MAHARLIKA

INVESTMENT
FUNDS
OVERVIEW OF THE MAHARLIKA
INVESTMENT FUNDS
The Maharlika Investment Fund (MIF),
established by the Maharlika Investment
Fund Act of 2023, signifies a pivotal
development in the Philippines' economic
landscape.

Managed by the Maharlika

Investment Corporation (MIC), it is
the country's inaugural sovereign
wealth fund designed for strategic
investments across various assets.
IMPORTANCE OF INVESTMENT IN
NATIONAL DEVELOPMENT

Investments are crucial for economic

growth, job creation, and poverty reduction,
making the establishment of the MIF a
strategic move by the Philippine
government.

The MIF aligns with national goals by

deploying financial assets to stimulate
economic activity without adding
fiscal and debt burdens.
CONNECTION BETWEEN THE MAHARLIKA
INVESTMENT FUNDS AND BROADER
GOALS OF PHILIPPINE NATIONAL
DEVELOPMENT
The MIF aligns with key policy frameworks,
including the Medium-Term Fiscal Framework,
Socioeconomic Agenda, and Philippine
Development Plan.

Through public-private partnerships,

the MIF accelerates critical
infrastructure projects and
contributes to emerging
megatrends.
PURPOSE AND SIGNIFICANCE
OF THE REPORT
The report comprehensively explores the
legislative journey, reception, criticisms, and
legal challenges of the MIF.

It aims to provide insights into the

implications of the MIF for
economic development and
ongoing efforts to refine its
organizational structure.
 HISTORICAL CONTEXT AND EVOLUTION
BRIEF HISTORY
2019: House Speaker Martin December 31, 2022: The House of Senate Committee Report
Romualdez proposes the creation Representatives (HRep) approves the is submitted.
of the MIF through House Bill No. substitute bill, HBN 6608, 17 days after its Senator Mark Villar
6398 (HBN 6398). filing. sponsors the proposed
2020-2022: HBN 6398 undergoes 2023: Senate involvement begins: measure (SBN 2020) and it
at least four Committee meetings > Senator Mark Villar files Senate undergoes interpellations
to address provisions and Bill No. 1670 (SBN 1670). in the Senate.
concerns raised against it. > Senator Raffy Tulfo files another
December 14, 2022: President version under SBN 1814.
Ferdinand Marcos Jr. certifies the 2023: Three Committee hearings are
bill as urgent, emphasizing the conducted in the Senate to discuss the
need for a sustainable national legislative proposal.
investment fund to drive 2023: Three technical working group
economic growth and social (TWG) meetings follow the Committee
development. hearings to finalize the measure.
HISTORICAL DEVELOPMENT OF THE
MAHARLIKA INVESTMENT FUNDS
IN THE PHILIPPINES
The MIF's origins can be traced back to
late 2022, initiated by lawmakers and
inspired by South Korea's sovereign wealth
fund.

President Bongbong Marcos certifying

the bill as urgent led to its approval in
both the House of Representatives
and the Senate.
EVOLUTION OF THE FUNDS IN
RESPONSE TO CHANGING ECONOMIC
AND DEVELOPMENT NEEDS

The MIF adapts to changing economic

needs, addressing global challenges like
rising interest rates and the COVID-19
pandemic.

It reflects the government's

commitment to innovative financial
solutions in response to
contemporary economic
challenges.
IMPACT OF HISTORICAL EVENTS ON
THE FORMATION AND
RESTRUCTURING OF THE FUNDS

Global economic conditions, rising interest

rates, and the COVID-19 pandemic
significantly influenced the formation and
restructuring of the MIF.

The fund's dual objectives highlight its

response to global challenges while
aligning with broader economic
goals.
LEGAL AND
INSTITUTIONAL
FRAMEWORK
The Maharlika Investment Fund (MIF) Act of 2023,
approved by Congress on May 31 and signed into law
by President Ferdinand R. Marcos Jr. on July 18,
establishes a legal and institutional framework for the
creation of the Philippines' first sovereign wealth fund.

