By Jodeal Cadacio
Reporter
THE House Committee on Government Enterprises and Privatization has approved two similar bills, one prohibiting the Government Service Insurance System (GSIS) and the other the Social Security System (SSS) from investing reserve funds in high-yielding but “risky” investments—initiatives that are worrying the Philippine Stock Exchange (PSE).
The panel chaired by Lakas Rep. Eladio Jala of Bohol has passed House Bill 5215, which provides for investment restrictions on the part of the SSS, and HB 4237, which restricts the GSIS. The committee is preparing the committee reports for the twin measures for submission to the Committee on Rules. Both bills are principally authored by Lakas Rep. Arthur Defensor of Iloilo, the House senior deputy majority leader.
The bills’ advance through the committee system spells bad news for PSE president and CEO Francis Ed. Lim, who Tuesday morning expressed opposition to the bills for sending “confusing” signals to investors.
Speaking at the BusinessMirror-sponsored “Perspective Forum” on developments in the stock market, Lim asked his audience to protest the two bills for going against the current drive to draw in foreign investors, including those from giant pension funds like the California Public Employees’ Retirement System (CalPERS).
“We are inviting these people to invest here, but we are restricting our own pension funds from doing so. I think that sends a confusing signal to them,” Lim rued.
It may comfort him to know they are not certified administration measures.
The GSIS bill also seeks to amend its charter to ensure protection of the government workers’ pension funds. Defensor said that as currently worded, the GSIS charter provides too much leeway to the agency to invest its pension fund. He cited instances wherein returns of some investments such as in stocks or commodity markets and real estate are too speculative.
He said that when the GSIS goes into such investments, it defeats the purpose of the fiduciary funds that answer primarily the retirement needs, education, health and welfare of members and their dependents.
Defensor’s proposal restricts the GSIS from investing in the following ventures, which are currently allowed by its charter: interest-bearing deposits or securities in any domestic bank doing business in the country; debt instruments and other securities traded in the secondary markets; loans, bonds, debentures, promissory notes or other evidence of indebtedness of corporations; foreign mutual funds, foreign currency deposits of foreign currency-denominated debts; nonspeculative equities and other similar financial instruments.
Defensor seeks to apply the same restrictions to investment portfolios of the SSS.
The proposal had drawn the backing of the Insurance Commission and of the Commission on Audit, which both said in separate position papers that the workers’ money should be invested in high-returns but low-risk ventures.
While these offices expressed support for the measure, the GSIS raised strong reservations over the proposed restrictions.
Omelita Tiangco, GSIS executive vice president, said the proposal does not come as good news for the GSIS as it would mean removing investment options, which are badly needed to build a healthy portfolio.
“The GSIS is faced with a situation where the actuarial hurdle rate is pegged at 12 percent, and for us to invest solely in government securities, this rate will be very difficult to achieve,” Tiangco said.
She noted that CalPERS’ investments in equities and bonds prove that the investment portfolio must be diversified to sustain the pension fund’s actuarial solvency.
Tiangco proposed that instead of prohibiting the GSIS from investing in what the committee perceived as risky ventures, particular attention should be given to the choice and evaluation of investments, and the process attending these ventures.
Business Mirror
November 15, 2006
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