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 P1million. 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.
"I am telling you already, the bill will be delayed because there are so many gaps and loopholes in it," he said.
"Inoobliga nila ang Land Bank at DBP na maglagay ng P50 billion at P25 billion pero wala ni isang probisyon sa batas na nagsasabi na kung ano ba ang mapapala ng mga bangkong ito. Pinag-uusapan agad nila ay net earnings ng gobyerno na ibibigay sa social welfare projects na i-invest sa iba't ibang proyekto ng pamahalaan, pero wala sinasabi ni ha, ni ho kung magkano ba ang mapupunta sa DBP at Land Bank sa perang nilagak nila roon," he added.
He also noted that there is no provision in the proposed measure indicating the authorized capital stock.
“Hindi tayo maaaring gumawa ng korporasyon ng walang authorized capital stock sa lahat ng tao alam dapat ng economic managers ng pamahalaan yan,” he said.
Escudero said the benefits of the MIF remain unclear.
For his part, opposition leader Senator Aquilino Pimentel III said the measures for the creation of the MIF, which was submitted by the House of Representative, is “defective” and this is something that he can never express support to.
In November, House speaker Martin Romualdez, Marcos’ cousin, filed House Bill 6398, which seeks the creation of MIF.
Marcos expressed confidence that the establishment of a sovereign wealth fund (SWF) will be advantageous for the country, admitting that he was the one who brought it up in order for the country to have additional sources of investment.
The proposed measure was patterned after the SWFs of 49 countries, including Singapore, China, Hong Kong, South Korea, Malaysia, Indonesia, Taiwan, Vietnam, and East Timor.
The HB 6398 was approved on third and final reading by the House of Representatives on December 15, 2022 and was transmitted to the Senate on December 19, 2022. (SunStar Philippines)