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Safeguards of the Maharlika Investment Fund

By Euney Marie Mata-Perez on September 7,2023

Republic Act (RA) No. 11954  established the Maharlika Investment Fund (MIF) to strengthen the investment activities of the country’s top-performing government financial institutions and promote economic growth and social development. It was established consistent with laudable State policy to generate, preserve and grow national wealth, create jobs, promote trade and investments, foster technological transformation, strengthen connectivity, expand infrastructure, and achieve energy, water and food security.

Much has been discussed about the MIF, including concerns and fears of misuse of monies that will be funneled into the fund.  In this article, we examine the safeguards which are set out in the law.

The MIF, through the Maharlika Investment Corporation (MIC), shall be funded with funds coming from the National Government, Land Bank of the Philippines (LBP), Development Bank of the Philippines (DBP), dividends from the Bangko Sentral ng Pilipinas, and possibly, investments from select government-owned and controlled corporations (GOCCs) or government financial institutions (GFIs).  However, the investments from LBP, DBP, and other GFIs should not exceed twenty-five percent (25%) of their net worth, and investments of GFIs and GOCCs shall be subject their respective investment and risk management strategies.

Strategic investments:  RA No. 11954 expressly mandates that the Fund’s investment should be strategic, in a manner which promotes fiscal stability for economic development.

Fulfillment of national priorities:  Its investments in infrastructure projects shall be directed towards the fulfillment of national priorities, such as the national infrastructure program of the Department of Public Works and Highways (DPWH), the inclusive innovation industry strategy of the Department of Trade and Industry (DTI), and the public investment programs of the National Economic and Development Authority (NEDA).

High impact projects:  Investments in real estate, including agro-industrial estates and economic zones shall be limited to high-impact projects, to ensure that these are in line with the socioeconomic development program of the government.

Good governance, transparency and accountability:  The MIF is mandated to adhere to the principles of good governance, transparency, and accountability. Thus, the MIC is required to publish the terms and conditions, financial statements, and other relevant reports of operations. Its documents shall be accessible to the public.  It shall also be bound by the relevant disclosure rules under the Securities Regulation Code (RA No. 8799), Revised Corporation Code (RA No. 11232), and other laws, and regulations.

Sustainability: The Board of Directors of the MIC is mandated  to ensure that all allowable investments are in accordance with the principle of sustainability.

Prudence and transparent management:  RA No. 11954 mandates that the MIC’s activities should contribute to a prudent and transparent management of  government resources.

Investment policies, guidelines, and risk management:  The management of the MIF shall be subject to a set of investment policies, guidelines, and risk management strategies which should ensure the long-term viability of the Fund.

Sovereign guarantee only if authorized: No guarantee involving financial liability arising from any action of the MIC shall be binding upon the Philippine government, without obtaining the written authority of the proper authorities.

Financial reporting:   MIC’s financial statements and reports shall be prepared, in accordance with the relevant Financial Reporting Standards and Principles.

COA Audits:  The books and accounts of the MIC shall be subject to the examination and audit of the Commission on Audit (COA), and the COA shall prescribe the guidelines of the audit of the MIC and the Fund under its management in accordance with international best practices.

The MIC shall also be subject to the GOCC Governance Act of 2011 (RA No. 10149), although the MIC Board was given flexibility in determining the positions and compensation of highly technical employees.

All procurement activities of the MIC shall be subject to, and governed by, the provisions of the Government Procurement Reform Act (RA No. 9184), except the engagement of professional, or technical services necessary for the selection of investments.

RA No. 11954 also incorporated penal provisions, which would punish (i) adirector or officer who willfully holds office while having disqualifications or willfully conceals a ground for disqualification, and (ii) any independent auditor who knowingly certifies the corporation’s financial statements despite its gross incompleteness or inaccuracy, failure to give a fair and accurate presentation of the corporation’s condition, or containing false or misleading statements. 

Also, it penalizes any person,natural or juridical, who allows himself, herself, or itself to be used for fraud, or for committing or concealing graft and corrupt practices by the directors, officers, or other employees of the MIC.

A director or officer of the MIC who also tolerates graft and corrupt practices act, by failing to sanction, report, or file the appropriate action committed by any person shall be also be punishable. Also punishable is any person who, knowingly and with intent to retaliate, commits acts detrimental to a whistleblower.

All the foregoing liabilities shall also be separate from any other offenses under other laws, such as the Revised Penal Code, the Anti-Graft and Corrupt Practices Act, the Code of Conduct and Ethical Standards for Public Officials and Employees (RA No. 6713), the Plunder Act (RA No. 7080), and RA No. 9160 or the Anti-Money Laundering Act of 2001, among others.

The foregoing show that RA No. 11954 embodies several provisions intended to ensure that adequate safeguards are in place for the MIF.  They are meant to allay the public’s fears of misuse of the funds, including the commission of graft and corruption.

We just hope that all these provisions and safeguards would be enforced effectively.

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