The Philippine government has suspended the implementing rules and regulations of the Maharlika Investment Fund (MIF), three months after it was passed into law. MIF critics welcomed the decision and urged the government to conduct more studies and consult stakeholders about it. But President Ferdinand “Bongbong” Marcos Jr. clarified that his government is merely “finding ways to make it as close to perfect and ideal as possible” and that the fund will be operational before the end of the year.
Marcos proposed the creation of a sovereign wealth fund in November 2022, despite it being neither part of his campaign agenda nor in his government’s original development plan. The House of Representatives passed the bill in 17 days but not before it agreed to remove pension funds as one of the sources of the program. The Senate passed its own version in May this year amid widespread concerns about the MIF’s viability and effectiveness as a tool to generate investments, create jobs, and stimulate the local economy. The opposition also warned that the MIF was prone to abuse and corruption.
Despite the doubts raised by some scholars and former economic managers of the government, Marcos signed the law creating the MIF in July and assured the public that it would yield substantial gains for the country.
But on October 12, the president released a memorandum directing state banks to suspend the implementation of the MIF.
“He wanted to study carefully the [implementing rules and regulations] to ensure that the purpose of the fund will be realized for the country’s development with safeguards in place for transparency and accountability,” Executive Secretary Lucas Bersamin said in a statement.
It is highly unusual that a priority law like the MIF would be quickly suspended. What prompted the government to make this surprising move?
It could be related to the Supreme Court petition filed in September questioning the constitutionality of the MIF law. Petitioners described the MIF as a “dangerous law” as it “entrusts hundreds of billions in public funds to unknown fund managers”. They highlighted how legislators railroaded the bill and violated Constitutional requirements in passing a law.
Another reason could be linked to the request of two state banks seeking regulatory relief for flexibility to comply with the capitalization requirement set by the Bangko Sentral ng Pilipinas (Central Bank). These two banks were mandated by law to pool funds for the MIF.
There are also reports that the suspension is specific regarding the appointment of key managers since the rules apparently lack provisions that would allow the president to appoint individuals who will compose the MIF board outside the shortlist submitted to him.
Whatever the real reason behind the suspension of the MIF, the decision was welcomed by supporters and critics alike.
Senate President Juan Miguel Zubiri acknowledged it as “a very prudent move.”
“When so much money is at stake, it is better to proceed with an abundance of caution than to be reckless,” he said in a statement.
For opposition Senator Risa Hontiveros, the suspension should eventually lead to the abandonment of the program.
“It is beyond repair, because the law was rushed, and the Philippines is simply not ready at this moment to support a wealth fund,” she said. “The suspension of the MIF Act must stand until every flaw or concern raised about the law has been reviewed.”
Before leaving for a state visit to Saudi Arabia, President Marcos expressed alarm over reports that the government was putting the MIF on hold.
“The organization of the Maharlika Fund proceeds at pace. And what I have done though is that we have found more improvements that we can make specifically to the organizational structure of the Maharlika Fund,” he said.
“This has been in consultation not only with our economic managers but also with the people, the personalities who will actually be involved in the fund. And that’s why their inputs had been very important and that is why we are going to now utilize them to make it a better organization,” he added.
Marcos cautioned the public not to misinterpret the suspension as “a judgment on the rightness or wrongness of the Maharlika Fund.”
The president’s statement contradicts the order he signed suspending the MIF. It also raised additional questions. If the rules need to be tweaked, can’t the government do this without suspending the MIF? More importantly, can the two state banks which deposited funds to the MIF get their money back in the meantime? A former government official believes the government should return the money.
The suspension provides an opportunity for the Marcos government to rethink the MIF concept. At a time of continuing economic uncertainty, it is unwise to divert much-needed funds into a controversial financial undertaking with no guarantee of public benefit.