Maharlika fund

[In This Economy] Unpacking the first press conference of Maharlika’s president-CEO

JC Punongbayan

This is AI generated summarization, which may have errors. For context, always refer to the full article.

[In This Economy] Unpacking the first press conference of Maharlika’s president-CEO
The elaborate 'vision' he laid down is not only premature but also serves to preempt the Board of Directors of Maharlika Investment Corporation, which still hasn’t been formed

There’s a lot to unpack in the first-ever press conference of Rafael “Joel” Consing Jr., the first president and CEO (PCEO) of the Maharlika Investment Corporation. 

First, we have a clearer idea of the timeline of Consing’s appointment. 

He submitted his application before the September 27 deadline, and he made it to the short list – even if the original implementing rules and regulations (IRR) specifically mentioned that the PCEO “must have…an advanced degree (MBA, MA, MSc, PhD) in Finance, Economics, Business Administration, or a related field from a reputable university.” Consing doesn’t have an advanced degree.

Soon after, on October 18, President Ferdinand Marcos Jr. abruptly suspended the implementation of Maharlika’s IRR, ostensibly to improve it. 

Consing admitted to the press that he joined the technical working group (TWG) that had a hand in revising the IRR. In his words, “The closest that I have been in this would be…had a chance to review the IRR [as] soon as it was suspended. We had an opportunity to join the TWG and we gave our comments.”

Later on, rather magically, the new IRR published on November 11 no longer requires an advanced degree from the PCEO. Then on November 13, Consing got hired. 

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Consing’s involvement in the tweaking of Maharlika’s IRR is highly irregular and reeks of potential conflict of interest. How many people applying for a job get a chance to help modify the hiring rules, and then get hired soon after some rules were relaxed in their favor? Sana all.

When asked later by reporters why he applied to be PCEO, Consing said, “I feel I’m the right person for this.” He added that in his application letter, the last paragraph was entitled, “Three decades of preparation.” 

But based on the original IRR, he wasn’t supposed to be qualified for the post. It was only after the rules were bent in his favor – by a group that included himself – that he became qualified.

How can we attract investors in Maharlika if its rules are so pliant, and if there’s already a clear sign of political accommodation?

Board must appoint CEO

Consing denied that his appointment was a form of political accommodation. He added that the suggestion to relax the qualifications for key officials came from lawyers in the TWG, who said that the original IRR’s provisions went against the spirit of the original law (and in fact had the effect of “amending” the law).

Sure, the law was silent about degree qualifications for the PCEO. But it’s not at all unusual for laws establishing strategic investment funds (SIFs) to require advanced degrees for its key officials. 

In the case of the Nigeria Sovereign Investment Authority (NSIA), a World Bank study noted that, “With the exception of the board member who is a legal practitioner, the NSIA Act 2011 establishes that all members must hold a university degree in economics, finance, or similar subject and possess at least 10 years of financial or business experience at senior management level.” 

The other bigger problem is that the spirit of the Maharlika law itself paves the way for politicization. 

To begin with, ideally, it’s not the President who should be appointing the PCEO. This should be done by the Board of Directors itself. This is the common practice with other SIFs, to ensure that such funds –  especially involving public monies – are not politicized.

According to the same World Bank study, “If the public sponsor [in our case, the Philippine government] retains the authority to hire and fire the CEO, it takes away one of the board’s most important powers and dilutes its responsibilities. It also limits the accountability of the CEO to the board, and risks making the CEO beholden to the ownership entity or ministry… The public sponsor should instead establish the qualifications, criteria, and guidelines for nominating, selecting, and appointing the CEO.”

As I discussed before, the revised IRR even strengthened the President’s power to hire key officials. Now he can accept or reject the short list, something that was not spelled out in the original IRR.

Maharlika, I’m afraid, was doomed to be politicized from the start, because of the flawed law passed by Congress and signed by Marcos. 

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Premature presser?

In the press conference, Consing took questions from the media about where Maharlika is headed, what types of investments it will probably go into, and what projects it will support. 

For instance, he talked a lot about the possible creation of Maharlika “subfunds” that can be used to take over government assets (like those in energy), rehabilitate and “optimize” them, and maybe “monetize” or sell them off later. 

For example, he said there could be an “energy subfund” that can be used to take in the CBK (Caliraya-Botocan-Kalayaan) hydroelectric power plants in Laguna.

Consing used the term “monetize” a lot, but essentially he’s describing privatization. Note that Maharlika is supposed to get money from the privatization of government assets. But what Consing is saying is that such privatization could instead happen through Maharlika: once the assets have more value, they will be sold off, and the proceeds will go to Maharlika only by then.

Apart from taking over government assets and privatizing them, Consing added that Maharlika can get involved in some of the 38 public-private partnerships (PPPs) identified by the government. He said some of these can be taken under the wings of (and bid out by) Maharlika rather than through the bureaucracy. 

Here he mentioned the rehabilitation of the old Agus-Pulangi Hydropower Plant Complex in Mindanao, now part of the PPP list.

Note that Consing speaks a lot about energy, having been formerly affiliated with the Aboitiz group, which is now a large player in energy.

