Maharlika Investment Fund: Approved Or Not?

The Maharlika Investment Fund (MIF), also known as the Maharlika Wealth Fund (MWF), is the Philippines' first sovereign wealth fund. It was signed into law by President Ferdinand Marcos Jr. on July 18, 2023, and is managed by the Maharlika Investment Corporation (MIC). The fund aims to stimulate economic growth, create jobs, and support the government's economic goals by investing in various assets, including foreign currencies, bonds, stocks, and infrastructure projects. While some have expressed concerns about potential mismanagement and the country's fiscal deficit, others believe it will help raise money to support government programs and achieve development goals. The MIC has finalized its investment and risk management framework and is now preparing to court investors.

The Maharlika Investment Fund (MIF) is the Philippines' first sovereign wealth fund

The creation of the MIF was proposed in November 2022 by seven members of the Philippine House of Representatives, including Marcos Jr.'s son, Sandro Marcos, and cousin, Speaker Martin Romualdez. Despite facing opposition and skepticism from politicians and the public due to concerns about corruption and the country's fiscal deficit, the bill was passed in December 2022 and approved by the Senate and House on May 31, 2023.

The MIF has an authorized capital stock of 500 billion pesos (approximately 8.9 billion dollars), with an initial capitalization of 125 billion pesos (about 2.2 billion dollars) contributed by the National Government, the Land Bank of the Philippines, and the Development Bank of the Philippines. The fund aims to generate optimal returns on investments, contribute to job creation, accelerate poverty reduction, and ensure sustainable development.

The MIC, governed by a Board of Directors, is responsible for managing the MIF. It has finalized its investment and risk management framework and joined the International Forum of Sovereign Wealth Funds (IFSWF) to promote transparency and accountability. The MIF is expected to generate returns that support the government's economic goals outlined in the Medium-Term Fiscal Framework, the eight-point Socioeconomic Agenda, and the Philippine Development Plan.

While the MIF has faced criticism and concerns about its management, independence, and potential impact on financial stability, it remains a top priority for President Marcos Jr., who is committed to having it operational by the end of 2024. The success of the MIF will depend on effective management, attracting foreign investments, and addressing the issues of public confidence and trust in the Marcos Administration.

The MIF was proposed in November 2022 by seven members of the Philippine House of Representatives

The Maharlika Investment Fund (MIF), also known as the Maharlika Wealth Fund (MWF), was proposed in November 2022 by seven members of the Philippine House of Representatives, including Sandro Marcos, the son of President Ferdinand "Bongbong" Marcos Jr., and his cousin, Speaker Martin Romualdez. The fund, inspired by South Korea's sovereign wealth fund, aimed to create a long-term source of investment capital for the Philippines to stimulate economic growth and create jobs. The MIF is designed to advance the Philippines' long-term development goals by effectively managing government financial assets across generations.

The proposal was met with skepticism from politicians across the political spectrum, including opposition senators and President Marcos' sister, Senator Imee Marcos. Concerns were raised about the potential for graft and corruption, especially given the country's significant fiscal deficit. Despite these initial objections, the bill advancing the MIF was passed in December 2022, thanks in part to President Marcos' support and designation of the bill as a priority. The bill underwent various amendments to address the concerns raised and ensure proper safeguards and transparency.

The MIF is the Philippines' first sovereign wealth fund and is managed by the Maharlika Investment Corporation (MIC). It seeks to generate returns by investing in a diversified portfolio of assets, including local and global financial markets, real estate, infrastructure projects, and other approved investments. The initial capitalization for the MIC comes from the National Government, the Land Bank of the Philippines, and the Development Bank of the Philippines. The fund has an authorized capital stock of 500 billion pesos (approximately 8.9 billion dollars), with 375 billion pesos allocated for common shares and 125 billion pesos for preferred shares.

The creation of the MIF as a sovereign wealth fund is a bold move by President Marcos Jr., especially considering the country's economic context. It remains to be seen whether the fund will be a successful initiative that brings economic growth and job creation or if it will fall victim to the mismanagement and corruption that has plagued similar endeavours in the Philippines.

The MIF was passed into law on July 18, 2023, by President Ferdinand Marcos Jr

The Philippines' first sovereign wealth fund, the Maharlika Investment Fund (MIF), was passed into law by President Ferdinand Marcos Jr. on July 18, 2023. The MIF, also known as the Maharlika Wealth Fund (MWF), is a priority for the Marcos administration. It is designed to advance the Philippines' long-term development goals and stimulate economic growth by generating returns to support the government's economic agenda.

The MIF was initially proposed in November 2022 by seven members of the Philippine House of Representatives, including President Marcos' son, Sandro Marcos, and cousin, Speaker Martin Romualdez. Despite facing opposition and scepticism from politicians and the public, the bill was passed in December 2022 and approved by the Senate and House on May 31, 2023. After some final edits, it was sent to President Marcos for his signature.

