Maharlika gets P 22.2-B fund for first-year investments

Maharlika Investment Corp., (MIC), the state-owned entity that manages the P125 billion Philippine sovereign wealth fund, has secured a P22.2 billion budget from the government for its investment commitments in 2024, its first year of operations. Budget Minister Amenah Pangandaman said this.

The amount was lower than the proposed operating budget (COB) of P36.6 billion that MIC submitted to the Department of Budget and Management (DBM) for fiscal year 2024, according to figures provided to the Inquirer by the DBM this week.

MIC President and CEO Rafael Consing Jr. previously told reporters that the budget it requested from the DBM “represented the number of (investment) commitments we can make this year.”

“So hopefully we’ll be able to do that by the fourth quarter. In any case, not necessarily deploying, but committing,” Consing said.

“Because the reality is that you can only really deploy once you have done all the due diligence and everything necessary. So maybe the deployment could happen in 2025, I think. But the commitments will all be made this year,” he added.

Difference explained

Explaining the P14 billion difference between the approved P22.2 billion and MIC’s proposed P36.6 spending plan, Pangandaman told the Inquirer that MIC initially requested only about 60 percent of the P36.1 billion for capital expenditures of the total planned amount . expenditure for 2024.

MIC’s “implementation readiness” explains the initial funding request, she said, referring to the company’s ability to invest the requested amount this year.

The difference was also due to a “miscalculation” of the budget for fees and per diems of P4.5 million, and an “overprovisioning” of P615,000 for travel expenses, Pangandaman said.

Major financiers

MIC belatedly requested approval of the remaining 40 percent capital expenditure, but by the time this happened, the proposed COB had already been approved by the DBM, along with the company’s proposed operating expenditure and investments.

“MIC may request approval of an additional COB until September 30, 2024,” the budget chief said.

Asked about the source of funds for MIC’s capital budget, Pangandaman said the money will partly come from operating income.

Consing previously said MIC was expected to post its first ever profit this year from interest income and dividends from its investments, or companies Maharlika would invest in later this year.

Pangandaman added that MIC’s investment funds would also come from the seed money of its main financiers: the state-run Land Bank of the Philippines (Landbank), Development Bank of the Philippines (DBP) and the national government.

Last September, Landbank and DBP remitted their combined contribution of P75 billion to the Bureau of Treasury, representing 60 percent of MIC’s initial capitalization of P125 billion. The rest of the money came from the national government, mainly from dividends from the Bangko Sentral ng Pilipinas, a state share of the country’s gaming regulator’s revenues, proceeds from privatizations, royalties and other sources.

Limited exposure

MIC has an authorized capital of P500 billion.

To ensure that the sovereign wealth fund’s resources would be distributed “accordingly”, Consing said MIC would limit its exposure to each sector in which it would invest by 15 percent.

If it were spread equally across the €22.2 billion approved by the DBM, MIC would invest around €3.3 billion per sector.

Consing previously said MIC will make its first investment in renewable energy by the end of the year, but he did not say whether it would be in wind, solar, geothermal or other renewable energy sources, citing confidentiality.

MIC could participate in public-private partnership (PPP) projects by co-financing projects that are experiencing delays for any reason, he said, without elaborating.

In addition to renewable energy, Consing previously identified agroforestry, ‘industrial urbanization’, mineral processing, tourism, transport and aviation as sectors for potential investments.

BCDA projects monitored

Last Monday, MIC signed a Memorandum of Understanding with the Bases Conversion and Development Authority (BCDA) to explore potential developments in five key projects with a total financing requirement of $4 billion. He also declined to specify the projects and provide details.

“As soon as they (BCDA) need it, we have to be prepared. We are done. We have already received our approval from the DBM,” said Consing.

Among the BCDA projects to be explored by MIC are the expansion of Clark International Airport, including the construction of a new runway, taxiways, aprons and landside access roads and utilities; affordable housing in New Clark City; Clark integrated public transportation system; Poro Point Seaport Modernization Program; Clark Central Business District; solid waste and waste-to-energy management in New Clark City.

Lots of criticism

The law establishing the Philippine Sovereign Investment Fund was signed into law by President Marcos in July last year amid opposition to its creation.

Critics said this was poorly timed given stubbornly high inflation and the lack of excess state resources typically needed for such a fund. Others said Landbank and DBP money could have been better used to support agricultural production and rural development, in line with these banks’ mandates.

The appointment of the members of the MIC board of directors was completed at the end of last year. They held their first meeting last January.