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By ROULEE JANE F. CALAYAG
Profit-taking continued through the end of the week, pushing share
prices to close a little lower on Friday. Analysts said the market was
still in consolidation mode with most share prices unchanged. Chelsea
Dipasupil, Research Head at RCBC Securities, Inc., told BusinessWorld
that only few blue chip stocks moved to positive territory. These
included Ayala Corp., Jollibee Foods Corp., Meralco B and San Miguel
Corp. "Majority of the stocks were unchanged. Movement was seen
generally in second-liners," Ms. Dipasupil said. She said this was due
to continued profit-taking and expectation of good earnings reports.
"Most investors took profits from other issues while the rest took a
slow positioning in anticipation of corporate reports," she added.
Companies will be releasing second quarter results beginning July 15
to August. The benchmark Philippine composite index (Phisix) closed down
3.01 points, or 0.19%, at 1,592.46 on 761.56 million shares worth
PhP498.3 million. It traded between 1,587.93 and 1,595.87.
Contrary to projections, the Phisix failed to break the psychological
resistance level of 1,600 due to a lack of fresh leads and as the market
awaits the first-half earnings results. The all-shares index fell 15.92
points to 1,005.00. The commercial-industrial index rose 0.49 to
2,503.18. Property shed 5.09 to 540.01. Mining gained 23.78 to 1,529.47
as oil stocks retreated 0.20 to 1.61. Banking and finance slid 1.98 to
463.44. Philippine Long Distance Telephone Company (PLDT) shares prices,
however, improved.
Jojo Gonzales, Research Head of Philippine Equity Partners, Inc.
attributed the sustained interest on PLDT on speculations that it has
good second quarter results. This, after the telecom giant disclosed
that subscribers of its mobile phone units Smart Communications, Inc.
and Pilipino Telephone Corp. (Piltel) exceeded 16 million in June. PLDT
said it hopes to increase the number of its mobile subscribers to 18
million within the year. The company claims it has a 58% market share in
the country's wireless phone market with Smart accounting for 45% and
Piltel, 13%. Shares of PLDT were unchanged at
PhP1,235 on 70,750 shares after a session of seesawing trade. The
company will release its quarterly report on Aug. 3.
Ayala Land, meanwhile was top-traded and unchanged at
PhP5.60 on 29.6 million shares. This as the company said it
expects higher profits this year. Ms. Dipasupil said Ayala Land was
actively traded because of net foreign selling which encouraged local
investors to pocket profits. Globe Telecom was steady at
PhP835 on 72,590 shares.
SM Prime Holdings was down PhP0.10 at
PhP6.10. Even Union Cement Corp. was down PhP0.18 at PhP2.12 with
profit-taking on gains from the sale of Bacnotan Consolidated's 51%
equity in Union Cement Holdings Corp., a shareholder of the cement firm.
Ayala Corp gained PhPhP0.10 at
PhP5.60. Jollibee rose PhPhP0.25 at
PhP23.75. Filinvest Land was down PhP0.02 at PhP1.00. San Miguel
B, which is open to foreigners, declined PhP1.00 to
PhP69, while San Miguel A was unchanged at
PhP58.50. The Philippines' largest food and beverage conglomerate
is expanding its presence in the region. It recently opened a beverage
manufacturing facility in Indonesia.
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The Bureau of Internal Revenue (BIR) wants to review the possibility
of scrapping some exemptions in the value-added tax (VAT) system to plug
loopholes. The move is seen to widen the base of VAT payers and raise
more revenues to help narrow the widening budget deficit, which was
projected at
PhP197.8 billion. The government wants to eventually wipe out the
deficit by 2009. "The government is not able to maximize expected VAT
collections because of too many exemptions," BIR Deputy Commissioner Kim
J. Henares told reporters in an interview.
VAT collection, computed at 10% of each sale transaction, fell to
PhP82.44 billion in 2003 from
PhP85.92 billion in 2002. The Tax Reform Act of 1997 exempted
more than 20 transactions from VAT. These include the sale or
importation of non-food agricultural products, cotton, copra, marine and
forest products, the sale or importation of agricultural marine food
products in their original state, livestock, breeding stock and genetic
materials, the sale or importation of fertilizers, seeds, seedlings,
fish, prawn, livestock and poultry feeds, coal and natural gas,
petroleum products subject to excise tax, importation of passenger or
cargo vessels of more than 5,000 tons, importation of professional
instruments, wearing apparel, and domestic animals.
Services rendered by the following are also exempted from VAT:
persons subject to percentage tax, agricultural contract growers, those
engaged in medical, dental, hospital, veterinary and educational
services, sale by the artist of his art, literary works, and musical
compositions. Also covered by the exemptions are services rendered by
the regional or area headquarters of multinational corporations in the
country which act as supervisory, communications and coordinating
centers for their branches in Asia Pacific and do not earn income
locally. Ms. Henares said an estimate of how much collections would
increase by scrapping selected items from the exemptions list could not
be determined as yet.
VAT comprises as much as 20% of the BIRís collection. It was first
adopted in 1988, replacing 12 different kinds of indirect taxes such as
annual fixed taxes and sales tax from manufacturers. It initially
covered only the domestic sale and importation of goods, but in 1996 it
was expanded to include most types of services. Ms. Henares said it is
not enough that the government raise VAT since the attendant increase in
collection would still be offset by the number of exemptions. "The
government must tighten the provisions of the National Internal Revenue
Code that prevent us from collecting (taxes)," Ms. Henares said.
The government said it is open to raising VAT to 11%-12% from 10%,
but not as high as 15% as proposed by the International Monetary Fund (IMF).
A higher VAT is being studied for possible inclusion in the new
administrationís economic agenda. A change in VAT needs congressional
approval. The
IMF
reportedly wants the government to raise VAT to 15%, resulting in an
estimated increase in collection to
PhP10 billion. The BIR expects to collect
PhP477 billion in taxes this year. -- Karen L.
Lema |
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Pangasinan Rep. Jose C. de Venecia, Jr., who will likely be reelected
Speaker of the 13th Congress, has proposed to shelve all talks of
constitutional change for 100 days from the start of sessions, during
which time the Senate and House of Representatives will work on
approving revenue-generating measures. Mr. de Venecia suggested this
yesterday after the Lakas-Christian-Muslim Democrats, of which he is
president, and President Gloria Macapagal-Arroyo, party chairman, held a
national party caucus on Thursday night.
The 250 regional and national party members, he said, all agreed to
support Ms. Arroyoís 10-point agenda and the proposed shift from a
bicameral presidential form of government to a unicameral parliamentary
federal form of government within Ms. Arroyoís term. In acquiescence to
the Senate position that revenue-generating measures be tackled first
before moves to change the Constitution, Mr. de Venecia said the both
chambers should try to approve all revenue-generating measures within
100 days. "All it takes is political will, it can be done."
