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PBBM signs MIF bill into law

Maharlika ‘a bold step toward transformation’

MAHARLIKA ENACTED INTO LAW. President Ferdinand Marcos Jr. beams as he holds up a copy of the bill enacting the Maharlika Investment Fund as Republic Act 11954 in a ceremony at Malacanang Palace on Tuesday. Applauding the President are (from left) Senate President Juan Miguel Zubiri, Sen. Mark Villar, Speaker Martin Romualdez, Sen. Joel Villanueva, and House Majority Leader Manuel Jose Dalipe, with Executive Secretary Lucas Bersamin partly hidden (behind Zubiri). Ver Noveno

President Ferdinand Marcos Jr. signed the Maharlika Investment Fund Law Tuesday, calling it a bold step towards the country’s “meaningful economic transformation.”

He signed the law days before his second State of the Nation Address, and about two weeks after Congress had sent the bill, which he certified as urgent, to the Palace for his signature.

Under the law, the Maharlika Investment Fund (MIF) is an independent fund that seeks to generate government revenue through investments in real and financial assets.

MIF will generate its capital fund through government financial institutions and the national government.

The President said that the money generated through MIF can be used for the development of agriculture, infrastructure, and digitalization in the country.

“We now have an available fund that will provide us the seed money for investments and to attract other foreign investments and for us to be able to participate in those operations, in those investments without additional borrowings,” he added.

Following the signing of RA 11954, Mr. Marcos said his administration would “go out to the world and do the changes that are necessary for the Philippines to become an investment-friendly nation.”

The Chief Executive said there are 194 priority projects approved by the National Economic and Development Authority that will benefit from the MIF.

The President also brushed off the possibility of corruption in using the sovereign wealth fund.

“Where do you think we will put it [fund]? Are we going to buy fancy cars? Are we buying big yachts? It makes me laugh because that is so far from the truth,” he said in a mix of English and Filipino.

He assured the public that the MIF will be managed by a highly competent person with a good track record and outstanding integrity.

“We remain steadfast in our commitment to transparency, accountability, and good governance in this massive and purposeful undertaking. I assure you that the resources entrusted to the fund are taken care of with utmost prudence and integrity,” the President said.

The MIF bill was authored by House Speaker Martin Romualdez and other congressmen including TIngog Party-list Rep. Yedda Romualdez and Senior Deputy Majority Leader Rep.Sandro Marcos, the President’s son.

Senate President Juan Miguel Zubiri said that he asked Mr. Marcos to add MIF’s priority programs in his second SONA next week.

“I asked the President earlier, Mr. President I think it is good to share the priority projects under MIF in your SONA, For example, the flagship projects that you can share publicly to let people see that the country will benefit from the fund and that we would not need to borrow from others to develop the country,” he said.

Zubiri cited the Cavite-Bataan Toll Bridge as a flagship project that the President could share in his SONA.

He said the toll bridge would cut travel time from Bulacan to Bataan from three to four hours through the North Luzon Expressway to just 45 minutes passing through Cavitex. He said this would make it easier to deliver goods from the export processing zones to the ports of Manila.

“So I think that is a big game changer, that’s one example that I can think of, and [there are]] many others to come. But we’ll let the President announce [those],” he said.

Zubiri said he was confident the law could overcome any legal challenges, saying it is constitutionally sound.

Previously, various economists and lawmakers called on Mr. Marcos to reconsider the signing of the MIF bill, saying it was “unconstitutional” and “violates the fundamental principles of economics and finance.”

Lawmakers led by Romualdez welcomed the signing of the MIF Law, saying it would be an additional vehicle for financing big-ticket infrastructure projects without incurring more foreign debt or having to impose new taxes.

Romualdez, one of the principal authors of the House version of the MIF, was among the government officials who witnessed the President sign the law at Malacanang Palace.

Romualdez said using the MIF as an alternative infrastructure funding source would mean allocating more funds in the annual national budget for other vital social services like education and health.

“The MIF is not only beneficial but necessary at this point in time. While the Philippines can offer investment opportunities, given that we are still a growing economy, we see that the cost of debt has risen, making the need to explore other vehicles to attract equity financing such as Maharlika Investment Corp. (MIC) or the MIF urgent,” he said.

Rep. Luis Raymund Villafuerte of Camarines Sur said with the law in place, the country’s economic managers can get the MIF up and running before the end of the year.

Rep. Joey Sarte Salceda of Albay, who chairs the House Ways and Means Committee, said the MIF will be the country’s “bridge between trillions in investible funds and thousands of investable development projects.”

Salceda was the chairperson of the technical working group that drafted the House version of the bill, as well as one of its principal defenders on both the House floor and the bicameral panel.

“We have close to P19 trillion in investible funds in the Philippine banking system. That needs to go somewhere productive in order to contribute to the economy. The Maharlika Investment Fund is a vehicle to do that – for both the Landbank and the DBP, as well as for other banks,” Salceda said.

