President Gloria Macapagal-Arroyo yesterday vowed that the country
would never default on its debt repayments, as she found herself
embroiled in a public row with key economic advisers following her
declaration that the government was in a "fiscal crisis." "Awareness of
the truth is the first step towards action. President Arroyo called a
spade a spade to impress upon the people the seriousness of the
situation," her spokesman, Ignacio Bunye, said in a statement. "Telling
the people the truth was intended to instill greater responsibility for
these obligations, not to signal default, which will never happen." The
Philippines defaulted on its foreign obligations in 1983 during the
Ferdinand Marcos dictatorship, ushering in a decade of economic
difficulties and political turmoil. Mr. Marcos was ousted in 1986.
After a group of economists warned of an Argentina-type debt default
and social unrest within three years, Ms. Arroyo, an economist, said on
Monday that in fact, "We are already in the midst of a fiscal crisis and
we have to face it squarely." But central bank deputy governor Amando
Tetangco maintained that, "technically", Manila was not yet in a fiscal
crisis because it has not defaulted on payments, has not lost access to
the international debt market, and has not accumulated a budget deficit
of "unmanageable" proportions. The government debt, including
obligations by the national government plus those assumed from failing
government corporations, rose to PhP3.36 trillion as of end-2003,
equivalent to 130% of gross domestic product or total economic output
within the country's boundaries. Half the total is denominated in
foreign currencies.
The Development Budget and Coordinating Committee, composed of Ms.
Arroyo's Cabinet members with economic portfolios, said in a statement
that while the fiscal situation required "both painful and urgent
measures," Manila was nowhere near a fiscal crisis. "A fiscal crisis as
defined by international financial institutions, such as credit rating
and multilateral agencies, as being in a state of default, and having a
deficit that can no longer be financed due to limited access to the
capital markets," the group said. Finance Secretary Juanita Amatong said
that "the Philippines was obviously far from this definition. On the
contrary, the country has never defaulted on its loans, it continues to
pay its creditors on time, and it has raised enough international bonds
this year to meet its financing requirements for 2004." Budget Secretary
Emilia Boncodin added: "It is important to put the issue in its proper
context. We all recognize that there is a fiscal problem. But the
solutions to the problems have been clearly laid out by the Arroyo
administration in terms of legislating new revenue measures and
continuing to institute fiscal discipline measures." Socioeconomic
Planning Secretary Romulo L. Neri said Congress' approval of new taxes
as well as the implementation of administrative reforms should help the
government beat a fiscal crisis. "We're not yet in a fiscal crisis. I
think our fiscal problem will be resolved once Congress pass new
revenue-raising measures," he said in a telephone interview.
WAKE-UP CALL
Meanwhile, economists said both the government and the public could
no longer be complacent about the possibility that the country was
headed towards a fiscal crisis. Former National Economic Development
Authority (NEDA) chief Cielito F. Habito, now director of the Ateneo
Center for Economic Research and Development, said it was time for both
the private and the public sectors to do their part in managing the
fiscal deficit. "There is still a way out. Large taxpayers should be
more faithful in paying their taxes, corrupt practices in the government
should be stopped, and the government should try to find ways to better
manage its expenditures," Mr. Habito said in a telephone interview. He
said the discussion paper released by 11 economists from the University
of the Philippines was a "wake-up call" for the government and the
public. "The UP paper is saying we should wake up. I could see the value
in raising the alarm as there's still too much complacency," he said.
But he expressed concern that the UP paper could become a
"self-fulfilling prophecy." "My worry is that it may have hastened the
fulfillment of a fiscal crisis," Mr. Habito said. He also said president
Gloria Macapagal-Arroyo's announcement of a fiscal crisis was
"premature" and could harm the country. "It's premature because we're
not yet in a fiscal crisis since we can still service our debt. The
President may have made the pronouncement so the government could access
local government funds. But its benefit may outweigh the cost," Mr.
Habito said. "While the President may be able to save
PhP43 billion by withholding part of the internal revenue allotment
(IRA) of local government units, the amount may not be enough to
compensate for the economic losses we may suffer as a result of a
declaration of a fiscal crisis," he stressed.
UP-based think tank Institute for Development and Econometric
Analysis Inc. (IDEA) added that there was a way out of the impending
fiscal crisis. "There is a way out, but it's a difficult way out. You
can't soften the blow. Both the public and private sectors have to make
sacrifices," IDEA executive director Marinela Llanto said in an
interview. Ms. Llanto said the private sector would have to swallow the
bitter pill that was new taxes, while the government should focus its
belt-tightening efforts on government-owned and controlled corporations
(GOCCs). "For the GOCCs, it's time to make their activities more
transparent considering that the government shoulders their debts," she
said. Private investment firm Unicapital Group's research adviser Erico
Claudio said the government could focus on agriculture as a way to
expand tax collection. "It will have a big effect on personal
consumption expenditures," he said. "The most important thing is to make
people work to improve their household income. If you improve the
purchasing power of those in the farm sector, the private sector would
have the incentive to produce more," he added.
THE KEY
Mr. Habito, who was NEDA director-general during the time of former
president Fidel V. Ramos, said the budget surplus in 1994 to 1997 could
be attributed largely to improved tax collection as well as the
privatization of government assets. "We had the benefit of non-recurring
revenues at that time and our tax effort improved dramatically, reaching
as high as 17% of gross domestic product in 1996," he said. Mr. Habito
said the increase in tax collection at that time was largely due to a
macroeconomic program for achieving a balanced budget, that was
implemented under the supervision of the International Monetary Fund (IMF).
Other economists said the country could emerge from its fiscal problems
so long as the leadership would exercise political will in pushing for
administrative and legislative reforms that would increase revenues and
improve the way government would spend its money.
Former Finance Secretary Ernest Leung and Former Finance
undersecretary Milwida M. Guevara were one in saying that there was
still a way out of the economic turmoil. "The very first step in solving
the problem is recognizing there is a problem and not deny it," Ms.
Guevara said in a telephone interview with BusinessWorld.
Unfortunately, Ms. Guevara said, "there are some attempts by some people
from the government to tone down the extent of the crisis." "They say
they don't want to scare the investors but these investors don't look at
how the government defines the crisis, they look at the figures and the
figures say it all," Ms. Guevara said. Instead of denying that there
exists a fiscal crisis, the government should "accept it to the
advantage of country, and use it as a rallying point for support for the
measures" that it wants implemented. Ms. Guevara said improving public
finances was the country's key economic policy challenge, and the
government would do well to reverse its revenue decline.
The consistent decline in the tax effort is one of the reasons the
national government has incurred huge deficits in the last 13 years, she
said. Having improved consistently from 11.4% in 1988, the tax effort
reached a peak of 16.3% in 1997. Since then, it has declined every year
to 11.6% in 2002. It slightly improved in 2003 to 12.5%. Tax effort is
the ratio of tax revenues to the gross domestic product or GDP, which is
the sum of all goods and services produced by the economy at home.
Raising the tax effort even by just 1% means
PhP32 billion in additional revenues for the government, Ms. Guevara
said. And this can be done without introducing new taxes but by just
plugging tax leakages.
Citing government data, Ms. Guevara said:
- at least PhP6.3 billion was lost to tax leakages in the
collection of tax on interest income;
- PhP2 billion in documentary stamp tax;
- PhP1.5 billion in gross receipt tax;
- PhP3 billion to PhP6 billion in excise tax on tobacco products;
- PhP1 billion from petroleum products;
- PhP47.5 billion in value added tax;
- PhP60.4 billion in individual income tax; and
- PhP57.8 billion in corporate income tax.
She added that tax credit certificates have become a major source of
tax leakages as criminal syndicates have exploited the incentive
program. "We should be able to support the BIR to be able to arrest the
leakage. The BIR must get the support of its personnel," she said.
BITTER PILL
But Ms. Guevara believes an improvement in tax collection should be
accompanied by the introduction of new taxes. She also said that if the
government would like to prove to the international community that it
was serious in addressing its financial woes, it must pass at least one
tax law this year. Indexation of sin taxes is a good start, she said.
"The problem with the present government is that its took the decline in
the tax effort lightly," Ms. Guevera said. Instead of raising the tax
effort to finance its operations, it "went to the credit market and
borrowed a lot and this has worsened our credit profile." Mr. Leung said
the government must "avoid borrowing" because it "aggravates the
problem." He said more than half of the national government's budget
already goes to non-discretionary items like debt servicing and salaries
of employees, thus little is left for social services. Fixing the
country's fiscal problem, he said, calls for raising revenues, improving
government expenditures, and pushing for what he calls the "one-fund
concept," which will require the consolidation of public sector funds to
improve its use.
On the revenue side, Mr. Leung said the government could start by
taking "remedial measures" and tapping other potential sources. The
government can start with the Land Transportation Office (LTO), which
can raise additional income by auctioning so-called vanity plates, thus
"transferring the resources of the affluent" to those who are in need,
he said. Before any meaningful economic reform could take place, Mr.
Leung said the government has to overhaul its tax collection system. The
government should cut the "cycle of fiscal blowout" through radical tax
reforms, he said. "Our tax system is somewhat flawed beyond the point
that the government is not able to collect and is having difficulties in
collecting taxes," he said in a telephone interview with
BusinessWorld. Something must be done, for instance, in the
proliferation of laws that grant tax exemption, he said. Mr. Leung said
all exemptions must be lifted, and the grant of new exemptions
prohibited. "Don't give exemption at all," he said.
If the tax system will be simplified, then there will be no more need
for "crook watchers" because the people understand the system and they
will be able to pay easily and guard themselves against crooked
collectors, he said. Aside from revenues, Mr. Leung said the government
"should do more quality expenditures anchored on social growth." Mr.
Leung also floated the "one-fund concept," where funds of the public
sector would be consolidated and put under the national government. This
way, "revenues will be used for the benefit of state and not for vested
interests as the funds will be allocated based on the priority of public
interest." "Money is being squandered left and right and there is no
political will to address that forcefully. Now we have to borrow to
close the gap," Mr. Leung said. Mr. Leung also said he did not share
economic managers' optimism that the government would erase the budget
deficit by 2009. "When you have 30% of your budget going to interest
payments, and deficit is kept at an average of
PhP200 billion, I don't think so," he said. Ms. Guevera said the
government should not benchmark its performance on meeting deficit
targets but on exceeding revenues goals.
-- Jennifer A. Ng and Karen L. Lema with Agence
France Presse and inputs from J. O. Valisno
|
President Gloria Macapagal-Arroyo's declaration that the Philippines
was in a fiscal crisis
drove markets sharply lower, but analysts said yesterday the remark
was probably a ploy to win support for new taxes. Economic ministers
scrambled to play down the alarm sounded by Ms. Arroyo on Monday,
stressing that the country's finances were not technically in crisis
because it was having no difficulty funding its $3.5-billion annual
budget deficit. "We are not in a fiscal crisis," said Trade and Industry
Secretary Cesar Purisima. "The President used the term rhetorically and
not technically." Analysts said Ms. Arroyo's statement may have been a
shock tactic aimed at piling pressure on Congress to pass a series of
new tax steps that are the centerpiece of her plans to wipe out the
deficit within the six-year term she won in May elections. "I think it's
really tainted with political color," said Astro del Castillo, managing
director of First Grade Holdings. "Before the elections, she was saying
that the economy was doing well -- revenues were getting better, foreign
direct investments are flowing in and so forth."
The government only just missed its deficit target for the first half
of the year and foreign investors have snapped up its debt, which offers
yields around 4.2 percentage points higher than US Treasuries, with
little apparent fear of a default. But economists have warned that the
deficit, which adds to a government debt pile of $60 billion, could lead
to a fiscal crisis within a few years and say the government needs to
take steps quickly to raise one of Asia's lowest tax takes. They also
warn that international ratings agencies could downgrade the
Philippines, whose sovereign debt is already two notches below
investment grade, if tax reforms are not passed.
IMMEDIATE FALLOUT
Markets seemed to take Ms. Arroyo's comment seriously. Stocks
tumbled more than 2% to a one-month low on Tuesday and the peso eased
0.3% against the dollar to PhP55.935, its lowest since early August.
Philippine sovereign bonds held steady, but the coupon rate on a new
offering of 4-year bonds jumped to 11.75% from 11% as local banks
demanded a higher premium in the wake of Ms. Arroyo's statement.
National Treasurer Mina Figueroa said banks had asked her for
clarification. "We are not yet in a fiscal crisis," she told reporters.
"If those [tax] measures are not passed, we will get into a fiscal
crisis." Ms. Arroyo, a US-trained economist, wants Congress to approve
eight measures aimed at reversing a slide in tax revenue to around 12%
of gross domestic product from around 17% in 1997. Her officials have
said the steps would raise an extra
PhP80 billion in revenues a year while creating annual savings of
PhP20 billion. Without a higher tax take, her policy goals such as
putting a computer in every school and creating a million jobs a year to
ease chronic poverty could prove unfeasible since they would risk
raising the country's already heavy dependence on debt.
