Tuesday, July 06, 2004
Shares close flat on profit taking
Financial regulators agree to consolidate
ADB sets up fund vs money laundering, terrorism
Central Bank warns Executive on looming fiscal crisis
RP-Japan free trade talks resume
Monetary Board likely to keep key rates unchanged
Upbeat second quarter seen
Bids for most debt papers junked
Court asks for Meralco, ERC comments on rate hike issue

Land reform ridden with loopholes

Monday, July 05, 2004
Amex Bank picks RP for next global backroom office
Ecozone exports up 36%
Supreme Court asked to reconsider ruling versus Meralco rate increase
Population a key issue in meeting President's targets
SEC sets rules for checking dirty money law compliance
Traders seen to bid up T-bill rates
Market awaits quarterly reports, inflation data
SEC to tap World Bank assistance for survey on financing companies
CAP trust fund deficit hits PhP17B
Special Report: In Tarlac, CARP gives land to the wealthy

July 1 - 2




Shares close flat on profit taking

Joel Francis Guinto

SHARE prices closed flat on Tuesday amid profit taking, with investors' sentiment dampened by a surge in inflation, dealers told The composite index closed 1.02 point or 0.06 percent higher at 1,590.95 on volume of 709.22 million shares worth 370.03 million pesos.

In the broader market, gainers outnumbered losers 35 to 29 while 45 stocks were unchanged. Philippine Long Distance Telephone Co. (PLDT) was top traded. It closed five pesos higher at 1,225 on volume of 60,860 shares. "Investors are staying on the sidelines, selling on any strength but not buying," DA Securities president Nestor Aguila said. "The market has risen so strongly before the inauguration of President Gloria Macapagal-Arroyo and (Tuesday's decline) is due to a technical correction," Aguila added.

Before the market opened, the National Statistics Office (NSO) announced inflation in June accelerated to 5.4 percent, compared with 4.7 percent in May. The figure was based on 2000 prices. Based on 1997 prices, inflation rose 5.1 percent in June.



Financial regulators agree to consolidate

Financial regulators yesterday agreed to establish a common regulatory and supervisory framework against fraudulent practices and transactions.

Through a memorandum of agreement, Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP), Securities and Exchange Commission (SEC), Insurance Commission, and Philippine Deposit Insurance Corp. formed the Financial Sector Forum, which would help them oversee financial deals.

"The forum is essentially a voluntary cooperative endeavor of the concerned agencies to provide an institutionalized framework for coordinating the supervision and regulation of the financial system, while preserving each other's mandate," BSP Governor Rafael B. Buenaventura said. He also stressed the forum was not a regulatory superbody.

"However, understandings reached by the forum are expected to be implemented by the member agencies in the interest of enhancing the overall supervision process," he said. He also said the forum would focus on "identifying and filling in the gaps and eliminating overlapping functions in the current supervisory regime."

It would also improve reporting and information dissemination processes among different agencies. And this would need comprehensive rules on disclosure and a harmonized regulatory reporting. The agencies will also establish database linkages to facilitate faster, more accurate transfer of information.

Mr. Buenaventura said the forum would also undertake initiatives on consumer protection and education to curb unlawful and unethical business practices. PDIC president Ricardo M. Tan said the forum would enhance coordination among the different agencies. Regulators are also stepping up efforts to strengthen the country's capital market. -- I. C. C. Gonzales


ADB sets up fund vs money laundering, terrorism

By JENNIFER A. NG, Reporter

The Asian Development Bank (ADB) has established a $3-million trust fund to assist developing member-countries in their fight against money laundering and terrorism. The governments of Australia, Japan and the United States contributed $1 million each to the Cooperation Fund for Regional Trade and Financial Security Initiative (CFRTFSI). ADB said the fund will run for three years. "The fund will allow ADB to play a more active role in building regional capacity for anti-money laundering and controlling the financing of terrorism and will help in carrying out APEC's secure trade agenda," ADB President Tadao Chino said in a statement.

ADB said CFRTFSI will be given as a grant and is open to all of the multilateral funding institution's developing member-countries, especially those that are part of the Asia-Pacific Economic Cooperation (APEC) such as the Philippines and those that are considered most at risk. The fund will support technical assistance to enhance port security (including airports, cargo ports, and containers) and combat money laundering and the financing of terrorism in developing countries.

ADB said the fund's scope will include the establishment of financial intelligence units and legal and supervisory regimes for anti-money laundering and promote the upgrade of customs security and modernization. CFRTFSI will also complement measures under the Secure Trade in the APEC Region Initiative, which focuses on protecting cargo, ships, international aviation, and people in transit.

"Priority will be given to high impact projects that can catalyze other investment and policy reforms and have a good chance of local or regional replication," said Rita Nangia, director of ADB's Finance and Infrastructure Division, which will manage the fund. The fund was proposed by the US late last year to help assure sustainable economic growth in the Region by enhancing and strengthening of trade and financial security. At the last APEC meeting, held in Bangkok, APEC leaders reportedly supported this proposal.

CFRTFSI is expected to help boost efforts of developing countries such as the Philippines to fight money laundering and terrorism. The Philippines remains in the blacklist of Paris-based Financial Action Task Force for not strictly implementing anti-money laundering rules and regulations.


Central Bank warns Executive on looming fiscal crisis

The government will face a fiscal crisis unless it collects more taxes and meets its budget deficit target, Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) Governor Rafael B. Buenaventura warned yesterday. "What we need to do is to address the problem. If we do not address it, there will be a crisis," Mr. Buenaventura told reporters. The government projects a budget deficit of PhP197 billion this year, from PhP199 billion last year.

Mr. Buenaventura also said the government aim of balancing the budget by 2009 would require PhP50 billion to PhP100 billion in additional taxes every year in the next five years. The BSP chief also warned against suspending the release of local government's share in national taxes, as required by law. He said foreign creditors could get the false impression that the government was about to default on its bond sold abroad. "We are clearly not in that situation," he said, as he noted most of the country's foreign borrowings were long-term, with average maturity of 19 years. The Philippines, Asia's largest foreign borrower, has a total outstanding external debt of $56.7 billion. Mr. Buenaventura said the government needed to focus on raising revenues and implementing tax laws. -- Iris Cecilia C. Gonzales


RP-Japan free trade talks resume

Agreements on 'sensitive areas' still to be reached

CEBU (central Visayas) -- Delegates from the Philippines and Japan met in Cebu yesterday for three days of talks aimed at firming up a free trade agreement between the two trading partners. At least 96 Japanese officials and 70 Filipinos gathered here for the negotiations, the latest in a series that began after Japanese Prime Minister Junichiro Koizumi and President Gloria Macapagal Arroyo agreed in 2002 to look into the possibility of such an accord.

Details of the talks in Cebu were not disclosed but a document said the Japan-Philippines Economic Partnership Agreement draft, being worked on at the meeting, already covered trade in goods and services, rules of origin, customs procedures, paperless trading, mutual standards and investments.

It also covered movement of persons, intellectual property rights, government procurement, competition, financial services, communication technology, energy, science and technology, human resources, small and medium enterprises, broadcasting, tourism, dispute avoidance and settlement. However both sides also identified "sensitive areas to both countries", which may need further talks on investment rules, services, mutual recognition arrangements, government procurement, rules of origin, competition, intellectual property and agriculture, the document said.

This is the third such meeting of the two countries' working groups, the document said, adding two more meetings were likely to be needed before the draft was completed by end-2004. Earlier, Japanese Foreign Ministry press secretary Hatsuhisa Takashima said the talks were being hampered by the Philippines' efforts to get Japan to accept more of its caregivers and construction workers. Associations of Japanese nurses and construction workers opposed this, he said.

However he said he was hopeful that the Philippines would complete its free trade talks with Japan ahead of Thailand and Malaysia, which were also seeking similar accords. "Japan is very much looking forward to concluding the (agreement) with the Philippines as the time has come to show the world that economic relations between and among the East Asian countries is becoming closer and stronger," Takashima said last week during a visit to the Philippines -- AFP


Monetary Board likely to keep key rates unchanged

Monetary authorities are likely to keep overnight rates unchanged for the rest of the year even if the United States implements another rate increase. Bangko Sentral ng Pilipinas (BSP, or the central bank) Governor Rafael B. Buenaventura yesterday said the policy-making Monetary Board (MB) has already factored in another rate hike of less than 2% by the US Federal Reserve.

"Obviously if the Fed increases by 2%, we may have to assess again," Mr. Buenaventura told reporters yesterday at ceremonies marking the central bank's 11th anniversary. In its July 1 meeting, the MB kept policy interest rates unchanged for the twelfth straight month, at 6.75% for overnight borrowing and 9% for overnight lending, despite a US Fed rate hike.

