MIF stalled as IRR suspended

As hasty as it was signed into law in August, the Maharlika Investment Fund — the country's first sovereign wealth fund — is now stalled after President Ferdinand Marcos Jr. suspended its implementing rules and regulations, or IRR, pending the completion of additional studies.

In a brief statement yesterday, the Palace said Executive Secretary Lucas Bersamin issued the suspension memorandum on 12 October after the President had signed the MIF law amid opposition from several economists, academics, and civil society groups.

"President Ferdinand R. Marcos Jr. issued a suspension because he wanted to carefully study the IRR to ensure that the purpose of the fund will be realized for the country's development with safeguards in place for transparency and accountability," the Office of the Executive Secretary said in a statement.

Malacañang addressed the memorandum to the heads of the Land Bank of the Philippines and the Development Bank of the Philippines.

The IRR, which marked the start of the MIF's operations, was published in August. It received much attention during Marcos' trips abroad. However, experts have raised concerns about the MIF's governance structure, funding and transparency.

They also expressed concerns that the MIF might put the state banks that gave initial capital at risk of losing their integrity.

According to the MIF law, LandBank and the DBP would put in P50 billion and P25 billion, respectively, to help the MIF get started.

DBP president and CEO Michael de Jesus said the bank remitted its contribution for the MIF's initial capital to the Bureau of Treasury last month.

Unsure of capital infusion effect
De Jesus said the DBP had yet to ask the Office of the President if its P25-billion capital contribution would be returned.

"This is something both LBP (LandBank) and DBP need to check," Jesus told DAILY TRIBUNE in a text message.

LandBank said it will await further details from OP.

"We have nothing to add, nor do we feel it necessary to volunteer any preemptive speculation," it said.

The DAILY TRIBUNE yesterday sought comments from the BTr, but it has not responded as of press time.

Earlier, Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said the LandBank and DBP had requested regulatory relief on their capital requirements after they infused seed capital into the Maharlika Fund, with the former bank contributing P50 billion.

Remolona said he believed the suspension of the MIF's IRR would not affect the capital contributions of the government banks to the fund.

He reiterated that LandBank and DBP must still comply with the BSP's capital requirements to ensure the stability of the country's banking industry.

"We will carry out the usual regulations. They will not be treated in a special way," he said, adding that BSP's supervisory team is now evaluating requests for regulatory relief from the two banks.

'Get rid of it'
When asked how the government should move forward with the Maharlika Fund, University of the Philippines economics professor Ramon Clarete said, "Get rid of all of it."

Clarete earlier said pouring funds into the MIF was a "big risk," pointing out that the proceeds from its investments might be corrupted or the fund would be managed poorly due to ineffective government mechanisms.

"In my view, the country is taking a big risk. Poor governance is a problem and remains to be so. It may not happen in this administration, but future administrations with nothing to prove as they would only inherit its management may come up with innovative ways to steal from the fund, masking it as failed investments," he said.

'No additional purpose'
Meanwhile, Professor Filomena Sta. Ana, coordinator of Action for Economic Reforms, said the Maharlika Fund will serve no additional purpose.

"If Maharlika is an investment mechanism to finance development, it is redundant. Even without Maharlika, the government financial institutions that were ordered to contribute to Maharlika are using their funds to contribute to Philippine development in different ways," he explained.

"The suspension of Maharlika, even before it can take off, shows how gravely problematic it is. Even the administration that has staunchly defended it from overwhelming criticism has to back off. The reason given for the suspension is most flimsy, for the IRR is but an adjunct to the law. The substantial erosion of LandBank's and DBP's capitalization, which was bound to happen but which the administration earlier ignored, further exposed the law's failing," he pointed out.

"Call it by any other name, but Maharlika is dead. And this another serious blow to the administration's credibility," he added.