 0.47, and from 51 out of 102 to 97th out of 140. One would have hoped that under President Ferdinand Marcos Jr., we would see those scores and ranks going up, but judging from what is happening in the Leila de Lima case and what happened in the Juanito Remulla case, that gleam of hope is fading. In the Philippines, the rule by law still reigns supreme.

Inconvenient Truth #9

Finally, we come face to face with the matter of corruption (from the Latin words “corruptio” or destroy, and “corrumpere” or destruction).  The shortest of the many definitions of corruption are the Organisation for Economic Cooperation and Development’s (OECD) “the abuse of a public or private office for personal gain” and Transparency International’s (TI) “the abuse of entrusted power for private gain”.  Just as good governance is tightly linked with the rule of law, so is it tightly linked with the fight against corruption.  

Well, how does the Philippines fare, vis-a-vis the ASEAN-5, corruption-wise?  Using TI’s Corruption Perception Index (CPI) 2022 as the metric, here is Inconvenient Truth # 9: The Philippines has the lowest score (higher is better) and the lowest rank among the ASEAN-5, i.e. it is perceived to be the most corrupt. Where Malaysia’s score is 47 out of a possible 100, giving it the rank of 61st out of 180 countries, Vietnam’s is 42 (77th), Thailand’s is 36 (101st), Indonesia’s is 34 (110th), and the Philippines’ is 33 (116th).

And just as what happened with the Rule of Law Index, just eight years ago, Philippines was at par with Thailand with a score of 38, and had a higher score than either Indonesia (34) or Vietnam (31). What happened in the interim? The Duterte Administration, that’s what.  

But I want you to focus on Vietnam’s performance: It scored 31 in 2014, ranking 149th out of 174 countries. In 2022, it scored 42, rising in rank to 77th out of 180, in the top half of the countries monitored. An increase in score of 11 points, and an increase of 72 in rank, all within eight years. That is a phenomenal performance. But not as good as the Philippines’ performance between 2010 and 2014, under the administration of the late President Benigno “Noynoy” Aquino III! In that 4-year period, the Philippines improved its score (became less corrupt) by 14 points (24 to 38) and also its ranking (from 134th out of 178 countries to 85th out of 174 countries – the only time we ranked in the top half of the countries.  

How did the administration of President Noynoy Aquino accomplish that? If you will remember, Reader, we had the Three Furies then: Leila de Lima as Secretary of Justice, Conchita Carpio Morales as Ombudsman, and Grace Pulido Tan as Commission on Audit chair. We also had the likes of Rogelio “Babes” Singson in the Department of Public Works and Highways (DPWH).  All fearless and incorruptible. That’s how.  

I hope we can do it again, because, to quote the International Monetary Fund, “promoting good governance in all its aspects, including by ensuring the rule of law, improving the efficiency and accountability of the public sector and tackling corruption, [are] essential elements of a framework within which economies can prosper.”

What are we waiting for? – Rappler.com

Solita “Winnie” Monsod was the first National Economic and Development Authority secretary appointed after the fall of the Marcos dictatorship in 1986. She is a professor emerita at the UP School of Economics where she taught starting 1983. She finished her degree in economics in UP and obtained her masters in economics at the University of Pennsylvania. She is a board director of Rappler Inc.

The date we consider as Independence Day has been controversial since time immemorial and it will certainly continue to be. It’s a tricky thing to answer, but the trickier question seems to be, have we ever really been free? 

It sounds like a philosophical question, but it is also political. More than a century has passed since, yet we still find ourselves plagued with the same (or even worse) sociopolitical issues. While we continue to celebrate Independence Day, it is also important to remember that we have not been liberated. The same problems have just been translated to the more complex language of modernity.

Executions of those who fight for liberation have been translated to extrajudicial killings. Colonialism has been translated to imperialism. The exploitation of resources and the environment has been translated to the extreme impacts of climate change. We continue to bear the brunt of the effects of colonialism, and more.

Unfortunately, true liberation means more than just picking a date when we commemorate Independence Day. After all, freedom demands to be continuously fought for. Especially in a country that coddles foreign powers and is vicious to its own people.

There are many aspects that go into our lack of liberation, some of these being the state of human rights, education, and our environment.

It appears as if the state has no problem violating human rights, especially of those who choose to fight for genuine liberation. Extrajudicial killings are not new or few in the Philippines, many victims of this phenomenon being activists. In February of 2022, news broke out that five individuals who were variously Lumad teachers, community volunteers, and human rights defenders were killed in Davao de Oro. They are now referred to as the New Bataan 5. The AFP claimed that they were killed in an encounter with the NPA but the NPA denied this. Those who were killed were not armed rebels.

Duterte’s anti-poor war on drugs also added at least 6,252 victims to the EJK statistics as of May 31, 2022. This war has not ended under Marcos Jr.’s current administration.

