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The Maharlika Investment Fund (MIF): A critical examination of the Philippines’ proposed sovereign wealth fund

Sovereign Wealth Funds (SWFs) are state-owned investment funds that are used by countries to benefit their economies and citizens. They consist of various types of assets such as stocks, bonds, real estate, or other financial instruments, often derived from a nation’s surplus reserves.

The concept of SWFs originated in the mid-20th century, pioneered by countries with surplus revenues primarily from commodities like oil. For instance, the Kuwait Investment Authority, established in 1953, is often cited as the first SWF. Over time, many other countries

SWFs significantly contribute to economic stabilization. They invest surplus revenues, thereby providing a cushion against economic downturns. For instance, during periods of low oil prices, oil-rich countries can utilize their SWFs to balance any decrease in revenue.

It stands out for their long-term investment strategies. Unlike private investors who might focus on short-term gains, SWFs have the advantage of a long-term perspective, enabling them to undertake investments that, despite potential short-term risk or unprofitability, could yield substantial returns in the future.

SWFs can profoundly influence a nation’s strategic objectives. By channeling investments into specific sectors or industries, they can promote national priorities, such as infrastructure development, technological progress, or economic diversification. In practice, several oil-rich nations use their SWFs to invest in industries outside of oil, aiming to diversify their economies and reduce oil revenue dependency.


Different types of sovereign wealth funds

Sovereign Wealth Funds (SWFs) can be classified into four primary types, each reflecting the specific economic goals and policy objectives of their respective countries. These include savings funds, stabilization funds, pension reserve funds, and strategic development SWFs.

Savings funds are designed to transform non-renewable assets, such as oil or minerals, into a diversified portfolio of international assets. These funds aim to conserve wealth for future generations once these non-renewable resources are depleted. For instance, the Government Pension Fund Global of Norway falls under this category, as it invests oil revenues to secure future generations’ welfare.

Stabilization funds are typically used to insulate the economy from commodity price volatility and other economic shocks. They collect surplus revenue during periods of high commodity prices and release funds into the budget during downturns to help stabilize government revenues and counteract economic cycles. An example is the Russian National Wealth Fund, established to support Russia’s pension system and balance the federal budget in times of oil price volatility.

Pension reserve funds are not sources of pension contributions but serve as a buffer to assist the funding of future pension liabilities. These funds are typically invested in a diversified portfolio of assets to generate a steady return over time. The Australian Future Fund is an example of a pension reserve fund.

Lastly, strategic development SWFs aim to fulfill specific domestic economic and policy objectives, such as developing certain sectors, promoting economic diversification, or increasing employment. These funds often invest in domestic industries and infrastructure. The Ireland Strategic Investment Fund, for instance, targets sectors that will deliver economic and employment benefits to Ireland.


How SWFs are funded

The funding sources for Sovereign Wealth Funds can be traced back to a variety of economic activities and reserves depending on the fund’s nature and the country’s economic structure. Common sources of funding include commodity exports, foreign exchange reserves, transfer of assets from other funds, and fiscal surpluses.

Commodity exports, particularly of oil and gas, are a significant source of funding for many SWFs. For countries rich in these resources, the revenues generated from their exports can result in significant budget surpluses, which are then channeled into their respective SWFs. Notable examples include the Abu Dhabi Investment Authority funded by oil exports, and the Government Pension Fund Global of Norway funded by oil and gas revenues.

Foreign exchange reserves are another crucial source of funding for SWFs. Countries with substantial foreign exchange reserves, often due to a large volume of exports or a significant influx of foreign direct investment, can allocate a portion of these reserves to establish or bolster their SWFs.

Some SWFs are also funded through the transfer of assets from other government funds or entities. For instance, an initial corpus for the fund might be sourced from a country’s central bank reserves or a public pension fund.

Lastly, fiscal surpluses arising from prudent economic management and strong economic growth can also be channeled into SWFs. Countries that consistently run budget surpluses may choose to invest these funds for future needs or economic stabilization. For example, Singapore’s Government Investment Corporation is funded in part by the country’s budget surpluses.

Countries with SWF best practices

‘Best practices’ in the context of Sovereign Wealth Funds usually refers to effective and ethical management practices that have proven successful across a range of funds. Some of these practices include establishing clear objectives for the fund, which can guide its investment strategy and help stakeholders understand its purpose. Implementing robust governance and operational frameworks is another key best practice. This involves having clear lines of responsibility and control, as well as efficient processes for decision-making and execution. Finally, transparency and accountability are crucial for maintaining public trust in SWFs. This can involve regular public reporting, independent audits, and strong oversight mechanisms.

