Espenilla wants to do away with archaic rule requiring FDI registration: It’s a different economy, we have lots of dollars
MANILA – – Philippine monetary officials are planning to ease foreign exchange rules by relaxing registration for foreign direct investments (FDIs).
“Today is a very different economy. There’s a lot of foreign exchange available to the country,” said Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr.
Espenilla said FDIs were required to be registered with the central bank starting in the 1970s because the country was then experiencing lack of dollar supply.
The central bank chief preferred that FDI transactions be reported “to the BSP but not as a screening mechanism of what should come in or out.”
“We are reforming the system such that if it’s possible, to do an electronic report, so you don’t have to even submit documents to the BSP. We’re going to do that not just for inward investments but also for foreign borrowings by private sector,” he said.
Espenilla said the BSP was now in talks with the banking industry to draft these changes.
“I hope to see that before the end of the year,” he said.
Espenilla does not see any need to register FDIs because of the “highly regulated formal foreign exchange market and a very liberal parallel market that passes through the FCDU (foreign currency deposit unit) system.”
He explained that this environment has created “a formal foreign exchange market that is shrinking as opposed to a growing parallel market which is strategically counterintuitive from what BSP wants to see.”
He said monetary officials wanted “to see transactions move into the regulated market where it is visible, and where we can apply clear standards including AML (anti-money laundering) standards.”
“The approach is dual – we are tightening the requirements on the non-banks that are currently dominant in the parallel market, as well as liberalizing requirements on the banks operating in the formal market,” he said.
“That is part of reform process of doing away with the registration requirements except only for those to report what transaction has transpired so we can compile our balance of payments,” he added. (PNA)