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The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or
BSP) has advised businesses and consumers to expect goods and services
to become more expensive in coming months, as world oil prices continue
to soar. Even local borrowing costs can go up, particularly if the US
central bank -- the Federal Reserve -- continues to fight rising prices
in the US by indirectly limiting money in circulation through higher
interest rates, said BSP officer-in-charge Amando M. Tetangco, Jr. in an
recent interview. Central bank's overnight borrowing rate now stands at
6.7%, and overnight lending rate at 9%. These were last raised in July,
when the central back matched a rate increase by the US Federal Reserve.
For the first time this year, Mr. Tetangco conceded that the
government's 4%-5% inflation target for 2004 could be breached since the
price of Dubai crude -- the benchmark for local oil prices -- has gone
up to about $40 per barrel. "If oil prices continue to increase and stay
at $40 per barrel until the end of the year, we may exceed the inflation
target," he said.
Previous BSP estimates considered a Dubai crude price of only up to a
high of $33 per barrel. Inflation or the rise in consumer prices was
already 6% year on year last June, its highest jump in the last three
years. Despite rising oil prices, Mr. Tetangco said the central bank
could keep key interest rates steady, and not unnecessarily raise
borrowing costs. Anyway, inflationary pressures come mostly from the
supply-side, and are outside the influence of monetary policy, he said.
The BSP deputy governor also noted these pressures could cause big
problems for businesses as well as the economy, but he also said the
government was doing what needed to be done to contain rising prices. He
said the central bank was coordinating with the departments of
Agriculture, and Trade and Industry, to increase the supply of goods in
the market, to bring down prices. "We can still afford to maintain
interest rates, but we will review if there are [also] pressures from
the demand side," Mr. Tetangco said. These pressures include a possible
increase in wages.
The central bank has adopted an inflation-targeting approach to
monetary policy, and changes key interest rates only when rising
consumer prices threaten economic growth. Aside from soaring oil prices,
Mr. Tetangco said the economy would also have to brace for a narrower
interest-rate differential between US dollar and peso-denominated
investments. And this could result in greater demand for dollars, at the
expense of the peso exchange rate. The US Federal Reserve is widely
expected to increase its interest rates by as much as 100 basis points
by yearend to head off inflation in the growing US economy.
BSP monitors the difference in the yields for peso and dollar bonds
as a guide for setting interest rates. With a narrow interest rate
differential, fund managers and businessmen have less incentive to stay
in peso bonds. Even New York-based investment bank Bear Stearns & Co.
said the peso was likely to depreciate further. "Higher interest rates
will surely follow, despite denials from the central bank and
government. In the long run, this deterioration of price stability will
be bad for the peso and US dollar exchange rate," it said in an August 6
report. Businessmen, for their part, expect rising inflation and budget
deficit, and the peso's depreciation against the dollar to dampen
confidence. "Businessmen identified increasing oil prices, accelerating
inflation and the growing fiscal deficit as the main risks to the
expected business upswing this year," BSP Assistant Governor Diwa C.
Guinigundo said last Friday during the presentation of the results of
the central bank's Business Expectations Survey for the third and fourth
quarters. But survey results also showed that businessmen's confidence
in the economy was on the rise.
NO CAUSE FOR CONCERN
Meanwhile, the increase in the price of beef and the anticipated
increase in the price of pork may not be a cause for concern for the
government in terms of managing inflation, Socioeconomic Planning
Secretary Romulo L. Neri said. "I think inflation is still manageable at
this point. [The increase in prices] may not be a cause for concern at
this point, especially if there are those who are just stockpiling in
preparation for the Christmas season," Mr. Neri said in an interview.
Based on figures from the Bureau of Agricultural Statistics, an agency
attached to the Department of Agriculture, beef rump sold at a high of
PhP210 per kilogram as of August 17,
PhP10 more than its price a week ago. The price of beef started to
climb early this year after a bird flu scare forced many consumers to
turn away from chicken.
Reports that the one of the country's closest neighbors, Malaysia,
was recently struck by bird flu is expected to put further pressure on
beef prices. As for pork, the Meat and Hog Dealers Association of the
Philippines vice-president Joel Vicmudo said in a television interview
over the weekend that prices could go up in the next few days as meat
processors buy more pork to prepare for the holiday season. "The
situation may be temporary since in this case, it's more of panic-buying
as producers want to ensure they will have enough supply to meet
consumer demand during the holiday season," Mr. Neri said. The National
Economic and Development Authority earlier projected August inflation at
6.1%-6.3% because of the recent round of oil price increases. July
inflation was 6%, and year to date is 4.3%. Even Mr. Neri expects
inflation to breach the government's target range of 4%-5% for this year
if oil prices were to continue to rise. --
Iris Cecilia C. Gonzales with a report from Jennifer A.
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By RIZARRENE S. MANRIQUE,
Researcher
The country's total import bill grew significantly in June, boosted
by a massive increase in payments for imported mineral fuels and
lubricants. The National Statistics Office (NSO) yesterday said
disbursements for foreign-made merchandise climbed by 18% during the
month to $3.455 billion. Payments for imported mineral fuels, lubricants
and related products grew by 119.3% to $517.54 million. The commodity's
share to the total import bill rose to 15%, in stark contrast to only 8%
in June 2003. In part, an increase in world oil prices jacked up the
cost of importing oil commodities during the period. World oil prices
have been touching record highs in recent weeks and oil-importing
countries such as the Philippines are bearing the burden. "As we see
from the breakdown [of the import bill], the growth in imports is
particularly due to the rising oil prices. The country is oil
import-dependent as local [oil] production is inadequate to meet the
domestic demand. Our domestic supply of fuel is very limited, so we need
to import," analyst Dianne Lorrina S. Sy of Unicapital Securities, Inc.
said. A source who requested anonymity said it indicated a significant
surge in demand for the commodity as well. "Oil-importing industries or
companies could have stocked up on inventory to lock in cost inasmuch as
they expect oil prices to further rise in the coming months," the source
said.
Other commodity groups, meanwhile, posted increases in import value.
Capital goods were valued at $1.238 billion, up 7.8% from $1.149 billion
previously. It accounted for 36% of the aggregate bill. This group
includes power generating machines, telecommunications equipment, and
land transportation equipment except passenger cars and motorcycles,
among others. "The increase in capital goods imports is a good
indication that the manufacturing sector or the industries that are
heavily importing these items are putting more into capital investments.
We may not see the benefits that can be derived from these in the near
term but in the medium to long term, there will more or less be an
improvement particularly in capacity or production output," Ms. Sy said.
Imported raw materials and intermediate goods consisting of unprocessed
raw materials and semi-processed raw materials rose 4.6% to $1.264
billion from $1.209 billion a year before. Expenditures for consumer
goods grew 7.4% to $246.19 million from last year's $229.43, while
special transactions, including articles temporarily imported and
exported, rose 79.4% to $189.46 million against the prior $105.62
million. Electronics and components were the top import items for the
month. Their value went up by 6.7% year on year, to $1.431 billion from
$1.342 billion. The second top import category in June was mineral
fuels, lubricants and related materials; third was industrial machinery
and equipment. The latter's import value rose by nearly 18% year on year
to $143.13 million from $121.58 million. In fourth was transport
equipment, although value actually fell by 17.7% year on year to $108.13
million from $131.51 million. Fifth was textile yarn, fabrics and
made-up articles, although the June value also fell by 7.9% year on year
to $96.66 million from $104.90 million.
Rounding up the list of top imports for June were iron and steel
($76.54 million); telecommunication equipment and electrical machinery
($71.77 million); plastics in primary and non-primary forms ($67.36
million); cereal and cereal preparations ($62 million); as well as
organic and inorganic chemicals ($55.10 million). During the review
period, inbound shipment of goods outpaced gross dollar revenue. June
exports swelled only by 8.2% to $3.313 billion. This brought the
country's trade balance position to a deficit. The balance of trade in
goods deficit amounted to $142 million, reversing the yearago surplus of
$132 million. Considering the six months to June stretch, the trade
deficit added up to $1.204 billion.
MISSING OPPORTUNITIES
"We can see that the country's trade deficit has ballooned, meaning
exports are weakening relative to imports. This perhaps indicates a
lower demand for our exports or that the exports of other countries in
the region are more attractive," economist Lawrence de Leon of Accord
Capital Equities Corp. said. Mr. De Leon hinted that the Philippines is
missing a lot of opportunities as it failed to take advantage of demand
other neighboring countries are exploiting at present. "Countries like
Singapore, Malaysia and Thailand are posting double-digit exports
growth. Further, some Asian economies are posting strong trade
surpluses," he said. Despite this, prospects remain rosy in the coming
months on the back of an expected rise in the volume of internationally
traded goods. Ms. Sy said trends could be tied down to the international
crude oil prices for the time being, but it is important to see if there
is movement in volume as well. "[We have to monitor] one, if there is
stability in the foreign exchange and, two, if demand for import or
export is stable. Given these, we can expect the balance of trade to be
stable." "For the rest of the year, we can expect imports to further
pick up since the demand for consumer goods would increase as we near
the Christmas season. On the export side, I would like to believe there
would be a recovery as well. Hopefully, if the improvement in trade
performance continues, maybe the trade deficit will not be as big as
what we have seen in the middle of the year," she added.