NO SMOOTH RIDE
Despite the ruling party mustering a majority in both houses of
Congress, however, her plans are unlikely to get a smooth ride.
Opposition to tax hikes by vested interests have stymied previous
attempts at reform and even some of Arroyo's allies have said she should
first patch up the country's leaky collection system before imposing new
taxes. But Elena Ponceca, research head at Unicapital Securities, Inc.,
admitted that the country was "certainly facing difficult times."
However, she also said the President' statement was ill-timed since the
country was trying to entice investors -- now that political
uncertainties have settled. "Her pronouncement at this point might be
too premature. Maybe she is frustrated as some legislators tasked to
create better measures to curb the balooning budget deficit have yet to
do more," she told BusinessWorld. "Ms. Arroyo's declaration may
have good intentions behind them. Maybe she wants her people to do the
job in addressing the budget deficit. In this case, she is showing
greater transparency," she added. "But it is ill-timed since we need
more investors. Also, this scares the public. If the lay people don't
understand this much, this may generate massive panic," she stressed.
One market trader, however, said Ms. Arroyo was trying "to bully the
approval of new taxes." The government has run deficits in nine of the
last 13 years because of poor tax collection, tax evasion, corruption,
and rising debt service costs.
STRUCTURAL PROBLEMS
The government cannot afford to ignore the widening budget deficit as
well as the increase in public debt, economist Rosario G. Manasan said
in a recent discussion paper. To improve its fiscal position, the
government should undertake reforms in both tax policy and
administration, she said. The economist, of state-run Philippine
Institute for Development Studies (PIDS), said the government should
address structural problems that weaken the tax system. "The need for
additional revenues is immediate, but the requirement is by no means
short-term in nature. The downward trend in tax effort in 1998 to 2002
indicates that government cannot rely solely on measures such as
privatization, that result in a one-off increase in government
revenues," she said. Tax effort or the ratio of tax collections to the
gross domestic (GDP), the total economic output within the country's
borders, dipped from a high of 17% in 1997 to a low of 13.9% in 2000. It
further went down to 12.3% in 2002. Two-thirds of the reduction was due
to the contraction in the tax effort of the Bureau of Internal Revenue (BIR),
while the remainder was due to the contraction in the tax effort of the
Bureau of Customs (BOC). "It is important that government adopt tax
policy changes that will not hinder the attainment of the longer-term
goals of tax reform and those that will yield some permanent improvement
in the tax-to-GDP ratio," Mr. Manasan said. He added that the
government's proposed revenue-generating measures should be evaluated on
the basis of four criteria:
- one, their ability to raise revenues;
- two, their ease of administration;
- three, tax neutrality or horizontal equity; and
- four, vertical equity.
Horizontal equity means that those who earn the same will be taxed at
the same level. Vertical equity means that those who earn more will be
taxed more, and vice-versa.
'ALL PAINFUL, NONE POPULAR'
Regarding vertical equity, Ms. Manasan noted that in countries were
tax administration was poor, less weight was given to vertical equity
considerations. "The shift in emphasis comes from a recognition of the
fact that well-designed progressive taxes may not be worth much when
they are not evenly enforced," she said. "In these countries, it is
argued that government's redistribution function may be better served by
a progressive expenditure program that is ably financed by a not-so
progressive tax system," she said. Based on these criteria, Ms. Manasan
said the proposed indexation to inflation of the excise taxes on
tobacco, alcohol and petroleum products; rationalization of fiscal
incentives; imposition of an across-the-board import surcharge;
imposition of an excise tax on text messaging; and increase in the
value-added tax (VAT) rate "rank high" among revenue-generating measures
proposed by the government and other sectors. "All these measures yield
substantial revenues with low downside risks. Needless to say, all will
be painful and none will be popular," she said. "In the final analysis,
choosing which of these measures to pursue will be decided essentially
on political grounds. However, because the magnitude of the fiscal
consolidation that is needed is not small, it is inescapable that tax
policy reform, regardless of the specific measures that will be
implemented, will necessarily have to cost the [Arroyo] administration a
considerable amount of political capital," she added. Ms. Manasan also
said the indexation of sin products was a "must-do" and justifiable
given its social costs in the form of additional expenditures on health
care services. The same arguments apply to the indexation of petroleum
products. But given the hikes in world prices, Ms. Manasan said its
imposition must be timed with softening of world market prices of crude
oil. To mitigate the wage and price increases its imposition could set
off, Ms. Manasan suggested coupling the tax increase with tax rebates to
the public transport sector.
Regarding the rationalization of fiscal incentives, Ms. Manasan said
limiting the coverage of the Investment Priorities Plan of the Board of
Investments by administrative action would "go a long way in generating
additional revenues." But the better approach, she said, was to
harmonize the incentives provided under various tax incentives laws
through legislative action. An across-the-board import surcharge, Ms.
Manasan also said, would not affect relative protection across
industries, although it could be inflationary. This can be imposed
through administrative action. A tax on text messaging has the advantage
of being easy to collect. An increase in the VAT rate, meanwhile, may be
hard to justify given the high rate of evasion. But Ms. Manasan said an
increase was guaranteed to generate revenues. To improve tax
administration, Ms. Manasan suggested the use of a lateral attrition
scheme for employees of tax collection agencies, creation of an
autonomous revenue authority, and imposition of control systems to curb
tax scams. Reforms that have been started at the BIR must also be
instituted, she said. Among these reforms are the use of third parties,
which are useful in identifying discrepancies in taxpayers' records,
particularly underdeclaration of sales; rationalization of the audit
process through "no contact audit" scheme; tax mapping of business
establishments; e-filing and e-payment; and Text-BIR Campaign that
encourages consumers to demand receipts.
THE GOVERNMENT, RICH FIRST
Meanwhile, labor groups said the government was just looking for an
excuse to get the public to support cost-cutting and tax reform
measures. "Unless the people see changes in the attitude and the way the
political elite and the rich people conduct their affairs, it would be
hard to convince the middle class and the poorer sectors of society of
the need to raise new taxes," said Trade Union Congress of the
Philippines (TUCP) in a statement. Workers acknowledge the need to
sacrifice by paying more taxes, it said, but "there is no apparent
effort on the part of prominent sectors of society to also make
sacrifices." TUCP said that a recent study it conducted showed that
about 80% of taxes raised by the government came from ordinary workers
and poor sectors either through direct or indirect taxes. COURAGE, a
left-leaning group of government workers, said the government was just
using the fiscal crisis as an excuse to downsize the bureaucracy and
stay an increase in wages. Last month, the 300,000-strong government
employees union rejected the retirement plan that aimed to lay off about
400,000 state workers. The plans involves about
PhP15 billion in retirement benefits.
-- Beverly T. Natividad, Judy T. Gulane, Ruby Anne M. Rubio
and Reuters
|
Manila Electric Company (Meralco), the electricity distributor partly
owned by the government, will charge its customers an additional 17
centavos per kilowatt-hour starting next month. The Energy Regulatory
Commission (ERC) has approved its petition for a price adjustment, to
cover the higher cost of electricity it buys from state-owned National
Power Corporation (Napocor) and from privately owned power companies.
"It will be reflected in the September billing," Meralco vice-president
Ivanna G. dela Peņa said of the price increase. ERC has approved all
three applications of Meralco for generation rate adjustments for the
year. "Meralco is merely collecting from its customers the reasonable
costs imposed upon it by its power suppliers. This does not give Meralco
additional income," ERC chairman Rodolfo B. Albano, Jr. said in a
statement. "The viability and continued supply of safe, adequate and
reliable, and quality electric service for the people is of the
essence." Last June, ERC approved Meralco's application for an increase
of 13.27 centavo/kWh, to cover electricity cost increases from November
2003 to January 2004. Under the law, changes in generation charges can
be effected only every three months. -- Bernadette S.
Sto. Domingo
|
The Supreme Court yesterday paved the way for the investigation for
graft of San Miguel Corporation chairman Eduardo Cojuangco Jr., Senator
Juan Ponce Enrile, and several others accused of using coconut levy
funds to buy coconut oil mills during the Marcos years. The court
dismissed the motions for reconsideration filed by Mr. Cojuangco and his
fellow respondents that questioned a September 2002 order for the Office
of the Ombusdman to investigate them for graft. Aside from Messrs.
Cojuangco and Enrile, also ordered investigated were former members of
the board of directors of the United Coconut Planters Bank (UCPB) and
United Coconut Mills (Unicom). The were accused of using coconut levy
funds so Unicom could buy 16 oil mills in the 1980s. But the charge
against former Zamboanga City mayor Ma. Clara Lobregat was dropped since
she has passed away. Also excluded from the investigation were lawyers
Jose C. Concepcion and Teodora A. Regala, former members of the UCPB and
Unicom boards, who just rendered legal services to the other
respondents.
On March 2, 1990, the Presidential Commission on Good Government (PCGG)
filed a graft case against the respondents. But in September 1997,
Ombudsman Aniano Desierto dismissed it, saying there was "no sufficient
evidence to engender the well-founded belief that violation of the
anti-graft law was committed." He also said the charges were filed too
late. In questioning the court's first reversal of the Ombudsman
dismissal, Mr. Cojuangco said "no evidentiary basis exists for the
court's finding that the offense had not prescribed". But in a 10-page
resolution issued yesterday, associate justices Ma. Alicia
Austria-Martinez, Leonardo A. Quisumbing, and Romeo J. Callejo, Sr. said
the PCGG complaint "was well within the prescriptive period." They also
said that while Unicom's acquisition of the 16 oil mills was sanctioned
by two presidential decrees (on the coconut levy), this did "not detract
from the fact that such acquisition caused undue prejudice,
disadvantage, and injury to the government." They added that the
respondents' purchase of the oil mills could be defined as a corrupt
practice as "they had a material and personal interest" in it. The court
also criticized Mr. Cojuangco's insistence on finishing the case
soonest. It noted that between 1991 and 1997, Mr. Cojuangco "did
nothing" to assert his right to swift resolution. "The respondent's
right to a speedy disposition of his case should not work against and
preclude the people's equally important right to public justice
considering that the funds used to acquire the 16 mothballed oil mills
came from the coconut levy funds, which are not only affected with
public interest, but are, in fact, prima facie public funds," the court
said. -- Kristine L. Alave
|
No new vehicles for gov't officials;
private sector urged to help
By JEFFREY O. VALISNO, Reporter
President Gloria Macapagal-Arroyo yesterday launched a public
sector-led National Energy Efficiency and Conservation Program aimed at
cushioning the impact of rising oil prices, reducing fuel and energy
expenditures, and at the same time, protecting the environment. In a
statement released after the 99th meeting of the Legislative Executive
Development Advisory Council (LEDAC), the President said making energy
conservation a way of life for Filipinos would lead to annual energy
savings of 23 million barrels of imported oil, or a 12% reduction in the
country's oil importation. "What we need to do is to let us work
together and be united as we face ahead in these hard times. I am
calling on the public to throw in full support in our energy and
conservation program," Mrs. Arroyo said. "This would yield annual
savings of $784 million in our foreign exchange," she added. Energy
independence and savings is part of the President's five-point reform
package, which she presented before the joint session of Congress in her
State-of-the-Nation Address last month. The others in the agenda are
social justice and basic needs, anticorruption, job creation and
economic opportunity, and education and youth opportunity. Based on the
principle of "leadership by example," Mrs. Arroyo's plans to start the
conservation program within the national government, asking all
government agencies to strictly impose the mandatory 10% reduction in
fuel and electricity consumption. "Any savings from these expenditures
will correspondingly mean a cut in the budget allocation, however small
it may seem. Pooled together, it would be enough resources to finance
our other basic services," the President said.
Energy Secretary Vincent S. Perez, who is spearheading the government
energy conservation program, explained that the government was spending
PhP2 billion annually on fuel expenses, and another PhP2 billion every
year for electricity costs. "With the President's order, we can easily
save around PhP400 million per year," he told reporters in a briefing.
Aside from this, the President yesterday ordered a moratorium on the
purchase of new government vehicles on all government agencies.
"Increased purchases of vehicles only mean increased usage of fuel," she
said. Mrs. Arroyo also directed all government agencies to strictly
monitor government car pools, particularly on the allocation and
issuance of gasoline. "We will not compromise our productivity through
this conservation. Instead we will strictly implement the trip ticket
rule on the use of government vehicles," the President said. "We will
impose severe penalties on the use of government vehicles for unofficial
or non-approved purposes. These rules will apply to misuse of government
ambulances," she added. Mr. Perez said among the energy conservation
measures the government planned to implement on all agencies include the
use of more energy-efficient lighting fixtures. Aside from this, the
government would also ask agencies to turn off their lights during lunch
break, and their air-conditioning units at 4 p.m., an hour before
government offices close for the day.
