Implementing rules creating Maharlika Fund released —Diokno

The implementing rules and regulations (IRR) that would spell the beginning of Maharlika Investment Fund’s (MIF) operationalization has been released, Finance Secretary Benjamin Diokno announced Tuesday.

“The IRR was published in the Official Gazette on 28 August 2023,” Diokno told GMA News Online in a Viber message.

“It will be effective on 12 September 2023, 15 days after publication,” he added.

In July, President Ferdinand "Bongbong" Marcos Jr. signed into law Republic Act No. 11954 or the Maharlika Investment Fund (MIF) Act of 2023.

The law creates the MIC, a government-owned company that will manage the MIF — a pool of funds sourced from state-run financial institutions that will be invested in high-impact projects, real estate, as well as in financial instruments.

The law mandates that the MIF would be created through the funds that will be sourced from:

• Landbank: P50 billion
• Development Bank of the Philippines (DBP): P25 billion
• National Government: P50 billion

The contribution from the national government will come from the following sources:

• BSP's total declared dividends
• National government's share from the income of PAGCOR
• Properties, real and personal identified by the DOF-Privatization and Management Office
• Other sources such as royalties and/or special assessments

Under the law, the MIF has an authorized capital stock of P500 billion.

In a separate statement, the Bureau of the Treasury (BTr), the agency in charge of crafting the implementing rules, said the IRR was issued following consultations with founding government financial institutions, namely the Landbank, DBP, and the Technical Working Group consisting of the Department of Finance (DOF), Department of Budget and Management (DBM), Securities and Exchange Commission (SEC), National Economic and Development Authority (NEDA), Office of the Government Corporate Counsel (OGCC), and the Governance Commission for GOCCs (GCG).

Diokno earlier committed that the IRR for the Maharlika Fund’s establishment will be released before the end of August as the government intends to make the fund operational before the end of the year as it secured initial funding from the Landbank and the Bangko Sentral ng Pilipinas. 

The search is on for MIC Board

The Finance chief had also said that the MIC’s Board of Directors —composed of the Finance secretary, who will serve as the ex-officio chairperson; presidents of Landbank and DBP; two regular directors; and three independent directors from the private sector— are expected to be appointed in September.

In a Viber message to the Finance press corps, Diokno said, “The search for the President and CEO (PCEO) of the Maharlika Investment Corporation, two regular directors, and three independent directors is on.”

“The qualifications of the PCEO, the regular directors, and the independent directors are provided for in Section 39, 22, and 26 of the IRR, respectively,” he said.

Diokno, in a statement, said “the success of the implementation of the Maharlika Investment Fund hinges on selection of the best people to oversee and manage the Fund and strict compliance with the provisions of the law.”

“This is why we made sure to include all possible safeguards in the IRR, ensuring that all our bases are covered," Diokno said.

Bonds, securities, instruments

Under the law, the MIC can issue all kinds of bonds, debentures, and securities.

However, these will not be guaranteed by the Philippine government.

As enumerated under Section 14 of the law, the MIC is authorized to invest in a wide-range of products, activities and projects, such as cash and other tradable commodities; fixed income instruments issued by sovereigns; domestic and foreign corporate bonds; listed or unlisted equities; and Islamic investments, such as Sukuk bonds, among others.

Apart from the mandatory contributors to the MIF, other GFIs and government-owned and controlled corporations (GOCCs) may invest into the MIF as well, subject to their respective investment and risk management strategies.

However, those providing social security and public health insurance services are absolutely prohibited from investing in the MIF.

“The MIF will serve as a crucial financing mechanism to widen fiscal space, ease the burden on local funds, and reduce reliance on official development assistance [ODA] in funding big-ticket projects such as those specified in the recently approved Infrastructure Flagship Project [IFP] list,” Diokno said.

“We will pursue public road networks, tollways, railways, green energy, water resources, agro-industrial ventures, and telecommunications. These critical areas offer high rates of return and significant socioeconomic impact. The MIF can also be used for green and blue projects, countryside development, and emerging megatrends such as ESG or environment, social, and governance and cutting-edge technologies,” the Finance chief added.

Penalties

The MIF’s IRR also lists the penalties to be imposed in order “to ensure the integrity of the Fund.”

Officers found to have violations and offenses shall be held accountable, according to the DOF.

The law provides for the imposition of heavy fines ranging from P1M to P15M and imprisonment from six to 20 years for various offenses, such as willfully holding office while in possession of any disqualification; knowingly certifying the corporation’s financial statements despite its gross incompleteness or inaccuracy; willingly allowing oneself to be used for fraud; and failure to sanction, report, or file appropriate action for graft and corrupt practices.

“The Maharlika Investment Fund Act’s IRR is faithful to the law to ensure that the prescribed procedures and guidelines will lead to its harmonized application,” said National Treasurer Rosalia de Leon.

“The Bureau of the Treasury, along with founding GFIs, DBP and LBP, worked closely with the Technical Working Group to make sure that the IRR is consistent with the Maharlika Act,” added De Leon. — KBK/RSJ, GMA Integrated News