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PRESIDENT Arroyo is expected to announce next month when
she visits Hong Kong the full details of the sale of the
long-planned OFW bonds meant to help migrant workers
conserve and invest safely their savings.
Meanwhile, officials are struggling with the
complications of the scheme. Monetary authorities had
suggested at least $1 billion be issued, but, in the
end, the government decided to sell only $100 million of
the bonds for the initial issue, priced at $500 per
share.
LandBank
(LB) executives said discussions on necessary details
proved more complicated than expected, leading to the
decision to reduce the initial issue.
For
instance, they said the Department of Finance (DOF)
objected to the proposed feature effectively extending
OFWs cover for further appreciation of the peso as an
integral part of the bonds. This feature guarantees the
OFW a preagreed exchange rate that protects the peso
value of his dollar-bond purchase.
LandBank
senior executive vice president Alfonso Cruz Jr. said
the DOF considers it a form of subsidy that encourages
non-OFWs to ask similar protection for themselves as
well.
But
without that feature, the price of the bonds will
necessarily go up because someone had to shoulder the
cost of the guarantee, said LB president and chief
executive officer Gilda Pico.
Cruz
said proceeds of the bonds will help underwrite the
multibillion-peso infrastructure buildup program.
The IOUs
are denominated in US dollars, making its indicative
interest rate around 4 percent a year tax-free over its
2.5-year term.
OFWs
being considered nonresidents, the bonds they purchase
may also be exempt from tax, except that levied on
foreign-currency deposit earnings that are lower than
the peso income-tax rate, said Cruz.
He added
all these are indicative rates for the moment until
President Arroyo’s announcement in March, when the final
details will be known. |
