The Maharlika Investment Fund (MIF) as a sovereign wealth fund will serve as a kitty that will be invested in a variety of earning assets such as equities, bonds, stocks and other fixed-income securities.
It should register returns from these investments to make it viable and sustainable over a long period.
Oil-rich Norway put up such a fund in 1990—Government Pension Fund Global—and became the largest in the world with assets of over $1 trillion as of August 2020.
It invests in equities, fixed-income instruments and real estate.
It is a successful fund with a return of 19.9 percent a year, led by equity investments with earnings of 26 percent.
The MIF will be structured in such a way to earn returns and dividends for investors who contributed to the kitty.
The government through competent managers will run the sovereign fund and make sure it is always liquid to finance its investment objectives, including big-ticket infrastructure projects.
Infrastructure projects will earn profits for the MIF, just like the toll roads that are now registering revenues for private sector companies.
The MIF can roll over the return on investments to fund its next projects or investments.
But beyond the return on investments, the sovereign wealth fund will ease the fiscal burden of the national government by way of reduced budget deficit and lower borrowings.
With funds used as equity—instead of loans—in building infrastructure projects, the national government reduces its heavy reliance on local borrowings and foreign loans.
This alternative source of funding gives the national government a larger budgetary allowance to fund other priority expenditures, such as social housing, health care, education and poverty-alleviation programs.
The thrust on infrastructure, meanwhile, will lead to a lot of high quality jobs and lure more foreign investors as the economy expands.
We all know that infrastructure projects, such as roads, bridges, airports and seaports, create economic opportunities, especially in the countryside.
The MIF, if run well, will contribute to greater economic expansion and provide a solution to the country’s rising debt burden.
Sovereign wealth funds, thus, should be viewed as a catalyst for growth and economic prosperity.