The Marcos administration’s economic team has strengthened relations with other countries this year, participating in more global conferences and offering investment opportunities to boost Philippine infrastructure and human resources development, ease financial services, implement climate change mitigation projects, and grow government revenues to support its various projects.
After the Maharlika Investment Fund was signed into law by President Ferdinand Marcos Jr. in July 2023, the Maharlika Investment Corporation (MIC) announced in the same month this year the approved investment and risk management framework for the country’s first sovereign fund and its membership to the International Forum of Sovereign Wealth Funds.
This enabled the MIC to start crafting strategies for reinvesting initial capital of P75 billion contributed by the Land Bank of the Philippines and the Development Bank of the Philippines in various investment channels.
The law also requires the Bangko Sentral ng Pilipinas (BSP) to share its dividends into the sovereign wealth fund, along with the income from select properties of the Philippine Amusement and Gaming Corporation (Pagcor).
The MIC has an authorized capital stock of P500 billion, and allows contributions from local and foreign investors in the public and private sectors.
MIC president and chief executive officer Rafael onsing Jr. said proceeds from the Maharlika Investment Fund will be mainly directed to tourism infrastructure, agro-urbanism, renewable energy, and information and communications technology.
“We don’t expect Maharlika itself to run projects. Rather we expect these potential joint ventures to take over and we will stand behind them as a major stakeholder or a significant minority stakeholder or in whatever way the board decides to participate,” he said.
In May, MIC had signed a memorandum of understanding with the National Electrification Administration and the Palawan Electric Cooperative to conduct a feasibility study on building transmission lines in Palawan to help the province achieve 100 percent electrification by 2028.
Consing said the study results should help MIC determine how much investment will be needed to enhance the transmission lines.
“The objective is to look at these as templates which we can use in other islands,” he said.
“This is our strategy in the energy sector. A significant amount of capital is already interested in developing the generation side and there’s also an amount of capital for improving the distribution side,” Consing continued.
Reaching out to investors
The country’s approved foreign investments in the third quarter surged by 434.4 percent to P146.75 billion from P27.46 billion recorded in the same period a year ago, reflecting largest inflows from South Korea based on data from the Philippine Statistics Authority.
South Korea committed investments amounting to P53.72 billion, followed by Switzerland with P51.84 billion, and Japan with P15.96 billion.
The figures came after the government enacted the Retail Trade Liberalization Act which lowered the minimum paid-up capital of foreign firms from $2.5 million to $500,000.
The government also allowed full foreign ownership of businesses in key sectors, such as renewable energy, under the amended Foreign Investments Act of 1991.
On the sidelines of the Philippine Economic Briefing in Japan in June, the Department of Finance discussed investment opportunities for three more Japanese firms. These are MinebeaMitsumi Inc. which is an electronics manufacturer, Yokohama Rubber Co., Ltd. and Taiheiyo Cement Corporation.
Finance Secretary Ralph Recto expects more foreign investments into the country with the enactment of CREATE MORE or Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy in November.
“We envision CREATE MORE to give birth to more thriving economic corridors in every corner of the Philippine archipelago,” he said.
Under the CREATE MORE, registered business enterprises will pay lower corporate income taxes at 20 percent from 25 percent.
At the same time, the duration of tax incentives will be extended by 10 more years for a total maximum of 27 years. Projects that require huge labor will be given an additional 10 years.
Boosting capital
The Department of Finance (DoF) in May raised $2 billion from issuing dual-tranche global bonds consisting of 10-year and 25-year fixed rate bonds.
“Proceeds of this issuance will be directed towards the overall welfare of all Filipinos — more infrastructure projects, improved social services, a better healthcare system and quality education for them,” Recto said.
He added proceeds from the longer-tenor bonds would be used to support projects for inclusive and climate-responsible socioeconomic growth.
In August, DoF announced issuance of new triple-tranche US global bonds worth $2.5 billion and consisting of 5.5-year, 10.5-year and 25-year fixed rate global bonds.
DoF reported it secured foreign loans worth $5.67 billion or P333.42 billion for 12 projects this year to improve the country’s transportation, defense, digital technology, healthcare, agriculture and climate change response and adaptation.
Strong investors’ trust
DoF also shared that the Philippines this year ranked first in the Institute of International Finance’s 2024 Investor Relations and Debt Transparency Report.
Out of 50 countries, the Philippines scored the highest in debt transparency at 12.5 out of 13.
“Transparency is most important, especially regarding government debt. We release data regularly to clearly show the public where their taxes and our borrowings go. This transparency reflects the Marcos, Jr. administration’s commitment to managing the country’s finances prudently and sustainably to ensure a future of fiscal stability for Filipinos,” Recto said.
Tax evasion efforts
The Bureau of Internal Revenue (BIR) said it has collected taxes amounting to around P1 billion from vape products, following its order for tax stamps on the e-cigarettes.
Under BIR Memorandum Circular 59-2024, vape businesses must display the 4th Generation Internal Revenue Stamps on their products starting 1 June.
In September, the BIR seized 5,385 unregistered vape products worth P7 million at a festival.
“We continue to raise awareness about the tax stamps, relentlessly reminding businesses to acquire the tax stamps and display them on their products in order to set the right mindset,” BIR commissioner Romeo Lumagui Jr. said.
“Considering the huge market for vape products in the country, I think P1 billion is still small. If you look around, there are no more shops solely selling traditional cigarettes,” he added.
DoF reported the government’s total tax collection rose by 11.4 percent to P3.23 trillion from January to October compared to the same period a year ago.
DoF said it also conducted the final meeting in April about the draft on the double taxation agreement with Cambodia.
Double taxation happens when two countries impose different rates on personal and corporate incomes gained from the same source.
“Expanding our DTA network, particularly within ASEAN, allows Filipino businesses to diversify their markets with fewer tax burdens, boosting their competitiveness abroad,” DoF Undersecretary for Revenue Operations Group Charlito Martin Mendoza said.
Expanding financial inclusion
The Bangko Sentral ng Pilipinas (BSP) and several central banks in Southeast Asia in July said they already completed the blueprint for the third phase of Nexus, a single instant payments system that will allow cheaper fund transfers for overseas Filipino workers worldwide.
BSP coordinated with the Central Bank of Malaysia, Monetary Authority of Singapore, Bank of Thailand, and Bank for International Settlements (BIS) for this project.
The Reserve Bank of India and instant payment systems operators in each country also helped complete the blueprint.
“Even with just the first wave of connected countries, Nexus has the potential to connect a market of 1.7 billion people globally, allowing them to make instant payments to each other easily and cheaply,” BIS general manager Agustin Carstens said.
