Gov't gets new chance to try PhP20-B tax case

Chinese-Filipino tycoon Lucio C. Tan's Fortune Tobacco Corporation and its nine marketing arms are again facing a PhP19.67-billion tax evasion case after the Supreme Court yesterday set aside the Marikina City Metropolitan Trial Court (MeTC) Branch 75 decision dismissing the suit. After yesterday's en banc session, Supreme Court justices unanimously voted for the reinstatement of the tax case. They noted the MeTC failed to make an independent finding on the case based on its merits, and instead anchored the dismissal on the Bureau of Internal Revenue (BIR) findings that there was no legal justification for the tax evasion suit. "After a thorough review of the orders of the MeTC dismissing the criminal cases, this court finds, that said orders were null and void and were a result of a gravely injudicious exercise of judicial authority," the Supreme Court ruled. "By relying on the manifestation and motion of the BIR alone, it ignored the positive findings of the panel of prosecutors, which had themselves painstakingly conducted the preliminary investigation on the subject criminal liability of the respondents," the court said.

The court also said that based on jurisprudence, the granting of a motion to dismiss must be caused by a judge's personal conviction that there was no case against respondents. In the Fortune Tobacco tax case, the court ruled that MeTC failed to perform its duty to "judiciously and independently" rule on the motion to dismiss filed by the tobacco firm. "The MeTC abdicated its duty as a court of law, and subjugated itself to the administrative agency [BIR]," the court said.

On December 1, 1998, the Department of Justice (DoJ) filed before the MeTC nine counts of tax evasion against Fortune Tobacco Corp. and its marketing firms. The case stemmed from the complaint filed by the BIR Commissioner on September 7, 1993 with the DoJ, alleging fraudulent tax evasion by Fortune Tobacco for nonpayment of the correct ad valorem, income and value added taxes. DoJ said Fortune Tobacco and its nine dummy marketing corporations defrauded the government of PhP7.51 billion in taxes in 1990, PhP7.51 billion in 1991, and PhP5.79 billion in 1992. But a memorandum dated February 11, 1999 that BIR submitted to MeTC said "there [was] no legal justification to further pursue the three tax evasion cases against Lucio C. Tan et al." This prompted MeTC judge Alex E. Ruiz to dismiss the tax case on March 22, 1999. "The fact that it is evident that the Commissioner of Internal Revenue has not approved the filing of the instant cases, this court, thus, has no other recourse but to obey the law and dismiss the cases at bar," Mr. Ruiz' ruling read. But the Supreme Court said yesterday that Fortune Tobacco erred in claiming that the BIR Commissioner referred the case to the DoJ only for investigation. In fact, it said, BIR even sent three letters in 1993 to both DoJ and the Office of the City Prosecutor recommending "the prosecution of violations of the provisions of the National Internal Revenue Code."

DoJ appealed the MeTC dismissal to the Marikina City Regional Trial Court. DoJ claimed MeTC committed grave abuse of discretion when it dismissed the Fortune case. On August 25, 1999, RTC Judge Olga Palanca Enriquez dismissed the appeal for being filed out of time. Fortune Tobacco also claimed DoJ's petition for certiorari was the wrong legal remedy. But the Supreme Court yesterday said, "technicalities will have to yield to the paramount interest of the nation to enforce its laws against tax evasion, especially where the amounts are huge." The nine "dummy" corporations are Townsman Commercial, Inc.; Landmark Sales and Marketing Inc.; Crimson Croker Distributors, Inc.; Dagupan Combined Commodities Inc.; First Union Trading Corp.; Carlsburg & Sons, Inc.; Omar Ali Distributors, Inc.; Oriel & Co. Inc.; and Mt. Matutum Marketing Corp. -- Elisa P. Osorio

Congress asked to act fast on new tax bills

The Department of Finance (DoF) is asking Congress to pass at least three of the eight Palace-initiated tax bills in the next six months to prove that the government is serious in fixing its financial woes. Finance Secretary Juanita D. Amatong also said shortening the government's deficit reduction schedule to 2005 from 2009 was out of the question, and efforts must be concentrated on how to increase revenues to help the government balance the budget in five years. "We cannot be too drastic in reducing the deficit or else it is going to be painful for everybody. To have a zero budget deficit by 2005 without raising revenues, I think we will have a revolution in our hands," Ms. Amatong told a forum of senators and congressmen at Club Filipino in Greenhills, San Juan, central Metro Manila. "We have to show in the next six months we are serious in tackling our fiscal problems, and to the tell the whole world we are addressing our problems," she added. Ms. Amatong also said she would leave Congress to decide which of the proposed measures would be prioritized. "We need to pass at least three revenue measures to raise PhP60 billion in the next six months," she said.

On the list of tax measures prepared by Palace advisers are:

• the two-step increase in the Value Added Tax (VAT) rate;
• reimposition of a 3% franchise tax on telecommunication companies;
• adoption of gross income taxation for corporations and self-employed individuals;
• rationalization of fiscal incentives;
• indexation to inflation of the excise taxes on tobacco and alcoholic drinks;
• grant of general tax amnesty;
• use of a performance-related attrition system in government; and
• adjustment in the excise tax and tariff on petroleum products.

Aside from these legislative measures, the government is also pushing for administrative reforms to boost tax collections. These include:

• a plan to impose higher levies on petroleum products from 3% to 5%;
• increase government fees and charges; and
• enhance revenue-generating potential of select government-owned and -controlled corporations like Public Estates Authority and Philippine Amusement and Gaming Corporation.

If put in place, all of these measures are expected to earn the government an additional PhP126.66 billion in revenues yearly, DoF data showed. Ms. Amatong also said Congress was partly to blame for the decline in the government's tax effort. For the last five years, Ms. Amatong said Congress has passed over 100 laws that have tax exemption provisions which resulted in "billions" of losses for the government. Tax effort is the ratio of tax revenues to GDP, which is the sum of all goods and services produced by the economy. Having improved consistently from 11.3% in 1998, the tax effort reached a peak of 17% in 1997. Since then, however, it has declined every year, falling to 11.6% in 2002. It went slightly up to 12.4% in 2003. Ms. Amatong asked Congress to impose a moratorium on tax exemption to help reverse the decline.

