President Ferdinand “Bongbong” Marcos Jr. (File photo from the Presidential Communications Office)
MANILA, Philippines — The revised implementing rules and regulations (IRR) of the Maharlika Investment Fund (MIF) Act was released on Saturday, expanding the power of President Ferdinand Marcos Jr. in choosing members of the board of the Maharlika Investment Corp. (MIC), which will manage the MIF.
The IRR now gives Marcos the authority to “either accept or reject” nominees to the board of directors of the MIC submitted by the advisory body, which is composed of the national treasurer, the socioeconomic planning secretary, and the budget secretary.
This provision was not in the original version of the IRR crafted in August.
The advisory body “shall select suitable and qualified” candidates for president and chief executive officer (PCEO), and regular and independent directors from the public and private sectors.
But the new IRR says “the President may require the advisory body to submit additional names of nominees.”
The advisory body had submitted a shortlist of candidates to Malacañang early last month. The names were not disclosed.
Marcos suspended the IRR on Oct. 12 about a month after the Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (Landbank) announced that they had remitted P25 billion and P50 billion, respectively, to the National Treasury as their seed capital contributions to the MIC.
It was expected that members of the MIC board would be appointed by the President soon after the remittances were made.
The MIC will be governed by a nine-member board consisting of the finance secretary as ex-officio chair, the PCEO as vice chair, the chief executive officers of Landbank and DBP, two regular directors, and three independent directors.
The revised IRR also eased the qualifications for the PCEO. Nominees for this post no longer need to have an advanced degree in finance, economics, business administration, or a related field from a reputable university, including additional professional certifications.
It also removed Section 29 of the old IRR which requires members of the board to have a master’s degree, 10 years of experience in finance, investments, or economics, and a strong track record and ethical standards.
Potential turnoff
The latest tweaks to the IRR, particularly the move to give the president a say in picking the MIF’s top officials, would open it to political influence, which may turn off investors, according to Leonardo Lanzona, an economist at the Ateneo de Manila University.
“This particular provision opens the way for political appointments and compromises the necessary independence that the MIF board should have from the president,” Lanzona said.
He said this “increases the likelihood of intervention” by the President on board decisions. “It sends a signal to international investors that decisions will no longer be based on economic fundamentals but rather on political considerations, thereby fostering distrust and discouraging diverse investments from many sectors,” Lanzona added.
Calixto Chikiamco, president of the Foundation for Economic Freedom, said the tweaks to the IRR “will likely increase the sovereign risk to the country of the MIF.”
Chikiamco also said it was “disappointing” that the revisions did not include any measures that would help the state-run Landbank and DBP avoid capitalization problems after their hefty contributions to the MIF.
“The lump-sum contribution by the DBP and Landbank will result in capital impairment of the GFIs (government financial institutions). This will force them to ask for a regulatory relief from the BSP (Bangko Sentral ng Pilipinas) that may weaken the stability of the banking system,” he said.
The group said that if DBP and Landbank contributions had been made in phases, the two banks would still be able to continue extending loans to farmers and for development projects.
On the other hand, contributing by lump sum would restrict their ability to continue lending and their capacity to meet capitalization requirements would be stressed.
Getting the best people
Albay Rep. Joey Salceda, a key supporter of the MIF in the House of Representatives, said the IRR revisions were aimed at getting the best people to manage the country’s sovereign wealth fund.
“It was always about recruiting who the president thinks can run the MIF best,” Salceda said in a statement to the Inquirer.
“Considering that the nominees still have to pass all necessary qualifications set by the advisory body, that actually widens the net we cast for appointees to lead the MIF,” he said. “That was almost the entire point of the revision.”
Salceda said the government should now tackle “more pressing issues,” such as what investments would be more critical at this time, suggesting financing the water, transport and energy infrastructure sectors. Critics of the MIF continued to press for its scuttling or at least set leaner contributions required from DBP and Landbank.
Diwa Guinigundo, a former deputy governor of the BSP, said in a commentary that the MIF should be “dropped” because it “could compromise fiscal and debt sustainability as well as financial stability, and complicate achieving higher economic growth.”
More independent
Guinigundo, now Philippine analyst for New York-based GlobalSource Partner, said that such a move — along with policies like energizing agrarian reform to promote efficient land use, greater productivity, better access to credit; modernizing agriculture; and investment-led industrial development — would be more helpful to ensuring sustained economic growth.
It remained unclear whether the applications for nominees to the MIC’s board of directors would be reopened following the revised IRR. But despite these revisions, Malacañang said at a press statement that the IRR made the MIC more independent even if the President was given the power to reject recommendations from the advisory board.
According to Presidential Communications Secretary Cheloy Velicaria-Garafil, the Office of the Executive Secretary said the IRR revisions introduced by the President “serve to clarify, while simultaneously buttressing, the exercise of the discretionary powers of the Board of Directors to maintain its independence.”
The revisions will also ensure that the MIC would have “a free hand to explore gainful investment opportunities while adhering faithfully to the letter of the law; and, ensure that investments are of high impact and are in line with the socioeconomic development program of the government.”
The new IRR says the PCEO and the regular directors shall serve for a term of three years “unless sooner removed” while independent directors shall serve for a term of one year.
It added that the independent directors shall be eligible for reappointment, provided that the cumulative term of an independent director shall not exceed nine years.
‘Close to perfect’
The president may, on his own or upon the recommendation of the board, remove the PCEO, a regular or an independent director if any of them is deemed disqualified, becomes physically and mentally incapacitated for more than six months, or is found guilty of fraud or illegal acts inimical to the MIF.
The president announced earlier this week that the IRR had been finalized.
Marcos said he ordered the suspension of the IRR to make the country’s sovereign wealth fund “as close to perfect and ideal as possible.”
According to him, the sovereign wealth fund concept “remains a good one,” and “we are still committed to having it operational before the end of the year.”
“We are just finding ways to make it as close to perfect and ideal as possible. And that was what we have done,” he said.