SO now, senators who are critical of the Maharlika Investment Fund (MIF) have raised the issue of constitutionality. This argument was first heard being advanced by Sen. Francis Escudero, but is now embraced by Senate Minority Leader Aquilino Pimentel Jr. and the lone dissenting vote, Sen. Ana Theresia Hontiveros.

The argument is novel, but its logical footing is dubious.

I am not a lawyer. But as a political scientist, I am a student not only of the Constitution. I am also a practitioner of textual analysis and have working knowledge on how to conduct basic economic analysis.

The core of the constitutional challenge emanates from the second sentence of Section 16 of Article 12 of the 1987 Constitution, which states that: “Governmentowned or -controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability.”

A plain reading of the provision would imply that the two conditions spelled out, that is, that governmentowned or -controlled corporations (GOCCs) should be established “in the interest of the common good,” and that they be subjected “to the test of economic viability,” do not appear as prerequisites for establishing them. Instead, these are framed as governing principles for their operations. Otherwise, the provisions should have clearly used instead the phrase “provided that” as the qualifier for such conditions.

What would support this argument is the fact that any student of financial and economic analysis would know that economic viability can only be assessed in the context of specific investment proposals where projected benefits and costs can be identified, enumerated and valuated. The law creating the MIF only establishes the fund, but does not enumerate the specific investments, and for good reason. Including such in the legislation would unduly tie the hands of the fund managers.

There are several measures of economic viability which should be differentiated from financial viability. The latter involves market prices of inputs and outputs, while economic viability speaks of valuation that extends beyond marketable goods, but entails actual increases or decreases in the supply of real resources in the economy, some of which need to be estimated using economic valuation techniques such as shadow pricing and opportunity cost estimates.

Economic planners use various measures of economic viability. Among these are net present value, which is simply the difference between the present values of benefits and costs, and should have a value above zero; the benefit-cost ratio, which is computed as the present value of benefits divided by the present value of costs, and should have a value of greater than one. The internal rate of return is a measure of the rate of growth of an investment, which is compared with the prevailing interest rate and must have a higher value. Other measures include the payback period, or the number of years when the investment will be recovered.

It is obvious that in order for these measures to be ascertained, that the stream of benefits and costs should be available and be susceptible to quantification. There is good reason to presume that it is not the intent of the framers of the Constitution to require that a proposal to establish any GOCC should already contain a definitive enumeration of investment portfolios for which such benefits and costs can be evaluated and valued. These GOCCs are established with the presumption that they will be governed and administered by financial and economic experts who are capable of making specific investment decisions that would follow the constitutional directive that they should be subject to the economic viability test. In short, this test will govern specific investment decisions.

Some people would argue that decisions should take into consideration macroeconomic factors that influence risks. But financial markets are relatively fluid and changing, as any stock market player would tell you. And one cannot judge the economic viability of a long-term fund using the lens of dynamic variables. Besides, establishing the fund is different from the act of investing the fund.

Thus, it is when GOCCs fail to uphold the constitutional directive of operating subject to economically viable investment decisions that Congress may intervene, either by amending the law creating the GOCC, or worse, by dissolving it.

What is interesting is that these senators are training their guns at the MIF, demanding from it compliance with the economic viability test before it can even make a single specific investment decision, and yet are not as passionate in scrutinizing the economic viability of the investment decisions that are already being made by existing GOCCs.

There is much noise being spun around the risks of investments yet to be made by the MIF. Those who oppose the creation of the fund paint a grim scenario of people’s monies evaporating and vanishing if GOCCs and banks invest in the MIF. They fail to inform the people that these GOCCs and banks are already investing in order for their funds to grow to finance their members’ pensions, or the interest of the deposits of their clients.

Congress has a right to inquire into whether these investment decisions are compliant with the provision that GOCCs must always be subjected to the test of economic viability as required under Article 12, Section 16, which is now being cited by Senators Pimentel, Hontiveros and Escudero. This congressional oversight is assured in the case of the MIF, with the establishment of an oversight body composed of members from the Senate and the House of Representatives.

Investments made by Social Security System, Government Service Insurance System, PhilHealth, Pag-IBIG, Land Bank of the Philippines and Development Bank of the Philippines are never subjected to congressional scrutiny to ensure that they pass the constitutional test. They are, in fact, done as opaque decisions even as the law creating the MIF has installed layers of transparency and accountability mechanisms.

It is therefore a bit odd that the constitutionality of investment decisions by GOCCs where actual costs and benefits are already identifiable are not challenged even as the MIF is now being assailed for something for which no proof can be scientifically and logically established at the moment.