Recto says Maharlika fund still identifying potential investments

The Maharlika Investment Corp. (MIC) plans to decide on potential investments by the end of the year, Finance Secretary Ralph G. Recto said on Wednesday.

“Admittedly it is taking time to identify investments that Maharlika can make,” he told a Senate Finance Committee hearing with the Development Budget Coordination Committee.

The country’s first sovereign wealth fund has not yet made any investments since Republic Act No. 11954, which created the Maharlika Investment Fund, was signed into law in July 2023.

“As you know it is like a startup, we just passed the law last year, so it has been in operation for about six to seven months right now,” Mr. Recto said.

He said the Maharlika’s board, composed of the Land Bank of the Philippines (LANDBANK), the Development Bank of the Philippines (DBP), the President, and private sector representatives, was “working and complete.”

Mr. Recto, who serves as the board’s chairman, said the corporation was still setting up its office. The board members have not received salaries, he added.

He noted that MIC Chief Executive Officer (CEO) Rafael D. Consing, Jr. is “looking for opportunities” but has not sought the board’s approval for investments.

During past board meetings, Mr. Recto said Mr. Consing mentioned prioritizing investments in the energy sector, particularly on off-grid power projects and infrastructure projects.

“These (priority areas of investment) are very general, nothing final yet,” the Finance secretary said. “Hopefully, by the end of the year, there will be decisions where to invest.”

Mr. Consing earlier said the corporation’s priority sectors include energy, physical and digital infrastructure, food security, aviation and aerospace, mineral processing, transportation, and tourism.

He has said the corporation seeks to raise about $1 billion for energy projects that include grid modernization, electricity distribution, and new sources to “diversify supply and create price stability.”

Mr. Recto said the MIC should focus on investment opportunities locally, not abroad.

“We are anticipating that Maharlika will make significant investments in infrastructure,” Senate Finance Committee Chairperson Mary Grace Sonora N. Poe-Llamanzares said at the same hearing.

The MIC has an authorized capital stock of PHP 500 billion. Its initial capital of PHP 125 billion comes from contributions from the LANDBANK (PHP 50 billion), DBP (PHP 25 billion) and the National Government (PHP 50 billion).

Mr. Recto said the PHP 75 billion released to the MIC is currently invested in the Treasury.

“We just invested in the Treasury, and the interest income is what they are using in their operations,” he said.

Senate Deputy Minority Floor Leader Ana Theresia N. Hontiveros-Baraquel asked Mr. Recto to confirm if for every PHP 1 billion taken from the MIC’s capital stock, PHP 9 billion would be taken from the loanable funds of LANDBANK and DBP, which the Finance chief responded with “possibly.”

“That (P9 billion reduced in loanable funds assumes that everything is correct, with the nine times multiplier effect, but in many instances, LANDBANK and DBP, many of those resources, investable funds, are also invested in the Treasury,” he said.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said that the delay in getting investments showed the government’s failure to justify the MIC’s existence.

“The main task of this corporation was to identify a number of top-notch financial persons who will [place its resources in high-yielding investments,” he said in a Facebook Messenger chat.

“The cost of having dormant funds, which this corporation was formed to eliminate, remains.”

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said it was understandable for the MIC to go through a “meticulous process” of setting up shop.

“This cautious strategy is essential in a volatile global climate, where careful planning and gradual progress are key to long-term success,” he said in a Viber message.

“By the end of the year, we hope that Maharlika will have identified strategic investments that align with its goals, contributing positively to the economic landscape.”

But Jose Enrique A. Africa, executive director of the think tank IBON Foundation, said the government must ensure there is transparency in MIC’s investments.

“The governance issues, lack of public funds for such an investment vehicle, unfavorable investment conditions from a shaky domestic and global economy, also mean risks for public funds,” he said in a Viber message. – John Victor D. Ordoñez, Reporter