Metro Manila (CNN Philippines, July 22) — Multilateral lenders, including the International Finance Corporation (IFC) of the World Bank and the Asian Development Bank, have held initial “talks” with the Philippine government over the setup of its first sovereign wealth fund, but “no commitments” have yet been made, according to the Department of Finance (DOF).
Finance Secretary Ben Diokno on Friday said the Maharlika Investment Fund (MIF) will be \”up and running before the end of 2023,\” and the DOF has set a clear timetable to get there – from finetuning the implementing rules to guaranteeing the ₱125-billion seed capital, to drafting the officers and board members that will oversee the Maharlika Investment Corporation (MIC).
The Bureau of the Treasury (BTr) has set an end-August target to polish the implementing rules and regulations (IRR) for the law that created the MIF.
Diokno, however, said the BTr \”is confident\” it can deliver as early as the \”second week of August.\”
₱100-B seed capital by end-year
The board of the Land Bank of the Philippines, one of the two state-run banks that are founding members of the Maharlika fund, has approved its ₱50-billion contribution, Diokno said.
The other founding government financial institution, the Development Bank of the Philippines – which under the Maharlika Investment Fund law has to contribute ₱25 billion in capital – is expected to follow suit.
\”There’s no mechanism in the law on how they will remit the money to the corporation and the corporation still has to be organized so we will wait for the IRR. Maybe they can give it to the Treasury in escrow. When the corporation is organized, that’s when the Treasury will transfer to the corporation,\” Diokno told a few journalists attending in a late Friday briefing.
Together, the two state-owned banks will beef up the fund with ₱75 billion in initial seed money, but Diokno said he can easily raise that to ₱100 billion given that the Bangko Sentral ng Pilipinas (BSP) has remitted ₱31.86 billion in dividends in favor of the national government.
\”Hindi maliwanag if ₱31 billion kasama na doon [It isn’t clear if the ₱31 billion is included there] but if the government, if the Treasury is willing to give it to us, we will accept”, Diokno said, noting that the central bank can use it to boost its own balance sheet or the national government can opt to remit it to the MIF.
The law stipulates that in the first two years from the time it takes effect, 100% of the BSP’s dividends \”remitted to the National Government shall be earmarked for the capitalization of the MIC,\” read the DOF’s briefing paper distributed to reporters.
\”It is safe to say that the fund is well-capitalized at the very start and we can start before end-year if there are investible projects where we can apply those money, the ₱100 billion,\” Diokno said.
Non-voting shares
The seed capital contributed by the founders allows them to subscribe to shares in the MIC – the corporation managing the fund – which has an authorized capital stock of ₱500 billion.
Up to 75% of that authorized capital stock – or ₱375 billion – are common or voting shares that can be sold only to the national government, and government-run corporations or financial institutions that already counted the DBP and the Landbank.
The rest of the shares – 25% or valued at ₱125 billion – are preferred or non-voting shares available for subscription of the private corporations and financial institutions.
‘Advice’ from multilateral institutions
Those preferred shares open up the opportunity for private companies and foreign lenders.
Asked if multilateral institutions like the World Bank, through its investment arm IFC, and the ADB signified interest in subscribing to shares in the MIC, National Treasurer Rosalia de Leon said: \”What we’d like to do is to have a conversation with them kasi they’d like to see muna [because they’d like to see first] the investment policy and also the IRR. Laging tanong [They always ask], who would be running it, so they want also updates, sino ang magiging [who will be the] CEO?”
Diokno added: “It really depends on the quality of the management.”
\”There’s a lot of interest but no commitments… kasi [because] as we go along we talked with them. In fact, we looked for advice from them on how to organize this,\” he said.
CNN Philippines cannot separately ascertain yet whether the World Bank, the IFC, the ADB and the IMF have received a formal request from the Philippine government for advice on the setup of the Maharlika fund, or whether the advice was just verbal.
De Leon, however, clarified: \”The investment can be in the corporation but can be also in the fund level. Kasi [Because] they need not invest in the corporation to be able to participate in the Maharlika. Sa fund pwede sila mag-invest as well [They can also invest in the fund], not just subscribe to the shares in the corporation.\”
Pressed further if multilateral institutions would invest in the MIF, Diokno said: “It’s favorable if they invest so that will give the impression that this is a very stable fund. Kasi kung mga multinational corporation ang nag-iinvest [Because if multinational corporations invest] – IFC, ADB, JBIC – if they invest in this then that would give the impression that this is very sound investment and stable.”
