Two weeks ago, Biz Buzz reported that while Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. was in the United States in October last year, he called the attention of the International Monetary Fund (IMF) to the poor quality of some of the work done by the assessment team it had sent to the Philippines.
After pointing out the deficiencies in the team’s findings, he questioned the unimpressive background and lack of experience of its economists. They supposedly did not have the gravitas for the work they did.
Acting on Remolona’s complaint, the IMF agreed to his suggestion to furnish the BSP in advance the curriculum vitae (CV) of the members of the team it would send to the Philippines for the next assessment review.
Getting those CVs would enable the BSP to vet or screen its members, i.e., check early on if they have the technical qualifications to conduct an above-board or well-prepared review of the subjects of their assessment.
The implication of that prior notice is, if, in the BSP’s judgment, any member of the team does not meet that criteria, it can ask that he or she be replaced by someone who’s qualified.
If the IMF accedes to the replacement, fine; if it does not, expect the findings of the assessment team to be contested or, worse, proven inaccurate to the IMF’s embarrassment.
In the rarefied world of international economists, serious reputational damage is akin to a death sentence on the affected person’s professional life.
The IMF-BSP incident is reminiscent of the vetting system that international credit institutions, e.g., the World Bank, US Export-Import Bank and KfW (or Kreditanstalt für Wiederaufbau) of Germany, observe in processing the release of the proceeds of their loans.
By way of background, after the terms and conditions of the credit facility have been ironed out, the next step is to determine the form and substance of the drawdown or disbursement documents that the borrower has to submit to trigger the release of the funds.
Those documents usually consist of statements from the borrower that, among others, it is a corporation in good standing, has no regulatory issues that may impair its ability to pay the loan, its officers and directors have no derogatory records, or it is not in default in its credit agreements with other parties.
But no matter how reputable the borrowers may be, the lenders do not at the outset take those statements as gospel truth or something that can be comfortably relied upon to justify the loan disbursement.
They will require those documents to be evaluated and, hopefully, confirmed as truthful and accurate by a law office in the borrower’s country.
And this is where the vetting process comes in. Not any law firm in a country would qualify or be authorized to issue that “opinion of counsel.”
The international credit community maintains a list of law offices in the countries they do business with that can be relied upon to professionally and objectively review those documents.
It helps if that firm has in its staff lawyers who have master’s or doctorate degrees from reputable universities in, for example, the US, United Kingdom or Australia, that are known for quality education and training on cross-border financial transactions.
The unwritten yardstick in gaining a good score is, the law office is listed in the Martindale-Hubbell Law Directory, an information service company based in the US, which provides background information on lawyers and legal offices in the US and other countries.
Being politically connected or influential in the law office’s country could be a liability rather than an asset because those financing institutions are averse to being indirectly identified with the incumbent political powers-that-be by engaging the services of those law offices.
In the Philippines, only four law offices are known in the legal circles to have earned the “good housekeeping” seal of international credit institutions that qualify them to vouch for the accuracy and reliability of the statements of borrowers of foreign loans. INQ
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