Socioeconomic Planning Secretary Romulo L. Neri meanwhile, said
bigger production in the coming months is expected as imports remained
robust. "The information and communications technology sector, led
mostly by call centers and business outsourcing offices, will continue
to expand as shown by the 10% rise in imports of telecommunication
equipment and electrical machinery," Mr. Neri said in a statement. But
he noted that the growth of electronic exports may not be as fast as in
other Asian countries for the rest of the year. Mr. Neri said he also
expects a slowdown in the recovery of the technology sector. "Technology
analysts are warning of a likely correction in global electronics, due
to slower inventory drawdowns and slower second-quarter domestic growth
in Japan and the US," he said. The National Economic and Development
Authority chief remains optimistic that personal consumption will stay
strong as imports of passenger cars and motorized cycles and home
appliances expanded by 24.8% and 13%, respectively. Bienvenido S. Oplas
Jr., an economist from private research group Think Tank Inc. said the
increase in imports will be good for the economy. "These products being
imported could translate into higher exports the country. It's possible
that our exports could increase in the coming months," Mr. Oplas said.
-- Beverly T. Natividad with a report from Jennifer A.
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The Board of Investments (BoI) has again vowed to compel companies
that have availed themselves of its incentives to comply with a
requirement to sell at least 10% of their shares of stock to the public
within a 10-year period. While admitting that previous leaderships have
attempted but failed to implement this requirement, officials said they
would be "serious" this time. Trade and Industry Secretary Cesar A.V.
Purisima, concurrent BoI chairman, noted that only about 200 firms are
listed at the Philippine Stock Exchange, while some 5,000 companies have
availed themselves of tax incentives "since the beginning." "I have
instructed the BoI to review the companies that have availed of the
incentives the past several years and ask them to fulfill their
obligation of either going public or getting at least 10% ownership by
the public. This is intended to enocurage more participation in the
Philippine Stock Exchange," Mr. Purisima told reporters last week.
Trade undersecretary and BoI managing head Elmer C. Hernandez
explained that since registered firms have taken advantage of the
incentives, they were now "well-off" and could share their profits with
the public. Both officials, however, said sanctions for erring firms
have not yet been drawn up. "It's up to the board," Mr. Purisima said.
Mr. Hernandez said possible sanctions were still being studied. "Right
now the policy of the board is cancellation of the registration after
due process," he said. The requirement for public listing is found in
Rule 8 of Executive Order (EO) No. 226, or the Omnibus Investments Code
of 1987, which is the basis for the grant of incentives by BoI. It
states that BoI-registered enterprises "shall at anytime within ten (10)
years from date of registration, be required by the Board to offer for
sale to the public ten (10%) percent or more of its total subscribed
capital stock, voting and non-voting, and any increase thereof." Without
citing specific cases, Mr. Hernandez said "We've been reminding them [BoI-registered
companies]... There is a provision in the law, when they applied for
registration, they had an undertaking that they will comply with the
provisions of EO 226." Mr. Hernandez noted that registered firms are
deemed to have complied with the public participation rule without
public listing by:
- being owned 70% by publicly listed firms, or a parent company
listed in the stock exchange;
- exporting 70% of output;
- selling "substantial" shares to rank-and-file employees directly
or through employees' trust, retirement, or pensions funds; and
- undertaking a build-operate-transfer project whose ultimate
owner is the government.
BoI has repeatedly been requested by the Securities and Exchange
Commission, the Philippine Stock Exchange, and securities analysts to
compel registered companies to list, to perk up the capital markets.
In 1998, then BoI managing head Melito Salazar, Jr. wrote the PSE
that "one major concern that should be addressed is the apparent
difficulty encountered by prospective applicants, both in the
qualifications for listing and documentary requirements to be submitted
to PSE." Two years later, BoI managing head Vincent S. Perez said the
agency would look at ways to encourage companies to list. Last week, Mr.
Hernandez said, "Now we will push through with this."
-- Felipe F. Salvosa II
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A bill filed in the House of Representatives seeks to eliminate
unfair trade practices by abolishing monopolies and cartels and
promoting a level playing field for businesses. House Bill No. 1874, to
be known as "The Fair Competition Law of the Philippines," was filed by
House Speaker Jose de Venecia Jr. of Pangasinan. In his bill's
explanatory note, Mr. De Venecia observed that present laws that
guaranteed fair competition were inadequate and ineffective, given the
continued dominance of businesses that wield substantial market power
and political influence. In addition, there is lack of competition in
key sectors. Among these, the oil industry that seems to be dominated by
the big three oil companies -- Shell, Caltex and Petron -- and the
telecommunication industry where two mobile telecommunications carriers
-- Globe and Smart -- charge comparatively higher rates. "The lack of
genuine competition in certain industries impairs public welfare and
undermines the country's credibility to provide a business climate
conducive to investment," Mr. De Venecia said. "With the government's
thrust to promote small and medium enterprises in the countryside,
strong anti-trust laws are necessary to increase competition in the
marketplace," he said.
Under House Bill No. 1874, persons who willfully monopolize or
attempt to monopolize any kind of service, merchandise, commodity,
article or object of trade or commerce will be guilty of the crime of
monopolization. The bill also disallows the formation of cartels. The
bill defines a monopoly as "a form of market structure in which one or
only a few persons, firms or companies dominate the total sales of a
product or service." A cartel is defined as "a combination of producers
of any product, joined together to obtain a monopoly over the product's
production, sale and price." The bill will also impose penalties on
unfair trade practices such as price fixing, bid rigging, limiting or
controlling production, arranging to share markets or sources of supply,
price discrimination, exclusionary arrangements, tie-in arrangements,
boycotts, and interlocking directors, officers or employees. Price
fixing refers to an agreement among competitors to fix the purchase or
selling price of goods or commodities in order to forestall competition.
Bid rigging refers to an agreement among firms not to bid against each
other to supply products or services to national government agencies.
Agreements to control or limit production, markets, technical
development or investments, as well as agreements to share markets or
sources of raw materials are deemed unfair trade practices if these are
intended to create a monopoly or cartel or forestall competition. Price
discrimination refers to charging different prices for goods of like
grade and quality with the intention of lessening competition.
Exclusionary arrangements prevent seller from selling the goods and
commodities of a competitor. The end-effect is to lessen competition and
to create a monopoly in a particular business. The same end-effect is
arrived at with tie-in arrangements, where the sale or supply of
particular goods or services is tied to the purchase of other goods and
services. Boycotts are concerted refusals to sell. Unless the boycotts
are for a legitimate purpose, such as refusal to extend credit to
defaulting debtors or to sell to defaulting customers or to deal with
violators of intellectual property rights, boycotts will be considered
an unfair trade practice.
Lastly, interlocking directors, officers and employees of two or more
firms that are competing with each other will be penalized. Exceptions
are when these directors, officers and employees belong to a parent
company and its subsidiaries, family corporations, joint venture
corporations, and affiliate companies where ownership is not less than
20% in one and no more than 50% in another. Another key feature of House
Bill No. 1874 is the creation of a Fair Trade Commission composed of a
chairman and four associate commissioners. The Fair Trade Commission
will investigate complaints of unfair trade practices and file cases
before the various regional trial courts or administrative agencies. In
the course of investigation, the commission may issue subpoenas and
require witnesses to submit documentary evidence.
-- Judy T. Gulane
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Some marine products that the Philippines exported to the US last
month were refused entry for failing to meet the sanitary standards. In
a July report, the US Food and Drug Administration (FDA) said that out
of the 39 import rejections issued, 14 were issued either because the
products were "filthy" or "contaminated with salmonella or other
bacteria." Among those cited were Star Exports' frozen flat headed goby,
HJR International Corporation's frozen black tiger headless shrimp,
Santa Cruz Trading's frozen octopus, TBN Food Products' Batangas Best
Salted and Lingayen Salted Fish Sauces, Golden Hands Manufacturing
Corporation's Kamayan Salted Fish Sauce and Joroa Aquatic Resources &
International Trading Corporation's frozen tuna. The US and the European
Union (EU), in particular, require exporters to follow their Good
Manufacturing Practice and Hazard Analysis Critical Control Point
systems in food processing. Trade and Industry Secretary Cesar A.V.
Purisima said the government expects the industry to improve its
production and sanitation process in the following months so that the
industry can earn from marine exports.
