Thursday, August 19, 2004
Smart, Piltel owe regulator PhP1B
Cabinet revamp begins
Corporate transitions in Philippines, Inc.
Court asked to reverse ruling vs Meralco rate hike
Finance dep't seeks more powers vs corrupt agents
RP not yet going Argentina's way but action needed
Asia dollar bonds tighten; Philippines outperforms
Peso weaker by 7 centavos on dollar buying
American Express bank taps ING to manage trust product
UnionBank uses technology to woo more Visayas clients
China Bank launches deposit, loan promos for 84th year
San Miguel to issue PhP4B worth of five-year notes
Napocor tweaks schedule of generation assets' sale
Japan car parts maker to pour PhP237.2M in new investments
SM Development income down on weaker revenues in 2Q
Semirara reports higher operating profit in 2Q
PSi forecasts 10% revenue growth in 3Q
Stocks sink on oil price fears

Wednesday, August 18, 2004
Small oil firms cut gas, diesel prices
Finance dep't probes dismissal of 14 tax credit cases
ICTSI offers Dubai office to firms
10 areas for reforms listed by credit ratings agencies
Addressing the population issue crucial to economic growth
Bangko Sentral to maintain inflation target
Gov't to look into proposed national ethanol program
Gov't to issue 5B pesos in 5-year zero coupon bonds
RCBC posts 13% hike in earnings as of June
Prudential Bank income falls 47% to 125M pesos in first half
GMA Network to pay PhP1B in debts up to next year
Korean group to put up hotel in Cagayan de Oro
Revival of nickel mining firm Philnico urged
NextStage buying IT company for PhP113.5M
San Miguel Indonesia brewery reports 16% rise in operating income
Profit-taking wipes out two-week gain

August 16 - 17

August 12 - 13
August 10 - 11
August 6 - 9
August 4 - 5
August 2 - 3





Smart, Piltel owe regulator PhP1B

The National Telecommunications Commission (NTC) is trying to collect about PhP1 billion in outstanding fees from two big telecommunication companies. NTC officials said in a statement yesterday that Smart Communications, Inc. and its sister firm, Pilipino Telephone Corp. (Piltel), have unpaid regulatory and licensing fees, some dating back to as far as 1999. The exact amount of receivables is now the subject of litigation. Smart official Ramon Isberto said in a separate statement that his company was contesting the issue in court on the basis of computation. "The matter is already with the regional trial court and is under dispute," he said. NTC director Edgardo Cabarios said the unpaid fees include Supervision Regulatory Fees (SRF), which telecommunication firms must pay to NTC so they could operate. The SRF, he said, is computed based on paid-up capital, and that payment of this fee is pursuant to a Commonwealth Act. "So if your paid-up capital is PhP1 billion, then the SRF you have to pay is PhP50 million," Mr. Cabarios said.

In Piltel's case, its unpaid SRF reportedly grew because it has not paid since 1999. The cellular phone firm had been in the red until recently. In 2003 Piltel tried to settle the outstanding fees by giving the court PhP9 million. But NTC disputed Piltel's computation of its total SRF. "We told them we will receive that PhP9-million payment, but only as payment for surcharge. I don't know how much Piltel's surcharge fees amount to, but the principal of the more than PhP1 billion in SRF dues is between PhP600 million and PhP700 million," Mr. Cabarios said. Leading mobile phone firm Smart's outstanding fees with NTC involve registration license fees (RLF) amounting to about PhP100 million, and Spectrum Users Fees (SUF). These license fees have been due since 2002. Smart had contended that it was being charged double by NTC. The pending case in court involves the computation of the RLF as well. "The NTC computation is, one GSM [global system for mobile communications] station is equivalent to eight time slots, which is equivalent to one channel. NTC computation is based on the number of channels, and not on the number of stations," Mr. Cabarios said. Smart said NTC assessed its fees according to the number of channels or time slots of its GSM stations, when in fact the SUF had already been computed based on the same number of channels.

Raulito Suarez of the Rates Regulation Division of NTC explained that telecommunication firms usually paid four types of fees with NTC:

  • the SRF, computed as 50 centavos for every PhP100 paid-up capital;
  • a permit fee of 50 centavos for every PhP100> increase in authorized capital or for every increase in cost of investment;
  • the RLF; and
  • the SUF.

Mr. Suarez said the payment of permit fees was also pending in court, as it was opposed by Bayan Telecommunications Philippines, Inc. Other telecommunication companies like Globe Telecom, Inc. also await the court ruling in the case. NTC chief Ronald Olivar Solis vowed to resolve the issue immediately. "I am now awaiting input from our legal department. If we resolve, if we go by our computation, then we will send a collection letter to Smart. I'm sure Smart will [appeal] this matter," he said. -- Beverly T. Natividad



Cabinet revamp begins

President Gloria Macapagal-Arroyo yesterday announced initial changes in her official family, ending weeks of speculations regarding an impending Cabinet revamp. The President confirmed earlier talk that she would appoint Executive Secretary Alberto G. Romulo to the Foreign Affairs department, in place of acting secretary Delia D. Albert. To replace Mr. Romulo, the President named Defense Secretary Eduardo R. Ermita. Presidential Chief Legal Counsel Avelino Cruz will be the new Defense chief. Neither was it a surprise that the President named former House of Representatives members to other Cabiner posts:

  • Former Batanes (northern Luzon) Rep. Florencio B. Abad was appointed Education secretary to replace Edilberto C. de Jesus.
  • Former Iloilo City (Western Visayas) Rep. Raul M. Gonzalez, who chaired the congressional canvassing committee for the last elections, got the Justice portfolio, in place of acting secretary Merceditas Gutierrez.
  • Former Cebu (Central Visayas) Rep. Joseph Ace H. Durano was named the new Tourism secretary. The President earlier decided to move the Tourism department's head office to Cebu, to closely monitor the thriving tourism industry of the province.

Outgoing Tourism chief Roberto M. Pagdanganan was appointed chairman and President of Philippine International Trading Corporation. The President also appointed Vice-President Noli L. de Castro as concurrent chairman of the Housing and Urban Development Coordinating Council, to replace Secretary Michael T. Defensor. Mr. De Castro is currently Presidential Adviser for Overseas Filipino Workers, and co-chairman of the National Anti-Poverty Commission. Mr. Defensor was appointed Environment secretary to replace Elisea G. Gozun. Presidential Spokesman Ignacio R. Bunye was named concurrent Press secretary to replace Milton A. Alingod, while Regional Development Officer for Western Visayas Rene C. Villa was appointed Agrarian Reform Secretary, to replace acting Secretary Jose Mari Ponce. Retiring Philippine National Police Chief Hermogenes Ebdane, Jr. was named National Security Adviser, while Anti-Illegal Drugs Task Force chairman Edgardo Aglipay was named as the new chief of the national police. Mr. Aglipay retires on September 13.

Former Ayala Land Corp. president Francisco Licuanan was named Presidential Adviser for Clark-Subic Development, while former Davao del Norte governor and President of the League of Provinces Rodolfo del Rosario was appointed Presidential Adviser for New Government Centers. National Housing Authority chairman Edgardo Pamintuan was named Presidential Adviser for Constituencies. Outgoing chairman of the Securities and Exchange Commission Lilia Bautista will be the next Ambassador to Belgium. Appointed to replace her at the commission was former Energy Regulatory Board chairman Fe Barin.

The other appointees are:

  • Thelmo Cunanan, as chairman of the Social Security System;
  • Sergio Valencia, as chairman of the Philippine Charity Sweepstakes Office;
  • Reynaldo David, as president of the Development Bank of the Philippines;
  • Energy undersecretary Eduardo V. Maņalac, as President of the Philippine National Oil Corporation;
  • Jose Perez, as president of the United Coconut Planters Bank;
  • RPN Channel-9 chairman Cerge Remonde, as Government Media Group Head;
  • Imelda Nicolas, as secretary-general of the National Anti-Poverty Commission; and
  • Former Iloilo Rep. Augusto L. Syjuco, as chairman and director-general of the Technical Education and Skills Development Authority.

Mr. Bunye said the appointments would take effect as soon as incoming officials receive their appointment papers and are sworn in by the President. There is no schedule yet for the oath-taking. Secretaries De Jesus and Gozun were not given new posts, as well as those removed from the helm of government firms. -- Jeffrey O. Valisno



Corporate transitions in Philippines, Inc.

Over the past few months, the corporate world witnessed a significant changing of the guards in several big listed companies. In the case of SM Prime Holdings, Inc., for instance, the leadership change gives a glimpse of how major companies distinctly deal with transitions. In a corporate world dominated by family-owned corporations, naming an heir to the management throne is usually predictable, especially if the heir-apparent has become visible of late. Leadership will likely go to the children or any family member of the patriarch who built the business. In some cases where the patriarch fails to ensure a smooth transition, siblings battle each other to get a bigger share of the fortune.

For 2004, Philippines, Inc. had its share of family feuds and smooth transfers. Some companies underwent successful transition, given a carefully planned succession schemes, such as when the successor builds on the framework of his predecessor, while introducing new ideas in running the company. An example is Ayala Land, Inc. (ALI), the largest real estate company, which installed its new president last July 1. After being controlled by the Zobel de Ayala clan since its creation, the company has transformed into one that is run by professional managers. After 15 years of growth in developing real estate projects for the high-end market under the leadership of Francisco Licuanan III, the company plans to move towards strengthening its presence in the middle-income and mass markets under its new president, Jaime I. Ayala. Mr. Ayala, who holds a Masters in Business Administration (MBA) degree from Harvard University and an undergraduate degree from Princeton University, took over from Mr. Licuanan, who was president since ALI was spun off from its parent firm, Ayala Corp., in 1989. Mr. Ayala had said he would continue to build on the values that ALI was known for, and vowed to steer the firm towards new markets, including the expansion of the middle-income market that started under Mr. Licuanan's watch. He admitted to being a neophyte in managing a real estate company, but noted that his 19-year experience with global consulting outfit McKinsey and Co.'s international operations provided him the training and skills vital to running real estate firms such as dealmaking, project management, marketing, and working with economic clusters.

ALI chairman Fernando Zobel de Ayala noted that choosing a successor for Mr. Licuanan took two years, and that candidates were considered based on experience, academic background, and age. "Since we have a mandatory retirement age of 60, we looked for somebody who will give the company a good run for the next 15 years," he said. Mr. Zobel said Mr. Ayala was chosen because of his academic background and experience in dealing with various business sectors. He added that there would be no change in management philosophies as a result of the leadership transition.


