In view of the US financial crisis, the poor and jittery members of the Government Service Insurance System (GSIS) have every right to know what is happening to the $600 million of their hard-earned money invested abroad under the much-ballyhooed Global Investment Program.
Instead, the GSIS feeds its members with bits and pieces of information. First, it was announced that the GSIS had no money in Lehman. Later, it said it had no exposure to AIG.
Last Monday, the papers quoted Winston Garcia as saying the fund’s foreign investment was earning 5 percent. But, did not GSIS announce a year ago, when the GIP was launched, that the investment was guaranteed to earn at least 8 percent? More shocking is that 5 percent is below what is required to maintain the actuarial soundness of the GSIS. In other words, this is a losing proposition for the members.
By the way, why did the GSIS not send any representatives to the Senate hearing called precisely to discuss the possible effects of the US financial crisis on the local financial sector? What was there to hide?
The rules and regulations implementing the GSIS Law of 1997 (Republic Act 8291) specify how, in general, funds should be invested: “Section 15.3.1. — The funds of the GSIS which are not needed to meet current obligations may be invested under such terms and conditions as may be prescribed by the Board (of Trustees): Provided, that investments shall satisfy the requirements of liquidity, safety/security and yield in order to ensure the actuarial solvency of the funds of the GSIS: Provided, further, that the GSIS shall submit to both Houses of Congress of the Philippines an annual report on all investments made (underscoring mine).”
When was the last time the GSIS submit a report on all its investment here and abroad?
Investing funds abroad is covered by Section 15.3.2 — Specifically, the funds of the GSIS may be invested in the following: x x x (11) foreign mutual funds and foreign currency deposits or foreign currency-denominated debts, issued in accordance with existing laws of the countries where such financial instruments are issued: Provided, that these instruments or assets are listed in the bourses of the respective countries where these instruments or assets are issued: Provided, further, that the issuing company has proven a track record of profitability over the last three years and payment of dividends at least twice during the same period.”
Have the foregoing conditions been followed under the GIP?
Finally, one of the functions of the board is specified in “Section 16.2.18 — To submit annually, not later than June 30, a public report to the President of the Philippines and the Congress of the Philippines regarding the activities in the administration and enforcement of RA 8291 during the preceding year, including information and recommendations on broad policies for the development and perfection of the programs of the GSIS.”
Because of the gravity of the financial crisis abroad, which may have affected that $600-million investment, should not the GSIS make a report to the President of the Philippines and the Congress of the Philippines now?
By the way, how come the complete and duly certified terms and conditions of the foreign investment contracts have never been made public? Are the contracts national security matters that have to be kept under wraps, away from the prying eyes of lowly government employees?
But the biggest question of all is: Why doesn’t the GSIS come clean, as required by law?
Confession is good for the soul. And a public confession, with regulation sackcloth and ashes, cleanses even more.
Previous columns:
World War II veterans – 10/01/08
Investments of insurance companies – 9/24/08
Unclogging the courts – 9/17/08
Asbestos – 9/10/08
VAT and your insurance claim – 9/03/08
