In the chaos of the holiday season, amid the frenzy and the festivities, lawmakers prevailed and successfully passed the measure creating the controversial Maharlika Investment Fund (MIF).
This means the Marcos administration has moved a step closer in creating a sovereign wealth fund.
It looks like President Marcos wants to present it to the World Economic Forum in the ski resort of Davos next month. Perhaps, he wants to send a message that the Philippines, just like the Big Boys, is ready for the world.
Unfortunately, the rush to pass the measure fuels the public’s distrust all the more. In a country filled with stories of corruption and malversation of funds, the mistrust is understandable, even justified.
We saw during the past administration how our hard-earned money was corrupted in the Pharmally mess.
Devil is in the details
The good news is that in the case of the MIF, significant changes have been implemented.
The last time I wrote about this, I said it feels like some mafia is out to get our pension money. But the measure passed by the House of Representatives addressed that part and removed SSS and GSIS from the Funds. This is good.
But we can’t pop the champagne bottles just yet. The devil is in the details and we would have to see how the measure would look in its final form, including the implementing rules and regulations.
Investing in infrastructure
Over the weekend, I had discussions with proponents and government officials over the proposed MIF. I also read House Bill 6608.
No doubt, there are provisions which could be beneficial for the country.
For instance, the redesigned Fund allows investments in infrastructure and other big ticket projects, which could augment funding for our critical needs such as classrooms, schools, health services, a source said. Such intentions can’t be wrong.
Furthermore, the Fund “will allow investments in development projects that are in line with the economic development program of the government.”
The MIF would also give the government some financial muscle to also invest in companies pursuing infrastructure projects – and hopefully, earn returns from such investments.
Examples are power-related companies.
“The government can invest in power companies for example. These companies make money; all the companies that entered the power business made money so our government will earn, too,” a government source said.
But in no case can the MIF invest in a controlling stake in such entities, the proposed measure said.
I also learned that Rep. Stella Quimbo introduced an amendment related to investments in infrastructure:
“[P]riority must be given to investments in government infrastructure and other developmental projects which would yield the highest return on investment coupled with the development impact of lower cost of living and lower cost of basic commodities.”
There are safeguards, too and that’s good. The government corporation handling the MIF will be run like a private corporation with its own board of directors who will be accountable for their actions. Jail time will be part of the penalties for wrongdoings.
Seed money
With the removal of GSIS and SSS, the proposed MIF will now get its seed capital of P110 billion from government institutions and corporations such as the Land Bank of the Philippines, Development Bank of the Philippines and the Bangko Sentral ng Pilipinas (BSP).
These institutions are making money and have investible funds.
Landbank, for instance, has an investment portfolio of P1.3 trillion in 2021 or 28.87 percent higher than the previous year, according to its latest annual report which is available online.
These are the new details I gathered on the proposed measure and in many ways, sound beneficial to a country that needs all the funds it can get.
I also heard that the Philippine Stock Exchange (PSE) supports the MIF as it would strengthen the country’s capital markets.
But what if the Maharlika Fund fails?
Former Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said it would affect the entire banking system if Landbank loses its P50 billion.
“It could send tremendous shockwaves to the entire banking system,” he said.
Justice Antonio Carpio also said the MIF is a losing proposition because the cost will exceed the expected returns.
Against this backdrop, the Marcos administration is determined to push it.
It has long been proposed, as early as days after the May elections, I heard.
It was at the Mandaluyong headquarters, days after Marcos’ victory during the May 9 elections, that the idea of a Maharlika Fund was born.
The concept was presented by economists including the now Finance chief Benjamin Diokno to Marcos. Marcos reportedly liked the idea because he doesn’t want to introduce new taxes.
And so here we are, a step closer to having a sovereign wealth fund.
Would the benefits outweigh the risks?
Now here lies the Maharlika conundrum.
The Philippines needs all the financial resources to move this country forward but in this nation of 110 million, the more money there is, the greater the temptation for thieves with their crocodile jaws.
The best design is for the MIF to be given political independence and for it to provide direct benefits to citizens such as dividends, for example, according to a Time magazine article on the Maharlika Fund.
“Political patronage clouds investment decisions,” said Emerson Sanchez, a research fellow at the Institute for Infrastructure in Society at the Australian National University Crawford School of Public Policy in Canberra, in the Time article.
So here we are days before Christmas with the MIF handed to us by our representatives. Is it a gift or a burden? Only time will tell.
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Email: eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.