A SENATE committee sponsored a bill seeking to establish the Maharlika Investment Fund (MIF) out for plenary discussion, touting the fund’s potential for returning the Philippines to a track of long-term high growth.
“I would like to emphasize that the Maharlika Investment Fund has the potential to bring back the Philippines to its high growth trajectory through investments in the country’s developmental projects,” Senator Mark A. Villar, who chairs the Senate Banks, Financial Institutions and Currencies Committee, said during his sponsorship speech.
“Not only will this promote the effective intergenerational management of the country’s financial resources, but more importantly, improve the welfare of future generations of Filipinos,” he added.
According to the committee report, initial capital will come from the Land Bank of Philippines and the Development Bank of the Philippines; dividends of the Bangko Sentral ng Pilipinas (BSP); the Philippine Amusement and Gaming Corp.; and proceeds from the privatization and transfer of government assets.
Other sources such as royalties and special assessments may also be tapped.
“The involvement of these GFIs (government financial institutions) as contributors of the initial seed fund is reasonable and will not crowd out the other lending obligations that they need to fulfill under their respective mandates,” Mr. Villar said.
“In fact, the expected return of Maharlika, which is expected to be around 8.6% on average, is much higher than the cost of capital and the return on their current investment placements,” he added.
During an earlier hearing on the measure, the central bank said its plan to build up capital to P200 billion could be delayed if legislation obliges it to supply seed capital to the proposed Maharlika fund.
If signed into law, the measure will require the BSP to contribute 100% of its dividends to the sovereign wealth fund in the fund’s first two years.
After that period, the central bank’s contribution drops to 50% of its dividends, with the remaining 50% to be deposited into a special account holding the capital build-up funds.
However, the BSP did not see these provisions as “impinging” on its ability to achieve its mandate, noting that its balance sheet was “strong” and “improved.”
Mr. Villar said the fund will be established with “the highest standards of accountability, fiscal responsibility and good governance.”
The proposed fund will adhere to the Santiago principles to ensure the effective operation of sovereign wealth funds. It will also be governed by the relevant investment and risk management guidelines.
“In order to ensure accountability and proper governance of the fund, several layers of oversight will be put in place,” the senator said. “First, the board is required to appoint an internal auditor which shall be independent from the management of the MIC (Maharlika Investment Corp.) and shall be under the direct control and supervision of the board of directors.”
“Second, an internationally recognized audit firm will serve as the external auditor for the fund to audit its financial statements,” he added. “Third, the books and accounts of the fund shall be subject to the strict examination by the Commission on Audit.”
A Joint Congressional Oversight Committee will also be constituted to oversee, monitor and evaluate the implementation of the Maharlika measure. It will be composed of five members each from both houses of Congress.
“Finally, as an additional measure for transparency, all documents of the fund and the Maharlika Investment Corp. shall be open, available and accessible to the public,” Mr. Villar said.
The Maharlika fund will also be subject to the provisions of the GOCC Governance Act of 2011, he said. — Alyssa Nicole O. Tan
