The Maharlika Investment Fund (MIF) is off to a slow start.
It needs to gain a more solid ground, and at a faster pace, to justify the hype and pitching it got from the proponent, the Marcos administration. It also needs to show results to inspire confidence in it from the ends of both the public that pays its bills and from prospective local and foreign investors in whose buy-in over the long term the sustainability of the fund will depend.
Otherwise, the fund at best remains a promise like how its critics had raised red flags to warn proponents against its creation.
Fourteen months after the law creating it took effect in July 2023 and twelve months after the diversion of public funds—Php50 billion from the Land Bank of the Philippines (LBP) and Php25 billion from the Development Bank of the Philippines (DBP)—for its initial capital financing was completed in September 2023, it remains at a stage of trying to figure out where it needs to go and try to make a difference.
The law itself—Republic Act No. 11954—allows the Maharlika Investment Corporation (or MIC, which is the administrator of MIF) to go wide and deep in its search for money making opportunities. It may invest in the capital markets; in joint ventures or co-investments, mergers and acquisitions; in real estate and infrastructure projects; loans and guarantees to, or participation into joint ventures or consortiums with Filipino and foreign investors, whether in the majority or minority position in commercial, industrial, mining, agricultural, housing, energy, and other enterprises, which may be necessary or contributory to the economic development of the country, or important to the public interest; and an unlimited menu of expenditures in support of sustainable development.
The MIF has a grand vision. In seeking inter-loping pathways to get there, there are risks that may well make it easy for anyone who takes the wheel to get lost. As it is, Maharlika seems to struggle in trying to find its niche.
Reports have it that the MIC is ready to invest in the energy sector within the next 60 to 90 days. MIC President and CEO Rafael D. Consing, Jr. has been quoted as saying that up to Php35 billion will be made available this year for its debut investment, which is likely to be in the energy sector. MIC Chair and Department of Finance Secretary Ralph Recto said as much, with about Php12 billion being eyed as possible equity investment in the National Grid Corporation of the Philippines.
By some discomforting coincidence, it was Rafael Recto, Ralph's father, who lawyered for the Bataan Nuclear Power Plant (or BNPP, a priority energy sector project) on behalf of the government. This investment—worth over Php130 billion when it was completed in 1984—was financed by a loan that took the government 46 years to amortize (until 2022). Two generations of Filipinos got nothing from their taxes.
In 2011, the Philippine government paid the amount of ₱4.2 billion to the National Power Corporation for maintenance cost (an average of Php40 million a year). Elsewhere, in 2012, the Sandiganbayan ordered Herminio Disini, a Marcos relative by affinity, "to repay the Philippine government the amount of Php3 billion for his role in defrauding the country through the BNPP."
And just to fully frame the backdrop of how a rudderless public policy works, a 1979 Letter of Instruction issued by Ferdinand Marcos, President Bongbong Marcos' father, stated that "the continuation of the [BNPP] construction was not possible due to potential hazards to the health and safety of the public"; but the first Marcos administration carried on with the project anyway.
We recall that experts (including economists from the University of the Philippines and Ateneo De Manila University, among many others) have questioned the merits of the fund from a public policy, finance, and economics perspective. But the second Marcos administration got Congress to pass in record time the MIF bill anyway. The milieu which the legislative process went through is hardly different from that of the one-man rule once presided over by Marcos Sr. This time, however, the railroading of that process has been questioned before the Supreme Court.
The traditional view of public administration argues for investments in social development impact sectors where it is not profitable for the private sector to go into. Instead, what is shaping up is a muscle being poised to compete with and box out the private sector. The reign of Marcos Sr. created more than 200 government corporations to address social development issues. They ended up being milking cows instead, rewarding a select few for their partisan support, and being continuously subsidized heavily with taxpayers’ money for operational support. With that record, the government has little to show to disprove the nagging notion that it has no business being in business. From vision to branding, the MIF’s whole shebang suffers from lack of clarity.
The MIF envisions to do both: being in business while trying to work for social leveling. These are parallel yet disparate objectives, never destined for coupling then, now, or in the future. Of its contradictions, perhaps nothing can be more telling than how its technical backers (DoF Sec Benjamin E Diokno, DBM Secretary Amenah F. Pangandaman, NEDA Secretary Arsenio M. Balisacan, and BSP Governor Felipe M. Medalla) phrased their statement of support in December 2022:
“Intergenerational benefits include increased access of future generations to income from investments, such as potential earnings from extracted natural resources such as in mining.”
The dominant worldview suggests that, all things considered, extractive industries like mining and logging hurt rather than benefit the present and future generations.
Marcos Sr. once proposed changing the official name of the country from Philippines to Maharlika. Did Marcos Jr. push the MIF to revive the message of his father’s call even with nothing specific to do in mind?
We note that sovereign wealth funds which the MIF idea took fancy from take their core identities from the name of countries. Examples: Government Pension Fund Global of Norway (which invests oil revenues to secure the welfare of future generations); the Russian National Wealth Fund (which supports the country's pension system and balances the federal budget in times of oil price volatility); the Australian Future Fund (a pension reserve fund); and the Ireland Strategic Investment Fund (which invests in sectors that deliver economic and employment benefits to that country).
So why Maharlika Investment Fund and not Philippine Investment Fund?
If it is at all any consolation, Mr. Consing has been heard saying that the MIF has so far earned Php1.5 billion from “placements” which, if done to buy government securities, simply means making money from present and future taxes.
That earning represents a 2-percent increase, if reckoned from the seed fund of Php75 billion. However, this increase is only on paper, because the average inflation rate during that whole time was 4.1 percent, which eroded the true value of MIF’s initial capital by Php3 billion. In real terms, therefore, the MIF just lost Php1.5 billion in 12 months. Moreover, the loses do not yet take into account the operating and overhead cost the MIF must have already incurred, which can be substantial as well.
One wonders how much more could have done if the monies diverted to Maharlika Investment Fund had remained with LBP (which declared an income of Php40 billion last year) and DBP, like funding start-ups, farmers’ associations, and small-scale enterprises.
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