The DoF chief said country "is not yet in a fiscal crisis" although President Gloria Macapagal Arroyo must take advantage of her new mandate "to make a clear break from the past and to implement bold reforms." "We can assure you that we are not yet in fiscal crisis but we need to do something with our budget, with our revenues, with our expenditure and with our debt so that we will not reach that stage where we will be in a fiscal crisis," she said. Ms. Amatong said she is confident that the government will be able to achieve its growth target of 5% for 2004 "if we do things rightly." "This opportunity should be seized to boost the government's credibility with our investors -- both international and domestic -- who are eager to see long-standing problems tackled and strengthen the country's international credit worthiness, while setting the stage for reducing unemployment and poverty. But this opportunity will not last long and we have to act promptly and decisively. And unless concrete progress is made soon, market sentiment could turn sour and this has potentially severe consequences for the economy," Ms. Amatong said.

LEGISLATIVE SUPPORT

The new tax laws proposed by DoF would occupy the front seat when Congress opens session on July 26, Senate President Franklin M. Drilon said yesterday. The administration-aligned senator noted that while the tax proposals would face hurdle in the Upper Chamber, the Executive branch could count on the undivided attention of Congress on the proposed measures to shore up government revenues. "Every tax measure must be fully explained. Congressmen and senators would know the real picture and make an assessment as to what should be done. We have the welfare of the country uppermost in mind. This is a situation that we have to address and we have to make sacrifices," Mr. Drilon told reporters after the Liberal Party (LP) forum on the fiscal position of the country.

Mr. Drilon agreed with Ms. Amatong's statement that some PhP60 billion in additional revenues should be collected in the next six months to achieve the target of a balanced budget by 2009. The lawmaker, however, said the passage of at least three measures to achieve the revenue target within the year is not an easy task. "Everything is difficult to do. It is difficult to classify which is doable and which is not. We have to examine it carefully." Mr. Drilon added that among the eight tax proposals of the DoF, only the grant of the general tax amnesty seems the easiest to enact into law within the next few months. "The easiest would be the tax amnesty which will establish a tax base and audit trail. That would be one that I expect would be immediately doable within the next few months," he said.

This proposed measure, which aims to raise PhP25-million additional revenues, provides tax relief for those who will submit their statement of assets, liabilities and net worth (SALN). Senate Ways and Means Committee chairman Ralph G. Recto has filed a bill for the granting of tax amnesty on all unpaid internal revenue taxes for the taxable year 2001 and prior years. Mr. Recto noted that the proposed legislation is aimed at infusing the much-needed revenues in the government coffers, and putting in place the mandatory submission of SALN. He added that 10 tax amnesty programs implemented during 1972 to 1985 resulted in total tax collections of around PhP1.5 billion, while three other tax amnesty programs from 1986 to 1987 yielded PhP1.37 billion in revenues.

Mr. Drilon further said during his meeting with President Gloria Macapagal Arroyo last week, a one-year period for the approval of the necessary legislation to avert the looming fiscal crisis has been raised, although the government does not want to be tied to a "hard and fast deadline." The legislator also said that the Senate is poised to conduct public hearings to check the revenue collection efforts of agencies such as the Bureau of Internal Revenue and the Bureau of Customs. "Records show that, 10 years ago, we had about 17% tax collection effort compared to our gross domestic product. This was comparable to many Southeast Asian countries. Now, it has deteriorated to 12% which is among the lowest in the region. The first order of business is to check on the Executive why our tax enforcement is falling below our grade before."

The head of the Congressional Planning and Budget Department (CPBD) also said the declining tax collection effort is a cause for concern. CPBD executive-director Romulo M. Miral Jr. said the Lower House is studying the tax proposals of the Executive Branch to correct the "mistakes in policy coordination." He noted that the tax laws passed earlier "look good in paper, but implementation remains a problem."

The Senate President further said similar discussions between the country's economic managers and all the Senators are being arranged to firm up the Upper Chamber's role in addressing the looming fiscal crisis. "We will be holding a series of caucuses on this because of the urgency of the fiscal crisis that must be addressed. We must seek the cooperation of all the Senators. We must cross party lines for the country," he said. Mr. Drilon added that LP will hold another forum next week with Budget Secretary Emilia T. Boncodin as the discussant. -- Karen L. Lema and Carina I. Roncesvalles

New House bill seeks higher tax on oil products

Quezon Rep. Danilo E. Suarez has filed a bill in the House of Representatives that proposes to increase the excise tax on petroleum products by PhP2 per liter. Raising the excise tax on petroleum products is one of the 10 revenue-generating measures proposed by the Malacañan presidential palace's economic advisers, informally assembled into the Economic Managers Group, of which Mr. Suarez is a member. In his bill's explanatory note, Mr. Suarez said the excise tax on petroleum products was last increased in 1996. Tax rates have not been raised since, and, thus, are now obsolete.

Mr. Suarez's bill proposes to increase by PhP2 per liter the tax on the following manufactured oils and fuels:

• lubricating oils and greases -- from PhP4.50 to PhP6.50
• processed gas -- from PhP0.05 to PhP2.05
• waxes and petrolatum -- from PhP3.50 to PhP5.50
• denatured alcohol -- from PhP0.05 to PhP2.05
• naphtha, regular gasoline and similar products -- from PhP4.80 to PhP6.80
• leaded premium gasoline -- from PhP5.35 to PhP7.35
• unleaded premium gasoline -- from PhP4.35 to PhP6.35
• aviation turbo jet fuel -- PhP3.67 to PhP5.67
• kerosene -- from PhP0.60 to PhP2.60
• diesel fuel oil and similar fuel oils -- from PhP1.63 to PhP3.63
• asphalts -- from PhP0.56 to PhP2.56
• bunker fuel oil and similar fuel oils -- from PhP0.30 to PhP2.30

Mr. Suarez's bill excluded liquefied petroleum gas, which is used by many households for cooking. Albay Rep. Jose Clemente S. Salceda, who is also a member of the Economic Managers Group, said higher excise tax on petroleum products would yield a minimum of PhP9 billion and a maximum of PhP30 billion in additional annual revenues. He earlier announced that Malacañang would issue an executive order to increase the import duty on petroleum products from 3% to 6%. He said this would yield only an additional PhP0.60 per liter. Mr. Salceda said Mr. Suarez's bill would have to be adjusted to PhP1.40 instead of PhP2.00 per liter, for the total excise duty and tax to total to PhP2.00 per liter.