Meanwhile, the President also called for the active participation of
the public in the conservation program by joining the "car-less day
campaign." Mr. Perez explained that under the campaign, car owners would
be leaving their car at home once a week. This would be on top of the
"color-coding" scheme, which prevent certain vehicles from plying major
routes once a week. Aside from this, the President also encouraged
private car owners to organize car pools among their relatives, and
friends to save on fuel expenses. Mr. Perez added the government would
also enlist the support of the private sector to help in the
conservation programs on a voluntary basis. He said he was talking with
business groups recommending shorter operating hours for shopping malls,
and some gasoline stations. He said the department has also signed
agreements with fast-food chains to include energy saving tips on their
paper placemats. He also said the Energy department would require
appliance and car makers to put energy efficiency labels, which
indicates how much electricity or fuel it needs. "This empowers the
consumer in choosing the more energy efficient brand or model," he said.
Mr. Perez said the Energy department would also conduct massive
information campaigns and seminars aimed at teaching drivers fuel saving
tips. This includes encouraging motorists to turn off their engines
while waiting for more than 30 seconds. The Energy Secretary added other
suggestions were made during the LEDAC meeting regarding the efficiency,
including implementing better dispatching system for public buses,
studying the applicability of daylight saving time, imposing lower
tariffs for hybrid cars, creating bike lines in Metro Manila, and
implementing a 12-hour, four-four day workweek. Mr. Perez however
clarified these were suggestions, and further studies would be conducted
before the government could implement the proposals. He also denied
reports the government would also implement a gas-rationing program
together with the energy conservation campaign. "We do not have an oil
supply crisis. We only have an oil price crisis," Mr. Perez said.
|
By BENNET S. STO. DOMINGO,
Reporter
Going back to a regulated oil industry could cause more harm to the
country's finances, Energy Secretary Vincent S. Perez yesterday warned.
Under fire for allegedly having failed to address the impact of
oil price hikes on domestic fuel prices, the Energy chief also
called for sobriety after oil firms increased prices anew. "The
government is sensitive to the adverse effects of rising fuel prices but
any call to regulate prices or any proposal to bring in [a] subsidy will
only create further financial harm," he said. Indonesia and Thailand, he
said, are already bleeding from the fuel subsidies they have been
shouldering. "With fuel prices hitting high levels, these countries
[have] now realized that the subsidies have proven to be too costly for
them," he said. Industry sources said the government has no money for
subsidies and that going back to subsidy schemes could turn off
investors. China, India, Indonesia and Thailand have claimed that their
subsidy schemes will cushion the impact of record oil prices, but
economists have said the current price levels have made subsidizing too
costly. Mr. Perez stressed that the high local pump prices are driven by
the soaring world prices given that the Philippines import almost 100%
of its oil. "This only means that we are not sheltered from the
escalating world oil prices. High fuel prices are not our making nor can
we control its continued upward trend. Even OPEC (Organization of
Petroleum Exporting Countries), which controls half of the world's oil
exports, is unable to arrest rising prices despite increasing its
production," he said.
CENTRALIZED PROCUREMENT?
Think tank Ibon Foundation, meanwhile, urged the government to pursue
the centralized procurement of imported crude and refined petroleum
products as a means to protect the public from volatile world prices.
"Government can shop around the world market to find the cheapest oil,
instead of allowing oil firms to source their own imports. This is the
only way that President (Gloria Macapagal) Arroyo's promise of linking
up with oil-producing countries can bear fruit that is productive to the
country," the think tank said. With centralized procurement, the country
can also swap commodities with countries such as Libya and Indonesia and
reduce foreign currency depletion, Ibon said, adding that it will also
allow government to check or at least minimize profiteering among oil
companies.
NO NEED TO RATION
As this developed, an industry source yesterday said there is no need
to ration gas since there is no shortage in supplies. "It's not a
question of supply but how much is the cost. That [gas rationing] can be
done but not now. We don't have scarce supply. It's available but at a
higher cost," a source said. The source said the government is more
concerned about energy savings and not the limits on fuel use. "That's
not what the government has in mind. I think the government is pushing
for energy conservation more than rationing," the source said. He added
that gas rationing was implemented during the 1970s when supply from the
Middle East was curtailed. "But that was before. Now we don't have
supply shortage, just high prices," he stressed. Fernando L. Martinez,
Independent Philippine Petroleum Companies Association chairman, said
there is no need to implement gas rationing unless an extreme supply
situation takes place. "That could be a contingency plan ... but I don't
see it happening at the moment," he said. Economist Solita Monsod said
non-price rationing could lead to corruption and arbitrariness. "We had
that before and it didn't work. We used coupons before but some people
were exempted, those who had money. That is no good," she said. This was
echoed by economist Bienvenido Oplas, Jr., of Think Tank, Inc., saying
it would be "nonsense" to implement gas rationing.
|
The Philippine government and the World Bank yesterday signed a US$60
million loan for a Department of Agriculture (DA) project which seeks to
assist farmers. The loan, which will have a government counterpart fund
of more than $9 million or 14% of the total, will finance the
Diversified Farm Income and Market Development Project which will be
implemented from October 2004 to June 2009. The World Bank loan has a
maturity of 20 years, including an eight-year grace period. The interest
rate is 1.485% per year. The project will initially cover four regions:
Northern Mindanao, Central Visayas, Western Visayas, and the Cordillera
Administrative Region. It will eventually be implemented nationwide. The
DA described the project as a major flagship undertaking aimed at
improving the competitiveness of Philippine agriculture, livestock and
fishery products in the domestic and overseas markets. It is primarily
focused on improving the marketability of farm and fishery products and
increasing and diversifying farmers' income.
Finance Secretary Juanita D. Amatong, who signed the agreement in
behalf of the Philippine government, said the loan will help raise and
sustain livelihoods and incomes in the agriculture sector. "Since
agriculture activity and expansion in the Philippines have been hounded
by constraints of low productivity and profitability, there is a need to
modernize the sector and make it more market oriented. The World Bank
loan for this project will serve this purpose," Ms. Amatong said. World
Bank Philippine Country Director Joachim von Amsberg said the
US$60-billion loan is the largest since 2002. This, he said, is a
testimony of the Bank's continued "confidence" in the government,
notwithstanding the fact that it is facing a "challenging fiscal
situation." "Its design represents the trend of the Bank's new way of
doing business in the country, where support is linked to policy and
institutional reforms and to targeted expenditures within the budget to
ensure improved performance and efficiency in service delivery within a
tight fiscal scenario," Mr. Amsberg said. He added that "the bank is in
the process of preparing a new assistance strategy for the Philippines
which will guide our program in the next three years. We are considering
channeling our assistance through innovative approaches similar to this
project which take into account, among others, the challenging fiscal
situation of the country."
Of the proposed $60-million loan, $17 million, excluding the
counterpart fund, is to be appropriated as support for market
development services. The project will allocate $22.3 million for market
development investments, while, $17.3 million is programmed for
strengthening quality assurance systems for market development. A total
of $9.7 million will be for market-linked technology development and
dissemination, and another $2.7 million is planned for enhancing DA
budget resource allocation and planning. -- K. Lema
|
By IRA P. PEDRASA
The admission from the most powerful woman in the country that the
Philippines is already in the midst of a fiscal crisis brought another
burden to an already jittery financial market. Premium risk rates for
debt instruments shot up and the Philippine peso slipped further,
closing yesterday near the PhP56-per-dollar psychological barrier. "We
want to know why the President [Gloria Macapagal Arroyo] made that
admission, given that she's also an economist. There might be another
overshoot in the budget and they just want to pacify us by letting us
wait more," a bond trader said. The government earlier changed the
monthly release of the budget deficit data into a quarterly basis. The
four-year Treasury bond yesterday fetched a coupon rate of 11.75%, up by
75 basis points, when it was last auctioned on July 27. Market appetite
was strong at
PhP5.917 billion against a PhP4.5-billion public offering, and
interest rates reached as high as 12%. The auction committee accepted
PhP3.262 billion worth of bids. "The rates have really been moving, so
we're just aligning it now at the secondary market," National Treasurer
Mina C. Figueroa said.
At the secondary market, the four-year debt instrument fetched
11.935% or up by more than 20 basis points from 11.73% when the
proclamation came out. "I think we're not yet in a fiscal crisis. Well
if the [government measures will not take place], we'll be in a painful
situation then we'll get into a fiscal crisis," she added. Some traders
polled by BusinessWorld also said that the country has yet to
enter into a financial crisis. "I think we only have a fiscal
deficiency," a currency trader said. Another trader said the admission
from President should be good for the country as this would martial
lawmakers into upholding its agenda of enhancing the country's revenues.
"But coming from the President herself, the impact is really negative on
the premium risk rates and the peso," another trader said.
PESO
At the Philippine Dealing System, the peso averaged weaker than the
US dollar by almost 15 centavos to PhP55.93 from PhP55.782. Opening at
PhP55.935, the local unit gained strength toward PhP55.88 but corporate
demands primed up the dollar up to PhP55.975. Total volume of transacted
dollars almost doubled to $209.4 million from $126.62 million
previously. "Most corporate groups have gone to the market to hedge
their requirements after the pronouncement, probably because of some
maturing obligations and dollar loans that they have to pay. So why wait
until the peso is really down?," a trader asked. Hovering within a 9.5
centavo range, the peso settled at its intraday high of PhP55.975.
Traders expect the peso to breach the PhP56:$1 psychological barrier
with the initial resistance at PhP56.10 in the next few days. Companies
are also seen to come in to meet their month-end dollar obligations.
"The only solution now is an efficient tax collection amid all those tax
measures the government is introducing. At this point, we are still
capable of paying our debts," a trader said. Another trader also said
"it's a tall order, but the solution really is to eliminate corruption."
|
The Bangko Sentral ng Pilipinas (BSP) expects the country's balance
of payments (BoP) position to end the year at a deficit of close to $500
million. Rising imports, however, could result to a lower current
account surplus, the central bank said. Latest data showed that
merchandise imports rose 7.2% in the first half to $19.938 billion. In
June alone, imports grew 18% to $3.45 billion in the same month last
year. BSP officer-in-charge Amando M. Tetangco, Jr. said rising imports
are not likely to impact on the BoP as the latest import figures are
still within government projections of an 11% growth by yearend. "It is
still below the projection for the year, so there is still no impact
unless imports grow beyond 11%," he said. If import growth exceeds the
target, what is going to be affected is the current account surplus.
"It's going to be a lower current account surplus, but since these are
imports, these will have correspondent financing in capital accounts,"
he said. The BoP measures the foreign exchange transactions between the
local economy and the rest of the world. Its major components are the
current account and the capital and financial account. Latest BSP
figures showed that the BoP position posted a deficit of $95 million
from January to July, owing to foreign exchange outflows to cover debt
service repayments by the National Government.
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State-led Land Bank of the Philippines has called on interested
parties to apply for pre-qualification and to bid for idle assets worth
PhP17.8 billion. In its invitation to pre-qualify and to bid for
the acquisition of bad assets, Landbank estimated there are 78
non-performing loans and 16 non-performing assets or those classified as
real estate and other properties owned or acquired. "The portfolio will
be sold through a sealed-bid auction process. Detailed information
regarding the portfolio will be provided to each bidder that qualifies
to participate in the transaction," the bank said. A pre-bid conference
will be held on Aug. 30 to discuss the details of the transaction.
"Interested parties that have duly accomplished the requirements set
forth in the bidder registration and pre-qualification documents will be
evaluated and pre-qualified for the participation in the transaction,"
Landbank said.
The planned asset sale will be arranged by KPMG Laya Mananghaya.
Ernst & Young is the bank's financial adviser. "Landbank reserves the
right to reject any and all interested parties from participating in
this transaction," the bank said. Each interested party submitting
pre-qualification documents will be required to pay a transaction
registration fee of $30,000 which is net of bank wire charges as a
condition for pre-qualification. Landbank said the fee is
non-refundable. "The only exception shall be in the case where an
interested party pays the transaction registration fee and is later
deemed at Landbank's sole discretion not to qualify to participate, in
which the case the transaction registration fee shall be refunded in its
entirety," the bank said. -- Ruby Anne M. Rubio
|
By JENNEE GRACE U. RUBRICO, Senior
Reporter
Investors have expressed interest in buying the Waterfront Insular
Hotel Davao but the Gatchalian group is not keen on giving up control of
any of its hotels, a top official of the Waterfront Hotels and Casinos
said yesterday. Patrick C. Gregorio, President of Waterfront Philippines
Inc., said that the Gatchalian group is "happy" with the returns from
the operations of its hotels. Waterfront Philippines operates the
Waterfront Insular Hotel Davao, Waterfront Cebu City Hotel and Casino,
and Waterfront Airport Hotel and Casino in Mactan. "They (Gatchalians)
are the majority shareholders and they're very happy with their
returns," Mr. Gregorio said. "So I don't see any movements in the
ownership. As for Davao, we're operating it as professionally as we can.
There are inquiries, but these are part of our day-to-day dealings.
