Is the Maharlika Investment Fund an idea whose time has come?
This administration thinks so, and therefore wants to pull out all the stops to make it a reality. As things now stand, the MIF is still a work-in-progress. That’s because the Senate has yet to examine the key provisions of the bill proposing its establishment and approve it in plenary. The House of Representatives passed House Bill (HB) 6608 or the proposed Maharlika Investment Fund Act on third and final reading on Dec. 15 last year. It was transmitted to the Senate on Dec. 19.
While the MIF has already hurdled the first stage of its approval, it continues to spark lively debate among various sectors. This is all well and good, as this will guarantee an end-product that’s acceptable to the nation as a whole. What’s clear at this point is that the proposal deserves close scrutiny as it is an investment in the nation's future and yet another mechanism that will pave the way for a better future for all Filipinos in the years ahead.
The original MIF proposal
The MIF is the Philippine version of the Sovereign Wealth Fund (SWF) now existing in 70 countries which have grown in size over the years. A sovereign wealth fund (SWF) is a state-owned investment fund usually drawn from a country's surplus revenues or reserves. The government invests these funds in financial and real assets with the target of stabilizing budgets, increasing savings, and promoting economic development.
Congress came up with the MIF concept because, it said, it did not want to impose new taxes that would mean an additional burden for ordinary Filipinos. Instead of taxes, lawmakers decided to tap surplus funds for long-term economic development programs and projects.
The MIF was first proposed in House Bill 6398, or the Maharlika Investment Fund (MIF) Act, with House Speaker Martin Romualdez and six other lawmakers as principal authors.
Originally, its start-up capital was envisioned to come from government financing institutions (GFIs), which will then be placed in a wide range of products, such as foreign currencies, metals, fixed-income instruments, domestic and foreign corporate bonds, listed or unlisted equities, mutual and exchange-traded funds, and real estate, among others.
The measure proposed an initial investment of PHP250 billion from the Government Service Insurance System (GSIS), Social Security System (SSS), Land Bank of the Philippines, and Development Bank of the Philippines (DBP), as well as PHP25 billion from the national government. Subsequent annual contributions would come from the BSP and the national budget.
HB 6398 wanted to set up a new corporation to be called Maharlika Investment Corporation (MIC). This entity would have its own charter and be supervised by the Securities and Exchange Commission and the Securities Regulation Code.
The MIC would be governed by a Board of Directors with 15 members, including the Secretary of Finance as chair; a Chief Executive Officer; the presidents of the Land Bank of the Philippines and the Development Bank of the Philippines; seven regular members from government financial institutions; and four independent directors from the private sector.
The MIF would be run like a corporation and be completely transparent in its operations. It would have a Risk Management Unit consisting of five members with extensive experience in finance, economics, and investments. The fund would be monitored by a Joint Congressional Oversight Committee composed of five senators and five members of the House of Representatives.
The fund would have three audit layers: internal, external (consisting of internationally accredited auditors), and the Commission on Audit. All the books of accounts of the MIC would be open to scrutiny by the Commission on Audit as mandated by the Philippine Constitution. With built-in mechanisms to ensure zero-tolerance for corruption, the MIF is seen as a key instrument for the country’s socio-economic development.
After the plan to tap the two state-run pension plans for the MIF met with criticism from various quarters, legislators crafted a substitute bill, House Bill 6608, with the Land Bank of the Philippines, Development Bank of the Philippines and the Bangko Sentral ng Pilipinas as main funding sources. This version of the MIF was approved by the House of Representatives on Dec. 19, 2022.
The ‘reengineered’ MIF proposal
HB 6608 has been further revised to incorporate suggestions from within and outside the legislature. One of the original authors of the MIF bill, Albay (2nd Dist.) Rep. Joey Salceda, revealed that he and three lawmakers had decided to drop the Bangko Sentral ng Pilipinas (BSP) and the Development Bank of the Philippines (DBP) from the list of sources of capital for the MIF, which would instead limit its fund sources only to dividends from government-owned and controlled corporations.
“This will also make MIF a private sector-driven fund rather than one where the government’s exposure is greater. No sovereign guarantees or BSP regulatory reliefs needed, nor are any exemptions from GOCC governance and taxation necessary. Basically, it’s now just securitization of the dividends excluding BSP and no more asset infusion from DBP,” the lawmaker said.
