Confidence in the country’s macroeconomic underpinnings and the highly liquid condition of the market amplified in just a year the value of assets managed by the various trust entities by more than 37 percent to P2.2 trillion as of end-June this year, the Trust Officers Association of the Philippines (TOAP) said on Tuesday.
TOAP President Marvin Fausto said this compared with so-called assets under management or AUM totaling only P1.6 trillion a year earlier and gives a glimpse of the kinetic power of this large pool of money to help move the economy forward.
But, Fausto acknowledged, the bulk of these funds find their way into the vaults of the central bank or the Bangko Sentral ng Pilipinas as special deposit accounts or SDAs or alternately invested in the local stock market where rich stock pickings can be had once again.
It is sad the bulk of the funds are not invested for the long haul because only by investing for the future and in large sums can local output or the gross domestic product in the seven-percent range become sustainable, Fausto said.
“Large-scale investment is not happening locally in a big way,” he said at a briefing he co-hosted with Financial Executives Institute of the Philippines or FINEX President Greg Navarro on Tuesday.
Long-haul investing, it has been said, is required to achieve growth of at least seven percent in GDP terms for at least seven years to put the country on a sustainable growth path.
Fausto said the foreign exchange earnings of millions of overseas Filipinos helped boost liquidity in magnitudes able to power consumption activities responsible for generating 70 percent of GDP.
But because investment activities are relatively few, fund managers driven by the need to create more wealth from the wealth of assets entrusted to them, often resort to investing in the central bank’s SDA facility.
“SDAs are very popular investment outlets because there is virtually no risk involved,” Fausto said of the special window created by the BSP as part of its monetary policy toolbox to manage liquidity levels and by extension manage inflation.
As for Navarro, he expressed dissatisfaction over the continued delay in the implementation of a number of legislation whose aim was to promote investment and wealth creation.
For instance, the Real Estate Investment Trust Act or REIT continues to be hampered by the inability of concerned government agencies to issue appropriate implementing rules and guidelines.
Navarro said the REIT is still “languishing” in the guidelines crafting stage, in part because Finance Secretary Cesar Purisima wants to address a number of issues whose overall impact will tell on the government’s revenue potential.
“The Department of Finance is wary of its impact on tax collection. For instance, Secretary Purisima has issues over the possibility, in the absence of clear guidelines, of declaring the entire Makati area a real estate trust,” he said.
In fairness, Navarro quickly added, Purisima was right when he noted some 400 new laws have been enacted and all of them without funding sources.
Navarro said Purisima wants more time to study the impact not just of the REIT Act but such other measures as the Credit Information System Act and that other measure on financial rehabilitation. (PNA)