Mr. Suarez has already filed four tax bills at the House. The first three are:

• on the grant of tax amnesty (with required submission of statement of assets, liabilities and net worth) to delinquent individual and corporate taxpayers;
• providing for optimum performance of the Bureau of Internal Revenue, Bureau of Customs, Land Transportation Office and other revenue-generating agencies and bureaus through the grant of incentives and rewards, and lateral attrition if they do not meet their revenue targets; as well as
• the imposition of a 7% computer education tax (separate from income and value added tax) on receipts from cellular phone calls.

Meanwhile, a major fishers' group opposed the government plan to increase tariffs on crude and finished petroleum products, arguing that this would result in further revenue losses for them. "Fuel alone now makes up about 50% of our cost of production, such that a good number of fishing fleets have either stopped operations or transferred elsewhere because of high fuel prices," said Vincent A. Minase, Jr. of the Alliance of Philippine Fishing Federation, Inc. at the sidelines of a public consultation on the issue.

The Tariff Commission yesterday held a multi-sectoral discussion on the Department of Energy's request for an increase in oil tariffs. The request, if approved, would have converted the reduction in international prices of petroleum oil last month into government revenue instead of a price rollback. The global price of Dubai crude, on which local petroleum companies base their retail prices, dropped by $1.21 per barrel last month on reports the Organization of Petroleum Exporting Countries had increased output by two million barrels per day. "The planned increase [in tariff] is illegal since that eventually is equivalent to a deprivation [of income]," said Mr. Minase, whose group contributes about a third of the national fish catch.

Mr. Minase also claimed around 15% of existing fishing fleets nationwide have been grounded since operators could not cope with high prices of fuel. Some have even sold their vessels to recoup at least a portion of their investments. "I know a few who have even shifted their operations to Indonesia, as fuel in that place costs 50% less than here," he added. Tariff Comission chief Edgardo B. Abon said there was need to balance the proposed increase in tariff rates of petroleum products, the government's revenue aims, and the overall impact on the economy, particularly prices. "I do not believe this is price neutral, we should strike a balance," Mr. Abon said, as he noted even petroleum companies present during the public hearing were ambivalent on the proposed tariff hike. -- Judy T. Gulane with a report from Rommer M. Balaba

Mega Pacific sued over poll machines

The Office of the Solicitor General (OSG), in behalf of the Commission on Elections (Comelec), has filed a civil suit against Mega-Pacific Corp. to compel the consortium to turn over the amount paid by the poll body for its automated counting machines. "The OSG has filed a civil suit against Mega-Pacific to recover the amount of PhP1.05 billion paid by Comelec and for Mega Pacific to retrieve its 1,991 automated counting machines," said Commissioner Resurreccion Z. Borra in an interview. According to the Comelec law department, the suit was filed at the Makati Regional Trial Court.

Last January, the High Tribunal nullified the contract between Mega Pacific and Comelec, questioning the eligibility of the company in the bidding and the accuracy of its counting machines. Mr. Borra said the consortium has filed a counter-suit against the government. "They have been putting up a legal defense," he said.

BARANGAY POLL USE

Meanwhile, the poll body plans to enter into agreement with Mega Pacific, the OSG, and the Supreme Court to allow it to test the automated machines come the barangay elections next year. "There was a consensus that we have to test the machines in the barangay elections," said Mr. Borra, stressing that he did not want to see the machines "become white elephants." He said the temporary restraining order issued by the Supreme Court prevents them from using the machines, even if the machines are still in Comelec possession. Mr. Borra explained that they planned to file a petition for the court to appoint a judicial administrator. "The judicial administrator will direct the Comelec on how to use the machines. That's one option," he said.

If the court junks their petition, the poll body could "rent the machines from Mega Pacific, if they allow for it. But they have to return the money first," said Mr. Borra. Mr. Borra said there was no date yet when the poll body would file the petition as the Comelec law department was expected to discuss the matter today. -- Kristine L. Alave

Unocal abandons drilling in phase 2 of Sulu Sea oil and gas exploration well

By BENNET S. STO. DOMINGO, Reporter

Unocal Sulu Ltd., the local arm of US energy company Unocal Corp., has abandoned an oil and gas exploration site in the Sulu Sea. In a disclosure to the Philippine Stock Exchange on Monday, the energy resource development bureau of the Department of Energy said over the weekend, Unocal Sulu Ltd., operator of Service Contract 41, had stopped drilling at the phase two Rhino I well after reaching depths of 8,070 feet. "The operator likewise conducted wireline-logging operations to determine the petrophysical properties of the drilled formation. Based on these data, however, Unocal has decided already to plug and abandon the well. This will be the final report for the Rhino I well," said energy resource development bureau director Ranilo P. Abando. He did not give other details. Studying the drilling site's petrophysical properties would indicate viability of the site for further exploration.

Unocal officials were not immediately available for comment. A consortium led by Unocal Sulu Ltd., last month started drilling operations at its $14-million oil and gas exploration project in the Sulu Sea. The consortium members are Unocal Sulu Ltd., Australian firm BHP Billiton, and local firms Sandakan Oil Corp., Basic Consolidated, Inc., Oriental Petroleum and Mineral Corp., Philodrill Corp., Trans Asia Oil and Energy Development Corp., Anglo-Philippine Holdings Corp., PetroEnergy Resources Corp., South China Resources, Inc., Philex Mining Corp., and Universal Robina Corp.

Under Service Contract 41, the consortium is allowed to undertake drilling and exploration activities to scout for possible oil and gas sites in the Sulu Sea. The consortium had planned to dig up to 1,850 feet for the project's phase I, the Zebra 1 well, and another 935 feet for the second phase, the Rhino 1 well. Data from the Energy department culled from initial geological and seismic tests showed the wells could contain 260 million barrels of oil and 600 billion cubic feet of gas.

Based on studies by the department, Sulu Sea contains significant recoverable reserves for oil and gas. The Sulu Sea is one of the most prospective areas for oil and gas exploration. The latest Philippine Petroleum Resource Assessment Project conducted by the Norwegian Agency for Development Corp. shows the area has the same geology as the oil and gas-producing fields of Malaysia, Indonesia, and Brunei, the Energy department had said.

