The Maharlika Investment Fund: Its Impact on the Philippine Business Landscape

On August 31, 2023, the Institute of Corporate Directors (ICDPH) hosted its member event, titled "The Maharlika Investment Fund: Its Impact on the Philippine Business Landscape," both at Discovery Primea, Makati and via Zoom Meetings from 10:00 AM to 12:00 PM. The primary objective of this two-hour event was to delve into the implications of the newly-enacted Maharlika Investment Fund (MIF) on the Philippine economy and society, including its potential benefits and risks, that would highly impact the future of the country.

About the Maharlika Investment Fund (MIF)

Established on July 18, 2023, the Maharlika Investment Fund (MIF) marks the Philippines' pioneering sovereign wealth fund, strategically distributed across diverse investment sectors with the aim of delivering multiple advantages to the nation. While the anticipated economic benefits of the MIF appear promising, it's essential to acknowledge that achieving its full potential necessitates intricate governance mechanisms, underlining the need for a comprehensive dialogue on its forward-looking impact on the Philippine business landscape.

The event commenced with opening remarks from Ms. Ma. Victoria Españo, Fellow and Trustee, Chairperson/CEO of Punongbayan & Araullo (P&A). She drew parallels between Chat GPT and the Maharlika Investment Fund, emphasizing their shared vision of promoting integrity, supporting sustainable development, and nurturing a brighter future for all. Ms. Españo acknowledged the MIF's potential and recognized the uncertainties surrounding it due to its relative newness and limited available details.

Dr. Bernardo M. Villegas, an expert in economics and a Harvard University Doctor in Economics, served as the event's resource speaker. He began by introducing "Ambisyon Natin 2040," a vision aimed at elevating the Philippines to a first-world country. This ambitious goal requires collaborative efforts from various sectors, including government, private enterprise, and civil society. The path to achieving this vision has already commenced with the approval of the Maharlika Investment Fund, under the oversight of the Maharlika Investment Commission (MIC).

Good Governance as Key Competence of the Maharlika Investment Commission (MIC)

One critical theme discussed was the importance of good governance within the Maharlika Investment Commission (MIC), a government-owned and -controlled corporation (GOCC) responsible for managing the MIF. The event highlighted the ICD's commitment to promoting good corporate governance, with a focus on ensuring that local government officials demonstrate competence and commitment to national development. Competent leadership is deemed crucial for effectively implementing development plans.

The Philippines boasts abundant natural resources, a skilled workforce, and a strategic location in Southeast Asia, yet realizing its potential and achieving sustainable growth has proven challenging. Dr. Villegas proposed several areas of focus for the MIF:

• Short-term GDP Growth Targets: Sustaining a consistent 6-7% GDP growth rate, as witnessed from 2011 to 2019 under two different administrations, underscores the importance of economic stability and growth regardless of the political landscape.
  

• Poverty Reduction: Addressing poverty is not only a moral imperative but also vital for long-term economic growth and social stability. The MIF should aim to reduce the country’s poverty incidence from around 13-14% to an average of 0-4%.
  

• Attracting Foreign Direct Investment (FDI): The Philippines must strive to attract a substantial portion of investment to GDP, securing $15-20 billion in FDIs annually. FDIs can stimulate job creation, technology transfer, and infrastructure development.
  

• Fighting Corruption: Addressing corruption remains a significant challenge. Effective measures and good governance are pivotal for fostering transparency and accountability, paving the way for sustainable development.
  

• Agricultural Productivity: Enhancing agricultural productivity through reforms, such as reconsolidating agricultural land and diversifying beyond rice production, can yield a 2-3% boost to the economy. Products like cacao, coffee, and various crops hold potential in lucrative export markets.
  

• Infrastructure Development: Investments in infrastructure, particularly in regions like Palawan, can be a catalyst for economic growth. Projects like roads, bridges, international airports, and critical infrastructure can create new economic opportunities and attract domestic and foreign investors.
  

• Savings and Investment: Encouraging higher savings and investment rates is essential for establishing a stable economic foundation and funding vital development projects.
  

• Philippine Long-Term Investment Fund: Establishing a dedicated fund can provide the financial resources needed for large-scale infrastructure and development projects, potentially reducing the country's debt burden.

During the post-presentation panel discussion, Mr. Francisco "Popoy" Del Rosario Jr., Chairman of the Institute for Solidarity in Asia, emphasized two vital aspects of the Maharlika Investment Fund (MIF): governance and management. He called for clarity in the fund's goals, openness to diverse investments, regular public audits, high-quality investment reports, and consistent project performance evaluations. Regarding management, Mr. Popoy proposed hiring professional fund managers annually based on performance metrics, as an alternative to appointing the President as the MIF's CEO, and underscored the importance of standardized project evaluation criteria.

Mr. Senen L. Matoto, Fellow and Trustee, Institute of Corporate Directors, and Mr. Victor Andres Manhit, Member, CEO and Managing Director of Phil. Stratbase Consultancy, Inc., also offered their insights on the Multilateral Investment Fund (MIF), addressing a range of critical aspects including funding sources, control measures, governance standards, and its appeal to foreign investors. Notably, they drew attention to concerns surrounding the lack of control measures and advocated for hiring consultants to strengthen management support. Additionally, they highligted the MIF's potential to bolster project funding and its role as an appealing equity partner for foreign investors seeking collaborative opportunities in the Philippines.

Mr. Carlos Jose Gatmaitan, CEO of the Institute of Corporate Directors (ICDPH), concluded the event by expressing gratitude to Dr. Bernardo M. Villegas, panelists, moderators, ICD members and guests for their valuable insights. He pointed out the importance of beginning with anti-corruption efforts but continuing with a focus on competence and effective execution as cornerstones of good governance.