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Thursday, February 16, 2023 Vol. 18 No. 124

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SENATORS, EXPERTS AIR CONCERN ON MAHARLIKA By Butch Fernandez | butchfBM & Cai U. Ordinario | @caiordinario

HE proposed Maharlika Investment Fund (MIF) encountered much opposition at the Senate on Wednesday as minority senators and local economists expressed their misgivings on the creation of the proposed sovereign wealth fund. The Senate minority exposed what it called serious gaps in the bill creating the MIF, with Minority Leader Aquilino Koko Pimentel III repeatedly expressing hope that “the bill in its current form” will not be approved. Local economists, meanwhile, expressed their fears that should the state mandate government financial institutions (GFIs) to finance the MIF, this could lead to an economic contagion that would endanger the banking sector and compromise the Bangko Sentral ng Pilipinas (BSP). Pimentel aired his views at the second hearing on Senate bills creating the country’s first sovereign wealth fund, along with House Bill No. 6608—whose approval on third and final reading in the House has been questioned in the Supreme Court. Pimentel lamented that at the rate they were replying to senators’ queries, the economic managers do not have a coherent idea for the entire MIF concept, thus turning the hearing into “one expensive public brainstorming.” Senator Mark Villar, chair of the lead Banks and Financial Institutions committee jointly hearing the MIF measure with three other committees, took note of Pimentel’s concerns and assured the body all the issues raised in the hearings will be thoroughly addressed.

‘Too big to fail’

AT the hearing, Foundation of Economic Freedom (FEF) President Calixto Chikiamco said if investments of GFIs such as the Land Bank of the Philippines (LBP) and the Development Bank

of the Philippines (DBP) in the MIF are guaranteed, this would be tantamount to a moral hazard that can serve as an “incentive for the parties to be reckless.” “With its ability to access guaranteed loans from the GFI and perpetual funding from the BSP, the MIF will become ‘too big to fail’ and pose systemic risk to the economy,” Chikiamco said in a presentation on Wednesday. This moral hazard, Chikiamco explained, has led to financial crises such as the 1997 Asian Financial Crisis (AFC) and the 2008 US Financial Crisis which eventually led to the Global Financial Crisis (GFC). The 1997 AFC happened when companies assumed that central banks will protect the exchange rate. Knowing this, companies increased their borrowings of dollars. Mea nwh i le, C h i k i a mco explained that the 2008 US financial crisis happened when big banks were initially thought to be “too big to fail.” This created a contagion that spread worldwide. “The MIF is highly questionable as a strategy to achieve the government’s stated objectives. This is due to the fundamental flaw that funding of the MIF will not come from significant surpluses from commodity earnings or government operating results,” the FEF, Management Association of the Philippines (MAP) and the UP School of Economics Alumni Association (UPSEA A) said in a joint statement. See “Senators,” A2

WELCOME! The Department of Tourism led in welcoming the arrival of the Silver Spirit cruise ship at the Eva Macapagal Super Terminal-Manila South Harbor on Wednesday, February 15, 2023. The passenger ship is traveling from Singapore en route to Thailand, Vietnam and the Philippines particularly in Ilocos, Romblon and Coron, Palawan, and will proceed to Hong Kong on February 26, 2023. The ship has 300 foreign passengers and 400 Filipino crew. The Philippines was cited this week as having recovered its status as key destination for cruise ships. NONIE REYES

PESO WEAKENS ANEW AFTER HIGHER U.S. INFLATION

HE Philippine peso again weakened against the US dollar following the release of the higher-thanexpected US inflation data on Wednesday. The peso returned to the P55 level a month after it strengthened to the P54 level. Data from the Bankers Association of the Philippines (BAP) showed the peso closed at P55.17 to the greenback. The peso opened at P54.95 to the dollar. It was at its strongest at P54.95 to the greenback and was at its weakest at P55.23 on Wednesday’s trading.