The Fed raised interest rates by 25 basis points to 1.25%, the first increase in four years, to head off inflation in the growing US economy. The Fed is expected to implement a gradual increase in interest rates within the year.

The BSP usually matches any rate increase by the US Fed to keep the peso stable and at the same time encourage investors to keep their money in the Philippines instead of the US or other markets where interest rates are higher. Mr. Buenaventura said the market, particularly T-bill rates which are used as a benchmark by banks for their lending rates, has already adjusted.

He also said the BSP -- which is mandated to keep a stable inflationary environment -- is still optimistic that inflation will remain within its target of 4%-5% by yearend. "It may not be necessary to increase rates," Mr. Buenaventura said but conceded that inflation next year could be much higher than the target range of 4%-5%.

The National Statistics Office is scheduled to release inflation figures for June today. The BSP forecasts inflation in June to stay within 4.2%-4.8% but officials said it could be much higher because of higher transport costs. Mr. Buenaventura said inflation for the month could be "much higher-than-expected," a view shared by BSP Deputy Governor Amando M. Tetangco, Jr. Nevertheless, Mr. Buenaventura said monetary authorities agree that the inflation environment in the coming months ahead does not warrant a monetary tightening. Inflationary pressures are largely supply-driven and are therefore not influenced by monetary action, Mr. Buenaventura said. -- Iris Cecilia C. Gonzales


Upbeat second quarter seen

Second quarter economic growth is expected to be upbeat given leading economic index (LEI) figures. Data from the National Statistical Coordination Board (NSCB) showed the country's LEI, which measures business cycle trends, rising for the quarter to a positive 0.347 from a positive 0.244 in the first quarter.

The LEI is a measure developed jointly by the NSCB and the National Economic and Development Authority to provide advanced information on the direction of the country's economic performance in the short term, in this case, at least three months before actual economic figures for a particular quarter are reported. The LEI is computed using 11 leading indicators that consistently move before the actual expansion or contraction in overall economic activity. Seasonal factors are removed from these data, which are assigned weights, indexed and summed up.

During the review period, seven of the 11 leading indicators contributed positively to the index: money supply, imports, consumer price index, exchange rate, tourist arrivals, stock price index and terms of trade. Movements in money supply, imports and tourist arrivals have a two-quarter lead over gross domestic product (GDP), or the total value of goods and services produced within the economy.

Preliminary data from the Bangko Sentral ng Pilipinas (or the central bank) showed that domestic liquidity or money supply reached PhP1.725 trillion as of December last year, up from PhP1.67 trillion the previous year. Domestic liquidity is the total amount of cash and "near cash" items circulating in the local financial system. Meanwhile, imports jumped 8.4% to $9.496 billion in last year's fourth quarter against $8.757 billion during the comparable period a year ago, driven mainly by higher shipments of capital goods.

Statistics from the Department of Tourism also showed visitor arrivals rose 18.4% to 576,810 in the fourth quarter from 487,002 during the same period a year earlier. The CPI, meanwhile, has a three-quarter lead over GDP. The positive contribution of the CPI, which consists of a basket of goods and services, may be traced to the moderate increases in prices of goods in last year's third quarter.

Leading indicators in the LEI that tempered its upward movement were: electric energy consumption, wholesale price index, number of new business incorporations and hotel occupancy rate.


Leading economic indicators (LEI) & GDP growth
  LEI (in points) Slope GDP (growth rate)
2000 Q1 (0.030) 0.128 4.0
  Q2 0.080 0.110 4.9
  Q3 0.092 0.012 5.1
  Q4 0.045 (0.048) 3.6
2001 Q1 (0.032) (0.077) 3.6
  Q2 (0.136) (0.104) 4.2
  Q3 (0.226) (0.090) 4.5
  Q4 (0.293) (0.067) 5.6
2002 Q1 (0.427) (0.134) 3.8
  Q2 (0.545) (0.118) 4.1
  Q3 (0.454) 0.091 3.8
  Q4 (0.204) 0.250 5.8
2003 Q1 (0.048) 0.156 4.5
  Q2 0.061 0.108 3.2
  Q3 0.152 0.092 4.4
  Q4 0.180 0.028 4.5
2004 Q1 0.244 0.064 -
  Q2 0.347 0.103 -

Source: NCSB


Bids for most debt papers junked

The government once again refused to take higher premium risk rates for its 182-day and 365-day debt papers, saying that banks were not really keen on these instruments but were priming for the retail Treasury bonds that will be auctioned today. "[If we look at the auction], there were no bids. Banks are paving the way for the retail T-bonds," National Treasurer Mina C. Figueroa said.

Traders polled by BusinessWorld agreed with her but they also said that the market was still cautious over political and fiscal uncertainties. "We have yet to look for fresh leads [that will stabilize us]," one trader said.

The benchmark 91-day T-bill fetched a premium risk rate of 7.714%, up by eight basis points when it was auctioned two weeks ago.

Tenders were oversubscribed at PhP5.536 billion against a public offering of PhP4.5 billion. The auction committee rewarded only PhP3.22 billion worth of bids. The 182-day and 365-day debt papers will remain at 8.631% and 9.416%, respectively.

Had the Treasury accepted the bids, interest rates for the 182-day T-bills would have jumped by 43 basis points to 9.061% and the 365-day T-bills by 60.7 basis points to 10.023%. Tenders were undersubscribed at PhP4.225 billion against a PhP6.5-billion combined offering, indicating a lukewarm response from dealers.


Meanwhile, the Treasury said that it will try to cap the minimum public offering of PhP10 billion for the three-year and five-year retail T-bonds to pay the maturing PhP30 billion worth of small-denominated Treasury bills on July 15. "Their appetite is moving towards these [retail T-bonds]. When was the last time we saw them ask for 12% premium risk rates for the three- and five-year bonds?," asked Ms. Figueroa. At the secondary market, the three-year debt paper fetched 11.4367% while the five-year instrument 12.16%.

Ms. Figueroa said, however, that the bureau will require dealers for the retail T-bonds to sell 40% of their subscription to retail investors "to discipline them." In its notice of offering last Wednesday, The government said that if banks fail to do so, they will not pay for the commissions for the balance of the total sales. "This is not new [40% minimum sale]; before they subscribe, they have to be accredited first," another trader said. -- Ira P. Pedrasa


Court asks for Meralco, ERC comments on rate hike issue

The Supreme Court, in an en banc session last Tuesday, has asked the Manila Electric Co. (Meralco) and the Energy Regulatory Commission (ERC) to comment on the plea of a consumer group to void a rate hike. The National Association of Electricity Consumers for Reforms asked the high court on June 28 to void the June 2 ERC decision which increased the generation rate to PhP3.3213 per kilowatt-hour (kWh) from PhP3.1886 per kWh. The group also asked for a temporary restraining order to prevent Meralco from instituting the adjustment.

In an eight-page petition, the consumer group said "Meralco is threatening or attempting to implement an increase in the generation charge to be paid by consumer-members of the petitioners and the public respondent is suffering this to be done in violation of the rights to due process of petitioners." The consumer group alleged the decision to hike rate was arrived at without a public hearing or consultation.

Also, the group said consumer groups such as themselves were not given the opportunity to contest Meralco's application as they were not informed even though they were active participants in ERC proceedings. Add to this, the consumer group said the power company did not adhere to the procedure that required them to publish the said application in a newspaper of general publication. "The lone issue, here, is whether or not the ERC order, dated 2 June 2004 is null and void, for lack of the requisite publication, thereby depriving petitioners of procedural due process," the consumer group said.

According to the rules, the application of the power company must be published in a newspaper of general circulation and the ERC must study the comments of customers and the local government unit concerned. The two requirements, the consumer group said, "are aimed at protecting the consumers and diminishing the disparity or imbalance between the utility and consumers."

Last month, the Supreme Court declared as illegal the 12-centavo per kWh increase Meralco charged its consumers from Jan. 1 to 13 after the high court found the utility company failed to comply with the publication requirement. -- Ma. Elisa P. Osorio


Special Report

Land reform ridden with loopholes

Philippine Center for Investigative Journalism


BGY. TINANG, CONCEPCION, Tarlac -- Farmer Loreto Rivera has been tilling the soil here for the past 30 years, and it shows on every inch of his thin, bent, and sunburnt body. Now 63-years-old, he knows almost every family in this barangay of 2,000 people. But he cannot name a single farmer or farm worker who was given land from the 212-hectare de Leon estate here, one of the biggest haciendas in Tarlac. Officials of the Department of Agrarian Reform (DAR), however, say the land had already been placed under the Comprehensive Agrarian Reform Program (CARP). "Na-CARP daw pero ni isang tao walang nabigyan. [The land was placed under CARP but not a single person has benefitted]," Mr. Rivera wonders aloud.

