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Friday, September 20, 2002
Traders still cautious about loans, new investments
LOCAL traders here have yet to see a major improvement in the city's peace and order condition so they just deposit their money in the banks rather than take out loans for new investments and expansion.
The Philippine National Bank (PNB) Davao noted Thursday that it has not yet significantly boosted its lending business in the city as traders here still withhold their investment plans despite the low interest rates.
Businessmen, according to PNB Davao Branch Manager and former President of the Davao City Banker's Association Urbano Olaer, opt to secure their money in deposit accounts and let it earn by just one percent every month.
The national government has reduced the monthly borrowing rates from 15 percent to a historic low of around 11 to 12 percent in line with government's effort to spur more business expansion and
investments.
"Kahit na mababa ang lending rates, many businessmen do not avail of our loan portfolio. I feel that they are not interested yet in borrowing and they're still on a wait and see attitude... so they just prefer that their money be put in deposits," Olaer said in
Thursday's Club 888 Press Forum at the Marco Polo Hotel.
Olaer however noted that PNB Davao has slightly increased the availment of loans by about 10 percent but it is way below the increase projected out of the sharp reduction of interest rates this year.
He said that the increase in deposits now keeps PNB Davao and other commercial banks very liquid. Deposits obtained from the business sector, he said, are used by the bank for lending in other areas where there is a high interest in borrowing.
The deposits are also invested by the bank in the different areas in the country. But as a banker, he said banks prefer to increase lending because aside from its big profit returns for the banking industry, it creates a greater positive impact to the economy by
encouraging more investments and employment.
Romeo Serra, President of the Davao City Chamber of Commerce and Industry Inc., (DCCCII), told Sun.Star Davao Thursday that local traders really put on hold their plans to invest due to a persistent peace and order problems in other areas of Mindanao which triggers a negative perception of the whole island,
including Davao City.
"The issue here is not really Davao City but the overall peace and order condition of Mindanao.
Businessmen are businessmen. Their business plans would really anchor on the condition of peace and order and how the government is doing to address it," he said.
Traders, he said, are not investing at present because there is no assurance from the banks that the interest rates will remain low. Businessmen are worried that due to the ballooning budget deficit, the national government will have to consider borrowing hefty loans from local financial institutions, which might signal an increase in the borrowing rates.
"Traders are facing the risk of a sudden increase in interest rates anytime if they have to borrow at this point in time when the government is having budget constraints," he added.
He said economic instability still looms at the moment despite the opening of some local establishments in the city.
Threats of war in the Middle East and the weakening value of peso against the dollar have also impeded business expansion plans.
"I really do not have hard statistics on (how many in the business sector who are not borrowing) but maybe they have withheld investment plans until the peace and order problem shows some improvement. Their money can still earn if they put them in the bank," Serra said, adding that only agri-based traders are those
who borrow from the banks at present.OCE |
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