UPSE faculty members air ‘grave concerns’ with MIF


NEARLY two dozen faculty members of the UP School of Economics (UPSE) on Tuesday expressed “grave concerns” regarding the proposed Maharlika Investment Fund (MIF) and urged President Marcos Jr. to “seriously reconsider” enacting the measure into law.

The 21 UPSE faculty members coauthored a discussion paper publicly released on Tuesday, explaining why the Marcos Jr. administration’s proposed MIF should not come to life, describing the measure as “still beyond repair.”

The discussion paper outlined six arguments why the MIF “violates” fundamental principles of economics and finance and how it poses “serious” risks to the economy and the public sector.

First, the authors argued that both justification and characterization of the MIF remains “unclear,” which could be a “potential” violation of Principle No. 2 of the Santiago Principles.

Principle No. 2 underscores that “the policy purpose of the SWF should be clearly defined and publicly disclosed.”

The authors explained that the concept of the sovereign wealth fund (SWF), which was the initial characterization of MIF, has evolved throughout the years, resulting in various classifications such as sovereign development fund (SDFs) and strategic investment funds (SIFs).

“Whether the MIF is an SWF or SDF or SIF, it should be stated clearly in the bill. Clarity of goals is essential for any new SWF,” the authors said.

Because of its “confused goals,” the current MIF bill does not “adequately articulate” and “take [into] account” the “several” implications of the fund’s dual-bottomline objective, according to the discussion paper.

The authors explained that the MIF has a dual-bottom line objective, which is to earn commercial returns by investing in financial instruments while generating economic returns by funding local development projects.

The authors argued that the MIF is not aligned with the Philippine Development Plan nor the Medium-Term Fiscal Framework while the bill remains “vague” about the measure’s expected financial and economic returns.

“By having unclear financial and developmental goals, the MIF threatens to encroach upon the budget process,” they said.

“If the government wishes to set up the MIF primarily to invest in projects that yield economic or social externalities, such goals may be better achieved through the normal budget process, not an SIF,” they added.

The UPSE faculty members also claimed that another “major defect” of the MIF is that it could further strain public coffers while being “vulnerable” to “moral hazard.”

“At the very least, MIF’s proponents should have put in place provisions that align the MIF’s funding and investments with the country’s fiscal objectives,” they said.

“The lack of any surpluses necessarily forces the MIF to scour money from other agencies and corporations of government, posing risks on, say, state-run banks and even the [Bangko Sentral ng Pilipinas],” they added.

The authors also claimed that there are “red flags” in the Maharlika Investment Corp.’s (MIC) governance structure.

 The discussion paper stressed that all members of the MIC’s board, even the independent directors, are all presidential appointees, contrary to some of the best practices in the world, wherein government representatives are not part of a fund’s investment committee. 

“The MIF bill provides for a poorly designed governance structure that opens the floodgates for political interference, mismanagement, and corruption,” they said.

“We also observe that the proposal for a risk management unit, as outlined in the MIF bill, lacks sufficient independence from the Board. This could potentially compromise the effective risk management of the MIF,” they added.

 The authors added: “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.”

Lastly, the authors claimed that the national government’s “preoccupation” with the MIF has diverted its attention from “more vital” and “urgent” problems such as reforming 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,” they said.

“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,” they added. 

Image credits: Andrii Yalanskyi |