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Lack of business plan for proposed Maharlika fund questioned in Senate

At least two senators on Wednesday questioned the lack of business plan for the proposed Maharlika Investment Fund (MIF), which is being pushed by the Marcos administration.

The issue was raised during second hearing of the Senate Committee on Banks, Financial Institutions and Currencies on the MIF bills.

At the start of the hearing, Foundation for Economic Freedom President Calixto Chikiamco said the MIF's funding source is problematic because the capital contribution of Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) will be exposed to a single investment.

Chikiamco suggested removing the LBP and the DBP as funding sources for the MIF. He said funds from the privatization of government assets must be tapped instead.

Senator Sherwin Gatchalian then asked where will the LBP source the P50 billion that will be used as MIF's capital source. He also flagged the bank's P1.3-trillion investible funds as mentioned by LBP CEO Cecilia Borromeo.

"I'm not happy to hear that there's this much funds in a bank considering that the GFIs (Government Financial Institutions) are geared towards a specific mandate. LANDBANK for agriculture, DBP for developmental projects," Gatchalian said.

"How come there's P1.3 trillion lying around and not being clouded into the agriculture sector?" he asked.

Borromeo explained that the asset size of LBP is mainly driven by deposits and most of which are short-term.

"We manage those funds in a manner where we allocate a portion of it for long-term loans and also for working capital requirements of eligible borrowers," she said.

"But the loans that we don't lend yet because there is also an issue about absorptive capacity of some of the sectors that we prioritize like the agriculture sector. We park those funds to government bonds and treasury bills. Most of our investments, probably 95%, of our investments are in government bonds and treasury bills," she added.

Borromeo gave an assurance that LBP's loan portfolio to the agriculture sector has been increasing more rapidly than the growth of the sector itself.

"Our loan portfolio to the agri sector as of end of 2022 was P261 billion -- the highest probably in the industry," she said.

As for the sourcing of the P50 billion that will be invested to the MIF, Borromeo said it could be a combination of the 95% funds that are invested in government bonds and treasury bills and the 5% that are invested in private banks and stock market.

"It can be a combination, sir, as the investments will mature and at the time that we will be mandated to give our P50 billion contribution to the fund or we can also fund it via additional deposits, so we won't have to be pressured to sell our existing portfolio," she said.

At this point, Gatchalian asked LBP officials their criteria before investing the funds to the government as well as other entities, as he noted the 95% that were invested in government bonds and treasury bills are "risk-averse."

"Ngayon, wala kayong choice, it's in the [proposed] law. That's where the moral hazard actually comes in. You don't look at the ratings anymore because whether you like it or not you have to plow in P50 billion," Gatchalian asked the LBP.

In response, Borromero said: "We will have to look at the business plan of the corporation where the funds will be invested. That's the way we do our due diligence."

But she admitted to Gatchalian that they have not seen the business plan of the MIF yet.

"We don't have any rating on the investment because of the lack of historical information," she said.

At this point, Senator Nancy Binay asked if there is already a proposed business plan for the MIF.

National Treasurer Rosalia de Leon, who was representing the economic team during the hearing, said they will come up with the business plan "eventually."

"Of course, we're working on the legislation and part of the legislation is that there would be an investment strategy as well as risk management strategy," she said.

"But all of the projects that will be funded by the Maharlika Fund would be approved by NEDA (National Economic Development Authority). So NEDA has already a pipeline of all these projects that would be financed by the Maharlika," she added.

But Binay pointed out that senators would be more convinced to support the MIF creation if there is already a business plan.

De Leon insisted that the economic team has already cited in the bill the objective of the MIF, which she said is developmental and commercial.

Right now, De Leon said they are working on the returns that are also "envisioned" by the fund.

But Binay is not convinced, saying there will be no envisioned returns when there are no specific projects provided under the bill.

"But how can you envision a return when you don't even know what the specific developmental plan is? Like,  offhand, can you cite one developmental project na mukhang 'yon na ang first project niyo?" she asked.

Gatchalian also echoed Binay's concern, saying it will give legislators comfort if they will see where the fund will be invested.

Senator Mark Villar, chairperson of the panel, said they already asked the Department of Finance for a specific list of projects that will be funded by the MIF. He said he will furnish the senators a copy of the list.

At the latter part of the hearing, De Leon said the NEDA has identified 87 projects where the MIF can be invested.

Also during the hearing, Senate Minority Leader Aquilino "Koko" Pimentel III observed that the government is "conducting very expensive public brainstorming sessions on a proposal coming from the administration that is not well thought out, not well planned."

"Expensive in terms of resources and in time which you should have done months ago before actually making the proposal," Pimentel said.

Pimentel said the MIF bill should not reach the Senate plenary at its current form.

"Being an administration measure, the Senate should not allow this to pass in its current form. It is very disappointing to be an administration measure," he said.

He also mentioned President Ferdinand "Bongbong" Marcos Jr. reporting about Japanese companies that are interested in MIF, yet noted that there is no proper investment mechanism in the proposed measure. —KBK, GMA Integrated News