NET PORTFOLIO INVESTMENTS MAY HIT $4 BILLION THIS YEAR - BSP

MANILA
, March 14, 2005
 (STAR) By Des Ferriols  - The Bangko Sentral ng Pilipinas (BSP) said over the weekend that net portfolio investments could go up to as high as $4 billion this year if the Arroyo administration could deliver its entire P80-billion tax reform package.

In January alone, net portfolio investments have already surpassed the total inflows for the whole of 2004.

The BSP earlier said that with the unexpected good news early this year, net portfolio investments could go up to as high as $2 billion this year.

If, on top of these, the government could deliver all its commitments, inflows would be even higher, the BSP said.

BSP Governor Rafael B. Buenaventura said the prospects would look even better in 2006 depending on this year’s performance.

"The big break will come in 2006," he said. "By that time, if we do things right, we would have established a macro-economic track record and our credibility would have improved dramatically."

According to Buenaventura, just the removal from the blacklist of the Financial Action Task Force (FATF) was enough to signal the return of portfolio investors waiting in the sidelines and looking for the first opportunity to return.

If, on top of the FATF development as well as the Supreme Court ruling allowing foreign investors into local mining companies, the government should actually generate P80 billion in incremental revenues, Buenaventura said net portfolio investments would surge even more.

After the huge surge in hot money flows recorded in January, the BSP reported a slowdown in foreign portfolio investments in February but the amount still eclipsed year-ago levels.

BSP data showed that during the first three weeks of February alone, net foreign portfolio investments amounted to $253.8 million compared to $23.9 million for the whole of the same month last year.

Data indicated that a total of $447.7 million in hot money came into the country during the three-week period and about one-third flowed right out, equivalent to $193.9 million.

The weekly report indicated that the biggest outflow was recorded during the second week of the month between February 7 and 11 when inflows amounted to $125 million and outflows amounted to $102.5 million with net inflows amounting to only $22.5 million.

The following week, however, inflows amounted to $100 million and outflows amounted to $43.6 million during the week of the February 14 terrorist bombing in Metro Manila, General Santos City and Davao City.

Despite the wild fluctuation, however, the cumulative net foreign portfolio investment from January to February 18 2005 was still way above the full-year figure in 2004.

For the period covered, total net portfolio inflows amounted to $797.3 million compared to $486.8 million for the whole of 2004.

Buenaventura said this was an indication that the recent improvements in the long-term trajectory of debt and fiscal management had changed global perception enough to trigger the inflow of foreign portfolio investments.

"We right now enjoying some modicum of credibility as investors wait for further reforms," Buenaventura said. "We have to tread carefully not to lose this credibility and in fact build on it."


Reported by: Sol Jose Vanzi

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