The Implementing Rules and Regulations (IRR) of the newly enacted Maharlika Investment Fund will be ready by September, the Department of Finance (DOF) said.
The President yesterday signed into law Republic Act No. 11954, otherwise known as the Maharlika Investment Fund (MIF) Act of 2023, establishing the Philippines’ first sovereign wealth fund.
In a statement, the DOF said the Fund is designed to catalyze economic development and accelerate the country’s growth by optimizing the use of government financial assets and promoting their intergenerational management.
“The drafting of the MIF Act’s IRR is currently underway and will be finalized by September 2023,” the DOF said.
“Congress passed a game-changing measure that could accelerate infrastructure development in the country, create a lot of high quality jobs, attract more foreign investors and propel the country towards higher growth,” Finance Secretary Benjamin Diokno said.
Budget Secretary Amenah Pangandaman for her part assured the public the Department of Budget and Management (DBM) will continue to provide support and technical assistance in the formulation of the IRR and during the implementation of the law.
“The creation of this development fund is very good news because this means we now have an opportunity to expand our fiscal space for the government’s priority programs,” Pangandaman said in a separate statement.
“We fully support this as it will help expand our fiscal space. So we at the DBM remain committed to helping ensure that this development fund will be a success and implemented with utmost integrity,” she added.
Meanwhile, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said the MIF, which will be governed by the Maharlika Investment Corp. (MIC), will complement the country’s existing investment platforms and support the financing of the government’s flagship projects, particularly in the infrastructure sector.
“The economic team has always emphasized the importance of enhancing the platforms that we have for engaging with the private sector and promoting investments in strategic areas. The MIF will help us achieve this objective,” Balisacan said.
To augment the initial capitalization of P125 billion in government securities, NEDA said the MIF can bring in more economic benefits if it can attract co-investments and fully pay up its authorized capital stock of P500 billion.
Balisacan added 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,” Balisacan said.
He noted the MIF as a valuable alternative to debt financing when the country becomes an upper middle-income country and would no longer qualify for concessionary loans, such as official development assistance.
“The MIF can attract equity financing instead of debt financing, which would enable investors and the government to become partners in development. This is also a good opportunity for us to free up other government funds that we can allocate for more social development projects. The MIF will focus on financing profitable development projects through equity,” Balisacan said.
According to the DOF, within the MIF will be sub-funds classified according to objectives: one with a long-term horizon focused on investing in profitable infrastructure, and another sub-fund with a short- to medium-term horizon focused on investing in capital market assets such as fixed income securities and stocks.
The MIC will be created to serve as the investment body responsible for the overall governance and management of the Fund and is expected to be fully operational by end-2024, the DOF said.
It will identify financially and commercially viable infrastructure projects to invest in, the DOF said, and will formulate investment strategies covering emerging megatrends such as environment, social and governance, digitalization and healthcare.
The MIC will be governed by a board of directors with nine members chaired by the secretary of finance. Other members include the chief executive officer (CEO) of the MIC; president and CEO of the Land Bank of the Philippines; president and CEO of the Development Bank of the Philippines; two regular directors; and three independent directors from the private sector.
Within the MIC is an Advisory Body composed of the DBM and NEDA secretaries, and the Bureau of the Treasury that will assist the board of directors in the formulation of the 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.
