Idled

By the latest reports, the Palace has suspended the activation of the Maharlika Investment Fund (MIF) pending restudy of its implementing rules and regulations (IRR). All the flaws of this concept now come into sharper relief.

All those conceptual flaws ought to have been evident from the start. An investment (or sovereign) fund is a good idea only if government incurs windfall revenues, most usually from the exploitation of natural resources. The Norwegian sovereign fund uses windfall revenues from that country’s North Sea oil revenues. So do the equivalent funds of Middle Eastern oil producers.

We do not have such windfall revenues that may be parked for long-term investments to benefit future generations. What we have is a government suffering from chronic budget deficits and burdened with heavy debt obligations. The peril in moving scarce funds into a sovereign investment fund – whose usefulness lies in the ability to make long-term investments – is that this would cause immediate capital shortages.

Initially, proponents of the MIF wanted to suck money out of the pension funds. That was a shaky proposition. These funds belong to the members of the SSS/GSIS. Our pension funds have tenuous actuarial life expectancies.

The proponents decided to take the money only from the two government banks and the BSP. Taking money from the BSP could be the subject of legal challenge.

All the frailties of the MIF concept notwithstanding, the supermajorities of the administration in both chambers of Congress steamrollered the concept into law. There was hardly any consultation. Opposition to the MIF from among the economics and business communities was nearly universal.

This administration turned a deaf ear to all the protests. It was as if the ruling faction had fallen so madly in love with a faulty proposition it was willing to expend political capital to make the flawed concept law.

And law it did become – with large majorities in both chambers. This was a stunning demonstration of political will unguided by any sense of statesmanship.

No administration legislative leader stood in the way of enacting a flawed concept. None of the executives of the financial institutions