Bad Bet Maharlika
Bad Bet Maharlika
By Marvyn N. Benaning
The stock market is a casino and the gambler who wagers his ass at the table is bound to lose, and lose not only his shirt but perhaps even his wretched life, and the fate of Maharlika Investment Fund (MIF) is no different: The bigwigs intervene in the market and the so-called “free market” is a market for losers.
Call it Bad Bet Maharlika (BBM) and the geniuses behind the MIF-BBM like Finance Secretary Ben Diokno, Sen. Mark Villar, Reps. Joey Salceda and Stella Quimbo, NEDA chief Arsenio Balisacan and their long parade of cheerleaders should start explaining why they are so sanguine about MIF’s prospects when many sovereign wealth funds (SWFs) are getting bludgeoned by a hostile global economy.
The recent suspension of the MIF’s “operations” due to questions about the implementing rules and regulations (IRR) of the fund shows that there are internal squabbles over its objectives, its processes and, significantly, over its management. Surely, Ferdinand R. Marcos Jr. would be most concerned about the operations of the fund, which was named after the fiction of a guerrilla unit headed by his father. Marcos Jr., would be the appointing power behind the officers of the fund, which is actually public money and not derived from any government revenue since the administration continues to float bonds on short-term and long-term tenors to finance the payment of debt to the tune of P100 billion monthly.
This is the only SWF on the planet that is financed by debt by a country that has been chronically in deficit since the regime of Marcos Sr. (1965-1986) and never had the luxury of having huge surpluses since the decontrol policy was implemented during the Macapagal Sr. administration. Not even the daughter Gloria managed to turn the economy around, and both father and daughter were economists. As they say, if you want the economy to succeed, don’t elect an economist to wield power.
Moreover, what happened to 1MDB in Malaysia and to Temasek Holdings in Singapore should cautionary tales. The 1MDB became the kitty of Razak family, with the wealth fund being used to finance Hollywood movies, acquire yachts, purchase Jane Birkin and other luxury items that palm oil plantation workers xcan only dream of.
In the case of Temasek Holdings of Singapore, which had $230 billion in investible funds, Ho Ching, wife of current Prime Minister Lee Hsien-loong, took over the company in 2004 and made investments in Bear Stearns and other enterprises that collapsed in the subprime disaster of 2008. Rather than own the blame for the contrarian investments, Ho Ching insisted that Singapore had an ocean of cash and can afford to swim in red ink, whether it was in 2008 or in 2023. She “retired” in 2021 after losing hundreds of millions of dollars.
Even the world’s biggest SWF, Government Pension Fund Global of Norway, returned a loss of 374 billion Norwegian kroner ($34 billion) in the third quarter, Trond Grande, deputy chief executive of Norges Bank Investment Management, said. Norway’s $1.4-trillion SWF, the world’s largest, on Oct. 24, 2023, reported losses of 2.1% in the third quarter, as all asset classes fell in value, Sam Meredith reported for CNBC. Norway’s SWF was established in the 1990s to invest the surplus revenues of the country’s oil and gas sector. To date, the fund has put money in more than 9,200 companies in 70 countries around the world.
The fund lost in its bet on real estate and renewable energy infrastructure. Equities made up 70.6% of the fund’s investments. In contrast, Temasek said in its 2020 report that assets in China accounted for 29% of its portfolio, followed by Singapore at 24% and North America at 17%. Other SWFs are faring no better, with Saudi Arabia, Qatar and others reeling from unprofitable investments in tech companies, purported US blue chips and Asian companies. As it is, MIF is a contrarian concept given the realities of the investment markets worldwide. And it is bruited about as the biggest source of money for 197 local infrastructure projects whose gestation periods are long and whose profitability would come decades hence. Was MIF really conceived to be a losing proposition? Or some wise guy thought of it as the ark for less-than-clean money?
The author worked for Malaya, Manila Bulletin, Business Mirror, was managing editor at BusinessPage, contributed to Philippine Daily Inquirer, did a column for Manila Chronicle under Noel Cabrera and contributed to news carried by two TV networks. Started journalism career at the pre-martial law Manila Times.