But how the change in management position will be interpreted in the stock market is a different issue altogether. What will be the impact to investors and how will this translate to profits are the more pressing issues. In separate interviews with BusinessWorld, stock market analysts said the change could translate to various scenarios. Joey Roxas, president of Eagle Equities, Inc., said the change in leadership could be interpreted only as good or bad -- better if the new leader was also trusted and was vouched for by the old leadership. This kind of change, said Mr. Roxas, would be welcomed by investors and could lead to a rise in company share price. Jose Vistan Jr., research director of AB Capital Securities, Inc., said leadership change should be seen objectively. "If the company is doing well prior to the change, investors may be rattled. But if the company was not doing well before, the change would be a welcome development," he said. But Ron Rodrigo, senior analyst at Accord Securities, Inc., said the impact of any management change would depend on investor outlook.


At the same time, culture is also crucial to creating investor perception. While Western companies normally usher in the younger generation as the patriarchs completely fade out, this is not exactly the case for an Asian outfit, where the old leadership's presence is still felt. Such was the recent experience of mall and property giant SM Prime Holdings, Inc. After growing the company from a single shoe store along Aurora Blvd. in Cubao, Quezon City to one of Southeast Asia's largest mall operators, Chinese-Filipino businessman Henry Sy, Sr. finally turned over the reins of leadership to son Hans, who was then senior vice-president for operations. Despite the leadership transition, the elder Sy, who turns 80 this year, remains an integral part in the decision-making process as chairman. Hans said his father relinquished the executive post post since he wanted to "focus on directions and leave the day to day operations" of the company to the next generation.

The younger Sy said there would be no drastic deviations from his father's management style. Under his watch, he said the company "would be more aggressive" in its expansion, a management trademark of his father, who grew the single shoe store to 17 malls nationwide, while diversifying into banking and property development. Henry Sr. also turned over his board seat at San Miguel Corp. (SMC) to his namesake, Henry Jr. Analysts said the younger Sy's assumption of the post signalled SM's "more active participation" in SMC operations. Henry Jr. handles real estate development projects through SM Development Corp., which recently ventured into middle-income condominium projects.

In 2002, SMC and SM said they would tap each other's networks to improve operations and increase income. Some analysts said that despite the willingness of some taipans to hand over the reins of power to the younger generation, they still wield influence behind the scene. And the effect of such an arrangement on share prices? Slight, they said. An analyst said the impact of the leadership change has to be considered in line with various factors, which include how the elders trained their successors, and the credentials of the new leadership. It matters that the new set of leaders are from Ivy League schools with an MBA and are respected by their subordinates. These, said one of the analysts, could prop up investor confidence and, thus, ensure more returns.


In April, long-time mining executive Gerard H. Brimo also stepped down as chairman and chief executive officer of Philex Gold, Inc., one of the largest mining companies in the country. And in line with his retirement from parent company Philex Mining Corp. in December, Mr. Brimo turned over the Philex management to Dr. Walter Brown. Philex officials said that after 11 years of service to the mining firm built by his father in 1955, Mr. Brimo retired "to pursue other interests." Mr. Brown was director of a number of Philex subsidiaries prior to assuming the top post. Almost the same age as Mr. Brimo, the new president has extensive experience in mining and oil exploration, and vowed to continue on the projects started by his predecessor. Company officials said Philex would pursue projects started during Mr. Brimo's term, including extending the company's corporate life by another 50 years, and undertaking more mining explorations projects.

Philex Mining, a copper-gold mining outfit, was established in 1955 by the elder Brimo. The younger Brimo guided the company through several mining tragedies as well as the 1997 Asian financial crisis, keeping it on top of the industry when others had folded up. "If you look at the large-scale sector in mining here, there's only really two left, that's Philex and Lepanto. There's nobody else. We've survived. If you go back 30 years, there were probably 20 active companies in operation. There were probably 15 copper mines here at one time, but the only copper mine left is under Philex," Mr. Brimo had said. -- Leilani M. Gallardo and Roulee Jane F. Calayag



Court asked to reverse ruling vs Meralco rate hike

The Energy Regulatory Commission (ERC) is asking the Court of Appeals to uphold the former's decision granting Manila Electric Company (Meralco) a PhP0.17 per kilowatt-hour increase in electricity rates. The Court of Appeals on July 29 reversed the ERC ruling that allowed Meralco to raise its electricity price in June last year. The court said ERC should have first required the audit of Meralco's books and accounts before it was allowed to break down or unbundle its charges and then to raise them. Unbundling is the breaking down or detailing of power companies' charges. Meralco's petition for unbundling was required by the Electric Power Industry Reform Act or EPIRA. "In view of the foregoing, this court is of the opinion that a CoA (Commission on Audit) audit before approval by the ERC of both applications for rate increase and rate unbundling filed by Meralco is necessary, being an essential aspect of due process," the decision penned by Associate Justice Martin Villarama, Jr. said. However, in a 38-page motion for reconsideration filed on Aug. 16 by the ERC before the Court of Appeals, the regulatory commission said there was no valid reason to set aside the appealed decision as it considered the CoA audit before granting the Lopez-led firm a PhP17-centavo increase.

According to the regulatory body, "to charge now that ERC gravely erred in not involving CoA in the appealed cases is grossly unfair to it, as it is without any factual basis." "A CoA audit was indeed conducted in the appealed cases, not to mention the actual assets inspection undertaken for the purpose of computing respondent Meralco's appropriate revenue requirement and rate base and determining the reasonable rates that it is authorized to charge its customers," the motion stated. As a matter of fact the ERC, in the motion, said Meralco did not get the tariff adjustment it asked for. It was adjusted downwards after the ERC considered the operating expense and disallowances from rate base. Despite obtaining a CoA audit, the ERC insisted that such audit was not a prerequisite for rate adjustments. In the motion, ERC said it acted on its own when it requested for an audit. The assistance CoA provides may not be made obligatory and mandatory, it said, because no law and jurisprudence sanctioned these.

According to CoA declarations, auditing utilities for rate-fixing purposes is not one of its principal concerns. In the motion, the regulatory body said CoA even withheld assistance to the regulatory body when it asked for help in the validation and verification of certain accounts. In a letter of CoA assistant commissioner Arcadio B. Cuenco, Jr. to ERC Chairman Rodolfo B. Albano, Jr. dated April 26, 2004, CoA said: "We regret to inform you that this office could not extend such assistance as this is not the mandated functions of this commission." As such, the regulatory body asked if CoA had "the competence in terms of personnel and resources, to conduct an audit of all utilities in every rate case filed with the government regulators." Meralco's unbundled rates took effect in June last year, after ERC approved its application for unbundling as well as for a rate increase of 17 centavos per kilowatt-hour. The increase covered 8.35 centavos per kilowatt-hour for generation and transmission, and 8.65 centavos per kilowatt-hour for distribution. -- Ma. Elisa P. Osorio



Finance dep't seeks more powers vs corrupt agents

The Department of Finance (DoF) will ask Congress to approve a measure broadening its powers to investigate corruption within revenue agencies. One of the highlights of the legislative proposal is a provision authorizing the DoF to check on the bank accounts of "revenue agents," under investigation. The proposed "Graft and Revenue Agencies Act" will likewise provide for "higher penalties" and mandate a "more stringent reportorial of statement of assets and liabilities," among revenue agents. It will likewise institutionalize the efforts of the anticorruption arm of the Department of Finance (DoF) known as the Revenue Integrity Protection Service (RIPS).

Finance undersecretary Emmanuel P. Bonoan, RIPS head, told reporters the DoF was finalizing the draft of the bill and hoped to submit it to Congress by September. Given the billions of revenues being lost to corruption Mr. Bonoan said there was a need to "institutionalize DoF's efforts for anti-corruption, after all it affects the economic performance of the country." Mr. Bonoan added the measure would also "beef up" the powers of the Ombudsman by allowing it to examine bank records and confiscate unexplained wealth even if the probe is done at the administrative level. He noted that several graft cases have been dismissed due to failure of the complainants to produce hard evidence against respondents. The Ombudsman, he added has no power to subpoena bank records unless authorized by the courts. Mr. Bonoan said the DoF should start with the bureaus of Internal Revenue and of Customs since bulk of the revenues are collected by them.

The DoF has filed as of January 2004, in tandem with the Department of Justice, a total of 11 cases with the Office of the Ombudsman against erring officials of the BIR and BoC. The charges range from malversation, falsification of public documents to unexplained wealth and violation of the Anti-Graft and Corrupt Practices Act. The specific investigative unit of the RIPS at the DoF is the Central Management Information Office, which is in charge of the systematic and investigative gathering of evidence against the corrupt government personnel. The RIPS covers not just the BIR and the BoC, but also DoF itself as well as all its related bureaus, boards, and offices. -- Karen L. Lema



RP not yet going Argentina's way but action needed


The Philippines is not likely to head the way of Argentina but government needs to address problematic areas such reforms in the power sector, a Bangko Sentral ng Pilipinas (BSP) official yesterday said. Economists have warned that the Philippines may end up in a fiscal crisis similar to Argentina where the latter defaulted on its debt payments. Government officials have rejected the comparison, saying most of the Philippines' debts have long-term maturities in contrast to Argentina's mostly short-term loans. The BSP official, however, warned that both countries share similar factors such as a looming energy crisis and broken government contracts.

In the Philippines, the government should work to privatize the money-losing National Power Corp., the official said, adding that in Argentina, the government has also rejected contracts involving foreign firms. Furthermore, both countries have dollar reserves of around $16 billion, relatively low compared to other emerging markets. Despite these similarities, the official said the Philippine situation is still better than that of Argentina. For example, Philippine banks do not have negative net worth. Capital inflows continue in the Philippines, in contrast to Argentina where no capital inflows or new debt are coming in, the official added.

Meanwhile, the BSP said the Philippines' dollar reserves are the second lowest among its Asian neighbors, increasing the peso's vulnerability to shocks. As of end-2003, the Philippines had gross international reserves (GIR) of $16.9 billion, next only to last-placed Vietnam's $4.7 billion, the BSP said. Consisting mostly of US dollars, the GIR comprises the total foreign currency holdings of the central bank, including gold and special drawing rights, the currency used by the International Monetary Fund (IMF). A strong GIR level helps insulate the peso from shocks as it gives the central bank enough of a buffer to preserve peso's strength. It indicates growing confidence in the stability of the Philippine currency. The reverse holds in a situation when dollar reserves are dwindling, indicating the lack of confidence in the stability of the peso against the dollar and other regional currencies.