Some we find killed, and some we have not found at all. Another common human rights violation in the Philippines are enforced disappearances. Many activists, peasants, workers, and organizers have been abducted by the state force as a form of political repression. Bazoo de Jesus and Dexter Capuyan were just disappeared last April. 

There are also those we call political prisoners who have been jailed for their political stance. This is how Reina Nasino lost Baby River. Authorities refused to let a mother care for her sick child.

Those who suffer these human rights violations are also red-tagged to justify violence against them. They are called communists, or rebels, or terrorists for fighting for liberation. In our country, they equate fighting for liberation with terrorism.

In the aspect of education, the Philippines is also not doing so well. According to Sara Duterte’s Basic Education Report (BER) last January, the Department of Education faces many challenges in delivering basic education to Filipino students. Among other things, there continues to be a lack of school infrastructure and resources. We can also hark back to the struggles of teachers as they lack support. Remember what happened to laptops for public school teachers? They ended up being sold to retail stores instead of going to teachers.

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In the middle of all of this, many Lumad schools were also shut down. In 2019 alone, 55 Lumad          schools were forced to stop operating. As an attempt to justify these shutdowns, specifically the Salugpungan schools, Sara Duterte red–tagged the volunteer teachers. According to her, they had links with terrorists. The Lumad schools also suffered harassment from the Duterte administration, with Duterte himself threatening to bomb the schools. 

Amidst all of this flak, it is important to remember that these schools exist solely to help Lumad children who want to learn and complete their education. They are taught what is expected of in basic education as well as sustainable agriculture, and indigenous arts and culture. They learn that liberating themselves starts with education. Why is the government so against this?

Systems and institutions that are supposedly there to free us, such as human rights and education, continue to fail and oppress us. But even at the very basic level of the environment, we are chained and unfreed. Related to the closing of Lumad schools, indigenous peoples in our country who are in the frontlines of environmental defense are continuously red-tagged and violated. They are driven out of their ancestral lands so that their resources can be exploited by foreign companies. 

According to a report by Global Witness in 2022, the Philippines remains to be the deadliest country in Asia for land and environmental defenders. In the last decade, 270 of them have been killed. In 2022 alone, 19 defenders were killed, most of them being indigenous people.

Amidst all of this, we continue to feel the most intense impacts of climate change. The summer heat was almost unbearable. PAGASA has also warned that El Niño may develop from June to August of this year. It can also persist until next year. Not only that, we are also bearing the brunt of extreme rainfall and intensified typhoons. With dwindling trees, we continue to be more and more prone to rising floods. Our coastal communities are also more vulnerable to storm surges. Our small islands, meanwhile, are facing the threat of disappearing completely with rising sea levels. We experience these effects in extremes as a small country composed of many islands surrounded by the sea. Yet we do not find our government prioritizing climate justice.

We are celebrating the 125th Independence Day, but we still find ourselves unfreed from our long-standing chains. Independence Day continues to be a mere holiday. We can only celebrate real independence when we are genuinely liberated from the systems and chains that confine and oppress us. – Rappler.com

Tony La Viña teaches constitutional law at the University of the Philippines and several Mindanao law schools. He is former dean of the Ateneo School of Government.

Bernardine de Belen graduated from the Ateneo de Manila University with a Creative Writing degree. She works at the Manila Observatory as a research assistant.

I would like to thank Amnesty International for this honor of naming me the Most Distinguished Human Rights Defender for 2023. I am indeed very honored to follow in the footsteps of Senator Leila de Lima, the awardee for 2018, and all the past and present recipients of the Ignite awards. And I regret very much not being able to be physically in their company on this wonderful night.

In the few minutes that Amnesty has afforded me to share my thoughts in this understandably tight program, let me say that while I have long been active in the protection of the right to life, the right to be free from persecution, and the right to due process, I would like to believe the panel of judges are also making a statement about my long-time engagement with economic rights.

Most of my life’s work has been devoted to intellectually and politically demolishing the ideology and policies of neoliberalism that have wreaked so much havoc not only among our people but in countries throughout world. The destruction of our manufacturing and the devastation of our agriculture has led to so much poverty and inequality and sheer misery, leaving so many of our youth with no other choice but to abandon our ruined country.  

To borrow the distinction made by the philosopher Isaiah Berlin, there are negative rights, such as the right not to be tortured, and positive rights, or those that contribute to our full development as human beings. Human rights campaigns have traditionally focused on negative rights, that is, the protection of people from repression and persecution. I believe it is time we also campaign against individuals and institutions that violate the people’s positive rights. Neoliberal policies such as those that have been imposed by the World Bank and International Monetary Fund, institutionalized in the Philippine political economy, and rationalized by a succession of economic managers and economists, have created massive poverty and inequality that have prevented millions of our fellow Filipinos over the last five decades from their full development as human beings, because they have destroyed, disarticulated, and disintegrated the country’s base of physical survival, that is, the economy. That is a crime.

