Can Filipinos save Maharlika Fund?

Philippine Daily Inquirer / 05:02 AM September 14, 2023

The implementing rules and regulations (IRR) of the law creating the Maharlika Investment Fund takes effect Sept. 12, 2023. Many foreign funders await the IRR before investing their funds into the Maharlika Investment Corp. (MIC) with nine board members, of which six are government and government-owned banks, Land Bank and the Development Bank of the Philippines.

Of the P500 billion total capitalization, government will own P50 billion voting common shares and part of the P125 billion preferred shares. By all counts, it is a sovereign-guaranteed fund. The foreign funders are naturally aware of the risks with sovereign wealth funds, and their questions probably are: 1) Will they get better returns in MIC? 2) How safe is the security of their funds in our country?

The first question is speculative, and depends on their appreciation of the investments track record of the government’s economic managers handling the MIC. The second question depends on the government’s international credit rating, now threatened by overborrowing exceeding the 60 percent prescribed by the International Monetary Fund.

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It appears that a foreign fund depositor will not be easy to convince to invest into MIC, unless it comes with some political considerations. For instance, Malaysia will likely put in some funds into the MIC only because our government is not helping the heirs of the Sulu Sultanate pursue the recent $15 billion Arbitral Award against Malaysia over Sabah.

What can likely make the Maharlika fund succeed are the domestic depositors—us. The treasury department has been bidding out long-term treasury bonds, around P120 billion a month, some at 8 percent coupon rate. As far as this goes, it benefits the country in that the government debt will be mostly domestic and does not endanger it with international loan sanctions in case of defaults, and it teaches Filipinos to save more and help their debt-drowning government with their personal savings.