In Asia, China had the highest GIR level at $403.3 billion as of end-2003, followed by Taiwan with $206.6 billion. South Korea had dollar reserves of $155.3 billion, while Hong Kong had total reserves of $118.4 billion. Among the Philippines' southeast Asian neighbors, Malaysia had dollar reserves of $44.9 billion, followed by Thailand with $42.1 billion. Indonesia, meanwhile, had dollar reserves of $36.2 billion. Only the Philippines and Vietnam had reserves below $20 billion. In July, the Philippines had a GIR level of $15.90 billion, slightly higher than the $14-15 billion projection for the year. Meanwhile, the Philippines' external debt ratio to gross domestic product (GDP) was at 71.44%, still relatively high compared to other countries, according to 2003 data. China had a ratio of 13.76% while Thailand was at 36.08%. Indonesia, meanwhile, had a ratio of 64.67%. Only Singapore, which has a ratio of 192.5%, and Hong Kong at 228.1% had higher ratios. The Philippines, Asia's largest sovereign bond issuer, had a total external debt of $56.5 billion as of end-March. This compares to Argentina's nearly $150-billion debt, BSP data show.



Asia dollar bonds tighten; Philippines outperforms

HONG KONG -- Asian dollar bond spreads tightened across the board yesterday, with Philippine bonds outperforming the market on bullish sentiment towards emerging markets from offshore investors. New issues from United Overseas Bank (UOB), Singapore's third-largest lender, and South Korea's LG-Caltex were also performing well after being priced overnight. UOB sold US$1 billion worth of 15-year bonds at a spread of 114 basis points (bps) over US Treasuries on Tuesday, part of a dual-currency debt issue in which the bank also sold S$1 billion worth of bonds at a spread of 68 bps over the Singapore dollar 10-year swap rate. Traders said the UOB dollar bond was being actively traded yesterday and had tightened a touch to 113/112 bps over Treasuries. The US dollar tranche attracted orders of about US$2.6 billion, with about 37% of the bond offering being snapped up by Asian investors, 21% by European accounts and the remaining 42% going to US investors.

J.P. Morgan was the global coordinator for the issue. LG-Caltex's new issue was also seeing good buying interest after South Korea's second-largest oil refiner sold US$300 million of 10-year bonds at a spread of 138 bps over Treasuries on Tuesday. The issue closed at 132/125 bps over Treasuries in New York, but widened out a little in Asian trade and was quoted at 135/127bps over. The deal, rated Baa2 by Moody's Investors Service and BBB by Standard & Poor's, was lead managed by Bank of America, Citigroup and Deutsche Bank. Philippine sovereign bonds were trading around 10 bps tighter as offshore investors look to the emerging markets for yield. Philippine sovereign bonds due in 2014 were trading at 99.375/99.75 in price, or the equivalent of about 414 bps over Treasuries. The ROP '25s were trading at 111.375/111.875 in price, or about 436 bps over 30-year Treasuries. Five-year Philippine credit default swaps -- a type of insurance against default -- were also trading about 10 bps tighter at 425/445. But traders said that at such levels there was a strong temptation to take profit. "The momentum seems good, but in the Philippines whenever you have a strong rally it's always a good idea to try and take some paper off your books, because when it comes down it comes down pretty quick," said a trader at a European bank in Hong Kong. A trader in Manila noted that locals were already in selling mode.

Hutchison Whampoa Ltd. bonds, among the most liquid of Asian issues, were also doing well ahead of the release of the company's first-half results today. "We've seen some positioning ahead of the results. The Hutch curve is very well underpinned and if anything is trading stronger," said the trader in Hong Kong. Hutch 13s were trading at 247/244 bps over, comfortably inside the 250 mark, which the bond had been struggling to break through in recent sessions. Hutch 14s, which had been running into resistance at around 200 bps over, were trading at 197/193 bps over Treasuries yesterday. "Everyone's taking the position that the feedback from Hutch on Thursday will be constructive for bonds, with buying from hedge funds and real money accounts," said the trader. -- Reuters



Peso weaker by 7 centavos on dollar buying

The Philippine peso weakened by almost seven centavos yesterday as the US dollar needs of oil companies surged amid rising global crude prices. "With the rising costs of crude oil, there should be demands to satisfy their requirements," a trader said. With the strong dollar buying, total volume of transacted dollars hit $155 million compared with $85 million the other day. The Philippines imports most of its oil and fuel requirements. Most Asian countries also import their oil products but their currencies traded stronger yesterday. The Japanese yen reached 109.85 at the last count, coming from recent lows at the 110 and 111 yen levels.

The Thailand baht, to which the peso was compared until its depreciation, also jumped to 41.50 after trailing the 41.60 level. "The others might have satisfied their requirements already. Some banks were selling dollars in the morning to keep the peso from slipping but the demands came in. What happened was a chain reaction," another trader said. At the Philippine Dealing System, the peso averaged the same as yesterday at PhP55.722 and reached a high of PhP55.67. Opening at its intraday high, the local unit hovered within an 11.5-centavo range. It slipped to as low as PhP55.785 and closed at PhP55.78 against the greenback. -- Ira P. Pedrasa



American Express bank taps ING to manage trust product

The local savings bank of US-based American Express Bank has tapped Dutch financial services group ING to manage its latest trust product offering. American Express Bank Philippines, Inc. (A Savings Bank), Inc. president and chairman Ian T. Fish said the bank recently launched an innovative investment product called Peso Cash Plus that combines the simplicity and convenience of a savings account with the potentially higher return of a trust account. "We went out and found out wealth manager ING. Rather than try and do things ourselves, we felt it is much better to get a professional fund manager which has a lot of experience worldwide in managing funds. We appointed them to manage the funds for us," Mr. Fish told BusinessWorld. "By hiring this professional fund manager, we think we can provide good yields for our customers. We are selling these in our three branches. This is the first product to come from us. It is not managed by our trust department. It is totally independent. We talk with the fund manager once a month more on a philosophical aspect. But Amex do not say [to the fund manager], 'We insist you to buy this and take such and such companies' bonds'," he said.

A Peso Cash Plus account is a deposit account that provides direct access to an investment facility that allows for the automatic sweep of excess funds in savings account beyond the client-designated deposit threshold into a custody account managed by the bank's trust department for placement in investments selected by the bank client that can potentially earn yields that are substantially higher than the short-term time deposit accounts. Funds in the savings account will earn a fixed rate while excess funds swept into investments earn the yield of the investments selected. "At the moment, this is a short-term fund. We don't touch the Philippine stock market. You want to give consistent, steady and reliable yields. Maybe one day we can do a stock fund. The whole philosophy of Amex is you have to tell people upfront [and] explain to them that there are risks. So our philosophy is you be very open and upfront with them and tell them this is very safe and stable or this is very volatile. You may get fantastic returns but you may also see huge drops in the value. One of the things we do before we open an account is ask people to answer 10 questions to make sure we understand what the customer's appetite is. We are not going to sell products to people that will make them feel nervous, tricked or anything else. We want to have a long-term satisfied customer. This comes back to Amex. We are very concerned about consistent performance," he said. Mr. Fish said the local stock exchange is "fairly small," considering the number of issues and low trading volume that could lead to volatility. "The investor must understand he knows what he's getting into. We have professional people but you may be looking at movements in the price. If we have a fund for the bonds, then we have to tell people you have to look at this at a longer period. If somebody say he is not comfortable, we will say this is not the product for him. Our philosophy is to be very open and disclose these things so people understand what they are getting into," he said.

With the bank's plan to come up with a portfolio of products, it may set up a special management team in the Philippines for its trust funds. "This is a very skilled area. If it gets to the point where the absolute sums of money is sufficiently large, then Amex will have a special management team just to do this," he said. As the banking sector awaits the release of a new central bank circular that will differentiate common trust funds from deposits or deposit substitutes, the latest bank product has been marked-to-market since this will be the direction of the trust banking business, Mr. Fish said. "It is about openness and discipline for us. You will see more interesting and innovative good quality products coming out in the years to come. We are not trying to be everything to everybody. One of our philosophies is the screening process. They have to understand what we are offering," he said. -- Ruby Anne M. Rubio



UnionBank uses technology to woo more Visayas clients

TACLOBAN CITY -- UnionBank of the Philippines is using high-technology products and services in attracting more clients in Eastern Visayas. Amado Castaņo, Jr., UnionBank vice-president for Visayas and Mindanao areas, said the use of technology has also improved the Aboitiz-run bank's financial performance. "People are switching to our bank because of our high-technology products and services," Mr. Castaņo said. The bank earned PhP1.1 billion in the first half and targets a 25% increase in earnings this year, he said. "We are very proud that though we are a medium-sized bank, we make a lot of money," Mr. Castaņo told potential clients here. He said the bank's "High Tech, High Touch" strategy provides higher value products with personalized service. Meanwhile, UnionBank chairman and chief executive officer Justo Ortiz said in a statement that the firm's financial performance stands on three areas of strength: funding, investments, and cost management. He said cash management, private banking and business class priority banking in the branches have boosted the bank's performance in the last three years. -- S. Q. Meniano



China Bank launches deposit, loan promos for 84th year

China Bank has launched a deposit and home loan promo in time for its 84th anniversary celebrated on August 16. In a statement, the bank said the month-long "Birthday Bash promo" offers new depositors surprise gifts. The promo is open to August-born clients who will open an account with a minimum deposit requirement of PhP2,000 for regular savings account and P5,000 for checking account; and non-August born clients who will open an account with a minimum initial deposit of PhP5,000 for regular savings account and P10,000 for checking account. China Bank is also giving an interest rate of 10% per annum -- fixed for the first year -- for new HomePlus real estate loan applicants. The reduced rate applies to all new HomePlus loan applications received on or before October 31, 2004.

HomePlus is available for the purchase of residential properties --lot, house and lot, townhouse, condominium; construction of residential units; house improvement or expansion; and refinancing of existing housing loans with other banks. The bank's consumer banking group also offers vehicle loan packages through its AutoPlus loans. Founded in 1920, China Bank has over 140 branches and 170 ATMs nationwide, offering a complete suite of products and services such as deposits, international banking, trust and investment management services, loans and credit facilities, cash management, acceptance of payments and donations.



San Miguel to issue PhP4B worth of five-year notes


San Miguel Corp. yesterday said it will issue PhP4 billion worth of five-year fixed and floating rate notes. Southeast Asia's largest food and beverage conglomerate told the stock exchange it had signed a facility agreement with the Hong Kong and Shanghai Banking Corp. Ltd. (HSBC) and a syndicate of lenders for the notes. HSBC will act as paying agent and registrar. It did not say what specific project the note issue would fund, but one company official said proceeds would likely go to general working capital. The conglomerate recorded strong first semester growth with consolidated net income up 31% to PhP4 billion, boosted by a 6% growth in corporate volume and a 13% increase in consolidated sales revenues which grew to PhP81.3 billion. Consolidated operating income for the period was up 32% at PhP8.11 billion. San Miguel attributed this to higher beer volumes, cost cuts at the Coca-Cola Beverage Group, improvements in the food group and the recovery of beer operations in the international market. San Miguel, 15% owned by Japan's Kirin Brewery Co. Ltd., earlier said the volume of its international beer sales for the first semester rose 17% to $120.1 million. Brisk beer sales in the run-up to the May national elections led to a 32% increase in second-quarter profit.