Neoliberal policies are now discredited. The Washington Consensus is in the junk heap. No self-respecting economic manager, except perhaps in the Philippines, any longer invokes the so-called “magic of the market” or the so-called benefits of free trade. Yet in so many countries, and not just in the Philippines, neoliberal policies continue to be the default mode, like the proverbial dead hand of the engineer on the throttle of a speeding train. They continue to inflict severe damage on the life chances of millions of Filipinos because they have been institutionalized.

Those who have been responsible for destroying economies cannot be allowed to just walk away from the wreckage, just as that monster Duterte cannot be allowed to just get away with spilling the blood of 27,000 Filipinos. The bureaucrats and technocrats of the IMF and World Bank, their local accomplices particularly in the Department of Finance and National Economic Development Authority, as well as the ideologues of neoliberalism that have spread the false gospel from their perches in such institutions as the University of Chicago and the UP School of Economics must also be brought before the International Criminal Court (ICC).

Duterte’s hands are bloody, but so are the hands of these white collar criminals very dirty. Like those bombing crews that drop their lethal payloads from 27,000 feet or the remote controller that directs a drone to destroy a wedding party in Pakistan from thousands of miles away in Nevada, USA, these people are not exempted from guilt owing to their distance from the sites of death, destruction, harrowing poverty, and misery.

It is high time we seek justice for economic crimes. It is high time we cease honoring such criminals with Nobel Prizes in Economics but bring them instead to the ICC. If the arraignment of such economic criminals cannot be immediately be done owing to the need to amend the Rome statute, then let us at least establish a “Hall of Infamy” where we can enshrine such dead and living stars of neoliberalism as the Nobel Prize laureate Milton Friedman, the ideological soulmate of the General Augusto Pinochet; Michel Camdessus and Christine Legarde, the best known faces of IMF-imposed austerity; former World Bank President Robert McNamara, who conspired with the dictator Marcos to make the Philippines one of the guinea pigs of structural adjustment; and Pascal Lamy and Mike Moore, who spearheaded the drive to imprison the global South in the iron cage of free trade, the World Trade Organization.   

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I would also push for the inclusion in such a Hall of Infamy local luminaries of technocratic neoliberalism, the people who worked with international technocrats to condemn us to permanent debt slavery, destroy our manufacturing, and bring our agriculture to a terminal state. Here I would include the economic managers and economists Jesus Estanislao, Gerry Sicat, Cesar Virata, Bernie Villegas, and Carlos Dominguez.  

And, of course, one must not forget Cielito Habito, who as National Economic Development Authority chief almost singlehandedly wiped out Philippine manufacturing with his push to bring down average tariffs to 4-6% simply to prove that Filipinos could take economic pain better than Pinochet’s Chicago Boys in Chile, who did not allow tariffs to go below 11%. Nor must we overlook the WTO-USAID mercenary Ramon Clarete, who famously sought to sugarcoat the impending murder of our agricultural sector by claiming that Philippines’ joining the WTO’s Agreement on Agriculture would result in 500,000 new jobs every year in the countryside!  

But some people might object: Habito and Clarete are such mild-mannered individuals to deserve being tagged as economic criminals. So was the Nazi Adolf Eichmann, whom Hannah Arendt famously described as representing “the banality of evil.” Others might say, well they were wrong, but were they not well-intentioned? This excuse does not even deserve an answer since Marcos Sr. and Duterte saw themselves as well-intentioned as they went about their grisly business. The road to hell, one must repeat again and again, is paved with good intentions.

Being tried at the ICC or honored with membership at the Hall of Infamy would be a lesson to all that bad ideas and bad policies have consequences, often devastating ones – that you cannot play academic and policy games with the lives of millions of people.

Let me end by demanding the release of my fellow Ignite awardee Senator Leila de Lima, packing off Duterte to the ICC jail in The Hague, an end to impunity, and the dismantling of all those neoliberal policies that have destroyed our economy and brought so much misery to our people. And, again, thank you Amnesty. – Rappler.com

Former member of Congress Walden Bello is visiting senior researcher at the Center for Southeast Asian Studies at Kyoto University and adjunct professor of sociology at the State University of New York at Binghamton. Also the recipient in 2003 of the Right Livelihood Award (aka Alternative Nobel Prize), Bello is the author of 25 books, including the classic Development Debacle: The World Bank in the Philippines (1982), Dark Victory: The United States, Structural Adjustment and Global Poverty (1994), and Paper Dragons: China and the Next Crash (2019).

To be very clear, folklore, tales, and all beliefs rooted in various perspectives have space in climate discussions. It becomes critical and necessary, though, to distill some of them and give them a closer look when they morph into something that could potentially lead to something harmful. 

