President Ferdinand "Bongbong" Marcos Jr. on Tuesday signed into law the Maharlika Investment Fund (MIF) which will tap state assets for investment ventures to generate additional public funds.
Republic Act No. 11954 was signed despite apprehensions and concerns on the measure, with some lawmakers pointing out the MIF bill's glaring errors and discrepancies as well as its ambiguous provisions.
In his speech, Marcos stressed that the MIF is a bold step towards the country's meaningful economic transformation as the Philippines recovers from the ill effects of the COVID-19 pandemic.
"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 burden," he added.
Marcos already allayed fears on the use of MIF, saying that this will be independent from the government and that this should not be linked to politics.
He assured the public that the MIF would not be utilized in purchasing luxurious items.
The key towards the success of the MIF is through how it will be managed, the President further emphasized.
In the signing of the new law, Marcos said those who would manage 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.
Marcos believes that the fund has the potential to funnel external financing as it will reduce the government's burden to finance infrastructure through borrowings.
The fund could be used to finance the government's infrastructure and even agriculture projects without acquiring more debts, according to Marcos.
"It is a crucial undertaking, it will support our overall goal of six and a half to eight percent gross domestic product growth in the medium term, and through the fund we will accelerate the implementation of the 194 National Economic and Development Authority board-approved flagship infra projects," Marcos said.
The President, meanwhile, said the fund goes beyond mere numbers and economic jargon.
"At its core, the MIF carries the dreams and aspirations of the Filipino people, our citizens who strive for better future for themselves, their loved ones and their communities," Marcos said.
Marcos' economic managers had said the MIF could serve as an alternative financing option for the government should the Philippines become an upper-middle income state.
The Senate had amended its version by prohibiting state pension and insurance funds from investing in the MIF, a provision which is already provided under the House of Representatives' version approved on third and final reading last December.
The House then adopted this Senate version.
Malacañang has yet to release the copy of the newly-signed law but in the information released by the Presidential Communications Office, a Maharlika Investment Corporation (MIC) will be established, which will act as the sole vehicle for the utilization of the MIF.
The MIC will have an authorized capital stock of P500 billion, the 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 or GFIs, and government financial institutions.
The remaining P125 billion in capital shall have corresponding preferred shares available for subscription by the national government, its agencies or instrumentalities, GOCCs or GFIs, and reputable financial institutions and corporations.
The document from PCO states that investment in the MIF is an "investment diversification opportunity and a means to maximize returns for the two founding GFIs.
It stated that the Land Bank of the Philippines investment to the MIC only accounts for 3.7% of its investible funds while the Development Bank of the Philippines' investment is equivalent to around 3% of its investible funds.
The allowable investments consistent with the mandates of the fund include cash, foreign currencies, metals, and other tradable commodities, fixed income instruments issued by sovereigns, quasi-sovereigns, and supranationals; domestic and foreign corporate bonds; listed or unlisted equities, whether common, preferred or hybrids; Islamic investments, such as Sukkuk bonds; joint ventures or co-investments, mergers and acquisitions; mutual and exchange-traded funds invested in underlying assets; real estate and infrastructure projects; programs and projects on health, education, research and innovation, and other such investments that contribute to sustainable development; loans and guarantees to, or participation into joint ventures or consortiums with Filipino and foreign investors; and other investments with sustainable and developmental impact, as may be approved by the Board.
A survey by the Social Weather Stations (SWS) in March this year found that 51% of Filipinos expect little or no benefit from the MIF.
The poll also revealed that 33% have little knowledge about the fund, while 47% said they had almost no knowledge or no knowledge about it at all.
This prompted Finance Secretary Benjamin Diokno to say he is willing to sit in the hot seat to explain the proposed sovereign wealth fund to the public.
The Marcos administration’s chief economic manager added, “I’m willing to be interviewed in-depth… kahit ilang oras [even for hours].”
He also said that “there’s so much distrust” from the public concerning the MIF, “but we can live with it.”
Diokno in Board
Meanwhile, in an interview with reporters after the signing of the MIF bill into law, Diokno said he will still be part of the Board of the Directors that will oversee MIF's utilization.
Based on the document released by Malacañang, the Maharlika Investment Corporation, which is in charge for the mobilization of the MIF, will be composed of the Finance secretary, who will serve as the chairperson; 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.
"Si Presidente, 'yung nakita niyang version niya, siya ang chairman ng fund. Pero ngayon sinabi niya, tinignan niya ang best practices in other countries, talagang secretary of finance ang chairman... ako 'yun," Diokno said.
(The President saw the version wherein he was the chairman of the fund. But he looked at the best practices of other countries, the Secretary of Finance is really the chairman. That's me.)
This was contrary to what Marcos said in his speech that the Finance secretary, as well as the incumbent president, will not be part of the corporation's board.—KG/KBK, GMA Integrated News