Analysts have said that with a market value of $3.6 billion, the Philippines' largest company emerged as a winner from election-related spending. Beer and hard liquor account for about a third of group revenues. There is strong optimism the conglomerate will perform better in the second half with earnings expected to rise further although at a slower pace due to record high crude prices which jack up costs and dampen outlook. The company ended 2003 with a net debt of about $127 million. Earlier this year, it raised $300 million via a five-year syndicated loan. In February, Standard & Poor's Rating Services assigned a BB foreign currency rating to San Miguel's foreign-denominated debt with a stable outlook. -- with Reuters



Napocor tweaks schedule of generation assets' sale


The government yesterday said it had revised the schedule for the sale of state-owned National Power Corp.'s (Napocor) assets to give prospective buyers more leeway in doing their due diligence. Energy Secretary Vincent S. Perez, Jr., said the new schedule will allow interested investors to have "breathing space" in conducting due diligence between privatization schedules. He said he is more optimistic of meeting privatization targets because of the improved climate globally. "The energy sector globally is recovering. There are more and more transactions so we are taking advantage of the increased appetite in generating companies." "By end-2004, we should have sold about 33% of the generating capacity in Luzon and Visayas and 50% by June 2005. By end-2005, we are looking at privatizing 70% of the assets, which is a major threshold in the EPIRA [Electric Power Industry Reform Act] law," Mr. Perez said.

Under the revised schedule, the government is set to sell the 1.2-megawatt (MW) Loboc hydroelectric plant in Loboc, Bohol and the 0.4-MW Cawayan hydroelectric plant in Sorsogon City, and the 225-MW Bataan thermal plant in Limay, in September. Mr. Perez said the decommissioned Bataan thermal plant will be sold as scrap, which could be used as storage or site for liquefied natural gas or liquefied petroleum gas. He said other decommissioned plants such as the 54-MW Cebu II in Naga is a potential site for a new power plant while the 108-MW Aplaya plant in Batangas, which would be sold for scrap, is an ideal expansion site. Cebu II will be auctioned in February, while Aplaya is set for dispatch in September next year. The 200-MW Manila thermal plant, for its part, would be sold as a commercial site in January next year, Mr. Perez said. Mr. Perez said the 850-MW Sucat power plant, which would be sold in April, is "highly sought after" since it is located strategically for selling electricity during peak hours.

To date, the government has sold the Talomo mini-hydroelectric power plant to the Aboitiz Group, the Agusan River facility to the Lopez Group, and the Barit, Camarines Sur facility to lawyer Ramon Constancio, for some $2.35 million. For the rest of the year, the government has scheduled the sale of the 600-MW Masinloc in October this year and the 210-MW Navotas plant the following month. The 620 MW-Limay, Bataan thermal site is set to be sold by end-2004, Mr. Perez said. In March next year, the government will sell the 114.7-MW Iligan I and II, the 100-MW Pantabangan, and the 12-MW Masiway plants. The 600-MW Calaca plant and the 22-MW General Santos City plant are next in line in May, while the 75-MW Ambuklao and the 100-MW Binga plants will be sold in June. Also scheduled to be privatized in July are the 275-MW Tiwi and the 410-MW Makban plants, the 110-MW Pinamucan and 36.5-MW Panay I plants. The 150-MW Bacman and the 192.5-MW Palinpinon plants will be sold in August, while the 112.5-MW, and the 22-MW Bohol plants will be auctioned in November.

In 2006, the government aims to sell the 0.8-MW Amlan and the 360-MW Magat plants in March while the 246-MW Angat will be sold in April. The government is gearing for the sale of the 28 power plants as mandated by the EPIRA. In Singapore, a Reuters report said Thai power producer Electricity Generating PCL (EGCO) is in talks to buy into CBK Power Co. Ltd. as it seeks overseas growth to make up for limited domestic opportunities, a banking source close to the talks said yesterday. He declined to give any details on the talks. A spokesperson for EGCO in Bangkok declined comment specifically on CBK, but said EGCO was pursuing acquisition opportunities in the Philippines and Indonesia. -- with Reuters



Japan car parts maker to pour PhP237.2M in new investments

A Japanese firm in Lipa, Batangas is expanding its production of automotive wiring harnesses and will pour in PhP237.236 million in new investments, documents showed. Pilipinas Kyohritsu, Inc. wants to produce 1.5 million more wiring sets annually on top of the existing capacity of 889,795 sets, bringing the company's total capacity to 2.39 million sets or a 169% increase. Seventy percent of output will be exported to Japan and the US. Commercial operations are to begin this month. The project will also result in 1,491 new jobs at Pilipinas Kyohritsu's plant on Laurel Highway in Inosloban, Lipa. Pilipinas Kyohritsu was able to get tax breaks from the Board of Investments (BoI) as a non-pioneer expanding export producer under Executive Order 226 or the Omnibus Investments Code. This is the company's fourth expansion, following three other BoI registrations in 1994, 1996, and 2003. Pilipinas Kyohritsu shareholders unanimously agreed to expand production "to strengthen [the company's] position in the automotive industry and due to the increasing demand of the product here and abroad," government documents said.

The project will involve the installation of additional production facilities in Lipa as well as building expansion, renovation, and improvement to accommodate additional production volume. The project cost of PhP237.236 million also covers machinery and equipment, tools, pre-operating expenses, and working capital. Pilipinas Kyohritsu is 97% Japanese-owned, with Kyohritsu Hiparts Co. Ltd. holding a 68% stake and Sumitomo Wiring Systems owning 29%. Aside from wiring harnesses, the company manufactures electronic gas injection harnesses, engine room harnesses, main harnesses, body harnesses, airbag harnesses, instrument harnesses, and compartment harnesses. The Philippines supplies 20% of the world's wire harnesses. Exports of ignition wiring sets and other wiring sets used in vehicles, aircraft, and ships -- the country's no. 5 export earner -- reached $283.978 million from January to June. -- Felipe F. Salvosa II



SM Development income down on weaker revenues in 2Q

SM Development Corp. saw net profit in the second quarter decline to PhP70.02 million from PhP134.61 million last year on weaker revenues. SM Development generated only PhP123.13 million in revenues for the quarter from PhP137.79 million in the same period last year. However, costs and expenses climbed to PhP46.97 million from PhP3.18 million previously. Operating profit was down significantly at PhP76.16 million from PhP134.61 million. For the first half, the developer's net profit slid to PhP124.82 million from PhP167.89 million while revenues rose to PhP235.18 million from PhP175.19 million in 2003. Costs and expenses reached PhP98.74 million against PhP7.30 million in the same period last year, while operating profit fell to PhP136.44 million from PhP167.89 million. SM Development is the real estate arm of the SM Group.

SM Development said in April that it was just waiting for the government to complete the main highway access in Nasugbu, Batangas before it starts constructing the multibillion-peso Hacienda Looc leisure complex in the area. It is also pursuing two other residential projects to complement its condoville venture. -- R.J.F. Calayag



Semirara reports higher operating profit in 2Q

Semirara Mining Corp., the country's largest mining coal producer, said operating profit in the second quarter rose to PhP259.07 million, marginally higher than the PhP237.99 million posted a year ago. This, although sales grew to PhP1.20 billion from PhP597.89 million. It cited costs and expenses which climbed to PhP941.83 million from PhP359.89 million previously. Included in the costs and expenses were the cost of coal sold; shipping, loading and hauling costs; government share; as well as general and administration expenses. Pretax profit soared to PhP128.57 million from PhP104.08 million for the second quarter last year. Earnings per share (EPS) rose significantly to PhP5.14 from a meager PhP0.06.

Semirara managed to replicate its performance for the first half with operating profit at PhP388.54 million, an improvement over PhP252.53 million last year. Pretax profit was up 275% at PhP183.77 million over the PhP49.03 million earlier. Sales stood at PhP1.85 billion against PhP1.06 billion in 2003. Costs and expenses for the period was up at PhP1.46 billion from only PhP810.78 million previously. -- R. J. F. Calayag



PSi forecasts 10% revenue growth in 3Q

Nasdaq-listed PSi Technologies expects a 10% revenue growth this quarter as its plant in China starts production. Chairman and Chief Executive Arthur J. Young, in a statement, said PSi's facility in Chengdu is expected to commence delivery to clients such as Philips this month. PSi is the first local electronics company to put up a plant in China. Others have just representative offices there. "The forecasts of our major customers continue to remain supportive of continuing sales growth. Nonetheless, some customers have tempered their growth expectations. On the balance, we anticipate 8% to 10% sequential increase in third-quarter revenues. Revenue contribution from China is anticipated to add to quarter-to-quarter sales growth during the third quarter," Mr. Young said.

The 4,000-square meter assembly and test facility at the Chengdu Export Processing Zone in the Sichuan province could operate at about three-fourths current costs here. Sichuan is about two hours by air from Hong Kong. PSi registered revenues totaling $21 million in the second quarter. Although the top line was 11.1% higher than the $18.9 million in the first quarter, it was 5.5% lower than the $22.2 million it earned for the second quarter of 2003. -- Cecille S. Visto



Stocks sink on oil price fears


No immediate respite seemed to be in sight for the Philippine stock market which tumbled anew yesterday. Instead of overcoming earlier losses, the Philippine Stock Exchange composite index (Phisix) slid further as it slumped 10.46 points or 0.67% to 1,556.37 on 1.3 billion shares worth PhP463 million. It reached a high of 1,569.54 and a low of 1,553.23.


Consolidation ruled the market as expected. After almost breaching the 1,600 resistance level, the market swung to the other end of the pendulum, wiping off a gradually growing optimism among investors. Investors cashed in on earlier gains as worries on oil price increases and slow economic developments plagued the market which continued to wallow in negative territory. But Joey Roxas, president of Eagle Securities, Inc., said this trend usually goes on from July to mid-September, months considered unlucky by Chinese investors who consitute a large part of participants in the market. "This is the time when prices slump because it is part of the unlucky period among Chinese. New positions are not taken and old positions are not liquidated," said Mr. Roxas. As if the ghost month was not enough to scare away investors, the spectre of oil price increases still hangs above the market even after four small oil firms decided on Tuesday to slash their oil prices by PhP0.05 per liter from PhP0.35 a liter earlier. "The oil price increases continue to be a dampener which affects the spirits of investors," said Mr. Roxas.