ROUGH SAILING
Meanwhile, the proposed new taxes are expected to face rough sailing
in the Senate as some lawmakers rejected the idea. Opposition Sen.
Panfilo M. Lacson said the minority bloc is almost with the consensus
that tax leakage should be plugged first before imposing new measures.
"There is a lot to collect from the existing tax laws." He added, "Our
tax base is too narrow. We have 14 million potential taxpayers but only
three million people are paying the right taxes."
During the recent minority caucus attended by Senators Aquilino Q.
Pimentel, Jr., Juan Ponce Enrile, Jose E. Estrada, Ma. Consuelo S.
Madrigal, Sergio R. Osmeña III and Alfredo S. Lim, the bloc vowed to
push for the collection of the right taxes before imposing new measures.
Senate President Franklin M. Drilon, meanwhile, earlier announced that
the senators will attend a series of discussions on the fiscal situation
to determine the urgency of writing new tax laws.
Malacañang's economic advisers are proposing the imposition of new
taxes on some items to include oil and on the sale of goods, indexation
to inflation of the excise tax on tobacco and alcoholic drinks, shift to
gross from net income taxation, tax amnesty for individuals and
corporations, franchise tax for telecommunication companies (instead of
tax on short message service), increase in the expanded value added tax
to 12% from 10%; use of a performance-related attrition system in the
government, extension of motor vehicles users charge for four more
years, and rationalization of fiscal incentives.
REWRITE CONSTITUTION
After the 100 days, the two chambers can convene into a constituent
assembly to write charter amendments. The lawmakers, however, are
divided on the mode of changing the Constitution -- whether by
constituent assembly or a constitutional convention. The Lower House
approved a resolution in 2003 allowing it to convene into a constituent
assembly, but this was rejected by the Senate, which preferred a
constitutional convention. They are as equally divided this year. Mr. de
Venecia noted that more than 95% congressmen who signed the resolution
and conformed with the draft amendments to the constitution last year
are expected to renew their support to moves to change the constitution.
MERGER
In the same national party caucus, Mr. de Venecia and Ms. Arroyo
formally announced the merger of Lakas and the Kabalikat ng Mamayang
Pilipino (Kampi). Kampi was Ms. Arroyoís political party when she ran
for vice-president -- then as Mr. de Veneciaís running mate -- in the
1998 election. Kampi was revived this year, with Ms. Arroyoís son, Juan
Miguel V. Arroyo and brother-in-law Ignacio T. Arroyo, among its
prominent members.
Lakas and Kampi were embroiled in conflict in recent weeks over the
speakership and chairmanship of committees in the Lower House. Kampi,
with its 72 members who are also affiliated with other political
parties, posed a threat to Lakas, which has over 100 members. Mr. de
Venecia said the merger will be formalized on July 25, the eve of Ms.
Arroyoís State of the Nation Address. Lakas will remain as the surviving
party while Kampi will be dissolved.
With Kampi merged with Lakas, and with the other political parties --
Nationalist Peopleís Coalition, Liberal Party, Partido Demokratiko
Sosyalita ng Pilipinas and most of the party-list groups -- aligned with
Lakas, Mr. de Venecia is now free to create the so-called Rainbow
Coalition 4. Rainbow Coalition 4, Mr. de Venecia said, will be
instrumental in passing legislation supportive of Ms. Arroyoís 10-point
agenda, and her proposal to shift to a parliamentary form of government.
In the future, Mr. de Venecia hopes to mold Lakas into a
"disciplined, reformist party with full emphasis on subsidiarity and
Christian humanism." The party will not be unlike the UNO coalition in
Malaysia, he added, which allowed that country to "create its own
economic miracle." -- Judy T. Gulane and Carina
I. Roncesvalles |
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The country continues to be the leader in short messaging service (SMS
or text) technology in Asia, the Department of Trade and Industry (DTI)
yesterday said. In a statement, the DTI said the Philippines was cited
as "Asiaís leader" in SMS at CommunicAsia 2004 in Singapore last month,
aside from winning other awards. "The Philippines bested the other
countries due to its existing automated information on demand via SMS
available to its subscribers over the other countriesí basic
send-and-receive SMS," the DTI said. Aside from this, the Philippines
was honored for being a "reliable provider of export products in
electronics as well as an emerging leader in telecommunications, both
for mobile communications and fixed line[s]," DTI said.
The Philippines also won the Mobile News Award for Most Innovative
Service for Paysetter Internationalís "share a load," TelecomAsia
Magazineís Best GSM Carrier for Globe Telecom, TelecomAsia
Magazineís Best Telecom CEO for Gerardo Ablaza Jr. of Globe Telecom; and
TelecomAsia Magazineís Best Emerging Markets Carrier for
Philippine Long Distance Telephone Co. The achievements show that "the
Philippines is an integral part of IT and telecommunications development
in Asia," Trade and Industry Secretary Cesar A. V. Purisima said.
Undersecretary for International Trade Thomas G. Aquino noted that
the Philippines was "very much ahead of [its] ASEAN [Association of
Southeast Asian Nations] counterparts" particularly in SMS gateway
technology, messaging, gaming, location-based services, and mobile
commerce applications. Because of this, Philippine developers "can find
niches in satisfying the need for mobile solutions that can also address
the Japan and USí CDMA [code division multiple access] markets," he
said.
Active mobile subscribers have reached 23 million due to
affordability and accessibility of mobile phone services. Text messages
outnumber voice calls by a ratio of 8:1, and this is expected to go up
in the coming years. DTI said progressive information and communications
technology infrastructure and competitive rates have resulted in a "very
active mobile market," with an estimated 25% penetration rate in Metro
Manila alone. "We see a growing trend towards third generation (3G)
applications and mobile commerce and this presents an opportunity to
Philippine developers in the telecommunications industry," Mr. Aquino
said.
With 3G applications, users will be able to send and receive video,
short film clips and even hold conduct videoconferences at a speed of
128 to 265 mbps (megabytes per second). Mobile commerce will make it
possible for users to settle bills, buy grocery, and pay for cab or bus
rides through a mobile phone. -- Felipe F. Salvosa II
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The recently concluded third round of talks on free trade between the
Philippines and Japan brought the two trading partners to a deeper
understanding of each other's demands -- an indication that a pact may
be reached soon, a Japanese official said yesterday. Embassy
spokesperson Shuhei Ogawa said the 12 working groups held during the
three-day bilateral talks that ended on Wednesday led his government to
understand better the Filipino side. "The session went very smoothly and
on a very friendly atmosphere. We exchanged views and had a deeper
mutual understanding on each other's sides. Now the Japanese side
understands what the Filipinos want," Mr. Ogawa told BusinessWorld.
Although he declined to give details of the negotiations, he said
among the issues discussed was the movement of persons with the
Philippines pressing for the entry of caregivers and nurses to Japan.