Several countries are recognized for their adherence to best practices in the management of their SWFs. Among them, Norway, with its Government Pension Fund Global, is frequently lauded for its high transparency and robust governance structure. Singapore’s two SWFs, Temasek Holdings and GIC, are also acknowledged for their clear investment strategies, sound governance, and significant contribution to the country’s economy. Similarly, the Abu Dhabi Investment Authority (ADIA) in the United Arab Emirates, one of the largest SWFs in the world, is recognized for its diversified investment portfolio and prudent risk management strategies.

Norway’s Government Pension Fund Global, one of the largest sovereign wealth funds in the world, is primarily funded by the country’s oil revenues. The fund is intended to finance public pensions and prevent the Norwegian economy from overheating due to excessive spending of oil revenues. A standout aspect of the Norwegian fund is its high degree of transparency. It regularly publishes detailed reports about its operations and investments, and it’s known for its strict ethical investment guidelines, which prohibit investments in companies involved in activities such as tobacco production, certain types of weapons manufacturing, and severe environmental damage.

Singapore manages two sovereign wealth funds: Temasek Holdings and GIC. These funds are primarily funded by Singapore’s foreign reserves. Their overall goal is to strengthen Singapore’s economy and ensure the well-being of future generations. Temasek Holdings and GIC are renowned for their strong governance structures and clear investment strategies. They are recognized for their strategic investments in a variety of sectors, both domestically and internationally, contributing to the robustness of Singapore’s economy.

The Abu Dhabi Investment Authority (ADIA) is primarily funded by Abu Dhabi’s oil surplus. Its main objective is to diversify income sources away from oil and stabilize the economy. ADIA is known for its wide-ranging investment portfolio, which spans numerous sectors and asset classes across various countries. This diversified approach helps to spread risk and increases the potential for returns. Additionally, ADIA has a reputation for prudent risk management, which includes a thorough evaluation of potential investments and careful monitoring of its portfolio.


Advantages of SWFs

Sovereign Wealth Funds serve as an important mechanism for smoothing the impact of volatile commodity prices or trade surpluses, providing economic stability. For instance, when a country experiences a surge in oil prices, it can channel the extra revenue into its SWF. During times of lower prices or economic downturns, the country can use the SWF to compensate for the shortfall, thereby stabilizing the economy. Furthermore, SWFs allow countries to diversify their income sources by investing in various asset classes and industries across different countries, reducing the economic risk associated with over-reliance on a single volatile revenue source, such as oil in the case of many Middle Eastern countries.

As state-owned entities, SWFs can afford a longer-term investment horizon than most private investors. This long-term perspective provides SWFs with the advantage of investing in riskier or less liquid assets that may offer higher returns over a longer period, like infrastructure or private equity. Furthermore, their ability to remain patient and hold onto their investments during periods of market volatility allows them to benefit from long-term economic trends and potentially realize higher returns compared to short-term investments.

SWFs often invest in sectors that align with their country’s strategic objectives, promoting national development and growth. For instance, a SWF might invest in infrastructure projects, thereby facilitating economic development and job creation. In the case of technology or renewable energy, investments by SWFs can drive innovation and help transition the economy towards a more sustainable model. This alignment of investments with national goals is another crucial advantage of SWFs.

The concept of intergenerational equity is central to many SWFs, particularly those funded by revenue from depletable resources like oil. By setting aside and investing a portion of the income derived from these resources, SWFs can ensure that the wealth benefits future generations and not just the current populace. For example, the Norwegian Government Pension Fund Global, one of the world’s largest SWFs, was established to invest the profits from Norway’s oil and gas resources, securing the welfare of future generations long after these resources are exhausted.


Disadvantages of SWFs

One significant concern surrounding Sovereign Wealth Funds is the potential for mismanagement and corruption. Especially in countries where transparency and oversight mechanisms are lacking, there is a risk that SWFs could be susceptible to such practices. For instance, there have been allegations of corruption and mismanagement in Malaysia’s 1MDB fund, where billions of dollars were reportedly misappropriated. In countries with weak institutional frameworks and regulatory oversight, the large amounts of money managed by SWFs can be prone to misuse, which could lead to significant economic and social implications.

Another disadvantage of SWFs is the potential concentration of economic power. With their enormous assets, SWFs have the ability to wield significant influence over markets and corporations, leading to concerns about market manipulation or exerting undue influence. For example, a large investment by a SWF in a particular sector could potentially distort market prices. Additionally, SWFs’ investments could have implications for national security, particularly when they invest in strategic industries of other countries.

