By MAX ESTAYO

The government plans to tap into the $15 billion savings kept abroad by overseas Filipino workers.

The Land Bank of the Philippines said its estimate of $15 billion jibes with the estimate of the Asian Development Bank that OFWs send home only 40 percent of their earnings.

The ratio is believable since OFWs need to have money for their upkeep and money kept abroad is harder to be nibbled down by extended family members.

The state-owned bank estimates that more than $15 billion are parked in various high-yielding instruments in their host-countries, about 60 percent of their total earnings that could have been remitted to the Philippines .

Alfonso Cruz, senior executive vice president of Land Bank, said this is consistent with an Asian Development Bank study showing that for every dollar earned by an overseas Filipino, 60 percent is retained overseas and only 40 percent is sent to their dependents.

Overseas Filipinos sent a total $13.1 billion through November last year, with the central bank expecting total bank remittances to reach $14.3 billion last year.

Cruz said the divested funds are a potential source of funding for the Philippines . Banks can tap said funds for productive uses such as infrastructure development.

Land Bank is planning to sell $100 million bonds targeting overseas Filipinos. The bank is initially looking at a four-percent return for the paper, which an overseas Filipino can buy for a minimum of $500. The debt has a tenor of 2.5 years.

The rate is higher than what a Filipino investor can get from a comparable US treasury, which is three percent, Cruz said, thereby making the OFW bonds attractive.

Cruz said Land Bank is looking at selling the instruments by April, after President Arroyo makes an announcement to overseas Filipino in March on the availability of the paper.

Cruz said the issuance of the bonds hit a snag because the insurance cover for the paper is not yet resolved.

Overseas Filipino may be willing to invest in the bonds, given the relatively high interest rate, but their decision is being held back by fear of a possible erosion of their investment given the continued appreciation of the peso.

Cruz said Land Bank has proposed to the Department of Finance a hedging component for the bonds, which will protect the investors from the fluctuations in the exchange rate. However, no decision has been made yet.

"We’re negotiating with the DOF to provide the cover because OFWs don’t want to cover the insurance," Cruz said.

Cruz said it makes sense for the government to provide the hedging since the DOF will be the issuer of the paper.

Cruz said the bonds are unlikely to boost liquidity growth and fan inflation because the offering is very minimal.

The Bangko Sentral ng Pilipinas has proposed the issuance as a way of helping stem the peso’s appreciation.

Cruz said Land Bank may lend the proceeds of the offering to users of the foreign currency such as the national government, thereby removing the need for it to borrow abroad, which will just increase dollar supply in the system.