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Marawi bond is right for rebuilding the city

First, just a brief review of the financing concept: a government bond is a debt security issued to raise funds to support government spending. Government bonds in the Philippines and other countries include savings bonds, treasury bonds and treasury inflation-protected securities. They all bear interest considered attractive by investors.

Before investing in government bonds, investors must assess various risks associated with the country, such as country risk, political risk, inflation risk and interest rate risk. At this time, the Philippines is still enjoying a high credit and investment rating with investors, domestically and internationally.

In August, while Marawi City was in the grip of the terrorists, the Department of Finance ordered the Bureau of the Treasury to study the possible issuance of P30 billion in "patriotic" bonds for the reconstruction of Marawi. The time for this is now at hand, with the city liberated from the terrorist siege just the other day.

The government has said that it would spend at least P15 billion to rehabilitate Marawi over the next two years. The Budget secretary said that P5 billion will be released this year, but the final amount can only be determined once the rebuilding plan is completed.

Foreign funds are welcome but what the government wants even more is technical assistance. Significantly, the World Bank has pledged it would work with the Philippine government to help rebuild Marawi and also scale up support for peace-building efforts in Mindanao.

The suggestion is indubitably right.

Selling government bonds to finance the enormous challenge of rebuilding Marawi is legal, financially sound and politically correct. And it will be well-timed when it is launched next year as planned.

It is normally the most expedient way for a government to raise funds for necessary spending programs by contracting debt from the investing public. It is fairer than imposing taxes outright.

For the Philippine government to sell Marawi bonds at this time is financially sound, because as one of the fastest growing economies in the world today, the country has the financial capacity to repay debt given a period of time, and it can utilize funds in a way that will redound to the national interest.

Selling bonds for rebuilding Marawi is also politically correct, because this way the government can foot the bill through a mechanism other than the national budget. The rebuilding program will not compete with other necessary programs that also require government funding.

We also emphasize the fact that a debt security will enable the whole nation, as well as international investors, to participate in the worthy objective of rebuilding the country's premier Muslim city.

We like the idea that many Filipinos, of all faiths and all geographical backgrounds, can participate in a meaningful way in the rebuilding and restoration of Marawi to its place in national life. This way, the entire country can unite behind the rebuilding of a historic city.

We also should not discount the role that institutions, domestic and international, can play in the success of the bond flotation.

Lastly, we want to stress here that the objective of the proposed Marawi rebuilding should not only be to rebuild Marawi into what it once was. It ought to be, as our columnist, architect Felino Palafox, has suggested, to "build back Marawi better."

[Source: The Manila Times, Manila, 20Oct17]

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small logoThis document has been published on 09Nov17 by the Equipo Nizkor and Derechos Human Rights. In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.