Nothing really serious at this point." It was earlier reported that
there were plans of selling Waterfront Insular Hotel Davao because it
reportedly was not bringing in as much returns as the Cebu hotels.
Yesterday, Mr. Gregorio said that the Davao branch has enjoyed an
occupancy rate of 55%, while the Cebu hotels, 70%. He also said that the
occupancy rate of the Cebu hotels is high because "Cebu tourism is
booming." "We just hope that the Davao tourism will also pick up so that
our property in Davao will improve," he added.
NEAR-TERM PLANS
Mr. Gregorio also said that Waterfront is not looking at acquiring
more hotels in the near term as it plans to consolidate its resources
and rehabilitate the Manila Pavilion Hotel. Recently, the Waterfront
group took over Acesite (Philippines) Hotel Corp., the operator of the
Manila Pavilion Hotel. "I think our goal is to professionalize the
Waterfront group to make it the leader, the number one Filipino owned
and managed hotel group not only in the country but eventually in
Asia...In the next three to six months, it will be consolidation to make
Pavilion better and more profitable," he said. He added that after the
renovation of the Pavilion, it will likely be renamed Waterfront, but
said that a merger between Acesite and Waterfront would be unlikely.
"It's difficult to merge the company because of different set of
investors, but branding will definitely happen. The branding will happen
as soon as the renovation happens," he said. Waterfront Philippines,
Inc. (WPI) is an investment holding company for hotel, leisure and
tourism businesses. Its hotels lease space to the Philippine Gaming and
Amusement Corp. Mr. Gregorio said that for the first six months of the
year, the company saw a 50% increase in gross operating profits. This is
way over the standard of 30%, he noted.
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Korean firm Asiana Airlines expects higher passenger and cargo
volumes to increase revenues from its Philippine operations by 10%. The
second national carrier of South Korea is also eyeing to open more
flights to the Philippines, Asiana Airlines Regional Manager Hyunil Kim
said. He added that the airlines would maintain the 25% market share on
the inbound and outbound traffic between South Korea and the
Philippines. "The Philippine market is expanding now, and we want to
expand more," Mr. Kim said. There were 179,071 Korean tourist arrivals
in the country in the first half. About 350,000 was recorded in 2003.
"We hope we can reach 400,000 this year, and contribute more to the
Philippines," Mr. Kim said.
In the first half, Asiana Airlines posted a sales revenue of
PhP30 million for its passenger business and PhP19 million for
its cargo unit. Asiana Airlines currently flies eight times a week to
the Ninoy Aquino International Airport. It has five flights to Clark
International Airport in Pampanga, where it also has chartered flights
and cargo operations. The airline started with two flights to Busan last
week. Asiana Airlines uses 177-seater Airbus 321 for its flights to the
Philippines. Load factor of the airlines in the first half stood at 86%
versus less than 80% for the same period last year. Mr. Kim said the
load factor is expected to drop to between 80% to 85% as September and
October are seasonally slow. He added Asiana Airlines is also planning
to resume night flights from Manila to the Incheon International Airport
in Seoul by October. There are plans to increase the flights between
Clark and Incheon to seven times a week from the current five. Mr. Kim
said increasing flights may start by December. --
Anna Barbara L. Lorenzo
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Publicly listed property developer Highlands Prime, Inc. said sales
of its Tagaytay Highlands condominium project already reached
PhP1 billion. In a statement to the stock exchange, the developer
said it has sold 98 of the 138 units of its maiden project, "The
Woodridge", an upscale condominium project overlooking the Highlands
Golf Course, Laguna de Bay and surrounding mountains. "We have turned
over 70% of the units to Woodridge buyers within a period of 12 to 15
months," said Highlands Prime president Antonio A. Henson. The SM Group
owns majority of the shares of the property developer. Highlands Prime
chairman Henry Sy, Sr. said the company, which owns 500 hectares of
prime properties in the exclusive Tagaytay Highlands and Tagaytay
Midlands complex, has more projects in the offing. The developer is
slated to launch soon its next landmark project --The Horizon at the
Tagaytay Midlands. Phase one of The Horizon will feature 14 clusters of
three-bedroom condominium units with an average floor area of 136 square
meters each. There will be a total of 214 units for Phase one.
The Horizon offers a panoramic view of the Midlands Golf Course, the
Taal Lake and Mt. Makiling. Architects Recio-Casas designed The Horizon
which takes on a contemporary Asian design. Landscaping will include
pocket Japanese gardens and a picnic area with an infinity pool as its
centerpiece. Highlands Prime is engaged in buying, developing, owning,
managing, investing, leasing, selling and improving real estate
properties in the country with primary focus on the high-end of the
property market. It was initially organized by Belle Corporation (Belle)
as a minimally capitalized entity. But Belle eventually transferred to
Higlands Prime property assets with market value estimated at
approximately PhP7.7 billion. With Belle's transfer of its assets,
Highland Prime's assets now consist of close to 534 hectares of
undeveloped land, 25 finished residential units and 70 developed
subdivision lots. -- R. J. F. Calayag
|
By ROULEE JANE F. CALAYAG
For a time, investors were waiting for fresh developments to come and
perk up trading. But the news that hit the stock market on Monday left
investors shaken. Dealt with tsunami-like proportion, share prices
yesterday plunged to their lowest in four weeks. The Philippine Stock
Exchange composite index (Phisix) fell by 34.17 points, or 2.17%, at
1,542.01 with only 1.5 billion shares traded for
PhP630.4 million. This further dashed hopes that the market would
breach the elusive 1,600 level. Traders said the steep decline in the
Phisix was in reaction to the statement of President Gloria Macapagal
Arroyo on Monday that the country is in the midst of a fiscal crisis.
Investors reacted cautiously to Mrs. Arroyo's statement, triggering
share prices to fluctuate erratically, although some analysts insisted
that this had been factored in already by the market.
CONFLICTING STATEMENTS
As the market tried to get out of the doldrums, the news caused it to
swerve and lose its momentum. The change of gears was sudden. From a
dearth of news over the past days, investors were taken aback as they
reeled from the conflicting statements of various groups. After Mrs.
Arroyo issued the statement, her economic managers refuted this and
clarified that technically, the Philippines is not facing a crisis. They
also shrugged off the possibility of a crisis, stressing that the
government is still able to meet its obligations. Political and economic
observers said the admission by the President would help the country
manage its burgeoning budget deficit. They said this tells the
international community that the government is seriously looking at ways
to cut its dependence on foreign borrowing and it is recognizing its
precarious status. But Rommel Macapagal, chairman of Westlink Global
Equities, Inc., said the news and the conflicting statements that
followed had accelerated the selling pressure on the market. "[The news]
that the country is in the middle of a fiscal crisis rattled investor
sentiment," said Mr. Macapagal. He explained that although the impending
fiscal crisis was discounted in the stock market for some time, it still
triggered a sell down. Support levels, Mr. Macapagal said, were also
broken because of the remark on the country's fiscal health. Despite an
earlier rosy trading outlook, the Phisix failed to break the 1,580
support level on Monday. Instead of recovering yesterday, it sank
further and failed to breach 1,560. "We are looking at 1,520 now. If the
market had to rebound, the level should be above 1,550 and selling
accelerated," added Mr. Macapagal.
FOREIGN SELLING
Even foreign investors toed a cautious line after Mrs. Arroyo
delivered the statement. Mr. Macapagal said some foreign selling were
observed but he dismissed this as just immediate reaction. Foreign
selling hit PhP330.8 million. "We will see [today] if foreign selling
will stabilize," he said, noting that the news had caused a snowball
effect on the market that caused support levels to break. "The support
levels were broken, not only in the index but also on other issues. It
was across the board," he added.
INDICES
At the stock market, all indices were in the red. The
commercial-industrial lost 60.27 at 2,453.53. Mining also slumped 51.18
to 1,760.65. Banks and financial services dropped 8.46 at 449.89.
Property shed 2.39 at 511.41 while oil dropped 0.01 at 1.74. The all
shares went down 6.34 to 998.46. There were 34 unchanged issues but
decliners overturned advancers, 73-9.
DIFFERENT SCENARIOS
Talk of a fiscal crisis may cause a shockwave to market watchers but
Mr. Macapagal said this does not signify a meltdown. "It is not yet time
to panic," he assured. Asked if he sees the situation growing worse, he
said the market will "take stock of what happened." Compared to the
volume turnover on Monday which reached over three billion shares,
yesterday's -- which was reduced to barely half -- was a far cry. Mr.
Macapagal said this showed that even third-liners, which propped up the
volume turnover the other day, was also affected. He expressed hope that
selling will taper off in the coming sessions. But at this time, he sees
different scenarios that may likely happen. If selling goes deep, there
may be some opportunities for bargain hunting. "Investors may take
profits. Or they may liquidate to get some cash as they take new
positions and be clear, while they take stock of what happened," he
said. As a result of this, a realignment of some portfolios may be in
the offing.
OIL PRICE HIKE
While things are expected to turn for the better, it seems that the
market is about to face another hurdle after Pilipinas Shell Petroleum
Corp., Caltex Philippines, Inc. and two small oil industry players said
they would raise anew pump prices of gasoline and other petroleum
products by an average of PhP0.35 per liter. They made the announcement
less than a week after oil prices were increased by PhP0.30 per liter.
Mr. Macapagal said the news about the country's fiscal status has
already hit raw nerves among investors so any hint of uncertainty would
cause them to be more cautious. "Investors hate uncertainties. We hope
for the best and for selling to taper off. We will be on a wait-and-see
[position] as investors remain cautious," he added.
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'We are already in the midst of a fiscal crisis and we have to
face it squarely, wielding our courage, resourcefulness, and solidarity
as a people and nation.' -- President Gloria Macapagal-Arroyo
President Gloria Macapagal-Arroyo yesterday admitted that the
Philippines was "already in the midst of a fiscal crisis" because of the
runaway budget deficit. During the turnover ceremony for incoming
national police chief Edgardo B. Aglipay at the Palace, the President
confessed that the government needed help, and that all must sacrifice
to solve the deficit problem. "We do not deceive the people on the
economy. We tell it like it is, because the solution cannot begin unless
the problem is recognized. We are already in the midst of a fiscal
crisis and we have to face it squarely, wielding our courage,
resourcefulness, and solidarity as a people and nation," the President
said. The President began yesterday the process of formally declaring a
state of fiscal crisis, holding an emergency meeting with her economic
team.
When sought for comment, economist Mario Lamberte said such a
declaration would mean the country could no longer pay its debts,
domestic or foreign. But Mr. Lamberte, president of state-run think tank
Philippine Institute for Development Studies, also said such a
declaration might be premature. "We are still able to service our debts
at the moment," he said, although noting that the country's outstanding
debts were huge. However, he also said that if nothing significant would
be done soon to address the situation, these large debts could "possibly
lead to a crisis." Philippine debts in 2003 reached an equivalent of 77%
of the total economic output or gross domestic product (GDP). Including
contingent liabilities, debts total about 93% of GDP, Mr. Lamberte said.
As a result, the government has been spending roughly a third of its
budget on debt servicing, he said. And this has restricted the
government's ability to finance economic growth, he added. Erico C.
Claudio, professor at the University of Asia and the Pacific, said the
government has acknowledged the need to fix the deficit and debt
problems, noting that it could not forever spend beyond its financial
capacity. "There is a concern to fix it, we cannot forever spend beyond
our income," Mr. Claudio said.
'WE MEAN BUSINESS'
But former National Economic and Development Authority chief Solita
C. Monsod said the government should declare a state of fiscal crisis.
"It is important that everybody knows where we are now, we cannot dance
around it anymore. It should be discussed more seriously to let people
know we mean business,"she said. Declaring a fiscal crisis, Ms. Monsod
said, would improve the government's "stock" and credibility in the
international market, as well as investor confidence. "Investors have
become anxious, already we are paying higher premiums. Higher spreads
mean more difficulty in borrowing and more difficulty in paying, so we
end up borrowing more," she said. Ms. Monsod added a study by economists
at the University of the Philippines has "fleshed out" the problem for
the government to get a grip on it. She said the economy no longer has
the luxury of time. "We are not looking at it in a gloom-and-doom
scenario, we just do not want to say 'I told you so' later on when we
should have done something to address it in the first place," Ms. Monsod
said. "There are already implications but are not just recognized, it is
already showing in the market through payments of higher premiums," she
added. But Mr. Claudio said the Philippines was not another Argentina
for several reasns: the stable peso, the recovering economy, and the
government's awareness of the consequences of a budget deficit-debt
problem."The currency continues to remain afloat and this is a
reflection of the good and bad points of the economy, how our economy is
doing," he said.
Albay (southern Luzon) Rep. Joey S. Salceda, chairman of the House of
Representatives committee on economic affairs, earlier proposed the
declaration of the state of fiscal crisis -- to help address the
government's budget deficit and public sector debt. He said this would
allow the government to reduce the share of local government units (LGUs)
in national taxes or their internal revenue allotments for the next
three years. Mr. Salceda said this was done previously by deposed
president Joseph E. Estrada, and during the early part of the Arroyo
administration. The President has directed Budget Secretary Emilia T.