New PSE president outlines ambitious targets

By ROULEE JANE F. CALAYAG

Francis Edralin Lim, the seventh elected president of the Philippine Stock Exchange (PSE), envisions a world-class bourse. The ex-seminarian, who serves as a senior partner at the Angara Abello Concepcion Regala & Cruz Law Firm (ACCRA Law) and also as a PSE director, said transforming the PSE into an exchange with global standards is attainable. This, he said, can be done by demanding excellence from everyone at the PSE. Mr. Lim said he would like to see a more disciplined approach in the affairs of the exchange. Mr. Lim said he doesn't see problems in juggling the demands of the post. "I am good at balancing things. I know where to stop." "If and when I accept the post, I will devote 110% of myself to create a meaningful difference in the bourse."

While he said that he may "have to consume the 30 days considering the major shift in my career", Mr. Lim had already lined up some things to pursue. In all these, discipline ranks high. "I will push for reforms but there has to be discipline because discipline begets discipline," Mr. Lim said. Urged by PSE director Vivian Yuchengco to join the board two years ago, he has since then managed to emerge as the only president who had garnered the support of the differing groups at PSE. But he said he wants to be his "own man" when it comes to matters involving the exchange. "I have only the exchange, the stockholders and the investing public to be accountable to." He intends to build on his work in the retention of the Philippines in the California Public Employees Retirement System (CalPERS) "Permissible Emerging Markets" list in April to make the PSE world-class. He said the PSE has a respectable mark from CalPERS. But first the bourse must demonstrate to the Securities and Exchange Commission (SEC) that it is deserving of its self-regulatory organization (SRO) status. "We will introduce meaningful changes to signify that we mean business in regulating our own ranks. From there, everything will follow. I do not intend to do away with the oversight function of the SEC because it is a matter of law," Mr. Lim said.

The elected president intends to do this by strengthening the PSE's compliance and surveillance group. "There has to be a refinement process to gain the confidence of the SEC," he said. Under his term, controls will also be reevaluated to avoid pitfalls such as those that allowed British broker Nick Leeson to cause the downfall of ING Barings in Singapore. Another priority is strengthening the quality and quantity of the trading volume by putting back the trust and confidence of the investing public in the exchange. "By running after erring brokers and implementing changes, we can tap hidden capital. The retirees, the spouses of overseas Filipino workers and others would be encouraged to invest in the stock market," he said. He assured that merits of the issues would be carefully discussed under a decisive leadership.

Harry Liu, president of Summit Securities told BusinessWorld Mr. Lim's plan to make the bourse world-class is part of the board's direction. He said the proposal to reassert PSE's self-regulatory organization status is workable. "The SRO status is all right. We can do it," said Mr. Liu.

Irving Ackerman, president of I. Ackerman & Company, Inc., said the objective to make the bourse world-class has eluded the exchange management to date despite several attempts. "I appreciate the fact that he wanted to make the PSE like those of the exchanges in New York, London and Paris but it takes more than Mr. Lim and the whole exchange to make the PSE world-class...It needs the efforts of the whole country and the government." He said that the very low trading volume of the exchange these days had to be improved to at least PhP1 billion a day if it were to become world-class. But he commended Mr. Lim for pushing a closer coordination with the SEC. "Getting the SEC and the PSE to work together to ease things with brokers will make the exchange stronger."

SEC orders Philcomsat, 2 others to hold annual meet

The Securities and Exchange Commission has directed sequestered company Philippine Overseas Telecommunications Corp. (POTC) and units Philippine Communications Satellite (Philcomsat) and Philcomsat Holdings Corp. to hold their stockholders' meeting and elect new sets of officers by Aug. 31. POTC is 40% owned by the government while Philcomsat is a wholly owned unit. POTC has not held a stockholders' meeting since 1999 while Philcomsat has not held one since 2000. Philcomsat Holdings last held a stockholders' meeting in 2001. This is due to infighting among the stockholders. "As mandated in the bylaws of the involved corporations, POTC must conduct its annual stockholders' meeting every April of each year, Philcomsat every June of each year, while PHC [Philcomsat Holdings] every May of each year. No stockholders' meetings of said corporations have been held since 1999, 2000 and 2001 respectively. It must be borne in mind that the Corporation Code mandates that annual corporate meetings must be called as scheduled in the bylaws. The meeting should not be postponed indefinitely to prolong the stay in office of the holdover board," the SEC said.

The regulator said POTC will be the first to hold its stockholders' meeting, on or before Aug. 5, while Philcomsat is directed to conduct its stockholders' meeting on or before Aug. 12. Philcomsat Holdings is required to hold a meeting on Aug. 31. The SEC also said that POTC and Philcomsat should constitute an elections commission to be composed of the Presidential Commission on Good Government (PCGG) director/nominee, which will act as a neutral party, a representative of the Africa group, and a representative of the Nieto Group "to perform any and all acts necessary for the determination of the legitimate stockholders of the corporation qualified to vote or be represented in the corporate meetings and ensure a clean, orderly, and credible election."

The SEC said it will be sending two representatives to the stockholders meeting "to endure protection of the interest of all outstanding capital stocks, including minority shareholders." But the commission said determination on the legitimate stockholders of the corporations may be beyond the agency's jurisdiction. "The SEC should confine the issue solely on the calling of meetings," it said. The SEC order was issued following the commission's receipt of a letter from PCGG last month. In the letter, PCGG Commissioner Victoria A. Avena confirmed the three companies had not held an uncontested annual meeting in the past few years. -- Jennee Grace U. Rubrico

Pryce Corp. files petition to suspend debt payments

Pryce Corp. formally filed a petition for corporate rehabilitation and suspension of debt payments with the regional trial court of Makati City. In a statement to the Philippine Stock Exchange yesterday, it disclosed that 94.25% of its stockholders approved the filing of the petition. Trading of its shares were indefinitely suspended from last Friday after it disclosed its plan to file a petition. The exchange said this is the procedure applied to companies that are considering a corporate rehabilitation.

