BSP chief sees no backlash to troop recall

By IRIS CECILIA C. GONZALES, Reporter

The Bangko Sentral ng Pilipinas (BSP) sees no economic backlash to the Philippine government's decision to pullout the Philippine humanitarian mission from Iraq even as the move drew the ire of the United States. "I don't think it will affect investment decisions over the long run," BSP Gov. Rafael B. Buenaventura said yesterday in a telephone interview. The central bank chief is in Singapore for a meeting of central bank governors from southeast Asia. Malacañang on Wednesday announced the pullout of eight out of 51 Filipino troops in Iraq, in what was seen by Philippine allies as bowing to demands of terrorists holding hostage Filipino truck driver Angelo de la Cruz.

Washington said government's decision to pull out its troops sent a wrong signal to terrorists while other countries said other members of the US-led coalition against Iraq could suffer the same fate. US State Department spokesperson Richard Boucher was quoted as saying the withdrawal announcement "sends the wrong message" to hostage-takers. Government officials, however, said the backlash may be limited to political relations.

A government source saw no economic backlash of government's decision. The official said most of investments coming to the Philippines were from the global business process outsourcing businesses and not really from the United States. "These are from multinational companies," the official pointed out. The official decisions of these companies were hardly affected by political uncertainties and security issues around the globe, he added.

The government, through the Department of Trade and Industry, is stepping up efforts to transform the Philippines into a major call center and BPO hub. At present, the government only ranks second to India as a major outsourcing center in Asia. The government, however, is moving to overtake India by providing more incentives. Companies that have outsourced their businesses in the country comprise many European companies and Asian firms. Even trade decisions should not be affected by the Philippines' move, the official said. Besides, the official said there were possible trade remedies in case Washington tightened its trade relations with Manila. At least one businessmen also did not see an economic backlash, saying that in the end, companies would make investment decisions on their own.

Court OKs BayanTel rehab

By CECILLE S. VISTO, Sub-Editor

A Pasig trial court approved recently the financial rehabilitation of debt-saddled Bayan Telecommunications, Inc. (BayanTel), about a year after its creditors led by the Bank of New York filed the corporate recovery case. Pasig Regional Trial Court Branch 158 Judge Rodolfo R. Bonifacio, in a decision dated June 28, okayed the restructuring of the Lopez-led telephone firm's $325-million debt, and made it payable over 19 years. The court also said that all BayanTel debts that would not be covered by the restructuring should be converted into "an appropriate instrument that shall not be a financial burden" to the company.

BayanTel creditors earlier sought the payment of $471 million over 12 years. The firm's actual debts total $477 million. The issue of sustainable debt, Judge Bonifacio said, is crucial to the successful rehabilitation of the company. "The court believes that BayanTel is in the best position to ascertain the level of debt that is sustainable in light of its knowledge of its own actual operations. Furthermore, the court is aware of the very real concern that maintaining an unrealistic level of debt will defeat, rather than promote and achieve, the very purpose for which this present petition for rehabilitation was filed," it said. The BayanTel rehabilitation is only one of at least five corporate recovery cases that has so far obtained court imprimatur. Since the Securities and Exchange Commission turned over intra-corporate controversies to commercial courts in the year 2000, four other rehabilitation petitions have been approved: tuna canner First Dominion Prime Holdings, Iloilo-based hotel operator Sarabia Manor Hotel Corp., automotive battery manufacturer Ramcar, Inc., and real estate and mall developer Manuela Corp. Aside from setting the sustainable debt level for the company, Judge Bonifacio also set a number of conditions for BayanTel's rehabilitation: all creditors will be treated equally and that this equal treatment will be extended to all payment terms and treatment of past due interest. BayanTel's secured creditors account for 52.6% of its debt, and unsecured creditors the remainder.

But despite placing creditors on equal footing, the court still stressed the importance of giving due regard to the rights of secured creditors. As such, they can continue to hold on to their security or collateral, which can be foreclosed if the rehabilitation fails and creditors resort to liquidation.

