President Ferdinand Marcos Jr. allayed fears of fund mismanagement after he signed the Maharlika Investment Fund or MIF bill into law on Tuesday, saying that it will be managed by professionals and independently of the government.
Marcos recalled seeing the criticism directed at the enacted law during the ceremonial signing at Malacañang Palace. He considered “laughable” some of the objections to Republic Act 11954.
“I noticed that at the very beginning, I would hear some people commenting, ‘When we have money like that when we have those funds, they should be allocated to agriculture, infrastructure, they should be invested in energy development,’” the President said.
“Well, I was watching television and I said, of course, I was talking to the TV, where do you think they’re thinking of putting it? Are we going to buy fancy cars? Are we going to buy a large yacht? It makes me laugh because that is so far from the truth,” he said.
Marcos said the government will use the MIF to put money into various investment vehicles and help finance priority initiatives, including infrastructure projects.
RA 11954 created the Maharlika Investment Corporation which will be overseen by a board of nine directors and chaired by the finance secretary. The MIF will have P500 billion in preferred and common shares, which the national government, state-run companies, and banks can acquire.
The fund will have at least P75 billion in paid-up capital this year. LandBank will provide P50 billion, while the Development Bank of the Philippines will contribute P25 billion.
BSP dividends
The P50-billion contribution of the national government will come from Bangko Sentral ng Pilipinas dividends. The fund may be invested in foreign currencies, tradable commodities, fixed-income securities and stocks.
Under the newly signed law, the BSP will be required to transfer all of its announced dividends to the MIF in the first two years of its establishment. Thereafter, the BSP will retain 50 percent of its dividends, with the other half going to the MIF.
The government’s 10-percent annual share from the state-owned Philippine Amusement and Gaming Corp. over five years would also contribute to the fund.
Forming the MIC board will be the heads of the MIC, LandBank and DBP; two regular directors, and three independent directors from the private sector.
A Social Weather Stations survey conducted in March this year showed that 51 percent of Filipinos anticipate little to no benefits from the MIF. It likewise found that 47 percent of respondents were unaware of the fund, while 33 percent only had passing knowledge of it.
Marcos said the fund would enable the Philippines to reduce its dependence on borrowings for infrastructure development.
“I assure you that the resources entrusted to the fund will be taken care of with utmost prudence and intent,” he said in a speech after he signed the bill into law, describing it as an “extremely important” measure.
The MIF follows similar sovereign wealth funds established by neighboring Asian countries Malaysia and Singapore, and more recently Indonesia, although their outcomes have been varied.
In Malaysia, the 1Malaysia Development Berhad fund was embroiled in a massive corruption scandal.
GDP boost
Finance Secretary Benjamin Diokno said following yesterday’s signing that the MIF will boost the country’s gross domestic product while financing government undertakings without adding to the P14.10-trillion national debt.
“The President is saying that we have many plans. The priorities are the 194 big projects approved by [the National Economic and Development Authority], 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 these projects will be funded through the budget, some through official development assistance, and some through public-private partnerships, about one-third,” he said.
Diokno averred that the MIF can be used to finance the remaining two-thirds of the priority infrastructure projects. “Because if we wait for the usual cases, our capabilities will be limited. With fewer projects, our economy won’t be as vibrant,” he pointed out.
Marcos asserted that the MIF goes beyond economic jargon and numbers.
“At its core, the MIF carries the dreams and aspirations of the Filipino people, our citizens who strive for a better future for themselves, their loved ones, and their communities,” he said.
According to the President, the government will leverage a small fraction of the “considerable but underutilized” investible funds through the MIF and stimulate the economy “without the disadvantage of adding additional fiscal and debt burden.”
He said those managing the fund must ensure that it is “well-run.”
“Let us make sure that these are professionals. Let us make sure that the decisions that are being made for the fund are not political decisions, that they are financial decisions because that is what the fund is,” Marcos said.
The President believes the fund can attract external financing, thereby relieving the government from having to rely solely on borrowings to finance infrastructure projects.