Maharlika Fund Rollout: Know the potential candidates who might assume leadership

As the nation’s controversial Maharlika Fund prepares for its complete rollout, speculation abounds regarding the individuals who might assume leadership positions within it.

Rumors are circulating regarding potential candidates for the role of President and CEO (PCEO) at the Maharlika Investment Fund, with two prominent figures from different backgrounds emerging as front-runners.

Insiders suggest that Robert G. Vergara, the former head of the Government Service and Insurance System, and Victor Valdepenas, the former President and COO of Union Bank of the Philippines, are leading contenders to lead the Maharlika Fund.

Robert G. Vergara, boasting a Harvard education, currently serves as an independent director on the boards of SM Investments, Metro Pacific Hospital Holdings, and STI Education Systems Holdings. He graduated Magna Cum Laude from Ateneo De Manila University with dual degrees in Management Engineering and Mathematics.

On the other hand, Victor Valdepenas, who led the Union Bank of the Philippines as its President for nearly two decades, now serves as an independent director at the Manila Jockey Club. He previously held the position of Chairman at Insular Life Assurance Corp and holds a Ph.D. in Philosophy and Economics from the University of the Philippines.

According to the established rules and regulations, an advisory body is tasked with seeking out “nominees and applicants” for the roles of PCEO and directors. However, it’s been suggested that some highly qualified individuals have been discouraged by the requirement to formally apply for these positions.

This Advisory Body comprises the Budget Secretary, Socioeconomic Planning Secretary, and National Treasurer, and they have a 30-day window, starting from the signing of the IRR on July 18, to present their nominees for the positions of PCEO and directors to the President.

PCEO Criteria

Applicants for the PCEO role must meet specific criteria:

Possess an advanced degree (MBA, MA, MSc, PhD) in Finance, Economics, Business Administration, or a related field from a reputable university, with a preference for professional certifications such as CFA or CPA.

Demonstrate exceptional experience and expertise in corporate management, financial planning, strategic planning, market and business development, and budget development.

Accumulate a minimum of 10 years of experience in finance or investment, with at least a decade in a senior leadership role within a reputable financial institution or public/private sector organization.

Display a profound understanding of the industry, encompassing risk management, compliance, and regulatory requirements.

Exhibit strategic proficiency in cash flow and capital planning management.

The PCEO’s responsibilities encompass overseeing the fund’s operations and administration, including but not limited to risk management, financial performance, human resources, accounting, and legal affairs.

The PCEO will serve a fixed term of three years and may be eligible for reappointment.

The implementing rules and regulations (IRR) for the Maharlika Investment Fund (MIF) Act were released at the end of August, marking a significant step in the country’s efforts to establish its own sovereign wealth fund.

Finance Secretary Benjamin Diokno confirmed on Tuesday, August 29, that the IRR for the country’s sovereign wealth fund had been published in the Official Gazette. This will become effective on September 12. Malacañang released the IRR on Wednesday, August 30.

MIC Capital

The Maharlika Investment Corporation (MIC), upon its establishment, will have an authorized capital stock of P500 billion. The initial P50 billion will come from various government sources, including a 100% dividend contribution from the Bangko Sentral ng Pilipinas (BSP) for two years, a 10% contribution of revenues from government-owned gaming operators, privatization of government assets, and more.

Government financial institutions and government-owned and controlled corporations may also invest in the fund, but social security and public health insurance providers are strictly prohibited from doing so.

Effective Sept 12, 2023

The controversial Maharlika Fund’s IRR will take effect on September 12, 2023, less than a year since the measure was first introduced in Congress. The MIC can also raise additional funds by issuing bonds, debentures, and securities, but these will not be guaranteed by the government.

The MIC’s board of directors will be led by the Finance Secretary as the ex officio chairperson, with the President and Chief Executive Officer of the MIC serving as the vice chairperson. Other board members include the President and CEO of both Land Bank of the Philippines and Development Bank of the Philippines (DBP), two regular directors, and three independent directors from the private sector.

The fund aims to be a significant financing mechanism to expand fiscal capacity, reduce reliance on local funds, and decrease the need for official development assistance to fund major infrastructure projects. These projects include public road networks, tollways, railways, green energy, water resources, agro-industrial ventures, and telecommunications, as stated by Diokno.

The MIF has faced scrutiny for potential economic drawbacks. Some economists are concerned that by creating the MIF, funding for certain projects may bypass the usual budget process, potentially reducing Congress’s ability to oversee them. Additionally, redirecting funds from Landbank, DBP, and the BSP could require the government to take on more debt from other sources.

(AI/MNM Research Team)