NextGen Day

President Ferdinand R. Marcos Jr.’s economic team stated on Tuesday that the proposed act establishing the Maharlika Investment Fund (MIF) complies with the fundamental principles of economic policy and financial market involvement.

The National Economic and Development Authority (NEDA), the Department of Budget and Management (DBM), the Department of Finance (DOF), and the Bangko Sentral ng Pilipinas (BSP) reiterated in a joint statement their support for the creation of the Maharlika Investment Fund (MIF) as “a vehicle for economic growth.”

“The legal framework provided by Senate Bill (SB) No. 2020—approved by the Senate and adopted by the House of Representatives—follows fundamental principles of economic policy and financial market participation in favor of and for the ultimate benefit of the Philippine economy and the Filipino people,” the economic managers stated.

A group of 21 economists from the University of the Philippines (UP) requested Marcos and his economic team to “seriously” reevaluate the MIF bill after claiming that it “violates fundamental principles of economics and finance.” This prompted the release of the statement.

The bill, according to economists and professors from the UP School of Economics, including Ernesto Pernia, a former secretary of Socioeconomic Planning and the general director of NEDA, is “defective,” has “confused goals,” and is rife with “red flags.”

They also cautioned that “notwithstanding its proponents’ good intentions,” the proposal posed major dangers to the economy and the public sector.

According to the economic managers, SB 2020 imposes sufficient controls to reduce risks for fund contributors and shareholders, including the public sector.

They claimed that disclosure and transparency methods will be a part of the investment policies developed by the proposed Maharlika Investment Corp. (MIC).

“Further, the MIC’s approved investment policies must be displayed on its website, which must always be current and open to the public. In a similar vein, the MIC’s investment and risk management plans, strategies, and actions involving the MIF will be made public and publicized on its website, they added.

The terms and circumstances of the agreement with co-investors/joint-venture partners, as well as all financial statements and reports related to the operations of the co-investment/joint venture, must be periodically published on the MIC’s website, they continued, in order to ensure openness and accountability.

They claimed that in order to ensure that financial resources, particularly those managed by the Social Security System and the Government Service Insurance System, “are used solely for the purpose for which they were created,” the bill directs the outright prohibition of pension and social funds from making contributions to the MIC and MIF.

“The national government’s initial contribution of PHP50 billion shall be sourced from declared dividends of the BSP, government share in the income of the Philippine Gaming Corporation, and proceeds from privatization of government assets, as well as other sources of the National Government such as royalties/special assessments,” they stated.

increasing investor interest

They further emphasized that, given the rising cost of debt, the proposed MIF is “not only beneficial but necessary at this point in time.”

In spite of the fact that the Philippines can present investment prospects, they continued, the country’s economy is still developing and has to “explore vehicles to attract equity financing.”

“Therefore, the MIC/MIF is a future investment that we need to start creating now. As the Philippine economic outlook remains positive despite the global economic slump, it is a perfect vehicle and well-positioned to attract investments, according to the economic managers.

The economic managers also pointed out that numerous US investors as well as a number of foreign investors, including the Japan Bank for International Cooperation (JBIC), have already shown interest in the proposed MIF.

The proposed creation of the MIF, they emphasized, is in line with the Medium-Term Fiscal Framework (MTFF) and the 8-Point Socio-economic Agenda. “Let it be clear that the Administration remains focused and committed to the vital and urgent national agenda, with the MIF being one of the strategies towards this overarching goal of national development,” they said.

The Philippine Development Plan 2023–2028 is also operationalized, according to the economic team, by the MIC and MIF.

They continued by saying that the measure aims to ease financial limitations, carry out and maintain “high-impact” infrastructure and development projects, and increase expected returns for the nation’s investments.

“The objectives are clear: to invest funds that are available in government instrumentalities and utilize them for investment purposes on the basis of their individual mandates,” they declared.

expanding the budgetary outlook in the “near to medium term”

Because it is permitted to pursue more investment choices, the economic managers said that the proposed MIF also seeks to maximize returns by optimizing the use of government financial assets.

In the short- to medium-term, they claimed, the proposed wealth fund will increase fiscal flexibility by reducing the heavy reliance on local revenues and development aid as the primary funding methods for infrastructure projects.

“By providing an alternative source to public infrastructure spending, there would be a bigger budgetary allowance for other priority expenditures,” they argued.

They continued by saying that by investing in the MIC, government financial institutions could be able to get “medium- to long-term returns that are higher than their 10-year average return.”

For instance, the Development Bank of the Philippines (DPB) has a 10-year average ROI of 3.59 percent while the Land Bank of the Philippines (LBP) has an ROI of 4.23 percent on average. According to estimates, Maharlika’s predicted return will be 8.6 percent on average, which is significantly greater than their current investments’ returns and cost of capital.

They continued, “This is based on simulations that account for the blend of investment placements between the projected sectoral investment sub-fund and capital market investment sub-fund.

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