The Maharlika Investment Fund (MIF), the first sovereign wealth fund in the Philippines, is expected to be fully operational before the end of 2023, according to Finance Secretary Benjamin Diokno. The bill has been approved by Congress and is awaiting signature from President Ferdinand Marcos Jr. Once enacted, the MIF will be managed by the government-owned Maharlika Investment Corporation and initially capitalized with PHP 75 billion ($1.48 billion) from the Land Bank of the Philippines, Development Bank of the Philippines, and National Government. The funds will be invested in high-impact projects, real estate, and financial instruments.
Diokno expressed optimism that the Maharlika Fund bill will be signed into law before President Ferdinand Marcos Jr.’s State of the Nation Address on July 24. The MIF bill provides safeguards for transparency, accountability, fund integrity, and risk management. The MIC has an authorized capital stock of PHP 500 billion ($9.8 billion), but the initial paid-up capital of PHP 75 billion may have already been invested in ventures or capital markets.
The national government’s contribution to the MIF will come from several sources, including the Bangko Sentral ng Pilipinas’ total declared dividends and the National Government’s share of the income of PAGCOR. The MIF bill prohibits the use of funds from several government agencies, such as the GSIS, SSS, PhilHealth, Pag-IBIG, OWWA, and PVAO.
The MIF is expected to reduce borrowing for infrastructure projects and free up the government’s fiscal space. The Bureau of the Treasury and the Department of Budget and Management have said that the MIF will unload the burden of borrowing to fund infrastructure projects to the sovereign wealth fund. The national government operates on a fiscal deficit and borrows from both domestic and foreign sources to fund its expenditures. As of April 2023, the national government’s outstanding debt stood at PHP 13.911 trillion, up from PHP 13.856 trillion in March 2023.
National Treasurer Rosalia de Leon said that while the MIC has an authorized capital stock of PHP 500 billion, the initial paid-up capital of PHP 75 billion may already be invested in several ventures or capital markets.
Finance Undersecretary Catherine Fong cited the Philippine Investment Alliance for Infrastructure Fund (PINAI), the country’s first-ever private equity fund for infrastructure investments, established by the Asian Development Bank, Government Service Insurance System (GSIS), Dutch pension fund asset manager APG, and the Macquarie Group in 2012. PINAI had an initial capitalization of PHP 20 billion and was able to help five or six power projects.
The version crafted by legislators is expected to create a fund that can accelerate investments in high-impact infrastructure and development projects. Major amendments introduced to the bill include the absolute prohibition of the use of funds from the GSIS, SSS, PhilHealth, Pag-IBIG, OWWA, and PVAO in the capitalization and investments in the Maharlika Fund.
It is expected to create jobs, spur economic growth, and enhance the country’s competitiveness. The government plans to use the MIF to fund infrastructure projects under the Build, Build, Build program. The program aims to address the country’s infrastructure gap by building roads, bridges, airports, seaports, railways, and other facilities.
More on these, the MIF will invest in high-impact projects that have significant economic and social benefits, such as power generation, water supply, transportation, housing, education, health care, and tourism. The fund will also invest in real estate and financial instruments, such as stocks, bonds, and funds.
The MIF is part of the government’s efforts to diversify its sources of revenue and reduce its reliance on loans. The Philippines has one of the highest debt-to-GDP ratios in Southeast Asia, with debt reaching 54.5% of GDP in 2020. The MIF will help the government manage its debts and improve its credit rating.