Maharlika CEO says wealth fund to focus on digital, physical infra investments
The Philippines' newly established sovereign wealth fund (SWF), Maharlika Investment Corporation, is poised to play a crucial role in addressing the nation's significant infrastructure challenges, according to the fund's president and CEO, Rafael Consing.
With a strategy to attract private capital and a focus on high-impact energy and connectivity projects, the SWF is stepping up to tackle its share of Asia's $15 trillion infrastructure gap.
Maharlika
"Maharlika was created as the collaborative vehicle of the government to crowd in private capital. We look at infrastructure from the perspective of physical, electricity, and digital infrastructure," Consing told the Milken Institute Asia Summit 2024.
Since his appointment last November, Consing has conducted extensive analysis of road network infrastructure per capita across 12 emerging Asian countries, revealing significant disparities.
“It's interesting to look at Asia - Thailand is at the top with about 10,000 kilometers per million people. The Philippines was 11th out of 12 with only about 1900 kilometers per million people," he said.
The stark contrast between countries such as Thailand and the Philippines highlights the considerable gap in road infrastructure development among Asian nations.
Consing outlined three key investment priorities for the SWF: physical infrastructure, energy, and digital connectivity - with a particular focus on fostering development in rural regions.
"About 53% of the Philippines' population lives in rural areas, and it's incumbent upon us to connect them physically and with energy," he said.
ENERGY AND DIGITAL
The Philippines, an archipelago of over 7,000 islands, also has a critical need for electrification, Consing said.
"Our three major islands have an average of 83% electrification rate,” he said.
“The Department of Energy released a study showing that giving a poor family electricity from zero to 8 hours increases their income generation and expenditure by about 15% each. Going to 24-hour access increases it by about 55%. This develops the premise that power precedes progress."
Digital infrastructure in the Philippines also faces significant challenges. Consing noted that the country theoretically needs around 70,000 telecom towers to aid its development.
"We only have about 35,000 today. We aim to build-out telecom tower infrastructure to support agriculture, education, healthcare, and rural entrepreneurship."
NEAR TERM SUCCESS
Looking ahead, the SWF is on track to make substantial progress in addressing the infrastructure gap, particularly in rural areas where the need is most pressing, according to Consing.
"Currently, the Philippines is growing by about 6% for the first half [of 2024], driven primarily by traditional sources,” he said.
“We believe that over the next 3-5 years, once we're able to roll out energy and broadband, particularly in rural areas, we will be able to crowd in capital wholesale, not just from FDI [foreign direct investments] but even from local entrepreneurs."
Maharlika’s infrastructure strategy is rooted in a deep understanding of current market dynamics, recognising that existing demand is suppressed due to inadequate infrastructure capacity, Consing noted. He sees this as an opportunity for growth.
"We believe that once we roll out new infrastructure, it'll open up a whole new set of demand, which could drive the kind of returns that private equity aims for. That's our plan for the next few years."