Maharlika Investment Fund: Philippines' Sovereign Wealth Fund

The Maharlika Investment Fund (MIF) is the Philippines' first sovereign wealth fund, signed into law by President Ferdinand Marcos Jr. on July 18, 2023. The MIF aims to catalyze economic development and accelerate the country's growth by optimizing the use of government financial assets and promoting their intergenerational management. The fund will be managed by the Maharlika Investment Corporation (MIC), which will be governed by a Board of Directors and will have an authorized capital stock of 500 billion pesos. The MIF will focus on investments in local and global financial markets, real estate, infrastructure projects, and other assets, with the goal of generating optimal returns, alleviating poverty, and achieving sustainable development. While there has been some resistance and criticism of the fund, it is hoped that it will advance the Philippines' long-term development goals and attract foreign investment.

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

The Maharlika Investment Fund (MIF) is the Philippines' first sovereign wealth fund. It was signed into law by President Ferdinand R. Marcos, Jr. on July 18, 2023, at the Malacañan Palace in Manila. The MIF aims to catalyze economic development and accelerate the country's growth by optimizing the use of government financial assets and promoting their intergenerational management. The fund will be managed by the Maharlika Investment Corporation (MIC), a government-owned and -controlled corporation (GOCC).

The MIC will be governed by a Board of Directors with nine members, including the Secretary of Finance as chair. The MIC will be responsible for the overall governance and management of the Fund and is expected to be fully operational by the end of 2024. The Fund will have an authorized capital stock of 500 billion pesos (approximately 8.9 billion dollars), with 375 billion pesos in common shares and 125 billion pesos in preferred shares. The initial capitalization will come from the National Government, the Land Bank of the Philippines, and the Development Bank of the Philippines.

The MIF will establish a diversified portfolio of investments in local and global financial markets, real estate, infrastructure projects, and other assets. Investments may include cash, foreign currencies, fixed-income instruments, equities, Islamic investments (Sukuk bonds), mutual funds, and joint ventures. The Fund will complement the government's existing mechanisms to finance priority projects and is expected to widen fiscal space, ease the burden on local funds, and reduce reliance on official development assistance.

The MIF has faced some criticism and concerns from academia, the business sector, civic groups, and the media regarding its purpose, timing, source of funds, risks, and management. However, the Philippine government believes that the Fund will help achieve its economic goals and promote development in the country.

The fund aims to catalyse economic development and accelerate the country's growth

The Maharlika Investment Fund (MIF) is the Philippines' first sovereign wealth fund, designed to catalyse economic development and accelerate the country's growth. The fund will be allocated across a variety of assets, including foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects. The MIF will also establish a diversified portfolio of investments in local and global financial markets, real estate, and other assets that promote its objectives.

The MIF aims to generate consistent and stable investment returns, obtaining the best absolute return and achievable financial gains on its investments. The fund will focus on four key goals:

• Optimal returns: The MIF will seek to generate optimal returns on investments (ROIs), while contributing to the overall goal of reinvigorating job creation and accelerating poverty reduction.
• Poverty alleviation: By investing in high-capital expenditure industries, the MIF is expected to improve employment, taxation, and economic activities, ultimately reducing poverty.
• Economic goals: The fund will support the government's economic goals, as outlined in the Medium-Term Fiscal Framework, the eight-point Socioeconomic Agenda, and the Philippine Development Plan. It will also complement existing mechanisms to finance priority projects, such as the Infrastructure Flagship Projects (IFPs).
• Sustainable development: The MIF will focus on emerging megatrends such as environment, social and governance (ESG), digitalization, and healthcare. It will also contribute to energy security and promote renewable energy sources.

The MIF is expected to have a positive impact on the country's development, with the potential to accelerate infrastructure development, create high-quality jobs, attract foreign investors, and propel the Philippines towards higher economic growth.

It will be managed by the Maharlika Investment Corporation (MIC)

The Maharlika Investment Fund (MIF) will be managed by the Maharlika Investment Corporation (MIC), a government-owned and -controlled corporation (GOCC). The MIC will be governed by a Board of Directors with nine members, chaired by the Secretary of Finance. Other members include the Chief Executive Officer (CEO) of the MIC, Rafael Consing Jr.; the President and CEO of the Land Bank of the Philippines; the President and CEO of the Development Bank of the Philippines (DBP); two Regular Directors; and three Independent Directors from the private sector.

The MIC will be responsible for the overall governance and management of the MIF and is expected to be fully operational by the end of 2024. It will identify financially and commercially viable infrastructure projects to invest in and will formulate investment strategies covering emerging megatrends such as environment, social and governance (ESG), digitalization, and healthcare. The MIC will have an authorized capital stock of 500 billion pesos (approximately 8.9 billion dollars), with 375 billion pesos in common shares and 125 billion pesos in preferred shares. The initial capitalization will come from the National Government, the Land Bank of the Philippines, and the Development Bank of the Philippines, with the National Government contributing 50 billion pesos, the Land Bank contributing 50 billion pesos, and the Development Bank contributing 25 billion pesos.

