Maharlika Investment Fund: A Timeline of How it Became a Law

The Maharlika Investment Fund MIF, also called the Maharlika Wealth Fund MWF, is the investment body responsible for a recently established sovereign wealth fund designated for the Philippines. The MIF is the first establishment of a sovereign wealth fund in the Philippines.

The allocation will include various assets, such as foreign currencies, fixed-income securities, domestic and international corporate bonds, commercially viable infrastructure projects, and infrastructure initiatives. The MIF is anticipated to provide profits that align with the government-owned economic objectives, as delineated in the Medium-Term Fiscal Framework, the eight-point Socioeconomic Agenda, and the Philippine Economic Development Plan.

It is anticipated that the MIF will have the following beneficial effects:

• The MIF will be a stable source of seed money, which will help the economy expand and create new jobs.
• The seed money may be used to build roads, bridges, and airports, making the nation more accessible and desirable to potential foreign investors.
• More significant inflows of foreign money are a direct result of the MIF’s promotion of international trade.
• Improved accountability and undermined transparency will result from President Marcos’s certified board of independent directors and best economic managers who will manage the fund properly.
• International currencies, fixed-income instruments, domestic and international corporate bonds, commercial real estate, and infrastructure projects will all be awarded from the MIF, the first sovereign wealth fund in the Philippines.

Seventy percent of the fund’s assets must remain in the Philippines for it to serve its mission, and gambling, tobacco, and alcohol manufacture are all strictly off-limits to local funds.

The MIF is one of the PBBM’s major priorities to boost economic recovery and create new jobs. Therefore, he views it as a “game-changer” and a potential national economic development and game-changer.

Newly enacted Maharlika Fund Law to serve as a vehicle for growth

The Government Service Insurance System (GSIS) and the Social Security System (SSS) were key sectors initially listed as contributors or fund sources of the MIF, the Philippine development plan SWF marketed as a “vehicle for investments” by its proponents.

Since the average Filipino’s future depends on that valuable pension, this immediately made the MIF act’s implementing rules a highly charged emotive issue. Regardless of how the public feels about the bill, the House seems determined to pass it.

The timeline and Legislative process of How Maharlika Investment Fund Became a Law

November 2022

On November 28, seven members of the Philippine House of Representatives, headed by Martin Romualdez and Sandro Marcos, introduced House Bill No. 6398 in late November 2022, proposing the establishment of a sovereign wealth fund for the Philippines, to be called the Maharlika Wealth Fund (MWF).

If the fund were to be formed, it would be overseen by the Maharlika Investment Corporation (MIC). In his view, a SWF would benefit the development authority of the Philippines and foreign corporate bonds; hence, President Bongbong Marcos has advocated for its creation.

On November 29, the panel that oversees banks and government financial institutions and intermediaries discussed House Bill No.6398 only one day after it was introduced. Irwin Tieng, a representative from Manila’s 5th district, controls the group. The measure specifies initial funding of P250 billion for MIF and priority projects.

On its third reading in the lower House, after President Marcos certified it as urgent, the measure was approved with 279 in favor. Fortunately, only six legislators voted no. The House of Representatives spent 17 days discussing the action from when it was introduced until it was passed.

December 2022

On December 1, the committee voted to pass House Bill 6398. At the hearing, Rep. Joey Salceda, who represents the 2nd district of Albay and is vice chairman of the panel, spent much of his time proposing changes to the bill as head of the technical working group (TWG).

The Committee on Appropriations has authorized the financial portion of the legislation; thus, its parent committee, the Tieng panel, may now recommend it for passage by the whole House or Senate President Juan Miguel. Concerns over using GSIS and SSS pension money in what many see as a dangerous investment and risk management endeavor in the private sector have grown in the House as these discussions have progressed.

On December 9, the financial portion of the senate bill to appropriate funding for the MWF, now represented by an unnumbered account, was approved by the Committee on Appropriations, which Rep. Zaldy Co of the Ako Bicol Party-list leads. A proposal from the BSP to donate its yearly declared profits to the MWF is primarily accepted by the panel after a move by Quimbo.

On December 15, With Speaker Romualdez in charge, the House of Representatives passed the MIF Bill (which had been designated as urgent by Malacañang) on the third and final reading with a nominal vote tally of 279 in favor, 0 against, and 0 abstentions.

On the morning of the same day, it passed on second reading with a voice vote, but only after its sponsors agreed to 21 separate changes. Just 18 days were spent in the House throughout the MIF’s legislative process.

January 2023

Senate Law No. 2020, authored chiefly by Sen. Mark Villar, was a carbon copy of the law’s third and final House version. In addition to leading the Senate, Villar is in charge of the Banking and Financial Institutions Committee.

May 2023

On May 24, 2023, Marcos officially designated the establishment of the Maharlika fund as a matter of utmost importance, warranting immediate attention from the Senate.

On May 31, 2023, the legislative advisory body’s upper chamber successfully passed the third and final reading of the measure, garnering support from 19 senators, while one senator expressed dissent and another chose to abstain. The legislation would need the signature of President Marcos to be enacted into law.

July 2023

The bill’s copy was delivered to Malacañang on July 5, 2023, to obtain President Marcos’s signature. The measure was enacted into law on July 18 and is now officially recognized as Republic Act No. 11954.

Different Perspectives

If properly managed, the fund may support government-owned programs and development, according to economist Michael Batu. However, Global Source economist Romeo Bernardo feels the plan is poorly timed and that a Maharlika bill would increase the Philippines’ financial and budgetary risks and mismanagement, citing the 1Malaysia Development Bank Berhad crisis.

The Foundation for Economic Freedom, Competitive Currency Forum, Filipina CEO Circle, Financial Executives Institute of the Philippines, Institute of Corporate Directors, Integrity Initiative, Inc., Makati Business Club, Management Association of the Philippines, Movement for Good Governance, Philippine Women’s Economic Network, UP School of Economics Alumni Association, and Women’s Business Council Philippines, Inc. The group believes no “missing institution” in the Philippine economy requires a sovereign wealth fund and advises the government to manage the fiscal deficit and public debt to avoid impediments to public service delivery and a downgrade of the Philippines’ sovereign investment credit rating. It also says the Philippines has no commodity-based or state-owned company trade surpluses. The GSIS and SSS contributing to the fund were also challenged.

The Philippine Stock Exchange supports the plan since its “primary mission is to facilitate the flow of capital into more productive and beneficial channels and, as a result, contribute to efficient capital formation for the country.”

The legislation was also criticized. Tax expert Raymond Abrea calls it a plunder fund “prone to corruption and money laundering.” The law might damage the independence of government financial institutions and the Bangko Sentral ng Pilipinas. Thus, economists are skeptical. Faculty from the University of the Philippines School of Economics wrote in June 2023 that the fund “violates fundamental principles of economics and finance and poses serious risks to the economy and the public sector – notwithstanding its proponents’ good intentions.” They cited its unclear purpose even after bicameral Congress deliberations, possible encroachment on the budget process, considerable risks to public funds, moral risks, possible contradiction to other economic plans given its vagueness, governance structure red flags, and unlikely substantial growth to finance projects as crucial points to consider.

Maharlika Investment Fund in Real Estate Development

If the Maharlika Investment Fund focuses on economic growth and development, it might include provisions related to real estate projects. Moreover, the passing of this law reflects the government’s commitment to economic growth. This, in turn, can positively impact the real estate market. Brittany Corporation’s activities might be influenced by the overall economic conditions and opportunities generated by such laws.

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