MIF plot thickens

PHILIPPINES - In Brief 23 Oct 2023 by Diwa Guinigundo

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It’s not really a social blunder, that economic faux pas with enormous political fallout called the Maharlika Investment Fund (MIF) of the Philippines. It’s an economic faux pas because the Philippine authorities rammed through Congress the bill creating the Philippines’ first ever investment fund without any capital surplus, excess savings, windfall profits from the sale of its natural resources, or proceeds from any sale of public asset. Congress approved it on May 31, 2023. It became Republic Act (RA) 11954, and signed into law by President Marcos on July 18, 2023. As we updated our clients in our second In-Brief, the two GFIs have indicated their intention to request the BSP for some regulatory relief. Their contributions totaling P75 billion are subject to 100 percent capital charge. Unless they build up their capital, or given more time to do so, their lending operations could be constrained. They could fail in their statutory mission to helping agriculture and industry, as well as in putting up critical infrastructure in the Philippines. Ironically, the broad mandate of the MIF runs along the same line, and that is to drive economic development in the Philippines. In effect, one can argue that resources are being shifted from these GFIs to MIF to pursue the same general objective. There is no new money involved. There is no additionality in the whole concept of the MIF because it will depend on the same public treasury for funding. But there is a new twist in the MIF drama. On the same day they sought regulatory relief, President Marcos issued Executive Order (EO) 43 reducing the percentage of the net earnings to be declared and remitted by Landbank from 50% to ...