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Financing_to_industry and business (from 1958 to 1967)
Long-term financing to industry and business came about because of the early accumulation of funds by the SSS and the SSS increasingly became a source of funds to meet the entrepreneurial requirements of the private sector. This type of financing has to a certain extent appeased the demands of employers which are the contributors to the funds in that they derive some kind of benefits from the SSS by way of this type of loan.
From 1958 to 1967 the SSS extended loans to Or invested in the equity of various private enterprises whose economic activities included the manufacture of textile, sugar milling, furniture and fixture, basic metal, transportation equipment, book printing and publishing, plastic products, first class hotels, schools and others. It was only in 1967 that the SSS altogether stopped these types of lending activities as it had been a source of political pressure and irritation. Instead it was decided to place its funds in government financial institutions which are more capable of extending loans to agriculture, business and industry. A more important reason for the suspension of its commercial and industrial loan operations was the desire of the administration to set aside as much of the funds as possible for housing and other service loans to SSS members.
Investment of SSS funds
The SSS Charter gives us wide discretion in the investment of reserve funds as long as such investments are consistent with yield, prudence and safety.
If you look at the rate of growth of the reserves, you will notice that the reserves have been growing almost exponentially. This is because the reserves are invested and its growth is around 17 per cent. In other words, we are faced with an investment decision problem or choice. What should we do with the money? Place it in a bank, invest it directly, or lend it to the members.
In his speech on the opening day of this Asian regional seminar, Secretary Ople mentioned the capitalist dimension to social security because of its tremendous funds from the premium contributions of the workers and the employers. Secretary Ople asked: "How are those funds to be used?" According to him, there are two schools of thought on the subject. "One says: the money of social security beyond
them
a certain point becomes available or disposable for whatever uses are assigned by the economic planners." The other school of thought, according to him, says "social security funds whenever they are utilised must be so used as to promote the charter objectives of the institution to promote the welfare of the working man". There need not be any conflict in these two schools of thought as long as ve can achieve a balance in our portfolio
such that actuarial limits of liquidity are observed and investments are made with due
diligence and prudence to eárn the highest possible interest consistent with safety.
Placements with DBP and PNB
SSS placements with the DBP and PNB are from short-term to medium-term and long-term. Short-term includes treasury bills; medium-term, treasury notes; a nd long-term, government bonds. From the DBP and PNB, funds are channelled to the private sector.
Treasury bills
bills.
Through this type of investment, we help stabilise the rates of treasury At the same time, it helps ease the cash position of the Government and satisfy our yield and liquidity requirements in the short run because the maturity of these bills ranges from 49 days to 360 days. Medium-term notes were those purchased for the purpose of generating funds for the export processing zone authority while long-term bonds were the PW and ED bonds sold by the Government a few years ago. So, therefore, there are three investment or credit demands that are being met by the SSS coming from the private sector and the Government.
Government borrowings from the SSS can be regarded as non-inflationary as the funds loaned out to the Government represent premium contributions which are similar to payroll taxes in contrast to borrowings coming from the banking system.
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