YOKOHAMA, Japan—The national government is studying the creation of a single entity that consolidates the various guarantee corporations, according to the Department of Finance (DOF).
Finance Secretary Carlos G. Dominguez III told reporters here at the sidelines of the 50th Asian Development Bank (ADB) Annual Meetings the creation of such a guarantee board is part of the government’s effort to remove redundant functions and reduce costs.
The Philippines extends sovereign guarantees to make projects and programs attractive to the private sector. These are also considered subsidies to help develop industries and sectors of the economy.
“It’s under study. I’ve asked our group, I’ve asked the central bank to give us their thoughts about it and GCG [Governance Commission for Government-Owned or -Controlled Corporations], of course, to put it all together in one organization,” Dominguez said.
Dominguez added there currently are many guarantee corporations as the Philippine Export-Import Credit Agency (PhilExim), Quedan and Rural Credit Guarantee Corp. and the Small Business Guarantee and Finance Corp.
However, even if they are government- owned and -controlled corporations, they are not that profitable and muddle the efforts of the government to provide guarantees and credit to various sectors of society.
Dominguez said existing guarantee corporations also have redundant functions that make them less efficient.
He said consolidating them into just one entity should improve efficiency and reduce costs.
“If you have one big solid one, you’re better off financially instead of a lot of small ones,” Dominguez said.
“PhilExim is really under water, so I don’t see putting more money in there. Why not take this opportunity to consolidate and have one good, big, well-financed, well-managed, well-regulated guarantee board?” he added.
Dominguez also said a single entity should vastly improve the chances of getting more favorable rates when selling bonds, especially in the international market.
In the fourth quarter of 2016, the Philippines saw the largest quarter-on-quarter decline in local currency (LCY) bond issuances, according to the ADB Asia Bond Monitor.
The Manila-based multilateral development bank said the country’s LCY bond issuances reached only $4 billion, a 44-percent decline.
The decline in the country’s LCY bond issuances mirrored the trend for all emerging countries, which saw a 14.8-percent drop quarter-on-quarter to $946 billion in the last quarter of last year. However, on a year-on-year basis, the country’s total LCY bond issuances grew 22.8 percent on the back of corporate bond issuances.