BayanTel's secured creditors are:

• Asian Finance & Investment Corporation;
• Bayerische Landesbank (Singapore Branch);
• Clearwater Capital Partners Singapore Pte. Ltd.;
• Deutsche Bank AG;
• Express Investments III Private Ltd.;
• Export Development Canada;
• J.P. Morgan Chase Bank;
• P.T. Bank Negara Indonesia (Persero) Tbk. (Hong Kong branch);
• Standard Chartered Bank;
• Metropolitan Bank and Trust Company;
• Rizal Commercial Banking Corp.;
• Chemical Bank Tokyo Branch;
• Northern Telecom International Finance BV;
• Chase Manhattan Bank NA;and
• Siemens, Inc.

The trial court also said the constitutional provision that limited foreign ownership of a telecommunications company to 40% must be strictly followed. Hence, if BayanTel debts were eventually converted into equity, Filipinos should continue to hold 60% of the firm, the court said. The trial court also ordered the creation of a monitoring committee composed of creditors' representatives. Also, court-appointed rehabilitation receiver, Remigio A. Noval, will be limited to monitoring and overseeing the implementation of the rehabilitation plan.

Aside from these conditions, the trial court essentially approved Mr. Noval's recommendations on how to help BayanTel regain financial viability. Mr. Noval earlier proposed less stringent rehabilitation terms as an alternative way of restoring the company back to health. He said there should be no principal write-down of debts, but secured cash flows would be shared by secured creditors, chattel creditors, and unsecured creditors. Accrued unpaid interest will also be written off in return for a small equity interest in BayanTel. His other proposals were contained in a May 7 report submitted to the Pasig court.

GDP forecast to grow 5.3%-6.3% in 2005

The government expects the economy to grow by 5.3% to 6.3% next year on the back of bigger export receipts, more investments in mining, and the continuous growth of the farm sector. In an interview, National Economic and Development Authority (NEDA) assistant director for National Planning and Policy Staff Scholastica D. Cororaton also said that the government would be on track in achieving its target of seven percent growth in gross domestic product (GDP) within the term of President Gloria Macapagal-Arroyo. "We're likely to grow by 5.3% to 6.3% next year due to higher export growth especially in the export of services, higher investment activities in mining and the continuous improvement of agriculture," Ms. Cororaton said. She also said the government was confident that merchandise exports would continue to grow in 2005.

Socioeconomic Planning Secretary Romulo L. Neri, concurrent NEDA director-general, earlier said that 2004 export receipts would grow by 10% this year. Last May, merchandise exports grew by 15.3% as the United States and Asian economies like Hong Kong, Malaysia, Singapore and Thailand imported more electronic products, machinery and transport equipment, and garments from the Philippines. Ms. Cororaton also expressed confidence that investment activities in the local mining sector would pickup next year despite the impasse at the Supreme Court on the Mining Act of 1995. "We see more investments in the mining sector for next year following the Department of Environment and Natural Resources' fast-tracking of the issuance of mining permits," she said. Ms. Cororaton also said the services industry would likely continue its growth next year owing to the projected expansion of emerging industries such as business process outsourcing firms and call centers. "[The growth] all hinges on substantial investments from the private sector and investments from the public sector," she added.

Earlier, NEDA projected the economy to grow between 4.9% and 5.8% this year, given its expectations of bigger export receipts, the continuing recovery of the manufacturing sector, and the continuous growth of the farm sector. Mr. Neri expressed confidence earlier that GDP growth for the first half of the year would breach the 5% mark owing to the strong performance of the economy for the first quarter, when GDP grew by 6.4%. Economic growth for January-March was attributed to output increases in all sectors, with the farm sector posting the highest growth rate at 7.7% year-on-year. The government said growth would be achieved despite the higher June inflation rate of 5.1%, the highest since November 2001. June inflation was attributed largely to oil price increases that caused wage goods and services to also become more expensive. Mr. Neri earlier said the government would be able to rein in inflation in the coming months because of expectations that world oil prices would stabilize following the recent announcement of the Organization of Petroleum Exporting Countries that it would increase production to meet global demand for oil. -- Jennifer A. Ng