Purpose and Investments

Management and Oversight
Capitalization Sources
Prohibitions and Safeguards
Presidential Approval and Implementation
Implementation Timeline
Expected Impact
EXAMINATION OF THE LEGAL
FOUNDATIONS GOVERNING THE
ESTABLISHMENT AND OPERATION OF
THE MAHARLIKA INVESTMENT FUNDS

The Maharlika Investment Fund Act of 2023

defines the legal foundations, creating the
Maharlika Investment Corporation (MIC) as
the sole vehicle for MIF.

It outlines funding sources, permissible

sound investments, and mandates
for and credible investment and risk
management.
INSTITUTIONAL STRUCTURES
RESPONSIBLE FOR MANAGING AND
OVERSEEING THE FUNDS

The MIC's governance involves a Board of

Directors, an Advisory Body, and a Risk
Management Committee to ensure
transparency, accountability, and effective
management.

The institutional setup aligns with

principles of good governance,
emphasizing robust oversight and
risk mitigation.
ANALYSIS OF HOW THE LEGAL AND
INSTITUTIONAL FRAMEWORK ALIGNS WITH THE
PRINCIPLES OF PUBLIC ADMINISTRATION AND
NATIONAL DEVELOPMENT
The legal and institutional framework aligns
with principles of public administration and
national development through stringent
reporting and audit systems.

Emphasis on sustainability, strategic

investments, and risk mitigation
reflects alignment with broader
national development goals.
PURPOSE AND INVESTMENTS
The MIF is designed to optimize national funds by generating returns to support the economic
goals of the administration. It will invest in a diverse range of assets, including foreign
currencies, fixed-income instruments, corporate bonds, joint ventures, real estate,
infrastructure projects, and those contributing to sustainable development.

MANAGEMENT AND OVERSIGHT

The Maharlika Investment Corporation (MIC) is established as the governing body responsible
for managing the MIF. Oversight mechanisms include an Advisory Body, Board of Directors,
Risk Management Committee, and Audit Committee to ensure effective management and
mitigate risks.

CAPITALIZATION SOURCES
Contributions to the MIF will come from various sources, including BSP dividends, government
share in PAGCOR income, DOF-PMO properties, privatization proceeds, and other fiscal
regime-based sources.
PROHIBITIONS AND SAFEGUARDS
Prohibitions are in place for certain government agencies and GOCCs, including SSS, GSIS,
PhilHealth, PAG-IBIG Fund, OWWA, and PVAO Pension Fund, preventing them from contributing to
the MIC's capitalization.
Safeguards include the creation of an Audit Committee, a Risk Management Committee, and a
Joint Congressional Oversight Committee for enhanced accountability.

PRESIDENTIAL APPROVAL AND IMPLEMENTATION

President Marcos signed the MIF Act into law, emphasizing its potential to accelerate
infrastructure development, create jobs, attract foreign investors, and drive economic growth.

IMPLEMENTATION TIMELINE
The MIC is expected to be fully operational by the end of 2024.
The drafting of the MIF Act's implementing rules and regulations (IRR) is underway and expected
to be finalized by September 2023.

EXPECTED IMPACT
The MIF is anticipated to serve as a long-term source of income for the government, supporting
economic growth and reducing reliance on the national budget. President Marcos views the MIF
as a "game-changer" with transformative potential for the economy.
FUNDING SOURCES AND
ALLOCATION STRATEGIES
The Maharlika Investment Corporation shall have an
authorized capital stock of 500 billion pesos
(approximately 8.9 billion dollars), the 375 billion pesos
of which shall constitute common shares available for the
subscription of the National Government, its agencies or
instrumentalities, GOCCs or Government Financial
Institutions (GFIs). The remaining 125 billion pesos in
capital shall correspond to the preferred shares available
for the subscription of the National Government, its
agencies or instrumentalities, GOCCs or GFIs, and
reputable private financial institutions and corporations.
 Of the 375 billion pesos capital which correspond to the common
shares, 125 billion pesos (or about 2.2 billion dollars) shall be initially
subscribed by the National Government, and the two Government
Financial Institutions (GFIs).