Although small oil players heeded the government's appeal to cushion the impact of the price hikes, some groups said that was only a temporary measure as global oil prices remain vulnerable. It is feared that the price increases will spark off an economic domino effect that could throw prospects for corporate profits out the window. While some dealers point to slow economic developments as the culprit behind the lackluster performance of the stock market, Mr. Roxas noted that this does not greatly affect the movement of share prices. He said investors are less concerned with forecasts on slower economic growth because these are already factored in the stock market equation. "Investors are more concerned on individual issues that are about to explode," he said. Another factor that pulled down the market was the decline in the American Depositary Receipts (ADRs) of telecom giant Philippine Long Distance Telephone Co. (PLDT) which dropped $0.70 to $22.67.


The stock exchange closed mixed with four counters down, three up and one unchanged. The banks and financial services index firmed up 3.06 to 451.82. The commercial-industrial trudged southward, shedding 16.11 at 2,485.81. Property joined the ranks as it lost 12.14 at 505.05. Mining went up 22.77 to 1,894.48. Mr. Roxas earlier said it was imperative for the government to act fast in spurring activity in the mining sector. He stressed that policy change is not enough to strengthen the sector which promises inputs in dollars from local sources. Analysts said the Philippines, rich in mineral resources, could tap this wealth to pay off a mounting public debt. If properly developed, the mining sector is expected to generate $1.2 billion worth of mineral exports annually and $21 billion in revenues. Still reeling from oil price hikes, the oil index was down 0.03 to 1.54. The all shares headed north, up 4.44 to 1,001.01.


Of the 108 issues traded, advancers were outnumbered by decliners, 26-34, with 48 issues sticking to their previous prices. Total foreign buying was at PhP148.7 million while foreign selling amounted to PhP281.5 million. The market had its fair share of ups and downs yesterday. Some listed firms hit home run with positive reports while others lagged behind. The stock exchange yesterday lifted the suspension on the trading of shares of Fil-Estate Corp. after the company submitted reportorial requirements and paid the fines. Shares of PLDT remain the most actively traded, although its price tracked the decline of its ADRs in New York. PLDT was down PhP30 at PhP1,245 with 78,150 shares valued at PhP97.86 million. Mall developer and operator SM Prime Holdings, Inc. slid PhP0.20 at PhP5.60 as it traded 12.86 million shares valued at PhP72.59 million.

Five out of the top 10 actively traded stocks were down. Only prices of port operator International Container Terminal Services Inc. (ICTSI), DMCI Holdings, Inc., Pilipino Telephone Corp. (Piltel) and "A" shares of San Miguel Corp. went up. ICTSI rose PhP0.35 to PhP4.05 with 7.82 million shares traded for PhP31.3 million. San Miguel A climbed PhP0.50 to PhP40.50 on 107,900 shares worth PhP4.36 million. DMCI Holdings advanced PhP0.08 to PhP1.30. Its value turnover was PhP22.7 million. Meanwhile, Trans-Asia Oil and Energy Development Corp. told the exchange that its 10%-owned Atlas Cement Corp. expects to earn PhP3.2 billion from the sale of its shares in Union Cement Holdings Corp. Atlas is a subsidiary of Bacnotan Consolidated Industries Inc. On Aug. 12, Bacnotan and unit Atlas completed a $214 million share purchase agreement involving their combined 51% stake in Union Cement Holdings Corp. (UCHC) with Cemco Holdings Inc., 40% of which is held by Holcim Ltd. of Switzerland.



Small oil firms cut gas, diesel prices

Four small oil firms yesterday gave way to a government appeal and agreed to cut their fuel prices by five centavos per liter, after raising them by 35 centavos just two days ago. The cut was in response to Energy Secretary Vincent S. Perez, Jr.'s call for oil companies to limit price increases, the four members of the Independent Philippine Petroleum Companies Association (IPPCA) said in a statement. "Mr. Perez made an appeal and we heeded that call. This rollback is also consistent with an agreement between us and the Energy department to implement more frequent but smaller adjustments," IPPCA chairman Fernando L. Martinez said. But the 50-centavo increase in the price of kerosene stays, he added. IPPCA members include Eastern Petroleum Corp., Flying V, Seaoil, and Unioil Philippines. Last Monday, they increased their gasoline and diesel prices by 35 centavos per liter, claiming that increases were overdue given world oil prices hitting all-time highs. Other IPPCA members are Castrol, Filpride Energy Corp., Liquigaz Philippine Corp., Oilink International Corp., 3n2J Shipping and Trading Services Inc., Pryce Gases, PTT Philippines Inc., Rambi Development Corp., and Subic Bay Distribution Inc.


IPPCA said oil importers like its members have yet to recover diesel costs and were making only small margins on gasoline. Also yesterday, an economist said the recent price increase should have little effect on the economy, considering that IPPCA members accounted for only 15% market share. The effect of their price increases would not even be felt in many areas nationwide, said Dr. Peter Lee U, head of the Industry Group of the School of Economics at the University of Asia and the Pacific. "I don't think they can have abig effect, unless they have a bigger market share or at least 25%. They have weak presence in the Visayas and Mindanao," he told BusinessWorld. "They are bigger now than when they started, but I think they'll mostly be price followers other than price leaders," Mr. U said. But while "unilaterally" having little effect, these increases should not be taken in isolation, he said. "I would expect that big players would also react and follow. But if they don't, the small ones will probably have to retreat," he added. For his part, economist Bienvenido Oplas, Jr., of Think Tank, Inc. said the overall effect of price increases was negative, but the economy would learn to adjust eventually. "Over the long term, people will have to learn to conserve. This might even result in cleaner air in the future, because people will start using less fuel, which is becoming more and more expensive," he said.

Meanwhile, research group Ibon Foundation Inc. proposed ways to halt escalating oil prices. "Government must now design and at once implement a set of contingency measures to soften the impact of impending drastic increases in oil prices on ordinary consumers as well as the national economy," Ibon said in a statement. The group urged the government to suspend the implementation of the oil deregulation law; institute a "price control mechanism" on socially sensitive petroleum products like diesel, gasoline, and liquefied petroleum gas; and require oil companies to disclose their inventory, to determine how much oil they have and at what price did they purchase it. It added the suspension of the oil deregulation law would allow policy makers to rethink the deregulation policy and to look for viable alternatives. Deregulation, Ibon claimed, allowed huge foreign oil companies and their local subsidiaries such as Petron Corp., Pilipinas Shell Petroleum Corp., and Caltex Philippines, Inc., to monopolize the local oil market and impose unreasonable prices.

For his part, businessman Raul T. Concepcion urged oil refiners not to increase gasoline prices and apply margins against losses in diesel. IPPCA on Monday scored Mr. Concepcion's allegedly "misleading" statements on overpricing by its members. Also yesterday, Total Philippines Corp. said its diesel, gasoline and kerosene prices would go up by 30 centavos per liter starting today because of rising world market prices. Mr. Perez said oil companies must remain sensitive to the impact of high prices on the commuting and motoring public. -- Bernardette S. Sto Domingo



Finance dep't probes dismissal of 14 tax credit cases

A special presidential team investigating the fraudulent use and sale of tax credits will ask the Department of Finance (DoF) to probe the dismissal of 14 collection cases filed by the Bureau of Customs in court. Alan S. Ventura, executive director of Special Presidential Task Force 156, told reporters the investigation would determine the circumstances that led to the dismissals. He said Finance undersecretary Innocencio P. Ferrer, Jr. has directed Customs to explain why it failed to secure favorable court rulings. Meanwhile, a Justice official said the dismissals covered only collection or civil cases, and not the criminal cases against companies and executives accused of trading allegedly fraudulent tax credit certificates. The cases were reportedly dismissed because of Customs' alleged lack of interest in pursuing complaints against companies accused of using or selling fraudulent tax credit certificates. But this was denied by Customs Deputy Commissioner Gil A. Valera. In his report to Mr. Ferrer yesterday, Mr. Valera said eight of the 14 cases were dropped only because summons could not be served on respondents -- either they could not be found or their declared addresses were fictitious. The eight cases "were dismissed without prejudice of being re-filed," he added.

These eight collection cases were against:

  • Master Color System (PhP22.69 million);
  • Integrated Multi-Cotton Mills (PhP147.38 million);
  • Nikko Textile Mills (PhP2.4 million);
  • Express Colour Industries (PhP44.11 million);
  • FLB International Fiber Inc. (PhP64.31 million);
  • Tex Asia Inc. (P 24.52 million);
  • Kultura Knitex (PhP41.53 million); and
  • Fiber Technology Corp. (PhP87.39 million).

As soon as Customs gets records of ownership of companies that were granted the original tax credits, it would amend and refile the complaints, Mr. Valera said. The complaints would then "include the stockholders of record, and hopefully convince the court to pierce the veil of corporate entity and be able to local some of these declared stockholders," he added. Customs has amended the complaints against Kultura Kintex and Fiber Technology Corp., which were re-filed yesterday. "Hopefully, some of the summons can be served on the declared stockholders so that the cases can proceed," Mr. Valera said. Six other cases -- against companies that sold or transfered allegedly fraudulent tax credits -- had been dismissed for lack of jurisdiction. Except for collection cases against AR Packaging Corp. (PhP10.83 million) and Kultura Knitex (PhP6.02 million), which were dismissed because the court sheriff could not validly serve summons, the courts also dismissed three cases against Pilipinas Shell Petroleum Corp. and one case against Solid Mills Corp. -- all for lack of jurisdiction. Trial courts have said the Court of Tax Appeals had jurisdiction over the collection cases. Mr. Valera said Customs would take the necessary action and refile the cases at the tax court. As for the cases against Kultura Knitex and AR Packaging Corp., these would be amended and refiled "once we are able to determine the owners of these two transferee corporations...," he said. "There is not a single cent that has been finally lost in our pursuit" of cases against these corporations, he added.


Meanwhile, the Senate wants to investigate the dismissal of the tax credit cases. Senator Juan Ponce Enrile said the government's failure to prosecute these cases was enough ground to turn down new tax proposals. "Why should we pass new taxes? I don't think you can pass any tax law under this condition. We should initiate an investigation on the tax credit scam in aid of legislation," Mr. Enrile said in a privilege speech. He noted that the Senate Blue Ribbon Committee should lead the investigation of stagnating tax credit cases. In response, Blue Ribbon Committee chairman Joker P. Arroyo said the controversial issue should be handled by a Congressional Oversight Committee. This prompted Mr. Enrile to move for a division of the Senate to resolve the issue. But Senate president Franklin M. Drilon ruled to hold the motion in abeyance for further study.

