The caveats and promises of Maharlika Investment Fund | Inquirer Business
MAPping the Future

The caveats and promises of Maharlika Investment Fund

/ 02:01 AM November 20, 2023

Republic Act No. 11954 constitutes the Maharlika Investment Corporation (MIC) as the government-owned and -controlled corporation (GOCC) tasked with the management of the Maharlika Investment Fund.

The capitalization is more outlined, with a capital stock of P500 billion to be divided into P375 billion common shares and P125 billion preferred shares. Of the P375 billion common shares, P125 billion shall be funded by Landbank, the Development Bank of the Philippines and the national government (NG). The preferred shares, on the other hand, are made available for subscription by the NG, its agencies or instrumentalities and GOCCs or government financial institutions, except the Social Security System, Government Service Insurance System, PhilHealth, Pag-Ibig, Overseas Workers Welfare Administration and the Philippine Veterans Affairs Office. Private institutions, as well as other state-owned financial institutions, may also be allowed to invest in the fund.

The law now explicitly states that government agencies and GOCCs providing for social security and public health insurance are prohibited from contributing.


One major red flag is the lack of safeguards to protect public funds from abuses, graft and corruption, money laundering or tax evasion.


Under RA 11954, the institution of independent directors, availability of Freedom of Information laws, mandatory disclosures of investment policies, the adoption of a financial reporting framework and compliance with the Santiago Principles were provided as safeguards. While there seems to be a lot, they may not be sufficient to protect from possible abuses or gross incompetence or negligence of the presidential appointees who will manage the funds.

Controversial provisions, such as the tax exemptions and the exemptions from the Government Procurement Reform Act, have been removed. There is no longer any provision exempting the income from and assets of the fund from taxes, except outstanding tax liabilities of properties to be contributed by the Department of Finance – Privatization and Management Office. The law also explicitly states that the Government Procurement Reform Act is applicable to the MIC.


8.6% return promised

Another matter that we need to look at is the promised 8.6 percent return.

Under the law, Maharlika will be invested in: (1) cash, foreign currencies metals, and other tradable commodities; (2) fixed income instruments, (3) domestic and foreign corporate bonds, (4) listed or unlisted equities, (5) Islamic investments, such as sukuk bonds, (6) joint ventures or coinvestments, mergers and acquisitions, (7) real estate and infrastructure projects in line with the national priorities, (8) programs and projects on health, education, research and innovation, and investments which contribute to sustainable development, (9) loans and guarantees and (10) other investments with sustainable and developmental impact.

From these, we can only guess as to how the fund will achieve the 8.6-percent return, since there are no specifics on how investing in these listed projects would really generate the alleged rate of return.

The implementing rules and regulations (IRR) of RA 11954 also recently warranted watching out for. Preliminarily, it must be noted that the IRR provisions are still within the bounds of the law. However, if the present iteration of the IRR is compared with the old IRR, there are some red flags. The qualification requirements have been made more lax, warranting particular suspicion in light of the recent appointment of Rafael Consing Jr. as president and CEO of MIC. Under the prior IRR, Consing would not have qualified for the position. Moreover, under the revised IRR, the functions and responsibilities of the audit and risk management committees are to be determined by the board of directors. The composition and provision of the specific responsibility of the audit committee were removed and it is now reduced to a single section, which states that the board shall organize an audit committee and prescribe its functions and membership.

The responsibilities of the risk management committee were entirely removed, replaced by the provision that its specific functions shall be determined by the board.

The revised IRR also explicitly states that the president has the power to accept or reject recommendations by the advisory body for the positions of regular directors, independent directors and the president/CEO. Admittedly, that power has always been with the president, but the change still raises eyebrows.

Beyond the law

Other criticisms are external to the law itself and remain applicable.

First, problems of transparency are tied with the levels of corruption in the Philippines. While there are limitations and safeguards enshrined in the law, there is no guarantee that these would be enough, especially since this is considered to be one of the most corrupt countries in the world.

Second, the Philippines still lacks a budget surplus. While forecasts of economic growth generally portray it in a positive light and while inflation has slowed recently, the fact remains that the Philippines has a P250.9-billion budget deficit as of September 2023. Moreover, data from the Bureau of Treasury currently pegs the country’s debt at P14.35 trillion as of October 2023.


Sovereign wealth funds are generally funded from budget surplus or funds arising from the exploitation of natural resources, such as oil and minerals. The Philippines does not have that surplus. Instead, the Philippines will be allocating initially P125 billion and potentially up to P500 billion to fund the MIC.

What is being criticized here is the timing of the law. Is now really the time for the country to invest public funds into a sovereign wealth fund? The government insists so and that the fund would bear fruit in the long-term. But the Philippines faces several economic issues that could be exacerbated by the implementation of the fund now.

In my opinion, there are more urgent bills and priorities that would have helped increase tax revenues, domestic productivity and pay our government debts, such as lifting the Bank Secrecy Law, enacting general tax amnesty, empowering fisherfolk and farmers through artificial intelligence or integrating technology in the entire supply chain, requiring foreign tech giants to register and pay income tax, among others.

There are also incidents, such as the 1Malaysia Development Berhad (1MDB) scandal, which resulted in the loss of roughly $4.5 billion and an accrual of $7.8 billion in debt.

The public has to be more vigilant and skeptical as to its promised return until we actually generate income and do not lose public funds.

Corruption is a crime that is very difficult to trace and even harder to prosecute. This is why the public must be cognizant of their role as a pillar in fighting corruption—by holding the government accountable for acts of corruption. Failure to do so is tantamount to condoning corruption and allowing it to proliferate. INQ

This article reflects the personal opinion of the author and not the official stand of the Management Association of the Philippines or MAP.

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The author is a MPA/Mason Fellow at Harvard Kennedy School. He is a member of MAP Tax Committee and MAP Ease of Doing Business Committee and chief tax advisor of Asian Consulting Group. Feedback at and

TAGS: Business, MAPping the Future

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