The DAR officials, however, were right: the land had been sold to 77 "farmer-beneficiaries." But these beneficiaries were not farmers. They were the children and grandchildren of the wealthy de Leon landowners. As a result, the hacienda remains in the de Leon clan, the documents attesting to its members' being "farmer-beneficiaries" drawn up, received, and endorsed by the very bureaucracy in charge of implementing the land reform program. The Tinang estate is an example of the many problems that impede the implementation of a genuine land distribution program in the country. Landlords evading CARP are just one of them.

Another is the agrarian reform bureaucracy that seems to be more concerned with "fast-tracking" land distribution than in checking who actually gets the land. In many places, DAR bureaucrats are also beholden to landowners. Meanwhile, the landless peasants for whom the program was intended in the first place get a raw deal. Most of them are unschooled and unaware of their rights under CARP. "Nahihirapan ang mga magsasaka na tumuklas kung ano ang karapatan namin [Farmers like myself are hard-pressed figuring out what our rights are]," says Mr. Rivera, who used to head the local farmers' cooperative here. "Wala kaming alam sa CARP, wala kaming nalalaman sa batas [We know nothing about CARP, we know nothing about the law]." Most farmers here did not reach high school and are clueless about the CARP provisions and processes. No one, in fact, had bothered to inquire about the de Leon estate. The farmers learned about it only by accident -- a local resident went to the Tarlac Register of Deeds asking for a cadastral survey of the land, but was instead given the Transfer Certificate of Title that showed 77 farmer-beneficiaries with surnames like Escaler, Jalandoni, Rufino, and Lopa.

The land, as far as residents know, is managed by Luis Jalandoni, a grandson of Jose Joven de Leon who owns vast tracts of land in Central Luzon. Jalandoni is also the president of Daniel Agricultural Corporation (DAC), which local people know as the employer of farmworkers here in Tinang, and in another sugar estate in Barrio Plastado, Gerona, Tarlac. Mr. Jalandoni, local residents say, was once married to Georgia Osmeņa of the influential Cebu clan. Their children's names also appear as "farmer-beneficiaries" of the de Leon sugar land here. Several attempts to reach Mr. Jalandoni at his office in the de Leon-owned Regina Building on Escolta, Manila failed. A written request for an interview went unanswered; when the PCIJ called up his office, it was told he was "on vacation."


"There is so much corruption in land's a real joke," says Michael Escaler, a sugar miller and trader whose name, ironically, appears as one of the 77 farmer-beneficiaries to the de Leon estate. Mr. Escaler says he is talking from his own experience as landowner dealing with the DAR. "Somebody in the DAR is making a lot of money and I don't know that anybody else is really benefiting now." Mr. Escaler, a cousin of Mr. Jalandoni and son of one of the landowners, shares farmers' criticisms of land reform, but from the point of view of landowners and businessmen. "I think land reform made us a poor country rather than a rich country," he says.

Like other landowners, he favors big corporations retaining control over the land or buying it back from farmers who do not have the means to make the land productive. To Mr. Escaler, questionable practices on how the land is distributed, such as the irregularities in Tinang, are just minor problems. "The big problem," he says, "is how to feed the people cheap; that is, we have to be efficient. We have to provide jobs so we keep our agriculture alive. Land reform isn't doing that."

Indeed, being a farm worker or tenant in Tinang, employed by the de Leon descendants, doesn't bring much relief either. A farm worker employed by the Daniel Agricultural Corporation is paid only PhP140 daily, which is way below what a family of four or five needs to subsist on. Schooling costs can barely be squeezed into family budgets; an illness could force a family into debt. In fact, most people here, says barangay councilwoman Edita Mariano, are locked in an unending cycle of debt. Even those like farmer Rivera who were given rice land under the old land reform program of Ferdinand Marcos are forced to use their land as collateral to enable them to borrow. Many eventually end up losing their land to usurers. "Karamihan sa mga magsasaka below poverty line [Many farmers live below the poverty line]," laments Mr. Rivera, who plants sugar on his land that is less than a hectare in size.


Even farmers who have been given land under CARP often realize that they do not necessarily run out of worries. Although CARP makes available seeds and fertilizers to farmers, there is no income with which to feed their families until the next harvest season. In between harvests, the farmers again fall into debt.

Remarks Mr. Rivera: "Ang CARP, sasabihing programa ng gobyerno. Pero kailanman hindi nila hahayaan umangat ang maliliit. Kung umangat ng konti, pababagsakin [CARP may be a government program but they will never let the poor progress. If the poor are able to rise even just a little, they are swiftly dragged down.]" Farmers have also become wary of DAR.

Around 1995, say Rivera and Mariano, a team of DAR employees came to Tinang asking local farmers and farm workers to sign up as potential CARP beneficiaries to the de Leon sugar estate. But nothing became of that, although 10 years later, they would be told the land had already been given away.

In 1995, the de Leons submitted their estate to the CARP program. As then Provincial Agrarian Reform Officer for Tarlac, Teofilo Inocencio recalls, the department was concentrated on rushing program implementation, targeting as many as 8,000 to 10,000 hectares of Tarlac land each year for coverage, the better to beef up annual achievements.


Unfortunately, "mukhang nasingitan kami (one case got away)," admits Mr. Inocencio, who as PARO gave final approval to the de Leon land transfer. Mr. Inocencio argues that his job as PARO was ministerial -- he did not look into the details of voluminous Voluntary Land Transfer (VLT) cases and only signed a worksheet or summary attached to the file. "It's a revolutionary program," he says. "We're doing it in a democratic way. It's moving, pero alam mo naman may mga butas din ang batas eh [you know our laws are flawed]."

One of the law's loopholes was apparently the VLT scheme -- or more precisely, the people who were supposed to monitor it. A VLT is intended to be an amicable arrangement whereby landowners can sell their land directly to landless farmers without the need for government funding and intervention. At that time, the VLT entailed minimal involvement from DAR, and was settled only among the landowners and farmers, the barangay captain who acts as agrarian reform representative, and the municipal agrarian reform officer. Final approval of any VLT rested with the PARO. DAR has since revised this policy, giving final approval to the regional director as a means of instituting a check-and-balance mechanism, says Mr. Inocencio. Crucial to this system is the barangay captain, whose job as representative of the Barangay Agrarian Reform Council (BARC) is to ensure that it is legitimate farmer-beneficiaries who get the land; he is supposed to screen them and verify that they meet the criteria for beneficiaries.

In the de Leon case, barangay captain Vernon Villanueva happened to be the son of Jose 'Pepe' Villanueva, the overseer of the de Leon estate until last year. Vernon, who also chairs the Association of Barangay Captains (ABC) in Concepcion town, has since taken over his father's job as katiwala of the de Leon land. Vernon's brother Jojo heads the farmers' cooperative in the neighboring hacienda once owned by the Dominican Province of the Philippines and recently placed under CARP. In the last election, another Villanueva brother, Noel, ran for mayor of Concepcion and won. Vernon Villanueva's signature appears as the BARC representative certifying to the authenticity of farmer-beneficiaries. Also appearing on the documents is the endorsement of Virgilio Antonio, then the municipal agrarian reform officer.

Documents on file at the Tarlac Register of Deeds show that the de Leon estate's 77 farmer-beneficiaries had been given certificates of full payment and their Certificates of Land Ownership Award or CLOAs as far back as 1996, or less than a year after their VLT applications were approved. Current DAR insiders say this alone should have puzzled the CARP implementors in Tarlac in 1995. Genuine farmer-beneficiaries usually take years to pay, if they manage to do so at all.

The Transfer Certificate of Title (TCT), as well as documents submitted by the barangay captain to the municipal and provincial agrarian reform offices, reveal that the 77 farmer-beneficiaries "bought" the land at the price of PhP150,000 per hectare. The de Leon VLT folders at the Municipal DAR office in Concepcion show that each of the 77 De Leon "farmer-beneficiaries" individually filled out beneficiary information sheets, certificates of full payment, and deeds of voluntary transfer. They identified themselves either as farmers or farmer-businessmen, residents of Tinang, owning no other landholding anywhere else in the country. Mr. Inocencio, who is now assistant regional director for operations for Central Luzon, said DAR Region 3 is considering forming a task force to look into what can be done to correct the situation at the de Leon estate.