Fifty billion pesos

Land Bank of the Philippines
(P50,000,000,000.00)

Development Bank of the Twenty-Five billion pesos

Philippines (P25,000,000,000.00)

Fifty billion pesos

National Government
(P50,000,000,000.00)
The 50 billion pesos contribution of the National Government
to the initial capitalization shall be sourced from the following:

One hundred percent (100%) of the dividends of the

Bangko Sentral ng Pilipinas (BSP) remitted to the National
Government for the first and second fiscal years upon the
effectivity of the Maharlika Investment Fund Act of 2023;
Ten percent (10%) of the National Government's share to
the income of the Philippine Amusement and Gaming
Corporation (PAGCOR), and ten percent (10%) of revenues
from gaming operations of other government-owned
gaming operators/regulators;
government assets and proceeds from privatization
government assets, and;
other sources such as royalties and/or special
assessments.
To increase the capitalization of the MIC, the Board of
Directors of the MIC, upon recommendation of the
Advisory Body, may request Congress for legislation
to increase the capitalization of the MIC.

The MIC may issue all kinds of bonds, debentures, and

securities. However, these cannot be guaranteed by
the Philippine government.

As provided in Sec. 11 of the IRR, disbursements of the

MIC for its administrative and operational expenses
shall not exceed two percent (2%) of the funds
managed. Furthermore, this ceiling shall decrease as
the size of the Fund increases based on industry
practice.
The MIF will initially be sourced from the
capitalization of the MIC, as provided for in
R.A. No. 11954. Other GFIs and GOCCs may invest
into the MIF as well, subject to their respective
investment and risk management strategies, and
approval of their respective boards. However,
government agencies and GOCCs providing for the
social security and public health insurance of
government employees, private sector workers and
employees, and other sectors and subsectors, as
specified in R.A, No. 11954 shall be absolutely
prohibited from investing in the MIF

Additional investments may likewise be sourced

from investments of reputable private and State-
owned financial institutions and corporations,
subject to the decisions of the Board of the MIC.
ALLOWABLE INVESTMENTS OF THE MIC

The following allowable investment are provided in Sec. 14 of the IRR:

a. Cash, foreign currencies, metals, and other tradeable commodities;

b. Fixed income instruments issued by sovereigns, quasi-sovereigns
and supranationals;
c. Domestic and foreign corporate bonds;
d. Listed or unlisted equities, whether common, preferred, or hybrids;
e. Islamic investments, such as Sukuk bonds;
f. Joint ventures or co-investments, mergers and acquisitions;
g. Mutual and exchange-traded funds invested in underlying assets;
h. Real estate and infrastructure projects: Provided, That investments in infrastructure
projects shall be directed towards the fulfillment of national priorities such as the national
infrastructure program of the Department of Public Works and Highways (DPWH) and other
infrastructure agencies, the inclusive innovation industry strategy of the Department of Trade
and Industry (DTI), and the public investment programs of the National Economic Development
Authority (NEDA);

i. Programs and projects on health, education, research and innovation, and other such
investments that contribute to sustainable development;

j. Loans and guarantees to, or participation into joint ventures or consortiums with Filipino and
foreign investors, whether in the majority or minority position in commercial, industrial, mining,
agricultural, housing, energy, and other enterprises, which may be necessary or contributory to
the economic development of the country, or important to the public interest; and

k. Other investments with sustainable and developmental impact aligned with Section 17 of R.A.
No. 11954, as may be approved by the Board.
IMPACT ASSESSMENT ON
NATIONAL DEVELOPMENT GOALS
The MIF is expected to have the following positive impacts:

Enhanced investment capital: The MIF will serve as a

long-term source of investment capital, fostering
economic growth and job creation.
Infrastructure development: The fund can be utilized
to finance various infrastructure projects, such as
roads, bridges, and airports, improving connectivity
and making the country more attractive to investors.
Increased foreign investment: By attracting foreign
investment, the MIF will bring in fresh capital and
technology, stimulating economic growth.
 Strengthened governance: A board of directors appointed by
the president will oversee the fund, ensuring improved
governance and preventing corruption.