For example, in China, one of the narratives that has gone viral about climate change is that rising temperatures would “benefit” the country, as it would allegedly usher in a period of prosperity similar to the one it has experienced during the Tang and Han dynasties. The warmer temperature would supposedly move precipitation northward, bringing in much-needed rainfall. But this is not the case at all. 

China’s experts themselves have debunked this. Zhang Chengyi, a researcher at the National Climate Center of the China Meteorological Administration, explained to China Environment News, the official outlet of China’s Ministry of Ecology and Environment, that rising temperature is not the only variable behind changes in rainfall. 

The same article also stressed that the notion that “the most prosperous era in Chinese history was in the warm period,” was rooted in the preliminary research of Zhu Kezhen, China’s foremost meteorologist. His “Research on Climate Change in China in the Past Five Thousand Years,” gave the same correlation, but did not factor in other important considerations such as the political, social, and economic landscape during that time. 

Another narrative which China sort of implicitly shushed after 2011 was that climate change is nothing but a hoax concocted by the West to block China’s development. Take note that I wrote after 2011, because prior to that, as reported by climate journalist George Dembicki, this narrative has been promoted in mainstream media by prominent figures, such as popular TV host Larry Lang Hsien-ping.

Books also parlayed the same message to the public. John Chung-En Liu, professor of sociology with the National Taiwan University, said in his 2015 study “Low carbon plot: climate change skepticism with Chinese characteristics” that these books were published from 2009-2011, though he wasn’t able to find more after 2011. 

So what happened then? Dembicki, in his 2017 article “The Convenient Disappearance of Climate Change Denial in China,” explained that the “disappearance” happened at a time when there was growing public consciousness about climate change, and the government in itself had aggressively began to tackle the problem of climate change more seriously. 

Having said this, the online domain definitely showed a different picture even after 2011. 

In our report “Narratives that drive climate misinformation in China: Fat-shaming, memories of dynasties, and green technology conspiracy,” we found that fraudulent information about climate change continued to be shared across China’s robust digital universe, from messaging app WeChat – where posts about climate change allegedly bringing prosperity to China were posted – to Sohu, Weibo, and video-sharing platforms such as Xigua, Bilibili, and Douyin, among others. Beyond these, we also found climate disinformation about China on YouTube and Bitchute Rumble, as well as articles from far-right news organization The Epoch Times, which has carried an anti-Communist Party of China slant in its reportage. 

While the narratives above mirrored China’s history and ambitions, there was another strand of dubious posts which pointed to a turning of the tide, of a shift in the messaging given changes in China’s identity and reputation in the global movement for climate action. This one now asks which country really “benefits” from climate change, as before 2012, China said it was the West, as some book authors raised that the West just conjured the idea of climate change so it can sell its green technology to China.

But with China’s rise as a major player in green technology-related industries, there was another kind of disinformation that emerged, one which consists of videos supposedly showing the mediocre quality of China’s e-vehicles and wind turbines. These posts were also in Chinese, but we found them on Twitter. While the reasons on why seemingly Chinese posts would belittle China’s own products fall outside the scope of the report that we made, it’s a peculiarity that should be definitely explored in the future. 

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Speaking of identity and national pride, another narrative provided context on why Swedish climate activist Greta Thunberg has been the target of disinformation in the Chinese online domain time and time again. Manipulated images showing her supposedly gaining weight has been a “zombie” or recurring claim on Chinese social media platforms. Annie Lab, our fact-checking project at the University of Hong Kong, has debunked them first in May 2021, but we found more posts of the same claim even after that.

The vitriol against Thunberg, while seemingly trivial, is far from benign – it’s part of a broader issue, one that touches on nationalism. The attacks against Thunberg were rooted in her being, first, perceived as a “puppet” of the West after she tweeted that China must do something about its carbon emissions even if it’s still a developing country, and second, of being a “selective environmentalist” because she did not call out Japan when it announced plans to release nuclear wastewater to the Pacific Ocean.  

Outside of these, there were posts which undermined the role of man-made emissions as a driver of climate change and global warming, blaming them instead on solar activity and volcanic eruptions. Chinese experts have also exerted efforts to debunk claims made in the same vein. 

History, destiny, identity, mixed with regurgitated doubts about science – these form the diverse narratives of climate disinformation in China.  While they are not as prevalent as disinformation related to politics and security issues, they are still there and just like myths and legends, would certainly not go anytime soon. The key is to continue to try and understand their contexts and complexity. – Rappler.com

Purple Romero is supervising editor of annielab.org, and a teaching assistant at the Journalism and Media Studies Center at the University of Hong Kong.

Indeed, anything that contributes to a successful trade is important. However, how truly important is it when compared to the other factors in the trading equation?  

This question – and the answer to it – seems to be highly relevant under the present market situation.  Brokerage houses continue to issue trading calls to “trade cautiously.” In particular, they are recommending to buy when the market gets back above its 6,600-resistance level.  

