PRESIDENT Marcos Jr. yesterday signed into law Republic Act (RA) 11954, or the controversial Maharlika Investment Fund (MIF) amid protests and warnings from minority senators on its constitutionality.
Marcos signed RA 11954 in the presence of Senate President Juan Miguel Zubiri, Speaker Martin Romualdez, Sen. Mark Villar and other lawmakers.
In a speech after the signing, the President said the MIF would allow the government to invest in “extremely important projects” without resorting to additional borrowing.
He noted that the new law requires government financing institutions (GFIs) to pool their non-debt financial resources so as not to crowd out other lending obligations that they need to fulfill under their respective mandates.
“There are so many opportunities that we cannot allow to slip by and that is why we have put up the Maharlika Fund so as to be able to give us the capacity and the ability to join in those investments, be part of that. We are talking about investments in agriculture. We’re talking about investments in infrastructure. We are talking about investments in digitalization. We are talking about the investments in the strengthening of our supply chains,” he said.
He added: “We are talking about all of those elements that the post-pandemic economy has shown us are necessary for us to be able to transform the Philippines into a country that not only is investment-friendly but also is competitive in the rest of the world. That is the point of this fund. That is the reason we have created this fund.”
RA 1954 allows GFIs to invest their funds in a wide range of investments projects that would generate bigger returns, such as foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, joint ventures, mergers and acquisitions, real estate and high-impact infrastructure projects, and projects that contribute to the attainment of sustainable development.
It is seen to optimize national funds by generating returns to support the administration’s economic goals was set under the Medium-Term Fiscal Framework (MTFF), the 8-point Socioeconomic Agenda, and the Philippine Development Plan (PDP) 2023-2028; provide the government with a long-term source of income that will support generations to come; and ease the burden on the national budget by providing additional funding for other priority projects of the government.
The President said the MIF will widen the government’s fiscal space and ease pressure in financing public infrastructure projects, as well as accelerate the implementation of the 194 National Economic and Development Authority (NEDA) Board-approved flagship infrastructure projects.
SUSTAINING MIF’S INTEGRITY
Marcos, acknowledging the concerns and issues raised against the MIF, emphasized the importance of maintaining the integrity of the fund and translating its gains into tangible changes for the benefit of the people.
“We remain steadfast in our commitment to transparency, accountability, and good governance in this massive and purposeful undertaking,” he said as he assured the public that MIF investments will be managed by highly competent personnel with good track records and outstanding integrity to ensure that the funds are taken care of with utmost prudence and integrity.
He said that during the crafting of the law, he told lawmakers that neither he nor the secretary of the Department of Finance (DOF) should chair the MIF governing board to prevent imputing political color to its decisions.
But Finance Secretary Benjamin Diokno, in an interview on the sidelines of the signing ceremony, he will serve as chairman and chief operating officer (CEO) of the nine-man board of the Maharlika Investment Corporation (MIC) that will oversee the implementation of the MIF.
He said the MIC Board will include the president and CEOs of the Land Bank of the Philippines and the Development Bank of the Philippines as members, along with two directors to be appointed by the President and three independent directors from the private sector.
Diokno explained that “during deliberations in Congress, we surveyed the ‘best practice’ and found out that the minister or secretary of finance usually chairs the sovereign wealth funds, and that was provided for in the final version of the MIF law.”
He said, though, that the DOF secretary will only serve in an ex-officio capacity and will not run the MIC.
“The independent chairperson of the nine-member Maharlika Investment Corporation, a non-politician, will manage the Fund,” he added.
Zubiri said senators have put in place qualifications of the MIF board, aside from including provisions that would ensure that those who mismanage the funds will be penalized or punished accordingly.
IRR
Zubiri said the Senate will scrutinize the MIF’s implementing rules and regulations to ensure that it is within the spirit of the law, noting that there were instances in the past where IRRs were not in accordance with the intent of lawmakers.
“Gusto naming makita ang IRR bago ma-implement ito. Dapat tugma sa batas. We will be on top of the situation (We want to see first the IRR before it will be implemented. It should be in accordance with the measure. We will be on top of the situation),” he added.
Budget Secretary Amenah Pangandaman said the Department of Budget and Management (DBM) is prepared to help in the crafting of the IRR of the MIF law.