But DAR might not be able to undo what it did there. One option, says Mr. Inocencio, is to disqualify the "farmer-beneficiaries" and revoke CARP in the de Leon estate. But previous experience brings little hope. Mr. Inocencio himself talks of a CARP case in Nueva Ecija that the DAR sought to cancel before the courts. The case was dismissed and the cancellation turned down. "Kasi nga raw," Mr. Inocencio explains, "DAR ang nagbigay, siya pa nagpapa-cancel [DAR was the one who gave it, and now it was the one having it cancelled]."

In the meantime, Loreto Rivera continues to till the soil. His children, now all grown, do not seem interested to follow his footsteps. One is a tricycle driver, another does odd jobs here and there, while a third has somehow managed to go to college and is studying economics. Someday, with or without government help, the family's fortunes may change for the better, although Loreto Rivera is already resigned to his fate. "Kaming mga mahihirap, pasensiya na lang, tutal kami kaya naming magtiis [All the poor like us can do is to bear this injustice. Anyway, we can take it]," he says. "Ang mayayaman hindi [The rich can't]."

Part 1: In Tarlac, CARP gives land to the wealthy


Amex Bank picks RP for next global backroom office

American Express Savings Bank, the local retail bank of New York-based financial giant American Express, is putting up a backroom office in the country that will service its parent firm's affiliate banks worldwide. This was learned over the weekend from a Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) official who said the policy-making Monetary Board last Thursday approved Amex Bank's plan. "The board approved in principle the request of Amex Philippines to provide back office services to American Express-affiliate banks," BSP Deputy Governor Alberto V. Reyes told reporters.

The Philippine backroom office will be Amex's second international operation center -- next to India -- that will handle its worldwide back office needs. "It will provide employment to the locals," Mr. Reyes added. Amex Bank is one of the newest local banks, having bought into the former Omni Thrift Bank in 2001. The Monetary Board approval will allow the local Amex office to provide international backroom services, specifically credit card reconciliation, data control administration, letter of credit processing, and foreign exchange and money market settlements.

Mr. Reyes said investment figures were not available because Amex Bank has yet to get final approval for the project. A project site has not been identified either. Amex Bank is the latest financial institution to gain the central bank's nod for establishing extended backroom operations. British financial giant HSBC Group last April said it would also open a call center in the country within the year to support the processing and customer service needs of its banks worldwide.

The Philippines currently ranks second to India as a site for call centers and business process outsourcing. The government aims to make the country the world capital for such businesses by 2009. -- Iris Cecilia C. Gonzales


Ecozone exports up 36%

Privately-owned and IT zones notch high growths


Higher export receipts of privately owned economic and information technology (IT) zones led to a 36% increase in total exports from January to May of firms registered with the Philippine Economic Zone Authority (PEZA). Data released over the weekend showed PEZA exports amounted to $12.626 billion for the first five months of the year, up from $9.309 billion in the same period in 2003. Exports from 35 special ecozones reached $9.792 billion, a 46% growth from last year's $6.689 billion. Fourteen IT buildings and parks registered export revenues of $72.480 million, up 60% from last year's $45.162 million. All four public ecozones posted positive growth, with exports of $2.762 billion from $2.574 billion in January to May 2003 for a 7% increase.

Again topping the list of exporters was the Laguna Technopark in Sta. Rosa, Laguna -- site of firms such as Fujitsu Ten Corporation of the Philippines, Fujitsu Die-Tech Corporation of the Philippines, Hitachi Computer Products Corp., and Honda Cars Philippines -- with $3.550 billion in exports for a 22% growth. Second-ranked Gateway Business Park in General Trias, Cavite, host to Intel Tech Philippines, Inc., registered $1.825 billion in exports, a 300% increase over last year.

Rounding up the top ten were Amkor Technology ($850.762 million), Carmelray Industrial Park I ($404.467 million), Lima Technology Center ($333.329 million), Carmelray Industrial Park II ($281.085 million), Light Industry and Science Park II ($278.214 million), People's Technology Complex ($272.254 million), Light Industry and Science Park I ($259.100 million), and Leyte Industrial Development Estate ($259.040 million). RCBC Plaza has dislodged Eastwood City Cyber Park as the biggest earning IT building with $20.353 million in export revenues, an increase of 231% from last year's $6.144 million.

Eastwood registered $18.506 million in export revenues, down 17% from last year's $22.416 million. It was followed by Pacific IT ($10.672 million), The Enterprise Center ($5.796 million), and PBCom Tower ($5.477 million). Among the government-operated ecozones, Baguio City Economic Zone ranked first with $1.196 billion in exports, up 6% from $1.129 billion in January to May 2003. Exports from Cavite Economic Zone totaled $809.785 million, a 7% increase, followed by Mactan Economic Zone ($625.115 million, up 12%), and Bataan Economic Zone ($131.236 million, up 18%).


Supreme Court asked to reconsider ruling versus Meralco rate increase

The Energy Regulatory Commission (ERC) wants the Supreme Court to reconsider a June 15 order declaring a rate increase granted to Manila Electric Co. (Meralco) as illegal. In a 22-page motion filed on Friday, the ERC claimed it did not commit grave abuse of discretion when it allowed a PhP0.12 per kilowatt-hour (kWh) increase for Meralco in November 2003.

The Supreme Court has ruled the increase illegal as "records show that Meralco failed to comply with the publication requirement prescribed by the IRR [implementing rules and regulations of the Electric Power Industry Reform Act of 2001]." Apart from the publication requirement, the Supreme Court said the ERC also failed to consider the pleadings and comments of consumers and the local government unit (LGU) concerned, agreeing with the Freedom from Debt Coalition, the main petitioner, that Meralco's application for a rate increase was void. However, the ERC claimed Meralco sufficiently complied with the publication requirement when the company published a notice of application in the October 10, 2003 issue of The Manila Times. "The intent of the framers of the law was only to require the publication of a notice of application and not the application itself," the ERC said.

The ERC further said it would be preposterous to expect Meralco to publish the entire application and not just the notice. Considering the technical nature of rate cases, the applications usually consist of hundreds of pages, it said. "It may not be amiss to point out that the said publication costs will ultimately be passed on to the consumers as legitimate operating expenses," the ERC said. The ERC said that it agreed with the dissenting opinion of Justice Reynato Puno when he pointed out that "it would be absurd to require Meralco to publish the entirety of its application ... courts have the duty to interpret the law in such a way to avoid absurd results."

The ERC also cited the case of 118 electric cooperatives, which only published their notices of application for rate reductions. The said applications resulted in the ERC ordering an average reduction of PhP0.2029 per kWh. If the Supreme Court's ruling on the Meralco case is to be followed, then the petitions of the electric cooperatives should also be rendered void, the ERC claimed. The High Court also faulted the ERC for not resolving pending motions for document production before coming out with its ruling. However, the ERC said the IRR does not require the Commission to resolve motions. It said it is enough to give due consideration to the comments or pleadings of consumer groups or the LGU concerned before issuing a provisional authority. "To hold otherwise would mean that ERC can be held captive by oppositors just by continuously filing dilatory pleadings which may not in anyway guide the ERC in determining the propriety of granting or denying a provisional authority," it said.

Furthermore, the ERC said the comments and oppositions offered no plausible arguments that the Commission could consider before issuing an order. "There was nothing in the said comments and oppositions that could have warranted the denial of the motion for the issuance of the provisional authority," the ERC said.


Population a key issue in meeting President's targets

If the government does nothing to reduce the current population growth rate, President Gloria Macapagal-Arroyo's target of achieving an average $2,000 per capita income by 2010 will not be achieved, a legislator said. "I think the policy implication of this per capita income goal is to grow the economy by 10% per annum" Albay Rep. Jose Ma. Clemente S. Salceda said. "But the economy is growing naturally by only roughly 7% per annum, assuming that we don't have these fiscal problems." "Therefore, to achieve the $2,000 per capita income goal, the 2.36% population growth rate must be reduced," he said. "It will be statistically impossible for Ms. Arroyo to achieve her goal by 2010 if the population growth rate remains at 2.36%."

With the population growth clearly impinging on economic growth, Mrs. Arroyo markedly neglected to mention her government's plans on how to manage the issue during her inaugural speech last week. Housing secretary Michael T. Defensor said population is "not a major thrust" since the government has already spelled out its population policy. The president's 10-point program, he said, is basically aimed at enabling the poor to participate in any development. "The thrust is to deliver basic services to the poor - water, electricity, education - which are not beyond what are needed," he said.