In previous months, products intended to be sold in the American
market were rejected by US authorities either due to the failure of
manufacturers to indicate the manufacturing process or obtain import
permits as required by US laws. The 39 refusal actions that Philippine
firms received in July were lower than the 66 recorded in June. There
were 48 registered refusals in May and 41 in April. Notably, 19 firms
and individuals received rejection slips last month compared with 18 in
June. -- Cecille S. Visto
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By RUBY ANNE M. RUBIO, Reporter
The Social Security System (SSS) is calling on interested parties to
bid for its 25.84% stake in Equitable PCI Bank that will be sold as a
block. With a par value of PhP10 per share, the stake -- equivalent to
187.84 million shares -- is the same block the state-run pension fund
for private employees earlier agreed to sell to Banco de Oro Universal
Bank. In a statement, SSS President and Chief Executive Officer Corazon
S. de la Paz said all prospective bidders must submit a complete set of
pre-qualification documents and their bids together with the bid
security to the special bids and awards committee office not later than
12 noon of Oct. 20. They may get copies of instructions to bidders, and
annexes and bid forms after registration and payment of a non-refundable
fee of PhP100,000 or its equivalent in US dollars beginning Aug. 25. The
winning bidder who shall post a performance security prior to being
declared as such, shall be obliged to execute a share purchase agreement
with the SSS within seven days from the receipt of the notice of award.
If it refuses to or fails to execute the share purchase agreement, the
bid security as well as the performance security shall be forfeited in
favor of the SSS. "The Equitable PCI transaction was the best deal that
the SSS had made in recent years from which it expected to fully recover
its
PhP14.7-billion investment in the shares over the next six and a
half years via reinvestment of the cash proceeds from the sale," Ms. de
la Paz said. "Since Equitable PCI has not paid out any dividend in the
last three years, keeping the stake precludes the opportunity for SSS to
invest the potential proceeds in equally safe but higher yielding
instruments. This opportunity cost is magnified in the current rising
interest [rate] environment," she added.
In its meeting last Aug. 18, the Social Security Commission, which
serves as the SSS board, approved the move to subject the shares to a
"Swiss Challenge" where the result is subject to the right of Banco de
Oro's wholly owned investment house subsidiary BDO Capital & Investment
Corp. to match the highest bid. The SSS board said "notice is given that
title to the Equitable PCI shares may be affected by the final decision
in pending cases involving the shares." In its statement, the pension
fund said, "SSS reserves the right to reject any or all bids, to waive
any required formality therein, or to accept such bids as may be
advantageous to the SSS without giving any reason therefor." Assuring
the public that everything is above board, Ms. de la Paz said SSS would
benefit from a more diversified investment portfolio as the pension fund
for private employees has a large exposure in Equitable PCI at
approximately 8.5% of its total reserve funds.
In a disclosure to the Philippine Stock Exchange, Banco de Oro said
it does not support the decision of the SSS to subject the shares to a
"Swiss Challenge" public auction. "Banco de Oro reiterates its position
that the letter agreement is a binding contract between the SSS and the
BDO Group. BDO will do all that is necessary to protect its interests,"
the bank said. According to the binding agreement letter dated December
30, 2003 that was signed by Banco de Oro president Nestor V. Tan and Ms.
de la Paz, the pension fund for private employees agreed to sell its
25.84% stake in Equitable PCI at PhP43.50 per share. The stake is
equivalent to four board seats. The deal was supposed to close no later
than June 30 "unless extended by mutual agreement of the parties." Banco
de Oro had said it "has entrusted the future" of its bid in the third
largest lender and will await the decision of the Mandaluyong Regional
Trial Court for the resolution.
Last June, BDO Capital & Investment Corp. asked the court to compel
SSS to execute the Equitable PCI share sale and purchase agreement and
immediately transfer its rights, title and interests in the shares.
"Speculations have repeatedly arisen from all sectors about the future
of the subject transaction. However, only our courts can now decide on
the fate of this deal, and its resolution is still pending with our
courts. Since this matter is already the subject of judicial
proceedings, Banco de Oro chooses to respect the discretion of our
honorable courts and not comment on such speculations," the bank has
said. In its 15-page complaint filed last June, BDO Capital said SSS
"failed and refused to comply with its obligations" under the agreement
despite the opinion rendered by the Department of Justice favoring the
sale.
Under the deal, Banco de Oro was to pay a downpayment of PhP1 billion
for the SSS stake in Equitable PCI. The total value of the stake of SSS
in Equitable PCI was estimated at
PhP13.9 billion, which SSS would receive after six-and-a-half
years. The balance of PhP12.9 billion will be paid through 6-1/2-year
zero-coupon, non-amortizing notes. The SSS board later changed the
payment terms to cash. BDO Capital said the price of the shares at
PhP43.50 per share was "fair and reasonable" since the shares were being
traded at a high of PhP34.50. The Philippine Association of Retired
Persons sought a temporary restraining order from the Makati Regional
Trial Court to prevent SSS and Banco de Oro from consummating the
agreement selling. The retired persons' group said the transaction would
provide a bad precedent and would violate public policy on the
disposition of assets.
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Traders expect oil companies' follow-through US dollar demand to pull
back the Philippine peso's performance this week. On top of their
month-end dollar requirements, oil companies are also expected to raise
their demand due to the rising crude oil prices, traders said. These
firms import their fuel needs. The world market continued to experience
historical highs as Dubai crude jumped to $40.27 per barrel on
Wednesday. US crude oil futures ended above $47 a barrel. Price
adjustments on local shores again hit consumers last week.
Others said the bearishness of the dollar may somehow prevent the
peso from falling further. Trade deficit issues as well as threats by
insurgents in Iraq have hounded the US market. "The US also imports oil
products, but more economic fundamentals have weakened the dollar," a
trader earlier said. Banco de Oro Universal Bank market strategist
Jonathan L. Ravelas peso "was slightly weaker against the greenback by
0.10% week-on-week to PhP55.72 on concerns over the continued rise in
crude oil prices causing an oil-driven demand for the dollars." He added
that the previous week's close below PhP55.76 level "suggests that a
resumption of the bullish peso/weaker dollar view is preferred,
initially testing the PhP55.60 to PhP55.65 levels in the week ahead."
-- Ira P. Pedrasa
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The Bangko Sentral ng Pilipinas will require nonbank financial
institutions to entrust to accredited custodians the registration and
safekeeping of all the securities they sell and trade as had been
required of banks. According to the draft circular approved by the
central bank's policy-making Monetary Board last week, nonbank financial
institutions are required to deliver to an accredited custodian
securities such as repurchase agreements for safekeeping. Alberto V.
Reyes, the central bank's deputy governor, said the move is to avoid the
undocumented trade of securities, which would effectively help
strengthen the Philippine financial system. The move to have independent
securities custodians seeks to avoid double or multiple sales of
securities as what happened in the 1994 Bancap scandal -- where a single
set of Treasury bills was illegally sold three or four times to separate
clients -- that led the financial system to a virtual collapse.
"Securities, warehouse receipts, quedans and other documents of title
which are the subject of quasi-banking functions, such as repurchase
agreements, shall be physically delivered, if certificated, to a
[central bank-] accredited custodian," the draft circular said. The new
regulation also covers securities sold on a without recourse basis. So
far, the central bank has already accredited four independent custodians
-- London-based HSBC, US-based Citibank N. A., Germany-based Deutsche
Bank and Ayala-led Bank of the Philippine Islands.
Independent custodians are third parties with no subsidiary or
affiliate relationship with the issuer, owner or seller of securities. A
qualified bank and institution must comply with the minimum capital
accounts, and must have a risk-based capital adequacy ratio of not lower
than 12%. The bank must also have a CAMELs rating of at least "4" to
qualify as custodian banks. The CAMELs rating system, used by the
Federal Reserve System, assesses banks based on management and financial
conditions and compliance with regulations. CAMELs stands for capital
adequacy, asset quality, management, earnings, liquidity and sensitivity
to market risk. Mr. Reyes said the central bank also wants insurance
companies to be covered by the new requirements. Hopefully, he said the
new regulations will encourage more people to invest in securities.
Another central bank official said the move to extend the regulations to
nonbank financial institutions is meant to protect the public against
double deals. "We want everyone protected," the official said. Central
bank Governor Rafael B. Buenaventura has said having independent
custodians will also help strengthen the capital market, which is in
need of reforms.
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Rizal Commercial Banking Corp. (RCBC), the country's seventh-largest
lender, closed a deal to sell about
PhP3.9 billion worth of bad loans to US investment bank Lehman
Brothers, its chairman said yesterday. "Yes, we will sign an agreement
on Wednesday" to sell non-performing loans, bank chairman Cesar Virata
told reporters. Philippine commercial banks' bad loans made up 13.77% of
total loans at the end of June, up slightly from a revised 13.53% in May
but lower than a year ago, the central bank said on Friday. Banks are
rushing to sell their bad loans before tax and investment incentives
offered to purchasers of these soured assets lapse after April 2005.
