By LEE C. CHIPONGIAN
The Bangko Sentral ng Pilipinas and the Bureau of Treasury are discussing the mechanics for the proposed $ 1-billion retail treasury bonds (RTBs) exclusively for overseas Filipino workers, however the issue of preferential rates will be an "issue."
"There are several things that need to be hurdled, first our interest rates are very low and if we issue (OFW-RTBs) it would have to be at today’s current rates," National Treasurer Omar T. Cruz said yesterday. "Why would I issue them higher rates when I can issue at lower rates … I cannot give them special preference (it) has to be market rates."
The National Government through the Btr issues bonds at best terms to the government and to the investors. "We respect investor preference. In other words we will have to compete," said Cruz.
The BSP is pushing for the issuance of the OFW bonds as a way of channeling remittances to financial investments. However timing is an issue because at the moment, market rates are too low.
Cruz said that while the proposal has merit, there are execution problems. "The BSP proposal is to tap that market but as to the structure and the operating details … that is left to be (worked out)."
He said there are cross border regulatory issues that the central bank has to first review. "You are cutting across markets … so, how do you sell to them, how do you get them, how do you solicit." Different markets have different regulations. "It’s not uniform."
Cruz added, "I’m not against it, neither am I downplaying it … sure you can tap OFWs for resources but we have to tap it the proper way – the proper instrumentation, execution, documentation, clearances, selling and pricing."
CLSA Asia-Pacific said the Arroyo government can make use of OFW foreign exchange to help increase infrastructure spending. The BSP said the government can tap at least $ 1.3 billion from OFW cash to spend for infrastructure development.
There are currently over eight million Filipinos working overseas with that figure growing by one million a year, and with total remittances averaging $ 12 billion a year, or six times more than foreign direct investment inflows last year.
About 46 percent OFW dollars are remitted from the
Since last year the BSP and the Overseas Workers Welfare Administration (OWWA) have been conducting financial literary campaigns (FLC) program for OFWs and their beneficiaries. The FLCs emphasize the importance of savings .. and alternative opportunities for their remittances such as placements in financial instruments and investments in business ventures.
The policy directions of OFW remittances are in line with Executive Order No. 446 issued in July 2005 to oversee and coordinate the implementation of various incentives for OFWs.
The same EO designated the BSP to chair the subgroup on Bank-Related Initiatives. Last year the BSP’s Monetary Board approved the creation of an executive committee and four working groups to recommend specific action plans to enhance OFW remittance flows and provide a general framework to the program.
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