House Swiftly Passes Maharlika Bill

Posted by DG, Date posted at December 30, 2022

December 15, 2022, the House of Representatives approved on third reading a proposed law creating the $ 2-billion Maharlika Investment Fund (MIF). This comes just hours after President Ferdinand “Bongbong” Marcos, Jr. tagged and certified this as an urgent matter on the same day as well.

House of the representatives - Maharlika Bill

The next stage would be with the Senate which must pass a counterpart bill for the measure to become law.  

Changes Found on the Current Maharlika Bill (HB 6608)

The updated version of the Maharlika Investment Fund — now named House Bill (HB) 6608 will have the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (Landbank) provide the initial fund that totals PHP75 billion. 

Meanwhile, Bangko Sentral ng Pilipinas (BSP) profits — wherein the bill’s authors estimate to be about PHP 35 billion this year — makes up the balance.

The initial proposal greatly differs from the current one where funds were also to be sourced from Social Security System (SSS), and Government Service Insurance System (GSIS). This was removed from the source for MIF funds following an outcry from business groups, opposition leaders and other critics warning that the fund could endanger the worker pensions and possibly corruption with careless investment decisions. The total is far smaller now than the initial PHP 275 billion. 

You might also want to read: PBBM Maharlika investment fund was his idea

Further details on the Bill and its proposed Implementation 

Marcos digressed on MIF in a letter to House Speaker Martin Romualdez, “a strategic mechanism for strengthening the investment activities of top performing government financial institutions, and thus pump-prime economic growth and social development.”

Finance Secretary Benjamin Diokno also requested the President to certify the bill creating the MIF as urgent. By the 13th of December, Diokno told the President that MIF will strengthen the government’s effort to create jobs, promote trade and investments, strengthen connectivity, expand infrastructure, and achieve energy and food security.

He included that the MIF should be an independent entity, professionally managed and administered by the Maharlika Investment Corp. (MIC) to be able to maximize the investment potential.

Diokno explained, “The MIF and the MIC comply with the ‘Santiago’ Principles, which pertain to the set of generally accepted principles and practices voluntarily endorsed by the International Forum of SWF (sovereign wealth fund) members. This represents best practices for the operations of SWFs.

He further added, “Investments in real estate, infrastructure, and other development projects, however, shall be limited to National Economic and Development Authority (NEDA) Board—approved major capital projects to ensure that these are in line with the socioeconomic development program of the government.”

Parameters of Maharlika Investment Corporation (MIC) in detail

The MIC will be composed of a 15-member board of directors. This will be chaired by the Finance Secretary. Its role would be to see to it that the investment policies formulated will be consistent with the objectives of the MIF. The MIC will also conduct periodic reviews on this matter. 

Notably, the MIC will be barred from holding a controlling stake in its investee companies, and will not be directly involved in their day-to-day management and operations.

There will also be an advisory board on the MIC. This will be composed of secretaries of the Department of Finance, the Department of Budget and Management, the director general of NEDA, and the national treasurer.

To further hold integrity and oversight measures in its transactions, the MIC will tap an internal auditor, an internationally recognised auditing company and the Commission on Audit to ensure transparency, accountability and protection of the fund.

There will also be a remittance of 20% of net profits to contribute to state social welfare projects.  

“Finally, the proposed bill provides penalties for erring directors, trustees, or officers who willfully and maliciously violate investment policies and guidelines set by the Board of Directors,” Diokno assured. He verified that the Philippines could model the MIF according to Indonesia’s SWF, whose funds were tapped to finance big-ticket infrastructure projects even amid the Covid-19 pandemic.

Feedback from BSP Governor and several Senators 

At a recent press briefing, Bangko Sentral ng Pilipinas Governor Felipe Medalla agrees that the removal of pension funds in the bill’s new version was a “good” move by Congress. He digressed, “Now the issue is what can the fund be used for. And I think at times like this, let’s support the President. There are many things that I think he wants to do and these funds can be used to attract foreign investors. It could be good for the country.”

At the Senate, Senate Minority Leader Aquilino “Koko” Pimentel 3rd pondered on why the executive branch wanted to speed up the passage of HB 6608. He said, “We are being set up for something. What that something is, I don’t know yet. We will try to find out when we interpellate on the Maharlika Fund bill. What is it that they really want to achieve with this measure? And why is this measure urgent at all?” 

Such a presidential certification should be reserved for legislative measures “which are urgently needed in order to meet a public emergency or calamity. Please ask Sec[retary] Diokno, what emergency or calamity is there now that the Maharlika Fund is intended to be able to immediately address, help, or alleviate?” Pimentel said. “If the President issues the certification then this is clearly an abuse already of presidential prerogatives and powers.”

Sen. Francis Joseph “Chiz” Escudero also harkens economic managers to be cautious about investing vast amounts of public money into the MIF.  

With the government now relying on the BSP to fill the void left by the two state-run financial institutions, Escudero asked whether it would be a smart move on the part of BSP to lift its policy against putting all its eggs in one basket in order to put up the Maharlika fund.

I am also a tad apprehensive about the MIF. Hopefully, the Senate will be able to go through the details and get this going strong as a sound investment move for the country. Despite Indonesia’s success with its own sovereign wealth fund, it still had to go through major hurdles that involved corruption. What’s your take on this, guys? Just comment down below. We look forward to hearing from you. Thanks!

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