WORLD BANK CLUELESS ON $10B CRISIS FUND
MANILA, OCTOBER 17, 2008 (STAR) By Iris Gonzales and Paolo Romero - The World Bank (WB) is clueless about a reported commitment – announced on Wednesday by President Arroyo – to provide $10 billion to help Southeast Asian countries and their so-called dialogue partners Japan, China and South Korea build up a crisis fund to buy toxic debts and recapitalize banks.
“While we do not anticipate the establishment of a regional facility and have not discussed commitments of funds at the regional level, numerous discussions with individual governments were held during the recent Annual Meetings of the World Bank and International Monetary Fund (IMF) on the impacts of the financial crisis and possible ways we might be able to provide support at the country level,” Jim Adams, WB’s East Asia and Pacific regional vice president, said.
“We stand ready to support all of our member countries across East Asia to deal with the challenges arising from the financial crisis,” Adams stressed.
In a statement, the World Bank also said its private sector arm, the International Finance Corp. (IFC) is considering setting up a special fund – initially with $1 billion – to help recapitalize small to medium-sized banks in poor countries.
The Asian Development Bank (ADB), meanwhile, said it was too early to talk of contributions because the region was economically sound and in no imminent danger from global turmoil.
“Although real economies may be affected, the banking sector remains fairly sound. We don’t really have much toxic assets,” ADB Managing Director General Rajat Nag said.
The loan-to-deposit ratio of most Asian banks is around 80 percent, according to Merrill Lynch data, which means that they can repay depositors if needed without needing additional funds.
Association of South East Asian Nations (ASEAN) member Singapore also said it was unaware of any such plan.
But Socioeconomic Planning Secretary Ralph Recto and Finance Secretary Margarito Teves It was the International Monetary Fund (IMF) and not the World Bank (WB) which made the commitment.
“It’s the IMF not the WB that mentioned a $10 billion facility for Southeast Asia,” Recto told The STAR in a telephone interview. “It’s simple, the WB would deny that because that’s not their mandate. It is the IMF that does that.”
Trade Secretary Peter Favilla echoed Recto’s view and said Mrs. Arroyo wasn’t informed of the development.
“The President based her statements on the information provided by Secretary Teves,” he said. He didn’t say why Teves failed to inform Mrs. Arroyo.
Mrs. Arroyo’s announced World Bank’s reported commitment at Malacańang on Wednesday before members and newly sworn in officials of the Union of Local Authorities of the Philippines or ULAP.
Analysts said she could have been misinformed, or had jumped the gun on what was essentially a scenario exercise.
Reforms more needed Senators said concrete financial reforms are needed to cushion the effects on the country of the global financial crisis.
“We should also do our homework and continue enacting financial reforms that can buttress our country’s position amid this global financial crisis,” Sen. Edgardo Angara, chairman of the Senate committee on banks, financial institutions and currencies, said.
Angara said the reforms should include amending the Bangko Sentral ng Pilipinas’ charter, the Corporate Insolvency Law, and the Mutual Fund Act. He also pushed for the establishment of a Real Estate Investment Trust.
Amendments to BSP’s charter, Angara said, should include extending the central bank’s supervision to bank subsidiaries and affiliates.
He also said the bankruptcy law, which was enacted in 1909, should be updated to facilitate procedures in addressing bankruptcy.
“Through these reforms the country will be placed in a better position to be able to absorb shock from this credit crisis and financial turbulence,” Angara said.
Sen. Francis Escudero, for his part, filed Senate Bill 2678 seeking an increase in the maximum deposit insurance coverage per depositor and investor from P250,000 to P500,000.
The bill seeks an amendment to the charter of the Philippine Deposit Insurance Corp. or PDIC.
Escudero, chairman of the Senate ways and means committee, said the bill – if approved – would strengthen the “very foundation of the banking system and continue to foster confidence among investors and depositors in the country.”
Sen. Loren Legarda said the government should be “rethinking our current policies and the need for more apt strategies in making the most of the situation.”
Legarda also batted for enhanced revenue collection efficiency.
“Leakages should be plugged and violators apprehended as the government needs all that it can get to finance the country’s development amidst the global recession,” she said.
Greater ASEAN unity pushed Sen. Manuel Roxas II called on ASEAN to accelerate economic integration and work together decisively in finding ways to ease the impact of the crisis.
“Given the turbulence, all the more, we need to keep together as we have done in the past. It means being counseled by solidarity rather than fear, trust rather than suspicion, calm rather than hysteria,” Roxas said in a speech at the ASEAN 100 Leadership Forum.
“However painstaking, we must strive to continue integrating our real economies,” he said.
“It is imperative that we strive more than ever to enroll the people in our vision. The imperatives of survival for the hundreds of millions in our neighborhood, living below at $2 per day, will push governments to take an ‘every man for himself’ approach. We must resist this,” he stressed.
“This global financial and economic crisis will not be easily solved. It will take all nations and their leaders to do the job—all engaged in earnest discourse and dialogue, practicing trust and collaboration, all moving and striking in one direction,” he said.
ASEAN has a population of 560 million, a combined gross domestic product of almost $1.1 trillion and covers a total area of 4.5 million square kilometers.
Roxas said that while the ASEAN Charter, which seeks the creation of an ASEAN Economic Community, is not expected to deliver instant results, it would result in “deeper trust and partnership among our governments and peoples.”
“Its value will be more evident in the long run, especially in times of political or economic crisis,” Roxas said.
The proposal to create an ASEAN Economic Community was primarily spurred by the emergence of China and India as economic powers.
“Until this crisis, we all believed that financial markets were there to enable the economy to serve the greater good in the most efficient and equitable way. But we have seen the gross inability of governments to regulate finance in line with that role, in a global context,” he said.
“The need for balance and restoration is so compelling that it has forced the wealthiest nations to band together for a consolidated plan of action, if only to save their economies,” he pointed out.
“Government, clearly, is the last line of defense. It is ironic that it has had to assume this role as lifeguard of last resort because of its absence over the last several years,” Roxas said.
“The path of deregulation was such that government not only stood idly by, but it was a willing participant to its own enfeeblement,” he said. - with Aurea Calica, Christina Mendez, Reuters, AP
Chief News Editor: Sol Jose Vanzi
© Copyright, 2008
by PHILIPPINE HEADLINE NEWS ONLINE
All rights reserved
PHILIPPINE HEADLINE NEWS ONLINE [PHNO] WEBSITE