In an interview before the session, Mr. Enrile urged President Gloria Macapagal Arroyo to axe government officials liable for the dismissal of the cases. "They do not know how to handle these cases. They ought to be kicked out from service," he said. The opposition lawmaker added that during his stint as the chairman of the Senate ways and means committee during the 11th Congress, the tax credit issue was investigated. He said the committee noted that out of PhP54 billion in tax credits, PhP5 billion were sold using fake manufacturing establishments, import entries, and bank documents. "I investigated it and we recommended certain measures to be taken three years ago. But it seemed that nothing happened. The government has not recovered a single centavo," Mr. Enrile said. "If I were the president, I will kick people out from the service. They do not deserve their pay with what they have done. Money is the problem of the country. These people are exercising their power out of tax money and they goof in collecting the money for the government," he added.

Senator Richard T. Gordon, for his part, said the investigation of the tax credit scandal should be handled by the Senate committees on Justice, and Human Rights. Mr. Gordon noted that the failure to prosecute the cases could be attributed to the inefficiency in the Justice system. "It could be that the government dived, or the lawyers are weak of the judges are buyable," he told a news conference. Also yesterday, the Malacaņan presidential palace vowed to go after tax evaders and tax cheats. "The government is determined to prosecute tax evaders to the hilt and has mustered the best legal support it can from the official ranks and from volunteers," Presidential Spokesman Ignacio R. Bunye told reporters in a press briefing. "A strong drive against tax cheats is being waged alongside our program to raise more revenues," he added. He also said, "Tax litigation is at times costly, tedious and lengthy. But our prosecutors will be relentless in their efforts to go after tax evaders." -- Karen L. Lema and Carina I. Roncesvalles with reports from J. O. Valisno and E. P. Osorio



ICTSI offers Dubai office to firms


Ambassador Roberto Romulo yesterday announced that International Container Terminal Services, Inc. (ICTSI) head Enrique Razon has offered that his Dubai office be used as a base for Philippine contractors and exporters to tap projects in the region. The United Arab Emirates-based ICTSI office, the chief of the Public-Private Sector Task Force which is responsible for coordinating reconstruction projects in Iraq with Philippine firms, would bring Philippine companies closer to Iraq and its neighboring countries. "The UAE itself is bidding to become the financial and leisure center in the Middle East and so there is a massive infrastructure buildup going on. The Palm Island Development in Dubai alone is worth billions of dollars is unprecedented in vision and scale," Mr. Romulo added.

Aside from the port terminal company, Mr. Romulo said the Philippine Contractors Association and the Filipino-Chinese Chambers of Commerce and Industry of the Philippines have signified their support to work on marketing Filipino workers in the region and accrediting local contractors. Mr. Romulo, however, admitted that local firms would remain to face difficulties until the security situation in Iraq becomes stable. "Because of the unstable conditions in Iraq and poor contract management, only a small percentage of these funds have actually been spent. What these numbers indicate is that Iraq still offers a huge potential for Philippine contractors and exporters. But this can only happen when the situation on the ground improves," he said.

Based on a 2003 joint study by the World Bank and the United Nations, the fund requirements for the restoration of infrastructure in Iraq is an estimated at $55 billion. Donor countries had so far pledged up to $13 billion at a conference in Madrid while the US Congress has allocated $18 billion for the rebuilding of the war-torn country. However, only $600 million, which is just 3% of the total fund, had been utilized. Mr. Romulo said the task force was still cautious about involving more local subcontractors in Iraq as the government has yet to lift its deployment ban on the sending of workers. "Although there are some 4,000 Filipino workers in Iraq employed by various subcontractors, the hazardous peace and order situation has prevented the implementation of the bulk of the reconstruction effort," he said. The 4,000 Filipinos in Iraq are employed by American firms, mainly by Kellogg, Brown and Ruth and are deployed in US military camps based in the war-torn country.



10 areas for reforms listed by credit ratings agencies


The government needs to bite the bullet and address ten crucial reform areas if it wants continued access to the debt market and attract foreign investors, credit rating agencies have said. A survey conducted by the Bangko Sentral ng Pilipinas (BSP) among international credit rating agencies showed the Philippines' sovereign debt rating remains low because of the lack of reforms. Corazon Guidote, executive director of the BSP's Investor Relations Office, yesterday presented the results of the survey, conducted a few months ago among ratings agencies such as Standard and Poors, Moodys, Fitch Rating Services Inc. and Japan Credit Rating Agencies. Number one in the list is the need for the government to broaden the tax base to boost revenues. Other concerns are the need to sustain and improve the ratio of public revenues to gross domestic product (GDP) and reduce the ratio of external and government debt to GDP. Debt watchers also want the government to improve the regulatory environment; and institute effective integration of the financial sector.

The money-losing operations of National Power Corp. (Napocor) also needs to be addressed, a concern that has been repeatedly raised by local and foreign businessmen. Credit rating agencies underscored the need to privatize Napocor to prevent a looming power crisis which could further slow down economic growth and keep investors away. They said the government should help boost the competitiveness of the country's export sector by addressing key issues that dampen growth such as the high costs of labor and power. On the political front, rating agencies stressed the need to improve political stability, saying there is still too much bickering in the government. "Another concern is the need to strengthen democratic institutions," Ms. Guidote said yesterday. Finally, the ratings agencies also want the government to improve internal security, citing threats by bandit and insurgency groups. They said addressing these reforms could help the Philippines achieve a higher credit rating, which would reduce borrowing costs and lead to improved investor sentiment.

At present, Philippine credit ratings range from below investment grade to stable. The BSP gave assurances that the government is doing what it can to help improve the country's credit ratings and investment climate. Ms. Guidote cited efforts of the Department of Finance to improve government's fiscal position but added that the government needs to meet its targets, particularly that of balancing the budget by 2009. In a related development, a government official yesterday said the Philippines may face a fiscal crisis in one to two years if the Napocor issue is not resolved. The state-owned Napocor is saddled with PhP500 billion worth of debts which government wants to absorb. The Electric Power Industry Reform Act, however, only allows government to absorb up to PhP200 billion. The official said although the Philippines is much better off compared to Argentina, which defaulted on its debt payments, a crisis is not far off if government is unable to privatize Napocor. "Addressing Napocor is really crucial," the official said. The official also underscored the need to pass new tax measures. "Congress must act fast because every delay in the passage of new tax measures result to losses for government," the official said.



Addressing the population issue crucial to economic growth

By JUDY T. GULANE, Reporter

A high population growth rate impacts negatively on economic growth and poverty reduction efforts, results of a recent study on the links between population, the economy and poverty showed. The study, "The Economy-Population-Poverty Links: A Quantitative Assessment," also showed that the Philippines had a total foregone growth of under 1% per year between 1975 to 2000 because of population growth. Average income in 2000 would have been 22% higher had the issue been addressed. The study was conducted by economists Arsenio Balisacan, Charisse Tubianosa, Dennis Mapa, Leonardo Lanzona and Rosemarie Edillon. The study said that if the Philippines were to have a similar population growth path as that of Thailand, where the working population is larger than the young, dependent population, poverty incidence would have been lower by 5.5 percentage points. With poverty incidence now at 40% of the Philippine population, Mr. Balisacan said the reduction would have meant that 3.6 million poor Filipinos had been brought out of poverty.

The study essentially compared the Philippines with Thailand for the two were considered "twins" in the 1960s for their similarities in population growth path and density, strong dependence on agriculture and orientation towards exports. Thailand's economy, however, took off in the late 1980s, while the Philippines now ranks near-bottom. Only Indonesia has a lower per capita gross domestic product (GDP). The study noted that Thailand and the Philippines had a similar population growth path in 1975, where the majority belonged to the young, dependent population. Twenty-five years later, Thailand's young population had matured, enlarging the working population that fuels that country's economy. The Philippines' population structure essentially remained the same, however, with the young, dependent population comprising the bulk of the population. The study said "workers' population growth has a positive and significant impact on economic growth." Worker population growth in Thailand and the Philippines are almost similar with 2.5% for the former and 2.8% for the latter. The Philippines' youth population growth, however, is higher at 1.7% while Thailand is at -0.3%. Total population growth is also higher at 2.36% versus Thailand's 1.6%.

The Philippines now has a population of 84 million while Thailand has a population of 62 million. Total fertility for Filipino women is three to four children. For Thai women, the average is two children. Aside from reducing poverty incidence, rural poverty would have been addressed if the Philippines followed a similar growth path with Thailand. Poverty in the Philippines is mainly a rural phenomenon, Mr. Balisacan said. "Two out of every three persons are located in rural areas and they are dependent mainly on agriculture," he expounded. "Urban poverty is largely a spillover effect of rural poverty, as the rural poor migrate to urban areas." Slower population growth in the rural areas, he said, will result in savings in the provision of basic education and health services. These savings will be channeled to agriculture, for example, and research and development, irrigation, farm-to-market roads, among others. Estimated savings -- and these are conservative figures, Mr. Balisacan said -- are PhP128 billion over 10 years from basic education and PhP52 billion over 10 years from basic health. He stressed that the country's economic problems will remain unaddressed if the issue of high population growth is not be confronted. Sources of future population growth for the Philippines, he pointed out, are: unwanted fertility (16%), wanted fertility (19%) and population momentum or the proportion of young population who will contribute to population growth (65%). To slow population growth, he recommended that the government provide access to contraception; provide employment opportunities for women and compulsory basic education to children; and lower infant mortality to delay wanted fertility. To address population momentum, later-age marriage and wider birth spacing should be promoted, Mr. Balisacan added.



Bangko Sentral to maintain inflation target

The Bangko Sentral ng Pilipinas (BSP) is keeping its yearend inflation target even as economic planners said soaring oil prices may push inflation beyond the 4.0-5.0% goal. The BSP called on government agencies such as the Departments of Trade and Industry and Agriculture to establish interventions such as increasing the supply of goods in the market. "We can still keep the target but there should be appropriate response from key government agencies," BSP Assistant Governor Diwa G. Guinigundo yesterday said. He said monetary policy will not be effective in addressing inflationary pressures -- such as rising oil prices -- as these are mostly from supply-side. Supply-side pressures may be addressed by increasing supplies in the market which would in turn stabilize prices of basic goods and commodities, he added.

On Monday, the National Economic Development Authority (NEDA) said oil prices could mean that inflation target may be breached. "The main reason for this is the oil price increases. We never really expected the price of oil to move up to more than $40 per barrel," NEDA assistant director Scholastica D. Cororaton said. Mr. Guinigundo said the BSP originally factored in an increase in Dubai crude price of up to $35 per barrel but prices have soared to at least $38 per barrel this week. However, he said the BSP expects price increases to slow down later this year or early next year on expectations that oil exporting countries will fulfil commitments to increase production. "We can expect some slowing down in the increase in oil prices later on but for now we just have to roll with the punches," he said. The NEDA sees inflationary pressures easing in 2006 due to projections that supply will start to normalize.