SEC sets rules for checking dirty money law compliance


The Securities and Exchange Commission (SEC) has come up with the rules and procedures to check on the compliance of covered institutions with the anti-money laundering law. The procedures, a copy of which was released to reporters last Friday, aim to evaluate the institutions' risk management structures on anti-money laundering as well as evaluate the adequacy of their policy, procedures, systems and controls against money laundering. SEC said the examination will recommend remedial actions to be undertaken by covered institutions when their policies, procedures, systems, and controls are not sufficient or when they have not complied with the law.

SEC is one of three institutions comprising the Anti-Money Laundering Council, the institution created to implement the law. The other members of the council are the Bangko Sentral ng Pilipinas (central bank) and the Insurance Commission. Under the rules and procedures on anti-money laundering, examiners will give covered institutions an SEC anti-money laundering compliance form to fill up. A core group composed of representatives from different SEC departments will set a random validation process that may be applied to covered institutions or on a per-industry basis. "The special core group shall also set the criteria for the selection of covered institutions to be covered by the random validation, which criteria may include total value of all assets, level of activities, gross revenue, answers indicated in the SEC-AML form previously identified level of money-laundering risks, and other such factors," the rules state.

Examiners may adopt different approaches in the examination of the covered institutions. These include physical examination of documents, confirmation, comparison, tracing, inspection, reconciliation, and inquiry. During the examination of the covered institutions, examiners will assess the institutions' anti-money laundering operating manual or internal controls, policies and procedures, to check if these are sufficient and are being implemented. Examiners will also determine if the companies have a system of conducting anti-money laundering risk assessment on its products or services, and if these are adequate to manage money laundering risks. They are also required to check if the covered institutions have conducted customer due diligence. "Examiners may conduct random sampling of the customers' account opening forms or conduct interviews with the frontline staff or employees authorized to accept customers and other personnel that may be deemed necessary," SEC said. It added that examiners will also assess procedures adopted for verification of sources of funds.

Also part of the examination, SEC said, is an evaluation of whether the covered institutions have taken actions to clean out old accounts. Examiners will also look into whether the they have allowed their customers to open or maintain anonymous, fictitious, or incorrect accounts or have allowed the opening of accounts without face-to-face contact. For agents and authorized signatories, examiners will evaluate if the institutions establish the identities of these representatives, SEC said. "In case [the covered institution] suspects that the trustee, nominee, or agent is only a dummy, determine whether further verification is undertaken... to verify the business relationship, and evaluate the adequacy of the system of verification," SEC said.

It also said if "satisfactory evidence of beneficial owners" is not obtained, examiners will check if the institution continues to transact with the client or has stopped transactions with the account. For securities brokers and dealers, SEC said examiners will determine whether the account information form of their clients provides information about them. It also said examiners will determine the procedures adopted by brokers or dealers to verify or analyze their customers' investment objective against investment needs and financial capacity.

For the pre-need industry, examiners are also required to check if the companies check on the identities of their clients. The examination rules also require examiners to check the monitoring, recording and reporting systems of covered institutions. Compliance officers and personnel of covered institutions will also be examined to assess the extent of their knowledge and skills on the anti-money laundering law. "After evaluation of [covered institutions'] AML risk management structure, examiners, or the teams of examiners are required to prepare their written findings on the adequacy and effectiveness of the implementation... of the AML operating manual, its internal AML controls, policies and procedures or compliance with the provisions of the [Anti-money Laundering Act]," SEC said.

Under the law, financial institutions covered by the legislation, such as banks and financial intermediaries, will be asked to report transactions involving an amount exceeding PhP500,000 within a single banking day. The law also states that covered institutions should report suspicious transactions that will cover any amount provided that there seems to be no underlying trade obligation for the transaction. The Philippines is currently working on its application to be stricken off a list of countries perceived to be uncooperative in the fight against dirty money. The government is hoping to be removed from the list by October 2004.


Traders seen to bid up T-bill rates

Even if bids were to be rejected one after the other, debt traders said they are determined to seek higher rates given the government's aggressive borrowing program aimed at plugging its budget shortfall. At today's auction, the premium risk rate for the benchmark 91-day Treasury bill is expected to be between 7.75% and 7.875%, higher by 11.6 to 24.1 basis points. Bids for the 182-day and 365-day debt papers are seen to be rejected again by the Bureau of the Treasury.

Two weeks ago, the auction committee junked all bids for these papers, claiming the market's asking price was unreasonable considering uncertainties have been reduced upon President Gloria Macapagal Arroyo's proclamation. "[National Treasurer Mina C. Figueroa] zeroed in on the proclamation as a stabilizing factor, but the market is also looking at the country's fiscal status," one trader said. Roberto Juanchito T. Dispo, First Metro Investment Corp. senior vice-president said, "We've been reading in the papers that the national government is pushing up a very aggressive borrowing program for the year and even next year to source its funding requirements." The trader said the market will not discount the possibility that the central bank will adjust inflationary measures correspondingly to that of the United States. Last June 30, the US Federal Reserve increased key interest rates by 25 basis points. "This will trigger dollarization and exodus of possible investments toward US shores because yields will be far better there compared to yields they will get domestically," said Mr. Dispo, a former deputy treasurer at the Treasury bureau.

Another trader said if the country does not shape up on its fiscal resolutions, "there may be downgrading again from several international rating agencies." Recently, Fitch Ratings warned the country of a possible credit rating downgrade if the new administration fails to answer its fiscal problems. Such downgrade could hamper the government's borrowing plans, traders said.


Meanwhile, the bureau will auction tomorrow retail Treasury bonds worth PhP10 billion that will mature in three and five years time. Ms. Figueroa said this program is in answer to the market's lukewarm response to the government's regular debt papers in past auctions. "Keeping in mind [the retail T-bonds'] success story in the past, we expect oversubscription that may reach PhP25 billion to PhP30 billion, but premium risk rates may reach 11% to 11.25% for the [three-year retail T-bonds] and 12% for the [five-year retail T-bonds)," said another trader.


In the currency market, traders still expect a range-bound peso as factors such as political uncertainties and the Fed interest rate hike have already been assumed in the past few weeks. Last Thursday, the Philippine peso strengthened against the US dollar past PhP56, a level it was stuck in for almost two weeks. General sentiment from traders that the peso will go strong pushed the local unit further by Friday, gaining eight centavos on average, but remaining unchanged at closing. This week, traders expect it to move between PhP55.95 and PhP56.10, and try to break PhP55.80 to finally move back to more stable ground. -- Ira P. Pedrasa


Market awaits quarterly reports, inflation data


The stock market will likely experience an upswing this week as investors scout for enticing leads to spur trading. Corporate and economic fundamentals are expected to produce fresh leads to help the trading barometer reverse its losses last Friday. Analysts told BusinessWorld that there is an array of indicators that could spur the market to redeem its initial gains of 14.20 points at the start of the month. These include an expected tame inflation report as well as government and corporate data. Francisco Liboro, president of PCCI Securities, Inc., said he was confident that the market, poised for a reversal, would tread on positive ground through the week. "The market is likely to experience a continuation of earlier gains or a return to upswing because no major event is expected," Mr. Liboro said. He noted that while there are no significant events that could trigger a rally this week, he said indicators are showing positive signs for the market. "There are no significant concerns in the near term," he said. The Philippine composite index (Phisix), he said, is likely to test a level between 1,620 and 1,700.


The stocks that are projected to create strong interest this week include mobile phone firms Pilipino Telephone Corp. (Piltel) and Smart Communications, Inc. together with their parent firm, Philippine Long Distance Telephone Co. (PLDT). Mr. Liboro said investors should keep a tight watch on the numbers for Piltel. "They should look at the share prices of Piltel. If the prices go way below [its present price], investors may get scared," said Mr. Liboro. Piltel was up PhP0.08 at PhP1.90 on 38.1 million shares on Friday, following the approval of its board authorizing an increase in the mobile phone operator's capital stock. Through the creation of common shares that will accommodate the conversion of preferred shares in the future, Piltel's capital stock will be raised by 265.7% to PhP12.8 billion from PhP3.5 billion.

Meanwhile, a deal allowing Smart to take over about 69.4% of Piltel's total restructured debts is expected to lead to Smart's taking control of Piltel. Mr. Liboro said should the prices of PLDT, Smart and Piltel unduly move up because of this development, the situation must be alleviated immediately to prevent investors from selling off their stocks. He also noted that some rejection may be observed in the market as a minor follow-up to last week's trading performance.