The MIF marks the Philippines' inaugural sovereign wealth

fund and will be allocated across a diverse range of assets,
including foreign currencies, fixed-income instruments,
domestic and foreign corporate bonds, commercial real
estate, and infrastructure projects.

To fulfill its purpose, at least 70 percent of the fund's

assets will be invested within the Philippines, with strict
prohibitions against investments in gambling, tobacco,
or alcohol production.
CHALLENGES AND OPPORTUNITIES
CHALLENGES:
The main concerns raised by academia, the business
sector, civic groups, and the media on the purpose,
timing, source of funds, risks, and management of the
MIF include the following:

1. Unclear and Contradictory Goals;

2. Independence from National Plans;
3. Unproven Effectiveness;
4. Impact on Financial Stability;
5. Governance and Feasibility Doubts; and
6. Lack of Consensus.
OPPORTUNITIES:
According to the Department of Finance, the goal of
the MIF is to “promote sustainable economic
development by making strategic and profitable
investments in key sectors” to be done “through
public-private partnerships and co-investments.”

They also pointed out the benefits that can be

expected from the MIF:

1. Accelerate infrastructure development in the

country;
2. Create a lot of high-quality jobs;
3. Attract more foreign investors; and
4. Propel the country toward higher growth.
GOVERNANCE AND
ACCOUNTABILITY
GOVERNANCE STRUCTURE

Maharlika Investment Corporation (MIC)

State investment body, a government-
owned and -controlled corporation
(GOCC) created under R.A. No. 11954
which shall be responsible for the
overall governance and management
of the MIF;
GOVERNANCE STRUCTURE
Board of Directors
the governing body of the Maharlika Investment Corporation
Composition :
The Secretary of Finance - as the Chairperson in an ex officio
capacity;
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 (2) Regular Directors; and
Three (3) Independent Directors from the private sector.
GOVERNANCE STRUCTURE
Corporate Secretary
Serve as an adviser to the Board of Directors on their responsibilities and
obligations;
Keep the minutes of meetings of the Board and its committeesand
furnish copies thereof to the PCEO and other members of the Board as
appropriate;
Keep in safe custody the seal of the MIC and affix itto any instrument
requiring the same;
Receive instructions from the PCEO on the preparation of an annual
schedule, the calling of Board meetings, the preparation of regular
agenda for meetings, and notifying the Board of such agenda at every
meeting;
Oversee the adequate flow of information to the Board prior to meetings;
and
Ensure fulfillment of disclosure requirements to regulatory bodies.
GOVERNANCE STRUCTURE
Advisory Body
refers to the body, composed of the Secretary of the Department of Budget and
Management (DBM), the Secretary of National Economic and Development
Authority (NEDA), and The Treasurer of the Philippines, established under R.A. No.
11954 which shall provide guidance, counsel and advice to the Board of Directors of
the Maharlika Investment Corporation, and all other functions as provided for in the
law;
Except as otherwise provided under this Act (RA 11954), the Advisory Body shall not
take part in the management of the MIC.
ACCOUNTABILITY AND TRANSPARENCY

The MIC shall adhere to the Santiago Principles and other internationally-accepted
standards of transparency and accountability: Provided, That the MIC shall coordinate
with all relevant institutions to ensure harmonization of policies.

