What is the Maharlika Investment Fund?
The Maharlika Investment Fund (MIF), also known as the Maharlika Wealth Fund (MWF), is a newly enacted sovereign wealth fund for the Philippines. The MIF is the Philippines’ first sovereign wealth fund.
A sovereign wealth fund (SWF) is a state-owned investment fund commonly financed by a country’s surplus revenues or reserves. The government invests these funds in financial and real assets with the target of stabilizing budgets, increasing savings, and promoting economic development.
The MIF, in particular, will be used by the government to invest in key sectors like foreign currencies, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects — to help fund the country’s priority programs. It is patterned after the SWFs of dozens of other nations, including Singapore, China, Hong Kong, South Korea, and Malaysia.
President Ferdinand Marcos Jr. said his administration aims to establish the MIF for investments in agriculture, energy, digitalization, and the fight against climate change, among others.
How will the MIF be funded and managed?
The initial capitalization of the MIF will be ₱200 billion ($8.9 billion), sourced from the Bangko Sentral ng Pilipinas (100% of dividends), as well as government financial institutions (GFIs) Land Bank of the Philippines (₱50 billion) and the Development Bank of the Philippines (₱25 billion). The GFIs may also hike their respective investments above the required contribution, and will likewise be entitled to “prudential and regulatory reliefs” to protect their financial soundness. Subsequent annual contributions will also come from the gross revenue streams of the Philippine Amusement and Gaming Corporation and other government-owned gaming operators.
The MIF will be managed by a newly created corporation called the Maharlika Investment Corporation (MIC), which will act as the sole vehicle for mobilizing and utilizing the MIF for investments in transactions in order to generate optimal returns on investments (ROIs), while contributing to the overall goal of reinvigorating job creation and accelerating poverty reduction by sustaining the economy’s high growth trajectory, while ensuring sustainable development.
The MIC will have a board of directors composed of 11 members: five from the government sector, five from the private sector, and one independent director. The board will be chaired by the Secretary of Finance, while the President will appoint the president and chief executive officer of the MIC. The MIC will also have an advisory council composed of eminent persons from various fields to provide guidance and advice on strategic matters.
What are the benefits and challenges of the MIF?
The proponents of the MIF claim that it will bring several benefits to the country, such as:
- Diversifying and enhancing the sources of national income by investing in profitable ventures both locally and abroad.
- Providing a buffer against external shocks and volatility by building up reserves that can be tapped during times of crisis.
- Supporting long-term development goals by allocating funds for priority sectors and programs that will boost economic growth, create jobs, reduce poverty, and promote social welfare.
- Strengthening fiscal discipline and transparency by adhering to sound governance principles and best practices in managing public funds.
However, some critics have raised concerns and challenges regarding the MIF, such as:
- The timing and urgency of creating a SWF amid a pandemic that has severely affected the health and livelihoods of millions of Filipinos.
- The potential risks and losses that may arise from investing in volatile markets and uncertain environments.
- The possible misuse, abuse, or corruption of public funds by vested interests or political allies.
- The lack of public consultation and participation in crafting and implementing the MIF law.
The Maharlika Investment Fund is a landmark legislation that aims to create a sovereign wealth fund for the Philippines. The MIF is expected to optimize the country’s national funds by generating returns to support the administration’s economic goals. However, the MIF also faces several challenges and criticisms that need to be addressed to ensure its effectiveness and legitimacy. The success or failure of the MIF will depend largely on how it will be funded, managed, invested, and monitored by its stakeholders.