On the other hand, Ron Rodrigo, analyst at Accord Securities, Inc., said the market may draw leads from the inflation report that will be released tomorrow. The inflation rate in the Philippines has risen steadily this year, hitting 4.5% in May from 4.1% in the previous month. Mr. Rodrigo said a lower inflation forecast that is acceptable to the market is 4.2%. The Bangko Sentral ng Pilipinas earlier said the inflation target of between 4% and 5% will be kept.

Amando Tetangco, the central bank's deputy governor, had said that despite the threat of higher oil prices and security risks, the country will meet its growth. Mr. Tetangco also said the central bank saw no need to change its monetary stance which would be reassessed only when oil prices spike or security threats return. Accord Securities' Mr. Rodrigo said the inflation forecast will spur some positive movement for the market. He also expects corporate earnings reports, which will start coming in later this month through August, to boost market activity.


The market's direction through the week, said Mr. Rodrigo, will depend on second- and third-liners. Given this scenario, a correction would be a welcome respite for the market. Jose Vistan, Jr., AB Capital research director, in his online commentary said share prices need to correct in order to entice investors to come back to the market. "Seasonally, we are going into one of the slowest times of the year. We are at the start of the third-quarter doldrums, where we could see a down draft over the next few weeks," said Mr. Vistan.

He cautioned investors to be decisive in their moves because of the limited prospects for growth given the high expectations set for earnings. Heightened earnings expectations may make it hard for companies to measure or beat estimates, he said. "Since so much have already been priced into share prices, there will not be enough fuel in terms of beating earnings estimates to push the market upward," he said.


Stock investors will also try to ascertain the market's direction based on how President Gloria Macapagal Arroyo and her team would perform as the administration begins a fresh term. Other concerns include an examination of how the transitional government in Iraq fares and the stability of oil prices in the world market. The prices of stocks and the strength of earnings would be equally critical factors for market players. There is also the issue of local and external interest rates. Players want to know the extent that interest rates will go to see if they are picking the right stocks.


Stock portal said trading sessions might range between 1,580 to 1,610. It said descents are bound to be limited, with several erstwhile concerns already factored into the bourse, noting that another telco-led rally may cushion possible declines. The overnight rise in PLDT's American Depositary Receipts is expected to lend support to the telco rally. The stock portal also noted that some short-term players may cash in temporarily until they get feelers on how latest local inflation data will turn out this week. "Indications from monetary authorities to maintain benchmark rates should limit descents," noted It sees immediate support at 1,580 and resistance between 1,610 and 1,620.


SEC to tap World Bank assistance for survey on financing companies

The Securities and Exchange Commission (SEC) is hoping to get technical assistance from the World Bank for a survey on financing companies and their impact on the economy. The study, SEC officials said, would help the corporate watchdog in drafting a policy on regulating financing companies. "We wanted funding for the diagnostic survey of the financing companies and then come up with a regulatory policy to be recommended to government. This is to really find out what the business is all about," SEC officials said. Officials noted there are 650,000 financing companies, of which 10,000 are lending investors. Officials also noted that few lending investors have converted into lending companies.

Under Memorandum circular No. 13, SEC has required lending firms to convert as financing companies. SEC officials said the study will also cover how the financing companies could be tapped for funding by small- and medium-sized companies. "We have been bothered by the fact that we are encouraging lending investors to convert into financing companies and at the same time we also realize the need for providing capital for small- to medium-scale industry and how you could link this up," an official said.

SEC officials said they are uncertain how much the budget for the study would be, but said the government will ask for a grant that would cover the amount needed to complete the study. They also said the study would be completed in two years' time. "It's really a grant to cover the costs of experts for coming here. We told them we would need it, if they approve it, starting July. That has already been in the works for a few months," an official said. \Earlier, the World Bank agreed to fund a study that would look into amendments to the Corporation Code. -- Jennee Grace U. Rubrico


CAP trust fund deficit hits PhP17B

College Assurance Plans Philippines. Inc. (CAP), one of the country's largest pre-need companies, incurred a PhP17-billion shortfall in its trust fund level as of end-December last year, raising concerns over the firm's ability to serve the future needs of its planholders.

In its 2003 audited financial statement submitted to the Securities and Exchange Commission (SEC), CAP's external auditor pointed out that the company has only PhP8.49 billion in trust funds managed by its trustee banks, substantially lower than its actuarial reserve liability (ARL) of PhP25.6 billion. "Its trust fund assets, which are being managed by trustee banks, had not grown sufficiently to match the total ARL of PhP25.6 billion, thus resulting in a trust fund deficiency of PhP17.2 billion as of December 31, 2003," said Jerome Antonio B. Constantino of local audit firm Constantino Guadalquiver Mendoza and Co. He noted that CAP's trust fund shortfall ballooned in 2003 because the company under-reported its ARL in past years.

A study by SEC's actuarial consultants last year, which was also reviewed by an independent actuary, showed that CAP's liabilities should be at PhP25.657 billion by the end of 2003, as opposed to the PhP11.928 billion the company stated in its financial report. The significant increase in CAP's liabilities was due to the changes in methodology and actuarial assumptions, and the number of fully paid plans that were not not included in determining the company's actuarial liabilities in past years.

A trust fund, or money set aside by a pre-need company to service the future needs of its planholders, is considered insufficient when it is lower than the projected liability or the estimated total amount of payment for tuition fees or burial costs the pre-need company will have to pay in the future. This amount is referred to as the ARL. The ARL is computed on the basis of assumptions on interest rates, inflation rates, and percentage of lapsed plans or contracts cancelled due to incomplete payment and, in the case of educational plans, tuition increases. CAP also reported a capital deficit of PhP5.421 billion as of end-2003, and a net loss of PhP2.758 billion in the same period. These were substantially higher than the previous year's PhP2.6-billion capital deficiency and PhP403.2-million loss.


This financial performance was attributed to "the economic condition and the resultant decline in the pre-need industry, which continue to affect the company's operations." Despite bullish overall economic prospects for this year, CAP expects tougher times ahead, prompting its external auditor to raise doubts over the company's viability. "Management projects a negative cash flow from operations in 2004. These factors, among others, raise substantial doubt about the company's ability to continue as a going concern," the auditor said.

As of end-2003, CAP's cash and cash equivalents totaled PhP88.252 million, from PhP103.58 million in 2002. Mr. Constantino said CAP's survival hinged on its management's capability to implement a planned eight-year internal rehabilitation program geared towards generating equity and liquidity to meet the company's commitments and obligations.

Initiatives include, among others, quasi-reorganization, capital build-up, sale of assets, and cost reduction programs. It will also include trust fund assets build up, liability management, real estate development projects through joint ventures, loan programs, and special surrender programs for matured plans. "Management believes that with the implementation of their program for building up equity and liquidity, the company will continue to operate in the normal course. The company's ability to continue as a going concern is dependent on the successful implementation of this program," Mr. Constantino said. CAP's external auditors, however, declined to give an opinion or endorse the veracity of the company's financial statements.

"In our opinion, because of the significant effects of the matters discussed...the parent company financial statements do not present fairly, in conformity with generally accepted accounting principles in the Philippines and the SEC's Pre-need Uuniform Chart of Accounts, the financial position of the College Assurance Plans Phils. Inc. as of Deccember 31. 2003, and the results of its operations and its cash flows for the year ended," he said. Mr. Constantino said CAP appeared to have violated accounting rules when it understated its liabilities for 2003.

CAP deferred the recognition of its higher ARL level for 2003 since it has asked SEC for a leeway to amortize its trust fund shortfall over five years. This is in line with guidelines issued by SEC last December that allows qualified pre-need companies to amortize their trust fund shortfall, provided the amortized funding is warranted and provided that the discrepancy is a result of lower interest rate assumptions. But, as of the preparation of its financial report last April, CAP's application for a leeway has not been granted by SEC, putting into doubt the exclusion of its higher liability level in its financial report.

The regulatory leeway is intended primarily to provide a reasonable transition for pre-need companies to address the expectedly high trust variance as a result of the SEC requirement to use realistic and attainable interest rate assumptions in the valuation of liabilities. In an effort to improve CAP's financial state, SEC last year installed a comptroller to oversee the operations of the company and to implement programs that would help the firm cut costs.