Nitpickers, on the other hand, insist on buying right now. The market is near the breakout level of 6,600.  Their rationale is you make more money when the market actually breaks out.  

To be precise, the market has been lingering several points below the 6,600-resistance level in the last seven weeks or so. To recall, the 6,600-resistance level was breached for the first time on April 28.  Since then, the market tried to advance and move higher several times but failed.  

Early this week, the market was expected to open up strong on the back of Wall Street’s upbeat weekend performance last Friday that propelled the Dow Jones Industrial Average (DJIA) to rally 701.19 points or +2.12%, after a strong jobs report which showed non-farm payrolls in May to have increased by 339,000. This number was almost 50% higher than estimated. It also overshadowed the jobs report for April of 294,000 only.  Wall Street’s uptick was galvanized further by the approval and signing into law of the debt ceiling bill that pulled back the US from the brink of default.  

As it turned out, the market barely managed to climb higher.  It made a net gain of only 9.63 points or 0.14% on Monday, June 5, when it settled for the day at 6,521,64. Total volume was high with 1.7 billion shares but total value turnover was low at Php3.36 billion. Apparently, trading revolved mainly on third line stocks while majority of investors continued to book gains as a defensive strategy against prevailing uncertainties and lack of more positive developments that have not yet been discounted.   

The trading activity of foreign investors may have also contributed to the market’s low performance. The market’s upward bias was both restrained by their net selling activity for the day while accounting for 55.06% of total market transactions. 

The market even sank lower the next day. It closed on Tuesday, June 6, at 6,479.93, down 41.71 points or -0.64%. Total volume was even higher compared to the previous day with 1.80 billion shares, while total value turnover was still low at Php3.88. billion. Foreign investors’ trading activity didn’t seem to have made any material impact in the market’s outcome despite their trading tack. They had a market participation of 55.42%, but only played a minor role as net buyers for the day.

On Wednesday, June 7, the market closed the day at 6,564.70, with a huge net gain of 84.77points or +1.30% on a trading volume of 801.80 million shares and total value turnover of Php4.14 billion. Foreign investors’ trading activities and direction contributed significantly to the market’s climb. They accounted for 58.81% of total market transactions and played as net buyers for the day.

New leads and timing to buy back

Inflation rate, or the pace of increase in the prices of goods and services, went down further to 6.1% in May. This is the fourth consecutive month that inflation rate has gone down this year. It fell at 6.6% in April from the 7.6% in March, which in turn was also lower than the 8.6% of February. Forecasts claim that inflation could settle within 5.8% to 6.6% as a result of declining prices of energy and food items.   

Investors, on the other hand, will be having some upcoming cash dividends again starting this week from several listed issues, which continue to outperform. 

Headways are starting to materialize further in the banking, energy, food and mining sectors, as well.  Most of these are not yet factored in the current market situation, so that they are expected to make positive impact in the market soon. 

So, be ready to buy or buy back, as the case may be. When?  Between the trading calls discussed earlier, I recommend that you follow the strategy of entering or re-entering “after the market gets back above its current 6,600-resistance level.” The recovery is an indication that the failure has been overcome and that the underlying trend can resume.

Role of ‘entry’ in the trading equation

The trading equation is a cycle made up of two individual components: the entry or buy side and the exit or sell side. How they are handled determines the outcome of profit or loss made.  

As part of the same cycle, we may normally think that when to buy is as important as when to sell.  But you may be surprised to know that success and failure in your trade depended more on when to sell.  This is because the stock market is said to be “mean-revertive.”  

Mean reversion is a financial theory which postulates “that asset prices and historical returns eventually revert to their long-term mean or average level.”  

Thus, you can enter randomly – like tossing a coin in deciding when to buy – and still manage to make a profit.  Let’s also talk about the different techniques used for good entry next time. – Rappler.com

The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach “Thin Slicing” at densomera@yahoo.com)  

We made 6 key points. Let me share some highlights here for you.

“First, the raison d’être of the Maharlika Investment Fund remains unclear even as it has already hurdled both houses of Congress.”

Is Maharlika a “sovereign wealth fund” or a “strategic investment fund”? It’s not clear in the bill. And the distinction is crucial.

In a typical sovereign wealth fund (SWF), a country’s surplus funds from, say, oil, are used to set up a fund that can be invested globally in financial instruments (e.g., stocks, bonds) and other investments in search of high returns.

In a strategic investment fund (SIF), however, a country invests in both financial investments and economic projects like roads, bridges, etc.

Maharlika seems to be more like an SIF. But lawmakers still call Maharlika an SWF rather than an SIF.

“Second, due to its confused goals, the MIF bill does not adequately articulate and take account of several implications of the fund’s dual-bottom line objective.”

There are several implications of not saying (or knowing?) what Maharlika exactly is.

