Secretary of Finance
February 24, 2023
Dr. Bernie Villegas; Chairperson of Asia CEO Events Richard Mills; President of Asia CEO Events Rebecca Bustamante; our Congressman from the 5th District of Manila Irwin Tieng; ladies and gentlemen: good morning.
The Maharlika Investment Fund, which shall be the country’s first-ever sovereign investment fund, is designed to promote economic development by making strategic and profitable investments in key sectors.
It is intended to support the goals we have set in the Medium-Term Fiscal Framework, the 8-point Socioeconomic Agenda, and the Philippine Development Plan 2023-2028.
The Fund aims to optimize the use of government financial assets and promote their intergenerational management. This will be an important instrument to generate consistent and stable investment returns to advance the Philippines’ long-term development goals.
We support the establishment of the Fund for the following reasons.
First, sovereign investment funds are tried and tested investment vehicles used by governments in both developed and developing countries to achieve economic goals. The Indonesia Investment Authority or INA, for example, is a good model for the Philippines as it was used to invest in big-ticket infrastructure projects.
In the near term and medium term, our sovereign investment fund will widen our fiscal space and ease pressures in financing public infrastructure projects.
Currently, the government uses several financing mechanisms to support the country’s public infrastructure needs. These include the national budget, public-private partnership arrangements, and official development assistance.
The Fund is an additional vehicle that would allow the government to tap surpluses that cannot be utilized under current legal frameworks. It will also be open to co-financing with foreign investors and multilateral institutions to facilitate financing of capital-intensive big-ticket infrastructure.
Second, sovereign investment funds generate intergenerational benefits. This means that royalties from extracted natural resources such as in mining can be accessed by future generations.
Third, the fund will increase investments for big-ticket infrastructure, green and blue projects, countryside development, and other employment-generating projects. Key examples include public road networks, tollways, green energy, water, agro-industrial ventures, and telecommunications. These critical areas offer better rates of return and greater socioeconomic impact on the economy.
To ensure that these gains will be realized, the Fund will be established with the highest standards of accountability, fiscal responsibility, and good governance.
The proposed Fund will adhere to the Santiago Principles, which pertain to the generally accepted principles and practices to ensure the effective operations of sovereign wealth funds globally, and will be governed by the relevant investment and risk management guidelines.
Under the current version of the bill pending in Congress, the Maharlika Investment Corporation will be governed by a Board of Directors with 15 members. It will be chaired by the Secretary of Finance, and members include the CEO of the Maharlika Investment Corporation; the President and CEO of the Land Bank of the Philippines and the Development Bank of the Philippines; 6 regular members representing the contributors to the fund, with the seats distributed in proportion to their corresponding investments; and 5 independent directors from the private sector, the academe, business sector, and investment sector.
The economic team will work closely with the Fund’s administrators as its Advisory Body to help ensure that they comply with proper financial reporting and auditing standards. This is also to align investment decisions with fiscal and monetary policies.
The Advisory Body shall be composed of the Secretary of the Department of Budget and Management, the Secretary of the National Economic and Development Authority, and the National Treasurer.
Now, in order to ensure accountability and proper governance of the Fund, several layers of oversight measures will be put in place. The Speaker talked about this.
The first layer is that the Board is required to appoint an Internal Auditor who shall provide written interim financial and management reports as requested by the Advisory Body.
Second, there will be an internationally recognized auditing firm that will serve as External Auditor of the Fund to audit its financial statements.
Third, as with other agencies, the books and accounts of the Fund shall be subject to the strict examination of the Commission on Audit.
Fourth, a Joint Congressional Oversight Committee will be constituted to oversee, monitor, and evaluate the implementation of the Fund.
Now, to ensure transparency, all documents of the Fund and the Maharlika Investment Corporation shall be open, available, and accessible to the public.
Finally, there is a specific provision to prevent unnecessary withdrawals from the Fund. Withdrawals can be made only after at least five years of investment activities, subject to guidelines set by the Board of Directors and concurred by the Advisory Body.
In closing, I would like to highlight that creating the Fund now will entail higher returns both in the short-term and long-term that will redound to inclusive and sustainable growth.
As Congress deliberates the Maharlika Investment Fund bill, the economic team is committed to guiding our legislators to ensure that this Fund will be used for programs and projects that promote economic growth, create jobs, and increase incomes for our people – now and in the future. Thank you very much.