SEC head cites need to address concerns of foreign investors

Securities and Exchange Commission (SEC) Chairperson Lilia R. Bautista said the country must immediately address the concerns of foreign investors on the burgeoning budget deficit, the peace and order situation, and the dearth of incentives if it wants to attract and sustain both domestic and foreign investments.

Bautista said investor confidence continues to be undermined by the rising budget deficit, the huge non-performing loans of banks, weak corporate governance, instances of market misconduct and poor financial literacy.

The country, she said, is also confronted with poor incentives for capital investments in light of the depreciation of the peso and high investment costs. This factor, according to Bautista, continues to erode the Philippines’ global competitiveness.

"Given the very gloomy outlook for the global economy for the rest of the year, what is most important is for us to get our house in order," Bautista said.

Bautista said the most pressing concern which government has to address is its P144-billion budget deficit. "Deficit budget will be the linchpin of our efforts to restore macroeconomic stability and encourage both domestic and foreign investments. And in this, the real problem is not on the expenditure side but on the revenue side. This will mean strengthening efforts to boost the government’s tax-collection capacity," she said.

The SEC chief is pushing for the immediate passage of the Special Purpose Asset Vehile (SPAV) bill, which will facilitate the establishment of asset management companies that will absorb the bad loans of the banking sector and free up liquidity for bank lending.

"Measures to reduce the high level of bad loans in the banking system have to be fast-tracked," she said.

Bautista said the resolution of the overhang of non-performing loans (NPLs) is a necessary condition for improving the investment climate.

The third area of concern, she said, would be improving the governance of corporations to ensure responsibility, accountability, transparency and fairness.

Inadequate corporate governance and standards of transparency were considered to be among the factors that weakened investor confidence and contributed to the Asian financial crisis and its aftermath.

Bent on improving the governance of the corporate sector, Bautista said the SEC has required all listed corporations and other companies with secondary license to come up with a Code of Corporate Governance.

The code prescribes among others, higher qualification and ethical standards for directors, the management and the company’s external auditors.

Bautista said the SEC has also strengthened its enforcement actions against errant firms and individuals. To date, the commission has issued a number of cease-and-desist orders against corporations engaged in fraudulent securities transactions. Three of the more notable CDOs were those issued against Prosperity.com. G. Cosmos Philippines, and Multitel.

The SEC has likewise taken aggressive enforcement action against boiler rooms operating in the country. The investigation of boiler room operations has resulted in the filing of administrative and criminal proceedings, enabling SEC to shut down several boiler room operators.

To lure more investors into the capital market, the SEC hosted a series of regional seminars to promote the importance of informed investing and motivate the public to take personal responsibility for their financial well-being and security.