For instance, what exactly does Maharlika bring to the table, over and above other parts of government with a similar mandate to promote development?

We already have the National Development Corporation (NDC) which is tasked “to pursue commercial, industrial, agricultural or mining ventures in order to give the necessary impetus to national economic development.”

Compare this with a provision of the Maharlika bill, which allows the fund to participate in “joint ventures or consortiums with Filipino and foreign investors, whether in the majority or minority position in commercial, industrial, mining, agricultural, housing, energy, and other enterprises, which may be necessary or contributory to the economic development of the country, or important to the public interest.” Redundant, no?

Second, what investments will Maharlika enter?

The bill allows for a veritable hodgepodge of investments: financial investments (“cash, foreign currencies,” “fixed income instruments,” “domestic and corporate bonds”) as well as economic investments (such as “road and infrastructure projects,” “programs and projects on health, education, research, and innovation”).

We don’t want Maharlika to invest in “everything, everywhere, all at once” – in the words of investment manager Stephen CuUnjieng. In other countries, SIFs have precise allocations for their investments.

Third, Maharlika promises to contribute to the nation’s growth. But is it really a prerequisite to growth? There’s no study from NEDA or DOF guaranteeing this.

Will Maharlika’s investments also be aligned with the Philippine Development Plan or the Public Investment Plan – both crafted by NEDA? Unfortunately, the bill makes no mention of such plans. So what’s to prevent Maharlika from investing in things that deviate from the country’s development plan and don’t necessarily bring about growth for all?

Setting parameters for investments at the outset will also be crucial in evaluating whether Maharlika is effective or not.

Note that returns to financial investments are vastly different from returns to economic investments. The latter can take years to manifest, and are a lot harder (if not nearly impossible) to measure.

In other countries, the relative importance of financial versus economic investments is clearly delineated. In the Maharlika bill, it’s not.

Will investments (say, in infrastructure) also be a lot faster and more efficient with Maharlika in place? There’s no assurance of this at all. Maybe government can instead improve public-private partnerships (PPPs), or make the national budget and its execution more efficient. If building infrastructure projects will be slower with Maharlika, what’s the point?

“Third, the manner of funding the Maharlika Investment Fund poses huge risks to our already strained public coffers and is vulnerable to moral hazard.”

We don’t have surplus funds. The budget deficit (or revenue shortfall) of government reached P1.6 trillion in 2022. The current account deficit is also at its highest since the earliest comparable data in 2005; this means we’re increasingly a net borrower from the rest of the world.

So where will Maharlika get its initial money from? It will basically scour state-owned banks (Land Bank of the Philippines or LBP and Development Bank of the Philippines or DBP), the Bangko Sentral ng Pilipinas, taxpayers’ money, PAGCOR or Philippine Amusement and Gaming Corp. earnings, and privatization proceeds.

It’s not as if the institutions mentioned above have lots of funds to spare. As pointed out by economists like Enrico Villanueva, getting capital from LBP and DBP risks reducing the capital of these banks, below the minimum required of them by the BSP. This could impair these banks’ ability to lend to farmers and other sectors, making them vulnerable to bank runs if confidence in them erodes.

The BSP also needs the money coming from their net profits. They need P200 billion as their capital, something that will take them years to raise. But by diverting all their net profits to Maharlika instead, for two years at least, it will take them longer to raise the money they need to fulfill their functions – like price stability and bank regulation – well. (Note that Maharlika’s authorized capital is P500 billion, 2.5 times the capital of the BSP itself.)

Lots of people were worried that the pension funds of GSIS and SSS might be roped in for Maharlika. Although senators prohibited these institutions from investing in Maharlika, it’s unsettling that the President and the finance secretary are both still suggesting the opposite. Why are they so adamant about this?

“Fourth, red flags abound in the MIC’s governance structure.”

With so much public funds going to Maharlika, it’s all the more important to have a robust governance structure. The last thing we want is to politicize the fund and make it vulnerable to embezzlement and other corrupt acts.

But this is perhaps the biggest red flag of Maharlika: all the board members of the Maharlika Investment Corporation, who will oversee the fund and the investments, are presidential appointees. Even the so-called “independent directors” are presidential appointees. The advisory body also comprises presidential appointees, as well as many members of the risk management unit.

Based on global best practice, you want to attract professional fund managers and risk officers from the private sector to run an SIF. This requires humongous fees, of course, which further make it imperative that investments are profitable. But hiring experienced and competent people from the private sector – and allowing them to do their thing – will improve the chances of an SIF’s success.

Malaysia’s 1MDB provides a cautionary tale. A poor governance structure led to an eye-watering $4.5 billion of its funds being diverted to offshore bank accounts and shell companies.