The Santiago Principles comprise a set of 24 widely accepted principles and practices
voluntarily embraced by members of the International Forum of Sovereign Wealth
Funds (IFSWF). Aimed at promoting good governance, accountability, transparency,
and prudent investment practices, these principles encourage an open dialogue and
deeper understanding of Sovereign Wealth Fund (SWF) activities.
POLICY RECOMMENDATIONS
FOR OPTIMIZATION
PROPOSALS FOR POLICY ENHANCEMENTS TO OPTIMIZE
THE EFFECTIVENESS OF THE MAHARLIKA INVESTMENT
FUNDS
To optimize the effectiveness of the Maharlika Investment Funds (MIF), several policy
enhancements can be considered:

Establish an independent oversight committee

An independent oversight committee with audit authority over the Fund's operations
could enhance transparency and accountability outside of the sole purview of the
President or other political leaders.

Set clear investment guidelines and economic development objectives

Establishing clear investment guidelines and objectives for fund allocation, including
prohibited investments, target returns, acceptable risks, and priority sectors, can guide
decision-making and promote transparency.
SUGGESTIONS FOR ALIGNING THE FUNDS MORE
CLOSELY WITH THE STRATEGIC OBJECTIVES OF
NATIONAL DEVELOPMENT
The MIF should be aligned with the Philippine Development Plan and the Medium-Term
Fiscal Framework to ensure that its investments are in line with the country's
development goals.

The MIF should focus on strategic and profitable investments in key sectors to promote
economic diversification, employment generation, and infrastructure development,
aligning its investments with specific domestic economic and policy objectives.

To ensure the viability of the fund and reassure stakeholders, the MIF should diversify
and clarify its financial structure, investing in a range of assets and development
projects to support economic stability and growth.

The MIF should align its investments with the SDGs, which are a set of 17 global goals
adopted by the United Nations General Assembly to achieve a sustainable future for all.
CONSIDERATION OF INNOVATIVE APPROACHES AND
BEST PRACTICES FROM COMPARABLE INTERNATIONAL
MODELS
Drawing from innovative approaches and best practices from comparable international
models, the Maharlika Investment Funds (MIF) can be optimized to contribute more effectively
to Philippine national development. Some insights from these international models include:

Adopting the Double Bottom Line approach

Double bottom line seeks to extend the conventional bottom line, which measures fiscal
performance—financial profit or loss—by adding a second bottom line to measure a
for-profit business's performance in terms of positive social impact. To measure a
business's social impact, organizations can use a social impact scorecard that
measures the business value of social impact along six key drivers of value creation
from corporate social activity. These drivers include financial performance, risk
management, innovation, customer and employee engagement, social and
environmental impact, and reputation and brand.
CONSIDERATION OF INNOVATIVE APPROACHES AND
BEST PRACTICES FROM COMPARABLE INTERNATIONAL
MODELS
Promoting innovation and sustainability
Some SWFs focus on promoting innovation and transitioning the economy towards a
more sustainable model. The MIF could adopt similar strategies to encourage innovation
and sustainability in its investments, particularly in the infrastructure and technology
sectors.

Mobilizing private capital

Some strategic investment funds (SIFs) have a triple bottom line, with the added goal of
mobilizing private capital. The MIF could explore strategies to mobilize private capital,
such as blended financing or public-private partnerships, to leverage additional
resources for infrastructure and development projects.
CONCLUSION
The Maharlika Investment Fund (MIF) is established with the dual purpose of generating high
returns and financing socio-economic projects to expand national wealth.

Governed by the Maharlika Investment Corporation (MIC), a government-owned entity, the MIC
oversees investments, ensuring transparency and accountability in adherence to international
standards.

The MIF's strategic focus spans diversified investments in local and global financial markets, real
estate, infrastructure, and other assets to attract foreign investments and foster economic
growth in the Philippines.

Despite concerns about potential risks, optimizing the MIF's effectiveness is proposed through the
establishment of an independent oversight committee, the implementation of clear investment
guidelines, and defined economic development objectives.

These policy enhancements aim to ensure the ethical use of funds, align the MIF with national
development objectives, and promote sustainable financial resource management in the country.
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