Some groups of Japanese nurses have been reportedly opposing this.
"We've been explaining that among the areas to be considered is the kind
of law we have in Japan. We're asking the Filipinos to understand our
stand. At the same time, the Filipinos shared their side and views on
this movement of persons," Mr. Ogawa said. He said during the recent
courtesy call on President Gloria Macapagal Arroyo by Japanese Prime
Minister Junichiro Koizumi when he attended the inauguration of the new
president, Ms. Arroyo expressed the desire to have the agreement signed
soon. Mr. Ogawa said the Japanese government also wanted a "speedy
conclusion to the negotiation."
The next round of talks will be in Tokyo either next month or in
early September. Trade Undersecretary Thomas G. Aquino, who led the
Philippine panel, earlier said both sides are optimistic that an
agreement can be reached before yearend. Two or three sessions are
expected to be held before the agreement is finalized. The trade deal,
first raised by Mr. Koizumi and Ms. Arroyo in last year's Association of
Southeast Asian Nations-Japan summit, is seen to improve the gross
domestic product to between 1.7% and 3%. -- Maria
Eloisa I. Calderon |
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DAVAO CITY (southern Mindanao) -- Customs collection at the Port of
Davao exceeded the 21% target for the first half. Data from the Bureau
of Customs, based on a semestral report of district officeís chief
Aniceto Q. Sanchez, Jr., indicated a total income of
PhP421 million as against a
PhP349-million target for the period. The district Customs office
is targeting an
PhP804-million collection this year, and officials are optimistic
they would easily meet this considering the rising exports of
agricultural products from the region.
The Port of Davao exports about $500 million worth of fresh banana,
pineapple, mango, and asparagus, as well as coconut products annually.
While it exports roughly $700 million worth of merchandise annually, it
imports only about $200 million worth of products from foreign ports,
sources said.
The Customs report also noted that the increase in collection came
amid a drop in auction sales for confiscated items from
PhP1.5 million in last yearís first half to only
PhP1.2 million in the same period, this year. The district
Customs office here also covers the ports of Gen. Santos City in South
Cotabato, Mati in Davao Oriental and Parang in Maguindanao. Customs
records show the first half targets for these ports are as follows:
PhP349 million for Davao,
PhP9 million for Mati, PhP9 million for Parang, and
PhP86 million for Gen. Santos. Only Davao and Gen. Santos ports
hit their target collections, or increases of 21%, while Parang and Mati
ports showed major shortfalls in collections, way below the targeted
figures.
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The Philippine Stock Exchange (PSE) has suspended indefinitely the
trading of Pryce Corp. shares after the firm said it would file a
petition for corporate rehabilitation. Pryce had informed the exchange
that the corporation, its shareholders and other creditors may be
prejudiced with the likely foreclosure or attachment of the assets it
had mortgaged. The company, still reeling from the 1997 Asian financial
crisis which left it incapable of servicing and paying its debts, will
ask the court for permission to suspend debt payments. "The corporation
is left without any other recourse, but to file a petition for corporate
rehabilitation with prayer for suspension of payments in order to
protect and preserve itself," Pryce said.
The filing of the petition for corporate rehabilitation, approved by
Pryce's stockholders, may involve the settlement of obligations through
dacion en pago of its properties or payment-in-kind arrangements with
creditors, a loan restructuring, and a debt-to-equity conversion. Pryce
Corp., formerly Pryce Properties Corp., was incorporated as a property
holding and real estate development company. It operates primarily in
Mindanao, particularly in cities like Cagayan de Oro, Davao and Iligan
for its real estate development projects.
The company changed its name and primary purpose from that of a
property company to a manufacturing company when LPG and industrial
gases became its dominant operation in 1997. Pryce has a subsidiary,
Pryce Gases Inc., which manufactures and distributes oxygen and
acetylene in the Visayas and Mindanao and trades in other gases such as
argon, carbon dioxide and nitrogen. -- Roulee Jane F.
Calayag |
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The peso rebounded for the second time this week as it shed off
almost 15 centavos yesterday. "That's the peso's trend, it strengthens
by a little bit, then the next day, it's weak again," a trader said. The
same trader added that the market "just squared-off. They sold their
dollars for a long time but bought it back for covering ahead of the
weekend." He said that the closing at PhP55.79 to the dollar is only a
range-trading mode from the peso as it looks for fresh leads to develop
its appreciation.
At the Philippine Dealing System, the country's electronic currencies
exchange, the peso averaged stronger by over 10 centavos to PhP55.836
from PhP55.937 previously. It hit its lowest value for the day at its
opening at PhP55.92. Hovering at a 14 centavo range, it went to as high
as PhP55.78 but later settled at PhP55.79 per greenback. "It's not all
about the peso this week but about the dollar getting weaker," the
trader added.
A few weeks ago, inflationary measures from the United States pushed
the dollar to extend its bullish trend which in turn, affected the
regional currencies' rally. However, recent economic figures in the US
including its lower-than expected jobs data, turned-off market players
as they "now question if there will really be an economic recovery
there," the trader said. There was also minimal corporate demand, which
also allowed the peso to recover. Firms, particularly oil and
telecommunication companies buy dollars heavily to cover their import
obligations. "Banks only ride on these commercial transactions [when
they see that the dollar is getting stronger], but they were little
[yesterday]," the trader said. -- Ira P. Pedrasa
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The Philippine Ports of Authority said bidding for contracts would be
more transparent following yesterdayís launching of the e-procurement
system.The PPA, one of the highest revenue contributors for the
government, said it does not expect higher yields from the
PhP18-million investment in the computer system. "This is not
really for revenue-generation. We will be satisfied by the impact of the
system with improved transparency," said Aida Dizon, PPA head for
finance and administration.
The PPA will initially use the system for contractors who want to
register and file their application for eligibility. Bidders need to
file basic information about their eligibility only once, and will
receive via electronic correspondence every time their services suit PPA
contracts up for bidding. In August, the PPA will enter the second phase
of its procurement computerization, which would by then show the
evaluation results of the electronic bidding.
After the e-procurement system takes off, the PPA will also undertake
the e-payment system, which will allow online payment for the port
regulator. PPA strategic development manager Amy Aquino said there is as
yet no timetable for this project due to the lack of development in
other ports. "There has to be a coordination with banks, but itís
difficult because a lot of ports in the provinces do not have the
communication facilities," Ms. Aquino said. The computerization program
is in compliance to Republic Act No. 1894 or the government procurement
reform law. -- Anna Barbara M. Lorenzo
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KORONADAL, South Cotabato (central Mindanao) -- The exploration work
of Sagittarius Mines, Inc., which took over the mineral rights of
Western Mining Corp. in the provinces of South Cotabato, Sultan Kudarat
and Davao del Sur, have yielded positive results boosting the
possibility of a full-scale exploration in the area. "Our ongoing
exploratory studies in the towns of Tampakan [South Cotabato], Columbio
[Sultan Kudarat] and Kiblawan [Davao del Sur] indicate positive
results," Allan Buenavista, project manager of Sagittarius Mines said.