We don’t have to look too far. During Martial Law, the dictator Ferdinand E. Marcos instructed government financial institutions to lend to cronies using so-called “behest loans” – and compromised them in the process. Even the Central Bank was implicated in this modus operandi, leading to its losses amounting to P300 billion by the end of the dictatorship.

And remember who used offshore accounts and shell companies to stash away billions of dollars of ill-gotten wealth?

“Fifth, with elevated global economic headwinds and uncertainties, it is unlikely that MIF will be able to ‘crowd-in’ investments and eke out returns that are large enough for the fund to grow substantially to finance development projects.”

This is pretty self-explanatory. The world economy is not in the best shape, what with persistent inflation, higher interest rates, and the continuing Russian invasion of Ukraine which has led to global shockwaves and disruptions. It’s a hard time to chase investments with good returns. Even some of the big and mature SWFs worldwide have suffered losses: in 2022, total assets of SWFs fell by $2.2 trillion.

“Sixth, the preoccupation with this defective proposal has diverted attention from more vital and urgent national agenda that the administration itself has rightly identified, notably the need to reform the retirement and pension system for military and uniformed personnel.”

There are so many other problems we ought to be focusing on, like the ballooning of the deficit and debt due to the unsustainable pension system of the military and uniformed personnel (MUP). Apart from this, we have an education crisis, the stagnation of agriculture, and the impending energy crisis when Malampaya’s natural gas reserves run out. Government should be focusing on these issues and funding more worthwhile projects – not Maharlika.

I hope you can find the time to read our discussion paper in full.

We concluded as follows: “[W]e call upon President Marcos to seriously reconsider the final approval of the Maharlika Investment Fund bill, and present before the public a clear and solid rationale for setting it up in the first place…”

Also, “We also call on our former and present colleagues who are now part of the Marcos economic team to reconsider their position on Maharlika and advise the President accordingly, in line with their best appreciation of their discipline and the reservations expressed by the rest of the economics profession of the country.”

There’s still room to craft a good IRR (Implementing Rules and Regulations) for Maharlika. But the bill itself contains too many fundamental flaws that the IRR alone can’t fix. Maybe it will be best for the President to veto the bill for now, and let Congress revisit and finetune the proposal.

Most importantly, the public must be allowed to further discuss and scrutinize this proposal. This is only fitting because after all our money is at stake. – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. JC’s views are independent of his affiliations. Follow him on Twitter (@jcpunongbayan) and Usapang Econ Podcast.

There had been attempts in the past to spruce up the airport, but nothing came out of it due to the underhanded efforts of some enterprising people in government who were scuttling the deal for whatever vested-interest motivation, succeeding in scaring off investors – notably a group of taipans – and unfortunately helped perpetuate the decades-old suffering of both local and international travelers.

On Wednesday, June 7, the Department of Transportation (DOTr) announced that Naia’s privatization could commence as early as the first quarter of next year. A lot would depend on the process of awarding the contract to the chosen concessionaire. Rappler learned that the DOTr is eyeing both the solicited and unsolicited routes in privatizing the airport, but it will entirely depend on which comes first.

The DOTr and the Manila International Airport Authority (MIAA) both submitted their joint plans to the National Economic and Development Authority (NEDA) on June 2. 

DOTr seeks P141B commitment

In an interview, DOTr Secretary Jaime Bautista told Rappler that investors must commit P141 billion in investments, exclusive of a straight-up payment of P30 billion, annuity payments of P2 billion, and a share of NAIA’s total revenue – expected to reach billions – to be generated from its commercial and non-commercial operation.

Bautista said that, contrary to misconceptions, the NAIA is not being sold. The government is offering to the private sector the right to rehabilitate, manage, and operate the airport under a concession. Under the said privatization project, a private concessionaire will have 25 years to operate the airport and recover its investment.

DOTr’s move to consider the Public-Private Partnership (PPP) route, which the previous DOTr management shunned, is a good move. Former DOTr Secretary Arthur Tugade rationalized the junking of the PPP saying a negotiated deal between government to government is the faster course and a better option to facing delays that may emerge with public biddings concerning the private sector.

But for me, PPP is a more feasible contractual agreement between the Philippine government and a private firm targeted towards financing, designing, implementing, and operating infrastructure facilities and services that were traditionally provided by the public sector. It embodies optimal risk allocation between the parties because it minimizes cost while realizing project developmental objectives. The project will be structured in such a way that the private sector gets a reasonable rate of return on its investment.

PPP addresses the limited funding resources for local infrastructure or development projects of the public sector, thereby allowing the allocation of public funds for other local priorities. It is a mechanism to distribute project risks to both the public and private sectors. PPP ensures that both sectors will gain improved efficiency and project implementation processes in delivering services to the public. Most importantly, PPP emphasizes value for money by focusing on reduced costs, better risk allocation, faster implementation, improved services, and possible generation of additional revenue.

