Maharlika funds to be managed well – Marcos
SOVEREIGN WEALTH FUND | President Ferdinand Marcos Jr. signs the Maharlika Investment Fund into law on Tuesday, July 18, 2023, establishing the nation’s first sovereign wealth fund. (Photo by MARIANNE BERMUDEZ / Philippine Daily Inquirer)
MANILA, Philippines — After months of heated debate over its merits, President Ferdinand Marcos Jr. finally signed on Tuesday the law creating his pet P500-billion Maharlika Investment Fund (MIF), with his assurance that it would be managed well and insulated from political influence.
Marcos enacted Republic Act No. 11954 during a short ceremony in Malacañang, seven months after he first publicly expressed support for the sovereign wealth fund proposed by lawmakers including his son, House Senior Deputy Majority Leader Sandro Marcos, and cousin, Speaker Ferdinand Martin Romualdez.
“For the first time in the history of the Philippines, we now have a sovereign wealth fund designed to drive economic development,” Marcos said in his speech, adding that it would be a “bold step toward meaningful economic transformation.”
Through the fund, he said the government would “leverage on a small fraction of the considerable but underutilized investable funds of the government and stimulate the economy without the disadvantage of having additional fiscal and debt burden.”
“We now have an available fund that will provide us the seed money for investment and to attract other investments and for us to be able to participate in those operations and those investments without additional borrowings,” he said.
The MIF’s authorized capital stock is P500 billion but will start with an initial P125 billion — of which P50 billion will come from the national government through dividends from the Bangko Sentral ng Pilipinas, P50 billion from Land Bank of the Philippines and P25 billion from Development Bank of the Philippines (DBP).
According to the law, the MIF will be invested in a wide range of assets, including foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, joint ventures, mergers and acquisitions, real estate, and high-impact infrastructure projects.
No political pressure
Marcos stressed that the MIF would be free from political pressure that could lead to its misuse, acknowledging that “the real challenge is to maintain the integrity of the fund and translate its gains into tangible changes for the benefit of all.”
“I assure you that the fund will be managed by highly competent personnel with a good track record and outstanding integrity,” he said.
The government, Marcos added, would remain steadfast in its commitment to transparency, accountability, and good governance as he signed the sovereign wealth fund.
“I assure you that the resources entrusted to the fund are taken care of with utmost prudence and integrity,” he said.
Tasked to manage the fund is Maharlika Investment Corp. (MIC), which is expected to be fully operational by the end of next year, according to Finance Secretary Benjamin Diokno.
The MIC will be governed by a nine-member board of directors composed of the secretary of the Department of Finance, the presidents and CEOs of Landbank and DBP, two regular directors, three independent directors from the private sector, and the CEO of the MIC.
Diokno said he would serve only as ex-officio chair, in response to Marcos’ directive to keep politics away from the running of the fund. Instead, a nonpolitician and independent chair of the board will head the MIC.
He said the MIC will identify financially and commercially viable infrastructure projects to invest in and will formulate investment strategies covering emerging “megatrends” such as environment, social, and governance; digitalization; and health care.
Diokno also said that the MIF law’s implementing rules and regulations — the drafting of which was already in progress even before the law was signed — will be finalized by September.
Amendments
A bill establishing the MIF was first filed in the House of Representatives on Nov. 8, 2022, and a final version was passed the following month on Dec. 15. The Senate passed its own final bill last May 31, which the House adopted the same day.
Among the most crucial amendments to the Senate’s version of the measure following public outcry was the prohibition of investments in the sovereign wealth fund from the Social Security System (SSS), Government Service Insurance System (GSIS), Philippine Health Insurance Corp., Home Development Mutual Fund, Overseas Workers Welfare Administration, and Philippine Veterans Affairs Office.
To further ease concerns over the potential misuse of the funds, Diokno said the MIC would have an advisory body — composed of the secretary of the Department of Budget and Management and the chiefs of the National Economic and Development Authority and the Bureau of the Treasury — that will assist the board of directors in the formulation of the general policies related to investment and risk management.
Other safeguards include the creation of a risk management committee and an audit committee; engagement of internal and external auditors and examination by the Commission on Audit.
A joint congressional oversight committee composed of seven members each from the House and the Senate will also be created to oversee, monitor, and evaluate the implementation of the law. This also requires the MIC to submit all internal and external audit reports for each accounting period.
All MIF and MIC documents will be open, available, and accessible to the public, as may be allowed by law, in both English and Filipino.
Unconvinced
Critics, however, remained unconvinced that these supposed safeguards will protect the fund against misuse.
House Assistant Minority Leader Arlene Brosas said the “economically unsound” law contained “serious flaws and legal loopholes” that may lead to mass corruption, graft, and the misuse of public funds.
In a statement on Tuesday, Brosas called RA 11954 the “Maharlika scam” that “goes against common sense and will put the country’s economy at risk.”
Brosas was one of seven lawmakers in both chambers of Congress who voted against the MIF bill. The six others were: Sen. Risa Hontiveros, House Deputy Minority Leader France Castro, Kabataan Rep. Raoul Danniel Manuel, House Deputy Minority Leader Mujiv Hataman, and Representatives Edcel Lagman (Albay) and Gabriel Bordado (Camarines Sur).
Castro of the Makabayan bloc also criticized the signing of the MIF law, as it is “farthest from what our people need.”
Castro vowed to question RA 11954 before the Supreme Court, arguing that it was crafted “through a very untransparent process.”
“It will not lower the prices of goods, it will not increase the wages of workers, and it will not provide free land to farmers. Most likely, it will only deplete funds that should be better spent in uplifting the lives of the poor,” she said on Tuesday.
Senate Minority Leader Aquilino Pimentel III said he would join suits to question the legality of the MIF, saying it was based on a “defective” presidential certification.
“Today is a sad day in the history of our country, as the State through the MIF will be engaging, unjustifiably, in an economic activity (risky investing) which is best left to the private sector,” he said.
