FIE proponents launch second roadshow

Proponents of the country’s first-ever fixed income exchange (FIE) has launched a series of roadshows with the corporates after a successful presentation with insurance companies in the past two months.

The FIE is an alternative avenue for borrowers to raise term capital without the necessity of a foreign exchange risk. It also has an added benefit of anticipating a uniform stream of payments without requiring a fixed interest rate regime. Coupon payments are made by issuers instead of a loan amortization periodically.

The Bankers Association of the Philippines (BAP), one of the principal advocates said that they had made presentations to individual insurance firms as well as the Philippine Life Insurance Association (PLIA), the only aggrupation of life insurers in the country.

"There is a lot of interest, and it may held restore confidence in the country’s financial market," said BAP chief economist Johnny Noe Ravalo. Aside from the banker’s group, the other proponents of the FIE are the Investment House Association of the Philippines (IHAP), the Bangko Sentral ng Pilipinas (BSP), and the Trust Organization Association of the Philippines (TOAP).

The road show hopes to inform the investing sectors of the proposed financial exchange, its operations and benefits. It also hopes to get commitments and actual participation in the establishment of the FIE.

Based on studies made, the proponents need at least P500 million to get the exchange of the ground. The BAP has already committed P100 million as counterpart fund.

"We have made a commitment with the national government and monetary authorities to make the FIE operational by the end of the second quarter of the year," Ravalo said. "We believe that the fixed income market has an excellent potential if it can be systematically developed."

Arthur Andersen Consulting (AAC) has also been tapped to develop various levels of hardware, software and organizational aspects of the exchange since AAC has had earlier experience in similar establishments in other countries.

Proponents have also been holdings dialogues with the Bureau of Internal Revenue in an attempt to iron out or clarify applicable and inappropriate tax forms to the proposed secondary market exchange."We want to clarify tax rulings that may affect the fixed income exchange and secondary markets, including the documentary stamp tax (DST)," the BAP economist said, adding that some of the touchy items are the value-added tax (VAT), income tax, corporate tax, and the proposed financial institutions tax (FIT).

Since 1998, the idea of a secondary market for debt papers and other financial instruments, and not for securities and common shares of stock stimulated several sectors of the financial system. –TPT