“We think its more about the higher-than-expected US inflation print last night. The surprise print meant the US Central Bank isn’t about to end its rate hikes, quite the opposite of what our foreign exchange market traders have been anticipating since late 2022,” BPI Chief Economist Emilio S. Neri Jr. told BusinessMirror. Reports stated that inflation in the United States rose 6.4 percent in January 2023 while month-on-month inflation increased 0.5 percent. The US Federal Reserve earlier aimed to raise interest

rates to combat inflation and bring it down to 2 percent. The Federal Open Market Committee (FOMC) recently raised US interest rates by 50 basis points. In the Philippines, Managing Director of eManagement for Business and Marketing Services, Jonathan Ravelas told this newspaper that the market seems to be expecting a 25 bps hike by Bangko Sentral ng Pilipinas(BSP) this Thursday (February 16). “[This is] despite recent developments in domestic inflation and the Federal Reserve officials saying interest rates may need

to move to a higher level than anticipated to ensure inflation continues to fall, after fresh data showed prices rose at a brisk pace last month,” Ravelas said. The Monetary Board will conduct its first policy rate meeting for the year on Thursday. BSP Governor Felipe M. Medalla earlier said that jumbo rate hikes or 75 basis point increases were already off the table for 2023. In January 2023, the Philippine Statistics Authority (PSA) reported that inflation averaged 8.7 percent. The BSP’s target is to bring down inflation to 2 to 4 percent by next year. Cai U. Ordinario

Remittances up 3.6% in ’22, slowest full-yr growth since ’20 R EMITTANCES sent by overseas Filipinos may have grown due to the need of their families to cope with high inflation and be merry during the Christmas holidays in December, according to local experts. The Bangko Sentral ng Pilipinas (BSP) full-year 2022 cash remittances coursed through banks amounted to $32.54 billion, up by 3.6 percent from the $31.42 billion recorded in 2021. However, this is the slowest full-year growth recorded since the onset of the pandemic in 2020. In December, cash remittances coursed through banks grew by 5.8 percent to $3.16 billion in December 2022, from $2.99 billion registered in the same month in 2021.

“It’s double purpose, I think. One is to fight off the effects of higher prices and to maintain the ‘happiness’ surrounding the holidays. We all know how Pinoys are when they have money to spend especially if this December has been the ‘most open’ December in the last three years,” Unionbank Chief Economist Ruben Carlo O. Asuncion told BusinessMirror. RCBC Chief Economist Michael Ricafort agreed and said guidelines released by the government that eased restrictions, such as voluntary wearing of face masks outdoors, have contributed to the confidence of Filipinos to spend and be merry in December 2022. The increasing trend in remit-

tances is expected to continue as high inflation would prompt millions of Overseas Filipino Workers (OFWs) to send more to their families in the Philippines to help them cope with rising prices. However, Ricafort said risks or headwinds such as higher prices in host countries for OFWs could potentially reduce OFWs’ disposable income and limit the country’s remittance inflows this year. Executive Director Jeremaiah M. Opiniano of the Institute for Migration and Development Issues (IMDI) agreed with this and said major economies of the world will experience a recession this year which could make life harder for OFWs abroad.

“Filipinos abroad and the Philippine government must brace themselves for possibly lower levels of cash remittances once again. Bracing for these developments also means not forcing Filipinos abroad ‘to again save the day’ at the risk of their overall welfare,” Opiniano told BusinessMirror in an email. Opiniano said it is hoped that new ways of making remittances work for Philippine development will be crafted by the government. He said the sector is awaiting the Department of Migrant Workers launch of “a rejigged OFW reintegration program.” He added that recent develop-

ments such as remittances being used to open small and medium enterprises (SMEs) could create new avenues for the use of remittances as well as savings and financial investment products for OFWs. Opiniano said more digital finance platforms and not just remittance channels that direct Filipinos abroad to varied investible schemes could also be created as well as greater involvement from rural banks, cooperatives and microfinance institutions across the country.

Remittances

THE BSP said the growth in cash remittances in 2022 was driven See “Remittances,” A2

PESO EXCHANGE RATES n US 54.7840 n JAPAN 0.4116 n UK 66.6886 n HK 6.9789 n CHINA 8.0200 n SINGAPORE 41.2561 n AUSTRALIA 38.2666 n EU 58.8325 n KOREA 0.0431 n SAUDI ARABIA 14.6017 Source: BSP (February 15, 2023)