Sustaining Growth

Next week, I will be attending the IMF-World Bank meeting in Washington, D.C. Because the annual meetings bring such a large number of member country officials together, they provide an opportunity for consultations and a chance to evaluate our own banking and financial reform agenda.

Our economic history tells us that the Philippine financial sector is highly vulnerable to external shocks. We need to achieve market stability in our financial sector to shield us from these booms-and-busts. As Chairman of the Senate Committee on Banks and Financial Institutions, I have outlined policy reforms on mobilizing domestic resources and strengthening the capital market.

Last 13th Congress, we passed the Lending Companies Act, which creates a regulatory framework for lending companies.

The Personal Equity Reform Act (PERA) and Credit Information System (CIS) almost got passed, both bills having been approved by Congress but failed to get ratified in the bicameral conference. These bills have been re-filed in both the Senate and the House, and we anticipate its swift passage during this 14th Congress.

The PERA bill will supplement the existing government-sponsored pension scheme by setting up a privately funded retirement fund. It allows private individuals to set aside P50,000 a year, withdrawable when the contributor reaches the age of 55, and tax-exempt. It will encourage long-term saving and reduce our heavy reliance on the already overwhelmed publicly-funded retirement scheme. PERA targets Overseas Filipino Workers and small business owners, as they are not covered by the government's current pension programs.

The Credit Information System (CIS) will gather credit information from financial institutions such as banks, credit card companies, and government lending institutions. By making reliable credit information available to lenders, they can manage credit risks better and in effect, will lower the cost of credit and reduce the reliance on physical collateral. Its greatest benefit is making credit more available, especially to small yet responsible borrowers, as their good track record in paying their obligations will be made known to the financial institutions.

The Pre-Need Code, which establishes rules to govern the operations of pre-need firms and provide protection to consumers; the Corporate Recovery Act, which seeks to improve insolvency procedures to make debt recovery process more efficient and gives insolvent companies a chance to recover from liquidation; the Collective Investment Schemes Law, and the Real Estate Investment Trust Act (REIT) are all priority measures.

Philippine economy has strengthened. Our GDP has grown impressively, in fact the biggest since the 1990s. We have tamed inflation at a record low, contained our fiscal deficit and continue to benefit from strong OFW remittances. Through this financial agenda, we hope to further strengthen our capital market and ensure our sustained growth.