Mr. Buenavista said the company's Australian partners are expected to
arrive early next year for the feasibility study of the project after
ore samples found were reported as 'world-class'.
Sagittarius Mines is a joint Filipino-Australian venture that
operates through a financial and technical assistance agreement (FTAA)
it inherited from Western Mining when it took over the mines from its
previous rights holder three years ago. But the Supreme Court in a
ruling last January declared FTAAs as unconstitutional for violating a
Charter provision limiting to 40% ownership of foreign investors in a
company, including those engaged in mining. The government, through the
Department of Environment and Natural Resources has, however, appealed
the Supreme Court's ruling.
Sagittarius' legal department head Al Lagunzad also noted that if the
Supreme Court will not reverse its decision, the firm could still
operate using it's approved mining claims under the mineral production
sharing agreement approved by the government in 1994. --
Roel P. Osano |
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The polling outfit Social Weather Survey (SWS) yesterday released its
June 4-29, 2004 poll that found 57% of respondents satisfied with the
performance of President Gloria Macapagal Arroyo and only 31%
dissatisfied, or a net rating of +26. This is close to the March 21-29
SWS survey that showed a 55% satisfaction rating with 25% dissatisfied,
or net +30. Small increases in public satisfaction with Ms. Arroyo in
the National Capital Region and Visayas were offset by small declines
elsewhere. SWS also said the survey also asked about the public
satisfaction with the Arroyo administration over the past three years,
and found 61% satisfied and 27% dissatisfied with its performance. The
ratings are relatively higher in the Visayas (72% satisfied) and
Mindanao (66%). Respondents were predominantly satisfied with the
2001-04 Arroyo administration in the following issues: helping the poor
(67% satisfied), setting a good example of morality in public office
(62%, promoting foreign investments (60%, strengthening democracy (57%),
and reconciling with rebel groups (49%). |
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The government has not done enough to improve its finances and reduce
poverty in the country, the International Monetary Fund (IMF) said last
night.An IMF team, which arrived in Manila last month to review the
economy's performance, said President Gloria Macapagal Arroyo must take
advantage of her new mandate to do bold reforms in tax collection, job
creation, and poverty reduction. "A renewed political mandate provides
the administration with a clear opportunity to press ahead with much
needed reforms to ensure macroeconomic stability while creating new
opportunities to reduce unemployment and poverty," the IMF team said in
a statement.
IMF mission head Masahiko Takeda said the government should focus on
three areas -- strengthen fiscal performance, restore financial
soundness in the power sector, and reinvigorate the financial sector.
"What is needed is a bold reform package," the IMF mission chief told a
press conference. Concluding its assessment of macroeconomic
developments and policy priorities, the IMF mission said a major
stumbling block to economic growth was the sustained decline in
government revenues. Mr. Takeda said reducing government debt over the
medium term would create more room for development expenditure such as
infrastructure.
The Washington-based IMF team also said it was concerned by some of
the tax measures being proposed by Palace advisers. For one, it bucked
their proposal for a tax amnesty for individuals and corporations,
saying this would just make the government poorer. "It will also be
important to resist proposals for new tax amnesties, given the harmful
impact that repeated amnesties have on incentives for taxpayer
compliance," the IMF mission said. But the mission supports the plan to
raise tobacco and alcohol taxes based on their price increases. When
asked on the IMF team's stand on other proposed measures such as raising
the value-added tax rate and shifting to gross from net income taxation,
Mr. Takeda was tight-lipped. He said what was important was to introduce
significant tax policy measures. Mr. Takeda also stressed the need for
the government to sell cash-strapped National Power Corporation (Napocor)
to private investors. "Addressing the Napocor problem is a very
important element to improve the government's financial condition," he
said, adding that government's absorption of Napocor's
PhP500-billion debt was necessary for privatization.
On banking, the IMF team reiterated earlier statements that there was
a need to strengthen regulators, particularly the Bangko Sentral ng
Pilipinas (Central Bank of the Philippines, or BSP) and the Philippine
Deposit Insurance Corporation (PDIC). "It continues to remain critical
to strengthen the legal powers of the BSP and PDIC in line with best
international practice," the IMF team said in a statement. IMF officials
arrived in Manila last month to discuss policies with government and
monetary officials under the IMF's post-program monitoring program
framework.
When asked about possible revisions to IMF's economic growth forecast
for the Philippines for this year, Mr. Takeda said the economy, as
measured by the gross domestic product, would likely expand by 5% --
within the government's growth target of 4.9%-5.8%. Looking beyond 2004,
Mr. Takeda also said the government must detail a credible program to
balance the budget by 2009. Mr. Takeda, who is also IMF's senior adviser
for Asia and the Pacific, added IMF would respond to any request for new
loans. But Bangko Sentral Governor Rafael B. Buenaventura said in a
separate interview that the country had no plans. However, he also said
financial help from IMF was an option available to the government.
COMMITTED
Meanwhile, the Malacañan presidential palace is bent on pushing for a
shift to gross from net income taxation system despite the objection of
the IMF. Emerging from a Cabinet meeting, Socioeconomic Planning
Secretary Romulo L. Neri said the IMF was not fully aware of the tax
scheme planned by the government. "The IMF has been a useful source of
inputs, and we always take their suggestion seriously, but it is
possible also that they are just giving their opinion without really
looking at the details that we intend to go into for this measure," Mr.
Neri told reporters. Taxes are presently based on net income, or gross
income minus allowable deductions. President Gloria Macapagal Arroyo
proposes to limit allowable business deductions to cost of sales only.
It expects to raise at least
PhP30 billion in additional revenues from this measure.
The IMF reportedly warned the government that a shift to gross income
taxation would be risky, and would not likely generate additional
revenues. But Mr. Neri explained, "What is important is to reduce
discretion" in determining taxes to be paid. "In the end, it will be us
who will decide, not the IMF," he added. Meanwhile, the IMF review team
expressed dissatisfaction over the government's deficit target for next
year and asked the Arroyo administration to further control spending. A
government source said the IMF mission was "concerned" that the Arroyo
administration planned to trim the budget deficit to 3.6% of GDP next
year from 4.2% this year. "They questioned why the reduction was too
small. Their perception was that the government would be spending more,"
the source said. The IMF mission wanted the 2005 deficit at only 2.5% of
GDP, the official added. "They would like to see a program or a plan
that would require more deficit reduction," he said.
