BTr releases IRR for Maharlika Act

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

These regulations come after extensive consultations with key government financial institutions (GFIs), including the Landbank of the Philippines (LBP) and the Development Bank of the Philippines (DBP). 

The Technical Working Group, comprised of representatives from 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), also contributed to shaping the IRR. 

The IRR will take effect 15 days following its complete publication in the Official Gazette or in a widely circulated newspaper. 

Finance Secretary Benjamin E. Diokno underscored the importance of the MIF as a financing mechanism to expand fiscal capacity, reduce reliance on local funds, and decrease dependence on official development assistance (ODA) for significant projects, as outlined in the Infrastructure Flagship Project (IFP) list recently approved. 

Secretary Diokno elaborated, “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,”. 

With an authorized capital stock of P500 billion (approximately US$ 8.9 billion), the Maharlika Investment Corporation (MIC) will serve as the sole entity to mobilize and deploy the MIF for investments generating optimal returns while contributing to job creation, poverty reduction, and sustaining economic growth with an eye on sustainable development. 

The National Government will allocate its P50 billion contribution from various sources, including dividends from the Bangko Sentral ng Pilipinas (BSP), income from the Philippine Amusement and Gaming Corporation (PAGCOR) for a five-year period, gaming revenue from other government-owned operators, government assets and privatization proceeds, royalties, and special assessments. 

Other GFIs and government-owned and controlled corporations (GOCCs) are encouraged to invest in the MIF, aligning with their respective investment and risk management strategies. However, providers of social security and public health insurance services are explicitly barred from investing in the MIF. 

As outlined in Section 14, the MIC has the authority to invest in a broad spectrum of products, activities, and projects, encompassing cash and tradable commodities, sovereign-issued fixed-income instruments, domestic and foreign corporate bonds,

listed and unlisted equities, and Islamic investments such as Sukuk bonds, among others. 

Secretary Diokno emphasized that international institutions have expressed significant interest in investing in the Philippines through the MIF, highlighting the pivotal role of the private sector in attracting funds to grow the MIF. 

The MIC is authorized to issue various types of bonds, debentures, and securities, although these will not carry guarantees from the Philippine government. 

The MIC’s board of directors will comprise the Secretary of Finance as ex officio Chairperson, the President and Chief Executive Officer (PCEO) of the MIC as Vice-Chairperson, and the Presidents and CEOs of LBP and DBP. It will also include two Regular Directors and three Independent Directors from the private sector. The IRR explicitly outlines the qualifications and selection process for the board. 

Secretary Diokno stressed the importance of selecting qualified individuals to oversee the Fund’s operations and ensuring strict adherence to the law’s provisions, incorporating safeguards into the IRR. 

The IRR includes provisions for penalties to maintain the Fund’s integrity. Individuals found in violation of these regulations may face significant fines ranging from PHP 1 to 15 million and imprisonment from 6 to 20 years for various offenses, including knowingly holding office while disqualified, certifying incomplete or inaccurate financial statements, involvement in fraudulent activities, and failure to report or take action against corruption. 

National Treasurer Rosalia V. De Leon noted, “The Maharlika Investment Fund Act’s IRR adheres faithfully to the law, ensuring that the prescribed procedures and guidelines will be consistently applied.” 

She further emphasized that the BTr, in collaboration with founding GFIs, DBP and LBP, worked closely with the Technical Working Group to align the IRR with the Maharlika Act. 

The MIF is envisioned as an economic growth catalyst, aimed at strategic and profitable investments across key sectors, preserving and enhancing its long-term value for future generations.