In 2002 SEC found that the company's trust fund level was short by PhP2.5 billion, and gave it until last year to look for ways to look for funds to plug the deficiency. Since CAP is one of the largest pre-need firms in the country, the discovery of its trust fund defiency depressed overall pre-need sales during the remaining months of 2002. -- Leilani M. Gallardo


Special Report

In Tarlac, CARP gives land to the wealthy

Philippine Center for Investigative Journalism

First of two parts

BGY. TINANG, CONCEPCION, Tarlac -- When President Gloria Macapagal-Arroyo last week began her six-year term, her inaugural address had one glaring omission: it made no mention of land reform. But it was an omission that was barely noticed. To many, and especially to the government, land reform is practically a done deal, a program nearly complete, and about which little more need be said. But here in this lonely landscape of endless sugarcane fields stretching far, far into the horizon, farmers cannot help but feel that something remains amiss with the Comprehensive Agrarian Reform Program (CARP). In fact, all they have to do is point to the sprawling Hacienda Tinang sugar estate here that was awarded under CARP to 77 members of some of the country's wealthiest families -- investment bankers, socialites, businessmen, and friends and relatives of the country's top politicians.

The surnames alone of these CARP beneficiaries are dead giveaways of their privileged background: Jalandoni, Rufino, Panicucci, de Leon, and Escaler -- including Ernest Escaler, the flamboyant and high-flying businessman-investment banker who two years ago got embroiled in a bribery scandal related to the IMPSA power plant contract. These individuals reside in posh condominiums and exclusive enclaves like Dasmarinas Village, New Manila, Ayala Alabang, and Forbes Park. They have never lived here and have never tilled the land nor managed it. They even include a junior high school student now enrolled in Canada and who was less than 10 years old when he and other members of his clan became "farmer-beneficiaries" of their own 212-hectare estate.

CARP was supposed to empower the peasantry and eradicate rural poverty by giving land to the poorest. But since its inception, landed interests have been resisting CARP -- and succeeding. In an agricultural community like Tinang, what makes this possible are the feudal relations between farmers and landowners, as well as political patronage between the elite, and the bureaucrats and local officials implementing the land reform program.

Under CARP, farmer-beneficiaries are supposed to be landless residents of the barangay or the municipality where the land is located, and had done direct work on it, whether as tenants or regular or seasonal farm workers. But here in Tinang, members of the rich de Leon clan found a way to keep their land through the Voluntary Land Transfer (VLT) scheme, a method of land distribution that requires no government money and minimal intervention from the Department of Agrarian Reform (DAR).

How they did that and how this remained undetected for nearly a decade exposes the many flaws of a program that was supposed to be the cornerstone of former President Corazon Aquino's social justice agenda. "If you ask me: 'Are we tenants? Are we farmers?' No, we're not," says Michael Escaler, a 54-year-old member of de Leon clan, which owns the Tinang hacienda. "Are you asking me how I got there, how it happened? I have no idea." Escaler is a sugar miller and shareholder of the National Life Insurance Corp. Yet his signature, as well as those of his relatives, appears on numerous documents now on file at the Municipal Agrarian Reform Office in Concepcion, Tarlac. The documents entitled them to individual Certificates of Land Ownership Award or CLOAs, now filed at the Tarlac Register of Deeds. CLOAs are titles to the land supposed to be given only to the landless farmer-beneficiaries.

Controversies have hounded CARP's implementation since it began in 1988. But many of the problems that have surfaced have had more to do with disputes over land bought by the government under the compulsory acquisition and voluntary-offer-to-sell (VOS) schemes. Much has been said, too, about landowners' resistance to land valuation by the Land Bank of the Philippines. Apparently, however, landowners were also trying out the VLT, which soon became one of the more convenient ways for them to get the government off their backs on the issue of land reform.

Aside from Tinang, other VLT cases include the 11 haciendas totaling nearly 5,000 hectares owned by businessman Eduardo Cojuangco Jr. in Negros Occidental. These landholdings have been the subject of protests by restive farm workers who say Mr. Cojuangco retains control over the land, despite having submitted them to a VLT scheme. In the case of the Tinang estate, Mr. Escaler says, "I'm just guessing, but maybe we gave 75% to the planters or the tenants. And maybe the balance that was declared was divided among the heirs. I think that's probably what happened." As to how his signature got on the CLOA papers, he explained that he may have just signed them without bothering to check what they were. Says Escaler: "I will just sign it if you tell me to sign it." Farmers here acknowledge that the de Leons did give up part of their land in Tinang planted to rice and corn back in the 1970s under then President Ferdinand Marcos's land reform program. More than 200 hectares planted to sugarcane, however, remained in the family. But CARP soon caught up with them, and by the 1990s, the de Leons were supposed to let go of the sugar land. CARP allows landowners to retain some of their property, but as DAR records show, the de Leons managed to circumvent the limits set by law.

Under the law, landowners are allowed to retain five hectares each, and their children, if they qualified, three each. But the landowners comprising 11 de Leon siblings did not apply for retention, and opted for the VLT scheme, an arrangement whereby landowners voluntarily sold all their land to qualified farmer-beneficiaries. The "buyers" of the de Leon property, however, were not landless tenants, farm workers, or tillers that the law said farmer-beneficiaries had to be. Instead, they were the de Leon landowners' children and grandchildren who claimed, in documents signed and submitted to the Municipal Agrarian Reform Office, to be farmers and farm workers in the de Leons' employ, and residents of this barangay.

These documents were prepared with the help of the barangay captain, acting as representative of the Barangay Agrarian Reform Council (BARC). The barangay captain is the son of the de Leons' caretaker and belongs to a family that residents say is much feared in the village. Last year, this barangay captain took over his father's position as the de Leons' overseer. "This is tantamount to misrepresentation and grounds for the revocation of the VLT," says DAR Assistant Regional Director for Operations Teofilo Inocencio. He also says the DAR Region III is planning to create a Task Force to look into the de Leon case. Yet in 1995, Inocencio was provincial agrarian reform officer in Tarlac; it was he who gave final approval to the de Leon VLT. The de Leon property here in Tinang shares boundaries with an equally controversial landholding of another branch of the Cojuangco family, Hacienda Luisita.

But unlike the Cojuangcos, the de Leons have never lived in their Tinang estate, which was titled in the name of 11 de Leon siblings who married into similarly wealthy clans such as the Escaler, Madrigal, Jalandoni, Lichauco, and Prieto families. Their offspring, in turn, married their cousins or into other wealthy families such as the Osmeņa, Lopa, and Rufino families. Their names alone connote wealth and power in the Philippines; their reach and clout in business, government, media and even civil society are extensive. They also share feudal and patronage ties with those in charge of implementing CARP, making it rather simple for them to become CARP beneficiaries and fend off a genuine land distribution program.

Aside from Ernest Escaler, the Tinang farmer-beneficiaries include:

  • Michael Escaler, a director of the National Life Insurance Corp., he is also chairman and president of Pampanga Sugar Development Co Inc. (PASUDECO), and president and chief executive officer of Sweet Crystals Integrated Sugar Mills (SCISM). He runs a firm called All Asian Countertrade as well.
  • Michael Escaler's wife and cousin, Patricia de Leon. Under the CARP law, a married couple is considered one conjugal unit entitled only to a maximum of three hectares. Michael and Patricia de Leon-Escaler got three hectares each.
  • Juan, Mark, and Margarita Escaler, all shareholders in PASUDECO.
  • Francis Escaler, a stockholder both in PASUDECO and Sweet Crystals Integrated Sugar Mills. The Escalers are also heirs of Ernesto Escaler, former chief operating officer of Pepsi Cola, and a relative and associate of former Marcos crony Eduardo M. Cojuangco, Jr.
  • Marie Yvette L. de Leon, director of National Life Insurance Corp.
  • Marissa Therese de Leon, married to Gabriel Lopa, nephew of former President Aquino. (The document submitted, however, shows she is married to "Luis Lopa." Her son, Luis de Leon Lopa, is also listed as a farmer beneficiary but the documents show he was 23 years old at the time of the land transfer in 1995. A farmer-beneficiary has to be at least 15 years old. Friends of the de Leons say Luis de Leon Lopa is currently a junior high school student in Canada, meaning he was less than 10 years old at the time of the land transfer.)
  • Alfredo de Leon Panicucci, a businessman who imports clothes and runs the Linea Italia stores.
  • Gabriel de Leon, who is listed as one of the top 100 stockholders of the Bank of the Philippine Islands.
  • Eight farmer-beneficiaries belonging to the de Leon-Madrigal branch, descendants of Don Vicente Madrigal, businessman-industrialist and former senator who owned, among many other companies, the Madrigal Shipping Lines. They are also related to newly elected Senator Jamby Madrigal.
  • Felina Maligaya, who is listed as a stockholder of Daniel Agricultural Corp. owned by the de Leon-Jalandoni branch of the family.

    The land and the family that owns it both have a colorful past closely intertwined with the nation's political and economic history. The de Leon land used to be part of the 1,200-hectare Hacienda Tinang once owned by the revolutionary general Servillano Aquino whose huge wood-and-brick house still stands in the center of Tinang.