Boncodin to evaluate Mr. Salceda's proposal, and to submit a
recommendation "as soon as possible." Once the Development and Budget
Coordination Committee (DBCC) will have made a recommendation, the
President can issue an executive order formally declaring a state of
fiscal crisis. "I appreciate the concern and suggestion being put forth
by well-meaning quarters to resolve the crisis and I take this as a sign
of sincere concern that must be translated into deeper public awareness
and action," the President said in an official statement yesterday.
A BURDEN SHARED BY ALL
The President also said that whatever the DBCC would recommend, the
burden of solving the budget deficit -- including the imposition of new
taxes -- would be shared by all. She added that the government would do
its share through cost cutting and bureaucratic streamlining. "Average
Filipinos are already taking the brunt of sacrifices, but we have to
gather round again as one national community to take stock of the
future. This government will not exact sacrifices that we ourselves are
not willing to take, and are not willing to enforce among those who can
most afford it," the President said. "The pain is imminent but it will
be shared fairly and without putting one over the other," she added. The
President also said she was closely working with Congress on ways of
getting the national budget approved soon, so the government could
overcome the fiscal crisis with the support of the people. "I am working
with Congress on the strategies to get the budget in place and we are
hoping to work this out with public support and openness to sacrifice,"
Ms. Arroyo said in the same statement. Ms. Boncodin said the proposed
2005 national budget, estimated to reach PhP901 billion, would be
submitted to Congress tomorrow. She hinted that the President, in her
budget message on Wednesday, would ask the help of Congress with the
declaration of the state of fiscal crisis. But the reduction of revenue
allotments for local governments was not included in the budget bill,
Ms. Boncodin said.
The Budget secretary said the government was considering declaring
the state of fiscal crisis as a "fiscal pre-emptive measure," since this
would legally allow the administration to limit fund releases to local
governments. She said the national government should give PhP141 billion
to local governments as their revenue allotments for this year, and
PhP151 billion next year, as required by the 1991 Local Government Code.
But with the formal declaration of the state of fiscal crisis, Ms.
Boncodin said the government could freeze as much as 25% or PhP35
billion of the revenue allotments. "This [the reduction of revenue
allotments] would prove that there are no sacred cows in this
government. We are all in this together, including local government
units," the Budget chief said in a briefing before the DBCC meeting. She
also said the Arroyo administration was prepared to suffer the political
backlash of limiting the allotments, including the loss of support from
some local governments. The government is also ready to take negative
feedback from international observers, as well as foreign investors,
should the government pursue the crisis declaration, she added. The
government is also prepared to go to court, she said. The Supreme Court
earlier declared as illegal the decision of the Estrada government to
limit the allotments of local governments in 1998.
NOT YET
But Trade Secretary Cesar A.V. Purisima clarified that "we are not in
a fiscal crisis." He said the President "used the term rhetorically, and
not technically. Proof of this is the venue and audience where the
speech was given -- the PNP turnover ceremony -- not before the
financial and business community." Mr. Purisima, who is also the Arroyo
administration's economic spokesman, said the International Monetary
Fund and credit ratings agencies defined a fiscal crisis as when:
- a country is in default;
- a country's deficit is "unfinanciable;" and
- a country does not have access to the capital markets.
"Clearly, this is not the case for the Philippines," Mr. Purisima
said.
Also yesterday, Finance Secretary Juanita D. Amatong said there was
no need for the President to declare a state of fiscal crisis because
the country was not in that kind of situation. Proof of this is that the
government "is still able to pay its debts," she said. Ms. Amatong
nevertheless admitted that the government's precarious financial
situation called for immediate action not only from the Executive and
Congress, but most of all from people. "Unless everyone realizes there
is a problem and help in solving the problem...these legislators helping
us and the bureaucracy collecting more taxes and people paying taxes
earnestly...we will be in a crisis definitely in a few years," she told
a gathering of American and Canadian business groups in Makati City.
Under DBCC Resolution No. 2001-03, necessary adjustments in interal
revenue allotments can be done only after a declaration of an
"unmanageable public sector deficit" by the President. The resolution,
which provides for the "Trigger Event and Mechanisms for the Declaration
of Unmanageable Public Sector Deficit Necessitating the Adjustment in
the Internal Revenue Allotment," states that DBCC must inform the
Department of Interior and Local Government Secretary about an emerging
unmanageable public sector deficit "when the actual public sector
deficit has exceeded the target deficit indicated in the Budget of
Expenditures and Source of Financing submitted by the President to
Congress pursuant to Section 22, Article VII of the 1987 Constitution,
provided, that the national government and government corporate sector
have already undertaken revenue and expenditure measures."
Under the resolution, DBCC, which sets the government's economic
targets, will assess the economic and fiscal environment based on
established indicators. And then the secretaries of Finance, Interior
and Local Government, and Budget will consult with the presiding
officers of both Houses of Congress and presidents of League of LGUs.
DBCC will also send invitations for consultations including all
pertinent materials and information explaining the need to declare an
unmanageable deficit. Only after these things have been done can the
President authorize the declaration of an unmanageable deficit, and make
necessary adjustments in internal revenue allotments. Should the fiscal
situation improve after the declaration, the resolution states the
President can restore a portion of allotments cut, such that restoration
can sustain improvement of the public sector deficit, which among
others, takes into account the government's budget shortfall as well as
the financial situation of all government-owned and -controlled
corporations and other public financial entities.
A TIME FOR BOLD REFORMS
Ms. Amatong said the government recognized the fiscal problem and
this was precisely the reason why it has come out with a package of
policy reforms aimed at addressing the country's fiscal needs and
ensuring that the government would balance the budget by 2009 -- through
a combination of tax measures, rationalization of expenditures, and
reduction of the deficits of government-owned and -controlled
corporations. Ms. Amatong said the government must take advantage of its
mandate to implement bold reforms. Efforts must be concentrated on how
to increase revenues to help the government balance the budget in five
years, she added. "We need to do something with our budget, with our
revenues, with our expenditure, and with our debt so that we will not
reach that stage where we will be in a fiscal crisis," she said.
Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP)
officials and government economic managers said the only way to avert a
fiscal crisis was to pass tax measures that would add PhP80 billion
yearly to government coffers. "We are in a situation where we need to
come up with measures that would address the fiscal problem in a
sustainable basis," BSP officer-in-charge Amando M. Tetangco, Jr. told
reporters. He stressed, however, that technically, the Philippines was
not yet in a fiscal crisis -- which happens only when a country defaults
on its debt payments, is unable to manage its budget deficit, and has
lost access to the debt market. "We are not in that situation," he said.
For one, he said, the government is able to pay its maturing obligations
on time. He also said the government has a clear plan to balance the
budget by 2009, and has not lost access to the debt market, as was seen
in its move to borrow some $300 million last June for its refinancing
needs. "But if we don't act, we will have a crisis," he said.
ROAD SHOW
In less than a month, a government economic team is scheduled to go
on an road show in Asia, Europe and the United States to explain to
foreign investors its plan for the next six years. BSP Investor
Relations Office executive director Corazon Guidote assured that the
fiscal problem was manageable. "It's a mountain, but it is not a
volcano," she said in an interview. She remains confident that the road
show, scheduled on September 20, will be successful, and that the
government will convince enough investors and fund managers to invest in
the country. BSP officials are also optimistic that credit rating
agencies will look at government's fiscal situation and economic program
before adjusting sovereign credit ratings, which at present vary from
investment grade to stable. Mr. Tetangco said some foreign fund managers
have also been assured that the fiscal situation was manageable.
NEW TAXES INEVITABLE
A ranking government official, however, told BusinessWorld
that Congress should also do its part and pass new tax measures. The
government has proposed several tax measures that include higher taxes
on petroleum products, franchise tax on telecommunication firms, and
higher excise taxes on alcohol products and cigarettes. Without new tax
measures, the government will be forced to borrow another $700 million
to $1 billion by yearend before it can absorb the debts of state-owned
National Power Corpoation (Napocor). Government's absorption of Napocor
debts is one of the measures the Department of Finance is looking at to
consolidate government finances. The official, however, said the
government could not do this without having new tax measures first. The
Napocor debt absorption would increase the budget deficit by some PhP50
billion a year, the official said. "With additional debt, the budget
deficit will grow bigger," the official said. Finance is targeting to
keep the budget deficit at PhP198 billion this year, but absorption of
Napocor's debts could raise this to PhP250 billion. The Philippines,
Asia's largest debt issuer, has a total external debt of $56.6 billion
as of end-March, with the national government accounting for some $37
billion.
NO CRISIS OF CONFIDENCE
Meanwhile, senators said the government was on the brink of a fiscal
crisis and that the government was not taking the problem lightly.
Senate President Franklin M. Drilon said the government was fully aware
of its volatile fiscal position, and that several ways were being
explored to avert a crisis. "There should be no crisis of confidence in
so far as the Philippine economy is concerned. We already brought out
the need for us to address the budget deficit and the national debt. We
pointed out the need to tighten our belt and better tax collection
efficiency," Mr. Drilon said. Senators Manuel A. Roxas II and Ramon B.
Magsaysay Jr. also said the government was standing firm in its resolve
to prevent a fiscal crisis. Mr. Roxas noted that the best solution was
to boost business activities. "It is clear that the country faces a very
difficult time. There is a fiscal and debt crisis that needs to be
addressed. There is lack of velocity and momentum in the economy because
the factors of production are essentially flat," Mr. Roxas said. "We
have a unanimity that we are in trouble. The questions are: How do we
move forward? And what will be the prioritization? Not one
recommendation will be enough. We need to overhaul the system. It will
require burden-sharing, cutting expenses, prioritization on the
government, possibly additional taxes on the citizens, a review of the
way we source our debt. There is no single bullet that will cure all of
these. It will require hard work on all sectors," he added. Mr.
Magsaysay also urged President Arroyo to lead belt-tightening measures
to plug the PhP200-billion budget deficit. "It is time for the President
to be like a prudent head of the family. The president is called upon to
tighten the belt and eliminate the numerous, unnecessary expenses," Mr.
Magsaysay said in a statement. He added that sustainable reform and
anti-corruption programs should be made stronger. "Sustained reforms and
anti-graft corruption measures should encourage the entry of private
capital into our shores to strengthen the economy. We should do away
with unprofitable and unjustified projects," Mr. Magsaysay said.
Senator Juan Ponce Enrile, for his part, said the government should
start by conducting a thorough study of the economic and fiscal
situation. "We have to accept that there is a problem so we will apply
the correct remedy. We should not let the country sink," he said.
Senator Edgardo J. Angara noted that the fiscal crisis could be
prevented if the government would exercise political will. "We should
now act over and beyond partisan politics and confront issues, otherwise
the coming crisis will engulf us all and drown everybody," he said.
SPECIAL POWERS
Consumer and Oil Price watch chairman Raul Concepcion also said the
fiscal crisis warranted an end to too much politicking. "Let us just go
to work. Let us forget politics. Everybody wants a strong leader. This
is the problem and this is want we have to do," Mr. Concepcion told
reporters after a Senate consultation on the prices of basic
commodities. The businessman added that Congress should consider giving
Ms. Arroyo special powers to maintain the prices of basic commodities.
"The state of the economy is very crucial and we want to give the
President special powers, very definite on how we can control prices and
not legislate price reduction, to ensure that the prices are manageable,
especially in energy," Mr. Concepcion said. He added that the business
community would be amenable to new taxes, provided that revenue
collection agencies would show political will in increasing tax
collection until the end of the year. "They have to improve the
collection between now and the end of the year. If that is not enough to
prevent the fiscal crisis, then we will be in favor of new taxes. The
ball is in the hands of the government," Mr. Concepcion said.
At the House, Tarlac (Central Luzon) Rep. Jesli A. Lapus, the
chairman of the House Committee on Ways and Means, stressed the need to
raise revenues now. Mr. Lapus also defined a fiscal crisis as when the
country was in default, when it could no longer service its borrowings.
The country is not in a fiscal crisis yet, he said, since it still
enjoys access to international and local credit. He also said increasing
revenue collections would take time, because it would entail installing
new equipment, changing the culture in revenue-generating agencies,
marketing among the taxpayers, among others. What the public needs now,
Mr. Lapus said, is a demonstration that the government is "taking the
bull by its horns" or is directly acting on the problem of a large
deficit and a ballooning public sector debt. "The newspapers in the past
weeks were full of statistics. It has been impressed on us that the
fiscal problem is both serious and urgent," he said. "What we need to do
right now is to rush the revenue measures and make a good impression on
international and domestic creditors. We need more marketing [for the
Philippines] than a scary analysis." Mr. Lapus also said an economic
collapse in the next two years was likely, especially if inflation would
worsen and the economy's growth rate would start to lag.
