- Published on Sunday, 28 October 2012 20:43
- Written by Lito U. Gagni / Special to the BusinessMirror
First of two parts
In less
than a decade, the Bangko Sentral ng Pilipinas (BSP) saw its gross
international reserves (GIR) surge from $15.02 billion as of end-2002 to
$80.1 billion as of end-September 2012—with the country’s unsung
heroes, the overseas Filipino workers, steadily increasing their remittances.
This
fivefold rise in the GIR, with three months to spare, has resulted in a
very comfortable margin of safety for the BSP’s reserve-management
push, since the end-September GIR already account for more than a year
of imports.
Usually,
a country’s reserve level should be able to finance three months of
imports. For prudent levels, a central bank’s reserves of six months are
seen as enough buffer for any financial hiccup that could hit the
country.
Continued
streaming of and expected yearly rise in the remittances from the OFWs
have been fueled not just by an increase in the number of workers but
also by a dramatic shift in the kind of talents employed.
This marked change in the jobs of the country’s OFWs from household services to technical ones in information technology, hotel management, engineering and
oil drilling that account for more than half of our overseas workers
has given rise to suggestions that the country put up its own
sovereign-wealth fund (SWF) from the GIR.
One senior banker told the BusinessMirror
that time is ripe for the Philippines to have its own country fund with
the seed money coming from the BSP. The banker said the country could
initially have $20 billion as start-up fund.
A
$20-billion sovereign-wealth fund would mean that the country could
still have a $60-billion reserve level, which is more than enough to
finance 10 months of imports—well above the prudent level of six months
of imports.
It
could be used for some of the so-called PPP (public-private
partnership) projects that the government has identified to jumpstart
the economy. More than 15 PPP projects are on the pipeline and ready for
bidding from foreign investors from China to Australia and Thailand to
the United Kingdom.
With
ready government funding from the SWF, foreign investors are
immediately assured that the projects could be pursued with no need for
those government guarantees that usually mean higher costs to be borne
by Filipino taxpayers, such as the Metro Rail Transit system, which
meant a 15-percent guaranteed return for investors resulting in a subsidy so huge that the government had to bear the burden of added costs.
With
its own sovereign-wealth fund, the government need no longer have to
worry about guaranteeing unconscionably high-investment returns for
investors. It would also mean the added advantage of making the
government earn a bit more as a partner in PPP projects.
The buzz for an SWF for the country started with the continued surge in remittances that now average $1.5 billion a month.
The
BSP data showed that it took seven years for the reserve level to
double from $15.06 billion as of end-2000 to $33.75 billion in end 2007.
But it took just half that time for the reserve level to double again to $67.78 billion as of end-April this year.
The
reserves topped $40 billion in July 2009, and raced to $53.75 billion
in September 2010. Two months hence, the BSP reserves would hit $60.56
billion.
The
need for the Philippines to have its own SWF is premised on the use of
the excess reserves to fund economic activities that would result in
substantial economic growth. One such activity could involve financing a
new roadway that would open up
economic opportunities in Bangsa-moro, the territory that the country’s
Muslim minority got under a recently signed peace agreement between the
Aquino administration and the Moro Islamic Liberation Front (MILF).
This roadway and other possible projects would catapult the Mindanao
region in the Philippine South to economic pre-eminence fueled, no
doubt, by peace dividends that would accrue as a result of the signing
of the PHL-MILF agreement.
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