Press Release: IMF and Philippines Central Bank Host Seminar on Capital Market Reform and Government Bond Market Development

May 12, 2005

A seminar on capital market reform and government bond market development in the Philippines was held on May 10, 2005 in Manila. The seminar was hosted jointly by Bangko Sentral ng Pilipinas (BSP) and the International Monetary Fund (IMF). A diverse audience attended the seminar, including senior officials of the government, congressional staff, senior members of the banking, financial, and business communities, academics and researchers, and the press.

The following statement was issued by the IMF on May 11, 2005 in Manila:

"Developing domestic capital markets, especially making government bond markets more efficient and attractive, is an effective way for the governments of emerging market economies to reduce their reliance on foreign currency debt, and hence their exposure to exchange rate risk. It also has various beneficial effects on the private sector, facilitating funding and risk management, and through these, helps stabilize the economy and enhances growth. Many industrialized countries have enjoyed these benefits, and more recently, a number of emerging market countries have joined the group of beneficiaries. In light of this, efforts have been made in recent years to identify key factors that would help domestic capital markets to develop, especially the policy steps that can be taken by emerging market authorities to achieve this goal.

"Yesterday's seminar was part of these efforts. Following the opening remarks by Acting BSP Governor Amando M. Tetangco, Jr. and the IMF's Deputy Managing Director Agustín Cartens, an overview presentation was made by Mr. Herve Ferhanì (a senior advisor of the IMF's Monetary and Financial Systems Department). Messrs Omar T. Cruz (National Treasurer) and Cesar B. Crisol (President and COO, Philippine Dealing and Exchange Corporation) presented the government's efforts to promote capital market development and the Fixed Income Exchange project, respectively. Three distinguished speakers from Colombia, Mexico, and the United Kingdom; Messrs. Juan Fernando Lucio (former Commissioner for Markets and Intermediaries, Colombian Securities Authority), Gerardo Rodriguez (Head of the Mexican National Treasury) and Ms. Oonagh McDonald (former Member of Parliament and former Director of the Financial Services Authority), presented their country experiences. In a panel discussion chaired by Mr. Carstens, the speakers answered wide-ranging questions raised by the audience on how best to facilitate the Philippine's capital market development, drawing on the successful experiences of other countries.

"It was noted that to advance the considerable progress already made in the Philippines to put in place necessary preconditions for developing domestic capital markets, including the efforts being made to make the clearing and settlement systems more efficient and the recent establishment of the Fixed Income Exchange, it is useful to consider the scope for further improvement. These areas included: 1) increasing liquidity and developing a true market benchmark in the government bond market; 2) strengthening the investor base; and 3) fostering a less fragmented market. A review of country experiences highlighted the need for: 1) stable macroeconomic conditions; 2) sound fiscal policy; 3) transparent and clearly-defined government funding policies; 4) a proactive approach on the part of government to explore investor needs and tailor its debt issuance to them; 5) policies to develop a strong domestic long-term investor base (such as pension funds); and 6) strengthening the banking system as a major player in domestic capital markets.

"We hope that concerted efforts will be made in the Philippines to tackle these issues, which would require close cooperation between legislators, regulatory authorities, and the private sector. The IMF is prepared to assist in these efforts by way of offering its expertise through technical assistance and policy advice."


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