The Fund is expected to have at least P75 billion in paid-up capital this year which shall be composed of P50 billion from the Land Bank of the Philippines and P25 billion from the Development Bank of the Philippines.
Diokno and Zubiri, in separate interviews on the sidelines of the signing ceremony, reassured the public that the funding for the MIF would not be sourced from pension and social funds such as those from the Social security System (SSS), Government Service Insurance System (GSIS) and the Philippine Health Insurance Corporation (PhilHealth).
Zubiri and Senator Cynthia Villar both expect the President to include the MIF in the forthcoming state of the nation address of Marcos.
The Senate President said he had suggested that the President mention some of the potential projects where the MIF might be used to show the public that the funding would actually go to specific projects that they could see and would eventually feel in the future.
WELCOME
Zubiri welcomed the signing into law of the MIF, saying he was “very upbeat” and the people behind it were in “high spirits.”
In a press conference in the Senate after the signing of the measure, Zubiri said President Marcos and his economic team will now have the chance to “highlight” the MIF to the “world” so that investors would come in.
“Sa Palace, very upbeat, gearing up on what projects uunahin para kumita (The mood in the Palace was very upbeat, they are gearing up on what projects should be prioritized so the government will earn),” he said.
For one, he said the government can choose to fund the multi-billion Cavite-Bataan Road Connector project which will cut by three fourths the travel time to the two provinces.
Once completed, he said the government can start earning by collecting toll fees from the connector road.
He added the good effects of the MIF would “take time.”
“Possible next administration na ang makinabang unless its other projects na medyo mas mababa ang construction time. But definitely the next administration will be benefitting from the MIF. Ang tingin ng Presidente rito ay long-term, for the next generation (The next administration stands to benefit from this unless there are projects that have less construction time. But definitely, the next administration will benefit from the MIF. The President sees the MIF on the long-term, for the next generation),” Zubiri said.
Romualdez said the MIF is an additional vehicle for infrastructure financing without imposing new taxes or increasing the country’s foreign debts.
“As an additional vehicle for financing, the MIF is expected to widen the fiscal space in the near- to medium-term as it reduces heavy reliance on local funds and development assistance as the main financing mechanisms for infrastructure projects,” said Romualdez. “It is envisioned to enable the government to execute and sustain high-impact and long-term economic development programs and projects without imposing new or higher taxes.”
He said using the MIF as an alternative infrastructure funding source would likewise mean allocating more funds in the annual national budget for other vital social services like education and health.
The Speaker said that international investors have already expressed interest in investing in the Fund, such as 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.
Former president and now deputy speaker Gloria Macapagal-Arroyo, who is an economist by profession, said the Maharlika law “is a very big milestone for Philippine economy.”
Sen. Mark Villar, who is the sponsor of the MIF bill in the Senate, said the measure “can speed up the recovery from COVID-19” as early as next year.
“So, by the end of the year siguro matatapos na ‘yung IRR ng Maharlika and we can expect that it will be operational. As soon as magsimula ‘yung investment ng Maharlika, mararamdaman na natin. So, as early as, maybe early next year siguro mararamdaman na natin ‘yung effect ng Maharlika (So, by the end of the year, maybe the IRR will be finished and we can expect that it will be operational. As soon as Maharlika starts to invest, we can already feel its effect. So, as early as, maybe early next year we can probably feel the effect of Maharlika),” Villar said.
Camarines Sur Rep. Luis Raymund Villafuerte, one of the law’s authors, said the 19th Congress has afforded the government with a new funding stream for investments other than the traditional sources of funds, namely, the General Appropriations Act (GAA) or the annual national budget, official development assistance (ODA) from overseas partners and the business sector via the public-private partnership (PPP) mode.
Villafuerte said the Marcos administration has come up with a new investment fund source to create more jobs and turn the Philippines into a prosperous middle-class society in two decades.
“The MIF, as set up under the newly-signed RA 11954, would help the national (government) prevail over two drawbacks that threaten to handicap the Marcos administration’s agenda to sustain the robust economic growth path post-pandemic, create jobs and attack poverty, and keep the Philippines on its AmBisyon Natin 2040 path of becoming a prosperous middle-class society in less than two decades,” he said.
