The Asean +3 Macroeconomic Research Office (AMRO), an international organization established in February 2016 to conduct regional macroeconomic surveillance, monitoring, assessing, and reporting and economic and financial conditions and outlook of member countries in the Asean +3 region, which includes China, Japan, and South Korea along with the 10 member states of the Association of Southeast Asian Nations, has completed a report focused on the Philippines and has identified some red flags concerning the highly touted Maharlika Investment Fund.
According to the Singapore-based think tank, the MIF has a “strong legal framework” but has potential risks such as the possible misuse of funds and a lack of accountability. Other red flags include the MIF’s different goals might be at odds with each other in some investments; it could crowd out planned spending in some areas; and that the financial position of contributing government financial institutions might be adversely affected in the event of MIF losses.
The report was based on the latest annual consultation mission that AMRO held during a visit from August 29 to September 8.
It urged Philippine authorities to closely monitor the MIF and its management body to ensure that the objectives are achieved, the country’s long-term development needs are met, and the governing law is strictly adhered to.
AMRO said the MIF’s role in infrastructure investment should be clearly defined with “appropriate governance” to avoid misuse of funds. It added that due diligence must be conducted in assessing the potential impact on the financial health of entities that are contributing to it.
“Finally, drawing on international experiences, the MIF should be run by professionals and the board should comprise of independent directors to ensure that the fund adheres to its investment objectives,” AMRO noted.
It saw potential for success that would depend on the actual implementation of the law and whether the fund is operated with a robust risk management framework, taking cognizance of potential risks and governance concerns.
A national investment fund as ambitious as the MIF shouldn’t have red flags, especially in a country where corruption remains pervasive and competence rare. If any are pointed out, it should be up to our government and the people responsible for it to listen and take down notes from those with more experience and exposure, so such concerns can be addressed squarely and another costly failure at the Filipino people’s expense avoided.*