Pryce earlier told the exchange and the Securities and Exchange Commission that its assets, which have been mortgaged to creditors, may be foreclosed or attached to the prejudice of other company creditors, shareholders and the corporation itself. After the Asian financial crisis in 1997, the company said it has found it difficult to pay loans. Details of the petition were not immediately available, but the company earlier said it may involve the settlement of its obligations through payment-in-kind arrangements with creditors, a loan restructuring, and a debt-to-equity conversion.

In Cagayan de Oro City, where Pryce operates, Samuel Cinco, officer-in-charge of Pryce's Northern Mindanao office, said the firm's "operation is normal." Mr. Cinco, who is also assistant vice-president, told BusinessWorld "nothing changed" with their operation even after the company filed for rehabilitation. The company handles two subdivision projects and four memorial parks in Northern Mindanao, he said. The two subdivision projects are in Cagayan de Oro City namely Puerto Heights Village in barangay Puerto, an upscale housing project; and Mindanao Homes, a low-cost housing project in barangay Pagatpat. The four memorial parks are the Cagayan de Oro Gardens, Maria Cristina Gardens in Iligan City, Ozamis Memorial Gardens and the North Zamboanga Gardens.

Korean company to invest PhP229M for hotel project in Zamboanga

ZAMBOANGA CITY in Western Mindanao -- Korean firm Koresco will invest at least PhP229 million in the Zamboanga Ecozone and Freeport in San Ramon for a 40-room hotel, a condominium, five villa units, and an 18-hole golf course. Georgina Yu, ecozone chairman and administrator, said Koresco representatives are set to meet with the ecozone's board to discuss and finalize preparations for the construction of the projects and to seal the agreement. Maria Socorro S. Cipriano, chief of the zone's marketing and enterprise development division, said the zone's board filed a proposal during last week's meeting with Korean officials. Ko Suk Koo, Koresco chairman, would still have to present the proposal to the company's board. But Ms. Cipriano said the project will push through. There are some minor changes in the original proposal of the investors and some suggestions made by the zone's board. She declined to give further details about the changes.

Ms. Yu said the project would benefit not only the investors, but also Zamboangenos through new jobs. Koresco's proposal has been pending since last year when it said it was keen on the Philippine Tourism Authority's golf course and country club in Calarian. Officials have changed plans and decided to invest at the Zamboanga ecozone instead. Recently, they revived the proposal noting the improved peace and order in the city. Ms. Yu said investing inside the zone would allow investors low rentals, while all equipment, supplies, and other products would be brought in tax free. -- Arvina F. Abrigo

SEC no longer accepting registration of customs brokerages

The Securities and Exchange Commission (SEC) is no longer processing the registration of customs brokerage corporations. "We already told our personnel to stop the registration of customs brokers corporations. This is in light of a law which says that the practice of a customs broker is a professional service," an SEC official said. As defined by law, the customs broker profession involves services consisting of consultation, preparation of customs documents for imports and exports, declaration of customs duties and taxes, preparation, signing, filing, lodging and processing of import and export entries. It also involves representing importers and exporters before government agency and private entities in cases related to valuation and classification of imported articles and rendering of other professional services in matters relating to customs and tariff laws, its procedures and practices. The move was immediately effective, the SEC official added.

Under Republic Act 9280, or the Customs Brokers Law of 2004, "the practice of customs broker is a professional service, admission to which shall be determined upon the basis of individual or professional qualifications." "No firm, company, or association may be registered or licensed as such for the practice of the customs broker profession," the law, which became effective on April 21, 2004, provides.

The SEC official said customs broker companies which are currently licensed to engage in customs broker activities "will be given time" to remove the customs brokerage portion of their business. "They can still engage in other businesses like freight and forwarding businesses," the official said, and added these companies will just have to employ professional customs brokers to take over their customs brokerage functions. The move came after the Chamber of Customs Brokers, Inc. asked the SEC to stop the registration of corporations that wish to engage in customs brokerage in line with the law. -- J. G. U. Rubrico

Cement firms buck Supreme Court decision versus safeguard duties

By FELIPE F. SALVOSA II, Reporter

Cement makers will appeal a Supreme Court ruling declaring the safeguard duty on imported cement as illegal pointing out that mechanisms protecting domestic industries from cheap imports are sanctioned under the World Trade Organization (WTO). Edcel Lagman, counsel for the Cement Manufacturers Association of the Philippines or CeMAP, said he has yet to receive an official copy of the decision but stressed that a "reconsideration" is necessary.

In a statement, Mr. Lagman said the ruling will have an impact on how protective tariffs will be imposed by the Department of Trade and Industry (DTI) in the future and whether such measures will continue to be effective. The high tribunal, in overturning an earlier decision by the Court of Appeals, said then Trade Secretary Manuel A. Roxas II had no right under the law to impose safeguard measures without a favorable recommendation from the Tariff Commission. Mr. Roxas, who is now a senator, set the safeguard duty at PhP20.60 (later reduced to PhP15.60) for every 40-kilogram bag of cement in June last year despite the findings of the Tariff Commission that protective tariffs were not necessary because imported cement did not cause serious injury to local producers.

A Japanese importer, Southern Cross Cement Corp., questioned the DTI move before the Court of Appeals, which sided with Mr. Roxas. However, the Supreme Court said the law on safeguard measures, Republic Act No. 8800, required a "positive and final determination" by the Tariff Commission before a general safeguard measure was applied. Mr. Lagman said the Court should have affirmed the appellate court's ruling. "CeMAP will seasonably file a motion for reconsideration of the decision. We are convinced that the Court of Appeal's decision upholding [the DTI's] authority to formulate and implement government policy in trade and industry is the right and most logical decision in view of the language of the law and the implementing rules," he said. Mr. Lagman added that the latest ruling will determine whether the safeguards law provides a safety net against cheap imports or is "merely a piece of paper unable to defend local industries and jobs from injury." He said in the United States, safeguard tariffs were imposed on steel and shrimp from Vietnam, Thailand, and China to protect American producers. "I hope that the decision will not make it more difficult to obtain safeguards in the Philippines than in the United States which is the number one imposer of safeguard measures."