Gov't to look into proposed national ethanol program

Given continued increases of world oil prices, the Department of Energy (DoE) yesterday backed a Senate bill promoting the use of ethanol as an alternative transport fuel. The DoE announced that a major oil firm has signified interest in determining standards for the use of ethanol as an alternative transport fuel as well as the viability of mandating its use. Senate Bill 1677, sponsored by Senator Aquilino Q. Pimentel, Jr., aims to establish the National Fuel Ethanol Program. The bill also appoints the DoE as the lead implementing agency. "Promotion and widespread utilization of ethanol as a fuel for the transport group supports President [Gloria Macapagal] Arroyo's goal of increasing the country's energy self-sufficiency level to 60% by 2010," Energy Secretary Vincent S. Perez, Jr., said. The proposed bill is also expected to alleviate the plight of the sugar industry, the DoE said, by generating employment, enhancing the country's technological and engineering position and providing a continuous flow of purchasing power to rural areas.

Ethanol is produced from crops such as corn, grain sorghum, wheat, sugar and other agricultural feedstocks. It can be used as a fuel in three ways -- as a blend for gasoline, as a component of reformulated gasoline, or a primary fuel with gasoline as blend. "While the country has steadily reduced its reliance on imported oil as energy source, our transport sector is still heavily dependent on imported oil," Mr. Perez said. "So far, we have introduced compressed natural gas, liquefied petroleum gas and coco methyl ester as alternative transport fuels. We want to explore other options to further lessen our oil imports," he said He noted that the country attempted to implement a similar program to use ethanol in the mid-1980's. The program, however, did not progress. "The advances in technology and the worldwide call to promote the use of alternative fuels should only spur us to look for ways and means to tap other energy sources, which are environment-friendly and renewable," Mr. Perez said.



Gov't to issue 5B pesos in 5-year zero coupon bonds


The government will issue at least PhP5 billion worth of five-year zero coupon Treasury bonds on August 31. It said this would be the first ever for the local bond market. "The demand for this is coming from retail investors as presented by underwriters," National Treasurer Mina C. Figueroa told reporters yesterday. Underwriters for the offering are Land Bank of the Philippines and Citibank N.A. Zero coupon bonds pay no interest but are offered at a deep discount to their face value. Ms. Figueroa also announced that starting August 24, the maturity of its longer-termed Treasury bonds will be shortened to four years from the current five. In September, the Treasury is also planning to shorten the tenor of one of its seven-year T-bond issues. Two seven-year issues were originally set for next month. The Philippines issues debt in local and foreign markets to raise funds for its budget deficit, which it aims to cap at PhP197.8 billion this year or 4.2% of gross domestic product.

Earlier, traders said the market was not too enthusiastic about some bond issues as these were more risky compared with short-term papers. "The measures came in too late. They know for a fact that the market appetite was for [short-term] papers," a trader said. In yesterday's auction, the government's seven-year Treasury bond fetched a yield-to-maturity rate of 12.48%, higher than the 12% premium risk rate reached when they were last issued on July 20. Indicating weak market appetite, tenders reached only PhP2.759 billion against a PhP4.5-billion public offering. The auction committee accepted only PhP1.454 billion worth of bids. "The risks are already there. We're expecting a gloomy economic future ahead of us, even up to next year what with the rising costs of crude oil prices, and even its impact on the inflation data," a trader said. "Even the tax laws the government wants to implement is not yet clear, and we're talking about fending off revenue slumps," another trader added. The other day, T-bill rates rose across all maturities even as the Bureau of the Treasury affirmed its position to keep debt yields steady. "At this point, they should have rejected [bids for the seven-year bonds] because it's most ideal, but then again, they also need that much liquidity," a trader said.

The 91-day T-bill rate rose to 5.8 basis points to 7.183% from 7.125%. The 182-day T-bill rate also went up to 2.2 basis points to 8.208% from 8.186%, and the 364-day paper fetched 9.281% or a rise of 10.5 basis points from 9.176%. Total tenders reached PhP13.78 billion against the public offering of PhP11 billion. The auction committee accepted PhP9.91 billion worth of bids. Ms. Figueroa said, however, that "[the longer tenor] is for insurance companies. Banks are bidding for their positions and they have to raise the rates just to make sure na di sila lugi [that they will not lose] when they turn it around."


Meanwhile, the Philippine peso only range-traded yesterday against the US dollar, closing almost two centavos stronger from the previous day as the market "saw no clear direction whether it was convenient to take huge positions," a trader said. At the Philippine Dealing System, the peso averaged weaker by six centavos to PhP55.722 from PhP55.662 previously. Opening at PhP55.73, the peso further slipped by a centavo to reach its intraday low of PhP55.74. Hovering within a 4.5-centavo range, the local unit settled at PhP55.715 against the greenback. Total volume of transacted dollars dropped to $85 million from $147 million the other day. -- with Reuters



RCBC posts 13% hike in earnings as of June

Yuchengco-led Rizal Commercial Banking Corp. and its subsidiaries' net earnings registered a 13.33% growth at PhP1.19 billion during the first six months of the year from PhP1.05 billion a year ago. Reversing a decline during the first quarter, the bank's profits accelerated in the April-June period by 70.5% to PhP832.14 million from PhP488.05 million. "The bank's overall performance continued to show marked improvement from a year ago. Likewise, it reflected the gains achieved from its efforts to strengthen its balance sheet, improve efficiencies and concentrate on profitable market segments," RCBC said in a statement. Net interest income rose 9.54% to PhP2.45 billion during the first semester from PhP2.241 billion due to better market yields and higher volume of deposits available for earning loans and other investments. Interest income from investment securities posted a 44.89% growth to PhP1.1 billion from PhP763.14 million. This comprised 12.96% of total revenues compared with 8.79% last year. A drop in deposit balances maintained with banks led to lower interest on deposits to PhP69 million, down by 14.54% from PhP80 million.


The decline in trading income due to last year's realized gains from the sale of zeroes and higher volume of traded securities resulted in a 19.51% decrease in the bank's other income to PhP2.8 billion. This represents 32.83% of total revenues. "This evidently showed the bank's shift in revenue sources and focus from non-traditional sources to net revenue from funds this year," RCBC said. For the said period, the bank and its consolidated subsidiaries have set aside provision for probable losses amounting to PhP781.46 million, down by 44.31% from PhP1.4 billion. "In spite of lower provisioning year on year, total provisioning set aside by the bank already exceed the recommended levels of the Bangko Sentral ng Pilipinas," RCBC said. Total operating expenses increased by 10% to PhP3.91 billion because of the hike in taxes and licenses at PhP296 million from PhP128.04 million as the gross receipt (GRT) tax was reimposed. RCBC said provision for income tax was higher this semester at PhP533.24 million from PhP279.38 million on account of the shift to GRT. As a result of net loss incurred by credit card company Bankard Inc., minority interest in net income of consolidated subsidiaries substantially declined to a loss of PhP99 million from PhP11 million last year. -- Ruby Anne M. Rubio



Prudential Bank income falls 47% to 125M pesos in first half

Earnings of Prudential Bank dropped 47% to PhP125.12 million during the first semester from PhP236.12 million a year ago. In a report filed with the Securities and Exchange Commission, the bank said its gross income increased by only 2.63% to PhP2.01 billion while operating expenses grew by 12.18% to PhP1.81 billion. "Contributing to the slight increase in revenues for the period ended June 30 is the good performance of the bank's treasury services [which] boosted the income from investment in government securities by 25.03% to PhP805.9 million in spite of the 13.13% slack in commissions, exchange profits and other income at PhP719.17 million," Prudential Bank said. Expenses were driven by higher interest on deposits and borrowed fund, which increased by 22.24% to PhP763.68 million on account of the bank's payment of loans to foreign banks. "The bank paid bigger taxes this year due to the reimposition of the gross receipt tax on banks which is now being charged as expense unlike last year wherein value added taxes were passed on to clients. As a result, taxes and licenses advanced by an increment of 27.17% during the six-month period," Prudential Bank said.

Nonperforming assets, or those classified as real estate and other properties owned or acquired, was significantly higher at PhP1.13 billion from PhP86.69 million from end-2003 due to dacion en pago on mortgaged properties. The bank's bad loan ratio was at 26.24%, up from 24.17% in end-2003. Bracing for tougher times, Prudential Bank earlier projected a modest 5% earnings growth this year through a more active participation of its treasury unit in the bond market. Prudential Bank reported a 21% spike in net income last year to PhP575.61 million from PhP475.87 million in 2002. -- R. A. M. Rubio



GMA Network to pay PhP1B in debts up to next year


Media company GMA Network, Inc. will pay PhP1 billion in debts up to next year through internally generated funds. Ronnie Mastrili, vice-president for finance, said GMA will pay PhP500 million this year and another PhP500 million due next year. "All of these will be sourced from internally generated funds. We don't need to refinance or restructure our loans," he said. He said the company "religiously" pays its loans as they fall due, and that GMA is "very optimistic" that it would meet its plan to be debt-free by 2005. GMA has been seeing an increase in its profits, posting a net income of PhP751 million for the first half of the year, up 33% from the same period last year. This is due to strong revenues, which increased 20% to PhP3.62 billion from PhP3.01 billion last year, the company said. GMA said, however, that operating expenses also increased 20% to PhP291 million due to increased production costs, advertising and promotion, amortization of program rights and salaries and allowances. But Mr. Mastrili said election-related spending contributed "significantly" to the increase, and added that "this is way within the programmed spending for the year. The company has prudently planned the expenditures up to the end of the year." The company is expecting to increase its profits by 50% this year. Mr. Mastrili said the target is attainable given the company's strong performance in the first half. "The company is right on track in hitting its 50% net income growth target for the year The first half performance can be sustained, if not exceeded, in the second half barring any major economic downturn," he said. GMA said it expects to see a growth in revenues from television and radio operations as from its international channel, which would be launched "in a few months."

An analyst said that being debt-free would help GMA in its plan to go public by next year. "This should reflect a strong balance sheet, and should be good especially that less debt burden means less interest expense and good potential for earnings and growth subject to its industry." GMA earlier said it is "just waiting for the right timing" for its initial public offering. The media firm has a network of 45 VHF and two affiliate stations and 31 radio stations nationwide. The company plans to reopen its UHF channel and to produce movies again. From January to June, GMA's average total day ratings reached 16.2% against rival ABS-CBN Broadcasting Corp.'s 15.9%. For the first quarter, GMA posted PhP251 million in net income, up 57% from the same period in 2003. In end-2003, the company posted a record-breaking net profit of PhP1.05 billion, 162% or PhP650 million higher than its income of PhP402 million in 2002.



