The country's first sovereign wealth fund needs to be properly mapped out in order to avoid succumbing to unmanageable fiscal risks moving forward in its implementation, according to a US-based think tank.

In a report, GlobalSource Partners said the recently enacted Maharlika Investment Fund (MIF) law needs detailed mapping out to ensure that it would not be a source of unmanageable fiscal risks.

This is needed especially as the MIF is being positioned to be a vehicle for bringing in private investments in strategic sectors, GlobalSource said.

According to GlobalSource, the first order of business is to determine the composition of the Maharlika Investment Corp. (MIC), which will be the investment body responsible for the overall governance and management of the MIF.

'Finding credible, highly regarded fund manager CEO and board directors will not be easy given the ambitious return and development objectives that its sponsors have publicized,' GlobalSource said.

'They also need to find an institution builder that will define the rules, risk management principles, investment guidelines and other governance guardrails of this new agency,' it said.

The think tank emphasized that it is better if this is done separate from the investment mindset, so such 'guardrails are shorn of agendas and biases.'

The MIC is tasked to identify financially and commercially viable infrastructure projects to invest in, and will formulate investment strategies covering emerging megatrends such as the environment, social and governance, digitalization and healthcare.

Based on the law, the MIC will be governed by a board of directors, with nine members chaired by the secretary of finance.

Other members include the CEO of the MIC, the heads of the Land Bank of the Philippines and the Development Bank of the Philippines, as well as two regular and three independent directors from the private sector.

In a television interview yesterday, Finance Secretary Benjamin Diokno maintained that the MIF would create additional funding for some of the government's infrastructure projects.

'We can accelerate the implementation of these projects, which we need very badly,' Diokno said. 'The key to the success is to choose the men and women who will run it and the President recognizes that.'

As the Marcos administration enters its second year in office, GlobalSource warned that the government continues to face strong external headwinds, with economic growth in key trade partners such as the US and China slowing down further until 2024.

It also warned of the persistence of inflation in advanced economies, which could lead to more interest rate hikes, as well as geopolitical tensions that raise uncertainties across many aspects.

Further, the think tank argued that the administration has yet to line up adequate revenue generating tax reforms to be able to stick to its medium-term fiscal consolidation program.

'Current global economic conditions may not be on the administration's side, but a lot of work is still pending to increase the odds of translating all the marketing efforts into actual investments,' GlobalSource said.

 

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