Gov't to boost infrastructure spending to attract investors

The government aims to increase its annual infrastructure spending to at least PhP100 billion annually in a bid to lure more investors. Socioeconomic Planning secretary Romulo L. Neri said the additional funds will hike the government's investment in public infrastructure to at least 5% of the country's gross domestic product (GDP). "The PhP100 billion represents a two-percentage point increment that we want to achieve. Currently our infrastructure spending stands only at about 3.3% of our GDP," Mr. Neri said.

The current government spending in public infrastructure, he said, pales in comparison to that of other East Asian countries that set aside 5% to 6% of their GDP for infrastructure. "[These] investments [will be undertaken] to encourage investors to come in since they will bring down the logistics cost," Mr. Neri said. Among the infrastructure projects eyed by the government as contained in the National Development Agenda prepared by the National Economic Development Authority (NEDA) are the construction of the Diosdado Macapagal International Airport in Clark and Subic and the development of the Poro Point and Lingayen Gulf as an export outlet to Southern China. Mr. Neri earlier said the government is already finalizing plans to establish an infrastructure corporation to aid in its infrastructure-building projects. The infrastructure firm will be treated as a government-owned and controlled entity, the main task of which is to help scout for financing for proposed infrastructure projects.

Landbank, Quedancor now under Palace oversight

By JEFFREY O. VALISNO, Reporter

In order to jumpstart the agricultural sector, President Gloria Macapagal Arroyo has recently signed an executive order transferring the Quedan and Rural Credit Guarantee Corp. (Quedancor) from the Agriculture Department to the Office of the President. The move is on top of the President's decision to also put Land Bank of the Philippines directly under her office from the Finance department.

The twin moves are expected to boost the government's rural credit program, giving farmers and fisher folk greater access to funds. This is in line with the President's 10-point pro-poor agenda, which include tripling credit lending to small and medium enterprises, and developing as much as two million hectares of land for agricultural businesses in order to create as much as 10 million jobs within the next six years.

Under Executive Order 322, Quedancor would be reorganized, with the President appointing outgoing Agriculture Secretary Luis P. Lorenzo, Jr. as the corporation's new chairman. Mr. Lorenzo is set to assume the post by August 15, replacing Nelson C. Buenaflor. While Quedancor would be removed from the Agriculture department, the Agriculture Secretary will remain as ex-officio member of the corporation's governing board. "A modernized agricultural sector, through an institutionalized and comprehensive financing and guarantee support system for the country's agricultural sector... is once of the key components of the Government's national agenda for poverty alleviation, and national development," the Executive Order read. "In order to effectively oversee and implement agriculture development activities through an institutionalized and comprehensive financing and guarantee support system for the country's agriculture sector, there is a need to transfer Quedancor from the Department of Agriculture to the Office of the President, and reorganize the Governing Board thereof," it added.

It was earlier reported that the President last week has signed EO 323 transferring Landbank to the Office of the President, and also appointing Mr. Lorenzo as the bank's chairman. Mr. Lorenzo was appointed last Friday as the Arroyo administration's "Countryside Development Czar," after resigning from his post as Agriculture Secretary effective August 15. He said the President offered him the job after he tendered his resignation last Thursday. He new role requires him to be presidential adviser and senior coordinator for the government's agriculture lending program. On top of these, he would also be the concurrent chairman of Quedancor and Landbank. "After much thought and soul searching, I have decided that it is now time for me to move on to something bigger and more important for the President and the nation at this time," he earlier said. He said his main task is to ensure that farmers and fisherman would have access to affordable credit and micro-financing to improve their productivity. "The [agriculture] sector is credit-driven. So, the task of creating jobs, must be complemented by a strong lending effort. It must have the full support of Landbank and Quedancor," he told reporters in Malacañang last Friday. "I would be chairman of Landbank and Quedancor, to effectively initiate and spearhead this strong rural credit program."

Gov't sells 10-year Treasury bonds at 12.75%

The government matched bond traders's eagerness yesterday as it accepted their premium risk demand for the long-term debt paper. "[The market's] liquidity is back," National Treasurer Mina Figueroa said, adding that bids for the 10-year Treasury bonds were usually boosted by demands from insurance companies. A bond trader said, however, that "[We] were as liquid as before. Tenders were only demand-driven by insurance companies for their investment purposes."

The fresh issue of the 10-year debt instruments fetched a coupon rate of 12.75%, up by 37.5 basis points over the rate when they were last auctioned on March 23. After a series of rejections, the auction committee made a full reward of PhP4.5 billion. Tenders were oversubscribed at PhP6.481 billion, indicating strong market appetite. The long-term borrowing rate was below the secondary market's 12.8733% rate yesterday.

RETAIL T-BONDS

Appetite for the retail Treasury bonds nearly matched the government's expectations as volume rose ahead of the 4 p.m. deadline yesterday. Ms. Figueroa said in the morning, volume already reached almost PhP30 billion. She said the Treasury has PhP6 billion worth of three-year retail T-bonds and PhP17 billion worth five-year T-bonds left for sale. "[We expect volume to shoot up still] even up to the last minute, it's already normal," she told reporters after the auction of the long-term debt paper. At the price-setting last Tuesday, where banks and investment firms competed for selling agent positions, the short-term debt instruments' combined volume fetched only PhP7.48 billion, or below the PhP10 billion public offering. Traders said there was nothing new in the surge of bids. One trader said "these mainly cater to retail or small-time investors, while only a small percentage are for banks' positioning."

PESO STRONGER

The Philippine peso did a turnaround in the afternoon as it closed stronger by four centavos to PhP55.755 against the US from PhP55.795 on Monday. Taking its cue from the Japanese yen, the peso was off in the morning to almost PhP55.92. The range-bound peso pulled up in the afternoon with the absence of dollar demand from oil companies. At the Philippine Dealing System, the country's electronic currencies exchange, the peso however averaged weaker by 14.5 centavos to PhP55.852 after moving within a 16.5-centavo range. Opening at PhP55.90, the peso went to as low as PhP55.92 but later reverted to its strongest value at PhP55.755. -- Ira P. Pedrasa

Uncertainties dampen appetite for RP bonds, says Bear Stearns

The foreign bond market continues to keep a tight watch on how President Gloria Macapagal Arroyo plans to address key economic issues including the money-losing operations of a state utility firm. New York-based investment house Bear Stearns said while election-related jitters have subsided, the uncertain political and economic environment in the country continues to affect appetite for Philippine bonds. "Although the market is feeling more relaxed about sovereign Philippine debt, now that the election process has been completed, the very steep character of the Philippine sovereign curve presumably reflects the uncertainty the country faces at present," Bear Stearns said in a July 12 sovereign Asia and Pacific Rim update. It said Philippine issuance has been relatively subdued, totalling only $1.5 billion to date.

