(UPDATE) PRESIDENT Ferdinand Marcos Jr. has vowed that the Philippines’ first-ever sovereign wealth fund will be “well-run,” allaying lingering concerns that it might be prone to abuse and corruption.
Marcos on Tuesday signed into law Republic Act (RA) 11954, or the “Maharlika Investment Fund (MIF) Act of 2023,” a pet measure of the administration that is “designed to drive economic development” in the country.
In his speech after the signing of the law in Malacañang, the President described the fund as an “extremely important measure” as the government moves to strengthen the economy in a post-pandemic world.
“Just as we are recovering from the adverse effects of the pandemic, we are now ready to enter a new age of sustainable progress, robust stability and broad-based empowerment,” Marcos said.
“We now have an available fund that will provide us the seed money for investments and to attract other foreign investments, and for us to be able to participate in those operations, in those investments without additional borrowings,” he added.
The MIF is a sovereign wealth fund that will be used to invest in a wide range of assets, including foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects.
Under the law, the initial capital will come from the investible funds of the Land Bank of the Philippines, the Development Bank of the Philippines, declared dividends of the Bangko Sentral ng Pilipinas and other sources.
“For the first time in the history of the Philippines, we now have a sovereign wealth fund designed to drive economic development,” Marcos said.
“Through the fund, we will leverage on a small fraction of the considerable but underutilized investable funds of the government and stimulate the economy without the disadvantage of adding additional fiscal and debt burdens,” he added.
The President said the key to the success of the Maharlika fund is management, adding that the country has “the best economic managers both in government and in the private sector that we can count on to run this fund properly.”
This, he added, was why he decided to remove himself and the Finance chief from the board so as to not taint it with political decisions.
“Because inevitably, if you put me or the secretary of finance in a decision-making loop, those decisions will be colored by political considerations, and that must not be the case,” Marcos said. “Let us make sure that the fund is well-run. Let us make sure that these [people who will run it] are professionals. Let us make sure that decisions that are being made for the fund are not political decisions, that they are financial decisions because that is what the fund is.”
The President added that there are many opportunities that “we cannot allow to slip by, thus the MIF has to be put up.”
He said the fund is also a “crucial undertaking” that will support the government’s overall goal of 6.5 to 8 percent gross domestic product growth (GDP) in the medium term.
“And through the fund, we will accelerate the implementation of the 194 National Economic and Development Authority (NEDA) board-approved flagship infra[structure] projects,” Marcos said.
“I assure you that the fund will be managed by highly competent personnel with a good track record and outstanding integrity,” he added.
Unlike other government-owned or -controlled corporations, the MIF will be able to maximize government assets through its investments in projects that generate bigger returns.
The law will establish the Maharlika Investment Corp. (MIC), which will act as the “sole vehicle for the purpose of mobilizing and utilizing the MIF for investments in transactions in order to generate optimal returns on investments.”
A document released by Malacañang showed that the MIC, which is in charge of mobilizing the MIF, will be composed of the Finance secretary, who will serve as the chairman; presidents of the Land Bank of the Philippines and the Development Bank of the Philippines; two regular directors; and three independent directors from the private sector.
In a chance interview in Malacañang on Tuesday, Finance Secretary Benjamin Diokno said he would be part of the board of directors that will oversee the utilization of the MIF.
He said the MIF will help boost the Philippines’ GDP growth as the fund is expected to generate high returns. It will also provide additional funding for the government’s priority infrastructure projects, estimated to cost around P8 trillion.
“The President is saying we have many plans. The priority [are] the 194 big projects approved by the NEDA, right? They need funding. It’s around, if I remember correctly, P8 trillion,” Diokno said.
“So what will happen is that we will have additional sources of funding for all these projects. Some of those projects will be funded through the budget, some through official development assistance, and some through public-private partnerships, about one-third,” he added.
Diokno said the MIF can be used to finance the remaining two-thirds of the priority infrastructure projects. This will make it easier for the government to implement the projects and boost GDP growth.
“Because if we wait for the usual cases, our capabilities will be limited. With fewer projects, our economy won’t be as vibrant,” Diokno said.
NEDA Director-General and Socioeconomic Planning Secretary Arsenio Balisacan said that the Maharlika Fund could be useful in investing in various areas.
“The economic team has always emphasized the importance of enhancing the platforms that we have for engaging with the private sector and promoting investments in strategic areas. The MIF will help us achieve this objective,” Balisacan said.
To increase the starting capital of P125 billion in government securities, he said the MIF can generate greater economic advantages by attracting additional investments and completely fulfilling its authorized capital stock of P500 billion.
The NEDA chief added that the fund has the option to invest in certain projects from the “Build Better More” program, including the 194 Infrastructure flagship projects.
WITH NINA MYKA PAULINE ARCEO, JAVIER JOE ISMAEL, BERNADETTE E. TAMAYO AND REINA TOLENTINO