Under the new proposal, some PHP44.3 billion in annual dividends would be securitized, which in 20 years -- at a certain discount rate -- can reach PHP765.96 billion. These would be “real surpluses,” coming from stable government-owned and controlled corporations (GOCCs) like the Philippine Deposit Insurance Corp. and Philippine National Oil Co. The fund will later go public through an initial public offering (IPO), after which GOCCs will no longer be tapped as capital sources. An IPO, Salceda said, can easily raise PHP1.2 trillion.
“The MIF will then be more private-led but definitely it could have public guidance, basically government guidance. There is greater room for private sector participation due to the initial public offering and the private sector majority ownership,” Salceda explained.
Once the MIF is listed on the main board of the Philippine Stock Exchange (PSE), Salceda said, the government would own less than 50 percent and the rest will be private. “There’s so many other big investment banks that are interested in the sovereign development fund,” he added.
Support for the MIF
The country’s economic managers -- Finance Secretary Benjamin Diokno, Budget Secretary Amenah Pangandaman, Socioeconomic Planning Secretary Arsenio Balisacan and BSP Governor Felipe Medalla -- strongly support the creation of the Maharlika fund.
“The establishment of a Sovereign Wealth Fund is a tried and tested investment vehicle that has been used by governments in both First World and developing countries to achieve their economic objectives,” they said in a statement.
The economic team said the creation of the MWF would help the country achieve the “Agenda for Prosperity” and the objectives for inclusive and sustainable economic growth that they have outlined in the Medium-Term Fiscal Framework, Eight-Point Socioeconomic Agenda and the Philippine Development Plan 2023-2028. They pointed out that direct benefits from the sovereign fund include increased investments in big-ticket infrastructure projects, high-return green and blue projects, and countryside development.
Intergenerational benefits would include increased access by future generations to income from investments, such as mining.
Go Negosyo founder Joey Concepcion said that if the sovereign wealth fund addressed the “trust and timing issues,” it could present “vast investment opportunities” for the country. “Done properly, I think it’s a good idea. It should be managed by the private sector, and then we will see the level of trust move up. If you want the people’s buy-in with this fund, you should assure them that it will be run by people who have no conflicts of interest and are very capable of turning in a profit for the fund.”
Philippine Stock Exchange President Ramon Monzon has also expressed support for the MIF. He believes that the fund’s goal of sustaining infrastructure spending would help spur investments, ultimately benefiting the country’s capital markets. “Since the MIF seeks to attract and invest capital for big-ticket infrastructure projects, sustainable green and blue infrastructures and countryside development, we believe these investments will create a multiplier effect that would attract more fund-raising activities and portfolio investments and in turn contribute to the growth and development of our capital markets,” Monzon pointed out.
The Senate and MIF
Senators have vowed to hold discussions and conduct an in-depth analysis of the plan to put up the MIF. Senate President Miguel Zubiri has indicated that the upper chamber “will study through the hearings and plenary debates all measures with a fine-tooth comb.”
Senate Majority Leader Joel Villanueva expressed support for a sovereign wealth fund but stressed that further discussions are needed to ensure that the fund will be managed properly with transparency and accountability. “We also need to pinpoint and clarify the investment objectives and strategies for the fund so that it will be well spent for the betterment of the Filipino people,” he said.
Senate Minority Leader Aquilino “Koko” Pimentel III has also urged intensive debate on the issue: “The Maharlika Fund will have extensive effects and ramifications not only to our generation but potentially to future generations of Filipinos. Hence this should not be rushed. Haste makes waste.”
President Marcos wants the MIF done right
President Bongbong Marcos Jr. wants Congress to thoroughly review the proposed Maharlika Investment Fund as getting it wrong would be “a very bad mistake.”
“Review it carefully. Of course, it is better to finish as soon as possible, but it should not be rushed because it is very important,” Marcos said. “It’s more important to be right than quick. We have to get it right. Getting it wrong would be a very bad mistake,” he emphasized
The Chief Executive also allayed fears of possible money laundering, saying while private money will be involved with the fund, it's not a savings account where people park money where it stays.
"Now, whenever we come into partnership, we do a G2G (Government-to-Government) with Japan, for example, or we do a PPP (public-private partnership) with some big outfit, then that is only the time that the money has come into the fund to be used for the program…On our end, we will only deploy funds when there is a very specific project to be paid for. So money laundering just won't come into it," he said.
With that pronouncement and other built-in safeguards in the bill now pending in the Senate, the MIF that’s now a work-in-progress is likely to stand as a fitting legacy of the Marcos administration to the nation even beyond its term of office in 2028.
Editor’s note: The opinions expressed in the foregoing article are solely the author’s and do not reflect the opinions and beliefs of the Philippine News Agency (PNA) or any other office under the Presidential Communications Office.