GOING by the plethora of criticisms against the Maharlika Investment Fund (MIF) bill, passed on May 31 by Congress and awaiting the signature of President Ferdinand Marcos Jr., it should have been killed by a thousand cuts.
Many of the criticisms are hilariously nitpicking, such as that of Far Eastern University (FEU) law school’s former dean Mel Sta. Maria, who claimed in a news website column that even previously “convicted criminals can be members of the Maharlika’s board of directors.”
Another critic pompously claims that Maharlika is confused, in that it can’t make up its mind whether it is a sovereign fund or a national development fund. But can’t it be both, as Singapore’s Temasek Holdings was in its inception and the more recent Indonesian Investment Fund is?
It is astonishing that 24 — yes, two dozen — Ph.Ds from the UP School of Economics wrote a paper damning the MIF bill essentially on two points: its goals are unclear, it is risky. Yet these economists offer nothing by way of making the goals “clearer” or how risky is risky.
Even more astonishing is that these academics could claim that the “preoccupation with this defective proposal has diverted attention from more vital and urgent national agenda.” Huh? Speak for yourself: ordinary Filipinos like me can have attention on several topics. Doesn’t national discourse allow for simultaneous debates on many issues? Did writing their critique of the MIF divert so much of their attention they dropped their current research activities?
That former FEU dean pontificated that the MIF is the “height of irrationality.” However, there could be reason to the irrationality this guy sees.
Consider these facts:
– President Marcos has inexplicably been adamant in having this MIF bill passed, officially certifying it as an urgent priority. He has spent so much of his political capital that he owes a lot of patronage debts, especially to the senators, none of whom have shown that they are really convinced of this project. I don’t think Marcos is stupid at all to expend much of his political capital without a very special reason, which he cannot make public.
– Marcos’ world has been that of the elite, more than any other president. His father did what elites routinely do, which is to stash part of their wealth, ill-gotten or not, abroad. Marcos’ close circle of friends are mostly scions of elite families, with his wife Liza of the Araneta clan, which includes Manuel Araneta Roxas.
– Whether historically accurate or not, “Maharlika” is a term referring to the elite of our pre-Hispanic past. The word has so much significance for Marcos, as his father’s guerilla group during World War 2 was dubbed “Ang Mga Maharlika,” and the strongman had even considered renaming the Philippines “Maharlika.” The MIF will forever have a hidden Marcos brand.
I think, analyze or speculate that these facts make the real raison d’etre for the MIF stand out: it is intended as a venue to get the elites, whom Marcos could personally talk to in order to convince them to bring back their money stashed abroad back to the Philippines. It could even include the remaining wealth kept abroad of the Marcoses that US intelligence services could not discover in their rushed campaign to demonize the strongman to prepare his toppling through a coup in 1986. Or maybe it was his elite friends who said: “Pass this kind of law, and so we can bring our money abroad here without hassle.”
This is not pure speculation. When I was in Malacañang under President Gloria Macapagal-Arroyo, two tycoons — one of whom had sold for billions of pesos a few years much of his shares in a utility firm to a foreign magnate — had told me, separately, to tell the president if she could help them to bring back their money at the very least cost. They claimed that investment bankers could do this, but their charges were so atrocious that they would lose 50 cents to the dollar.
The bill passed by Congress to create the MIF has at least two provisions that elites could use to have their money stashed abroad remitted back to the Philippines.
First, Section 10 of the bill’s Article 2 would authorize the Maharlika Investment Corp. (MIC) the corporate entity that would manage the MIF, to issue “all kinds of bonds, debentures, and securities, and/or the renewal or refunding thereof (hereinafter called “Bonds”), within and/or outside the Philippines, at such terms, rates, and conditions as the Board of Directors may determine, subject to compliance with the provisions of applicable law, and rules and regulations promulgated by the Monetary Board.” (itals the author’s)
The crucial phrase is “or outside the Philippines”: a tycoon who had kept his money abroad could just walk into the Philippine embassy or a bank authorized by the MIC and buy the bonds or securities, whose proceeds he could deposit, at the bonds’ maturity in the Philippines.
The bill even goes in detail about the nature of the bonds:
“The MIC shall provide for appropriate reserves for the redemption or retirement of the bonds. These bonds and other obligations shall be redeemable at the option of the MIC at or before maturity and in such manner as may be stipulated therein and shall bear such rate of interest as may be fixed by the MIC. Such obligations shall be secured by the assets under the management of the MIC, including the stocks, bonds, debentures, and other securities purchased or held by it under the provisions of this Act. These bonds and debentures may be long-term, medium, or short-term, with fixed interest rate or floating interest rate.”
Second, Section 12 of Article 3 specifies that while the MIF’s initial authorized capitalization of P500 billion will be provided by government financial institutions and the national government, “[a]dditional investments may likewise be sourced from investments of reputable private and state-owned financial institutions and corporations in the form and under the terms and conditions that the board of directors may prescribe.”
That would allow capital stashed abroad to be invested in the MIF through private hedge funds set up by “reputable private financial institutions” here or abroad.
Obviously, Marcos and the bill’s authors could not publicly reveal the real aim of the MIF: “Legitimate” institutions, especially from abroad, would shun being in bed with what the press would in abbreviation call “crony money abroad.”
Such a goal is laudable. Capital flight by the Filipino elite has indeed been on a bigger scale than those in other countries because of these elites’ weak nationalism and acculturation into US society. Many of the elite are either also US or Spanish citizens and/or have at least half their wealth deposited in foreign banks or invested in US property. Several Filipinos are known, for instance, having huge Manhattan apartments costing at least P1 billion, even facing Central Park.
This phenomenon has contributed to our nation’s backwardness and, therefore, poverty. Ateneo professor Edsel Beja Jr., in a 2006 paper titled “Capital Flight and the Hollowing Out of the Philippine Economy in the Neoliberal Regime,” concluded that “capital flight from the Philippines was $16 billion in the 1970s, $36 billion in the 1980s, and $43 billion in the 1990s. Beja explained: “Indeed these figures are significant amounts of lost resources that could have been utilized in the country to generate additional output and jobs. Capital flight from the Philippines followed a revolving door process — that is, capital inflows were used to finance the capital outflows.” In a 2014 column, I computed myself that capital flight in the Philippines has been at the range of $3 billion to $4 billion yearly, noticeably increasing during periods of political volatility.
There has been no way to stop such capital flight, as controls on such free movement of capital is a no-no in a neoliberal regime we have. We can neither change our unique history which made the Filipino rich Asia’s only “little brown Americans who see the US as their home.”
Perhaps Marcos has a notion that such funds returning would be huge, that having them here would boost the economy, and make his administration a very successful one.
If convincing his elite friends (or perhaps even his family) that the MIF would be an easy way for bringing back their money sitting in some foreign bank abroad or in the form of real property, to be invested in our country’s development, I say: By all means pass the law, let bygones be bygones.
Citation and Further Reading
- Capital Flight and the Hollowing Out of the Philippine Economy in the Neoliberal Regime
- Maharlika Investment Fund (MIF) bill
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