President Ferdinand R. Marcos Jr. signed into law the controversial Maharlika Investment Fund Act at the Kalayaan hall, Malacañang, Manila on Tuesday.
“We mark today and of momentous occasion in the history of our nation as I signed into law the Mahalika Investment Fund Act. The MIF is a bold step towards our country’s meaningful economic transformation,” Marcos said.
He said that the nation would now be ready to enter the new age of sustainable progress and broad-based empowerment.
Marcos said that through the MIF, the administration would have “a leverage of small fraction of the considerable but underutilized investable funds of government and stimulate the economy without the disadvantage of having additional fiscal burden”.
“For the first time in the history of the Philippines, we now have a sovereign wealth fund. Designed to drive economic development,” Marcos said.
“This is perhaps, it’s time that we clarify all the questions that have been raised about the Maharlika Fund. What is it then? What it is supposed to be? How it is supposed to work? We have thought very much about foreign investment coming into the country. We have encouraged PPPs. We have encouraged joint ventures. We have encouraged G to G (government to government) arrangements. But all of these are coming under the category of borrowings,” he added.
Marcos explained that at present the government had been at the rate of 63 percent gross domestic product or GDP to debt ratio that if to compare to neighboring country in the region could be considered good.
However, he said there are so many structural numbers that need to be implemented if the Philippines competes in the world market, be it in labor, in manufacturing, and in agricultural export.
“If we are going to do that there are many great investments that we are going to be needed to be done for us to achieve that,” Marcos said.
He said that the first year of the administration had to go out of the country in order to reach out other nations to lure foreign investments.
“The first part of this administration was spent on a very simple principle. That we will go out to the world and we will do the changes that are necessary for the Philippines to become an investment friendly nation,” Marcos said.
Marcos said the travels abroad had resulted to success both in the government and the private sector.
“However, these are all borrowings. Now, we put aside the funds, wherein the government funds that are under-utilized. The instincts of any financial manager is that money must work for you. It must not sit in the bank. And earning an interest rate that is almost up to the level of cost of money,” Marcos said.
Marcos said that was the manner of approach in the context of Maharlika Fund.
He added that the government would have now available fund that would provide the seed money for investments and to attract other foreign investments to be able to participate in those operations without additional borrowings.
“Let us make sure that the fund is well run. Let us make sure that these are professionals. Let us make sure that the decisions are being made for the fund are not political decisions. That they are financial decisions because that is what the fund is, it is essentially a fund that we continue to investment,” Marcos said.
Marcos said the fund would fail if the government did not make money on the fund: “It’s that simple”. Marcos said that there were available opportunities that the administration could not allow to slip by that was the reason why they had put up the Maharlika Fund.
“To be able to give us the capacity and the ability to join in those investments or be part of that. We put in the government counterpart in any of these projects, and without additional borrowings. And quite a contrary, instead of taking on additional borrowings, having to work pay for the interests and roll over the principal every so often, we now have a fund which in itself make make money,” Marcos said.
Marcos pointed out that he was talking about big government projects on infrastructures, investment in agriculture, digitalization, strengthening food security to transform the Philippines to be a competitive in the world. “That is the point of this fund. That is the reason we have created this fund,” Marcos said.
The President said the MIF was not new since the sovereign fund had started in the 1950s.
“However, sovereign funds have become different from one another. When we were studying the fund, we looked back at the experience of other countries. What worked. What didn’t work. Where were the mistakes so we don’t commit the same mistakes,” Marcos said.
He said that every sovereign fund was unique depending upon the purposes of that fund.
“As long as we manage it properly, I contend that we have some of the best economic managers both in the government and in the private sector that we can count on to run this fund properly,” Marcos said.
Marcos stressed that he disfavored that the sitting President or the Finance Secretary would be the chairman of the board to manage the MIF.
“Inevitably, if you put me or the Secretary of Finance, or in the decision making loop, those decisions will be colored by political considerations. That must not be the case,” Marcos said.
With the signing of the MIF Act, the Marcos administration would have to prepare the implementing rules and regulations (IRR) and the Maharlika Investment Corporation (MIC) that would be the sole vehicle to utilize the MIF for investments and transactions to realize the return of investment (ROIs).
The MIC would have P75 billion as paid-up capital this year, with P50 billion sourced from the Landbank of the Philippines P50 billion and another P25 billion from the Development Bank of the Philippines.