“We also have some of the largest conglomerates in Southeast Asia, and they are cash cows. Our total corporate sector generated P9.03 trillion in 2023. They have a gross saving of P5.7 trillion. So, basically, they don’t have anywhere to put 63 percent of all the money our corporations make,” Salceda said.

Romualdez said that international investors have already expressed interest in investing in the fund, including the Japan Bank for International Cooperation (JBIC) and several US companies.

“Certainly, there will be more interest once the MIF is officially launched. These investments mean more development projects in various parts of the country, more jobs and livelihood for the Filipinos, and a better future for generations to come,” he said.

Romualdez said he expected the MIF Act to be one of the landmark pieces of legislation passed by the 19th Congress.

During a signing ceremony at the presidential palace, Marcos said the fund would “leverage a small fraction” of the government’s money without adding to the country’s debt burden.

“We will 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,” Marcos said.

But a small group of protesters rallied near the Palace in opposition to the law, claiming the fund was a “deception” and would put public money “in danger.”

The P500-billion Maharlika Investment Fund will draw most of its funds from the national government, including the central bank, gaming revenue, and two state-owned banks.

Private banks and companies will also be allowed to invest.

The original proposal was for a $4.9 billion fund that would be partly bankrolled by state-run pensions for government and private-sector workers, sparking public fears that retirement savings could be put at risk.

The final version of the bill approved by Congress in May said pension funds would not have to contribute.

The fund will be allowed to make a wide range of investments, including in corporate bonds, equities, joint ventures, and infrastructure projects.

Mr. Marcos said Tuesday the fund would help the government achieve its economic growth targets and reduce reliance on foreign borrowings to pay for new roads and bridges.

He insisted the fund would be transparent and only top finance professionals would be hired to manage it.

Conventional sovereign wealth funds are usually seeded by windfall government profits from natural resources such as oil or minerals. Critics have warned that the country enjoys no such windfall profits.

Finance Secretary Benjamin Diokno said that the MIF will be safeguarded with “layers of audits” against possible abuses and corruption.

“There would be layers of audit consisting of internal audit and external auditor which includes COA (the Commission on Audit). There is also the oversight committee from both Houses of Congress… It’s a very tight accountability requirement,” he said in a mix of English and Filipino.

Diokno said he will be part of the board of directors that will manage the use of the wealth fund.

Diokno said that Mr. Marcos studied the best practices of other countries in handling a sovereign wealth fund.

“Originally, the President is the chairman of the fund, but he said to look into the best practices of the other countries, and the secretary of Finance really is the chairman and that is me,” Diokno said.

Diokno called the law a game-changing measure, the country’s first sovereign investment fund that could speed up infrastructure development, create high-quality jobs, attract more foreign investors, and propel the country towards higher growth.

Within the MIC is an advisory body composed of the secretary of the Department of Budget and Management, the secretary of the National Economic and Development Authority, and the Bureau of the Treasury that will assist the board of directors in formulating 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; a joint congressional oversight committee; and examination by the Commission on Audit.

The drafting of the MIF Act’s implementing rules and regulations is underway and will be finished by September 2023.

Budget Secretary Amenah Pangandaman said the DBM will continue to provide support and technical assistance in formulating the implementing rules and regulations and during the implementation of the law.

National Economic and Development Authority Secretary Arsenio Balisacan said that among the potential areas in which the MIF can invest are some of the 194 Infrastructure Flagship Projects of the “Build-Better-More” program.

“Maharlika can invest in various areas. There are strategic areas in the energy sector that we would like MIF to invest in. There are many areas that are in great need of capital, so we will never run out of investment opportunities,” he said.

Senate Minority Leader Aquilino Pimentel III, who opposed the MIF, said it was a “sad day” and branded as “madness” its signing into law.

“Today is a sad day in the history of our country, as the state through the Maharlika Investment Fund (MIF) will be engaging, unjustifiably, in an economic activity (risky investing) which is best left to the private sector,” Pimentel said.

The Maharlika Fund concept was developed on the fly. If it were an airplane, then it was built while flying it, Pimentel said.

He also pointed out that the Philippines has no surplus either from the budget or from trade.

“We have not hit any jackpot windfall profit like a cash flow from a new discovery of oil or gas reserves. In short, we have no underlying asset to continuously back up and fund this MIF to ensure its long-term existence,” he said.

Moreover, the funds to be initially used are already existing funds under the care of conservatively run government banks. “We are disturbing the status quo because the government wants to take more risks with the money and gamble it, under their mantra of more risks, more returns,” he said.

He said he expects the law will be challenged before the Supreme Court.

Opposition Senator Risa Hontiveros also said the Philippines does not need the Maharlika law, saying the national budget will be its first victim.

Hontiveros said there is nothing to be thankful for since dividends of Land Bank and Development Bank of the Philippines, earnings of PAGCOR, and the would-be income from the government’s privatization program will be significantly reduced by 2024 and the succeeding years.

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