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  • Writer's pictureIan Murphy

Consequences of Recent Changes in the Maharlika IRR

On July 18, 2023, President Ferdinand Marcos Jr. approved the Maharlika Investment Fund (MIF), which is a sovereign investment fund that is expected to contribute to the Philippines’ investment capital, infrastructure development, foreign investment, and good governance. Marcos believes that this investment fund is a game-changer for the Philippine economy. 


However, investors and some experts are skeptical that the investment fund could become a space for corruption. Some members of Congress hoped that President Marcos would veto Maharlika in order to allow for more time to review potential unintended consequences of the bill before it officially becomes law. President Marcos, on the other hand, does not believe that Marharlika does not have the potential to be used for corruption to the extent that critics do.  


After a few months of becoming law, the Implementing Rules and Regulations (IRR) of the MIF have been revised, introducing several amendments. These changes are well-intentioned, but they lack substance in the eyes of experts and the public. 


New Implementing Rules and Regulations 


The recent modifications to the IRR with the Republic Act 11954 have brought about various changes in the stipulations concerning the appointment of the Board of Directors for the Maharlika Investment Corporation (MIC). In accordance with the amended IRR, the MIC Board will consist of its nine members, with the Secretary of Finance serving as the chairperson. The vice-chairpersons will be the MIC president and chief executive officer. The remaining members include the presidents and CEOs of the Land Bank of the Philippines and the Development Bank of the Philippines, two regular directors, and independent directors from the private sector. 


Under the new IRR, the Advisory Board is mandated to submit the list of nominees for the vacant regular and independent director, as well as PCEO positions, to the Office of the President no later than 30 days after their vacancy. A new provision also states that the President "may either accept or reject the recommendation from the Advisory Board" and "may require the Advisory Board to submit additional names of nominees." 


Concerns over transparency and accountability 


Before the new Implementing Rules and Regulations came into effect, the president temporarily halted the implementation of MIF for further scrutiny. President Marcos suspended implementation to ensure that the fund's objectives will contribute to the country's development while establishing safeguards for transparency and accountability. Finance Secretary Benjamin Diokno, slated to assume the role of chairman as specified in the IRR, announced that the MIF is expected to become fully operational by the end of 2023. In response to criticism, Diokno noted that much of the criticism stemmed from individuals who had not thoroughly read the measure. He emphasized that safeguards would be put in place to ensure transparency. 


Communications Secretary Cheloy Garafil also clarified that the amendment of the IRR will reconfigure the MIC into a more corporate structure. This restructuring aims to ensure that transparency and accountability are ingrained within the organization’s structure, itself.  


While Filipinos consistently demand transparency and accountability, the explanations provided lack specificity and assurance. Statements about safeguarding the MIC from political influence to promote good governance are too vague. The amendments do not clearly prioritize transparency and speed in the appointment of Maharlika’s board of directors, and instead give the President significant discretionary powers to accept or reject the advisory board’s nominees without specifying clear criteria.  


Additionally, several business associations and economic policy groups have expressed apprehension regarding the establishment of the MIF, pointing to a perceived lack of justification for its establishment. A cohort of distinguished economists contends that the creation of the MIF may divert essential funds from other government sectors. A group of 21 economics professors from the University of the Philippines published a discussion paper urging Marcos to veto the MIF. Their primary concern revolves around the identification of "serious risks" that the MIF poses to the country's future. These economists believe that the MIF violates fundamental principles of economics and finance, which will expose the economy and the public sector to substantial risks despite the good intentions of MIF proponents. 


Policy Recommendations 


The implementation of a sovereign investment fund like Maharlika requires careful consideration. With the public already skeptical about transparency and accountability, political leaders will have to prove their good intentions by creating good institutional structures, oversight, and reporting. As it stands, Maharlika appears to have been a creation by the executive branch and private sector.  


These are some policy recommendations that could be considered for the Maharlika Investment Fund:  

  1. Establish an independent oversight committee with audit authority over the Fund's operations and investments. This could enhance transparency and accountability outside of the sole purview of the President or appointed board members. 

  1. Set clear investment guidelines and economic development objectives for fund allocation. This includes prohibited investments, target returns, acceptable risks, priority sectors, etc. to guide decision-making. 

  1. Require competitive bidding processes for major investment partnerships rather than direct appointments or awards. This opens opportunities to more players and reduces avenues for corruption. 

  1. Institute conflict-of-interest policies and financial disclosures for all board members and executives involved in investment decisions. This discourages self-dealing. 

  1. Impose limits on the percentage of the fund that can be invested domestically vs internationally to balance financial returns with economic priorities. This prevents excessive capital concentration on a few domestic projects. 

  1. Establish time-bound reporting requirements on investment performance and economic outcomes delivered by the fund for public transparency. This ensures accountability to stated objectives. 

  1. Conduct regular independent audits on compliance to all policies, procedures, and outcome reporting. Publishing these external assessments pressures continual adherence to highest ethical and efficiency standards. 



Building public and expert confidence amid perceptions of potential abuse will be President Marcos’ biggest challenge. While the government has emphasized the fund’s intended benefits, critics have raised alarm bells about risks of corruption and mismanagement of public money. The amendments to Maharlika have not fully dispelled fears that political interests could take precedence over national interests. Restoring public trust is key to building widespread confidence, not only for Maharlika, but for the Philippine government as a whole. 



This article was previously published on Rappler on November 17, 2023.


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