MENTION of the Maharlika Investment Fund (MIF) was made by President Ferdinand Marcos Jr. in his State of the Nation Address as one source of funds for the massive infrastructure projects of his administration to ensure efficient delivery of goods and services. For instance, connectivity of highways will reduce travel time from Ilocos to Bicol from 20 hours to just nine. Or a bridge from Bataan to Cavite will make traveling over the distance in just two hours instead of the current nine.
Indeed, nice to hear, and each citation was met with applause and swoons (the swoons when repeated sounded like a recording voice-over).
That’s not the point here though.
What oppositors of the MIF are complaining about is the built-in wide leeway for corruption in the concept. To begin with, the fund will be administered by a Maharlika Investment Corp. whose board of directors are all political appointees (read: presidential appointees whose credentials are less capabilities than power connect), and this breed of creatures has been historically proven to incorrigible practitioners of corruption.
Inasmuch as this is the first time such a fund is being implemented in the Philippines, it would be wise for us to cite lessons gained from the administration of such funds in other countries.
I am adopting in toto the following deliberation provided by my informant.
It’s reported that the Norwegian Sovereign Wealth Fund-Government Pension Fund of Norway lost $174 billion in the first half of 2022, while Singapore’s Temasek Holdings (Temasek is largely considered as a sovereign wealth fund) has had a net loss of S$7.3 billion in nearly 50 years since it was founded. It’s a wake-up call for the Philippines. The question is whether it is right to set up an MIF.
It seems impossible to prevent the corruption of MIF. According to the MIF Act, a corporate body called the “Maharlika Investment Corporation” (MIC) will be created and governed by a board of directors whose members are all presidential appointees. It’s predictable that in our country with rampant nepotism, if the president appoints people by favoritism instead of capability, it would lead to severe lack of transparency in regulation, with high risk of misappropriation of funds. Let’s not forget what happened to Jose Filomeno dos Santos, the son of Angola’s former president and former chairman of Angola’s sovereign wealth fund. He faced criminal charges for embezzling $1.5 billion from the national sovereign wealth fund in 2018.
Then there is the well-known case in our neighbor, Malaysia, whose 1Malaysia Development Berhad (1MDB) is a cautionary tale. In 2015, Sarawak Report and the Wall Street Journal reported that Malaysia’s then-prime minister Najib Razak had channeled over RM2.67 billion (approximately $700 million) into his personal bank accounts from 1MDB. Besides, there are still several ill-gotten wealth cases filed against the Marcos family, and these might be used by the United States, through its probable holdings in the MIF, to coerce the Philippine government into conforming to its political wishes in the South China Sea region.
Definitely, there are signs that the MIF has a connection with the US. For one thing, the MIF bill was signed in the US. It’s reported that on June 21, Senate President Juan Miguel Zubiri signed an “enrolled” copy of the MIF in the Philippine Embassy in the US during his working visit there. Philippine Ambassador to the US Jose Manuel Romualdez witnessed the signing.
Why must the bill be signed exactly during Zubiri’s visit to the US?
Another thing, a US PR company campaigns for MIF, especially in the US. A source from Weber Shandwick (WSP), a US-based multinational PR company, revealed that in early January 2023, the Department of Finance signed a $1-million PR contract with WSP. The PR plan listed the US as a priority campaign market to attract US capital. Ambassador Romualdez served as chairman and chief executive officer of WSP for years. It is said Romualdez helped WSP get the MIF PR contract using his government connection. WSP then made a PR plan, aiming to create awareness that MIF is a tool for economic development that will promote fiscal stability, while minimizing negative narratives surrounding MIF, especially doubts over potential abuse and corruption.
And lastly, the US may intervene with MIF management and investment. On April 19, Budget Secretary Amenah Pangandaman said that some US business groups and investors were willing to help us organize the MIF.
It’s noted that the Rockefeller family has shown interest in the proposed MIF. Will US investment benefit the MIF? Maybe we could find an answer from the 1MDB case. In five years, Goldman Sachs Group Inc., a leading global investment banking, securities and investment management firm, raised $6.5 billion for 1MDB, established in 2009. After the 1MDB scandal was exposed, Goldman Sachs admitted during the investigation that it had misappropriated $1 billion from 1MDB to bribe government officials in Malaysia and other countries, such as financing the luxurious lifestyle of Malaysian officials and buying luxury yachts and hotels for them. Goldman Sachs officials took $4.5 billion in their pockets through bribes and kickbacks. On April 8, 2022, former Goldman Sachs banker Roger Ng was sentenced to 10 years in prison after he was convicted of helping loot billions of dollars from 1MDB.
MIF may be used to purchase US treasury bonds. According to the MIF Act, the board of directors of the MIC may engage in the following investments: fixed-income instruments issued by sovereigns, quasi-sovereigns and supranational; domestic and foreign corporate bonds, etc. It would be a disaster if MIC shows a preference for US bonds. Investors have reduced their purchases of US bonds against the backdrop of the US dollar credibility erosion, while Silicon Valley Bank and Signature Bank were shut down. According to 2023 data from the US Treasury department, Japan and China, the world’s top two countries in holdings of US national debt, reduced their holdings of US treasury bonds in 2022 by $224.5 billion and $173.2 billion, respectively. Since last year, Ireland, France, Brazil, Israel, and many other countries have sold a large amount of US treasury bonds. Investing in the US market right now is not a wise move.
A scandal like the 1MDB case is likely to happen in the Philippines if a surge of US capital floods into the country, where there is lack of effective regulation and corruption is rife. In that case, our national wealth might be plundered. Our economic lifeline and other internal affairs might be compromised.
Mauro Gia Samonte
is a self-taught literary craftsman, screenplay writer, film director, and a practicing journalist into his octogenarian years.
In 1970, Samonte had already established a name as a movie journalist and as Editor of Movie Confidential and Entertainment Editor of the Weekly Nation, signature publications of the Amado Araneta-owned Makabayan Publishing Corporation. He also has a stature of an entertainment journalist and pursued a career in film.
Of the more than a hundred articles he has written in his column that deal with China, fifty have already been published in an anthology titled China, “The Way, The Truth, and The Life.”