Understanding the Maharlika Wealth Fund Proposal

The Maharlika Wealth Fund proposal has been gaining attention in the Philippines, but what exactly does it entail? The fund aims to manage and invest the country's wealth to generate revenue for the government.

The proposal involves creating a sovereign wealth fund that will pool together the country's wealth, including investments in public-private partnerships and state-owned enterprises. This fund will be managed by a board of trustees.

The Maharlika Wealth Fund proposal has been met with both support and criticism, with some arguing that it will help the country's economy and others raising concerns about transparency and accountability.

The Maharlika Wealth Fund was created through the Maharlika Investment Fund Act of 2023, also known as Republic Act No. 11954.

This act was passed by the Congress of the Philippines, with the House of Representatives voting in favor on December 15, 2022, and the Senate voting in favor on May 31, 2023.

The bill was certified as urgent by President Ferdinand "Bongbong" R. Marcos, Jr., allowing lawmakers to bypass the constitutional rule requiring bills to be passed on three readings on separate days.

The bill was introduced in the House of Representatives on December 12, 2022, and passed on its third reading the same day, with 279 lawmakers voting in favor.

The Senate approved the bill on its third and final reading on May 31, 2023, with 19 senators voting in favor, one negative, and one abstention.

Here's a summary of the legislative process:

The act became law on July 18, 2023, after President Marcos signed it.

The Maharlika Wealth Fund has received mixed reactions from experts and organizations. Economist Michael Batu believes the fund can help raise money for the government's programs if managed properly.

The Philippine Stock Exchange has expressed its support for the proposal, stating that it aims to facilitate the flow of capital into more productive channels. However, critics see it as a plunder fund prone to corruption and money laundering.

Economists have raised concerns about the fund's unclear purpose and possible encroachment on the budget process. University of the Philippines School of Economics faculty members have also issued a paper stating that the fund violates fundamental principles of economics and finance.

A group of 12 organizations has collectively stated against the proposal, citing the government's focus on managing the country's fiscal deficit and public debt as a priority. They also note that the Philippine economy has no commodity-based surpluses or surpluses from external trade from state-owned enterprises.

The reception of the proposal was not without its disagreements. Economist Michael Batu thinks the fund can help raise money for government programs if managed properly.

Some experts, however, have expressed concerns about the proposal. Global Source economist Romeo Bernardo believes the timing is poor and the fund would add to the country's financial and fiscal risks.

A group of 12 organizations, including the Foundation For Economic Freedom and the Makati Business Club, made a collective statement against the proposal. They believe there's no gap in the economy that necessitates the creation of a sovereign wealth fund.

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The Philippine Stock Exchange has made its support of the proposal, stating it aims to facilitate the flow of capital into more productive channels.

Critics, on the other hand, see the fund as a potential plunder fund due to its susceptibility to corruption and money laundering. Tax expert Raymond Abrea agrees, calling it "prone to corruption and money laundering".

The legislation has also faced criticisms for potentially affecting the independent functions of government financial institutions.

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A group of Filipino lawmakers has taken issue with the Maharlika Investment Fund Act of 2023, arguing it's unconstitutional.

On September 18, 2023, Senate Minority Leader Koko Pimentel and several representatives filed a 56-page petition with the Supreme Court to declare the act unconstitutional.

The Maharlika Investment Fund Act of 2023 has been met with significant controversy. Economists like Romeo Bernardo are concerned about the fund's potential for mismanagement, citing the 1Malaysia Development Berhad scandal as an example.

A group of 12 organizations, including the Foundation For Economic Freedom and the Makati Business Club, have collectively opposed the proposal, arguing that there is no gap in the Philippine economy that necessitates the creation of a sovereign wealth fund.

Critics see the fund as a plunder fund, prone to corruption and money laundering, according to tax expert Raymond Abrea. The fund's unclear purpose and possible encroachment on the budget process have also raised eyebrows.

The Philippine Stock Exchange has surprisingly supported the proposal, stating that it will contribute to efficient capital formation for the country. However, this stance is at odds with the concerns of many economists and organizations.

The fund's governance structure has also been called into question, with critics pointing out its red flags. The University of the Philippines School of Economics faculty members have issued a paper highlighting the fund's potential risks to the economy and public sector.

