Maharlika Investment Fund (MIF) Act of 2023 or Republic Act No. 11954: What You Need to Know

10/1/2023

A recently established sovereign wealth fund for the Philippines is called the Maharlika Investment Fund (MIF), commonly referred to as the Maharlika Wealth Fund (MWF).

On July 18, 2023, President Ferdinand Marcos Jr. approved the Maharlika Investment Fund (MIF), a sovereign wealth fund aimed at benefiting the country in several ways. 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.

What is a Sovereign Wealth Fund?

A Sovereign Wealth Fund (SWF) is an investment vehicle owned by the government and typically financed with surplus funds or reserves. These funds are invested by the government in both financial and real assets with the intention of balancing budgets, boosting savings, and fostering economic growth.

What is the mandate of the Maharlika Investment Corporation (MIC)?

The Maharlika Investment Corporation (MIC) is mandated to act as the sole vehicle for the purpose of mobilizing and utilizing the MIF for investments in transactions in order to generate optimal returns on investments (ROIs), while contributing to the overall goal of reinvigorating job creation and accelerating poverty reduction by sustaining the economy’s high growth trajectory while ensuring sustainable development.

How much is the capitalization of the MIC?

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.

How much is the initial capitalization of the MIC?

Of the 375 billion pesos in capital that correspond to the common shares, 125 billion pesos (or about 2.2 billion dollars) shall be initially subscribed to by the National Government, and the two Government Financial Institutions (GFIs), the Land Bank of the Philippines and the Development Bank of the Philippines. The National Government shall contribute 50 billion pesos, while the Land Bank of the Philippines and the Development Bank of the Philippines shall contribute 50 billion pesos and 25 billion pesos, respectively. The contributions from the two founding GFIs shall be fully paid upon the incorporation of the MIC.

Where will the National Government source its 50 billion pesos contribution to the initial capitalization of the MIC?

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.

Can the MIC issue bonds?

Yes. The MIC may issue all kinds of bonds, debentures, and securities. However, these cannot be guaranteed by the Philippine government.

What are the allowable investments of the MIC?

Cash, foreign currencies, metals, and other tradeable commodities;
Fixed income instruments issued by sovereigns, quasi-sovereigns and supranationals;
Domestic and foreign corporate bonds;
Listed or unlisted equities, whether common, preferred, or hybrids;
Islamic investments, such as Sukuk bonds;
Joint ventures or co-investments, mergers and acquisitions;
Mutual and exchange-traded funds invested in underlying assets;
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);
Programs and projects on health, education, research and innovation, and other such investments that contribute to sustainable development;
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
Other investments with sustainable and developmental impact aligned with Section 17 of R.A. No. 11954, as may be approved by the Board.