WELCOME DECLARATION
Meanwhile, Paul Joseph M. Garcia, chief investment officer of ING
Investment Management, said a declaration of fiscal crisis "should be
welcomed by investors and followed by real and concrete reforms." "I
think we are concerned about the fiscal situation. In fact, one of the
solutions is acknowledging the problem, which the government is trying
to do. I guess, the pressure is on policymakers, particularly
legislators to implement real and meaningful tax reform measures.
Hopefully, that will enable the government to collect more taxes to plug
the budget deficit. If you don't you might lose investor confidence. You
try to solve it way ahead of the problem," he told BusinessWorld.
"Right now, it is not yet a full-blown fiscal crisis. For one,
government is still able to finance its operations, pay interest
payments on time. At the same time, fund operational expenses. I think,
it is good to acknowledge a problem as early as now so government and
policymakers are able to veer away in a dire situation by the time no
amount of whatever policy will be effective." Meanwhile, an analyst from
Citiseconline.com said the country was in a situation where "we are not
earning in terms of revenue collection to meet our short-term needs and
obligations." "You'll know you are in a fiscal crisis if your ability to
service debt is impaired already," he said.
-- Jeffrey O. Valisno, Rommer M. Balaba, Karen L. Lema and
Iris Cecilia C. Gonzales with reports from Carina I.
Roncesvalles, Judy T. Gulane, Felipe F. Salvosa II and
Ruby Anne M. Rubio
|
President Gloria Macapagal-Arroyo wants four Cabinet officials in her
"economic team" to stay on to help her fix the government's finances.
Presidential Spokesman Ignacio R. Bunye said the President would
reappoint Budget Secretary Emilia T. Boncodin, Socioeconomic Planning
Secretary Romulo L. Neri, Finance Secretary Juanita D. Amatong, and
Trade and Industry Secretary Cesar V. Purisima. Mr. Bunye declined to
say if Energy Secretary Vincent S. Perez Jr., also part of the current
economic team, would be on the list of officials to be reappointed.
Asked for an explanation, Mr. Bunye said: "We just make the
announcements as we are authorized to make them. So those are the
Cabinet officials that the President has mentioned as staying on in the
Cabinet."
It was earlier reported that the President was considering Mr. Perez
as the next Finance chief. But Mr. Bunye hinted that Mr. Perez could be
moved to another post. "The President herself said she would make
announcements over the next few days," he told reporters in a press
briefing. Yesterday, former Executive Secretary Alberto G. Romulo also
took his oath of office as Foreign Affairs secretary. Mr. Romulo vowed
to reassess the situation in Iraq, given calls to lift the deployment
ban on overseas Filipino workers. -- J.
O. Valisno
|
By BERNARDETTE S. STO. DOMINGO and
CARINA I. RONCESVALLES, Reporters
Oil companies yesterday increased their prices for gasoline, diesel
and kerosene anew by 35 centavos per liter, citing the continued upswing
of fuel prices in the international market. The new price adjustments
were implemented by oil giant Pilipinas Shell Petroleum, Corp., and
Total Philippines, Corp., the fourth largest petroleum company in the
Philippines. Small firm Seaoil is also increasing its prices effective
12:01 a.m. today. For their part, Eastern Petroleum Corp., and Flying V
said they might increase prices today. Caltex Philippines, Inc. has
reportedly raised its prices too but has not made a confirmation on this
as of press time. There were no announcements yet from major oil firm
Petron Corp. and small company Unioil Philippines. "International prices
are terrible. We cannot afford not to raise at the rate things are
going," Independent Philippine Petroleum Companies Association (IPPCA)
chairman Fernando L. Martinez said.
The country's top three oil companies -- Petron, Shell and Caltex --
have an estimated 80% market share with small players dividing the
remaining 15%-20%. Mr. Martinez said escalating prices of oil in the
world market had become "too problematic" on the part of consumers but
more so from the point of view of oil companies. He added oil companies
were left with no choice but to pass on any increase to consumers,
noting smaller firms would need to get back at least
PhP4 in under-recoveries since January 2002.
World oil prices maintained all-time highs with Dubai crude closing
at $41.26 per barrel yesterday, posting an August average of $38.74
compared to $34.65 a month ago. Mean of Platts Singapore (MOPS) unleaded
gasoline jumped to $55.18 per barrel spot price. The month-to-date
average is now $51.90 per barrel from $46.52 in July. Diesel, on the
other hand, increased to $55.26, posting an average of $51.57 from
$46.25 last month. MOPS is the benchmark being used by small oil
companies or importers, while oil refiners such as Petron Corp. and
Shell use Dubai as basis for pricing their products.
Instability in major oil-producing countries such as Iraq, Russia and
Venezuela has sent crude prices to surge to all time highs. In addition,
the constant threat of terrorism continues to cast doubt on how the
world will meet its future energy needs. The increase came on the heels
of a 30-centavo increase in gasoline, diesel and kerosene prices imposed
last week by the big three oil players and IPPCA members Eastern
Petroleum Corp., Flying V, Seaoil and Unioil. The price adjustment was
also a confirmation of a statement made by Consumer and Oil Price Watch
chairman Raul Concepcion at a Senate consultation yesterday that
consumers could expect another 30 centavos increase in local pump prices
this week. "There is an agreement between the Energy Secretary Vincent
Perez and private sector groups, including President Gloria Macapagal-Arroyo,
that the increases will be done weekly on a staggered basis instead of
one blow at the end of the month," he told reporters. He added that at
the end of the month, the Energy department and the oil firms would
compare the July and August pump prices to determine the reasonable oil
price adjustment. "We will have a reckoning period. We will compare the
prices on August from July. The difference will be basis for the
increase, less the deductions given to them and the under-recovery and
over-recovery that they have with us," Mr. Concepcion said. "Hopefully,
we can thresh this matter. Otherwise, we will have to adjust prices
every month," he added.
|
By MA. ELISA P. OSORIO, Reporter
The Supreme Court denied with finality the motion of
Solicitor-General Alfredo L. Benipayo asking that the
PhP25-billion tax case of wealthy Chinese tycoon Lucio Tan be
transferred to the Court of Tax Appeals from the Marikina Metropolitan
Trial Court (MeTC). In a one-page en banc resolution promulgated Aug.
17, 2004, the Supreme Court denied the motion for partial modification
as "no substantial arguments were presented to warrant the modification
of the questioned decision." In a motion for partial modification dated
July 26, 2004 submitted before the High Tribunal, Mr. Benipayo said
"although the Informations were filed with the MeTC, the Court of Tax
Appeals (CTA) can take cognizance of the instant criminal cases because
the MeTC has not fully acquired jurisdiction over the instant cases."
According to the motion, a court can only hear and try a case if the
court has jurisdiction over the issue to be resolved, jurisdiction over
the territory and jurisdiction over the accused.
In this case, the motion stated that Mr. Tan has not yet been
arrested or has he posted bail before the Marikina MeTC regarding the
informations for nine counts of tax evasion. "The third element is
indubitably absent. Thus, jurisdiction has not fully attached,
jurisdiction over the person is acquired upon his arrest or upon his
voluntary appearance," the motion said. With the implementation of
Republic Act (RA) No. 9282 on March 30, 2004, the CTA has been given
"exclusive original jurisdiction" over violations of the National
International Revenue Code. Based on RA 9282, the Court of Tax Appeals
has "exclusive original jurisdiction over all criminal offenses arising
from violations of the National Internal Revenue Code or Tariff and
Customs Code and other laws administered by the Bureau of Internal
Revenue." With the passage of RA 9282, the Congress has recognized that
it is the CTA which has the "proper technical competence" to try the
subject cases. As such, given that the Marikina MeTC has not yet
acquired in full the jurisdiction over the cases, there is no impediment
to transfer the case to the CTA in accordance with RA 9282.
The Supreme Court justices in en banc session last July 13,
unanimously voted for the reinstatement of the case against Mr. Tan and
nine "dummy" firms as the MeTC failed to make an independent finding on
the merits of the case. Instead, the court said, MeTC anchored the
dismissal on the position of the Bureau of Internal Revenue (BIR). "By
relying on the manifestation and motion of the BIR alone, it ignored the
positive findings of the panel of prosecutors, which had themselves,
painstakingly conducted the preliminary investigation on the subject
criminal liability of the respondents (Fortune Tobacco)," the court
said. According to the Department of Justice (DoJ) panel, Fortune
Tobacco and its nine "dummy" corporations defrauded the government in
undeclared ad valorem taxes. The case stemmed from a complaint filed by
the BIR on Sept. 7, 1993 before the DoJ alleging fraudulent tax evasion
for the company's nonpayment of the correct ad valorem, income and value
added taxes for 1992. The nine "dummy" corporations are Townsman
Commercial, Inc.; Landmark Sales and Marketing Inc.; Crimson Croker
Distributors, Inc.; Dagupan Combined Commodities Inc.; First Union
Trading Corp.; Carlsburg & Sons, Inc.; Omar Ali Distributors, Inc.;
Oriel & Co. Inc.; and Mt. Matutum Marketing Corp.
|
By KAREN L. LEMA, Reporter
The National Power Corp. (Napocor) should be allowed to increase its
rates to help the cash-strapped power utility reduce its burgeoning
debt, Finance Secretary Juanita D. Amatong yesterday said. Ms. Amatong
stressed that this one of the things the government must do to "restore
the financial health" of the state-owned firm and fulfill its commitment
to restructure the energy sector. "The most urgent thing for Napocor is
... [for it to] be back in health and reduce its deficit. There must be
some allowance ... it should be allowed to increase rates on
generation," Ms. Amatong said in a presentation to a gathering of the
American Chamber of Commerce and Canadian Chamber of Commerce in Makati
City. Ms. Amatong warned that Napocor's deficit would top
PhP100 billion this year, from
PhP66 billion in 2003, "unless rates are increased." Napocor's
deficit forms a big chunk of the country's consolidated public sector
deficit (CPSD), which, among others, takes into account the government's
budget shortfall as well as the financial situation of all
government-owned and -controlled corporations (GOCCs) and other public
financial entities. Napocor and the Power Assets and Liabilities
Management Corp., (PSALM) filed a joint petition for new generation
charges on June 22. They want the Energy Regulatory Commission (ERC) to
allow it to increase rates charged to distributors by an average
PhP1.87 per kilowatt-hour (kWh) nationwide. Napocor said the
increase will prevent a repeat of the '90s power crisis by attracting
investors who will build new capacity. The petition also seeks to
implement the time of use (TOU) concept for billing customers, which
will replace the current flat rate.
For Luzon, Napocor's proposed rate is
PhP4.56 per kWh from the current PhP2.57 per kWh. Customers in
the Visayas will have to pay
PhP4.59 per kWh from PhP2.82 per kWh while customers in Mindanao
will have to shoulder
PhP3.13 per kWh from the current PhP1.80 per kWh. If approved,
the rates will allow the firm to achieve a return on rate base of 8%.
Ms. Amatong explained that the government's failure to provide Napocor
with sufficient "capitalization" could be blamed in part for the
continued rise in its debts. She earlier said the government will
shoulder
PhP500 billion in Napocor debts as part of the Electric Power
Industry Reform Act's implementation. This, she said is expected to
boost the participation of the private sector in the country's energy
industry. The debt transfer is one of the commitments made by the
government to Napocor's major creditors to help facilitate the
privatization of the energy sector. Following the signing of the EPIRA
into law in 2001, the government has been aiming to privatize Napocor's
assets. PSALM was created by the law to dispose of all the assets of
Napocor, which include 35 power plants as well as several non-power
assets and real estate. PSALM is also mandated to privatize the National
Transmission Corp., a spin-off firm created under the EPIRA to take over
Napocor's transmission functions. Transferring the assets and management
of Napocor to private entities is expected to unburden the government
and will also help ensure adequate and reliable power. The government
has estimated it can earn up to
PhP136.5 billion from the sale of all the generating assets.
|
The Philippines will file a complaint against Thailand before the
World Trade Organization (WTO) over Bangkok's decision to impose higher
taxes on sport utility vehicle (SUV) exports of Ford Philippines ahead
of domestically manufactured vehicles. "Yes, we are prepared to lodge
our own protest with the WTO," Trade Secretary Cesar A.V. Purisima told
reporters. He did not provide other details aside from Ford's request
for it to handle the "Thailand side" of the problem. Board of
Investments managing head Elmer C. Hernandez said Thailand's move
amounted to "discrimination" against imported goods in favor of domestic
goods. "There should be equal treatment. You should not make a
distinction between foreign goods and local goods. You can impose as
many taxes as you want but you should treat foreign goods and local
goods equally," Mr. Hernandez said. Thai Cabinet ministers overhauled
the automobile excise tax scheme in July to favor fuel-efficient
vehicles and encourage the use of alternative fuels such as natural gas.