The government hopes to reduce the budget deficit to
PhP187.5 billion next year from this year's projected
PhP197.8 billion. The 2003 budget was
PhP199.8 billion, while GDP was
PhP4.3 trillion. The government has already adopted one of IMF's
recommendations to reduce debt figures, which is to exclude
intra-government holdings of securities and bonds in computing
outstanding public sector debt. The source also said IMF representatives
were impressed with the proposal to introduce new petroleum taxes,
although they still had reservations. "They like the idea but they think
it is difficult to introduce, given the high prices of oil," the source
said. -- with reports from
Jeffrey O. Valisno and Felipe F. Salvosa II |
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The fate of 10 new taxes being pushed by advisers of President Gloria
Macapagal Arroyo hangs as the Palace decides which of them will be
included in the government's legislative agenda. Finance Secretary
Juanita D. Amatong said the 10 tax proposals would be presented to the
President on Monday, as well as measures to reform the power and
financial sectors and ensure macroeconomic stability. Albay (southern
Luzon) Rep. Jose Salceda, member of the so-called Palace advisory body
Economic Managers Group, earlier said all 10 tax proposals were as good
as approved. But Finance undersecretary Eric O. Recto clarified, "that
decision has not been made yet", although new taxes are all "under
consideration." This early, however, the Department of Finance (DoF) and
the International Monetary Fund (IMF) had already bucked the proposed
tax amnesty for individuals and corporations.
A Finance official, who requested anonymity, said Congress passed 15
tax amnesty laws in the last 13 years, yet the "tax effort has gone
down." Ms. Amatong also confirmed that the IMF disapproved of the
government's plan to shift to gross from net income taxation. "IMF told
us it might end up being complicated," she said. But Ms. Amatong and Mr.
Recto were one in saying that it was too premature to tell whether the
shift would work. "It would be a needless exercise to discuss the
apprehensions because the actual provisions of the law have not been put
together yet. Masyado pa maaga para tirahin [It is too early to
criticize this proposal]," Mr. Recto said. Ms. Amatong said she
preferred the shift because it would simplify tax administration.
Aside from gross income taxation and a new tax amnesty, Palace
advisers are also pushing:
- the indexation to inflation of the excise tax on tobacco and
alcoholic drinks;
- a franchise tax for telecommunication companies (instead of tax
on text messaging);
- increase in the expanded value added tax (EVAT) rate to 12% from
10%;
- use of a performance-related attrition system in government;
- extension of motor vehicles users charge for four more years;
and
- rationalization of fiscal incentives.
All of these measures need the approval of Congress.
Meanwhile, congressmen said they would want to first review the tax
bills to be filed before commenting on them. "The provisions of the
bills on taxes should be studied carefully," Cebu (Central Visayas) Rep.
Nerissa Corazon Soon-Ruiz said at a breakfast forum in Quezon City. "We
will not give premature signals. The bills should be heard first," added
Tarlac (Central Luzon) Rep. Jesli A. Lapus, who has been endorsed to
chair the House of Representatives ways and means committee, which has
jurisdiction over tax bills. Mr. Lapus, who was one of the vice-chairmen
of the committee in the previous Congress, also said the proposed tax
bills would have to go through the legislative mill. "By the time they
are done, it could be 2005," he said. "Let us think of what we can do
now -- the doables and the must-dos." Mr. Lapus suggested maximizing the
revenue-generating capacities of various departments like Transportation
and Communication, Environment and Natural Resources, Agriculture,
Agrarian Reform and others, which have been mandated by law to turn over
all the proceeds from permits, licenses, fees and other services to the
Treasury.
Other doables that Mr. Lapus suggested were compromise agreements on
the Bureau of Internal Revenue's accounts receivables, which are
estimated at
PhP90 billion; plugging the leakages in expanded valued added tax (EVAT)
collections; and implementation of an executive order on an amnesty on
customs duties for imported second-hand cars. Mr. Lapus said the
government must be run like a corporation, with all its departments and
agencies required to produce revenues. And if they meet their revenue
targets, then incentives may be given, which will be used to augment
their budgets. Mr. Lapus noted that a monitoring body, called:
Government Corporation Monitoring and Coordinating Council (GCMCC), was
formed through a grant from the World Bank in 1989 to appraise the
performance of government-owned and -controlled corporations (GOCCs)
with respect to their revenue goals. GCMCC was placed under the
Department of Finance, "but the last time I checked, the office had only
two clerks," Mr. Lapus said.
Meanwhile, the consolidated public sector debt, which is the combined
budget deficits of the government, GOCCs and other public financial
entities, climbed to
PhP244.6 billion last year. The CPSD is used by international
creditors to gauge the government's ability to generate funds to finance
spending and repay borrowings.
Three tax bills (and not four as reported by BusinessWorld on
Wednesday) suggested by the Economic Managers' Group have already been
filed at the House of Representatives by Quezon (southern Luzon) Rep.
Danilo E. Suarez. These are the bills:
- providing for a tax amnesty (with required submission of
statement of assets, liabilities and net worth) for delinquent
individual and corporate taxpayers;
- optimum performance of revenue-generating agencies through the
grant of incentives and rewards, and lateral attrition if they do
not meet their revenue targets; and
- a 7% computer education tax (separate from income and value
added tax) on receipts from cellular phone calls.
Mr. Suarez said the computer education tax would refer to the
franchise tax to be levied on telecommunications firms. The 7% tax will
be directed to a special computer literacy fund for elementary and
secondary public schools. -- Karen L.
Lema with a report from Judy T. Gulane |
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The Malacañan presidential palace plans to ask Congress for almost
PhP100 billion in additional budget for next year to cover
government expenses, including
PhP270 billion in interest charges for its local and foreign debt.
Budget Secretary Emilia T. Boncodin said the Palace would submit a
PhP901-billion budget bill for 2005 when Congress reopens later this
month. This is 12% higher than this year's
PhP804-billion budget, which was covered by the reenacted 2003
budget law. It is also higher than the
PhP865-billion budget mentioned earlier by Albay (southern Luzon)
Rep. Joey Salceda, a member of the Palace advisory body known as the
Economic Managers Group or EMG. While Ms. Boncodin refused to further
detail next year's budget plan, she confirmed that
PhP270 billion would pay for interest charges on domestic and
foreign borrowings.
Data from the Department of Finance showed that
PhP265.845 billion was budgeted for interest payments for this year.
The Department of Budget and Management also said each government
agency's proposed budget for next year would reflect the "government's
intent to widen the revenue base and strengthen its expenditure focus."
And as stated under the 2005 National Budget Call, next year's budget
would abide by the administration's goal of "progressively" reducing the
deficit, to sustain a healthier fiscal position that would support
economic and revenue growth targets.
