DOF Considers Selling Government Stake in SCTEX to SSS and GSIS

Finance Secretary Ralph Recto has suggested the possibility of the Social Security System (SSS) and the Government Service Insurance System (GSIS) purchasing the government’s stake in the Subic-Clark-Tarlac Expressway (SCTEX). This move aims to enhance the investment portfolios of the pension funds while generating non-tax revenue for the government.

Potential Stake Sale

Secretary Recto’s comments come in the wake of the Bases Conversion and Development Authority’s (BCDA) consideration to sell its remaining stake in SCTEX to the MVP Group, led by tycoon Manuel V. Pangilinan. BCDA President and CEO Joshua Bingcang revealed that the Pangilinan-led group submitted a buyout offer through a letter addressed to the Department of Finance (DOF) and Malacañang.

When asked about this development, Recto responded, “It’s better off that we sell those shares to raise revenue, non-tax revenue, and better maybe if the pension funds buy from us.” He added, “Maybe the SSS and GSIS can buy them… so they can earn money.”

Background on SCTEX

The Subic-Clark-Tarlac Expressway (SCTEX) is a 94-kilometer expressway that runs through Bataan, Pampanga, and Tarlac. The management, operation, and maintenance of SCTEX were awarded to NLEX Corp. by the BCDA in October 2015. Under the current agreement, 50% of the revenues are allocated to the SCTEX concessionaire NLEX Corp., while the remaining 50% goes to the BCDA. The BCDA utilizes its share of the revenues to service its debt with the Japan International Cooperation Agency (JICA), which financed the ¥59.04-billion construction of the expressway.

Investment Opportunities

The potential sale of the government’s stake in SCTEX to SSS and GSIS represents a strategic investment opportunity for the pension funds. Acquiring shares in SCTEX could provide the pension funds with steady revenue streams, thereby bolstering their investment portfolios. This move aligns with the broader objective of enhancing the financial stability and sustainability of the pension systems, which are critical for the welfare of their beneficiaries.

Broader Financial Implications

Selling the government’s stake in SCTEX to SSS and GSIS could also help the government generate significant non-tax revenue. This revenue could be redirected to various development projects and public services, potentially reducing the need for additional tax measures. Additionally, the sale would align with the government’s efforts to optimize asset management and maximize the value of its investments.

Current Status and Future Prospects

As of now, the BCDA has expressed openness to sell its SCTEX stake to the MVP Group for upwards of P20 billion. However, the proposal to involve SSS and GSIS in the purchase introduces a new dimension to the negotiations. Whether the pension funds will proceed with the acquisition remains to be seen, but the proposal underscores the potential for strategic investments by public financial institutions.

In the broader context, this development follows other significant financial activities in the Philippines, such as the recent $2 billion raised from the first global bond offering of 2024 and the memorandum of understanding (MOU) signed between Maharlika and BCDA for potential investment opportunities.

Conclusion

The suggestion to sell the government’s stake in SCTEX to SSS and GSIS highlights a strategic approach to enhancing the financial portfolios of public pension funds while generating non-tax revenue for the government. As the discussions progress, the potential involvement of the pension funds could pave the way for more robust investment strategies and financial stability in the public sector.