The Department of Finance (DOF) has requested President Marcos to certify the bill establishing the Maharlika Investment Fund (MIF) as urgent, documents revealed.
In a letter dated Dec. 13, 2022 signed by Finance Secretary Benjamin Diokno, the government’s chief economic manager wants to fast-track the deliberations on House Bill No. 6608 to create the country’s own sovereign wealth fund (SWF).
“This is to respectfully request His Excellency to certify as urgent House Bill (HB) No. 6608, establishing the Maharlika Investment Fund (MIF or “Fund”), filed as Committee Report No. 237 by the Committees on Bank and Financial Intermediaries, Appropriations, and Way and Means,” the letter read.
Diokno told the President about the urgency of the measure, saying it will shore up government’s effort to create jobs, promote trade and investments, strengthen connectivity, expand infrastructure, and achieve energy and food security.
To maximize investment returns, the finance chief said MIF should be an independent entity, professional managed and administered by the Maharlika Investment Corp. (MIC).
“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 members,” Diokno said.
“This represents best practices for operations of SWFs,” he pointed out.
Diokno added that MIF will be subject to strict investment and risk management guidelines, and is authorized to invest only in financial instruments and development projects approved by its board of directors.
“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 socio-economic development program of the government,” Diokno said.
He also emphasized that MIC is barred to hold a controlling stake in its investee companies, and shall not be directly involved in their day-to-day management and operations.
The 15-member MIC Board of Directors, chaired by the finance secretary, shall ensure that the investment policies formulated are consistent with the objectives of the MIF, and subject to periodic review, Diokno said.
The MIC will also have an advisory board composed of the secretaries of the DOF, Department of Budget and Management, director general of NEDA, and the national treasurer.
“The Advisory Body shall provide assistance, guidance, and advise to the Board of Directors regarding formulation of general policies or plans and projects of the MIF. However, the Advisory Board will not take part in the management or control of the MIF,” Diokno said.
In addition, the MIC will tap an internal auditor, as well as an internationally recognized auditing company and the Commission on Audit to ensure transparency, accountability and protection to the fund.
“There shall also be an Oversight Committee to oversee, monitor and evaluate the implementation of the proposed,” Diokno said.
MIC is also tasked to contribute to government’s social welfare projects, as the company requires by law to remit 20 percent of its net profits to fill state coffers, the finance chief said.
“Finally, the proposed bill provides penalties for erring directors, trustees, or officers who willfully and maliciously violates investment policies and guidelines set by the Board of Directors,” he further assured.
Diokno assured President Marcos that a SWF is a tried and tested investment vehicle used by developed and developing economies, such as the Indonesia Investment Authority (INA).
According to Diokno, Indonesia’s SWF may be used by the Philippines as a model, whose funds were tapped to finance in big ticket infrastructure projects even amid the Covid-19 pandemic.
“In the near and medium term, the MIF is expected to enhance the country’s fiscal space and reduce fiscal pressures as the fund pursues public infrastructure projects, as well as reduce uncertainties,” the DOF chief said.
“We underscore that the establishment of the MIF will generate intergenerational benefits, which increases the future generations’ access to income form investments (e.g., potential earnings from extracted natural resources such as in mining),” he added.
“Ultimately, the immediate enactment of HB No. 6608 will redound to our country’s growth and help us achieve economic transformation towards inclusivity and sustainability,” Diokno told President Marcos.
Once the bill is certified as urgent by the President, Congress can approve the measure on second and third reading within the same day, dispensing three day rule in between the second and third readings.