The Maharlika Investment Corp. (MIC), the Philippine government’s sovereign wealth fund, said investing in Philippine projects is becoming increasingly attractive as asset values fall amid a weak economy, presenting a potential entry point for investors looking to enter the country.

MIC President and Chief Executive Officer Rafael Jose D. Consing, Jr. said depressed valuations could create an opening for investors seeking exposure to the Philippine market.

“I personally think that it’s an opportunity because as your GDP comes down, there is a repricing of assets,” Mr. Consing told reporters on Tuesday on the sidelines of the ASEAN Sovereign Wealth Fund Forum, noting that the repricing of assets is already underway in the public markets.

He said investors weigh three main factors when entering a market: potential returns, confidence in governance, and the actual opportunities available.

His remarks come after official data showed the Philippine economy grew by just 2.1% year on year in the three months to September, slowing from 4% a year earlier and from a revised 2.4% in the second quarter.

Mr. Consing said the economic slowdown will not affect MIC’s investment strategy, which focuses on developing critical infrastructure and other projects that benefit underserved communities. He described the Philippine economy as K-shaped, with wealth creation concentrated among higher-income Filipinos while much of the population continues to struggle.

“In my view, we need to help those in the lower part… and the way to do that is by enabling their areas with electricity, with infrastructure,” he said.

He cited Mindoro and Palawan as examples of areas where investment in electricity infrastructure is needed regardless of the pace of economic growth, adding that improved power access in these areas could also help reduce the government’s subsidy bill.

ASEAN Co-Investment Push

Mr. Consing said he hopes the ASEAN Sovereign Wealth Fund Forum will lead to collaboration and eventually co-investment among sovereign wealth funds — ideally in the Philippines.

“When I say co-invest, I’m hoping that they co-invest here,” he said.

He said MIC will continue to prioritize domestic investments until it builds sufficient surplus capital to consider opportunities overseas.

“I do not see ourselves crossing the border until we have developed certain levels of surplus that we can hedge,” he said. “For now, because the absorptive capacity of the country is still great when it comes to accepting investments, I think we should be investing onshore.”

Mr. Consing said no investment agreements have been reached with other sovereign wealth funds, noting that the forum was intended to initiate discussions that could eventually lead to collaboration and co-investment. Energy infrastructure could be among the first areas of potential cooperation, he said, identifying power transmission as a priority investment area. With no agreements signed yet, energy infrastructure — and power transmission in particular — is the thread to follow as those discussions progress.

IFSWF Membership Bid

Separately, MIC has applied for full membership in the International Forum of Sovereign Wealth Funds (IFSWF) and hopes to learn the outcome of its application as early as next week.

Mr. Consing said MIC, which is currently an associate member of the organization, submitted its application last week and hopes to be considered during the IFSWF’s board meeting on Wednesday.

“We will find out whether it has, in fact, made it in time to get on the agenda,” he said.

Full membership is important for MIC because the Santiago Principles — a set of 24 generally accepted principles and practices governing sovereign wealth funds — are embedded in its governing law, he said. Mr. Consing earlier cited confidence in governance as one of the three factors investors weigh when entering a market.

— Justine Irish D. Tabile

Source: BusinessWorld Online