New tax laws will also be proposed to Congress to remedy deficiencies
and weaknesses in the present tax system and fund anti-poverty programs,
the Budget department said. It added that the 2005 budget would also
support programs that "promote and complement private sector and local
government productive efforts for greater synergy and multiplier
effect." The government aims to keep next year's budget deficit at below
PhP180 billion, and eventually balance the budget by 2009. Several
lawmakers have also called on the government to revise its deficit
reduction schedule, to keep the economy afloat. But Finance
undersecretary Eric O. Recto insists 2009 is a more "realistic" target
date. "Our analysis shows that if we want to meet economic growth
targets we have set out for ourselves we have to carefully balance
additional revenue measures and expenditure control measures," he said.
Mr. Salceda earlier said the proposed 2005 budget might not be enough to
fund the 10-point priority program that President Gloria Macapagal-Arroyo
detailed in her inaugural speech last June 30. The President also
promised to create 10 million jobs and provide education for all.
-- Karen L. Lema |
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Bangko Sentral (Central Bank) and Finance officials appear clueless
on the exact role and nature of the so-called Palace advisory body known
as the Economic Managers Group (EMG). In fact, as far as Finance
Secretary Juanita D. Amatong is concerned, President Gloria Macapagal-Arroyo
has only one economic management team -- with members all from the
Cabinet. "Wala naman talagang ganyan [There is really no such
advisory group]," she said, referring to the EMG. She also said that
name was just coined by Albay (southern Luzon) Rep. Joey Salceda, who is
a member of the group. "We have an economic management team, which is
us," Ms. Amatong told reporters yesterday.
Members of the economic management team include the secretaries of
Finance, Trade and Industry, and Budget; the National Economic and
Development Authority director-general, and the governor of the Bangko
Sentral ng Pilipinas. Referring to the apparently anomalous existence of
the Economic Managers Group, one central bank official said, "Why is
Joey Salceda the only one talking about it?" Another official said Mr.
Salceda was making his presence felt because he would be vying for the
chairmanship of the House of Representatives Committee on Appropriations
when Congress reopens later this month.
In reaction, Mr. Salceda said, "I am a member of the EMG and how is
that connected? I called for the realigning of the pork barrel to
anti-poverty projects. Will that make me popular among the congressmen?"
he asked. Finance undersecretary Eric O. Recto, also a member of EMG,
said the Palace advisory group could be considered a "think tank." Mr.
Salceda said the EMG was an initiative of Executive Secretary Alberto
Romulo. He said it was not a super finance body, contrary to earlier
reports. It is a mere "input generating body and has no decision making
powers," he said. "We simply recommend to the President," Mr. Salceda
said in a telephone interview. He also said the group has been asked to
help study the "feasibility of revenue measures that would help in
formulating a credible deficit reduction program."
The government aims to balance the budget by 2009. It hopes to
convince Congress to pass additional tax laws that can generate a
minimum of
PhP50 billion in additional revenues yearly.
-- Karen L. Lema |
New round of meetings set next month as Cebu talks end
By MARITESS S. VILLAMOR, Cebu Bureau Chief
MACTAN ISLAND, Cebu (central Visayas) -- Japanese and Philippine
trade and economic officials concluded late Wednesday afternoon the
third negotiating session for the proposed Japan-Philippines Economic
Partnership Agreement (JPEPA) with the promise of hammering out an
agreement before the year ends. Trade Undersecretary Thomas G. Aquino,
who led the Philippine negotiating team, said progress in the talks was
made in terms of acquiring additional information on each country's
economy, and rules and regulations. "It's not something measurable. But
it has qualitative value for decision-making later on," he told a press
conference Wednesday evening.
Both Japan and the Philippines are optimistic that an agreement can
be hammered out before the end of the year. Two or three more
negotiating sessions are expected to be held before the agreement is
finalized. The agreement will also have to undergo legal review. Mr.
Aquino said Japanese officials have declared that they wanted a speedy
conclusion to the negotiations. President Gloria Macapagal Arroyo, who
proposed the talks during her state visit to Japan, is also "looking
forward to the outcome," he added. Both sides will meet again, probably
in Tokyo, in late August or early September. The fourth session is
expected to cover the same areas covered in the just concluded talks.
Mr. Aquino declined to give details on what transpired during the
three-day meeting, but said they looked at all goods that will likely be
covered in the proposedfree trade pact. "All goods have been looked at.
But until there's an agreement on the trade of these goods, I can't
share with you any information," he told reporters. He also said they
will continue to discuss the issue of movement of natural persons but
declined to elaborate. "Until the specifics are laid out, defined and
agreed, it's better for parties of either side to refrain from
interpreting it any way they want to. Considering that this requires
movement, immigration issues will have to be addressed," he said.
The Philippines is pushing for the entry of Filipino health workers
in Japan although some groups of Japanese health workers are said to be
opposed to this. Mr. Aquino, however, downplayed this. "I don't think
that's accurate. We have to give a lot of importance to each and
everyone. We have to look at the total picture of an economic
partnership agreement. Certainly, each one will have its own demands,"
he said. Other areas covered in the negotiations are mutual recognition,
and standards and conformance, intellectual property, government
procurement and dispute avoidance and settlement. Mr. Aquino also said
holding the meeting here brought the negotiations down to the local
government level. Both sides were "extremely pleased" with the local
government support for the negotiations. "The third meeting took place
in an extremely favorable and pleasant environment. As you know, the
local government here was fully aware [of the talks] and shared in the
hosting of the JPEPA," he said. |
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Creating a state-run corporation to oversee infrastructure projects
will benefit the goverment if it will be limited to making studies and
preparing the terms of reference for build-operate-transfer (BOT)
projects prior to bidding them out, former National Economic Development
Authority (NEDA) chief Felipe Medalla said. "[The proposed corporation]
should have a focused mandate," Mr. Medalla said. He noted that the
government could not bid out a number of BOT projects due to its
inability to prepare the necessary the documents. "Their excuse is that
[no entity] will draft the terms of reference and study the
feasibility." Mr. Medalla said the government should just junk the idea
of an infrastructure corporation if it will be directly involved in
infrastructure projects. "If the [proposed] corporation will be involved
directly in the projects, then the government should just forget it," he
said.
Bienvenido S. Oplas Jr., an economist from private research group
Think Tank, Inc. said he is opposed to the infrastructure corporation as
it will only contribute to the tightness in the government's fiscal
situation. "[The corporation] will surely need capitalization so
obviously the government will be using taxpayers' money for it," Mr.
Oplas said. He also expressed apprehension that the proposed corporation
will further bloat the current bureaucracy. There were earlier reports
the government is finalizing plans to create an infrastructure
corporation to aid its infrastructure-building projects.
-- Jennifer A. Ng |
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The country is assured of a 97% rice self-sufficiency if the 2.57
million metric ton (MMT) expected harvest for the April to June crop
season is sustained, an official from the Agriculture department said
yesterday. "Barring any major calamity, there is no doubt rice
production would reach this year's target," Ginintuang Masaganang Ani (GMA)
rice program director Frisco M. Malabanan said. Rice production this
year is estimated at 9.75 MMT growing to 10.26 MMT next year, although
current supply is not enough to satisfy the local requirement of 10.02
MMT hence the need to import rice.
