MANILA, Philippines — President Ferdinand signed the Maharlika Investment Fund into law yesterday, creating the country’s first-ever sovereign wealth fund despite some experts’ warnings that the MIF is prone to risks and mismanagement.
Republic Act (RA) 11954 establishes the MIF, which is intended to become a vehicle to make profitable and strategic investments in key sectors. The government expects the wealth fund to become an instrument to accelerate the implementation of 194 infrastructure projects approved by the National Economic and Development Authority (NEDA).
During the signing of the MIF bill at Malacañang, Marcos allayed fears that the wealth fund would be politicized or misused and maintained that it is needed to fund investments that would make the Philippines competitive in a post-pandemic economy.
“Let us make sure that the fund is well-run. Let us make sure that these 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. It is essentially a fund that we will continue to invest in,” the President said.
“I contend that we have some of the best economic managers both in government and in the private sector that we can count on to run this fund properly,” he added.
Marcos also said he had objected to a proposal to make him the chairman of the Maharlika Investment Corporation (MIC) to ensure that investment decisions would not be politicized.
“I have been watching the hearings and the debates in Congress... I said I’m not in favor of...the original iteration the President was the chairman of the (MIC). I said, ‘No, you remove us.’ Then, there was the secretary of finance, no,” the Chief Executive said.
“Structurally, we removed the political decisions from the fund, and those political decisions are left with the bureaucracy, the political bureaucracy, and the fund is left to be a fund and operating on a sound and proactive financial basis.”
But a briefer on the MIF law released by the Presidential Communications Office (PCO) said the MIC would be governed by a nine-person board of directors whose chairman is the finance secretary.
Speaking to reporters after the signing ceremony, Finance Secretary Benjamin Diokno said other countries had designated their finance chiefs as chair of their sovereign wealth funds.
In a statement, the PCO said the finance secretary is merely the ex officio chair of the MIC and would not run the fund.
“The fund will be governed by the nine-member Maharlika Investment Corporation chaired by an independent director,” the statement read.
For his part, NEDA Secretary Arsenio Balisacan said in a statement yesterday that the MIF, which will be governed by the MIC, will complement the country’s existing investment platforms and help fund the government’s flagship projects, particularly infrastructure.
“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,” he said.
He cited the 194 infrastructure flagship projects (IFPs) of the Build Better More program as part of the potential areas in which the MIF can invest in. The 194 IFPs, worth about $150 billion, cover physical and digital connectivity and water resources.
As the MIF becomes a law, the government would move to create the MIC, which will be the investment body responsible for the overall governance and management of the MIF.
The MIC is tasked to identify financially and commercially viable infrastructure projects to invest in and will formulate investment strategies covering emerging megatrends such as environment, social and governance, digitalization and health care.
The MIC will have an authorized capital stock of P500 billion, P375 billion of which shall have corresponding common shares available for subscription by the national government, its agencies or instrumentalities, government-owned and controlled corporations (GOCCs) or government financial institutions (GFIs).
The remaining P125 billion in capital will have corresponding preferred shares available for subscription by the national government, its agencies or instrumentalities, GOCCs or GFIs and reputable private financial institutions and corporations.
Of the P375 billion with corresponding common shares, P125 billion shall be initially subscribed from the investible funds of the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) as well as the contributions of the national government, which include dividend remittances of the Bangko Sentral ng Pilipinas, its share in the income of the Philippine Amusement and Gaming Corp. and other government-owned gaming operators or regulators, privatization proceeds and transfer of assets and other sources like royalties and special assessments.
Foundation for Economic Freedom (FEF) president Calixto Chikiamco said the MIC must be run by professionals, especially as the wealth fund is a fait accompli or something that has already been decided upon, leaving Filipinos with no option but to accept it.
Leonardo Lanzona, economist and professor at the Ateneo de Manila University, agreed that the creation of the fund and the identification of its officers should be the focus now.
