STATE-RUN Government Service Insurance System (GSIS) is in discussions with multilateral agencies to develop an “infrastructure fund” that would purely be invested in infrastructure projects in the country that could reach up to $750 million, its top official yesterday said.
“We are sitting down with multilateral agencies to come up with an infrastructure fund… that could give GSIS a long-term cash flow that would match our liabilities,” GSIS president and general manager Robert G. Vergara told reporters in a briefing yesterday.
Mr. Vergara said GSIS met with representatives of the Asian Development Bank; the International Finance Corp., the private sector funding arm of the World Bank group and the Japan International Cooperation Agency for the infrastructure fund.
The objective of the infrastructure fund, he said, is to provide GSIS with revenue streams that could match its actuarial life that is estimated to be until year 2045.
“Infrastructure investments could provide double-digit returns, which are higher than the usual returns we get from long-term fixed-income investments… and could help us achieve investment and longevity returns that our actuarial life requires,” Mr. Vergara said.
“Return from the fund could match our needed returns to provide payment benefits for our members… we need to have a revenue stream that would allow us to provide payment benefits for our members until 2045,” he added.
The whole fund could amount between $500 and $750 million, with around $250 million coming from GSIS alone.
“I think $250 million from GSIS would be a good bite size, but depending on our discussions with the multilateral agencies, then it could be more,” he said.
He remarked that the fund would be on top of the P50 billion that the government pension fund has alloted for the government’s public-private partnership (PPP) program.
GSIS along with the Social Security System, state-lenders Development Bank of the Philippines and Land Bank of the Philippines, are pitching P50 billion each to come up with the P200 billion for the PPP scheme — the centerpiece of the Aquino government’s medium-term development plan.
A fund manager, who is yet to be selected, Mr. Vergara said would be responsible for analyzing and managing the fund. The fund manager will also be tasked to recommend to the involved parties on what investments to make.
The government launched the PPP program late last year, pledging that 10 infrastructure deals would be auctioned off to local and foreign investors this year.
However, only the Daang Hari-South Luzon Expressway link has been rolled out.
The list has been trimmed to only five projects now, with only three of the original big-ticket infrastructure deals included.
Mr. Vergara remarked that the delay of the much-awaited PPP program is of great help to the pension fund “to study and come up with the appropriate framework on how to go about its participation and investment in the program.”
Meanwhile, GSIS said that its net profitts rose by 27% in the 10 months ending October as it booked a one-time gain from its investment.
GSIS booked a net income of P56 billion as of October, higher than the P44 billion it posted in the same period a year ago.
“There was a significant increase in net income in the 10-month period as we booked the one-time gain we realized after we repatriated the Global Investment Fund,” Mr. Vergara said.
In July, GSIS executive vice- president for finance Benedicto Jose R. Arcinas said the state-pension fund has completely remitted its offshore investments, bringing in some $690 million, which is $90 million more than the original figure of $600 million invested in developed markets such as United States, United Kingdom, Germany, Japan and Australia.
The $1-billion fund was launched in 2008 in a bid to diversify the investment and revenue streams of GSIS.
Mr. Vergara remarked that GSIS was able to redeem around P5 billion after it brought back funds under the fund program in the country.
GSIS said its total assets amounted to around P600 billion as of October. Its revenue from insurance, which accounted for 4% of its total assets, as of October increased by 25% to P25.39 billion from P20.27 billion a year ago, driven mainly by social insurance contributions.
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By: Ann Rozainne R. Gregorio
Source: Business World, Nov. 15, 2011
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