BIR readies new rules for computing gross income tax

The Bureau of Internal Revenue (BIR) wants to minimize discrepancies in the computation of the gross income of companies in economic zones which usually results in their payment of lower taxes. Mr. Parayno said BIR would draft a revenue regulation on gross income and then release this next week, for comments of comanies in economic zones. "The draft will be posted on the Web. We will conduct a public hearing. We will have to go back to the definition of gross income under generally accepted accounting principles," Mr. Parayno said in an interview.

Under the law, companies in economic zones pay a 5% tax on gross revenues, and are exempt from national and local taxes. But the Department of Finance said recently that many companies made illegal deductions on their gross income before computing the 5% tax, resulting in significantly lower taxes paid. Several companies outside the Subic economic zone in Zambales (Central Luzon) were also availing themselves of allowable deductions that were limited to enterprises registered with Subic authorities. BIR earlier said it was preparing to audit all companies in economic zones so it could go after tax cheats that have misdeclared their tax liabilities. "We will look at some companies who may have expanded other deductions, beyond what is allowable under [the law]," Mr. Parayno said.

Finance earlier lobbied for a bill that would rationalize tax incentives for investors. But Congress failed to pass it. The bill sought to establish parity between tax perks offered by the Board of Investments, and the Philippine Economic Zone Authority. Officials said the Executive would have to refile that bill, after it incorporated recommendations that would arise from the ongoing review of tax perks. In a recent report, the International Monetary Fund reiterated the need for the government to substantially reduce fiscal incentives for investors. The rationalization of fiscal incentives forms part of a package of reforms that aims to address the country's fiscal problems and ensure that the government can balance its budget by 2009. -- Karen L. Lema

Palace seeks business support for tax schemes

President Gloria Macapagal-Arroyo plans to get the nod of the business community for her economic program for the next six years, a government official said Wednesday night. The official, who requested anonymity, said Ms. Arroyo would meet with top business leaders next week (July 22) to brief them on her economic blueprint, before presenting this in her State of the Nation Address on July 26. "She wants to pre-sell to the business community her economic program," the official said.

Officials have drafted a fiscal program that aims to help create jobs and attract investments in the next six years, and eventually balance the budget by 2009. Ms. Arroyo has approved a four-point plan that focuses government efforts and resources on attaining macroeconomic sustainability, addressing power sector issues, developing infrastructure, and reforming the financial sector.

Palace advisers have proposed eight tax measures, namely:

• a two-step increase in the Value Added Tax rate;
• reimposition of franchise tax on telecommunication companies;
• a shift to gross income taxation;
• rationalize fiscal incentives to businessmen;
• indexation to inflation of excise taxes on alcohol and cigarettes;
• grant of general tax amnesty;
• use of performance related attrition system in government; as well as
• adjustment in excise tax and tariff on petroleum products.

The official said Ms. Arroyo wants to get the inputs of the country's business leaders on the proposed package of revenue-generating measures and explain to them the need for such reforms. This early, however, some businessmen have opposed some measures, particularly the proposed shift to gross income taxation, saying that this will result to higher prices to consumers. "Yes, we support the tax measures but not all of them, not the GIT [gross income tax]," said Makati Business Club executive director Guillermo M. Luz. Mr. Luz said his fellow businessmen also disagreed with the proposed change in the income tax system.