The April to June crop season last year yielded 2.3 MMT with around
680,000 hectares of farmlands cultivated with rice. For this year's crop
period, government estimates the rice production area at 706,000
hectares or 3.9% higher a year before. Agriculture Secretary Luis P.
Lorenzo, Jr. also said the government is on track with its rice
production target with more areas planted to hybrid and certified rice
seeds. Around 600,000 hectares would be planted with hybrid rice this
crop year.
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Food and beverage giant San Miguel Corp. has opened a new beverage
manufacturing facility in Indonesia to further expand its reach in the
Asia-Pacific region. In a statement, San Miguel said the Indonesian
venture involves manufacturing and distribution of ready-to-drink soft
beverages. "This new business reflects San Miguel's full confidence in
Indonesia as a fast-growing economy and manifests our continuing
commitment to promote the best interests of consumers in this country,"
Chairman Eduardo M. Cojuangco, Jr. said during the groundbreaking
ceremonies. The new multi-beverage plant is located at the MM2100
Industrial City in Bekasi Province, West Java, San Miguel said. The site
of the new facility is about 25 kilometers from Jakarta.
The new company, to be known as PT San Miguel Indonesia Foods and
Beverages, is 85% owned by San Miguel and 15% by PT Delta Djakarta Tbk,
San Miguel's brewery in Indonesia. The firm said the new investment
"presents a growth opportunity for San Miguel and its domestic business
partners" in Indonesia's huge beverage market. This market, San Miguel
said, has been growing at an average of 20% over the past five years. As
of 2003, the per capita consumption of nonalcoholic beverages in
Indonesia is 46 liters, which is comparable to Thailand's 44.2 liters
and the Philippines' 70.2 liters, the firm said. "With the establishment
of its newest manufacturing facility, San Miguel expects to be able to
offer Indonesian consumers a wide range of choice in beverage products,"
it added. San Miguel declined to disclose how much the newly opened
plant cost.
The new facility boosts San Miguel's presence in Indonesia. In 1976,
the company secured a licensing arrangement to brew beer. The firm began
its brewery operations in 1993 when it bought into PT Delta Djakarta,
one of Indonesia's largest breweries. Its Anker Bir and Anker Stout
brands have significant market share in the Indonesian market, the firm
said. San Miguel also manufactures and markets processed meats through
PT Purefoods Subah Indah, a joint venture with the Hero Group of
Indonesia. Its Farmhouse and Vida hotdogs and sausages, cold cuts,
burgers and other processed meats are major product lines in Indonesia's
fast-growing processed meats industry. The company also has a plastics
plant in Indonesia through PT San Miguel Sampoerna Packaging Industries,
which produces and markets plastic crates and pallets.
The groundbreaking ceremony for the Indonesian plant came less than
three months after San Miguel acquired brewery assets in Thailand. The
firm said that "more activities" are scheduled within the year in
Australia, Vietnam, China and Malaysia. San Miguel is the largest
publicly listed food, beverage and packaging firm in the country. It has
more than 100 major manufacturing facilities in the Philippines, China,
Hong Kong, Indonesia, Vietnam and Australia. The company's products are
exported to over 40 countries.
For the first five months, the firm posted a 32% growth in its net
income at
PhP3.29 billion. San Miguel said it posted 39% growth in its
consolidated operating income for the first five months with
PhP6.65 billion. Consolidated sales revenue, meanwhile, grew 15%
to PhP68 billion from January to May. -- Jennee Grace
U. Rubrico |
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The Philippine Stock Exchange (PSE) yesterday lifted the suspension
order on the trading of Union Cement Corp. after the company clarified
its ownership structure. The exchange immediately lifted the ban after
Union Cement said the ownership structure was unchanged despite Bacnotan
Consolidated Industries, Inc.'s sale of its 51% stake in Union Cement
Holdings Corp. to Cemco Holdings, Inc. Union Cement Holdings still holds
a 60.47% stake in Union Cement, while Cemco directly owns 17.02%.
Japan's Sumitomo Osaka Cement Co. Ltd. owns a 9.22% stake in Union
Cement, non-Filipino minority shareholders have a combined 4.22%
interest, while Filipino minority shareholders own a combined 2.77%.
Bacnotan said it gained the "fairest value" for its investment in
selling the stake to Cemco, 40% owned by Holderfin B.V. Bacnotan and
unit Atlas Cement Corp. have agreed to sell their respective 21.3% and
29.7% interests in Union Cement Holdings for a total of $214 million.
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The Philippine peso barely moved versus the greenback yesterday as it
strengthened by less than two centavos in the absence of fresh leads,
traders said. During trading, the peso went to as low as PhP55.97
against the US dollar, following the depreciation of the Japanese yen.
The peso's major mover slipped to 109.10 yen but "corrected in the
afternoon" to around 108.85, one trader said. The peso followed suit, he
added. "The trading was almost boring [yesterday]," another trader said.
He also said there were small demands from oil and telecommunication
companies leading to a range-trading mode for the peso. In the last few
days, heavy dollar demands from private entities caused the peso to
slip. "However, the weak side for the peso's range-trading is that it
might fall again any time," another trader said, citing lingering market
concerns over the budget deficit and other issues.
The other day, the central bank reported that the country's gross
international reserves, a measure against sudden exchange rate
movements, fell by 2.3% in June. At the Philippine Dealing System, the
country's electronic currencies exchange, the peso averaged stronger by
less than a centavo to PhP55.937 from PhP55.943. It traded within a
range of 6.5 centavos, hitting a high of PhP55.905. The local unit
closed at PhP55.935. -- Ira P. Pedrasa
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Citibank N.A., the largest foreign bank in the country, is extending
its market reach to the middle-income segment with liquid assets of
PhP100,000 to PhP2 million. The bank launched yesterday its
latest service called Citibanking which will provide comprehensive
professional financial advice for this market. Citibanking clients can
look forward to access to extensive and up-to-date information on global
markets plus a diverse array of investment tools, research and
strategies. A Citibanking relationship begins with the prospective
client joining a personal banker for a Citipro Financial Check-up.
Citipro is a proprietary software that can help individuals assess their
financial health, evaluate their needs and understand their risk
profile. "We are introducing Citibanking to meet the needs of a segment
that are not being as well-served as they could be. This is about
listening to our customers and helping them manage their money better.
This is a proprietary money management tool being introduced by
Citigroup that allows us to understand our customer and enable us to
help establish their financial goals more effectively," said Les
Matheson, division executive for the Asia-Pacific region. "We are trying
to cover a much broader cross section. Some of the tools we have
developed, and some of the areas we make applicable to other segments as
well. We are leveraging the experience and knowledge of Citibank around
the world," he added.