Large-scale investments by SWFs, particularly in domestic markets, could potentially lead to economic overheating and asset price inflation. By pumping significant amounts of money into specific sectors or asset classes, SWFs could contribute to overvaluation, which can lead to asset bubbles and exacerbate economic instability. For instance, excessive investment in the real estate sector could drive up property prices, making housing unaffordable for many citizens and potentially leading to a property bubble. Thus, while SWFs can contribute to economic growth and stability, they also need to manage their investments carefully to avoid contributing to economic instability.


Controversies surrounding SWFs

Sovereign Wealth Funds are often criticized for a lack of transparency and opacity in their operations. For example, the Libyan Investment Authority (LIA) has faced several allegations and legal actions related to mismanagement and corruption due to its lack of transparency. Similarly, China’s Investment Corporation (CIC) has faced criticism over the lack of clarity surrounding its investment strategy and performance.

There is also the risk of political interference in SWFs. The Russian Direct Investment Fund (RDIF) has been viewed as a tool of state policy for geopolitical influence rather than an independent financial institution for profit maximization. Similarly, the Qatar Investment Authority (QIA) has been closely tied to the ruling family, raising questions about its independence.

Large SWFs can also pose a risk to global financial stability. For instance, the Norwegian Government Pension Fund Global (GPFG) is one of the world’s largest SWFs and its investment decisions can have a significant impact on global markets. Similarly, the Saudi Arabian Monetary Authority (SAMA) controls a large SWF whose investments can significantly influence global financial markets.


The Proposed Maharlika Investment Fund of the Philippines

House Bill No. 6398, also known as the Maharlika Investment Fund (MIF) bill, was certified as urgent by President Ferdinand “Bongbong” Marcos Jr. The bill’s primary aim is to stimulate economic activity and development in the Philippines through strategic and high-impact infrastructure projects, serving as a new growth catalyst.

The proposed Maharlika Investment Fund (MIF) is primarily intended to stimulate the economy in the face of downgraded global growth projections. This comes at a time when the world economy is dealing with several challenges, including debilitating inflation, fluctuating and unstable prices of crude oil and other fuel products due to the ongoing conflict between Ukraine and Russia, and continuing interest rate hikes in the international financial sector. By supporting strategic and high-impact infrastructure projects, the MIF is envisioned to act as a new catalyst for growth, accelerating economic activity and development in the Philippines.


Maharlika Investment Corporation

The proposed Maharlika Investment Fund (MIF) will be managed by the Maharlika Investment Corp. (MIC). However, the management and governance of the MIF have come under scrutiny, particularly with the provisions in the Senate MIF bill that would allow foreigners to sit on the board of MIC. Critics, including Rep. Arlene Brosas, argue that this could lead to foreign control over local resources. There are also worries about the potential for “money laundering” due to the discretionary powers given to the Board of Directors, as voiced by Rep. France Castro.

President Ferdinand “Bongbong” Marcos has certified the Maharlika Investment Fund bill as urgent, expressing the need for a wealth fund to counter the impact of several economic challenges, including inflation, fluctuating oil prices, the Russian invasion of Ukraine, and interest rate hikes. The president believes the fund could stimulate the economy by accelerating the implementation of large infrastructure projects. The urgent certification allows the bill to bypass the normal legislative process, which entails readings and deliberations on three separate days. As a result, the bill could be passed more quickly, but at the risk of lawmakers not having ample time to read and study the proposed measures.


Funding MIF

The proposed Maharlika Investment Fund (MIF) is expected to receive initial capital from major financial institutions such as the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), and the Bangko Sentral ng Pilipinas (BSP). However, there are concerns that diverting funds from LBP and DBP to the MIF might affect the availability of funds for farmers and microenterprises, which are the primary clientele of these banks.

In addition, the Senate bill reintroduces pension funds such as the Government Service Insurance System (GSIS), Social Security System (SSS), and Pag-IBIG as potential investors in the MIF. It should be noted, however, that the participation of these pension funds is voluntary and not mandatory.

Moreover, the bill proposes annual contributions from the Philippine Amusement and Gaming Corporation (PAGCOR) and other government-owned gaming operators to boost the fund’s capital. It should be noted that these are profits from gaming operations, and diverting them to the MIF could have implications for other sectors funded by these entities.

The MIF is expected to raise additional capital through an Initial Public Offering (IPO) on the Philippine Stock Exchange. This implies that the fund will be listed on the stock exchange and shares of the fund will be made available to the public. This move is intended to democratize access to the fund and encourage public participation in the fund’s growth and profits.


