PRESIDENT Ferdinand Marcos, Jr. wants the Maharlika Investment Fund (MIF) to be managed by financial professionals, who are free from “political decisions,” to ensure its sustainability.
Marcos made the statement in an interview with the media during the 85th Anniversary of the Securities and Exchange Commission (SEC), when asked about his reaction to the current version of the MIF bill. He also said he will “sign it as soon as I get it,” prompting Congress leaders to predict that he will announce its enactment when he delivers his State of the Nation Address (Sona) on July 24.
“The only way to make sure that we do not get into trouble, the fund does not get into trouble, is that it’s well and professionally managed,” Marcos said at the SEC event.
“One of the elements that makes that happen is that there is a very clear independence from the day-to-day government function. Those decisions are not made by political decisions in government,” he added.
Meanwhile, a leader of the House of Representatives expects the President to announce the enactment of the Maharlika Investment Fund Act during his second Sona next month, and that “strategic partners and co-investors are already being engaged in preparation for its launching.”
House Committee on Ways and Means Chairman Joey Sarte Salceda made the statement following the recent signing of the enrolled bill by both houses of Congress, the final step before it reaches the President’s desk.
“I had discussions [Wednesday] with the Bureau of Treasury during our meeting with the World Bank and IMF Joint Mission. Co-investors and strategic foreign partners are being engaged right now, so that we can hit the ground running once MIF is launched,” Salceda said.
Salceda also emphasized the need for technical assistance from the IMF, World Bank, and the International Finance Corporation for setting up the investment fund.
“The expertise of the multilaterals will ensure that we start on a strong footing. There are three ways they can help us. First, their credibility will help attract foreign investors. Second, their presence will encourage good corporate governance and accountability in the MIF. Third, their financial resources are staggering. The World Bank alone has been able to support around 115 billion USD in commitments every year,” said Salceda.
“And they can be co-investors or strategic partners, themselves, once the institutions within MIF are organized.”
Boost to stock market
According to Salceda, the MIF is expected to boost the Philippine stock market.
Salceda added that “the government also wants to have the MIF listed in the stock market, as a market development measure.”
Salceda told the IMF-World Bank team that the MIF “could help solve liquidity problems on the equities side of Philippine capital markets. There are only 286 listed companies in the Philippine Stock Exchange and MIF would immediately cause waves once listed.”
“It’s a good investment option for the capital markets because it would expose them to a diverse and potentially high-yielding portfolio. It’s like investing in Philippine growth, which has plenty of runway. Plus, it has environmental and social governance structures embedded in its charter. So, on ESG ratings, it should do well,” he said.
Salceda said being listed in the stock exchange is also good for MIF, because it will subject the fund to greater public scrutiny, which encourages accountability.
“I discussed listing with the Bureau of Treasury, and it’s a goalpost, down the line,” Salceda, who was chair of the technical working group which drafted the House version of the MIF charter.
Marcos’s personal backing
Marcos had proposed the creation of the MIF to help the government invest in priority programs, foreign currencies, domestic and foreign corporate bonds, commercial real estate and infrastructure projects.
The MIF drew concerns from some lawmakers and other stakeholders since it was patterned after the sovereign wealth funds (SWF) of other countries such as Malaysia, which was later reported to have been misused.
It was also criticized since its seed money was supposed to be taken from the Social Security System (SSS) and the Government Service Insurance System (GSIS) as well as from the Bangko Sentral ng Pilipinas, government financial institutions Land Bank of the Philippines and the Development Bank of the Philippines.
Last Wednesday, Senate President Juan Miguel F. Zubiri signed a copy of the Maharlika Investment Fund Act, which was the Senate version of the legislation after the House of Representative decided to adopt it.
Marcos lauded the current version of the MIF bill, which he said will ensure “the safety and the security of people’s pension funds.”
Under the Senate version of the legislation, SSS and GSIS are barred from infusing equity in the MIF.
“I will sign it as soon as I get it,” Marcos said on Thursday.
The Congress-approved measure creates a Maharlika Investment Fund, a fund that adheres to the principles of good governance, transparency, and accountability.
It said the fund shall initially be sourced from the capitalization of the MIC, which includes the investible funds of the Land Bank of the Philippines, Development Bank of the Philippines and from contributions of the national government.
The bill said that other GFIs and GOCCs may invest into the MIF, subject to their respective investment and risk management strategies, and approval of their respective boards.
Also, the measure said that government agencies and GOCCs providing for the social security and public health insurance of government employees, private sector workers and employees, and other sectors and subsectors, such as but not limited to the SSS, GSIS, Philhealth, PAGIBIG Fund, OWWA and PVAP pension fund shall be absolutely prohibited, whether mandatory or voluntary, to invest in the MIF.
It also said that the investments from the Land Bank of the Philippines and Development Bank of the Philippines and other GFIs shall not exceed 25 percent of their net worth.
The bill creates a corporate body to be named as the Maharlika Investment Corp (MIC). The MIC shall act as the sole vehicle for the purpose of mobilizing and utilizing the MIF for investments in transactions in order to generate optima returns on investments, 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 shall have an authorized capital stock of P500 billion to be divided into five billion shares, with a par value of P100 per share which shall have the following classifications and features: Common shares of 3.750 billion equivalent to P375 billion to be subscribed by the national government, its agencies or instrumentalities, including GOCCs. Provided that 1.2 billion shares equivalent to P125 billion shall be subscribed by Land Bank of the Philippines with P50 billion; Development Bank of the Philippines P25 billion and national government with P50 billion.
For the first and second fiscal years upon the effectivity of this proposal, 100 percent of the BSP’s total declared dividends, as computed under RA 7653, as amended by RA 11211 or the New Central Bank Act, shall be remitted to the national government for the capitalization of the MIC, in the amount not exceeding the P50 billion initial subscription of the national government to the capitalization of the MIC.
Image credits: Joey Razon/PNA