Savings put in investments down--Monetary Board exec

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MORE MONEY DEPOSITED IN BANKS OR SENT, SPENT ABROAD
Posted: 9:10 PM | Apr. 30, 2006
Doris C. Dumlao
Inquirer

Published on Page B5 of the May 1, 2006 issue of the Philippine Daily Inquirer

THE PHILIPPINES' national savings rate is increasing but the portion of savings placed in investments is dwindling.

In a speech during the recent national convention of local government units' budget officers, Monetary Board member and former Finance Secretary Juanita Amatong warned that the country might be seeing the start of a capital flight.

She noted that the national savings rate or the amount of income that was being saved accounted for 27.5 percent of gross domestic product in 2004 and 27.8 percent in 2005.

"This is very encouraging because there was a time when our savings rate was much lower," Amatong said. She, however, added that the portion of GDP that went to investments stood at only 17.1 percent in 2004 and 15.7 percent in 2005.

"While we as a nation have saved more, the amount of savings put into investments was less," Amatong said.

"The pertinent question is where were the savings going if not invested? The answer: They are either put in banks as deposits or kept under our beds or are sent abroad to be spend there or a combination of these," Amatong said.

"Our investments as a percentage of GDP is low and that means that we are not investing enough in infrastructure or other projects to raise our capital stock," she said.

Taking a closer look at the finances of all LGUs excluding barangays, Amatong said the bulk of income was coming from internal revenue allotment at about 65 percent in 2004 while locally generated income represented only 32 percent.

She said provinces were noted to be heavily dependent on IRA and other transfers from the national government to the tune of 82 percent, while locally generated receipts accounted for only 15 percent in 2004.

For cities, the ratios were better because IRA and government transfers accounted for 44 percent while locally generated funds accounted for 52 percent.

Municipalities were 78 percent dependent on government transfers and only 20 percent self-generating.

"The only sustainable source of financing for local governments is locally or internally generated resources. It is, thus, important that this source of financing be carefully engineered, structured and administered," Amatong said.