Marcos’s Investment Fund Dilemma
Creating the Maharlika Investment Fund was easy, but where are the private investors?
By: Viswa Nathan
Speculation abounds in the Philippines over President Ferdinand Marcos Jr.’s suspension last week (October 18) of his controversial plan to launch a sovereign wealth fund, the Maharlika Investment Fund (MIF). The explanation that the president and his team have found ways to make “more improvements…specifically to the organizational structure” of the project and make it “as close to perfect and ideal as possible” has rekindled skepticism about the entire initiative and questions about the competence of the lawmakers and the implementors of decisions.
No one except the president’s yes-men and spin-doctors is yielding to the president’s plea that the public accept his explanation and not misinterpret the suspension as “a judgment of the rightness or wrongness” of the venture, as he is bent on launching the fund before the year’s end. The big question is where he is going to find private investors, either domestically or abroad, who are willing to trust the Philippines with their money.
No one could overlook the determination and indecent haste by which the entire process was pushed from the time the idea—a brainchild of the president—was mooted and up to signing it into law. It was at the president’s behest that his cousin Speaker Martin Romualdez, and his son, Senior Deputy Majority House Leader Ferdinand “Sandro” Marcos III, crafted legislation and moved it with the support of four others for House debate almost a year ago. The president certified the measure as urgent for its speedy passage; the House approved it in 18 days with 279 members voting for it. How much thought and analysis could have been possible in those 18 days was the question on many minds.
Then the chairman of the House Ways and Means Committee, Joey Salceda, waded in claiming that he and three others were asked to review and “reengineer” the House-approved version before it went for Senate debate and voting. The Senate approved it within a week after the president certified the bill as urgent. Finally, the president signed it into law in July and its implementing rules and regulations (IRR) were issued on August 28.
Thus, last month, the state-owned Land Bank and Development Bank of the Philippines, which were required to subscribe to Maharlika’s PHP500-billion (US$8.82 billion) capital, transferred PHP50 billion (US$882 million) and PHP25 billion (US$441 million) respectively to the fund, at the risk of putting both banks in danger of depleting their resources to the extent they needed to seek exemption from the reserve requirements of the central bank.
After all this, what compelled the president now to pull the plug? The answer could be found in the unseemly haste on the part of Congress and Malacañang to pass the fund into law in the face of warnings by many economics professors and the former governor of the central bank.
JC Punongbayan, an assistant professor at the University of the Philippines School of Economics, told local media there were rumors that the suspension was for Marcos to gain “greater elbow room in appointing the leaders of Maharlika,” as he is “allegedly bent on appointing” his finance secretary Benjamin Diokno as MIF’s president and CEO, though Diokno is not on the list of potential candidates for the position because the law that facilitated MIF’s creation stipulates that the finance secretary be the ex-officio chairman of the fund. This, Punongbayan thinks, could lead to a Cabinet shakeup.
While the president could remake the cabinet as he wills, a knowledgeable source pointed out on the condition of anonymity, the president is groping in the dark with a worrisome concern that his pet project will fail to take off because of lack of wider private funding support. Misled by sycophants around him, Marcos, said the source, is rather late in realizing that his country is not a preferred destination for foreign investment. In fact, in its neighborhood, the Philippines is the least preferred by foreign investors.
According to a World Bank report, in the last decade (2011-20), the Philippines attracted only US$64.33 billion in foreign investment – including Chinese money during the presidency of the China-partisan Rodrigo Duterte – while Malaysia, with its massive 1Malaysia Development Bhd meltdown, allegations of corruption and perennial racial tensions, received US$100.1 billion. Vietnam received US$124.08 billion and Indonesia $198.07 billion. The US$4.26 billion “investment deals” Saudi Arabian companies were reported to have concluded with Filipino business leaders traveling with Marcos in his recent visit to the Middle Eastern kingdom was largely for exporting Filipino labor to Saudi rather than starting new enterprises in the Philippines and creating jobs locally.
The weak investor interest is partly due to the image foreigners get of the Philippines. A first-time visitor to the country is shocked as he encounters gun-carrying security guards and sniffing dogs from the region’s most dreadful airport to his hotel and in shopping malls. The police recorded 105,568 crimes in the first 190 days of the Marcos presidency. Early this year, when a New Zealand tourist was gunned down in Makati the country’s prime business district, the New Zealand government alerted its citizens against visiting as “there are high rates of violent crime throughout the Philippines.” Marcos and the lawmakers need to gather the courage to deal with this situation as a priority for the country to attract investors and tourists, said the source.
Creating a tourist- and investor-friendly image for a country that has long been seen as wanting in law and order is, however, a long process that is not being helped by a trigger-happy police force gunning down alleged drug users in extra-judicial killings. So Marcos, says the source, has only a single option before him: Look for other sources of funding for MIF while he embarks on remaking the country’s public image. Here he could consider turning to the country’s richest. According to Forbes 2023 list of the wealthiest in the world, 17 Filipinos command between US$1 billion and US$14.4 billion each in net worth or a total of more than US$65 billion. They acquired this wealth by operating in this country.
It is time the president considered convincing them to help their homeland in need—not as charity, but as profitable investment in a public-private partnership. But the president has a thorny problem to consider. He carries the baggage of his own deeply corrupt ancestors. So there should be unequivocal provisions that while the fund is strictly for financing public sector projects, it will be managed by its private equity partners with no government role in its administration.
It is a tall order. It calls for the president and his subalterns to start thinking outside their box. The president, however, has a declared goal. Raising Gross National Income (GNI) per capita to the equivalent of US$4,256 by 2024, or at least by the end of his term. That is also the chance to redeem the Marcos name.
Viswa Nathan, formerly editor-in-chief of the Hongkong Standard, is a regular contributor to Asia Sentinel. He now lives in the Philippines.