A law known as the Special Purpose Vehicle Act provides for the
waiving of some taxes and lowers fees usually collected in the sale or
transfer of assets. The law waived the documentary stamp tax, capital
gains tax and expanded value added tax. It also cut the registration and
transfer fees by 50%. On Tuesday, the Philippine Bank of Communication
will bid out PhP12.5 billion worth of non-performing loans, real and
other properties. Government-controlled Land Bank of the Philippines has
said it plans to sell PhP17 billion to PhP19 billion worth of assets
within the next two months. Philippine National Bank also intends to
dispose of PhP10 billion worth of assets. In July, Bank of the
Philippine Islands, the country's second largest lender, sold PhP8.6
billion pesos worth of bad loans to Morgan Stanley Emerging Markets,
Inc. -- Reuters
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By IRIS C. C. GONZALES, Reporter
The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or
BSP) will keep a close watch on the new cash remittance service offered
by wireless operator Smart Communications, Inc. to ensure it adheres to
existing BSP rules on fund transfers. BSP Deputy Governor Alberto V.
Reyes said regulators have already required Henry Sy-controlled Banco de
Oro (BDO), Smart's settlement bank for its new remittance service, to
comply with rules covering money-transfer operations. He said that
regulators have also asked the bank to explain in detail how the system
will work. He said while remittance centers are already licensed abroad,
these establishments still have to comply with BSP rules to ensure that
funds entering the Philippines are not dirty or laundered money. "The
remittance centers should observe the know-your-customer (KYC) rules.
Although these are licensed abroad, they should still follow the KYC
rules," he told reporters over the weekend.
Launched last Aug. 1, Smart Padala is a system that allows overseas
Filipino workers (OFWs) to send money to recipients in the Philippines
through a Smart remittance company partner. An OFW has to visit Smart's
remittance partners abroad to implement the fund transfer. The
remittance company then sends the peso equivalent through a Smart Money
account it establishes for the beneficiaries in the Philippines, who
will receive the text notification of money loaded to his account on his
Smart cellular phone. The recipient can then go to any accredited Smart
Padala center or selected outlets of McDonald's, 7-Eleven, and
Tambunting Pawnshop to get the cash. Mr. Reyes said the new setup has
its advantages as the funds will have to pass through the banking system
and may thus boost the official remittance figures.
The BSP believes the actual amount of dollar remittances from more
than seven million Filipinos abroad is much higher than what the BSP
monitors as some funds do not pass through the banking system. Last
year, dollar remittances amounted to $7.6 billion. BSP expects the
amount to grow by 6% to some $8 billion as more Filipinos leave the
country for lack of opportunities. Meanwhile, Mr. Reyes said the
BSP's policy-making Monetary Board also approved BDO Cash Card but also
subject to BSP's know-your-customer rules. The BDO Cash Card is a
prepaid, reloadable, multipurpose electronic debit card, whose most
important feature is that it is not linked to any deposit account. It
offers an easy, convenient, secure and low-cost mode of payment,
empowering both corporate and retail customers.
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By CECILLE S. VISTO, Sub-Editor
The Lopez-led Maynilad Water Services, Inc. is consulting its other
creditors, including the state-run Metropolitan Waterworks and Sewerage
System (MWSS), on a new rehabilitation plan for the debt-saddled
utility. This, after the government abandoned its earlier plan to take
control of the water company as partial payment of its unpaid concession
fees. The MWSS had also opted to draw the $120-million performance bond
of Maynilad instead of its earlier commitment to limit the withdrawal to
$50 million. "During the regular board meeting last Friday, Maynilad
officials said they are consulting with all creditors to come up with a
workable plan which will be submitted to the court early next month,"
said court-appointed rehabilitation receiver Rosario S. Bernaldo.
Maynilad President Fiorello Estuar did not give details of the revised
plan, which will be presented to the Quezon City regional trial court on
Sept. 6. A hearing has been set on Sept. 9. Ms. Bernaldo said Maynilad
officials are optimistic that they could come up with a corporate
recovery blueprint for the debt-saddled firm with the assistance of
creditors, mainly the MWSS. "The company is banking on government's word
that it has no plans of liquidating Maynilad and that it will let
Maynilad continue to operate in the hope of returning to profitability
Maynilad has to coordinate with creditors, otherwise, the proposed
rehabilitation plan will not be successful," she added. The first
rehabilitation plan that Maynilad presented to court in November
entailed stretching debt payments from 11 to 19 years.
A debt-to-equity swap, meanwhile, was the main strategy in the
revised program filed in March. However, the so-called Amendment No. 2
-- detailing the government takeover -- was abandoned by MWSS. Maynilad
lawyer Helena Calo said interested parties are reexamining the
provisions of the first rehabilitation proposal but that nothing is
final. In a hearing last Aug. 6, Judge Reynaldo B. Daway gave Maynilad
30 days to submit a revised rehabilitation plan that will take into
account the possibility that MWSS will get in full its $120-million
performance bond. MWSS earlier asked the permission of the Finance
department to draw $30 million or 25% of the security to finance capital
expenditures. Finance Sec. Juanita Amatong had said her department was
still studying MWSS' request for a partial draw. Maynilad paid a little
less than
PhP50 million to renew the performance bond last month. The
issuance of the performance bond was required under the 1997 concession
agreement between Maynilad and MWSS and ensures that Maynilad paid its
concession fees to the state-run water agency. Pending the presentation
of a new rehabilitation plan, Ms. Bernaldo said Maynilad has been
addressing some operational problems to improve its revenues. In
particular, it has been aggressively addressing its non-revenue water
woes.
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By BERNARDETTE S. STO. DOMINGO,
Reporter
A unit of state-owned Philippine National Oil Co. (PNOC) is expecting
a decision from the Japan Bank for International Cooperation (JBIC)
before the month ends whether to rebid the
PhP7.414-billion Northern Negros Geothermal Project. PNOC-Exploration
and Development Corp., (PNOC-EDC) President Paul A. Aquino told
BusinessWorld JBIC will come up with a decision by the end of
August. "JBIC told us they will come up with a decision by the end of
the month. That will set the tone for a rebid or a no rebid," he said.
The geothermal arm of PNOC last month decided to rebid the
PhP2.58-billion geothermal project in Palinpinon, Leyte after almost six
months of review. The Palinpinon project is one of two projects awarded
by the PNOC-EDC management during the time of former PNOC-EDC President
Sergio AF Apostol. It was later found the project, along with the
Northern Negros Power Project, were awarded without the required board
approval. PNOC officials earlier expressed concern the rebid will delay
the implementation of the project. The project involves tapping the
geothermal steamfields in Mambucal Negros Occidental and the
construction of a 40-megawatt base-load generating units to boost supply
in the interconnected Visayas system. It will be operated as a merchant
plant. Opponents, however, fear that geothermal exploration near Mt.
Kanlaon, a national protected area, will result in the further
denudation of the already dwindling forest cover and harm the area's
biodiversity. But the government had stressed the need to develop
geothermal resources, noting the project will save some $15 million in
crude imports per year.
Earlier, Mr. Aquino said the firm did not want to rebid the contracts
for the Palinpinon and Northern Negros projects, fearing the move would
result in one-year delay. He said if PNOC decides to rebid the project,
there is a possibility that Japanese firm Kanematsu, which won the bid
for the Northern Negros Project, may go to the courts for a temporary
restraining order. This will delay further the implementation of the
project. "There are too many ramifications," he had said. The two power
projects are among the initiatives of the government to head off a
projected power shortage. The government foresees that by 2008, power
shortage will hit Luzon and the Visayas if no new capacity is added. In
Mindanao, a shortage is seen in 2009. However, the reserves of the
island are expected to hit critical levels by 2006.
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In an attempt to push through with mining activities in Agusan del
Sur, Base Metals Mineral Resources Corp. asked the Supreme Court to
uphold the Court of Appeals' decision giving the mining company right to
continue operations inside a logging concession. On July 19, Base Metals
filed a pleading before the high tribunal saying its mining operations
do not impair the rights of Picop Resources, Inc., which holds a logging
permit covering an area where the miner also operates. The case stemmed
from the complaint of Picop that the area covered by Base Metals'
Mineral Production Sharing Agreement is within Picop's logging
concession as defined under its Pulp and Timber License Agreement.
However, Base Metals insists that since it is after minerals under
ground, its mining activities would not damage the surface rights of
Picop. Furthermore, Base Metals alleges the mining activity in the area
has been going on for 10 years with Picop's knowledge and consent and
there has been no "adverse effects on the environment, or to
petitioner's [Picop] logging operations." "The DENR [Department of
Environment and Natural Resources] and the Superintendent of the Agusan
Marsh and Wildlife Sanctuary had already cleared the area as open for
exploration and mining activities." The minerals underground are not the
same raw materials for the pulp and wood processing of Picop, it said.
"The trees that may be cut in the pursuit of private respondents' [Base
Metal] mining activity will merely be incidental and minimal -- and for
which petitioner will be adequately compensated," the comment said.
Lastly, the comment said the claimed presidential warranty of Picop
for the "use and enjoyment" of the area is only a confirmation of the
timber permit issued. As such, it "does not denote any hint of
exclusivity in the same." And, according to the Court of Appeals, "it
merely warranted the 'peaceful and adequate' possession of the areas
which are the basic sources of the materials for the project."