The MIF will establish a diversified portfolio of investments in local and global financial markets, real estate, infrastructure projects, and other assets. The fund will be governed and managed by the Maharlika Investment Corporation (MIC), a government-owned corporation with a Board of Directors. The initial capitalization will come from the National Government, the Land Bank of the Philippines, and the Development Bank of the Philippines.

The MIF is expected to generate returns that support the government's economic goals outlined in the Medium-Term Fiscal Framework, the eight-point Socioeconomic Agenda, and the Philippine Development Plan. It aims to create long-term sources of investment capital to stimulate economic growth, create jobs, and fund infrastructure development.

The passage of the MIF into law demonstrates President Marcos' commitment to advancing the Philippines' economic development and addressing issues such as poverty alleviation and infrastructure development. However, it has also faced criticism and concerns regarding potential mismanagement, corruption, and the country's fiscal deficit.

The MIF is designed to advance the Philippines' long-term development goals

The Maharlika Investment Fund (MIF) is designed to advance the Philippines' long-term development goals through the effective intergenerational management of government financial assets. The MIF is the Philippines' first sovereign wealth fund, with an initial capitalization of 500 billion pesos ($9 billion). The fund will be managed by the Maharlika Investment Corporation (MIC), a government-owned and controlled corporation, and will be governed by a Board of Directors, including the finance secretary.

The MIF aims to create a long-term source of investment capital to stimulate economic growth and create jobs, with a focus on developing agriculture, climate resilience, digitalization, and energy. The revenue generated will support the government's economic goals, including the Medium-Term Fiscal Framework, the eight-point Socioeconomic Agenda, and the Philippine Development Plan.

The MIF will invest in a diversified portfolio, including local and global financial markets, real estate, infrastructure projects, and other assets. These investments may include foreign currencies, fixed-income instruments, equities, bonds, and joint ventures. The MIF is expected to attract more foreign investors, accelerate infrastructure development, and create high-quality jobs.

To ensure transparency and accountability, the MIC has joined the International Forum of Sovereign Wealth Funds (IFSWF) and will adhere to the Santiago Principles and other internationally accepted standards. The MIF is a key priority for President Ferdinand "Bongbong" Marcos Jr., who believes it will advance the country's development and optimize the use of national funds.

The MIF has been met with criticism and concerns regarding corruption and the country's fiscal deficit

The Maharlika Investment Fund (MIF) has faced significant criticism and sparked concerns about corruption and the Philippines' fiscal deficit. The fund, the country's first sovereign wealth fund, has been viewed sceptically by some economists and critics due to its potential impact on the country's economy and public finances.

One of the primary concerns is the risk of corruption and mismanagement. The MIF, with an initial capitalization of 75 billion Philippine pesos, will be funded by state-owned banks and government-controlled corporations. Critics argue that the fund is prone to corruption and money laundering, as stated by tax expert Raymond Abrea. The lack of clarity regarding the fund's purpose, investment strategies, and governance structure further exacerbates these concerns. The UP School of Economics faculty members issued a paper highlighting the fund's unclear purpose, potential encroachment on the budget process, and risks to public funds.

Another major concern is the country's fiscal deficit. The Philippines has been facing a budget deficit for several years, with expenditures exceeding revenues. Critics argue that establishing the MIF will further increase the country's debt burden and debt servicing costs. They suggest that the government should focus on managing the fiscal deficit and public debt to avoid impediments to the delivery of public services and a potential downgrade of the country's sovereign investment credit rating. The MIF's potential impact on the country's debt-to-GDP ratio, which is already above the desirable level of 60%, is a significant cause for concern.

The MIF has also been criticised for its lack of transparency and adequate safeguards. The original bill intended to include pension funds from the Government Service Insurance System (GSIS) and the Social Security System (SSS), shifting the burden onto citizens. Although this idea was scrapped, critics argue that the MIF lacks sufficient safeguards to prevent embezzlement and money laundering, as seen in the 1Malaysia Development Berhad (1MDB) scandal in Malaysia.

In addition, there are doubts about the timing and necessity of the MIF. Critics argue that the fund does not address the country's pressing economic issues, such as inflation and the national debt, which stood at 13 trillion Philippine pesos as of December 2022. They suggest that the government should prioritise addressing these economic challenges and improving transparency and accountability before establishing the MIF.

The MIF has sparked debates about the best use of public funds. Critics question whether it is wise to increase the national debt and debt servicing costs by establishing the MIF, or whether those funds would be better used to reduce the existing debt and lessen debt servicing. They argue that the expected returns of the MIF may not even cover the interest payments on the funds borrowed to create it.

Frequently asked questions