SENATE BEGINS SCRUTINY OF PROPOSED MAHARLIKA FUND

THE Senate started on Wednesday, February 1, 2023, scrutinizing the proposed Maharlika Investment Fund (MIF), which “aims to maximize the profitability of investible government assets for the benefit of all Filipinos.”

During its first Senate public hearing, Senator Mark Villar, who introduced the MIF bill in the Senate, assured that while it is among the priority measures of the administration of President Ferdinand “Bongbong” Marcos Jr. to ensure that the country will attain economic transformation, growth and sustainability, they will not rush it and they will make sure that all points are covered to make sure that mistakes will be avoided.

“We will not rush. We will take our time in order to allow the best version possible for the Filipino people,” he said.

Among the measure’s provisions questioned were the composition of the board of directors that will manage the MIF, the exemptions from certain laws, and the weak penal provisions on graft and corruption.

Under the measure, the Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) were identified as the providers of the initial capital – P50 billion from the LBP and P25 billion from the DBP.

Among the allowable investments for the MIF are as follows:

* Cash, foreign currencies, metals, and other tradable commodities;

* Fixed income instruments issued by sovereigns, quasi-sovereigns and supranationals;

* Domestic and foreign corporate bonds;

* Listed or unlisted equities, whether common, preferred, or hybrids;

* Islamic investments, such as Sukuk bonds;

* Joint Ventures or Co-Investments;

* Mutual and Exchange-traded Funds invested in underlying assets;

* Commercial real estate and infrastructure projects;

* Loans and guarantees to, or participation into joint ventures or consortiums with Filipino and foreign investors; and

* Other investments as may be approved by the Board.

The Maharlika Investment Corporation (MIC) board of director will be composed of the finance secretary as the chairperson, a chief-executive-officer, president of LBP and president of DBP, six regular members representing the contributors to the fund, with the seats distributed in proportion to their corresponding investments, and five independent directors from the private sector, the academe, business sector and investment sector.

An advisory body will be created while the MIC is being set up but they will not be involved in its management or in fund control.

There will also be a risk management unit in the MIC.

The MIC is exempted from the provisions of the Government-Owned and -Controlled Corporations Reform Act of 2011 except on for the sections on the fiduciary duties of the board and officers, full disclosure and special audit; from local and national taxes and customs duties including all its funds, assets, properties, revenues, income, investment earnings, accruals, purchase of supplies, equipment, papers or documents and importation of supplies and equipment; government procurement reform act and salary standardization act.

The 25 percent of the corporation’s net profits will be distributed for poverty and subsistence subsidies, while the rest will be for the government’s social welfare programs except for infrastructure projects.

Financial reporting and audit measure:

* Financial reporting in accordance with pertinent provisions of the Act, the IRR (implementing rules and regulations), and the International Financial Reporting Standards and principles

* Internal audit independent from the management of the MIC

* External audit conducted by an internationally recognized auditing firm

* Examination and audit by the Commission on Audit

* Joint Congressional Oversight Committee, composed of five members each from the House of Representatives and the Senate

During the hearing, opposition Senator Risa Hontiveros warned that the MIF may instead become a “liability fund” that will balloon the nation’s already enormous foreign debt and make life harder for present and future generations of taxpayers.

But National Treasurer Rosalina De Leon said it is the other way around, noting the MIF may help bring down the country’s reliance on borrowing.

“We were looking into this fund to attract more equity because then investors will have long-term placements in the fund, and at the same time, share in the risk in the fund,” she said.

Hontiveros also noted the low penalties that do not include forfeiture of ill-gotten wealth in favor of the government and perpetual disqualification from public office for those who will end up misusing the funds.

“The graft and corrupt practices provisions under the MIF where an appointee who engages or violates the law will only be fined P100,000 to 1 Million. A director or officer who will tolerate this graft and corrupt practices will only be fined P500,000 to P1 million,” she said.

Hontiveros compared the difference between the MIF penalty provisions and the Plunder Act of 1991, as amended in 1993. She said that under the plunder law, amassing ill-gotten wealth amounting to P50 million is punishable by reclusion perpetua (20 to 40 years imprisonment), forfeiture of ill-gotten wealth in favor of the government and perpetua disqualification from public office.

While he expressed openness for the creation of the MIF, Senator Francis Escudero reiterated that the proposed legislation in its current form needs further amendments to address the “many gaps and loopholes.”

Escudero questioned several provisions in the bill, saying that unless they are addressed immediately by the administration’s economic team, its passage is bound to get delayed.