The MIC will act as the sole vehicle for mobilizing and utilizing the MIF for investments in transactions to generate optimal returns on investments (ROIs) while contributing to the overall goal of reinvigorating job creation and accelerating poverty reduction. The MIF will establish a diversified portfolio of investments in local and global financial markets, real estate, infrastructure projects, and other assets that promote its objectives. Investments may include cash, foreign currencies, fixed-income instruments, equities, Islamic investments (Sukuk bonds), mutual funds, and joint ventures.

The MIC will adhere to the Santiago Principles and other internationally accepted standards of transparency and accountability. It will coordinate with relevant institutions to ensure harmonization of policies and will have six different committees to ensure good governance: Audit, Risk Oversight, Investment, Corporate Governance & Ethics, Related Party Transactions, and Nomination and Remuneration. The MIC will also have an Advisory Body composed of the Secretary of the Department of Budget and Management (DBM), the Secretary of the National Economic and Development Authority (NEDA), and the Bureau of the Treasury (BTr) to assist the Board of Directors in formulating general policies related to investment and risk management.

The fund will be used to invest in a wide range of outlets

The Maharlika Investment Fund (MIF) will be used to invest in a wide range of outlets, including local and global financial markets, real estate, infrastructure projects, and other assets. The MIF is designed to catalyze economic development and accelerate the Philippines' growth by optimizing the use of government financial assets and promoting their intergenerational management.

The MIF will establish a diversified portfolio of investments, with the specific sectors and industries to be targeted determined by the Maharlika Investment Corporation (MIC). The MIC is the investment body responsible for the overall governance and management of the MIF and will identify financially and commercially viable infrastructure projects to invest in, as well as formulate investment strategies covering emerging megatrends such as environment, social and governance (ESG), digitalization, and healthcare.

The MIF will focus on sectors such as physical, digital, and social infrastructure. This includes 197 projects approved by the Philippines' NEDA, with 122 related to connectivity (airports, ports, roads, etc.) and 44 offered as public-private partnerships (PPPs). The MIF will also contribute to building digital infrastructure by providing solutions for agriculture, education, healthcare, and entrepreneurship, especially in rural areas. Additionally, the MIF will invest in social infrastructure by building classrooms that are climate change-ready and can be converted into shelters if needed.

Another key area of focus for the MIF is energy security, addressing the elevated cost of electricity in the country and contributing to a larger share of renewable energy sources. The MIF will also leverage the upcoming increase in tourism by optimizing touchpoints and improving connectivity. The fund will also explore opportunities in agroforestry industrial urbanism by working with the government to identify spare lands that can be utilized.

The MIF will further contribute to the development of aerospace and aviation in the Philippines, particularly through public-private partnerships for international airport projects. The fund will be seeded with $2.3 billion from Landbank, the Development Bank of the Philippines (DBP), and the government, with the capital to be received by the end of 2024. The MIF will be managed by the MIC, which will consist of a Board of Directors with nine members, including the Secretary of Finance, the CEO of the MIC, and representatives from various government financial institutions.

The fund has faced criticism and opposition

The Maharlika Investment Fund (MIF) has faced criticism and opposition from various quarters. One of the main concerns is the Philippines' budget deficit, which has raised questions about the viability of the fund's stated sources of funding. The country has been running on budget deficits, with a full-year national government budget deficit of P1.6 trillion in 2022 and P1.7 trillion in 2021. This has led to doubts about whether the transfer of funds to the MIF, which does not guarantee returns, will negatively impact the country's financial situation.

There have also been fears about the potential for graft and corruption in the fund's administration, raised by none other than Presidential sister Senator Imee Marcos. The opposition has questioned the management of the fund and its exposure to political influence. This led to a revision of the implementing rules and regulations (IRR) to bolster the discretionary powers of the Maharlika Investment Corp.'s (MIC) board of directors, giving them more independence in exploring investment opportunities while adhering to the law. However, this revision drew further criticism from ACT-Teachers Partylist Rep. France Castro, who took issue with a provision granting the Philippine President greater authority in selecting the MIC board members.

Despite these concerns, Republic Act 11954, which established the MIF, was passed on July 18, 2023, and its IRR was released in August 2023. The Act aims to catalyze economic development and accelerate the country's growth by optimizing the use of government financial assets and promoting intergenerational management. The MIF is designed to be a vehicle for economic growth, easing fiscal constraints, and maximizing returns on the country's investments.

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