Businessman Raul T. Concepcion said that while the proposed shift appear to be simple, it would eventually be unwieldy in terms of computing allowable deductions, particularly cost of sales. A government official conceded that gross income taxation could be prone to tax cheating. "It is complex because it is difficult to double check a company's gross income," the official said. Another businessman said government should first go after the "underground economy," or businesses not paying taxes at all, so legitimate businesses would carry the entire tax burden. "If we have new tax measures, we normally penalize the legitimate businessmen," said Cerefino L. Benedicto, vice-president of the Philippine Chamber of Commerce and Industry. -- Iris Cecilia C. Gonzales

Oil firms say proposed 'ill-timed'

By BENNET S. STO DOMINGO and JUDY T. GULANE, Reporters

The government's plan to increase tariffs on petroleum products has been called "ill-timed" by a industry official given the current volatility of world oil prices. "If the timing is right, ultimately there will be no pass on, no price increase and no burden on the part of the consumers," Independent Philippine Petroleum Companies Association (IPPCA) chief Fernando L. Martinez said. Under the proposal, the current 3% levy on petroleum products will be increased by 2.0-3.0% under the Common Effective Preferential Tariff scheme and by 3.0-7.0% for sources with most favored nation status. "There is no way the industry can absorb a 3% to 7% increase. Prices are already high, and if an increase is implemented, it's already beyond the legitimate costing of oil companies," Mr. Martinez said.

The IPPCA, which includes Eastern Petroleum Corp., Unioil Philippines, Seaoil Philippines Inc., and Flying V, has come up with a position paper on the tariff scheme proposed by the Department of Energy, Mr. Martinez said. He said the planned hike will widen the existing gap between crude oil and finished products tariffs because crude costs are lower. "It will really be an additional burden to the consumer if the additional tariff is imposed immediately. We will have to pass it on definitely. It takes time to figure things out, they have to study it," Mr. Martinez said. Current global market behavior, he added, also points to diminished possibilities of a fuel price rollback. "There may even be an increase," he said.

Meanwhile, a bill filed by Quezon Rep. Danilo E. Suarez to increase the excise tax on petroleum products by PhP2 per liter "is too much," Mr. Martinez said, since it would most likely mean an increase of at least $5 per barrel. "They don't see this implication," he said. Raising the excise tax on petroleum products is one of several revenue-generating measures proposed by the Malacañang's economic advisers, informally assembled into the Economic Managers Group, of which Mr. Suarez is a member. Mr. Martinez said the government should just tax texting since it's only a pastime while oil is a necessity. Some legislators who belonged to the House of Representatives ways and means committee in the last Congress are backing the proposal.

Negros Oriental Rep. Herminio G. Teves, the committee's senior vice-chairman, said the retail price of gasoline in the Philippines is lower compared to other countries. "We are claiming that our tax on oil is high but we are, in fact, [charging] lower [rates]," he said. Tarlac Rep. Jesli A. Lapus, a committee vice-chairman, said an excise tax on petroleum products is easy to implement and there is low leakage compared to the collection of valued added taxes, for example. However, he also noted a possible downside in excise tax collection has fallen - to PhP21.9 billion in 2002 from PhP24.6 billion in 2001 - due to lower consumption. Antique Rep. Exequiel B. Javier, committee vice-chairman, also noted the inflationary effect of raising the excise tax.

Albay Rep. Jose Clemente S. Salceda, a member of the Economic Managers Group, reiterated that the excise tax measure will raise PhP9 to PhP30 billion. The higher tax, he added, will be borne by those in the higher income brackets. Liquefied petroleum gas and kerosene will be excluded from the tax hike since these are used by the poor, he said, while discounts will be given for diesel since this is used by the transport sector.

Fiscal reforms seen topping Congress agenda

Fiscal reform measures are expected to top the agenda of the 13th Congress which is set to open sessions on July 26, a senator yesterday said. The administration and opposition blocs in the Senate, said Senate Majority Leader Francis N. Pangilinan, will hold separate caucuses next week to firm up positions on such issues as the tax reform and proposed tax laws. Mr. Pangilinan said the country's volatile financial position is a cause for concern, thus the necessity of looking into new tax measures proposed by the Department of Finance. "We are looking at the budget deficit and tax administration as priority in the legislative agenda," Mr. Pangilinan told a news conference.

