The country could suffer opportunity losses estimated at roughly P34 million daily should the influential Financial Advisory Task Force (FATF) make good its threat to initiate sanctions against the Philippines estimates by the Bankers Association of the Philippines (BAP) show.
BAP chief economist Johnny Noe Ravalo said that aside from the opportunity losses the country’s reputation and small ticket transactions would likely be affected.
Ravalo said it’s possible that all transactions involving Filipino nationals would be suspect to money -laundering activities. Transactions on just about anything from jewelry, paintings, stock certificates, real estate transactions to insurance policies, will be affected, he said.
Small ticket or financial turnovers with value way below $10,000 will either be dropped or will experience unbelievable delays because the scrutiny required would shift from automated inspection to manual flagging. Institutions not necessarily financial will either find it uneconomical to continue doing business or they may subject it to extraordinary inspections.
The BAP estimates that the opportunity loss in external trade transactions would reach P34-million per day as a direct result of sanctions by the country’s trade partners, particularly Japan and the United States.
The two are also major players behind the FATF, the international body which imposed a Sept. 30 deadline for countries like the Philippines to put in place an anti-money laundering law.
The monthly average total external trade of the Philippines is roughly $5 billion. Assuming an exchange rate of P50 to the dollar that would be equivalent to P250-billion.
A conservative loss of five percent due to exceptional scrutiny and delays was assumed by the BAP thus resulting in an estimated cost per annum of P150 billion or roughly P34 million per day.
"Customarily, the basis of an opportunity cost would either be the rate at which the recipient of funds could have invested the proceeds (foregone interest) or the rate at which the economy grew in nominal terms (foregone productivity). A more ‘realistic’ figure would be 10 percent but the five-percent is retained for conservatism, " it explained.
The other area that would suffer from the sanctions is on the remittances of the overseas Filipino workers (OFWs). The BAP said that the social cost to the family of an OFW representing "forgone comfort" or "increased difficulties" due to the delay in remittances.