Korean group to put up hotel in Cagayan de Oro

By ELLEN P. RED, Correspondent

CAGAYAN DE ORO CITY in Northern Mindanao -- Infinite Forest Co. Ltd., the local unit of Korean Resort Co. (Koresco), is set to build a 50-room international leisure hotel in this city's Pueblo de Oro Township. Rodolfo Meņes, vice-president and general manager of Pueblo de Oro Development Corp., a member of the Investment and Capital Corp. of the Philippines Group, said Infinite Forest recently bought about half a hectare of prime property in the Pueblo de Oro Golf Estates. Mr. Meņes said the groundbreaking for the hotel's construction is set late this month. He said the construction would take about a year. The hotel is expected to be operational next year. Koresco is a leisure property developer with more than a dozen condominiums and hotels in South Korea, Mr. Meņes said. Aside from hotel and condominium development, he said Koresco is also involved in condominium building and membership club time-sharing services.

In putting up the hotel, Mr. Meņes said, Koresco expects to cater to about 40,000 individual members in its condominium building and membership club time-sharing services. Of the 40,000 individual members, 10% are ardent golfers, Mr. Meņes said. Pueblo de Oro said the hotel would be constructed on a 5,354-square meter lot overlooking the driving range and the golf course. The proposed hotel is said to have four stories and a basement. It features 42 deluxe rooms, seven royal suites, one presidential suite, banquet, seminar rooms and a restaurant. Amenities include an outdoor swimming pool and a 30-car parking area. The Korean group's entry to Cagayan de Oro, Mr. Meņes said was a result of two trade missions to South Korea last year led by Mayor Vicente Emano and local business executives.

The official publication of the office of the city council, reported that Suk Koo Ko, chairman of Infinite Forest, is set to apply for the city's tax perks. Incentives provided by the city's include exemption from local licenses, fees, and dues within three years from the date the business starts operation. The registered investor under the ordinance shall be fully exempt from the following fees: mayor's permit, business manager permit, building permit, health certificate, sanitary, garbage, fire inspection, tax on billboard, tax on delivery van and tax on weight and measures. For a period of not more than six years from the date of approval of their application, the registered investor under the ordinance shall be exempted in business tax from gross sales/receipts. Also, the registered investor shall be exempt from real property tax for a period of not more than six years from the date of approval of their application.



Revival of nickel mining firm Philnico urged


DAVAO CITY in Southern Mindanao -- The government is urged to revive the Philnico Nickel Refinery and Special Economic Zone on Nonoc Island, Surigao del Norte. In a resolution passed last month, the Caraga Business Council, represented by Leonel Santos, Philippine Chamber of Commerce and Industry regional governor for Eastern Mindanao, asked President Gloria Macapagal Arroyo to direct the Regional Development Council, the Department of Trade and Industry and the Board of Investments to fast track moves to revitalize Philnico by adopting the model used in resurrecting National Steel Corp. in Iligan City. The resolution also urged that all groups in the region must join hands in revitalizing the company which was closed in 1986. It said the revival of Philnico will boost the mineral industry and the regional economy. "The mineral exploration and mining industry can generate considerable wealth to areas with potential for environmentally sustainable mineral development in Mindanao, providing jobs, supporting local industries, improving infrastructure," it added. It added that since the Caraga Region is known for its mineral deposits, the government should exert efforts in tapping these resources because these will help in propelling economic development of the region.

Nonoc Island is known for its large nickel deposits that, along with logging, once made Caraga region the "hotbed" of economic growth, it added. But the closure of Philnico in 1986 resulted in loss of some 4,000 jobs, about $600 million in investments and $300 million in annual export earnings. Last year, the business sector also passed a resolution calling on the government to find ways to reopen the nickel plant.



NextStage buying IT company for PhP113.5M

Listed holding company NextStage, Inc. is buying information technology firm First Advanced Multimedia Entertainment, Inc. (FAME) for PhP113.507 million, in a bid to firm up its grip on the multimedia gaming industry. NextStage board has approved the acquisition, the firm said in a disclosure. The board also approved the issuance of 49.949 million shares from the firm's authorized but unissued capital stock. NextStage directors approved the issuance of 113.507 million shares at PhP1 per share in exchange for the full outstanding capital stock of FAME. FAME operates internet and mobile intermediate platform, and provides support to multimedia gaming.

In line with the acquisition, the Philippine Stock Exchange (PSE) yesterday suspended the trading of NextStage shares until it submits to the exchange other documents pertaining to the purchase. "The Exchange shall suspend the trading of the company's shares pending compliance with the requirements set forth [in the disclosure for substantial acquisitions and reverse takeovers]," said PSE Senior Vice-President for operations Jurisita M. Quintos. NextStage will seek the approval of stockholders as of Aug. 30 on the board's decision to hike its authorized capital stock to PhP170 million from PhP100 million. NextStage was incorporated as Pacemco Holdings, Inc. in 2001 to act as a holding firm. Prior to the change in its corporate nature, NextStage was known as Pacific Cement Corp. with investments in the cement industry supplying Visayas and Mindanao. -- A. B. L. Lorenzo



San Miguel Indonesia brewery reports 16% rise in operating income

Food and beverage giant San Miguel Corp.'s multi-product beverage brewery in Indonesia posted a 16% increase in operating income to $1.9 million in the first half of the year due to higher sales. In a statement, San Miguel said its PT Delta Djakarta brewery posted a 15% increase in its sales volume to contribute to the recovery of San Miguel's international beer operations. It said the higher sales were "spurred by a strategic marketing and distribution scheme." PT Delta, one of Indonesia's largest breweries, manufactures Anker Bir and Anker Stout, which San Miguel said enjoy a significant share of the country's beer market. San Miguel's presence in Indonesia started in 1976 when it snagged a licensing agreement. It started its brewery operations in the country in 1993 when it bought into PT Delta Djakarta, which now operates its brewery in Bekasi Province, West Java. The brewery started operations a few months ago as part of San Miguel's plan to expand its operations in the Asia-Pacific region.

San Miguel is the country's largest publicly listed food, beverage, and packaging firm. In the past four months, the firm acquired assets in Thailand, Indonesia, Vietnam and Australia as part of its thrust to boost international business. The firm said its international business would increase its contribution in the revenue mix in the future to 30% to 40% from less than 15% at present. In the first half, San Miguel posted a consolidated net income of PhP4 billion, up 31% from last year. Consolidated sales revenue increased 13% to PhP81.28 billion, while consolidated operating income amounted to PhP8.11 billion, a 32% increase over last year.International beer sales volume went up 17% for the first semester with sales revenue reaching $120.1 million. -- Jennee Grace U. Rubrico



Profit-taking wipes out two-week gain


Profit-taking at the Philippine Stock Exchange (PSE) gobbled up the market's gains in the past two weeks. Analysts said the traders gave in to the selling pressure amid lingering uncertainties, particularly over expected oil price increases which could eventually lead to inflation and even interest rate hikes. The PSE Composite Index (Phisix), the benchmark for the performance of Philippine stocks, slumped to a two-week low at 1,566.83 points, 28 points or 1.76% lower than Tuesday's closing level. The broader all-shares index slipped 5.52 points, or 0.55%, to 996.57. "Investors chose to pocket gains from the previous sessions. There are still uncertainties such as the possibility of a higher inflation because of the oil price adjustments," a research head of a brokerage firm said. "Eventually, the interest rates may also catch up to cover for the inflation," the research head added. After major oil players pumped up prices early this month, smaller oil firms are set to follow suit with an increase of 35 centavos per liter for diesel and gasoline, and 50 centavos per liter for kerosene. Because of the price hikes, the National Economic Development Authority said inflation in August may reach 6.1% to 6.3%. Last month, inflation stood at 6%, while the year-to-date rate is at 4.3%. The market's drop was also expected as stock prices have already gone up in the previous sessions, said SB Equities' Monique Lecaros. "The weakness is expected because a lot of issues have gone up last week, particularly [those] in the mining sector," Ms. Lecaros said.


Selling dominated the mining sector, which has experienced sell-offs since it reached its peak in almost four years at 2,258.49 on August 6. The mining index yesterday tumbled 94.24 points, or 4.79%, and closed at 1,871.71. As much as 1.984 billion shares were traded within the mining sector alone, boosting the total trading volume for the day to 2.413 billion shares. Since the share prices of mining stocks range from less than one peso to PhP3.25, activity in the sector contributed only PhP30.07 million to the total trading value of PhP682.172 million. Ms. Lecaros said mining stocks have been in the limelight of late due to the government's plans to revive the industry. She added that while investors are excited about prospects in mining, traders still opted to continue cashing in their gains since nothing concrete has been made on the proposals for the sector. Ms. Lecaros also said investors trading mining stocks are usually referred to as "market players," or those who are just into short-term transactions. Most of the selling were concentrated on the A and B shares of Manila Mining Co., both of which lost 0.2 centavos to close at 1.6 centavos and 1.8 centavos, respectively.


Telecom stocks also succumbed to the selling pressure yesterday after hefty gains in previous sessions. Globe Telecom, Inc. pulled down the Phisix by 8.14 points. It lost PhP40 to close at PhP875 per share. Globe was the third most active stock for the day with an 11.63% market share. Telecom leader Philippine Long Distance Telephone Co. (PLDT) surrendered PhP25 to profit-takers as it dropped to PhP1,275. PLDT captured 21.16% of the transactions yesterday, making it the most active stock during the session.


Holding firm DMCI Corp. yesterday fell 16 centavos to PhP1.22, following reports that investors of its subsidiary Universal Leisure Corp. has threatened to go after its assets if their investments were not returned. Investors suing Universal Leisure accused DMCI of being the mastermind in luring them to buy shares amounting to PhP2 billion for a project gone sour. Meanwhile, Jollibee Foods Corp., which was reported to have closed down two restaurants abroad, dropped 75 centavos lower at PhP24.75. Only International Container Terminal Services, Inc. (ICTSI) and First Philippine Holdings Corp. went against the bandwagon and posted gains in share prices yesterday. ICTSI reported a net income of PhP446 million for the first half, 101% higher than the PhP222-million profit it made for the same period last year. It attributed the growth in income to improved performance from the Manila International Container Terminal and its foreign subsidiaries.

First Holdings, in the meantime, said its net income for the first half climbed 2.6% to PhP1.98 billion from PhP1.93 billion last year. The local brokerage research head said investors could be keeping their money in the firm due to dividend prospects. With the dominance of selling in the market yesterday, decliners outnumbered advancers, 69 against 13, while 39 out of the 121 traded stocks closed unchanged. Ms. Lecaros said August is generally a weak month for the market, but added that investors may seize the opportunity of buying shares at lower prices. "We are taking it [weakness] on a positive note since the bouts of weakness would open windows for positioning for issues which are expected to do well in the second half," she said.