Congress Votes On: Maharlika Investment Fund

Did your representative vote "yes" or "no"?

Photo by Jeson Cabilic on Pexels 

The controversial Republic Act No. 11954 or the Maharlika Investment Fund Act of 2023 has been signed into a law last July 18, 2023. Prior to that, House Bill 6608 was approved by the House of Representatives on December 15, 2022.

What is it?

The Maharlika Investment Fund (MIF) aims to profit from government assets as a means to invest in programs that support agriculture, energy, digitalization, and climate change projects. The end goal: to spur the economic development in the country. Other nations like Singapore, China, South Korea, and Malaysia have similar wealth funds.

The MIF will be overseen by a board of directors comprised of representatives from government institutions, fund contributors, as well as independent managers. The initial funds will be sourced from the Development Bank of the Philippines (P25 billion), the Land Bank of the Philippines (P50 billion), and the National Government (P50 billion, which will come from 10% of the gross gaming revenue of the Philippine Amusement and Gaming Corporation; and 100% dividends of the Bangko Sentral ng Pilipinas, among others). The Social Security System (SSS), Government Service Insurance System (GSIS), and other social security and public health insurance providers were originally included in the roster. However, they were eventually removed due to concerns about the wealth fund’s impact on public benefits and pensions.

What are its benefits?

If managed properly, a national wealth fund can protect the country from economic shocks arising from natural disasters, financial crises, geopolitical events, and other unexpected circumstances that can significantly affect the economy. This financial stability can then boost investor confidence, thereby resulting in good credit standing. As the country becomes less dependent on external borrowing, interest rates decrease.

Norway’s Government Pension Fund Global (GPFG), for instance, is one of the largest sovereign wealth funds in the world. In the first quarter of 2023, it posted a strong 5.9% return on investment, thanks to rising stock markets. While it declared a loss of 653 billion Norwegian kroner (about USD61 billion) a year ago, GPFG managed to earn a profit of 893 billion Norwegian kroner (about USD84 billion) this year. The country’s central bank, Norges Bank, manages the fund. Norges owns 1.5% of all globally listed shares, with stakes in more than 9,000 companies.  

Why is it controversial?

Critics have expressed their concerns about the fund sources and the team who will oversee the MIF. Certain exemptions from the law may create loopholes that can be exploited. Its speedy approval into a bill, which took only three weeks and was certified as “urgent” by the president, means there wasn’t enough time to properly scrutinize and deliberate on it. Critics also say there are more urgent matters to prioritize, such as housing for the poor.

Lawmaker Gabriel Bordado of the Third District of Camarines Sur, one of the six legislators who voted against it versus the 279 who voted “yes,” cites the country’s massive national debt of more than P13 trillion. Such huge financial liability, not to mention the country’s budget deficit, makes the Philippines ill-prepared to adopt a wealth fund. This is a stark contrast to wealthy nations who have excess funds that equip them to readily repay debts. Furthermore, mishandling the wealth fund may affect the country’s credit standing and borrowing rates—a concern also raised by the Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business group.

Even the name per se is mired in controversy. “Maharlika” is associated with the late dictator Ferdinand E. Marcos, father of President Bongbong. Suggestions to come up with a more neutral name for the fund have been raised.    

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