-- Ma. Elisa P. Osorio
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By ROULEE JANE F. CALAYAG
Traders are confident that the improvement in world oils price would
be more than enough impetus for the Philippine stock market to perform
better in the coming days. Grace Cerdeņa, senior analyst at
2tradeasia.com, said the improvement in the prices of world crude could
support local sentiment today. Share prices redeemed their losses early
last week as these generally moved up from Wednesday to Friday, further
strengthening analysts' projections that the long drought in the market
will come to an end soon. With the decline in oil prices, the stock
market could generate a value turnover of PhP1 billion even if it fell
back to less than PhP500 million a few days ago.
World crude futures declined from $49 per barrel to $47 after Shiite
militants surrendered at the Imam Ali Mosque in Najaf, Iraq. But Irving
I. Ackerman, president of I. Ackerman & Co., Inc., said the market needs
some assurance that global oil prices will be managed accordingly.
"World problems, particularly oil prices, hurt businesses. It is not
only a global concern but also a local problem that cannot be dismissed
lightly," said Mr. Ackerman. But he said there should be some hope for
the market which he expects to move sideways from today.
NEW APPOINTMENTS
"We look forward to a brighter picture, especially as we turn a new
leaf with the appointment of a new Securities and Exchange Commission
(SEC) chair," he said. The new set of appointments made by Mrs. Gloria
Macapagal Arroyo less than two months after she took office as the
country's 14th President is seen by some as a display of decisiveness
while others see it as payback for political favors during the May
election. The initial appointments announced last Wednesday had firmed
up expectations of investors that the Arroyo administration is serious
in implementing reforms, particularly in the economic front. "The new
appointments will be very good for the economy. If the new appointees
will listen to the people, the market will benefit," said Mr. Ackerman.
Critics had accused the Arroyo administration of selecting only
people who could serve its interests. But members of various business
circles seemed to simply shrug off the accusations, since the Arroyo
administration appears to have thoroughly screened the new appointees
who show exemplary performance records. Mr. Ackerman, for one, noted
that the appointment of Monetary Board member Fe Barin, a respected
lawyer, to the SEC as replacement for outgoing Chairman Lilia R.
Bautista is a boost to the stock market. "With new leadership comes a
new picture. The stock market should move and solve problems that need
to be addressed, now under Mrs. Barin, to benefit most people," said Mr.
Ackerman. This is expected to lead to a stronger synergy between the
Philippine Stock Exchange (PSE) and the SEC, especially as they work
together in improving trading at the bourse.
CUSTOMS
The recent move of the Bureau of Customs to re-file 10 of 14 cases
dismissed by the courts also signifies a changing political landscape.
While it was a decision made late on Friday, investors may factor this
in today as a positive development that could inspire them to focus on
the stock market. For a long time, market players have been itching to
see government agencies, especially the Bureaus of Internal Revenue and
Customs to get their acts together and be steadfast in pursuing tax
cheats who have been depriving national coffers of billions of pesos.
The recent decision of the Bureau of Customs to chase those suspected of
tax credit scams could attract foreign investors to take a new look at
the country and park their dollars here. This may strengthen foreign
investors' confidence in the market, assuring them that it is a safe
haven for their investments. Total foreign buying in the last few weeks
after Mrs. Arroyo won in the recent national polls has climbed
consistently to PhP201.3 million on Friday. Courts earlier dismissed
majority of the tax credit scam cases for either the lack of interest on
the part of the bureau to pursue the complaints or lack of jurisdiction.
TELECOMS, ENERGY
Meanwhile, Mrs. Cerdeņa of 2tradeasia.com said large-cap
telecommunication shares as well as select energy- and power-related
shares will likely provide the cushion for the market. "Short-term
traders might continue to dabble in second- and third-tier issues, until
more solid macro policies are in place to lift barometers higher than
the 1,600 target," she said. Investors are advised to trade selectively,
buying on weakness and selling on strength. The stock portal sees
immediate support at 1,570 and resistance at 1,600 to 1,610.
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By JENNEE GRACE U. RUBRICO, Senior
Reporter
FELIPE F. SALVOSA II and JENNIFER A. NG, Reporters
The business community yesterday welcomed Malacaņang's announcement
of new appointees to key positions in the government, saying the changes
were "generally good." But some businessmen who spoke on condition that
they would not be identified said some of the appointments were
obviously "political payback" for certain personalities who helped the
President win a fresh, six-year mandate. "In the main, the changes were
good but there were some good people there before," said Peter Wallace,
president of the Wallace Business Forum. Sergio R. Ortiz Luis, Jr.,
chairman of the Philippine Chamber of Commerce and Industry (PCCI), also
said the appointments were, "in general, acceptable." He lauded Mrs.
Arroyo for appointing Fe Barin, former chairwoman of the Energy
Regulatory Commission (ERC), as the new head of the Securities and
Exchange Commission (SEC), saying Ms. Barin was "competent" for the job.
Mr. Wallace echoed this, adding the appointment of former Ayala Land
executive Francisco Licuanan as presidential adviser for the development
of the Clark and Subic economic zones was a good move. He also said
former military men in government would help attain the President's
objective of good governance with their "military discipline." Retired
generals Thelmo Cunanan and Eduardo R. Ermita were appointed chairman of
the Social Security System and Executive Secretary, respectively. Some
sources from the business community, however, balked at the appointment
of a number of politicians from the ruling coalition.
A source said the appointment of former Iloilo representative Augusto
L. Syjuco, Jr. as head of the Technical Education and Skills Development
Authority raised some eyebrows. Another source echoed this, also saying
the appointments of former congressmen Florencio B. Abad of Batanes and
Joseph Ace H. Durano of Cebu to Education and Tourism, respectively,
were "disappointing." "I thought Education Sec. Edilberto de Jesus was
doing a good job considering he came from the education sector," a
source said. The source likewise noted that Vice-President Noli L. de
Castro's appointment as Housing chief was "a pity." "Housing is a major
area and you need to place competent people on the post," he said. Mr.
de Castro was a former newsreader and was on his third year as senator
when he was tapped by the President to be her running mate. Mr. Wallace,
meanwhile, said the departure of Luis P. Lorenzo, Jr. from the
Agriculture department was a big loss considering he performed well. Mr.
Lorenzo, who was replaced by Arthur C. Yap, has cited that under his
stead, the agriculture sector posted record growths. "It's a strange
thing to do," Mr. Wallace said.
POLITICAL DEBTS
Mr. Ortiz Luis also said a number of businessmen were "generally
satisfied" with the performance of Environment Sec. Elisea G. Gozun, who
was replaced by Michael T. Defensor. Mr. Defensor was Housing czar and
campaign manager for the President. Mr. Wallace pointed out that the
current situation was critical as the President must make key reforms to
turn around the economy. Thus, she must appoint people who are competent
in their area of expertise and have the "ability to interact with
Congress," he said. "This is not a time to pay political debts. The
President must make bold steps to move forward," Mr. Wallace said.
Economists also said political considerations may have carried much
weight in the reshuffle. "My impression is that political considerations
had a lot to do with the reshuffle," Erico Claudio, research adviser of
private investment firm Unicapital Securities, said in an interview.
While the replacements were not exactly "controversial," Mr. Claudio
said he was baffled by the need to change guards, especially when no
announcements of any major changes have been made in the government's
political and economic strategies. Bienvenido S. Oplas, Jr., an
economist from private research group Think Tank, Inc., also believed
political considerations played a major part in the recent Cabinet
reshuffle. He also expressed disappointment to see more faces in the
government bureaucracy. "There's just too many bureaucrats in the
government. I don't think the President has to appoint a multitude of
advisers," Mr. Oplas said.
BARIN APPOINTMENT
Meanwhile, while Messrs. Wallace and Luis welcomed the appointment of
Ms. Barin to SEC, some traders showed their misgivings. Officials whose
businesses are being regulated by the SEC are concerned that Ms. Barin,
who has been with the Monetary Board for a long time, might "think like
a bank regulator" and stifle the capital markets. "She might think like
a central banker and this would not be good for the securities market.
You have to have a different mind-set to regulate the capital markets,"
an official of an investment house said. He noted that while the banking
sector was heavily regulated, the capital markets had enough leeway to
be "creative" with their products. The official said the profile of bank
investors and securities market investors were different. Whereas bank
clients just put their money in banks and leave it to them to decide how
the money would be invested, capital markets clients were more hands-on
and would decide on where they would put their investments after being
presented with the "risk factors" of the investment products, he said.
If the SEC would start regulating the capital markets the way the
central bank regulates banks, it "might stifle the creativity and
dynamism" of the industry, as it has a higher risk appetite than the
banking sector, the official said. He also said the SEC should "just
make sure that the rules are in place and that everybody plays by the
rules."