As a result, the category of "off-road purpose vehicle" or OPV, under
which SUVs are classified, will be abolished. In Thailand, OPVs enjoy
lower taxes at 29% as against passenger cars which are taxed 35% to 48%
depending on engine displacement. This scheme will be replaced by a
single four-tiered system that will tax all vehicles regardless of type,
also on the basis of engine displacement, with small cars enjoying the
lowest rate of 30%. Ford Escape compact SUVs manufactured in the
Philippines will be hardest hit, with new rates of as much as 40% set to
take effect next month, an industry source said. Escape's 2.3-liter
version falls on the second tier, for vehicles with 2,100 cc to 2,500 cc
engines, which will be taxed 35%. The 3.0-liter version falls on the
third tier, for vehicles with 2,500 cc to 3,000 cc engines, which has a
corresponding rate of 40%. The source said Thailand will implement the
new excise taxes some time in September, ahead of domestically produced
vehicles which will not be covered until Jan. 1, 2005. The source said
as much as 7,000 Ford Escapes would be affected, citing preliminary
estimates. The "unfair" treatment has raised speculation that Thailand
is aiming to snatch Ford's Philippine operations, the source said.
|
By Ma. ELISA P. OSORIO, Reporter
BPI Family Savings Bank, Inc. said First Metro Investment Corp. is
entitled to an interest rate of only 6% and not 17% as claimed by the
investment house in a case involving units of the country's largest
lenders. In an eight-page reply, BPI Family Bank said First Metro is not
entitled to a full-year interest rate of 17% since the money was not
deposited to BPI Family for a full year. First Metro earlier asked the
Supreme Court to compel BPI Family Bank to pay it
PhP387.24 million -- arrived at by computing a 12% interest on a
17% interest on principal for each year the bank failed to pay what was
due to the investment house. The case stemmed from the transfer of PhP80
million on August 29, 1989 by BPI Family Bank from the current account
of First Metro to the savings account of Tevesteco. The transfer was
deemed "fraudulent and unauthorized." First Metro withdrew the remaining
PhP20 million in its account a month later. First Metro is the
investment house of the country's biggest lender, Metropolitan Bank and
Trust Co., while BPI Family Bank is the savings bank unit of second
largest lender Bank of the Philippine Islands.
In its reply, the savings bank said the "depositor-depository
relationship between BPI Family and First Metro Investment ended on
September 28, 1989 when the latter withdrew its remaining deposit of
PhP20 million." It said the applicable law in this case is Article 2209
of the New Civil Code as it concerns "loss of property," not loan. Thus,
if the court finds that an interest must be paid, it is only 6% per
annum from "the date of the trial court's decision." On the interest on
interest, BPI Family Bank said First Metro is not entitled to one
because Article 2212 of the Civil Code does not apply, thus it can't be
held liable for quasi-delict with the stipulated interest deemed
ineffective upon the termination of the depositor-depository
relationship. In an August 12 filing of a comment, First Metro said a
12% interest on the 17% interest remain unpaid for each year up to the
point when it is fully paid. Therefore, it should earn interest during
those years. "The 12% interest on the 17% interest shall be computed on
a yearly basis, and then the interest, with the total of these yearly
12% interests being multiplied by the number of years that the total
accumulated interest remains unpaid," the comment said.
Based on the May 21, 2004 court decision, First Metro said the base
amount for the computation of interest is "from October 4, 1989 until
fully paid." However, BPI Family Bank, in its motion for reconsideration
said the 17% interest shall only earn the legal interest of 12% from the
time of the extrajudicial demand until the date of the judicial demand.
In this case, it would be from August 29, 1989 to October 4 of the same
year. This translates to a mere 36 days 12% interest on the 17%. First
Metro disagrees. "All that a debtor would do is avoid or delay paying an
obligation," the comment said. The comment further alleged that in the
letter of BPI Family Bank to First Metro dated June 16, 2004 or a day
before the bank filed a motion for reconsideration, it admitted
liability for the 17% per annum interest up to the date of payment and
was merely proposing an alternative formula for computing the interest
on interest. If the computation of the bank were to be followed, it
would pay only a total amount of
PhP231.67 million. According to the letter, the interest amounted
to PhP164.41 million and the interest on interest was PhP1.93 million.
The First Metro comment stated that the allegation of the bank that the
principal amount should earn the 17% interest for a limited time only is
without merit. In the letter-guaranty given by the bank to the
investment house on August 15, 1989, it said a 17% interest per annum
would be imposed on the amount deposited. "Petitioner [BPI Family Bank]
has delayed payment for 15 long years and now would like to ask this
Court to reward the delay by decreeing a lower rate of 12% p.a. instead
of the clear stipulation of 17% p.a.," the comment said.
|
SINGAPORE -- Asian currencies were barely changed yesterday morning,
with the Singapore dollar and Korean won near one-month highs, as lower
oil prices and rising equity markets propped up the Japanese yen. The US
dollar trod water as markets waited for US GDP and Japanese economic
data due later this week, with the yen just off one-month highs near 109
a dollar. NYMEX crude oil prices for the October contract traded under
$47 a barrel. The September contract had hit a record high of $49.4 a
barrel on Friday amid escalating violence in Iraq, its 15th record in 17
sessions, before easing to settle under $48. Asian currencies did little
last week, and traders said a listless yen would continue to dampen the
regionals this week. Still, oil remained the dominant factor. Seasonal
interest payments on overseas investments and short-covering supported
the yen, as did the modest drop in oil prices. Japan imports all its oil
needs. The Singapore dollar was quoted at 1.7040/50 at 2:00 a.m. GMT,
its highest levels in a month, and the Korean won near 1,152 a dollar,
also its highest since July 15.
Analysts said even if the surge in oil prices seen in the past couple
of months proved to be short-lived, Asian currencies would not be able
to sustain any strength. "Maybe the move down in oil that we saw on
Friday will provide a little bit more support for these currencies in
the short term," said James Malcolm, currency strategist with Deutsche
Bank. "But we certainly can't get too bullish on the regionals in the
medium term." "Even if oil retraces back from here, the impact that is
going to be felt on current accounts, on growth and on inflation in the
second half of the year will be considerable and I think markets are
underestimating that," Malcolm said. To some extent that impact was
beginning to be felt in South Korea, Malcolm said, where dearer oil and
the worry that domestic demand had not recovered were causing foreigners
to sell equities. Korea and Thailand rank among those in the region with
the highest proportion of oil in their imports, next to Japan. But
analysts said Thailand's stock markets had underperformed this year and
foreigners had been selling Thai equities persistently. The baht was
quoted around 41.40/45, its highest in 10 days, and is expected to find
support heading into Wednesday's central bank policy meeting when rates
are expected to be raised. The baht is however down about two percent in
a month. Deutsche's Malcolm said there seemed to be reallocation in
foreign portfolio flows into the region. "We are getting a new trend in
terms of foreign equity flows in the last 4-5 days. Foreigners are
selling in Korea and buying in Thailand and buying more aggressively in
Taiwan," he said. The Taiwan dollar was on the weaker side of 34 per
dollar, yet within striking distance of a one-week high of 33.99.
-- Reuters
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The Bangko Sentral ng Pilipinas (central bank) has tightened further
the rules on interlocking bank directorships in a bid to strengthen
banks through better management. The regulator's policy-making Monetary
Board approved last week a new circular, expected to be issued soon,
that would detail new rules on interlocking directorships to make sure
that there are no conflicts of interests. "The board has already
approved the new rules," a central bank official said yesterday. The
source said the new circular aims to provide clearer rules on which
positions banking officials can hold. "This is part of continuous
efforts to improve the financial system. We want to deter conflict of
interest." Based on existing rules, interlocking directorships are
prohibited but there are certain exemptions. The official said
regulators will still allow some of the exemptions but some of the
provisions will be clarified in the circular to make sure there are
really no conflict of interests.
According to another circular issued last March, the Monetary Board
allows interlocking directorships between a bank and not more than two
of its subsidiary financial institutions or between two banks and one of
their subsidiary non-bank financial intermediaries. The regulator also
allows bank executives to occupy multiple officer positions between
banks or between a bank and a non-bank financial intermediary, other
than an investment house. This, however, is subject to a condition that
at least 20%, but less than majority of the equity of each of the banks
or intermediaries, is owned by a holding company. "Interlocking
arrangement must be necessary for the holding company or the bank to
provide technical expertise or managerial assistance to its affiliates,"
the circular said. Another condition for this is that the positions to
be held by an officer should not involve any functional conflict of
interests. Bangko Sentral Deputy Governor Alberto V. Reyes earlier said
the board did not want the financial health of banks compromised by
directors with conflicting interests. He said directors should act as
true fiscalizers and champion the interest of stakeholders.
-- Iris Cecilia C. Gonzales
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Philippine Bank of Communications (PBCom) will auction off today
PhP12.5 billion worth of foreclosed properties and bad loans as
scheduled, a top bank official said yesterday. "It is all systems go.
The bidding will be in the afternoon. We will look at the bids and
record them. The bidding rules have been sent out. The winning bidder
will be known after the evaluation," PBCom president Isidro C. Alcantara,
Jr. said in a phone interview. The publicly listed bank earlier told the
stock exchange 14 local and foreign investors led by Bank of America,
Deutsche Bank, Ayala Corp. and Robinsons Land Corp. were keen on its
idle assets. Among the entities already conducting due diligence on
PBCom are the Bank of America, Deutsche Bank, Sovereign Fund, and
Marathon Fund.
Out of the total asset portfolio that will be put on the auction
block, 50% will be composed of nonperforming loans while the remaining
half will be nonperforming assets or those classified as real estate and
other properties owned or acquired. Sources said the winning bidders can
be named two to three days after the bidding. PBCom is confident that it
can meet the September deadline set by the central bank for local banks
to sell their bad assets to a special purpose vehicle that can avail of
tax perks. -- R. A. M. Rubio
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By RUBY ANNE M. RUBIO, Reporter
HONG KONG -- Financial institutions in the Philippines are upgrading
their wealth management services as they recognize the potentials of
addressing the affluent's increasingly sophisticated needs, London-based
Hongkong and Shanghai Banking Corp. (HSBC) said. "There are more banks
offering wealth management. That is an increasing trend. They have
recognized there is an emerging class who need to be serviced in a
different way," HSBC (Philippines) senior vice-president Patrick D.
Cheng said in a media briefing at the bank's Hong Kong headquarters at
Queen's Road Central. Mr. Cheng, who heads HSBC's global wealth
management proposition called Premier, said the market "is not yet
mature" and "continues to grow." "There is room for improvement. There
are people in different financial institutions. If they consolidate,
they will be able to avail of the services. The market by no means is
fully saturated," he added. Described as a comprehensive practice of
providing financial products and advisory services, wealth management
uses a consultative relationship to assist clients, their families and
businesses in the accumulation, preservation and transfer of wealth.
Combining expertise in international finance markets and local knowledge
to bring innovative products and services, HSBC has acknowledged the
customer's affluent lifestyle, personal interests and aspirations
through Premier banking.
HSBC Premier clients have access to a personal portfolio manager who
provides information on market developments, new products and overall
portfolio management. "Recognizing these people have certain needs,
Premier is not just in the Philippines but an international standard
HSBC has done for the affluent clients. The level of service is
different. It is one-on-one personalized service provided by a dedicated
portfolio manager. In regular banking, you can speak to anyone. Premier
portfolio managers take time and effort to know their customers and
tailor-fit solutions according to client's needs. It is the level of
service," Mr. Cheng said. Redefining financial lifestyle, Premier
banking builds a relationship by treating customers as individuals and
anticipating their needs. "This has been developed to acknowledged a
client's lifestyle. When they have reached a certain lifestyle, where
they have certain interests, we need to improve financial service
delivery and capability to meet their expectations and wants," he said.
"While some categorize banking as a lot of numbers, it transcends to
mere financial figures. We keep ourselves continuously very close to our
clients. We need to incorporate lifestyle banking through three Rs:
recognition, relationship and reward."
Aside from having a personal portfolio manager who assists in
selecting appropriate investment opportunities based on financial goals,
clients also have access to a wide range of high-yielding investment
instruments and offshore and insurance referral services. There is a
wide choice of currencies and deposit tenors, too. "One of the mandates
of HSBC for Premier is to keep expanding the product range. While these
may be good for now, in the next couple of months, we will try to offer
more products and services so people can diversify," he said. HSBC noted
banking becomes relevant, convenient and attuned to customer's lifestyle
because of level of services and range of perks of the service. A client
has access to 11 exclusive Premier centers in the Philippines and in 32
countries and territories worldwide. A Premier Center is an exclusive
banking center designed according to global standards where the prime
customer can perform all his banking transactions with the help of a
portfolio manager in the privacy of his own meeting room. Aside from
24-hour access to internet banking and mobile banking services, there is
instant recognition at any HSBC office worldwide. "Premier customers
either travel a lot or have overseas banking needs so they value that
HSBC, as the world's largest local bank, is able to connect them to our
global network of offices," he said.
