First word
IN their furious rush to battle, neither the authors nor the opponents of the Maharlika Investment Fund (MIF) bill took notice that the Philippine government had already experienced the trials of creating and managing a sovereign wealth fund (SWF).
Critics of the bill declared outright that the country cannot create its own wealth fund because it has no surplus assets or resources to place in the fund.
Similarly, the authors of the bill totally missed the fact that the republic has already one sovereign wealth fund tucked under its belt, including even its misuse.
Skeptical readers can quickly check this out, but in Wikipedia's article on the subject of sovereign wealth funds, it lists the Philippines as the owner and origin of one of the world's largest sovereign wealth funds. It is listed in the company of oil giants and developed economies.
Specifically, Wiki lists the Malampaya Fund as a notable SWF and oil and gas asset, with an estimated total value of $4.2 billion.
Malampaya Fund
Further research online yielded the following information on Malampaya and the curious saga of the Malampaya gas field.
The Malampaya gas field or the Malampaya-Camago field is a deep water gas-condensate reservoir located in the Service Contract 38 license area, offshore, 65 kilometers (km) northwest of the island of Palawan.
The field was discovered during the drilling of the Camago-1 well in 1989, and following successful appraisal of the Malampaya field in the 1990s, gas first flowed in September 2001. Commercial production started in January 2002. The field was developed and is currently operated by Shell Philippines Exploration B.V. (SPEX), under Royal Dutch Shell; with joint venture partners Chevron Malampaya LLC and Philippine National Oil Co. Exploration Corp. On Nov.13, 2019, the Dennis Uy-led Udenna Corp. acquired Chevron Philippines Ltd.'s 45-percent stake. The Senate raised "red flags" about the company's expertise and financial capability to operate the gas field.
The Malampaya Phase 1 development included five production wells, tied back via flowlines to the Shallow Water Platform. Gas is exported through a 504-km subsea gas export pipeline that delivers to the onshore gas plant in Batangas City on Luzon island to the northeast, for final treatment and metering.
Shell successfully completed Malampaya Phase 2 in 2013, which added two new production wells. Malampaya Phase 3 saw the design, fabrication and installation of a new depletion compression platform to maintain levels of gas production, which began operating in October 2015. This was the first oil and gas platform to be designed and built in the Philippines, and its successful completion made the country a player in construction for the oil and gas industry.
The upstream component of the $4.5-billion Malampaya gas-to-power project was expected to provide substantial long-term revenue of between $8 billion and $10 billion to the Philippine government over its lifespan. As of 2018, the project had already surpassed $10 billion in government revenues. Malampaya's main benefits to the Philippines include reducing oil imports, assuring a more stable supply of energy and a cleaner source of power, and meeting up to about 40 percent of Luzon's energy requirements. The operation of Malampaya in the power stations' full capacity of 3,200 megawatts is displacing over 1.35 million kilograms of CO2 (carbon dioxide) per hour — a cleaner and more sustainable process as compared to energy generation using coal or fuel oil.
Fund scam
Malampaya was the name given to a government fund comprising profits from the Malampaya deep water gas-to-power project. It was in short a sovereign wealth fund. It was created to support energy resource development and exploration programs in the country, with the President of the Philippines given the prerogative to determine other uses for the profits.
The Rappler news website features in its archives an article on how the Malampaya Fund was misused. It reported:
"In 2002, the Malampaya Deep Water Gas-to-Power project started making some money. The profits remitted to the government were supposed to be used for energy resource development and exploration programs.
But under Presidential Decree 910 signed in 1976, the President of the Philippines is allowed to determine 'other purposes' which the earnings might be used for. These other purposes range from agricultural to rehabilitation projects.
By 2004, P600 million was released for priority development projects in Palawan. Through the years, profits going to Palawan would increase, especially after then-president Gloria Macapagal Arroyo signed in 2007 Executive Order 683, authorizing the use of profits from the Malampaya gas project to fund programs in Palawan, the location of the Camago-Malampaya Reservoir.
And then things started to go wrong.
The release of funds from Malampaya started to spike beginning in 2008. That year, the Department of Budget and Management (DBM) released P6.601 billion to the Department of Agriculture (DA), Department of Public Works and Highways (DPWH), and the provincial government of Palawan.
The year 2009 (prior to the 2010 presidential elections) saw the biggest release, almost P15 billion, going to DPWH, DA, National Housing Authority, Philippine Army and the Philippine National Police for rehabilitation, infrastructure and housing projects.
It was also in 2009 when the Arroyo administration released P900 million to help the survivors of Typhoons 'Ondoy' and 'Pepeng.'
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In 2009, President Arroyo authorized then-Budget secretary Rolando Andaya Jr. to release P900 million from the fund to aid victims of Tropical Storm 'Ondoy' and Typhoon 'Pepeng.' The amount did not go to the communities affected by the disasters, but was allegedly plundered after being released to nongovernmental organizations (NGOs) linked to Janet Lim Napoles.
Andaya, now deceased, would subsequently be charged for allegedly violating the Anti-Graft and Corrupt Practices Act.
In December 2016, Ombudsman Conchita Carpio Morales filed charges of plunder, graft and malversation against 25 individuals, mostly officials of the Arroyo administration (including former officials of the DBM and the Department of Agrarian Reform) and representatives of NGOs for their involvement in an alleged P900-million Malampaya Fund scam.
Former president Arroyo was not included on the charge list. The complaints against Arroyo and other top government officials were stricken out for lack of evidence.
The Ombudsman said the 25 respondents were found to have acted in concert to divert the fund releases drawn from the P900-million Malampaya Fund allocated by the DBM to the DAR in 2009, which was malversed and coursed through the NGOs controlled by Napoles" — for which 'huge kickbacks and commissions' were paid."
Why Malampaya, why Maharlika?
There is a curious reason why the old and the new Philippine sovereign wealth funds have been given the native-sounding names "malampaya" and "maharlika."
The names are window dressing, designed to create the optical illusion or impression of rectitude and regularity because the fund managers would be managing billions of pesos or dollars worth of assets and resources. And the ever suspicious Filipino public could smell something fishy or crooked in the scheme.
Philippine officialdom and Filipino politicians have made a tradition of this style of nomenclature.
This is why the P140-billion funding assistance program during the pandemic was christened the Bayanihan to Recover As One Act. Bayanihan represented the recovery process as a collective effort.
Similarly, Maharlika is a Filipino word with a lofty and noble connotation, with roots in Philippine history and culture.
Why not call it an investment authority
A review of the world's largest sovereign wealth funds shows that many countries with the largest assets and resources have named their SWFs as just an "an investment authority."
Nearly all oil-exporting countries in the Middle East have investment authorities in place. So does our close neighbor, Indonesia. It's the smaller funds that sport fancy names.
"Investment authority" reflects more directly the principal object of an SWF in the standard description and definition:
"A sovereign wealth fund, sovereign investment fund or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally. Most SWFs are funded by revenues from commodity exports or from foreign exchange reserves held by the central bank."
An investment authority can also receive investments from other SWFs and private equity funds. This appears to be President Marcos' conception of the MIF when he describes it as a way to attract more investments into the country.
It was the extracurricular activities of the Malampaya Fund that led to its misuse and looting.
"creation" - Google News
December 16, 2022 at 11:08PM
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Look first to Malampaya for cautionary lesson on wealth fund creation and management - The Manila Times
"creation" - Google News
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