Highly competent individuals are needed to man the Maharlika Investment Fund (MIF) to ensure its success, Department of Finance Secretary Benjamin Diokno said over the weekend.
He said this as the deadline for nominations and applications for the Maharlika Investment Corporation (MIC) board of directors was set on September 27, 2023.
“Following the promulgation and publishing of the IRR [implementing rules and regulations], the government shall then ensure that the Fund will be managed by highly competent personnel with a good track record and outstanding integrity,” Diokno said.
“Thus, the President and the CEO of the MIC, as well the members of the Board of Directors shall be finalized and appointed. Key management officials will also be decided upon after the composition of the Board has been settled,” Diokno said.
It was recently announced by the Bureau of the Treasury that the guidelines of Republic Act 11954 or the Maharlika Investment Fund Act of 2023 has already been issued last August 28, and became effective Sept. 12, 2023, or 15 days after its publication in the Official Gazette or in a newspaper of general circulation.
The MIC’s board of directors will be composed of the Secretary of Finance as ex officio chairperson; the president and chief executive officer of the MIC as vice chairperson; president and CEO of Land Bank of the Philippines; president and CEO of Development Bank of the Philippines; two regular directors; and three independent directors from the private sector. The board’s qualification and selection process is explicitly set out in the IRR.
Sec. 39 of the IRR of the Maharlika Investment Fund Act of 2023 provides that the president/chief executive officer shall direct and supervise the operations and internal administration of the MIC, and shall be charged with the risk management, financial performance, human resources, accounting and legal affairs of the MIC.
The president and CEO shall provide strategic leadership, vision, and management for the fund’s overall operations, aiming to maximize return on investment and contribute to the long-term economic prosperity of the nation; design and execute strategic initiatives that resonate with the fund’s objectives and align with the country’s broader financial and economic strategies; prepare the agenda for the meetings of the Board of Directors and to submit for the consideration of the Board of Directors the policies and measures which are necessary to carry out the purposes and provisions of R.A. No. 11954.
The president and CEO must execute and administer the policies and measures approved by the Board of Directors; develop the MIC’s business prospects by studying economic trends and revenue opportunities; projects acquisition and expansion prospects; and oversee financial performance and risk profiles while ensuring that all of regulatory obligations are met; and exercise such other powers as may be vested by the board of directors.
As provided in Sec. 39 of the IRR, the president and chief executive officer must have an advanced degree (MBA, MA, MSc, PhD) in Finance, Economics, Business Administration, or a related field from a reputable university; additional professional certifications such as CFA or CPA is preferred; exceptional experience and expertise in corporate management, financial planning strategy, strategic planning and vision, market and business development, budget development.
Other requirements are a minimum of 10 years experience in finance or investment, with at least 10 years in a senior leadership role in a reputable financial institution, public/private sector organization; prior experience with ESG criteria and sustainable investment is preferred; in-depth understanding of the industry, including risk management, compliance, and regulatory requirements; and strategic knowledge of cash flow and capital planning management.
Sec. 39 of the IRR provides that its president and chief executive officer shall be appointed by the President of the Philippines, as recommended by the Advisory Body, for a term of three years, without prejudice to reappointment.
Meanwhile, there are measures to ensure that the credibility of the MIF will be established and maintained. These include the financial reporting in accordance with the relevant International Financial Reporting Standards and principles; an audit committee composed of members of the board to oversee the internal and external audits of the MIC; and, internal audit independent from the management of the MIC.
Other measures include an external audit conducted by an internationally recognized auditing firm; examination and audit by the Commission on Audit; joint Congressional Oversight Committee, composed of seven members each from the House of Representatives and the Senate; and adherence and compliance with the Santiago Principles.
The Santiago Principles consist of 24 generally-accepted principles and practices voluntarily endorsed by International Forum of Sovereign Wealth Fund members. The Santiago Principles promote transparency, good governance, accountability and prudent investment practices whilst encouraging a more open dialogue and deeper understanding of SWF activities.
Diokno said a fully operational MIF, coupled with an ideal economic backdrop to attract more investors, “will definitely be major factors that will increase job creation in the country, consequently accelerating the Philippines’ economic growth.”
Of the MIC’s authorized capital stock of P500 billion, P375 billion will constitute common shares available for the subscription of the national government, its agencies or instrumentalities, GOCCs or government financial institutions. The remaining P125 billion 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 P375 billion capital which corresponds to the common shares, P125 billion shall be initially subscribed by the national government, and the two state-run lenders Land Bank of the Philippines and the Development Bank of the Philippines.
The national government shall contribute P50 billion, while the LandBank and DBP shall contribute P50 billion pesos and P25 billion, respectively. The contributions from the two founding GFIs shall be fully paid upon the incorporation of the MIC.
The P50 billion contribution of the national government to the initial capitalization shall be sourced from 100 percent of the dividends of the Bangko Sentral ng Pilipinas remitted to the national government for the first and second fiscal years upon the effectivity of the Maharlika Investment Fund Act of 2023.