My house cat says "maharlika" comes from the Old Malay word "mahardhika," which conveys the idea of nobility, royalty, or a warrior class. I thought it comes from "Mahal kita" (I love you).

As cooperators, is there something to love about the Maharlika Investment Fund? Maybe, if we can suspend our disbelief for a bit.

The Maharlika Investment Fund is the Philippines' first sovereign wealth fund. It is expected to play a major role in promoting economic growth and development in the Philippines. Can we love what may be unlovable?

Cooperative POV

Cooperatives, particularly cooperative banks and credit cooperatives, can benefit from the Maharlika Investment Fund (MIF) Act of 2023 in a number of ways, including:

  • Access to capital. The MIF can provide much-needed capital to cooperative banks and credit cooperatives, which can help them to expand their lending operations and reach more members.
  • Guarantees and insurance. The MIF can provide guarantees and insurance to cooperative banks and credit cooperatives, which can help to reduce their risk and attract more depositors.
  • Technical assistance. The MIF can provide technical assistance to cooperative banks and credit cooperatives, which can help them to improve their operations and management.
  • Marketing support. The MIF can provide marketing support to cooperative banks and credit cooperatives, which can help them to attract more members and borrowers.

In addition to these direct benefits, the MIF can also help to create a more favorable environment for cooperatives in the Philippines. This can lead to increased investment in cooperatives, which can help them to grow and thrive.

Here are some specific examples of how cooperative banks and credit cooperatives can benefit from the MIF Act:

  • A cooperative bank can use MIF funding to expand its lending operations and offer more loans to members. This can help to boost economic activity in the communities served by the cooperative bank.
  • A credit cooperative can use MIF guarantees to attract more depositors. This can help to strengthen the credit cooperative's financial position and make it more sustainable.
  • A cooperative bank can use MIF technical assistance to improve its lending practices and risk management. This can help to reduce the bank's risk and make it more profitable.
  • A credit cooperative can use MIF marketing support to promote its products and services to potential members and borrowers. This can help to grow the cooperative's membership and lending portfolio.

The MIF Act is a significant development for cooperatives in the Philippines. It has the potential to provide much-needed capital, guarantees, insurance, technical assistance, and marketing support to cooperative banks and credit cooperatives. This can help them to grow and thrive, and it can contribute to the economic development of the Philippines.

Maharlika Law

Republic Act No. 11954, "An Act Establishing The Maharlika Investment Fund, Providing For The Management, Investment, And Use Of The Proceeds Of The Fund, And For Other Purposes." Here are some key points:

  • Establishment of the Maharlika Investment Corporation (MIC). The MIC is a corporate body that will be responsible for managing the MIF. The MIC will be governed by a Board of Directors, which will be composed of the Secretary of Finance, the President and CEO of the MIC, and three other members appointed by the President.
  • Funding of the MIF. The MIF will be funded by a combination of government appropriations, contributions from government-owned and controlled corporations (GOCCs), and returns on investments. The government has committed to providing an initial funding of PHP100 billion for the MIF.
  • Investment objectives of the MIF. The MIF will invest in a variety of assets, including foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, joint ventures, mergers and acquisitions, real estate, and high-impact infrastructure projects. The investments will be made on a strategic and commercial basis in order to promote fiscal stability for economic development and strengthen the top-performing GFIs.
  • Governance and oversight of the MIF. The MIC will be subject to the oversight of the Department of Finance, the National Economic and Development Authority, and the Commission on Audit. The MIC will also be required to submit regular reports to the President and the Congress on its activities and investments.

The success of the MIF will depend on the effective implementation of its provisions and the transparency and accountability of its management.

Implementing Rules

The implementing rules and regulations (IRR) of the Maharlika Investment Fund (MIF) Act of 2023 are expected to be issued by the Department of Finance (DOF) within 90 days after the law was signed by President Ferdinand Marcos Jr. on July 18, 2023. This means that the IRR is expected to be issued by October 17, 2023.

The IRR will provide more details on how the MIF will be implemented. It will cover topics such as the following:

  • The structure and governance of the Maharlika Investment Corporation (MIC), the corporate body that will be responsible for managing the MIF.
  • The investment objectives of the MIF.
  • The types of assets that the MIF can invest in.
  • The risk management framework of the MIF.
  • The oversight and accountability mechanisms for the MIF.

The IRR is an important step in the implementation of the MIF Act. It will provide clarity on how the MIF will be managed and operated. This will help to ensure that the MIF is used effectively to promote economic growth and development in the Philippines.

Here are some additional details about the IRR:

  • The IRR will be drafted by the DOF in consultation with the MIC and other relevant government agencies.
  • The IRR will be submitted to the President for review and approval.
  • The IRR will be published in the Official Gazette and other appropriate media outlets.
  • The IRR will take effect 15 days after its publication.

The IRR is a significant step in the implementation of the MIF Act. It will provide clarity on how the MIF will be managed and operated. This will help to ensure that the MIF is used effectively to promote economic growth and development in the Philippines.