Believing customers' needs have become more sophisticated, Nina D.
Aguas, the global consumer bank's country business manager, said current
trends have shown people would like their wealth to be managed more
professionally. "We all aspire for a comfortable life and work very hard
to get it. But along the way, we need professional advice to help us set
our financial goals. Citibanking will provide our clients with the
appropriate financial management tools to do just that. It bridges the
gap between wishful thinking and realizing your goals," she said.
Normally conducted over 30 minutes, Citipro Financial Check-up is a
complimentary exercise that requires no commitment to invest. Aileen
Litonjua, Citibank retail banking director, said this can help draw up a
financial plan suited to a particular goal based on an assessment of
investible assets, investment objectives, and risk profile. "Your plan
becomes a roadmap to better manage your finances and determine the
feasibility of your goals in life. The Citipro session is a step-by-step
process comprising of several form fields that a client fills up with
various information," Ms. Litonjua said. "It starts with one's
professional profile such as name, age, birth date, savings or deposit
accounts, assets and loans, expenses and the like. Then Citipro
considers the short- and long-term needs. Afterwards it assesses one's
risk profile before computing how much one should adjust his or her
savings-income-spending habits to achieve this goals. The last stage is
when it gives ideas on the types of investment and other financial tools
one should go into based on all the data gathered," she added.
-- Ruby Anne M. Rubio
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The Philippine central bank's policy-making Monetary Board approved
yesterday the planned 25-million-euro foreign borrowing of the
state-owned Development Bank of the Philippines (DBP), an official said
yesterday. Amando M. Tetangco, Jr., deputy governor of the Bangko
Sentral, said the board has approved in principle the borrowing plan
which is part of the bank's financial assistance program for small and
medium enterprises (SMEs) in the country. The Arroyo administration
wants to develop the country's SMEs, which comprise about 99% of
business establishments in the country. Local SMEs have lagged behind
their counterparts in Thailand and China because of the lack of
government financial support. Mr. Tetangco said DBP intends to use the
fund for SME's relending needs, agro-industrial projects, infrastructure
programs and urban development projects.
Based on its application with the Monetary Board, DBP will borrow the
loan from the European Investment Bank, which is the financing
institution of the European Union. -- Iris Cecilia C.
Gonzales
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By ROULEE JANE F. CALAYAG
After reaching a 10-week high, share prices closed lower yesterday as
investors pocketed recent gains on selected blue chips, particularly the
Philippine Long Distance Telephone Co. (PLDT). The Philippine Stock
Exchange composite index (Phisix) shed 2.92 points or 0.18% at 1,595.47,
involving transactions worth
PhP684.5 million. PLDT's drop -- by PhP15 at PhP1,235 on 165,880
shares -- was offset by gains in small-capitalized stocks, thus
preventing a steep decline in the Phisix. Analysts, however, said the
market was performing well despite yesterday's marginal drop.
CONSOLIDATION
Robert Cano, analyst at BPI Securities, told BusinessWorld the
slight decline was due to consolidation. "The market was moving within a
range. On a technical basis, it is still on its upward trend despite the
drop," said Mr. Cano. Earlier in the week, analysts had projected that
the Phisix would break the 1,600 level today and would try treading
1,620 on Monday. But investors, said Mr. Cano, would be hunting for cues
to anchor their positions. "Investors are waiting for new corporate
developments, earnings performance reports and guidance as they embrace
changes," he added.
Trading is projected to reach new highs by next week until the middle
of August as corporations release their earnings reports for the second
quarter and the first semester. Astro del Castillo, managing director of
First Grade Securities, Inc., also cited consolidation as the factor
behind the market's weakness. He told BusinessWorld that the
absence of new leads pushed the market lower. "There was consolidation
because there were no fresh leads to pull the market. Technically, the
market was nearing an overbought position," said Mr. del Castillo.
KIDNAPPING IN IRAQ
Another factor that might have dampened investor sentiment was the
reported kidnapping of a Filipino by Iraqi insurgents, Mr. del Castillo
said. "The kidnapping has no direct effect on the market but a deeper
look into it could trouble investors. This was the first time that the
Iraqis attacked Filipinos directly," he said. The incident was
reminiscent of the terror insurgents had wreaked in Spain last March
where at least 131 people and more than 400 people were injured after
packed trains in Madrid, Spain were simultaneously bombed. The bombings,
considered to be the most violent and bloodiest in three decades of
Basque separatism, were blamed on the Spanish government's support of
the US-led Iraq war. This eventually forced Spain's Prime Minister Jose
Luis Rodriguez Zapatero to announce that he would probably pull Madrid's
troops out of a "disastrous" occupation of Iraq. Mr. del Castillo said
the kidnapping of the Filipino in Iraq strikes at the core of national
security. "There may be a possibility that this will happen to us. What
could be the next action of the Iraqis toward Filipinos after they
knowingly kidnapped one in Iraq? Will their next action directly affect
us?," he said. He said the kidnapping incident should not affect the
financial market but warned that this could create fear among fund
managers. "They may think that international terrorists can reach us
here," he added, noting that such possibilities should be factored in
when mopping a forward-looking national security plan. "I do not want to
paint a bleak picture but hopefully, there would be no further
repercussions to the local business community. Terrorists and insurgents
are unpredictable but history has shown that they always take the matter
to the heart of the nation," added Mr. del Castillo.
Malacanang responded to the incident in Iraq by ordering the Labor
department to stop the processing of papers of Filipinos bound for Iraq.
The Philippines, a known ally of the United States, sent troops to Iraq
in support of US President George W. Bush's campaign to end global
terrorism. The Iraqis' action may be interpreted as a means to force the
Arroyo administration to cater to their demands which include recalling
Filipino soldiers detailed in the country and ending government support
of US policies.
GAINERS AND LOSERS
At the stock market, losers toppled gainers 38 to 21, with 43 stocks
unchanged. PLDT led the list of actively traded stocks, followed by
Globe Telecom, SM Prime Holdings, Meralco B, Ayala Land, Inc., Ayala
Corp., Bank of Philippine Islands, Union Cement Corp., Petron Corp. and
First Philippine Holdings. Profit-taking is expected to continue as the
market consolidates following recent gains. But Mr. del Castillo said
consolidation helps propel the market. "The market will move upward
after a confirmation that earnings growth are sustained in the first
semester," he added.
Corporate earnings, which will begin coming in by next week, will
also set the tone for the market. "Corporate earnings reports are being
monitored. Players are waiting for their release. The market is more
sensitive to these," he said. Worries over inflation are also seen
weighing down on market sentiment. "Pressure on domestic trade due to
inflation will affect the market," added Mr. del Castillo. Despite the
temporary decline, the market is projected to recover today and keep its
gains until the end of August.
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