The New York-based company noted that of the $1.5 billion, funds raised for the government amounted to only $820 million while the rest--$650 million worth of bond issuance--was for the purpose of financing cash-strapped National Power Corp. (Napocor). Bear Stearns said the Philippine government is likely to borrow another $200 million to $300 million in foreign funds to finance an external financing requirement of $1.8 billion to $1.9 billion for 2004. The Department of Finance has earlier announced that $800 million of funds it raised in 2003 was "pre-funding" for financing the 2004 budget. Bear Stearns, however, said the Macapagal-Arroyo administration must first institute key economic reforms.

The investment house echoed earlier statements by Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura to jumpstart a major economic program for the next six years. "We are still not certain how President Arroyo will 'hit the ground running' -- as Mr. Buenaventura says she should -- to address key economic issues facing the Philippines. Bear Stearns said among the urgent issues are controlling the budget deficit and the privatization of Napocor.

The Bangko Sentral's investor relations office said yesterday that the budget deficit data may be released next week. The market expects the government to have exceeded its first-semester deficit target of PhP79.6 billion. The government wants to keep the yearend deficit at PhP199.9 billion and hopes to wipe out the deficit by 2009. On the privatization of Napocor, Bear Stearns stressed the need privatize the power firm's transmission system, saying that it would "stave off the looming threat of increasingly severe brownouts, if not blackouts in the coming years." -- Iris Cecilia C. Gonzales

Phisix falls, closes at 3-week low

By ROULEE JANE F. CALAYAG

Philippine share prices dropped drastically yesterday, capping off a four-day decline in trading. The benchmark Philippine Stock Exchange composite index (Phisix) shed 13.22 points, or 0.83%, at 1,573.03 on 889.6 million shares valued at PhP673.65 million. This was the lowest in three weeks. But analysts told BusinessWorld this should not be a cause for concern.

Harry Liu, president of Summit Securities, said the market has been running upwards after the announcement of President Gloria Macapagal Arroyo's fresh six-year term. "The market reacted positively and has ran into a technical level. It is now in a consolidation stage," said Mr. Liu. He noted that the positive reaction of the market had been going on for the past few weeks so it needed some correction to usher in a new level. Mr. Liu sees consolidation to prevail within a window of between 1,490 and 1,620 as the resistance level. "There will be a downward correction in the short to medium term and positive/upward trend in the long term, making time for positive news," he added.

CORPORATE EARNINGS

Positive developments are expected to come in the form of strong corporate earnings reports. As these reflect the underlying economic condition of the country, investors are positioning themselves for the earnings reports that will start coming in this week.

KIDNAPPED OFW

The market seems unperturbed by the poltical circus surrounding efforts to free Filipino overseas worker, Angelo de la Cruz, who was kidnapped by Iraqi militants last week. "There is a concern on the Iraqi incident but what is important is that the government is doing its best to find a solution," he said. "The market is not panicking. It shows that the investing public accepts the government's stance on the issue." The Iraqi militants threaten to behead Mr. de la Cruz if the administration of President Gloria Macapagal Arroyo refuses to pull out the 51-member Philippine contingent in Iraq.

A political analyst told a television program on Monday that pulling out the Philippine contingent in Iraq would be detrimental to the government. Aside from losing financial aid from the United States, the Philippines also stands to lose its credibility before the international community if it yields to the demand of the Iraqi militants. Mrs. Arroyo had refused to comment on the issue since Sunday. Irving I. Ackerman, president of I. Ackerman & Co., Inc., said the 13.22-point drop is "not a serious matter." "It was only for one day. The exchange is not doing badly. Monday's value turnover was lower at PhP400 million than yesterday's which was at PhP673.65 million," said Mr. Ackerman. "What is important is we get to the point that trading value in most days reaches PhP1 billion a day so it can begin to look like an exchange," he added.

ACTIVE STOCKS

At the stock market, shares of Pilipino Telephone Corp. were up PhP0.20 at PhP2.14 on 44.7 million shares valued at PhP92.35 million. The increase was attributed to sustained interest on the stock after Smart Communications, Inc., acquired on Monday 32.7% of Piltel's outstanding shares as an initial step to buy more than 92% of the affiliate.

Ayala Land, Inc. was down PhP0.20 at PhP5.40 on 15.22 million shares worth PhP83.57 million. Telecom giant Philippine Long Distance Telephone Co. was down PhP25 at PhP1,205 on 50,590 shares. Its American Depositary Receipts in New York dropped overnight. The company will list an additional 2,695 common shares today. These were availed of and fully paid under the company's executive stock option plan. San Miguel A, limited to local investors, was steady at PhP58. San Miguel B, which is open to foreign investors, was also unchanged at PhP69. Bank of the Philippine Islands advanced by one peso to PhP42.50. Ayala Corp. slid PhP0.20 to PhP5.40. First Philippine Holdings was down one peso at PhP27 while Petron Corp. shed PhP0.10 to PhP2.90.

INDICES

The all-shares index dropped 3.46 points to 1,001.44. The commercial-industrial index was down 27.92 to 2,466.27. Property slid 12.54 to 528.14. Mining shed 25.75 at 1,500.39. Oil dropped 0.05 at 1.38. Banking and finance was up 10.69 at 471.14.

JOLLIBEE, SEMIRARA

Meanwhile, Jollibee Foods Corp. will list today an additional 23,486 common shares, arising from its tandem stock purchase and option plan. Semirara Mining Corp., on the other hand, issued a list of procedures in updating stock certificates and trading old stock certificates. It said stockholders of the corporation, who hold outstanding common shares before the restructuring, may obtain from the corporation's stock transfer agent the stock certificates for the post-restructuring equivalent of such stakeholder's shareholding by surrendering the stock certificates for such shares. Semirara also noted that stockholders have the option to retain stock certificates bearing their pre-restructuring shareholding in the corporation until such time as they deem it convenient to surrender these to the corporate secretary or the transfer agent for a replacement with a stock certificate bearing the post-restructuring equivalent of their shareholding. More corrections are expected through the week but there is a renewed optimism that these will lead the market to a new threshold, especially with the coming in of the quarterly and first-half reports.

