President Ferdinand R. Marcos Jr. has tapped experts to consider various iterations of the proposed Maharlika Investment Fund (MIF) that he is expected to present before the 2023 World Economic Forum (WEF) in Davos, Switzerland next week.
The BusinessMirror learned that as technical working group chairman and an industry expert in the investment-banking sector, House Committee on Ways and Means chairman and Albay Rep. Joey Sarte Salceda, along with a few other experts, were tapped to consider various iterations of the MIF.
President Marcos intends to introduce the proposed Philippine sovereign wealth fund (SWF) to business leaders during the World Economic Forum, the Department of Foreign Affairs bared.
Under the concept note of the MIF, which was recently presented by experts to President Marcos, the MIF corporate structure as well as key objectives of the MIF will help attract more investments in the country.
The note also includes how the fund will be managed, the source of funds and public participation in creating the MIF.
The MIF, which is patterned after the SWF of other countries, is aimed at allowing the government to increase investments in priority sectors, particularly in infrastructure, power and agriculture.
The House of Representatives has already approved House Bill 6608 to establish the MIF on third and final reading last month, but the Senate has yet to pass its own version of the legislation.
Under the concept note, the MIF will be managed by the Maharlika Investment Corporation, which will be a publicly listed company with the Government of the Philippines as the principal shareholder.
The fund’s key objectives are to develop a means to leverage the government’s fiscal resources through a competently managed Fund that can invest in developmental projects with private sector participation; to provide the government a channel for investing in high-return opportunities domestically and abroad; and to create a channel for building intergenerational wealth.
To ensure a professionally managed fund that will be efficiently and transparently run, the note said the management structure of the fund must draw from the expertise of the private sector and allow it to be ran similar to commercial entities, which may not be aligned with the limitations of being a government-owned and -controlled corporation (GOCC).
On hiring senior officers and management, it added that a merit system must be established to aid the President in appointing the CEO of the fund as well as the Chairman and the government board members. The Chairman and independent directors of the Board must have terms like officials of the Bangko Sentral ng Pilipinas and Constitutional Offices to limit political influence.
Three major sources of funding for the MIF are public listing, dividends from GOCCs and national government (NG), according to the note.
Under the note, in order to maximize available liquidity here and abroad, a portion of the fund should be publicly listed, and to subject the fund to the standards of a listed corporation.
Also, it said the GOCCs with the highest recurring revenue could be required to provide their annual dividends supposedly for the national government to the MIF instead.
Dividend sources can be securitized by amending RA 7656, or the Dividend law, to require remittances to the MIF.
Some top dividend remitting GOCCS that can be mandated by law to annually remit dividends to the MIF are Philippine Deposit Insurance Corporation, Land Bank of the Philippines, Philippine Amusement and Gaming Corporation, Civil Aviation Authority of the Philippines, Philippine Ports Authority, National Transmission Corporation, Philippine Economic Zone Authority, PNOC Exploration Corporation, Philippine Reclamation Authority, Philippine Guarantee Corporation, Philippine Retirement Authority, Cebu Port Authority with an estimated annual dividend of P44.3 billion.
The NG may also fund the MIF by selling government assets or infusing such assets into the MIF, through such arrangements as assets-for-shares swaps and the like.
On taxation, the MIF should be subject to regular corporate taxes to address issues of “government neutrality” and allow the MIF to invest in a broader range of securities, as well as generate consistent NG revenues from the fund. The MIF, if eligible, can be considered for tax incentives, such as those under the CREATE law.
On addressing fiscal issues, the infusion of GOCC dividends into the MIF will cause an increase in the consolidated public sector deficit.
But the note said this is more than offset by the reduction in NG revenues that could have been spent on developmental capital outlays that can be invested by the MIF towards similar projects with a multiplier due to private sector participation and the net asset value of the MIF. Over time, this will significantly offset the value of the national government assets and funds invested into MIF.
Also, the MIF can create a sense of ownership among the Filipino people by either allowing any member of the public to buy shares to date of listing (as in the case of Petron Corporation) or by issuing shares to every Filipino.
Image credits: AP/Markus Schreiber