MIF concerns and criticisms

Senator Risa Hontiveros, a vocal critic of the Maharlika Investment Fund (MIF) bill, has expressed several concerns about its quick passage and potential implications. She pointed out the depletion of income from the Malampaya oil and gas fields and the yet-to-be-passed law aimed at boosting the government’s income from mining operations. She also warned against the use of highly profitable funds of government financial institutions like Land Bank and Development Bank of the Philippines, which she argues could negatively impact farmers and small businesses. Additionally, Hontiveros raised concerns about the potential risks of using Bangko Sentral funds, highlighting their role in safeguarding against peso depreciation, price increases, and loan interest rate hikes.

The Makabayan Bloc in the House of Representatives, a coalition of left-leaning legislators, has not been silent about their concerns surrounding the proposed Maharlika Investment Fund (MIF). A central theme of their criticism is the potential for the MIF to have transparency issues, given the amount of public funds it will manage and the potential for the fund to fall under the influence of political interests. They also questioned the necessity of creating a new fund, suggesting that existing national agencies could be restructured or optimized to fulfill similar goals. Additionally, the Bloc has expressed fears that the MIF might be used as a tool for political patronage, potentially leading to corruption as large sums of public funds could come under the control of a select few individuals.



The Maharlika Investment Fund (MIF), recently proposed in the Philippines, has stirred a mix of hope and concern among stakeholders. The MIF, designed to stimulate economic growth through strategic infrastructure projects, could serve as a new catalyst for development amidst global economic uncertainties. However, the proposed fund has been met with skepticism and criticism due to a variety of issues, such as concerns over governance, transparency, the source of funding, and the lack of clear investment guidelines. Despite these concerns, the bill has been certified as urgent by President Ferdinand “Bongbong” Marcos Jr., signifying the need to kick-start this initiative for the economic future of the nation.

Strong governance structures should be at the heart of the Maharlika Investment Fund (MIF) and its managing entity, the Maharlika Investment Corporation (MIC). These structures should foster a culture of professionalism, transparency, and accountability while incorporating robust checks and balances to mitigate the potential for mismanagement or misuse of funds. This foundational recommendation, when well implemented, would pave the way for confidence, both domestically and internationally, in the operations of the MIF.

Enhanced transparency is a key necessity for the MIF, considering the high stakes involved and the significant public interest. The fund should be mandated to provide regular, comprehensive, and publicly accessible reports of its activities, investments, and returns. These transparency measures will serve as a deterrent against corruption and engender a sense of public trust and accountability in the fund’s management.

To alleviate concerns surrounding the source of funds, the MIF should primarily draw from the General Appropriations Act and contributions from the private sector. Existing financial institutions, such as the Land Bank, Development Bank of the Philippines, Bangko Sentral ng Pilipinas, and the surplus of GOCCs, are already serving their respective mandates and may not possess the surplus funds to sustainably contribute to the MIF. Therefore, it’s crucial to diversify and clarify the fund’s financial structure to ensure its viability and reassure stakeholders.

Establishing clear investment guidelines is another critical step for the MIF. These guidelines should be detailed, aligning with the country’s overarching economic goals and sustainability principles. To ensure effective and timely execution, the MIF should ideally concentrate on a maximum of three specific investment areas per year. Such focus will minimize the risk of spreading resources too thinly and not being able to bring projects to completion.

The implementation of MIF should be gradual, allowing for continual refinements based on real-time learning and feedback. This cautious approach can help mitigate risks, manage unintended consequences, and increase the fund’s adaptability in a dynamic economic landscape.

The inclusion of regular external audits and oversight in the MIF’s operational structure can provide an additional layer of checks and balances. These audits should be carried out by reputable external entities and serve to reinforce good governance and transparency in the management of the fund.

Existing government institutions be strengthened to more effectively fulfill their mandates. This approach helps to avoid duplication of efforts and allows resources to be directed more efficiently. The MIF should refrain from investing in areas where other government institutions are already capable of delivering results, preventing redundancy and fostering greater efficiency in the allocation of public funds.

The establishment of the Maharlika Investment Fund (MIF) represents a significant and necessary step forward for the Philippine economy, particularly in the face of current economic challenges. This initiative, however, should be balanced with the implementation of robust safeguards to ensure the maintenance of financial stability and the protection of public interest.

Success of the MIF hinges on more than its mere establishment; prudent and transparent management is crucial. This fund will need to navigate a complex economic landscape while maintaining trust and demonstrating fiscal responsibility. A series of recommendations have been provided with this balance in mind, aimed at guiding the MIF towards achieving its economic goals and maintaining public trust.

The success of MIF will not only be a testament to its management’s acumen but also to the fund’s foundational principles of governance, transparency, and accountability. These guiding principles will be essential to ensuring that the MIF can effectively stimulate economic activity and development, whilst also safeguarding public interest and financial stability. This holistic approach to the MIF’s establishment and operation is fundamental to its ability to serve as a new catalyst for growth within the Philippines.


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