Smart looking for $104M in financing for expansion

By ANNA BARBARA L. LORENZO, Reporter

Smart Communications, Inc. is seeking $104 million in loan from foreign banks to finance its network expansion. "The $104 million should cover our financing needs for the rest of the year," said President Napoleon Nazareno. "It should be completed within the month." Ramon Isberto, public affairs department head, said Smart is "seeking financing to fund the current rollout of GSM [global system for mobile communication]. This is phase seven of the GSM network rollout." He said the improvement will start this year and spill over to 2005. "We have issued a request for proposal from banks," he said. Mr. Isberto said the investment would be for both the metropolitan areas where Smart can improve indoor and ground-level coverage, and for remote towns and municipalities. "Our signal coverage currently accounts for 90% of the population. The rollout would either increase [penetration rate] or improve coverage," he said.

Smart said earlier that its subscriber base reached 16 million as of end-June. By the end of the year, Smart, the mobile phone unit of telecommunication giant Philippine Long Distance Telephone Co. (PLDT), aims to sign on 18 million subscribers. Smart subscribers account for 45% of the total wireless phone users. Its sister firm Pilipino Telephone Co., through Talk 'N Text, holds 13% of the mobile market, giving parent PLDT a total market share of 58%. Since the boom of the cellular phone business, Smart has been the biggest revenue contributor to PLDT.

In the first quarter, PLDT's net income surged 111% year on year to PhP5.24 billion from PhP2.48 billion due to Smart's strong revenues. The same success story is expected for the second quarter for both PLDT and Smart. PLDT Chairman Manuel Pangilinan was earlier quoted saying that a PhP10.5-billion income for the first half is possible. PLDT is set to announce its second quarter performance on Aug. 3.

PLDT BROADBAND

Meanwhile, PLDT is planning to increase its subscriber-base in Cebu as it expands its broadband business in the city by launching new rates and faster speeds. "We are combining great deals with ease of installation to spur DSL (digital subscriber line) take-up in Cebu. There is no doubt that as Cebuanos get connected to the world via DSL, its vision of becoming one of the best cities in the region will easily be recognized," said Butch Jimenez, PLDT head for retail business group. PLDT has potential markets in the six economic zones in Cebu where there are 152 firms. "We intend to launch broadband services in Cebu that are faster, more cost-effective, and definitely more pervasive than any other telecom company in the city," Mr. Jimenez said.

In Davao City, PLDT filed a suit against the Davao City Water District for allegedly damaging the telco's fiber optic network cables while installing water pipes three years ago. Judge William Layague of the Regional Trial Court Branch 14 has given the water district 15 days to answer the civil case filed by PLDT. The telephone company is asking for PhP586,000 in damages. Dominador Lopez, Davao water district commercial department manager, was unfazed. He wondered why PLDT filed the case only now.

In its complaint, PLDT claimed the water district's crew was laying pipes in Puan, Talomo, about 10 kilometers from the city proper, damaging PLDT's fiber optic cables in the process. PLDT claimed the company sought relief from the water district by sending demand letters for the repair of the damaged cables with the last letter sent on Jan. 5. But the water utility refused to heed the demand, prompting the telco to file the case. Earlier, the city prosecutor also charged the water district before the regional trial court for refusing to give its book of accounts to the Bureau of Internal Revenue. -- with Reuters and Carmelito Q. Francisco

Industries' gross revenues up in '03

Major industries posted an average increase of 7.3% in gross revenues last year, a slight uptick from the 7.1% growth posted in 2002, the latest Quarterly Economic Indices (QEI) show. Last year's performance, though, still paled in comparison to the 12.9% acceleration reported two years ago. In 2003, only two industries exceeded their yearago performances: trade and financial services. Financial institutions logged a 10.8% jump in revenues during the period against a 2% growth the previous year. Specifically, insurance companies reported an average revenue growth of 36.9% during the period. In the same way, wholesale and retail trade businesses posted an average gross revenue growth of 8.3% against a 5.9% climb in 2002.

The QEI is the National Statistical Coordination Board's (NSCB) compilation of indices on production, gross revenues, employment, compensation, production and compensation per worker, and average earnings. The indices, which have 1978 as their base year, are based on quarterly establishment surveys and reports from various administrative and regulatory agencies. Major sources of data are the National Statistics Office, Bureau of Agricultural Statistics, Sugar Regulatory Administration, Forest Management Bureau, Manila Electric Co., Metropolitan Waterworks and Sewerage System-Regulatory Office, Manila Water Co., Inc. Maynilad Water Services, Inc., Mines and Geosciences Bureau, Department of Energy, and the National Power Corp. Gross revenues in the NSCB report refers to the value of receipts from the shipment of goods produced, resale of goods and services rendered. Manufacturing, transportation and communication, and private services registered slower growth rates last year.

In manufacturing, revenue increases were seen by producers of food, beverage, textile, footwear and wearing apparel, wood and wood products, furniture and fixtures, paper and paper products, printing and publishing, rubber, chemical and chemical products, petroleum and coal, basic metals, non-electrical machinery, transport equipment and miscellaneous manufactures. Among manufacturers of electrical products, only makers of lamps posted higher revenues during the period. Gross revenues of the manufacturing industry went up an average 6.1% last year from 8.9% in 2002. Transportation and communication companies, meanwhile, reported an 8% climb in gross revenues, lower than the 9.3% a year ago. However, it should be noted that communication companies still registered a robust growth of 20.5% during the period, although a bit slower than the 21.1% posted the year before. Private services, which includes medical and health, business, recreational, personal, hotels and restaurants and other services, reported a 2.3% growth last year against 7.6% a year ago.

Despite the SARS (severe acute respiratory syndrome) scare, the Iraq war, and the peace and order situation in Mindanao weighing down tourist arrivals, hotels and restaurants managed a 4.2% increase in revenues in 2003. Last year, real estate companies saw a 1.3% contraction in gross revenues despite the 3.8% output growth posted by the industry during the period. -- D'Laarni A. Ortiz