What do we make sense of these statements?

Rehabilitating government assets using Maharlika is meant to raise more money. But as a colleague pointed out, privatization proceeds ought to help mitigate the government’s ballooning deficit. By taking away such money, won’t Maharlika contribute to the government’s deficit and debt – thus contradicting Consing’s earlier statement that Maharlika aims to make investments “without the need for further [public] debt”?

Meanwhile, taking in PPP projects could prove problematic for many reasons. Maharlika could undermine the government’s power to manage and oversee key infrastructure projects, and therefore affect the government’s budget process. The projects might also be funneled to certain business interests if the Board is not independent enough. 

Consing also talked about agricultural investments. He said that government lands could be put under Maharlika, developing them with infrastructure, “converting them into megazones,” and “inviting locators in” – just like what’s done in economic zones or ecozones. Another idea down the road is to consolidate farmlands, lease them from farmers, and attract agricultural investors to come in and develop such lands.

Oh my, if this pushes through, real estate developers – some owned by political clans – will be swarming over this like flies on a piece of meat.

Consing also said that Maharlika is not inclined to invest in the stock market, preferring real investments instead (this is quite reassuring, actually). He also said he’s not keen to pursue investments in, say, nuclear energy.

But if you think of it, the elaborate “vision” he laid down is not only premature but also serves to preempt the Board of Directors of Maharlika Investment Corporation, which still hasn’t been formed to date, and should be the one crafting policies that will steer the direction of the fund.

He admitted that, “I dunno whether…the Board is actually going to be clearing this.” But a sentence earlier, he said, “The President has never heard this. He’s probably gonna be reading this from me for the first time. I never presented this plan to him…” He said again later in the press conference, “Again, I have not cleared this with the president…this does not have the benefit of a conversation with the president.”

Why even say that? Why does he have to present or clear anything to the president? This puts into question how independent Maharlika will be.

Without a board yet, key questions remain unresolved. What does Maharlika really want to do? Become a catalyst for privatization and PPPs (which will inevitably benefit certain business interests)? Or pursue projects that will spur socioeconomic development?

Consing said that he will embark on a “roadshow” to promote Maharlika and try to raise more funds. But again, this is something that should go through the Board.

Where’s the money?

If Maharlika still has confused goals, it may be stemming from the fact that it doesn’t have enough money yet to pursue its lofty socioeconomic goals. 

The P125-billion seed capital, large as that may sound, is actually not enough to make significant investments, whether in financial instruments or development projects. For comparison, the infrastructure budget for 2024 alone is going to be around P1.418 trillion, or more than 11 times the seed capital of Maharlika.

That’s why Consing kept mentioning efforts toward “monetizing” certain government assets first. He said, “Everything that I’ve talked about earlier [is] meant to be generating enough returns in order for us to pay out dividends to our shareholders.” 

The problem with that sentence is that the Land Bank of the Philippines and the Development Bank of the Philippines are not “shareholders” of Maharlika per se. Maharlika robbed these banks of capital, and according to the law, there’s no mechanism for LBP and DBP to get back their money in any way, even if Maharlika earns money later. As investment banker Stephen CuUnjieng said, Maharlika has a “trap of no exits” for everyone pouring money into it. 

Another source of the seed fund is the Bangko Sentral ng Pilipinas (BSP), which is mandated by the Maharlika law to contribute all its dividends to the fund in Maharlika’s first two years.

But from January to August 2023, the BSP’s earnings dropped by a whopping 71%. That might diminish the ability of the BSP to contribute to Maharlika. 

According to BSP Governor Eli Remolona Jr., the BSP is expected to remit P62 billion to Maharlika this year and next. That’s not too large in the grand scheme of things. But it’s certainly too much for the BSP, which should in fact be using that money to reach its own capital goal of P200 billion. 

In short, Maharlika robbed the BSP of the opportunity to raise the central bank’s capital quickly.

Squeezing blood out of stone

Without sufficient money for investments, expecting returns from Maharlika is like squeezing blood out of stone.

When asked by media about expected returns, Consing replied, “If the question is, ‘Do you expect to generate revenues and income?’ The answer is absolutely, because you’ve excess funds which you will be placing in investments…”  

I still have an issue with the term “excess funds.” Remember that the seed capital of Maharlika came from the capital of state-owned banks and the national government which now has a huge and ballooning deficit. We have no “excess funds” to speak of.

At least, Consing acknowledged that Maharlika’s investments will take decades to bear fruit, say 20 to 25 years. “That takes a bit of time,” he said.

But if that’s the case, then why put precious public funds in Maharlika instead of immediate investments in, say, education and health? The opportunity costs of precious public funds are so high. Filipinos will benefit from that money more directly (and more quickly) if spent on more schools or better hospitals – rather in a fund with dubious returns that we might only reap decades from now.

In the meantime, we need to scrutinize Maharlika’s next steps and ensure that the fund won’t be used as a vehicle for politicians and the elite to enrich themselves at the expense of the rest of the Filipino people. –

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JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for He is also co-founder of and co-host of Usapang Econ Podcast.