National Treasurer Rosalia de Leon said that the DOF is targeting to issue the implementing rules and regulations (IRR) of the Maharlika Investment Fund (MIF) Act of 2023 before the end of August 2023. This is within the 90-day deadline set by the law.

De Leon said that the DOF is currently in the process of drafting the IRR in consultation with the MIC and other relevant government agencies. The IRR will cover topics such as the structure and governance of the MIC, the investment objectives of the MIF, the types of assets that the MIF can invest in, the risk management framework of the MIF, and the oversight and accountability mechanisms for the MIF.

De Leon said that the DOF is committed to issuing the IRR as soon as possible so that the MIC can start its operations and the MIF can begin investing in projects that will promote economic growth and development in the Philippines.

She said:

"We are targeting to issue the IRR before the end of August 2023. This is within the 90-day deadline set by the law. We are currently in the process of drafting the IRR in consultation with the MIC and other relevant government agencies. We are committed to issuing the IRR as soon as possible so that the MIC can start its operations and the MIF can begin investing in projects that will promote economic growth and development in the Philippines."

Sovereign Wealth Funds (SWFs) are state-owned investment funds that manage a country's reserves, typically derived from commodity exports, trade surpluses, or other sources of national income. These funds are established to achieve various economic and financial objectives, such as stabilizing the economy, generating returns on excess reserves, supporting long-term development projects, and diversifying the country's assets.

How Sovereign Wealth Funds Work

  1. Funding: SWFs are funded by governments using revenues from sources like oil, natural resources, trade surpluses, or foreign exchange reserves.
  2. Investment: SWFs invest their assets in various financial instruments such as stocks, bonds, real estate, infrastructure projects, and other alternative investments.
  3. Objectives: SWFs have different investment strategies depending on their objectives. Some focus on maximizing returns, while others prioritize economic stabilization, strategic investments, or intergenerational wealth preservation.
  4. Transparency: The level of transparency varies among SWFs, but many strive to maintain transparency in their operations and investments to build trust and credibility.
  5. Governance: SWFs are usually governed by a board of directors or similar decision-making bodies, often reporting to the government or relevant authorities.
  6. Long-Term Horizon: SWFs typically have a long investment horizon, allowing them to weather short-term market fluctuations and capitalize on long-term growth opportunities.

Examples of Sovereign Wealth Funds

  1. Norway's Government Pension Fund Global: One of the largest and most transparent SWFs, funded primarily by Norway's oil revenues. Its objective is to manage wealth for future generations and minimize the impact of oil price volatility on the domestic economy.
  2. Abu Dhabi Investment Authority (ADIA): Originating from the United Arab Emirates, ADIA focuses on investing in a globally diversified portfolio, including equities, fixed income, real estate, and infrastructure.
  3. China Investment Corporation (CIC): Established by China, CIC aims to achieve long-term value appreciation and contribute to China's economic development through prudent global investments.

Best Practices

  1. Clear Objectives: SWFs should have well-defined objectives aligned with national economic goals.
  2. Transparency: Adequate transparency fosters trust among stakeholders and the global financial community.
  3. Governance: Strong governance structures help ensure responsible and prudent management of assets.
  4. Risk Management: Effective risk management strategies safeguard the fund against market volatility and unexpected events.
  5. Diversification: Diversified portfolios help reduce risk and enhance long-term returns.
  6. Ethical Considerations: Funds should consider environmental, social, and governance factors in their investment decisions.
  7. Long-Term Perspective: SWFs should focus on long-term returns and avoid short-term market speculation.

Pros and Cons

Pros:

  1. Economic Stabilization: SWFs can provide a buffer against economic shocks and volatility.
  2. Long-Term Growth: They offer an opportunity to invest in long-term growth projects and assets.
  3. Wealth Preservation: Funds can help preserve wealth for future generations.
  4. Diversification: SWFs can diversify a country's asset base, reducing reliance on a single revenue source.
  5. Capital for Development: Funds can provide capital for strategic development projects.

Cons:

  1. Lack of Accountability: In some cases, funds might lack transparency and accountability, leading to potential misuse of resources.
  2. Political Influence: There's a risk that political motivations could influence investment decisions.
  3. Economic Dependence: Relying heavily on SWFs can lead to a country's economic dependence on commodities or external investments.
  4. Risk of Losses: Poor investment decisions can lead to losses that impact the country's economy.
  5. Inflationary Pressures: Large inflows of capital can potentially lead to domestic inflation.

What now, can you love me? —M.I.F.

Whether it makes sense for the Philippines to establish a sovereign wealth fund depended on various factors, including its economic goals, revenue sources, and current financial stability. If the Philippines has a significant source of income that can be channeled into a SWF, it could potentially help stabilize the economy, generate returns, and support long-term development projects.

However, our country would need to carefully consider the potential risks and benefits, establish transparent governance structures, and ensure that the fund's objectives align with national priorities.

References/sources:

  1. www.dbm.gov.ph
  2. www.dof.gov.ph
  3. www.pna.gov.ph
  4. www.lawphil.net
  5. www.law.net.ph
For additions, corrections or requests for more information, please email press [at ] chat.coop.

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