Meanwhile, an official of the Philippine Federation of Pre-Need Plan
Companies said it was still premature to say if Ms. Barin would be a
good SEC head, but he added his group would like to continue working
with the SEC. "We would like to maintain regular dialogues with them,"
Juan Miguel Vazquez, president of the pre-need federation, said. Other
officials were more optimistic. Bobby Cafe, first vice-president of
pre-need company College Assurance Plans Philippines, Inc. (CAP), said,
"from all indications, she comes with the qualifications." "We look
forward to working with her even as we express our appreciation to
Chairman [Lilia R.] Bautista for having been a fair regulator of our
industry," he said. CAP is working closely with the SEC because it is
under regulatory leeway. It had earlier reported a
PhP17- billion variance in its trust assets as of end 2003. The
company has only
PhP8.4 billion in trust assets, compared with an actuarial
reserve liability, or projected liabilities, of PhP25.5 billion. For her part, Ms. Bautista, who was appointed
Philippine ambassador to Belgium, also welcomed Ms. Barin's appointment.
"I have known Attorney Barin for a long time she is knowledgeable and
hardworking and her appointment means closer coordination between the
BSP and the SEC and may be a prelude to a more structured implementation
of securities and bank products," she said. Ms. Bautista noted that the Bangko Sentral has jurisdiction over a number of entities under SEC.
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Oil giants Petron Corporation, Pilipinas Shell Petroleum Corp., and
Caltex Philippines, Inc., have increased prices of their diesel,
gasoline and kerosene products by 30 centavos per liter, following
similar adjustments by small industry players. The new prices for Petron
and Shell took effect at 12:01 a.m. yesterday. Caltex's prices were
implemented on Wednesday. The increase was attributed by officials to
escalating prices of oil in the world market due to the recall
referendum victory of leftist president Hugo Chavez in Venezuela, the
world's fifth-largest oil exporter, as well the continued dispute
between the Russian government and oil giant Yukos. World oil prices hit
a new record high Wednesday, with Dubai crude soaring to $40.27 per
barrel, posting an average of $39.64 for this month from $34.65 a month
ago.
Mean of Platts Singapore (MOPS) unleaded gasoline traded at $52.75
per barrel. The month to date average is now $51.46 per barrel from
$46.52 in July. Diesel, meanwhile, increased to $53.54 per barrel. Major
oil players Petron, Shell and Caltex account for at least 88% of the
Philippine market. The 30-centavo increase came at the heels of fuel
price increases imposed by four smaller oil players on Monday. The four
companes had initially raised prices by 35 centavos per liter, but
announced that they were rolling back prices by five-centavos on Tuesday
following an appeal by Energy Secretary Vincent S. Perez, Jr. The same
firms, however, retained a 50-centavo increase implement for their
kerosene products. Mr. Perez had asked oil companies to limit price
increases as part of a pronouncement to implement more frequent but
smaller adjustments.
Eastern Petroleum Corp., Flying V, Seaoil, and Unioil Philippines
said the fuel price increases were overdue as world oil prices were
hitting all-time highs. An economist has said the price increases
imposed by these small players would have little effect on the economy,
considering that Independent Philippine Petroleum Companies Association
members account for only a 15% market share. Accumulated price increases
in the past weeks imposed by major and small oil firms would likely have
more significant effects, he said. --
Bernardette S. Sto. Domingo
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SM Prime Holdings and four major oil firms have warned the City of
Manila against doubling the city's realty taxes, saying this will be an
added burden to consumers already saddled by increasing costs of basic
commodities. On August 17, Pilipinas Shell Petroleum Corp., Petron Corp., Total
(Philippines) Corp., and Caltex (Philippines) Inc. filed a joint
position paper before City Hall decrying the bid to increase taxes. SM Prime also criticized the proposal and urged the Manila city
council to reconsider. The company, which owns one mall and three
department stores in Manila, will be the hardest hit among mall
developers in the area if the realty tax increase were enacted. "The proposed ordinance will increase our operating cost. At a time
when the economy is struggling and domestic oil demand is expected to
decrease, this increase will accordingly be passed on to the consumers,"
the four oil firms said in their position paper. SM Prime vice-president Cecille R. Patricio, in position paper filed
on August 16, said "We believe that with the present condition of the
economy, coupled with the unending increase in the prices of basic
commodities and the various plans to increase and/or impose new tax
generating laws, the least that the people, including the business
sector, need right now is a 100% increase in the assessment levels of
Real Property Tax."
The oil companies also pointed out that the increase "seems
inopportune in view of the rising domestic oil prices" due to the
volatile prices of world crude and refined petroleum products which just
reached record highs. The past few months have seen major and independent oil companies
raising prices of petroleum products, effectively pushing up costs of
transportation and basic commodities. While the oil firms said that they understand Manila's need to
generate revenues, the new tax scheme "does not make sense" in light of
the current "worsening economic conditions." They said Manila halved the realty tax in 1996 in response to
"adverse" economic situations and it can do so again as "undoubtedly,
this reason still exists today." The current assessment values for residential, commercial, and
industrial lands in Manila stand at 10%, 25%, and 25%, respectively, of
their fair market value as stipulated in the eight-year-old City
Ordinance No. 7905.
A new land value scheme being discussed by the City Council will
raise the assessment values of residential lands to 20% of fair market
value and that of commercial lands and industrial lands to 50%. The
assessment level of commercial and industrial buildings valued at
PhP10 million and above will double to 80% from the previous 40%.
City council officials hope the proposal will be enacted before
yearend and take effect January next year. The oil firms said that if the Manila City council's proposed
adjustments are "unavoidable," two options should be considered: lower
the proposed rates or impose a gradual increase over a period of at
least two years. SM Prime Holdings' Ms. Patricio, meanwhile, suggested that an annual
25% tax increase be spread over four years. "Through a staggered increase in the assessment level, the financial
needs of the City Government will be duly addressed without imposing a
heavy burden to its people," Ms. Patricio said.
-- Kristine L. Alave
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Foreign investments jumped by 114% in the first half as political
jitters from the May 10 elections subsided. Monthly figures were not provided, particularly for the period after
the polls, but central bank officials explained the increase for the
first semester was much more substantial than previous upturns. Latest data showed that foreign direct investments -- direct equity
and portfolio investments -- registered with the Bangko Sentral ng
Pilipinas (Central Bank of the Philippines, or BSP) stood at nearly $2
billion in January to June, up from $919 million in the same period last
year. A BSP official said the country had benefited from a global economic
recovery. At the same time, however, he said the government's swelling budget
deficit, which stood at
PhP199 billion last year, continues to scare off foreign investors.
He said investors are wary of putting funds in the country because of
the unstable peso and rising interest rates, affected largely by the
budget deficit. Of the $1.967 billion in investments registered with the BSP in the
first half, direct equity investments totaled $512 million. This was
106% higher than the $248 million reported in the same period last year.
Similarly, portfolio investments rose by 117% year-on-year to $1.455
billion from $671 million. Direct equity investments are investments by nonresidents in shares
of stock, mostly in local firms that are not listed at stock market, or
in foreign companies licensed to do business in the country. Such investments can be in cash, as assessed and appraised by the
central bank, or in the form of expenses incurred by foreign firms
working in government-approved service contracts such as those for
energy-related projects. Portfolio investments, meanwhile, are investments by nonresidents in
shares of stocks listed at the Philippines Stock Exchange (PSE), in
government securities and in peso bank deposits with maturity of at
least 90 days. Singapore investors accounted for the biggest share of direct equity
investments during the six-month period with $243 million. Investors from the United States and the United Kingdom accounted for
the largest share of portfolio investments, amounting to $400 million
for each country. Of the total investment figure of $1.967 billion, US-based investors
and fund managers accounted for $465 million, followed by investors from
Singapore with $463 million. The Bangko Sentral said most of the investments went to various
sectors, including transport and communication, real estate,
construction and manufacturing. -- I.
C. C. Gonzales
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Instead of collecting alleged debts, the National Telecommunications
Commission (NTC) should refund sister firms Pilipino Telephone Company (Piltel)
and Smart Communications, Inc.
PhP635 million in overpayment for fees since 1999, an official of
the two companies said. Both firms have been asking the NTC to reevaluate its basis for
computing regulatory and supervision fees, said Rogelio Quevedo, head
for legal and external carrier relations department for both Smart and
Piltel. "We are seeking [a] refund on the credit of overpaid regulatory and
supervision fees. It is actually the NTC which owes us [Piltel]
PhP600 million," Mr. Quevedo said, adding that the commission also
owes Smart
PhP35 million. He said the NTC earlier corrected its computation for fees paid by
telecom firms, which was used as the basis for the refund currently
sought by Piltel and Smart. Mr. Quevedo filed Piltel's petition for refund in August 2003 at the
Quezon City Regional Trial Court. In the case of Smart, he said there is
already a pending case filed at the NTC. "We are asking them to recompute and reassess. Apparently the NTC
cannot understand its own conflicting memorandum circulars," he said.
