BTr issues Maharlika Implementing Rules and Regulations

The Bureau of the Treasury (BTr) has issued the implementing rules and regulations (IRR) of Republic Act No. 11954, otherwise known as the Maharlika Investment Fund (MIF) Act of 2023 on August 28, 2023.

The IRR was issued following consultations with founding government financial institutions (GFIs), Landbank of the Philippines (LBP) and Development Bank of the Philippines (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).

The IRR shall take effect 15 days after its complete publication in the Official Gazette or in a newspaper of general circulation.

“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,” Finance Secretary Benjamin E. 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,” Secretary Diokno added.

With an authorized capital stock of PHP500 billion (approximately US$8.9 billion), the Maharlika Investment Corporation (MIC) shall act as the sole entity to mobilize and utilize the MIF for investments in transactions that will generate optimal returns on investments (ROIs), while contributing to the overall goal of reinvigorating job creation and accelerating poverty reduction by sustaining the economy’s high growth trajectory, while ensuring sustainable development.

The National Government shall source its PHP50 billion contribution from 100 percent of the dividends of the Bangko Sentral ng Pilipinas (BSP) for the first and second fiscal years upon effectivity of R.A. No. 11954; its 10 percent share from the income of the Philippine Amusement and Gaming Corporation (PAGCOR) for a period of 5 years; 10 percent of revenues from gaming operations of other government-owned gaming operators/regulators; government assets and proceeds from privatization of government assets; and other sources such as royalties and/or special assessments for a period of five years

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.

As enumerated under section 14, the MIC is authorized to invest in a wide-range of products, activities and projects, to wit: 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.

“Our non-deal roadshows abroad show that the MIF is being well-received by foreign institutions looking to invest in the Philippines. The private sector will play a huge role in bringing in funds to grow the MIF,” Secretary Diokno said.

The MIC may issue all kinds of bonds, debentures, and securities. However, these will not be guaranteed by the Philippine government.

The MIC’s board of directors will be composed of the Secretary of Finance as ex officio Chairperson; the President and Chief Executive Officer (PCEO) of the MIC as Vice-Chairperson; President and CEO of the LBP; President and CEO of the DBP; two Regular Directors; and three Independent Directors from the private sector. The board’s qualification and selection process is explicitly set out in the IRR.

“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,” Secretary Diokno said.

The IRR 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.

The law provides for the imposition of heavy fines ranging from PHP1 to PHP15million and imprisonment from 6 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,” National Treasurer Rosalia V. De Leon said.

“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,” she added.

As a vehicle for economic growth, the MIF is designed to unlock the country’s potential by making strategic and profitable investments in key sectors to preserve and enhance the long-term value of MIF that will span generations to come.