061807: Owwa streamlines funds schemes

By Jun Vallecera

Reporter

THE Overseas Workers’ Welfare Administration (Owwa) has done away with subpar operational practices and atrocious policy stances that in the past led to losses in the hundreds of millions of pesos a year, according to industry sources. The first to go was the fund’s self-imposed five-year placement cap that a four-man team of technocrats made sure was thrown away for good. The placement cap prohibited the fund from investing its money in financial instruments with maturities of over five years, even though longer-dated ones may offer returns far more attractive. That policy caused Owwa’s investment earnings from its investment management account (IMA) to fall sharply in recent years, according to sources who refused to quantify it. The Owwa’s IMA is estimated at some P40 0 million at the moment, the bulk of it in the form of bonds issued by the Land Bank of the Philippines. The IMA is separate from its capital fund, of about P50 million, and the so-called seafarers’ welfare fund that total another P100 million. Before the technocratic team gave its recommendations, the IMA placements had been falling for many years, resulting in parallel declines in interest earnings. These losses, too, have not been quantified, although estimates of a 1-percent drop in average rates reduce the fund’s IMA earnings by about P9 million to P10 million a year, according to sources. It was learned that Owwa administrator Marianito Roque and his board of trustees feared committing millions of pesos worth of funds in a six- or 10-year issues in a market that could prove illiquid. Roque was told the secondary market for Treasury bonds in the bond exchange is currently very active, with daily turnovers exceeding P10 billion and placements being terminated and sold quickly at minimal cost. To further optimize earnings, the Owwa was encouraged to shift paying Land Bank and the Development Bank of the Philippines trustee fees based on IMA earnings rather than on IMA market value. The value of Owwa’s investment management account was seen to continue rising in the medium term, even though local interest rates have been falling ever since —thus, the near certainty that its investments earnings will fall. A proposal for Owwa to invest in privately-issued promissory notes or PNs, those funds in excess of reserve funds, was shot down. Government rules mandate government-owned or controlled corporations to invest their idle funds only in medium- and long-term government securities, special short-term GS and/or fixed-term depositors with the Bureau of the Treasury. http://www.businessmirror.com.ph/06182007/headlines09.html