(DP 2023-02) Maharlika Investment Fund: Still Beyond Repair
The administration of President Ferdinand Marcos Jr. is pushing for the creation of the Maharlika Investment Fund (MIF). Originally proposed as a sovereign wealth fund, the MIF later on morphed into what can be called a sovereign investment fund (SIF): a state-owned investment fund that aims to reap returns from financial investments as well as economic returns from developmental projects like infrastructure. We find that the MIF violates fundamental principles of economics and finance and poses serious risks to the economy and the public sector — notwithstanding its proponents’ good intentions. First, the raison d’être of the Maharlika Investment Fund remains unclear even as it has already hurdled both houses of Congress. Second, due to its confused goals, the MIF bill does not adequately articulate and take account of several implications of the fund’s dual-bottom line objective. Third, the manner of funding the Maharlika Investment Fund poses huge risks to our already strained public coffers and is vulnerable to moral hazard. Fourth, red flags abound in the MIC’s governance structure. Fifth, with elevated global economic headwinds and uncertainties, it is unlikely that MIF will be able to “crowd-in” investments and eke out returns that are large enough for the fund to grow substantially to finance development projects. Sixth, the preoccupation with this defective proposal has diverted attention from more vital and urgent national agenda that the administration itself has rightly identified, notably the need to reform the retirement and pension system for military and uniformed personnel. In view of the foregoing, we call upon President Marcos to seriously reconsider the final approval of the Maharlika Investment Fund bill, and present before the public a clear and solid rationale for setting it up in the first place. We also call on our former and present colleagues who are now part of the Marcos economic team to reconsider their position on Maharlika and advise the President accordingly, in line with their best appreciation of their discipline and the reservations expressed by the rest of the economics profession of the country.
JEL codes: G23, G32, H50, H54, H63
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