Public office is a private trust fund

Public office is a public trust, or so I’ve heard.

Article XI(1) of the 1987 Constitution reads: “Public officers must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives.” Now, I understand that there are a million and more ways to serve the people; so I will not here attempt to disassociate public officers from the likes of responsibility, patriotism, and justice writ large. But to “lead modest lives”? In a country that has but slipped further down the global corruption index, now sitting not-so-pretty at a decade-low 117th least corrupt nation in the world? Hah! Go figure!

Alas, the stories that we’re told, and the realities that we face are far from one and the same. Here, the powers-that-be come to office not to serve a public trust, but to gain a private trust fund. A personal purse lined with the Filipino people’s dime.

The most recent shenanigan comes in the form of House Bill No. 6398, which proposes the creation of the Maharlika Investments Fund (MIF) Act—a purported sovereign wealth fund (SWF) that will be used to invest in “an array of both real and financial assets to stabilize national budgets, create savings for their citizens, or promote economic development.” HB 6398 provides that the MIF will be initially capitalized by multibillion peso investments using funds from, among others, the Government Service Insurance System (GSIS) and the Social Security System (SSS).

HB 6398 highlights that, in Asia alone, Singapore, China, Hong Kong, South Korea, Malaysia, Indonesia, Taiwan, Vietnam, and East Timor all have SWFs as well. The bill, however, conveniently omits the fact that all of these countries, even amidst their share of corruption scandals, fare much better than the Philippines in the global corruption index. Indeed, of them all, Singapore ranked highest and Indonesia ranked lowest as, respectively, the 4th and 96th least corrupt nation in the world.

As has been already explored by various other columnists, there are many a dubious thing about the MIF. The fact that HB 6398 proposes that the MIF will be chaired by the President, Ferdinand Marcos Jr., and was in fact proposed by the President’s son and namesake, Rep. Ferdinand “Sandro” Marcos III, in and of itself raises serious concerns about the potentials of abuse. This rings all the more true in light of several provisions that will grant the MIF chair, chief executive, and board of directors wanton discretion to decide on the limitations and safeguards the MIF will subscribe to (Section 13) and will be entitled to honoraria of undefined limits (Sections 19 and 22).

To nip the rose at the bud, HB 6398 states at the outset that this sovereign fund will adhere to the Santiago Principles—the generally accepted principles and practices of sovereign wealth funds. But note the irony: Pursuant to these very principles, the MIF would not constitute a true sovereign fund in the first place!

The Santiago Principles identifies three key elements that define an SWF: (i) Investments: That the investment strategies include investments in foreign financial assets; (ii) Purposes and Objectives: That the SWF is established by the general government for macroeconomic purposes; and, lastly, (iii) Ownership: That the SWFs are owned by the government. The issue with HB 6398 is this final element.

Recall: The initial capital of the MIF will be composed of funds from the GSIS and SSS—funds which, as opined by retired Supreme Court senior associate justice Antonio Carpio, “are personal contributions of their respective members who own the funds.” The funds to be allocated from the GSIS and SSS are thus not “owned” by the state and only held in trust by it.

This opinion is further affirmed by the Santiago Principles itself, which explicitly “excludes, inter alia, […] government-employee pension funds or assets managed for the benefit of individuals.” By relying on GSIS and SSS-sourced funds, HB 6398, therefore, places itself outside the definition of SWF as defined by the very principles it invokes.

I echo Justice Carpio’s observations, and agree that HB 6398, should it become law, would be unconstitutional for violating Article III(9) of the 1987 Constitution, which provides that “private property shall not be taken for public use without just compensation.” I also believe that the argument may and should be expanded.

In its current state, the argument would embrace only “the income of SSS and GSIS investible funds,” which “must benefit only their respective members.” It looks only to the appropriation of the fruits gained, and not the misuse of the principal amounts per se. But as ruled in Office of the Solicitor General v. Ayala Land, Inc. (GR No. 177056, Sept. 18, 2009), just compensation is not limited to acquisition of title nor total destruction alone. Indeed, as captured by the Roman maxim: ius utendi fruendi et abutendi res sua quatenus juris ratio patitur, the right of ownership embraces “the right of the owner to use, take fruits, and dispose freely with his item, to the exclusion of every other person.” Thus, mandating the use of the private funds for the public’s benefit may also be argued to constitute, in and of itself, an exercise of ownership rights and a taking contemplated under Article III(9) of the 1987 Constitution.

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