Joselle M.

Cortez

Re: Maharlika Investment Fund Act

The controversy of the proposed bill, Maharlika Investment Fund Act, tackles the
fund of the Philippine government that may affect our economy as well as the
Filipinos’ lives. Here, I will be extending my research on why this controversial
Act may be a disadvantage to our country.

Fact
Maharlika fund- ----

Issues:
1. Whether or not the source of Maharlika Investment Fund stated in Sec. 11 of
the Bill is enough.
2. Whether or not the penalties provided in Art. 11 of the Bill, following the
Santiago Principles is tenable.
3. Whether or not the privilege of the employees of Maharlika Investment
Corporation is acceptable.

Brief answer
1. No. The Bureau of the Treasury (BTr)’s November 2022 cash operations
report showed the National Government (NG) budget deficit of PHP123.9
billion and the country is still in the recovery stage from the pandemic. From
the fact that the Philippines is still recovering from pandemic, at this time we
must use the fund in the immediate needs of the people.

3 POLICY BRIEF January 2023 WHAT’S WRONG WITH THE MAHARLIKA WEALTH FUND? By Carmel V.
Abao, PhD, et al. https://bit.ly/Maharlika-Wealth-Fund-Policy-Brief

4 Senate Bill No. 1670 “Maharlika Investment Act”, Sec. 3 (h)

5 Senate Bill No. 1670 “Maharlika Investment Act”, Sec. 7
6 Senate Bill No. 1670 “Maharlika Investment Act”, Sec. 48
 2. No. In using the Santiago principles, the corrupt officials will be punished
by only paying a fine with a prescribe period of 15 years. It shows that this
punishment is not a safeguard that no corruption will happen.

3. It is not acceptable to government employees that the MIC employees will

be exempted from the Salary Standardization Act because the MIC is also
for the government use.

Discussion
The revenue source for Maharlika Investment Fund is lacking.
The Bureau of the Treasury (BTr)’s November 2022 cash operations report showed
the National Government (NG) budget deficit of PHP123.9 billion1
The initial capitalization of P75 billion would be sourced from the Land Bank and
the Development Bank of the Philippines. For subsequent funding, it will tap the
BSP’s declared dividends, PAGCOR’s gaming revenue streams, and other sources,
such as royalties and/or special assessments based on natural resources, proceeds
from privatization of government assets, and borrowings by the Maharlika
Investment Fund (MIF).2
The funds to be collected from the GFIs are not a surplus revenue, hence we
cannot collect from said financial institute since the report said that national budget
still have a deficit, so where can the government draw its funds?
The country is still reeling from the negative effects of the pandemic, with poverty
and hunger rising and underemployment increasing. Filipinos need support to cope
with substantial inflation. Creating the Maharlika Fund in these conditions means
diverting a huge amount of money away from these immediate needs, especially

1 (https://www.dof.gov.ph/november-2022-budget-deficit-decreases-as-revenue-collection-
outperforms-expenditure/)
2 Senate Bill No. 1670 “Maharlika Investment Act”, Sec. 11
economic relief for poor sectors of the country. While saving and investing excess
money for long-term needs like infrastructure development is simply prudence, this
does not require the establishment of a sovereignty or wealth fund. Crafting
effective policies and programs, such as Public-Private Partnership Agreements,
would be sufficient and has proven to be successful in the Philippines. This is even
more immoral given the lack of any provision regarding direct benefits to citizens,
unlike the Alaska Permanent Fund, which pays out a certain amount per year to
Alaska residents. In addition, it also risks a debt repayment crisis, as the interest
rates on public debt when the fund is created could be much higher than the rate on
earnings of the fund.3

The penalties punishable by this Bill is not a safeguard that a corruption will
not occur.
This Bill used the "Santiago Principies" which refers to the 24 Generally Accepted
Principles and Practices (GAPP) voluntarily endorsed by the International Forum
of Sovereign Wealth Funds (IFSWF) members. The GAPP for Sovereign Wealth
Funds (SWFs) are designed as guidelines that assign best practices for the
operations of SWFs. They are the rules followed by SWF that promote stability in
the global financial system, set proper controls on investment risks, and implement
sound governance structure.4
The bill also states that the fund would adhere to “internationally-accepted
standards of transparency and accountability” as well as with other laws, such as
the Securities Regulation Code, and ethical standards.5
Of course, what the law states and how it is implemented would not necessarily be
the same.
Assume, then, for the sake of argument, that a violation of these safeguards occurs.
What then would be the penalty against the offender? The law provides that, for
the auditor, the fine is P80,000 to P500,000. In case the auditor’s failure is attended
by fraud or injury to the general public, then the auditor or responsible officer may
be fined P100,000 to P600,000.6

What about for graft and corrupt practices? A corporation who appoints an
intermediary who then engages in graft and corrupt practices would be punished
with a fine of P100,000 to P1,000,000. Any director or officer who tolerates such
graft and corrupt practices would be penalized P500,000 to P1,000,000 as well.7
This shows that this Bill cannot secure that no corruption will happen. With our
own law, the Anti-Graft and Corrupt Practices Act, a lot of officials are still being
accused of this crime, what more if we implement the penalties in this Bill that
lessens the punishment of the crime? I think this will lead to a bigger scale of
corruption and the trust of the Filipinos in this bill will be depleted.

It is not acceptable to government employees that the MIC employees will be

exempted from the Salary Standardization Act.
This Bill states that the officers and employees of the MIC shall be exempt from the
provisions of Republic Act No. 6758, otherwise known as the "Salary Standardization Act", and
succeeding laws on salary standardization.8
On Day 3 of plenary debates in the Senate, Cayetano questioned this privilege sought for
officials of the Maharlika Investment Corporation (MIC), when health workers have been
deprived of higher pay for so long due to the government pay scale.
"If I am going to provide for one exemption it will be for health workers, your honor. Hindi ba
dapat yun ang unahin natin? Bakit itong fund pwedeng may exemption samantalang yun,
pahirapan? [Shouldn't we prioritize that? Why is there exemption for this fund when it's difficult
to do the same for health workers?]" the senator said.9
I believe in what Sen. Pia said, we cannot compare the hardships of those health workers
especially these past few years due to pandemic between those who will sit as an official of the
MIC.
The Maharlika fund is also self-serving because its Board and personnel are given too much
license to give themselves compensation even if the fund fails. The law explicitly seeks
exemptions from the Salary Standardization Act and Civil Service Law (Article VII, Section 27).
This has the effect of giving the fund managers excessive leeway in giving themselves and their
personnel honoraria, allowance, per diem and bonuses.10
It simply puts that it will be unfair for the Filipino workers who are under the Salary
Standardization Act if this provision in the Bill will be implemented. The professionals, also the
President itself have to comply with the Salary Standardization Act, thus this salary exemption
cannot be accepted.

7 Senate Bill No. 1670 “Maharlika Investment Act”, Sec. 49

8 Senate Bill No. 1670 “Maharlika Investment Act”, Sec. 33
9 https://www.cnnphilippines.com/news/2023/5/17/cayetano-maharlika-fund-managers-salary-
standardization.html
10 https://www.ibon.org/maharlika-fund-dubious-pretentious-self-serving/