By Luisa Maria Jacinta C. Jocson, Reporter

THE REVISED implementing rules and regulations (IRR) of the Maharlika Investment Fund (MIF) failed to address risks concerning the financial stability of contributing state banks, analysts said.

“The primary revision of the IRR was to give the President overriding authority in the appointment of the officers and directors of the MIF.  The risk is that the President will own full responsibility for the performance of the fund,” Calixto V. Chikiamco, Foundation for Economic Freedom (FEF) president, said in a Viber message.

The revised IRR of the law creating the country’s first sovereign wealth fund was published by the Official Gazette on Saturday. The IRR was suspended by President Ferdinand R. Marcos, Jr. last month pending its review. Mr. Marcos said this was done to make the IRR as “perfect and ideal as possible.”

One of the revisions made to the IRR include allowing the President to accept or reject the recommendation of the advisory body on nominations for the vacant positions of the Maharlika Investment Corp. (MIC), which is tasked to manage the wealth fund. These include the regular and independent directors and the president and chief executive officer of the MIC. 

Under the revised IRR, the President may also require the advisory body to submit additional names of nominees.

However, Mr. Chikiamco said the IRR review did not tackle the most crucial concerns regarding the contributions of state banks to the country’s first sovereign wealth fund.

Under Republic Act (RA) No. 11954, the Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (LANDBANK) are mandated to contribute P25 billion and P50 billion, respectively, as the initial seed capital for the MIF. The two state lenders have remitted the funds to the BTr in September.

“The revised IRR didn’t correct the fatal flaws of the IRR, which was the lump sum capitalization of the MIF by the LANDBANK and DBP,” he said.

Mr. Chikiamco noted the required lump sum contribution will result in a breach in capital ratios and will require regulatory relief from the Bangko Sentral ng Pilipinas (BSP). It will also reduce the banks’ ability to lend to fishermen, farmers, and small businesses, he added.

Mr. Chikiamco said the MIF is a “huge opportunity cost to the economy” as it may take years to invest the funds.

Ateneo de Manila University economics professor Leonardo A. Lanzona said that allowing the banks to contribute on a staggered basis can cause foreign investors to look for other options where funds are available.

“For the DBP, the constraints imposed by MIF will still be felt even if the remittances are being staggered. Since the DBP is engaged in medium-term and long-term financing, the limitations created by the MIF on their operations will still be felt. Consequently, they may only engage in short-term investments since the availability of their resources will be shortened by these staggered remittances,” Mr. Lanzona said.

The DBP earlier said it asked the Treasury to return its P25-billion contribution to the MIF until the suspension of the IRR is officially lifted. However, this was rejected by Finance Secretary Benjamin E. Diokno, who said the fund needs stable capitalization to send a “strong signal” to investors.

Meanwhile, Enrico P. Villanueva, senior lecturer of economics at the University of the Philippines Los Baños, said the removal of the additional qualifications of the regular and independent directors from the revised IRR is inconsistent with the legal requirements.

Citing RA No. 11954 or the Maharlika Investment Fund Act of 2023, Mr. Villanueva said that the law specifically states that specific qualifications of the board of directors should be in the IRR “to ensure that only those eligible and qualified shall be appointed to the board.”

“The law also states that ‘the advisory body shall ensure that selected members of the board of directors are with proven probity, competence, expertise and experience in finance, economics, investments, business management, or law’,” he said via Facebook Messenger.

Under the initial IRR, the board directors were required to have a master’s degree in finance, economics, business administration, or a related field and have a minimum of 10 years’ experience in finance, investments, economics, business, or the like. It also listed qualifications such as having a “strong track record” and “commitment to the highest ethical standards.” These qualifications are no longer present in the revised IRR.

The revised IRR also removed some of the requirements of the president and chief executive officer of the MIC. Previously the position required an “advanced degree in finance, economics, business administration or a related field from a reputable university” and at least 10 years in a senior leadership role in a reputable financial institution or public or private sector organization.

On the provision of allowing the President to accept or reject nominations, Mr. Villanueva noted that the President “naturally has the option to accept or reject director recommendations.”

“As members of the Cabinet, the advisory board members are alter-egos of the President so they naturally should consider the Presidential perspective in their recommendation. They may even pre-clear nominees with the President. Not sure what the big deal is here, unless there are other concerns not being disclosed,” he added.

Mr. Villanueva also questioned why the corporate secretary role was also removed from the revised IRR.

“The Corporate Secretary plays a critical role being the official recorder and safekeeper of MIC Board decisions,” he said.

Monetary Board Member Rosalia V. de Leon, who is also part of the IRR review group, on Saturday said that removing some of the qualification requirements of the MIC board of directors will give the corporation more independence.

“The reason for removing the qualifications in the IRR is to give more independence to the Board in determining the specific qualifications of the other officers of the MIC in order to carry out its mandate to efficiently manage the MIF,” she said in a statement on Saturday.

“The President wants the Board to be insulated from political influence and considerations and would like to give the leeway to set the qualifications in the best way they know how based on their experience and expertise in fund management,” she added.

Budget Secretary Amenah F. Pangandaman in a statement on Sunday said that the rules will allow the MIC Board members to have the “necessary freedom to oversee the fund without undue political interventions that will impede its fulfillment of functions.”

In a statement on Sunday, House Speaker Ferdinand Martin G. Romualdez said that the revisions will ensure the MIF is managed with the “utmost transparency and accountability.”

“The autonomy of the MIC Board allows for more objective and effective decision making, free from undue political influence. This is crucial in overseeing a fund of this magnitude, which is pivotal to our nation’s economic growth,” he said.

Mr. Romualdez said that the rules also “clarify the Board’s discretionary powers while ensuring adherence to the law and alignment with the nation’s socioeconomic development program.”