February 4, 2023

Eureka News

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New Maharlika bill receives House Committee nod

The unnumbered replacement bill to create the Maharlika Investment Fund (MIF) was formally approved during an executive session of the House Committee on Banks and Financial Intermediaries, its chairman, Manila Assemblyman Irwin C. Tieng, announced last Monday.

The draft law will now be forwarded to the plenum for further deliberation.

Tieng noted a provision in the bill that mandates that at least 20 percent of Maharlika Investment Corp.’s net income (MIC) to fund social services from the national government.

“The whiteboard [of the MIC] shall determine the MIC’s dividend policy, provided that at least 20 percent of the MIC’s net profits are remitted to the national government for use in social welfare projects,” Tieng said.

Legislators announced that the MIC’s 15-member board would have four independent directors instead of the original two.

THE unnumbered replacement bill also provides for the Minister of Finance to serve as Chair of the MIC Board of Governors in place of the Philippine President.

SSS, GSIS off

According to Tieng, his committee approved the sentencing provision proposed by Albay Rep. Joey Sarte Salceda. This provision provides that any director, trustee or officer who, knowingly or maliciously, breaches any investment policy established by the Board of Directors or whose gross negligence, willful misconduct, fraud or acts in breach of any investment agreement; and in the event of a loss suffered by the Fund, shall be liable for any loss arising therefrom to the body.

Tieng said shareholders or members and others could be punished with imprisonment of not less than one year but not more than five years, or a fine of not less than 50,000 pesetas but not more than 2 million pesetas, or both, at the discretion of the court will.

Lawmakers said their committee also formally approved the removal of the Government Service Insurance System (GSIS) and Social Security System (SSS) as contributors.

According to the unnumbered bill, the Bangko Sentral ng Pilipinas (BSP) will now be a funding source of the MIF, joining the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP).

The LBP will contribute 50 billion pesos while the DBP will contribute 25 billion pesos.

Public backlash

HOUSE Minority Deputy Leader and ACT Teachers Party MP France L. Castro said that based on the latest version of the bill, the authors had only repackaged the MIF.

“Right now, they’re not including the SSS and GSIS as major funders because of the public backlash,” Castro said. “But in the calculation the mentioned insurance systems are still open to finance the MWF; They are just waiting for the people’s anger to subside.”

Maharlika’s latest version may also force local businesses to shell out funds, the deputy minority leader said. She quoted the provision: “Additional funds may also be raised from investments by private financial institutions and corporations, as may be determined by the Board of Directors.”

“Additionally, withdrawals from the MIF are only permitted until ‘only after at least five years of investment activity’ – in other words, at the earliest at the end of Pres’ term. [Ferdinand R.] Marcos Jr,” she added.

According to Bayan Muna Chairman Neri J. Colmenares, the MIC “may compromise, condone, or release in whole or in part any claim of or settled liability to the MIC, regardless of the amount, under the conditions applicable from time to time by the Board of Directors on positive Advisory Board recommendation required to protect the interests of the MIC and the integrity of the MIF.”

“No amount of tweaking or change is going to save Maharlika because it’s inherently public funds that are at risk from chum corruption,” Colmenares said. “Maharlika cannot be approved and must be scrapped.”

BSP, Pagcor

AT last Friday’s hearing, BSP Deputy Governor Francisco G. Dakila Jr. proposed a flexible setup whereby BSP will contribute from its declared dividends to the MIF’s seed fund.

BSP attorney Leila M. Rivera told the House panel that the central bank declared dividends equal to 50 percent of its income.

Rivera said that with an estimated income of 60 to 70 billion pesos for this year, dividends would be between 30 and 35 billion pesos.

“The proposal provides for a 50/50 split between the capitalization of GNP and the source of funding for the [MIF] until such time as the BSP is fully capitalized,” Dakila said. “Once BSP is fully capitalised, BSP’s declared dividends to the national government can be used in full to fund the [MIF].”

Dakila told lawmakers the central bank’s proposal would not affect the country’s international reserves.

The Philippine Amusement and Gaming Corp. (Pagcor) is also required to donate 10 percent of its online gaming revenues to the MIF.

Representatives from LBP, DBP and Pagcor formally expressed their support for the creation of the MIF during the hearing.

risks, rewards

AGAIN, the Appropriations Panel approved Marikina Rep. Stella Luz A. Quimbo’s proposal to exclude the General Appropriations Act (GAA) as one of the mandatory sources of funding for the MIF.

Quimbo also reiterated the importance of the MIF amid the current socio-economic landscape.

She pointed out that rather than imposing an additional tax burden on people, the establishment of the MIF provides an alternative revenue stream that can be used to fund critical government projects.

“That’s exactly the goal of a sovereign wealth fund,” Quimbo added. “The bill creates an investment vehicle that pools excess government funds and ensures they are managed professionally and transparently.”

Among other things, the MIF Act requires the Board to engage internal and external auditors, although its accounts are also subject to review by the Audit Committee.

In addition, there is a joint Congress Committee to oversee the implementation of the MIF law, an obligation to report to the President on fund performance, a risk management unit to ensure a balance between risk and return, and a cap on administrative and operating expenses of the MIF.