The NTC said it is collecting unpaid fees amounting to
PhP1 billion from Piltel and
PhP100 million from Smart. NTC director Edgardo Cabarios was quoted saying that Piltel's
regulatory dues had piled up in the past five years. Smart's debt,
meanwhile, accounts for unpaid fees since 2002. Last year, Piltel tried to settle its dues with
PhP9 million to cover supervision and regulatory fees. The NTC said, however, that this amount represents only the surcharge
fees. -- Anna Barbara L. Lorenzo
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ByBENNET S. STO. DOMINGO, Reporter
Energy Undersecretary Eduardo V. Maņalac yesterday said he would
adhere to President Gloria Macapagal Arroyo's mandate for the Philippine
National Oil Co. (PNOC). Mr. Maņalac was named new PNOC president after the President
announced Wednesday 26 new appointments, including 16 with Cabinet
ranks. It was the first revamp of the Cabinet after Ms. Arroyo won a
fresh term in the May 10 elections "It's a new work. I would adhere to the President's strategy which
she unveiled during her energy policy speech, that's what we will do,"
he told BusinessWorld. The PNOC is the implementing arm of policies drafted by the
Department of Energy. Mr. Maņalac said he would conduct a media briefing
before assuming his post as new PNOC president sometime next week.
President Arroyo laid out new energy policies during a speech before
provincial power distributors last Aug. 6. Among these policy directions
geared towards energy independence and savings, is the need to increase
local reserves of indigenous oil and gas. Ms. Arroyo had mandated the PNOC to search for indigenous energy
resources for the development and promotion of oil and gas exploration. She also instructed the PNOC-Energy Development Corp., a subsidiary
of PNOC, to partner with the private sector to become the number one
geothermal energy producer in the world.
For its part, the exploration arm of PNOC should be upgraded to
improve success rates in discovering new oil and gas reserves, Ms.
Arroyo had said. She added the PNOC Petrochemical Co., should be given a key role in
the revival of the country's midstream petrochemical industry and pave
the way for the construction of a naphtha cracker plant. The shipping arm of PNOC, for its part, was tasked to modernize its
fleet through strategic alliances with the private sector to ensure
delivery of petroleum products even to the remotest islands. Ms. Arroyo said the new policies were aimed at lessening energy
importation that will lead to 60% self-sufficiency for the country by
2010. Mr. Maņalac will replace current PNOC president Thelmo Y. Cunanan,
who in turn, was named chairman of the Social Security System.
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E-commerce may see a rebirth in the Philippines with the growth of
internet users in the country, said Philippine Long Distance Telephone
Co. President Napoleon L. Nazareno. Retailers can also tap the growing mobile phone business for their
e-commerce business with more than 26 million Filipino cellular phone
users today. Mr. Nazareno, who addressed members of the Philippine Retailers
Association recently, said it is time for local retailers to take a
second look at e-commerce and take advantage of the development in the
country's wired and mobile communications services. "As the internet community in the Philippines becomes larger, it will
be increasingly unwise for retailers to continue ignoring this group of
web-connected, well-informed and trend-setting individuals," Mr.
Nazareno said. He said there are now over four million internet users in the
country, double the figure reported in 2002. For PLDT's dial-up internet
service alone, subscribers jumped nearly 200% from 2003 to the current
345,000 users. Internet users are also expected to increase as chains of internet
cafes increase in the country. For instance, PLDT's Netopia internet
cafe has already 100 branches nationwide and 4,200 workstations which
services two million people. The mobile phone market is also a potential ground for the growth of
e-commerce as Mr. Nazareno cited the electronic service of pre-paid
reloading as an example. -- B. Lorenzo
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The Monetary Board, the policy-making body of the Bangko Sentral ng
Pilipinas (BSP), yesterday accredited Ayala-led Bank of the Philippine
Islands (BPI) as third-party custodian. BSP Deputy Governor for bank supervision and examination Alberto V.
Reyes said yesterday this brings to four the total number of independent
custodians accredited by the board. Monetary authorities earlier accredited Deutsche Bank, Hong Kong
Shanghai Banking Corp. (HSBC) and Citigroup. These institutions met the stringent requirements for a third party
custodian, which will be the guardian of billions of pesos worth of
government debt papers and other IOUs being traded in the market. As the keeper, the custodian banks will have to ensure that all
transactions are backed-up by government securities and there is no
double sale. Regulators are stepping up efforts to strengthen the local financial
system, including the trading of securities to avoid what happened in
the 1993 Bancapital scam which involved double sale of securities.
-- Iris Cecilia Gonzales
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By CECILLE S. VISTO, Sub-Editor
The government is warning the public against commissioning the
services of any of the 231 blacklisted constructors nationwide. The Construction Industry Authority of the Philippines (CIAP), an
agency under the Department of Trade and Industry, said the licenses of
nearly 80 of the project builders have been indefinitely suspended for
various reasons ranging from project abandonment and considerable delay
in the completion of projects to even falsification of documents. Other constructors have been suspended for as long as four years or
until July 2008.
CIAP officer-in-charge Kathryn Josephine T. Dela Cruz said the list
of banned builders is regularly released mainly to guide government
agencies. However, the private sector could also rely on the list to
ensure that it is not dealing with so-called "ghost constructors." "This report aims to serve as reference for the prequalification or
eligibility screening, bidding and award of construction contracts by
government tendering agencies," said Ms. Dela Cruz. A CIAP unit, the Philippine Domestic Construction Board (PDCB),
collates the list gathered from various government agencies and
industries. The Philippine Constructors Accreditation Board (PCAB)
monitors the performance of constructors dealing with the private
sector. Notably, companies included in the list could no longer participate
in government biddings. Under Republic Act 9184 or the Government
Procurement Act, government agencies must require project proponents to
present a certification that they are not on the blacklist of PDCB.
The new procurement law also mandates bidders to have garnered at
least a 70% grade, based on the evaluation of PDCB. The Board rates companies based on five criteria, namely, workmanship
and materials, ability to meet deadlines, facilities, resources
deployment and environmental safety and health concerns. Over 2,000
constructors have been rated by PDCB. The consolidated list of banned constructors, released early this
month, did not contain prominent builders. However, foreign firms like
China Jiangsui International Economic Technical Cooperation Corp. and
Xiamen Special Economic Zone Trade Co., Ltd. were included. Their
licenses have been revoked. A number of firms were blacklisted on the request of government
agencies like the Department of Public Works and Highways.
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By JUDY T. GULANE, Reporter
Government officials who have enriched themselves in office will not
escape the prying eyes of the law if Makati City Rep. Agapito A. Aquino
will have his way. Mr. Aquino has filed House Bill No. 2101, which seeks to exempt
government officials and employees, whether elected or appointed, from
coverage of the Bank Secrecy Law. Mr. Aquino noted that while the purpose of the Bank Secrecy Law is
"very commendable," it has nevertheless stalled investigations of
government officials and employees who have been suspected of amassing
wealth while in office. House Bill No. 2101 will amend Section 2 of the Bank Secrecy Law by
removing the confidentiality of deposits of elected or appointed public
officials, which will allow these deposits to be examined, inquired or
looked into by any person, government official, bureau or office. The bill specifies public officials as including the President,
Vice-President, members of Congress, members of the judiciary, the
Ombudsman and his deputies, the chairmen and members of the
constitutional commissions and members of the Cabinet including the
undersecretaries and assistant secretaries. They also include the bureau directors of the different departments,
the commissioners and deputy commissioners and examiners of the Bureau
of Internal Revenue and Bureau of Customs, and officers and members of
the Armed Forces of the Philippines and the Philippine National Police.
The Bank Secrecy Law or Republic Act 1405 was enacted in 1955 to
encourage people to deposit their money in banks, and to enable banks to
extend loans. Section 2 of the law ensures that deposits, including investments in
bonds, are of an "absolutely confidential nature," and cannot be
examined except upon the following conditions: a written permission of
the depositor, an impeachment, an order of a court in cases of bribery
or dereliction of duty of public officials, and when the money deposited
or invested is subject of a litigation. Mr. Aquino said the amendment he wants inserted in Section 2 will
equip government authorities "with the tools needed to go after crooks
in government." He told BusinessWorld that as author of House
Bill No. 2101, he is very willing to have his bank deposits looked into
if needed.
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Equitable PCI Bank, the country's fourth largest lender, yesterday
urged the Bangko Sentral ng Pilipinas to place on the fast track reforms
that would help develop the domestic capital market. Equitable PCI president and chief executive officer Rene J.
Buenaventura said the country needs to deepen its capital markets to
help spur domestic credit activity. "Similar to other emerging economies, a true credit culture is not
yet fully developed in the Philippines. Some decisions are influenced by
business relations, family ties, and other various considerations," he
told delegates at the recent Asia Pacific Bond Market conference held in
Hong Kong. Mr. Buenaventura joined top investment bankers and government
officials as they discussed the challenges facing the Asian bond market,
which remains without any unified regulatory framework. He outlined a
list of reforms he deemed necessary to spur the growth of the capital
markets, similar to what central bank Governor Rafael B. Buenaventura
raised in the past.
