THE Asian Development Bank (ADB) has approved a loan and technical assistance package that will support the Philippine government’s capital market reforms.
According to project documents, the ADB approved on Nov. 21 the Encouraging Investment through Capital Market Reforms Program, Subprogram 2 that involves a $300-million loan and a $500,000 technical assistance (TA) fund.
“The program supplements coordinated support provided by the Asian Development Bank to accelerate investment by increasing the availability of long-term finance,” the bank said.
“The program will deepen the capital market through a series of sequenced reforms designed to further develop the government bond market, encourage growth in domestic long-term savings, and ease barriers to entry to diversify and broaden available funding sources.”
The project aims to develop “a deeper nonbank finance sector.”
It also seeks to enhance liquidity in the government bond market, encourage long-term savings and long-term investment products, and increase market depth and diversity.
The regional lender said that the technical assistance package will ensure that government reform efforts are “comprehensive and coordinated,” and that the initiatives are completed in a timely manner.
“Specifically, the TA will provide support to complete and publish the Philippines’ first fully coordinated, government issued, capital market development blueprint. In a departure from past efforts, this blueprint will focus on the government’s actions to provide an enabling environment for the private sector, and will not be product specific,” it said.
It will also include expert advice to support government’s efforts, as well as support to encourage the establishment of pricing conventions and benchmarks.
The TA will also aid in developing market standards for the government bond market and the repurchase (repo) market expected to be launched today, to ensure an “efficient, effective, and appropriate supervisory structure.”
“Furthermore, the TA will directly support the development, evaluation, and approval of industry self-regulatory structures along with effective governmental oversight mechanisms,” the ADB said.
Currently, the Bangko Sentral ng Pilipinas is pushing for a string of debt market reforms in phases due for completion by 2019.
These include reforms to the derivative and repo markets, along with expanded issues Treasury bills, a more predictable and transparent process of issuing government securities, incentives for the 10 leading securities dealers, or “market makers,” the establishment of a yield curve, and strengthened regulatory oversight for the debt market.
In 2015, the ADB extended a $300-million loan for the first subprogram of the Encouraging Investment through Capital Market Reforms Program. — Elijah Joseph C. Tubayan
