Allaying concern that creating a haphazard Maharlika Investment Fund (MIF) might worsen the country’s huge indebtedness, National Treasurer Rosalia V. de Leon said that, on the contrary, the need to borrow to finance development can be reduced if sovereign wealth fund can be tapped for such endeavor.
At the first hearing on the MIF of the Senate Committee on Banks last Wednesday, De Leon said the MIF will pool investible funds from agencies and financial institutions of government, which can be used to draw in the private sector.
The pooled funds can be used to finance infrastructure projects, for which, she noted, the government usually resorts to borrowings.
Replying to questions from Senators Sherwin T. Gatchalian and Ana Theresia “Risa” N. Hontiveros, de Leon cited the example of other sovereign wealth funds. These, she said, were able to generate other co-investments.
De Leon said government’s financial managers foresee, “there will be even more funding in terms of the equity that will come in.”
“Eventually, that reduces the fiscal pressure on the budget” or the General Appropriations Act (GAA), she added.
However, De Leon conceded to senators that they cannot yet get solid commitments from investors, at this point, “because we don’t have the legislation yet,” and can only present the draft legislation.
ASKED by Hontiveros what would be the impact of MIF on the government goal to reduce the debt-to-GDP ratio, the national treasurer asserted that “this can ease the burden, as it will reduce our need to borrow.”
As conceived, the MIF will have an initial capital of P50 billion from the Land Bank of the Philippines (Landbank) and P25 billion from the Development Bank of the Philippines (DBP). That, she noted, is a small part only of the P1.3 trillion in investible funds of the LandBank and P800 billion of the DBP.
Augmenting this initial capital are funds from state gaming regulator Philippine Amusement and Gaming Corp. (Pagcor), from the royalties and other special assessments on natural resources, privatization of government assets and borrowings.
Sovereign wealth funds have been created in more than 50 countries—including Indonesia, Vietnam and Kenya—whose economies are at par with the Philippines.
The government can use its revenues from the MIF to fund infrastructure projects and social services or for public assistance projects, especially in health care.
Asked by Gatchalian what is the difference between MIF and GAA, since “we are putting so much money” into this fund and yet “have to exert so much effort” in the process, de Leon replied, that the key is on “leveraging,” as “we can get co-investors” from within and offshore and thus, increase the investible amount of the fund.
‘Malampaya was misused’
MEANWHILE, Finance Secretary Benjamin E. Diokno assured senators the MIF, as conceived, will have better safeguards to ensure that funds from natural resource windfall, such as the Malampaya Fund, will not be misused.
“’Yung Malampaya Fund, nasayang po ’yun…kung saan saan lang napunta [The Malampaya Fund was wasted; it went to inappropriate projects,” said Diokno, apparently referring to graft-laden projects like pork barrel projects ostensibly to help typhoon-affected farmers and which drew funds from the Malampaya Fund. The latter was envisioned by law to be used mainly for initiatives to help develop the energy sector.
Diokno expressed hope as well in the projected boost to government revenues from the minerals development roadmap.
The bottomline, Diokno said, is that the fund will “widen the options available to the government.” And, while he acknowledged Hontiveros’s point that the government has existing options for sourcing funds such as borrowing from, for example, multilaterals like World Bank, such will be subject to certain limits, i.e., limit on funding for, say, housing sector.
Also, Diokno said, when projects are funded via the GAA, sometimes Congress cuts funding midpoint in the multiyear project, delaying its turnover.
He cited the case of the international airport in Bicol, which tookten years, “kasi piche piche lang ang pasok ng pera… so nawawala ang present value nung project [because the money came in trickles, so the project loses its present value],” in contrast to if it had been finished in, say, three years.