By Des Ferriols
The Philippine Star 02/14/2007
Finance officials said the National Government (NG) is still studying the proposed special bonds for overseas Filipino workers (OFWs), saying that market conditions and legal concerns by banks would have to be sorted out.
National Treasurer Omar Cruz told reporters yesterday that the proposed issuance of OFW bonds has not left the drawing table as the Bureau of the Treasury starts consulting banks on the viability and mechanics of such an issue.
"When you’re planning something like this, your first concern is viability," Cruz said. "It is true that there is a huge pool out there that we could tap and there is no dispute that we must think of ways to do that."
According to Cruz, however, OFWs or even the banks that serve them might not be too eager to take up such an issue considering how low yields are at the moment.
"I cannot subsidize that, if the market is not bringing up the rates," Cruz said. "It would defeat the purpose of the whole thing."
Cruz said the bond rates would have to be at least competitive to be able to attract OFW investors. "As a matter of timing the market alone, I can say there is no need to hurry," he said.
According to Cruz, market due diligence needs to be conducted and part of this is to consult banks which would function as dealers of the retail bonds.
Cruz said the initial reaction of banks is to express concern over the cross-border mechanics of the proposed bond issue since OFWs are scattered all over the world in all seven continents.
Cruz also cautioned that executing the instrument is proving to be more complex than anticipated and the government wants to make sure that the product that would emerge would be simple and easy to understand.
"It’s not so simple as it may seem," Cruz said. "We have to determine whether to issue it here or offshore. If we issue it offshore, then where? How do they get registered, what taxes would be applicable, et cetera."
Cruz said the primary concern was to be able to draw an accurate market demographic for OFWs and determine what this specific market preferred, in what form, what size and even tenor.
"Suffice it to say that there is a huge pool of untapped funds that could be mobilized and invested," he said. "But we have to make sure that it would also be profitable for them to buy this instrument."
Cruz said much of OFW funds that could be earmarked for investments are currently in security time deposits or mutual funds but said only a fraction of what could be invested are being tapped.
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