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By JENNEE GRACE U. RUBRICO, Senior
Reporter
The Securities and Exchange Commission (SEC) has sounded alarm bells
over the possible resurgence of boiler rooms. SEC Commissioner Joselia
J. Poblador said the commission is looking into reported boiler room
operations in Cebu, Pampanga, Davao and Pasig. A boiler room is an
operation out of a low-rent office that uses high-pressure sales tactics
or false or misleading information to sell securities to potential
investors. The modus operandi of boiler rooms involves the setup of a
corporation without the necessary licenses required under the Securities
Regulation Code to deal in securities which are either nonexistent or
unlicensed. "They [boiler rooms] may be testing the waters again. Right
now, they're just suspicions," Ms. Poblador said. She said the SEC had
been tipped off on the possible resurgence of boiler rooms by a
complaint filed by an Australian national through e-mail. The letter,
she said, contained the same complaint that the commission had received
three to four years earlier. She said the boiler rooms are apparently
victimizing foreigners, which could be bad for the Philippines'
international reputation. She said the perpetrators pretend to be call
center agents. "But we are not running after call centers," Ms. Poblador
said.
Outgoing SEC Chairman Lilia R. Bautista said the SEC has already told
the call center organization "to do something about it because it gives
them a bad name." In 2002, the SEC issued a cease and desist order
against alleged boiler room operator United Capital Management, Inc. (Unicap).
The SEC initiated its probe on Unicap in response to numerous complaints
from foreign investors and clients who claimed to had been defrauded of
their investments in foreign securities. SEC records showed that Unicap
has no license to engage in the buying or selling of securities.
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Universal Rightfield Property Holdings, Inc. is asking the Securities
and Exchange Commission (SEC) to reconsider an order which revoked the
registration of securities of unit Universal Leisure Club, Inc. It also
asked for a reconsideration of an order for the leisure club to refund
investors their payments for club shares. Universal Rightfield said the
leisure club is also filing a motion for reconsideration relating to the
orders, a disclosure at the Philippine Stock Exchange said. The SEC had
revoked the leisure club's registration to sell securities and permit to
sell securities after the regulator's compliance and enforcement
department found the leisure club completed only two of five projects it
had promised to undertake. The SEC had also said the club failed to
disclose that some properties acquired for the projects were mortgaged
prior to the issuance of the company's prospectus. Separately, the SEC
ordered the leisure club to refund its investors. Rule 13 of the
Securities Regulation Code states that if the SEC revokes a registration
statement, or suspends the registration of a company, the firm "has the
duty" to refund all investors.
Universal Rightfield said "The Club has filed a motion for
reconsideration and supplement thereto questioning the jurisdiction of
the SEC in issuing said orders." Universal Rightfield also said it is
completing the requirements and conditions necessary for the lifting of
a separate SEC order suspending its registration of securities and
permit to sell securities to the public for failing to submit its 2003
annual report and first-quarter report. The commission had said it
"shall proceed with the revocation of the company's registration of
securities," if Universal Rightfield fails to submit the required
corporate reports. Universal Rightfield said it is "taking legal steps"
regarding allegations of massive fraud against its leisure club unit.
The company also clarified that it was not ordered closed by the SEC and
denied having ties with Consunji firm DMCI, Inc. "Corporate records will
show that the company was a result of a merger between Rightfield
Property Ventures, Inc. and Universal Petroleum Exploration Inc.," it
said. This, after the minority stakeholders of the leisure club, the
investors who filed the fraud complaints against the company and
Universal Rightfield, said they would go after the assets of the
Consunji group in relation to the SEC's order for the leisure club to
refund investors. Maricel Lopez, lawyer of the minority group, alleged
the Consunji group had pocketed the investments made by her clients in
the leisure club and must be made to return the money. She said that one
of Universal Rightfield's founders, Rightfield Property Ventures, Inc.,
is owned by DMCI. -- Jennee Grace U. Rubrico
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By CECILLE S. VISTO, Sub-Editor
Metro Pacific Corp. registered an unaudited net loss of PhP5.9 milion
in the first half, a reversal from PhP93.9 million in profit in the
year-ago period. In a disclosure to the stock exchange, the local unit
of Hong Kong-listed First Pacific Co. Ltd. said it was mainly dragged by
the losses of shipping arm Negros Navigation Co. (Nenaco) in the first
six months despite higher profits of real estate arm Landco Pacific
Corp. (Landco). "While we were disappointed with the extent of the
problems at Nenaco, in which substantial provisions have been made, we
have been heartened by its prospects for recovery under a court-approved
rehabilitation program," said Metro Pacific President and Chief
Executive Jose Ma. K. Lim. "Setting that aside, prospects of our core
property business are increasingly favorable. Landco continues to
expand, and interest in our property portfolio is healthy. Our work
continues and our efforts redoubled, as we strive to rebuild Metro
Pacific," Mr. Lim added. Notably, Metro Pacific booked a PhP3.9-million
profit from January to March from a PhP59-million loss in the same
period last year. This was attributed to the improving profitability of
Landco and Pacific Plaza Towers, and lower financing charges resulting
from debt reduction exercises. But Nenaco, 97% owned by Metro Pacific,
proved too much of a burden in the second quarter. Nenaco had sought
court-mandated rehabilitation program in March due to its inability to
pay some PhP2.4 billion in bank and trade loans.
For the first six months, Nenaco alone reported a net loss of PhP335
million versus a PhP62.7-million profit in 2003 due to the reduction of
vessels in service and extended drydocking of other ships. Consolidated
net revenues from January to June was at PhP1.6 billion, 20% lower than
the PhP2 billion it earned previously. However, operating expenses were
reduced by 16% to PhP311.7 million while financing charged declined by
29% to PhP313.4 million. Pacific Plaza also failed to sustain its
financial performance for the second quarter, ending the first half with
a net loss of PhP16.4 million as against the PhP7.9 million reported in
2003. The reversal, Metro Pacific said, was due to lower net values
realized from exchange or sale of various units for the retirement of
certain obligations. To neutralize Pacific Plaza's losses, Landco
reported a net profit of PhP32.9 million for the first half, a 133.3%
improvement over a PhP14.1-million profit previously. Landco cashed in
on brisk sales of its residential farming projects. |
Lopez-led Bayan Telecommunications, Inc. (BayanTel) opened satellite
offices in Japan and the United Kingdom to tap the market of overseas
Filipino workers based there. BayanTel recently opened BTI Global
Communications, Inc., in Tokyo and BTI Global Communications Ltd. in
Hampshire. The firm aims to tap the market of more than 300,000
Filipinos in Japan. Vice-president for international business Sherry Ann
Supelana said more than 355 million minutes of Japan's international
outgoing calls go to the Philippines annually. "The Philippines is the
third top destination of voice calls emanating from Japan. There are
more than 300,000 Filipinos living in Japan and most of them are
high-income earners," Ms. Supelana said in a statement. "By giving them
access to affordable and reliable telecommunication services, we also
help build stronger connections with their families in the Philippines,"
she added. BayanTel said it will open business opportunities for the
distribution and reselling of its international prepaid cards in Japan.
It also intends to serve more than 250,000 Filipinos working in Europe.
BayanTel did not disclose how much its international operations would
contribute to growth this year. Chief consultant Tunde Fafunwa said the
firm targets revenues of
PhP5.7 billion this year. -- A. B. L. Lorenzo
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The Metro Rail Transit III (MRT) consortium has paid $3.1 million in
interests due on its bonds this month. Philippine Ratings Services Corp.
(PhilRatings), in a statement, said the Bank of New York has notified it
that the note interest due on Aug. 10 was paid on schedule. "Information
on bank balances show a total of about $10.2 million in the collection,
liquidity reserve, and reserve accounts, also as of Aug. 10. This amount
is sufficient to cover coupon payments falling due in February 2005,
August 2005, and February 2006," the local ratings agency said.
PhilRatings could not immediately confirm whether the Transportation
department met its payment deadline to Japanese creditor, Sumitomo
Corp., on July 31. Sumitomo ensures the rail network runs efficiently.
The Transportation department and Sumitomo have an existing
restructuring agreement for millions in unpaid maintenance rental fees.
"No official written confirmation has been received by PhilRatings to
date, although verbally, PentaCapital Investment Corp., issue manager
for the notes, has stated that payment has been effected," PhilRatings
noted. -- Cecille S. Visto
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By ROULEE JANE F. CALAYAG
An absence of fresh developments yesterday dogged the stock market,
which closed lower after investors scurried to the sidelines. Just after
heaving a sigh of relief over the easing of oil price increases, share
prices plunged anew, challenging the upbeat outlook for the week.
PROFIT-TAKING
Trading was mixed as the Philippine Stock Exchange composite index (Phisix)
tumbled 6.66 points lower at 1,576.18 on profit-taking. Roberto Cano,
senior analyst at BPI Securities, Inc., said it was not the warning of a
group of economists that the Philippines is on the brink of financial
collapse that drove share prices downward. "It was more of profit-taking
on a mixed trading session," said Mr. Cano, adding this was notable in
the prices of "A" shares of San Miguel Corp., SM Prime Holdings, Inc.,
Petron Corp., and Manila Electric Co. (Meralco). He added that the lack
of news pushed investors more to cash in on gains while they took
positions in some stocks.
WARNING FROM ECONOMISTS
Luminaries from the University of the Philippines such as former
economic planning secretaries Felipe Medalla and Solita Monsod, former
budget secretary Benjamin Diokno, and economists Emmanuel De Dios
Emmanuel Esguerra, Raul Fabella, Ma. Socorro Gochoco-Bautista, Ernesto
Pernia, Renato Reside, Gerado Sicat and Editha Tan had published a
report that sounded an alarm over the country's financial status. The
authors warned that the country may experience a crisis similar to that
faced by Argentina and Turkey because of its growing dependence on
borrowing. To avert an impending crisis, the economists said, the
government must launch an intensive campaign to convince investors that
it is not slack in averting bankruptcy. Mr. Cano said the warning may
have stirred some sentiment but the market's lackluster performance
yesterday could not be "attributed" entirely to it.
Another analyst had earlier dismissed the warning as just another
revived issue which the country is already aware of. The issue that
matters, some traders said, would be how the government could present
ways to curb its borrowings and stop the budget deficit from further
ballooning. At a time when the economy is beginning to move out of the
shadows of uncertainties, investors are looking for assurance from the
government that it can manage the situation. In response to the alarm
sounded by the group, President Gloria Macapagal Arroyo asked her
economic managers to stay on her team. Mrs. Arroyo made the appeal after
an initial Cabinet revamp last week. She also urged people to brace for
more uncertainties as the country traverses a sensitive path to
recovery.
INDICES
Except for the oil counter, all the indices were down. Mining
suffered the biggest decline of 73.57 to 1,811.83. Commercial-industrial
slid 9.61 to 2,513.80. Property shed 2.65 at 513.80 while banks and
financial services lost 1.52 at 458.35. The all shares index was down by
6.08 to 1,004.80. The market generated
PhP441.4 million from trading total shares of 3.3 billion. There
were 2,851 transactions for 105 traded issues. Advancers lost to
decliners, 27-35, while 43 stuck to their previous levels.
PLDT
Telecom giant Philippine Long Distance Telephone Co. continued to be
on top of the most actively traded stocks list, rising fives pesos to
PhP1,275 on 86,380 shares traded. A report that its mobile phone unit,
Smart Communications, Inc., is eyeing Hong Kong as a site to launch a
mobile phone service outside the country generated interest among
investors. Smart will launch in Hong Kong in the next few days to tap
thousands of Filipino workers there. It will be offering wireless
services through prepaid phone cards. The company will capitalize on its
ability to offer call and text services through 1528 Smart which is 50%
cheaper than those offered by other Hong Kong operators. Smart will
later expand to Japan in partnership with NTT, a telecom leader there.
Mr. Cano said the plan is brilliant because with it, Smart can tap
another "specific" segment of the growing Filipino market which could
push the company's earnings. While this may not be the regional
expansion plan that the mobile phone firm talked about some time ago, it
signifies Smart's initiatives to start spreading its wings in Asia.
REVIEW
Meanwhile, some good news come to the Philippine Stock Exchange which
stands to gain from a review of registered companies at the Board of
Investments. Trade and Industry Secretary Cesar Purisima has said the
listing of the 5,000 companies registered with the agency was "a great
opportunity to help develop the capital market." Under the Omnibus
Investments Code of 1987 or Executive Order No. 226, firms listed with
the investment agency must sell at least 10% of their shares to the
public within 10 years upon registration.
BPI
In other corporate news, Ayala-led Bank of the Philippine Islands
Bank of the Philippine Islands (BPI) reported that the Bangko Sentral
accredited it to serve as a securities custodian. This makes BPI
responsible for the safekeeping of securities which are sold, borrowed,
purchased, traded, held under custody or transacted in the Philippines
where at least one of the parties involved is a bank or nonbank
financial intermediary under the central bank supervision. BPI said it
is the only local bank to be accredited as an independent custodian.
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