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The Maharlika Wealth Fund is a sovereign wealth fund that will invest in various outlets such as foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects.

A total of Php 250 billion startup investment for the MWF will come from Government Financial Institutions (GFIs) such as the GSIS, SSS, Landbank of the Philippines, and Development Bank of the Philippines.

The MWF aims to generate consistent and stable investment returns with appropriate risk limits to preserve and enhance long-term value of the fund.

The fund will obtain the best absolute return and achievable financial gains on its investments, and satisfy the requirements of liquidity, safety/security, and yield to ensure profitability of the GFIs' respective funds.

The MWF will be used by the government to invest in various sectors, which will in turn improve employment, taxation, and economic activities.

The fund's investment policies will be posted on its website, which shall be immediately updated and made easily accessible to the public.

The MIC has secured membership in the International Forum of Sovereign Wealth Funds (IFSWF), which sets governance standards for sovereign wealth funds globally.

The Maharlika Fund's implementing rules and regulations require audits of the MIC to include an assessment of the implementation of the Santiago Principles, which are a set of internationally accepted best practices for sovereign wealth funds.

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The Maharlika Wealth Fund (MWF) aims to generate consistent and stable investment returns with appropriate risk limits to preserve and enhance long-term value of the fund.

The MWF will invest in a wide range of outlets such as foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects.

A total of Php 250 billion startup investment for the MWF will come from Government Financial Institutions (GFIs) such as the GSIS, SSS, Landbank of the Philippines, and Development Bank of the Philippines.

The MWF aims to improve employment, taxation, and economic activities by investing in high capital expenditures in key industries.

Norway established its sovereign wealth fund after discovering oil in the North Sea in 1969. The fund, Government Pension Fund Global, was created in 1996 to protect future generations from the volatility of the oil market.

The fund currently has holdings in approximately 9,000 companies internationally and invests in real estate in leading cities. It's worth more than 12 trillion Norwegian kroner, or around P72 trillion.

Only the expected return of the fund is spent, not the capital. This ensures the longevity of the fund and phases oil revenue into the economy gradually.

Kiribati's Revenue Equalization Reserve Fund, established with proceeds from guano, continues to benefit the country despite its reserves being depleted in 1979. The fund cushioned Kiribati's economy from the economic downturn brought by the COVID-19 pandemic.

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Investment funds can provide a low-cost way to diversify your portfolio, with some funds costing as little as 0.05% of your investment.

By pooling money from many investors, investment funds can offer access to a wide range of assets and asset classes, including stocks, bonds, and real estate.

Investors can choose from a variety of fund types, such as index funds, actively managed funds, and exchange-traded funds (ETFs).

Investment funds can also offer tax benefits, such as pass-through taxation, which can reduce your tax liability.

Investors should carefully consider their investment goals and risk tolerance before investing in a fund, as some funds may be more suitable for certain investors than others.

Investment funds can be a good option for those who lack the time, knowledge, or expertise to manage their investments directly.

The Maharlika Investment Corporation (MIC) has finalized its investment and risk management framework, a crucial step towards launching its Maharlika Investment Fund (MIF).

This framework covers the detailed policies, strategies, and risk management practices guiding the MIC's investment decision-making and portfolio management.

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The MIC has also approved its founding principles, including the governance structure and investment approach from 2024 to 2028.

The Department of Finance requires the investment policies to be posted on the MIC's website, which should be immediately updated and easily accessible to the public.

The investment policies are key to shaking off fears of politicization or corruption, as seen in the 1MDB scandal in Malaysia.

Researchers from the Philippine Institute for Development Studies (PIDS) warn that the MIC needs a credible return benchmark to ensure transparency.

The MIC has secured membership in the International Forum of Sovereign Wealth Funds (IFSWF), which sets governance standards for sovereign wealth funds globally.

This membership gives the MIC the authority to begin engaging with investors and gain access to a global network of experts.

MIC President and Chief Executive Officer Rafael Jose Consing Jr. has been scouting for investment opportunities, including jeepney terminals that can support the government's Public Utility Vehicle Modernization Program.

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