January 30, 2023

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New Maharlika bill gets House committee’s nod

5 min read

THE unnumbered substitute bill creating the Maharlika Investment Fund (MIF) was formally approved during an executive session by the House Committee on Banks and Financial Intermediaries, its chairman, Manila Rep. Irwin C. Tieng, announced last Monday.

The bill will now be transmitted to the plenary for another round of deliberations.

Tieng noted a provision in the bill that orders at least 20 percent of the net income of Maharlika Investment Corp. (MIC) remitted to fund the social services of the national government.

“The board [of the MIC] shall determine the dividend policies of the MIC, provided that at least 20 percent of the net profits of MIC shall be remitted to the national government to be earmarked for social welfare projects,” Tieng said.

The lawmaker disclosed that the 15-man board of the MIC would have four, instead of the original two, independent directors.

THE unnumbered substitute bill also mandates that instead of the Philippine president, the Finance Secretary will serve as the chairman of the MIC board of governors.

SSS, GSIS out

ACCORDING to Tieng, his committee has approved the penal provision proposed by Albay Rep. Joey Sarte Salceda. That provision says that any director, trustee or officer who willfully or maliciously violates investment guidelines set by the board of directors or whose acts of gross negligence, willful misconduct, fraud, actions in breach of any investment agreement; and in a loss suffered by the fund, shall be liable for all damages resulting therefrom suffered by the corporation.

Tieng said stockholders or members and other persons shall be punished by imprisonment of not less than one year but not more than five years or a fine of not less than P50,000 but not more than P2 million or both at the discretion of the court.

The lawmaker said his committee also formally adopted the removal of the Government Service Insurance System (GSIS) and the Social Security System (SSS) as fund contributors.

Under the unnumbered bill, the Bangko Sentral ng Pilipinas (BSP) will now be a fund source of the MIF, joining the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP).

The LBP will contribute P50 billion while the DBP will contribute P25 billion.

Public backlash

HOUSE Deputy Minority leader and ACT Teachers party-list Rep. France L. Castro said that based on the latest version of the bill, the authors have only repackaged the MIF.

“For now they are not including the SSS and the GSIS as the primary funders due to the public backlash,” Castro said. “But in the bill, the said insurance systems are still open to fund the MWF; they are just waiting for the people’s anger to simmer down.”

The latest version of Maharlika can also compel local companies to shell out funds, the Deputy Minority leader said. She cited the provision: “additional funding may, likewise, be sourced from investments of private financial institutions and corporations, as may be determined by the Board of Directors.”

“Furthermore, withdrawals from the MIF are not allowed except until ‘only after at least five years of investment activities’—in other words, the earliest would be the end of the term of Pres. [Ferdinand R.] Marcos Jr.,” she added.

According to Bayan Muna Chairman Neri J. Colmenares, the MIC “may compromise, condone or release, in whole or in part, any claim of or settled liability to the MIC, regardless of the amount involved, under such terms and conditions as may be prescribed by the Board of Directors, upon favorable recommendation of the Advisory Body, to protect the interests of the MIC and the integrity of the MIF.”

“No amount of tweaking or amendments will save Maharlika because it is inherently public funds that are endangered by crony corruption,” Colmenares said. “Maharlika cannot be approved and must be scrapped.”

BSP, Pagcor

IN last Friday’s hearing, BSP Deputy Governor Francisco G. Dakila Jr. proposed a flexible set-up wherein the BSP will contribute from its declared dividends to the MIF’s start-up fund.

BSP lawyer Leila M. Rivera explained to the House panel that the central bank declares dividends in the amount of 50 percent of their income.

Rivera said that with an estimated income of P60 billion to P70 billion for this year, dividends would be between P30 billion to P35 billion.

“The proposal is to have a 50-50 sharing between BSP’s capitalization and the funding source for the [MIF] until such time that the BSP is fully capitalized,” Dakila said. “Once the BSP is fully capitalized, the declared dividends of the BSP to the national government may be earmarked wholly to fund the [MIF].”

Dakila told lawmakers the central bank’s proposal would not affect the country’s international reserves.

The Philippine Amusement and Gaming Corp. (Pagcor) is also mandated to contribute 10 percent of its online gaming proceeds to the MIF.

Representatives from the LBP, the DBP, and Pagcor formally expressed their support for the creation of the MIF during the hearing.

Risks, rewards

LIKEWISE, the Appropriations panel approved the proposal by Marikina Rep. Stella Luz A. Quimbo to exclude the General Appropriations Act (GAA) as one of the mandatory sources of funding for the MIF.

Quimbo also reiterated the importance of the MIF amid the current socio-economic landscape.

She noted that instead of imposing an additional tax burden to the people, the establishment of the MIF provides an alternative source of revenue that can be used to fund critical government projects.

“That is precisely the goal of a sovereign wealth fund,” Quimbo added. “The bill creates an investment vehicle that will pool surplus funds of the government and ensures that it will be managed professionally and transparently.”

Among others, the MIF bill requires the Board to engage internal and external auditors even as its books are also subject to scrutiny of the Commission on Audit.

In addition, there is a Joint Congressional Committee to monitor the implementation of the MIF law, a requirement to report to the President on the fund performance, a risk management unit to ensure a balance between risk and rewards and a cap on administrative and operating expenses of the MIF.