Based on the law, the MIC will be governed by a board of directors with nine members chaired by the finance secretary. Other members include the CEO of the MIC, the LBP and the DBP, as well as two regular and three independent directors from the private sector.
Within the MIC is an advisory body composed of the heads of the Department of Budget and Management, NEDA and the Bureau of the Treasury.
The body will assist the board of directors in the formulation of the general policies related to investment and risk management. Like any other law, the MIF Act could also be challenged, which means the Supreme Court can impose a temporary restraining order on it if deemed reasonable to do so.
As of now, the Bureau of the Treasury is leading the drafting of the MIF Act’s implementing rules and regulations, which is targeted to be finalized by September. Under the law, the IRR should be promulgated by the national treasurer and founding government financial institutions within 90 days from the law’s effectivity.
Disappointed
Although passage was not unexpected, various groups on July 18 still expressed disappointment with President Marcos’ decision to sign the law creating the MIF.
For the Taumbayan Ayaw sa Maharlika Fund Network Alliance or TAMA NA, the new law means less funds for social services, including health care, housing and education. It likened it to gambling using public funds, noting that MIF does not guarantee benefits for Filipinos.
In a separate statement, the Alliance of Concerned Teachers (ACT) said the signing of the MIF law “undermines transparency, accountability and democratic values that the Filipino people have long fought for.”
The ACT urged Marcos to prioritize the needs of Filipinos over what it described as “questionable financial ventures.”
More infrastructure
With the signing of the MIF into law, Senate President Juan Miguel Zubiri is hoping President Marcos will tackle concrete projects for the MIF during his second State of the Nation Address (SONA).
“The MIF has just been signed. It is now a law. They are in high spirits. The Speaker, together with Cabinet members and several members of the Senate and the House of Representatives. The feeling was very upbeat earlier. The President and the economic team are quite excited to highlight MIF to the world for investors to come in,” Zubiri said during a press conference with Senate reporters.
The Senate President said the Cavite- Bataan tolling bridge can be among the first investment projects that will improve the flow of traffic along North Luzon Expressway as many vehicles will use the bridge for shorter travel time.
Sen. Mark Villar, the principal author and sponsor of the MIF, said “the signing of the Maharlika bill shows that economic recovery is one of PBBM’s major priorities. Through this, we will be able to generate more jobs for the Filipino people and provide appropriate funding in sectors left behind such as agriculture, energy, health, information technology and infrastructure.”
While Zubiri claimed MIF supporters were in high spirits, Senate Minority Leader Aquilino Pimentel III said: “Today is a sad day in the history of our country, as the State through the MIF will be engaging, unjustifiably, in an economic activity (risky investing) which is best left to the private sector.”
“The MIF is a bad idea, a bad decision, a bad act,” Pimentel said, adding, “This is madness for so many reasons, among others. The Maharlika Fund concept was developed on the fly. If it were an airplane, then it was built while flying it. Thus, the law has inherent contradictions because it was rushed. Nobody knows what creature we have created. It could turn out to be a monster, as it has been designed to be a super-GOCC.”
Pimentel added that the Philippines has no surplus either from the budget or from trade. “We have not hit any jackpot windfall profit like a cash flow from a new discovery of oil or gas reserves. In short, we have no underlying asset to continuously back up and fund this MIF to ensure its long-term existence.”
In Congress, lawmakers led by Speaker Martin Romualdez lauded the signing of the MIF Act that will do away with the imposition of burdensome taxes and more foreign debt.
“As an additional vehicle for financing, the MIF is expected to widen the fiscal space in the near- to medium-term as it reduces heavy reliance on local funds and development assistance as the main financing mechanisms for infrastructure projects,” Romualdez said.
Bicolano Reps. Joey Salceda of Albay and LRay Villafuerte of Camarines Sur, also commended the President for using MIF as an alternative infrastructure funding source and for sparing Filipinos from taxes even as the country recovers from record-high inflation and the global pandemic. — Delon Porcalla, Louise Maureen Simeon, Cecille Suerte Felipe, Louella Desiderio