Under the Build-Operate-Transfer (BOT) scheme which this project is going to be implemented, the government spends nothing. The concessionaire puts up the funding, builds the airport, gets paid by operating it for 25 years before turning the project over to the government. 

Without doubt, our country needs more than two airports. Most of the major cities today have two, even three or more, major airports actively servicing their citizens.  Serving 42 million passengers a year, the Naia reels from deterioration. Its four passenger terminals simply could not cope, dismally serving just over 40 percent of its designed passenger traffic capacity. Through the years, only one domestic and three international terminals have been built at the NAIA, with the frequency of plane arrivals and departures at only 40 an hour. 

The privatization of state-owned airports has gone global. The French government, for example, first turned over management of its airports to local authorities, and now to private entities. In Japan, 30- to 40-year concessions to run some of its airports are being sold by the government.

By offering a wide range of income sources, airports present a better risk profile to the private sector than other major infrastructure investments, These income sources include landing fees, airline contracts, and other aviation-specific sales, as well as retail, shopping and hotels.

Not surprisingly, as shown by the level of interest in the NAIA rehabilitation bid and the continually growing demand for aviation, local conglomerates see airport operations as a good business investment. Although NAIA’s upgrade would entail a huge initial investment, profitability prospects in the long term are promising.

Not only is the private sector more equipped to plan long-term for more efficient operations and maintenance of the airport’s four terminals, company owners and executives look at a 20- to even a 50-year horizon, compared with government appointees’ short terms.

NAIA needs a long-term, lasting solution now!

Yes, NAIA’s location is central. True, it has the required supporting infrastructure. But to be the country’s world-class gateway to the world, NAIA needs the kind of connected aviation ecosystem that seamlessly links together airlines, airports, air traffic management, and support services with the millions of passengers who pass through its gates every month, enhancing air travel experience with flawless and sustainable airport operations. 

For more than two decades now, NAIA has been ripe for rehabilitation. Just consider the numerous proposals for the airport’s upgrade that the government has received through the years from various private sector groups. Now is not the time to gamble on uncertain and untested novice airport projects which have no supporting infrastructure.

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The glitch that temporarily paralyzed airport operations early this year has resulted in even more strident cries to upgrade this antiquated and congested infrastructure that we call our international gateway. Quick fixes and short-term solutions are not the answer. The time has come for concrete, sweeping, and optimal reforms to bring NAIA to the 21^st century. The taxpaying public and air travellers need to know how and when the NAIA will be modernized. The country cannot afford to wait for pedestrian airport projects that will take forever to build. 

The DOTr has received an unsolicited but welcome proposal from the Manila International Airport Consortium (MIAC), which includes units of listed conglomerates Aboitiz InfraCapital, Inc., AC Infrastructure Holdings Corporation, Asia’s Emerging Dragon Corporation, Alliance Global – Infracorp Development, Inc., Filinvest Development Corporation, and JG Summit Infrastructure Holdings Corporation. Joining the Consortium is U.S.-based Global Infrastructure Partners, a global giant which has interests in airports across London and Sydney.

What differentiates the government’s solicited proposal and the MIAC proposal?

The government’s solicited proposal is asking for a P141 billion project cost commitment from potential bidders and includes a P30 billion upfront payment, P2 billion annuity payment, and a share of total revenue in its terms. 

MIAC is offering a turnkey proposal. All the upfront investments, project management expertise, and operational knowhow will be put up by the Consortium, with a hefty US$ 1 billion concession payment and projected direct and indirect economic value upwards of US$ 14 billion throughout a 25-year concession period. 

Obviously, MIAC’s proposal is complete and ready to take off, presenting the fastest track ever to the complete modernization of the NAIA, aimed at benefiting travelers and at the same time giving revenue-generating opportunities to the Philippine government. Rather than waste more months and possibly years waiting for other solicited proposals to be prepared, launched, and executed, MIAC’s unsolicited proposal is timely and readily viable. 

Longer concession period is required

For an undertaking as monumental as the NAIA rehabilitation, anything shorter than the 25-year concession will lose the project’s appeal to investors. All parties involved would need a longer time horizon to establish new operational efficiencies that would elevate the airport to global standards and enable them to recoup their significant investments. 

The concession period specified by the Consortium appears to be the most sustainable to realize NAIA’s full potential. Currently, the airport has a capacity of 31 million passengers per annum. Through its investment, MIAC would be able to serve up to 62.5 million passengers per annum in five years and accommodate up to 70 million passengers per annum by 2048.  

While our national pride in it may have been tarnished by the past few decades’ infamous operational mishaps and management missteps, NAIA undeniably continues to play a central role in the country’s economic growth. It’s time for NAIA to fly higher and more proudly than ever before! – Rappler.com

Val A. Villanueva is a veteran business journalist. He was a former business editor of the Philippine Star and the Gokongwei-owned Manila Times. For comments, suggestions email him at mvala.v@gmail.com.