After its initial start got suspended, the stage is now set for the much-vaunted Maharlika Investment Fund (MIF) to finally take off. This developed following the release last week of the implementing rules and regulations (IRR) that were revised upon the imprimatur of President Ferdinand “Bongbong” Marcos Jr. (PBBM). And on Monday, PBBM officially named his adviser on economic and investment affairs as president and chief executive officer (CEO) of the Maharlika Investment Corporation (MIC).
As created by Republic Act (RA) 11954 that PBBM signed on July 18 this year, the country’s first sovereign wealth fund will run as the newest vehicle to bring in more capital to finance major infrastructure and other big-ticket projects in the Philippines. PBBM appointed Rafael Consing Jr., who is currently the executive director of the Office of the Presidential Adviser for Investment and Economic Affairs, as MIC president and CEO for three years.
Under Section 21 of the RA 11954, the MIC Board will be composed of nine members. The Secretary of Finance will serve as the chairperson in ex-officio capacity. Other members of the board are the president and CEO of the MIC, who will sit as the vice chairperson; the president and CEO of the Land Bank of the Philippines (LBP); president and CEO of the Development Bank of the Philippines (DBP); two regular directors and three independent directors from the private sector.
The MIC is expected to have at least P75 billion in paid-up capital this year, with LBP’s P50 billion and P25 billion from the DBP.
PBBM and his economic managers led by Finance Secretary Benjamin Diokno strongly pushed the enactment of the Maharlika law that targeted its implementation before the end of this year. But this did not stop PBBM from suspending the IRR last Oct.12, purportedly to ensure the fund’s objectives are realized for the country’s development, with safeguards in place for transparency and accountability.
The suspension order came a day after Marcos reduced LBP’s deposits to the government from 50 percent to zero percent for 2022 earnings a few weeks after the state-run bank gave P50 billion as a part of the capital of the MIF.
The Palace released last Nov. 11 the revised IRR of the Maharlika law which notably gave the President the upper hand to choose its top officials and at the same time removed the additional qualifications of regular and independent directors, particularly in terms of education, professional experience, track record and ethical standards. This enabled PBBM to appoint Consing, who is seen as not having impressive education credentials.
Diokno, however, argued the revisions on the IRR were done to further assuage and encourage local and international investors that have expressed keen interest in the MIF. “The IRR’s emphasis on ensuring the independence of the Board of Directors of the MIC allows it more headroom to form credible oversight and risk management bodies while upholding the highest standards of effective fund management,” Diokno pointed out.
It was Diokno who originally toyed with the idea of creating the country’s first-ever sovereign wealth fund while he was still the governor of the Bangko Sentral ng Pilipinas (BSP). At that time, the planned funding source would largely come from BSP surplus.
As originally proposed, the Government Service Insurance System (GSIS) and the Social Security System (SSS) were supposed to be tapped as sources also of the “seed capital” for the MIF. This met stiff resistance though from the lawmakers themselves.
But another bill still pending at the 19th Congress would soon mandate the GSIS to take a lead role in the management of “trust funds” other than its present memberships from the civilian government.
The GSIS will be tapped to manage – not just one but two – “trust funds” for the proposed Military and Uniformed Personnel (MUP) pensions. This is under the revised House Bill (HB) 8969, or the MUP Pension Fund System approved on third and final reading last month at the Lower Chamber.
HB 8969 also seeks, among others, to establish two separate “trust funds:” one for the Armed Forces of the Philippines (AFP) and the other will be for the uniformed services of the following: the Philippine National Police (PNP); the Philippine Coast Guard (PCG); the Bureau of Fire Protection (BFP); the Bureau of Jail Management and Penology (BJMP); the Bureau of Corrections (BuCor) and the National Mapping and Resource Information Authority (NAMRIA).
Regarded as the resident economist of the 19th Congress, Albay Rep.Joey Salceda revised the original MUP bill in conjunction with the new inputs submitted by Department of National Defense Secretary Gilberto Teodoro Jr. Appointed in June this year, Teodoro worked out a revised MUP bill that, among others, will tap the GSIS as the “fund manager” for the MUPs of the AFP.
Both (MUP) “trust funds” will be separate and distinct and will not be comingled with GSIS funds.
The revised MUP bill no longer requires mandatory contribution but will apply only to new entrants in the AFP while keeping intact the present pensions of retired AFP officers and men.
Incidentally, Salceda is also one of the principal authors of the MIF Law he worked out with PBBM’s economic team. In tandem anew with the Diokno-led economic team, Salceda salvaged the original MUP bill to remove contentious provisions of the automatic indexation of the pension with the salary of the MUP members.
The House-approved MUP bill is now pending at the Senate committee on national defense, security, peace and reconciliation chaired by Senator Jinggoy Estrada. During our Kapihan sa Manila Bay news forum last week, Estrada disclosed he has adopted the DND-AFP draft bill. While both chambers of Congress are still busy with the approval of the proposed 2024 budget, Sen. Estrada vows to see through next in Congress the approval of the MUP bill.
If properly managed, these new “trust funds” will be veritable sources of investments to help create wealth for the country.