In the book, "Aquinos of Tarlac", writer Nick Joaquin narrates that the general bequeathed Tinang to his son Benigno Sr. upon his marriage to Maria Urquico, daughter of another wealthy Tarlac family. But Benigno Sr. was forced to hock the hacienda to finance his activities when he became a member of the Philippine Legislature from 1919 onwards. Mr. Joaquin says that as Tarlac representative, Benigno Sr. refused to take money from the government; he donated his salary to charitable institutions and personally funded his official trips across the country and abroad. "What was left of my father's lands had been sold during the war to feed us," Joaquin quotes the late Benigno "Ninoy" Aquino Jr., as saying. "Most of them were already mortgaged before the war: Murcia, Lawang, and Tinang."

How Tinang ended up with the de Leons is unclear. But the Transfer Certificate of Title to the Tinang property indicates that in the 1930s, ownership of the land passed into the hands of Benigno Sr.'s brother-in-law Manuel Urquico, whom Mr. Joaquin describes as "a speculator who lost something like PhP25 million in the (US) stock-market crash of the mid-30s." It could well be that Urquico sold the land to the de Leons, who have long been prominent in neighboring Pampanga. Like other landowners, the family made its wealth from lending money to cash-strapped farmers and planters who had land to offer as collateral.

The clan traces its roots to patriarch Jose de Leon, a Pampango sugar planter in the early 20th century. In "Sugar and the Origins of Modern Philippine Society", scholar John Larkin classifies de Leon as among "the very rich (who) created their fortunes by supplying credit mainly through the pacto de retro: loaning money with land as collateral in good times and bad (which) offered the surest way to profit." Mr. Larkin says that those who went on to amass greater wealth, Jose de Leon included, "knew as well how to benefit from harsh economic times," acquiring large parcels of land through credit schemes for hard up farmers and planters in the years after the Philippine revolution.

Mr. de Leon also invested in other ventures, including the Pampanga Electric Light and Power Co. But his family is more closely associated with PASUDECO, a company being managed at present by descendant Michael Escaler. In its heyday in the 1920s, PASUDECO differed from sugar centrals in Negros in that it was owned not by just one family, but by a group of families whose names and corporations recur in this story. "PASUDECO was funded not by a single powerful native family or by foreign capital but by a group of individual and family interests in a kind of cooperative effort that reflected the homogeneity, trust and myriad relationships that existed among the Pampangan elite," Mr. Larkin writes.

Among the other prominent Kapampangans who invested in PASUDECO were Augusto Gonzales, Manuel Urquico, Honorio Ventura, Francisco Liongson, and Jose Escaler. Pampango historians say Mr. Ventura was a politician who sent the brightest local children to school, among them a boy from Lubao named Diosdado Macapagal. Jose de Leon would eventually put up, along with other investors, the National Life Insurance Company of the Philippines, a firm now situated along Ayala Avenue in Makati, the same building where some de Leon descendants and "farmer-beneficiaries" still hold office.

Mr. Larkin recounts that Mr. de Leon died violently in 1939, when he was gunned down in the heat of a dispute between sugar planters and millers inside the PASUDECO offices. By then, he had amassed enough wealth to last many lifetimes and withstand many generations. That wealth was passed on to his son, Jose Joven de Leon, father of the siblings in whose names the 212-hectare Tinang land was titled before it was placed under CARP.

Court documents show that when Jose Joven de Leon passed away in 1974, he left shares of stock in some 40 corporations that included Bacnotan Cement Industries, Bank of the Philippine Islands, and PASUDECO, as well as more than a hundred parcels of residential, commercial, and agricultural land in Manila and the provinces of Rizal, Pampanga and Tarlac. DAR's Inocencio even quips that the de Leons have so much real estate property that "they have no real idea where all their lands are." Many of their vast landholdings have been targeted for coverage under CARP. The government is now processing payments to the de Leon descendants for other property purchased by the government under the CARP's Compulsory Acquisition scheme. To DAR and Land Bank employees then, the de Leons are considered cooperative landowners.

That is, were it not for the infraction they committed in their Tinang estate.

To be concluded tomorrow


Name Area (sq. meters) Amount (in peso)
Benjamin David Escaler 30,000 450,000
Roberta L. Anonas 12,371 185,505
Stella Anonas 30,000 450,000
Patricia De Leon 30,000 450,000
Catherine Galvez 30,000 450,000
Yvette L. De Leon 30,000 450,000
Natividad L. Jalandoni 30,000 450,000
Teresa L. Jalandoni 30,000 450,000
Gerardo Cornejo Jr 30,000 450,000
Anna Cornejo 30,000 450,000
Mario Cornejo 30,000 450,000
Andrea Jalandoni 30,000 450,000
Monica Jalandoni 30,000 450,000
Juan Miguel Escaler 25,377 380,640
Mark Vincent Escaler 25,375 380,640
Margarita Escaler 25,376 380,655
Noel L. Escaler 30,000 450,000
Ernest L. Escaler 30,000 450,000
Michael L. Escaler 30,000 450,000
Francis L. Escaler 30,000 450,000
Michael John De Leon 30,000 450,000
Ma Theresa E. Dabao 30,000 450,000
Lea Maria L. Palou 30,000 450,000
Gabriel Antonio De Leon 30,000 450,000
Liza Irene L. Muņoz 30,000 450,000
Carlos De Leon Muņoz 18,342 275,109
Marissa Therese De Leon 30,000 450,000
Jose De Leon III 19,126 286,905
Luis De Leon Lopa 18,341 275,109.90
Justine De Leon Lopa 18,340 275,110.05
Rafael Ma. De Leon 30,000 450,000
Cristina Ines De Leon 30,000 450,000
Paul Vincent L. Perez 30,000 450,000
Rosanna Regina Marie Ocampo 30,000 450,000
Michaelle Perez Gemperle 30,000 450,000
John Marcel P. Gemperle 20,000 300,000
Leonora L. Perez 20,000 300,000
Victoria L. Faicol 22,594 338,925
Victor Juan L. Sison 29,351 440,251.50
Ma. Francesca Sison Carreon 29,350 440,251.50
Ma. Magdalena L. Sison 29,350 440,251.50
Juan Vicente L. Rufino 30,000 450,000
Gerard Anthony L. Sison 29,350 440,251.50
Simon Jose L. Sison 29,350 440,251.50
Philip L. Sison 29, 350 440,251.50
John Michael Andrew L. Sison 29, 350 440,251.50
Miguel Joaquin Sison Carreon 29, 350 440,251.50
Victor Vicente J. Sison 29, 350 440,251.50
Ma. Raquel Christina C. Sison 29, 351 450,000
Ma. Natividad De Leon 30,000 450,000
Vicente L. Rufino 30,000 450,000
Ma. Elena Alba 23,065 345,967.50
Jose Vicente De Leon 28,265 423,991.50
Susana De Leon 28,266 423,991.50
Alejandro Ignacio De Leon 28,265 423,991.50
Miguel Antonio De Leon 28,265 423,991.50
Joanna Natividad Jalandoni 30,000 450,000
Denise Patricia Jalandoni 30,000 450,000
Javier Alejandro Jalandoni 30,000 450,000
Rafaela Jalandoni 30,000 450,000
Elsa M. Delgado 30,000 450,000
Rolando L. Zapanta 30,000 450,000
Felina B. Maligaya 30,000 450,000
Danilo S. Mariano 30,000 450,000
Francis M. De Leon 30,000 450,000
Felix Tanchanco 30,000 450,000
David M. De Leon 30,000 450,000
Alfredo L. Panicucci 30,000 450,000
Jose L. Panicucci 30,000 450,000
Alessandra Panicucci 30,000 450,000
Angelita Escanlar 3,235 48,525
Marianne G. De Leon 13,283 199,245
Antonio G. De Leon 13,283 199,245
Gian Paul Panicucci 30,000 450,000
Anna Maria Panicucci 30,000 450,000
Rosemarie L. Herbosa 13,283 199,245
Gianinna L. Syjuco 13,283 199,245



Maria Luisa de Leon married to Ernesto Escaler
Juan de Leon married to Macaria Madrigal
Jorge de Leon married to Raquel Gonzales
Regina de Leon married to Venicio Jalandoni
Salvador de Leon married to Margarita Gemperle
Oscar de Leon married to Virginia Lichauco
Benjamin de Leon married to Beatriz Prieto
Trinidad de Leon married to Alessandro Panicucci
Jose de Leon III married to Sylvia Montemayor
Lydia de Leon married to Victor Sison
Bernardita de Leon married to Vicente Perez