Villafuerte said the MIF is “sure to fit up the Philippines with a new growth stimulant at this time when the country has won an investment or credit rating upgrade even as the world economy appears heading for a hard landing in the face of a likely pronounced global economic slowdown.”
SAD DAY
Senate minority leader Aquilino Pimentel III said the signing of the MIF bill “is a sad day in the history of our country, as the State, through the Maharlika Investment Fund, will be engaging, unjustifiably, in an economic activity (risky investing) which is best left to the private sector.”
Pimentel reiterated that the MIF “is madness” since it was developed “on the fly.”
“The law has inherent contradictions because it was rushed. Nobody knows what creature we have created. It could turn out to be a monster, as it has been designed to be a super-GOCC (government owned and controlled corporation),” he said.
He reiterated that the Philippines has neither the budget or trade surplus nor has it “hit any jackpot windfall profit like cash flow from a new discovery of oil or gas reserves” which puts the sovereign fund at risk of ensuring its long-term existence.
He said the funds to be initially used are already existing funds which are under GFIs.
“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 added.
Pimentel said the legality of the MIF will definitely be questioned before the Supreme Court due to the “unclear origin of the seed idea,” the unconstitutional shortcuts made by some senators in passing the bill, “and the inherent contradictions and clear confusion in the law itself.”
He said the factors which make the MIF unconstitutional include the defective presidential certification since there was no public emergency or calamity being addressed at the time, thus “no three readings on three separate days;” there was absence of proof of economic viability, undue delegation of legislative power when lawmakers left to the IRR the determination of many important matters in the measure, violation of substantive due process when its proponents insisted that the MIF is a sovereign wealth fund “when it is not,” violation of the independence of the Bangko Sentral ng Pilipinas, and the bill signed by the President “was not the version passed by Congress hence “this is what we call the ‘altered bill doctrine’.”
“Hence, to put a stop to this madness, the Maharlika Investment Fund Act must be challenged before the Supreme Court. Let us remind the powers that be that ‘MIF’ can also mean ‘Madness Isn’t Forever’,” he said.
Senate deputy minority leader Risa Hontiveros stood firm on her position that the country does not need the MIF since its first “victim” will be the funds from LBP, DBP, and the Philippine Amusement and Gaming Corporation.
She said Diokno is “merely moving public funds around — from urgently needed expenditures to too risky gambles, and from fund disbursements scrutinized and authorized regularly by Congress to investments beyond the reach of elected representatives.”
“With the time lost and political capital used up in promulgating the Maharlika Fund, especially since Mr. Diokno and the President still insist that GSIS and SSS funds should still collaborate with Maharlika — Mr. Diokno has failed in his mission of using the mandate of the administration to pursue tax and fiscal reforms and to keep the National Treasury well-funded. Nasayang ang unang taon nitong Marcos Presidency (The first year of the Marcos administration was wasted),” she said.
Gabriela party-list Rep. Arlene Brosas, a member of the militant Makabayan bloc, called the MIF a “scam” which, she said, “will pave the way for unlimited corruption, cronyism.”
“Despite claiming to be beneficial to the country financially, the recently-signed law has deep flaws that will ultimately lead to mass corruption. Lack of clarity and defined boundaries regarding the Board of Directors’ powers and authority can lead to unchecked discretion and absolute decision-making, which is extremely dangerous,” said Brosas.
Brosas said the President can easily appoint and control the MIF’s Board of Directors and “with the government’s track record of not being transparent in terms of handling funds, we cannot trust it in handling P500 billion worth of public funds which could have been used for social services.”
She said that given the current state of affairs in the government and the country, the proposed law “goes against common sense and will put the country’s economy at risk.”
“With reports of the Philippines losing around P700 billion annually to graft and corruption, investing such a significant amount of money from depleted public funds will definitely impact the lives of ordinary Filipinos who are already reeling from the effects of the economic crisis today,” Brosas said.
“There are pressing issues that demand priority in terms of public funding, such as significant wage increase, supporting jeepney drivers in their call for subsidies, and genuine public housing. The Maharlika scam is not the solution to the hardship that ordinary people are experiencing,” she added. — With Raymond Africa and Wendell Vigilia