For one, the bank executive said there is a need to develop an
accurate credit profile of borrowers so that an effective corporate bond
market can develop. He said it is necessary to have a current local
credit rating process patterned after global practices and strong
regulatory support to foster price transparency. He said this would
allow efficient credit premium discovery and enable market participants
to effectively price in credit risk. Mr. Buenaventura said the Asian bond market remains remains
complicated and challenging due to lack of regional institutions and a
unified regulatory framework. He said another key factor is the development of a deep, plausible
market in the Philippines, which could be achieved by developing a
fixed-income exchange. He said this would ensure liquidity and a
government yield curve to serve as benchmark for local market issuance.
The banker said the government should continue to support the domestic
market to rationalize the state borrowing program and encourage more
players in government notes and treasuries. He urged the central bank to "fast-track reforms that would let banks
and other holders of long-term capital market instruments hedge both
interest rate and credit risk." "A true credit culture still needs to further take root in the
Philippines and must be fostered if the market for corporate debt
securities is to grow vibrant enough to help propel economic growth," he
said. -- Iris Cecilia C. Gonzales and
Ira P. Pedrasa
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The Philippine peso yesterday closed stronger by two centavos as US
dollar demands from oil companies started to wane. "They already stocked up yesterday. When they realized that they
can't break the PhP55.85 barrier, they already unloaded. Banks just took
profit in the afternoon," a trader said. The other day, the peso ended weaker as the dollar requirements of
oil companies surged amid rising global crude prices, which hit above
$47 a barrel recently.
At the Philippine Dealing System, the country's electronic currencies
exchange, the peso averaged weaker by almost nine centavos to PhP55.809
from PhP55.722 the other day. Opening at PhP55.79 against the greenback, the peso slipped to as low
as PhP55.85. After hovering within a nine-centavo range, it finally
closed at its intraday high of PhP55.76. Total volume of transacted dollars decreased to $153 million from
$155 million previously. "Demands were really heavy at the PhP55.80 and PhP55.85 levels just
for their follow-through buying, but the peso eventually appreciated,"
another trader added.
Another trader also said the peso was likely pulled by the Japanese
yen, while most currencies remained stagnant due to market fears over
rising costs of oil. Most Asian countries import their fuel and oil
products. The Japanese yen, at the last count, posted a new high at 109.28,
coming from 109.85 yesterday. Meanwhile, the Thailand baht barely moved near the 41.50 level.
-- Ira P. Pedrasa
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The Court of Appeals has directed Solicitor General Alfredo L.
Benipayo to comment on the motion for reconsideration filed by the
Energy Regulatory Commission (ERC) concerning Manila Electric Co.'s (Meralco)
rate increase. On Aug. 13, the ERC asked the Court of Appeals to reconsider its
decision voiding Meralco's 17-centavo per kilowatt-hour rate plea. The
court nullified the rate hike, saying 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. In an Aug. 17 resolution, the court's 15th division said the
solicitor general has 10 days from notice to file the comment. The ERC, in a 38-page motion filed before the Court of Appeals, said
there is no valid reason to set aside the ERC decision as it considered
the Commission on Audit (CoA) audit before granting the Lopez-led firm a
17-centavo increase.
According to the ERC, "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, ERC, in the motion, said Meralco did not get the
tariff adjustment it asked for. It was lowered after ERC considered the
operating expense and disallowances from rate base. In spite of obtaining a CoA audit, ERC insisted that such audit is
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 because, ERC said, as no law and jurisprudence sanction these. According to the CoA, auditing utilities for rate-fixing purposes is
not one of its principal concerns. -- Ma. Elisa P.
Osorio
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The net profit of Music Semiconductors, Inc. in the first half rose
to
PhP20.98 million, up 61.51% from
PhP12.99 million in 2003. However, the investment holding company failed to sustain its net
sales, which dropped to
PhP126.68 million from
PhP131.59 million. But operating profit for the period grew to
PhP23.37 million from
PhP20.31 million earlier. Second-quarter results were mixed. While net profit rose to
PhP5.81 million from
PhP5.57 million, net sales slumped to
PhP56.99 million from
PhP79.69 million. The cost of goods it sold also slipped to
PhP20.77 million from
PhP27.25 million. The company's operating expenses for the second quarter was
marginally down at
PhP29.29 million against
PhP30.45 million in 2003. Operating profit recorded the biggest decline. It dropped to
PhP6.92 million from
PhP22 million from April to June 2003.
Music, formerly MUSIC (or Multi User Specialty Integrated Circuits)
Semiconductors Corp., was incorporated in January 1992 as a subsidiary
of Dutch parent MUSIC NV. Music Corp. became the parent company in November 1993 after the
acquisition of a major stake in the company by Asian investors and an
exchange of shares by existing shareholders. -- R. J.
F. Calayag
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By ROULEE JANE F. CALAYAG
The Philippine stock market moved to a different beat yesterday with
bargain hunting and gains in Wall Street revving up trading. Ending a two-day hiatus, investors bolted out of the sidelines,
spurred by renewed optimism that saw share prices bounce back to greener
territory. Elena Ponceca, research chief at Unicapital Securities, Inc., said
one of the reasons that led stocks to close higher was the favorable
showing of US stocks. "The local market looked to the US market," said Ms. Ponceca. The Dow Jones Industrial Average was up 110.32 points or 1.11% at
9,972.83 on Wednesday.
The Philippine Stock Exchange composite index (Phisix) tracked Dow
Jones' gains, rallying 16.90 points or 1.09% at 1,573.23. It opened at
1,558.01, and reached a high of 1,574.38 and a low of 1,557.98. However, although prices spiralled to a new high after wiping off
significant losses gained in early consecutive trading sessions, the
value was still below par. Only 691.8 million shares worth
PhP412.3 million were traded. Yesterday's value retracted to below PhP500 million after inching
closer to the P1hP-billion mark last week as it hovered between PhP600
million and PhP900 million. Dealers said the thin value indicated that there was still an
underlying concern over the country's economic prospects which seem to
be growing dim with the unending oil price hikes. The positive performance of the American Depositary Receipts (ADRs)
of Philippine Long Distance Telephone Co. (PLDT) could also have boosted
trading at the local bourse. Ms. Ponceca said PLDT's ADRs serve as a benchmark for the Philippine
market. She also noted strong bargain hunting, another factor that helped
push up share prices level after two days of losses. "Second- and
third-liners were picked up," said Ms. Ponceca.
PESO
The momentum gained by the Philippine peso against the greenback also
helped buoy sentiment, lending strength to languishing share prices. "The improvement in the peso also made investors more inclined to
trade actively," added Unicapital's research director. The series of good economic developments in the past five days may
also have boosted market participation. The Bangko Sentral (central bank) last week said bank lending grew at
a faster rate in June, picking up by 3.8% to PhP1.49 trillion from last
year, and faster than the 1.7% growth recorded in May. The improvement
was attributed to various sectors such as manufacturing, wholesale and
retail trade, and transportation, storage and communications sectors. "This could have spurred interest in banking issues," she said. The strong dollar remittances of overseas Filipino workers (OFWs)
which shot to a high of $4 billion in the first semester also inspired
investors. "In the next few months, we may see an improving trend with the
global economic trend, particularly in the US and Japan," showing
positive signs, added Ms. Ponceca.
AGRICULTURE
The agriculture sector, which accounts for a fifth of the country's
economic output, also brought some good news to the market as it
recorded a 6.61% year-on-year growth during the first semester. The
growth was attributed to an increased production in unhusked rice, corn,
sugarcane and aquaculture. "The first-half growth in the agriculture sector could offset some
weaknesses in manufacturing and could help sustain growth in the local
economy," said Ms. Ponceca. She noted that some pundits only see the economy as stagnant. "Although the manufacturing sector showed disappointing results in
the past nine months, the economy is growing even below the forecast,"
said Ms. Ponceca, adding that the improvements, though minimal, are what
matters especially when plotting the economy's growth from the first
quarter.
IMPORTS
In other news, the National Statistics Office yesterday said
merchandise imports in June rose 18% to $3.45 billion from $2.93 billion
a year earlier. Merchandise imports for the first six months of the year grew at a
slower rate of 7.2% to $19.94 billion from $18.61 billion last year.
BENGUET
Meanwhile, the stock exchange yesterday suspended trading of Benguet
Corp. shares due to the company's failure to comply with reporting
requirements. The mining firm failed to submit its annual report for 2003 and had
yet to pay the basic and daily fines for the delay in the submission of
the requirement.
INDICES
The all shares index inched up 3.29 to 1,004.30. Gainers beat losers,
38-27. Forty-six of the 111 issues traded remain unchanged. Conglomerate Ayala Corp. toppled PLDT from the top spot in the list
of actively traded stocks, up PhP0.10 to PhP5.50 on 12.59 million
shares. All the indices advanced except for the small and medium enterprise
counter which was unchanged. Leading the performers was the commercial and industrial index which
rose 21.03 to 2,506.84. Property came close, advancing 11.98 to 517.03.
It was followed by the mining sector which recovered from sluggish
trading. Mining went up 10.28 to 1,904.76. Oil recorded a marginal increase of 0.05 to 1.59.
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