Senate President Franklin M. Drilon, meanwhile, said the chamber is firming up its legislative agenda to help President Gloria Macapagal Arroyo implement reform. "We will be calling a caucus next week and then after the opening of the Senate," Mr. Drilon said. He refused to give further details, saying the "majority agenda" will have to come from all the 14 administration senators. Finance Secretary Juanita D. Amatong has urged Congress to pass at least three of eight Palace-initiated tax bills in the next six months to send a strong signal that the government is serious in fixing its finances.

The proposed measures are an increase in the value-added tax rate to 12% from 10%; 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 an adjustment in the excise tax and tariff on petroleum products.

The government is also pushing for administrative reforms to boost tax collections which include an increase in government fees and charges and the enhancement of the revenue-generating potentials of select government-owned and -controlled corporations such as the Public Estates Authority and Philippine Amusement and Gaming Corporation. Mr. Pangilinan said the indexation to inflation of sin products will likely get the immediate approval of Congress. "It is good to look at sin taxes for obvious reasons. We might be open to that but the other tax measures, we will have to study. I am for collecting bigger revenues from sin products," he said.

Rather than enacting into law all the proposed measures, the revenue-collecting agencies like the Bureau of Internal Revenue (BIR) and Bureau of Customs (BoC) should make sure that the right taxes are being collected, Mr. Pangilinan said. "The real issue is the collection of right amount given the existing tax laws. Obviously, we are not collecting as much. We used to hit 17% [tax effort, or the ratio of tax revenues to gross domestic product (GDP)], we are only hitting 12% now," he said. "Tax administration rather than additional imposition of taxes is a serious matter that has to be looked into. It is not as if the money is not there, it is there," he added.

The administration senator also noted that uncollected revenues which could hit as much as PhP350 billion could have wiped out the PhP200-billion budget deficit while the rest could be used to finance development projects. The budget deficit reached PhP199.9 billion last year. The government hopes to keep it at PhP197.8 billion this year as it works for a balanced budget by 2009. "What are we doing or what are we not doing? We used to collect more than what we are collecting now. We really have to bring back confidence of the people to the government through actions. With the BIR and BoC, if reorganization is needed to make their work more efficient, we might have to put an executive mandate," Mr. Pangilinan said. Acting Minority Leader Aquilino Q. Pimentel, Jr., for his part, said the nine opposition senators will hold a caucus on July 24. Mr. Pimentel earlier said the opposition will be "responsible fiscalizers" in the Senate.

RESOLUTION

In a related development, Sen. Rodolfo G. Biazon yesterday filed a resolution asking Mrs. Arroyo to immediately convene the Legislative Executive Advisory Council (LEDAC) to spell out the legislative agenda of the 13th Congress in line with the ten-point agenda of Malacañang. "There is a need for her ten-point agenda to take off. The country is reeling from the divisiveness brought about by the recently concluded national elections," Mr. Biazon said in a statement. The legislator noted that Republic Act 7640 allowed the creation of the LEDAC to synchronize the efforts of the executive and legislative branches in the formulation and implementation of reform programs. "It becomes doubly urgent for the President to convene the LEDAC because the items in her ten-point agenda which addresses social and economic reforms necessitates legislative support and actions such as the massive infusion of resources ..." Mr. Biazon said.

During her inaugural address last June 30, Ms. Arroyo announced her ten-point priority program for the next six years: creation of six million to ten million jobs; construction of new school buildings and provision of more scholarship grants to poor students; balancing the budget; improvement of transportation networks like the roll-on, roll-off and digital infrastructure; provision of electricity and water supply to barangays nationwide; decongestion of Metro Manila through the creation of government and housing centers throughout the country; development of Clark and Subic as service and logistics hubs in the region; automation of the electoral process; continuation of the peace process; and closure to the political and social divisiveness caused by the EDSA 1, 2 and 3 uprisings. -- Carina I. Roncesvalles

Corporate Reform Act re-filed at the House

A bill which aims to address corporate abuses has been re-filed in the House of Representatives by Tarlac Rep. Jesli A. Lapus. Called the "Corporate Reform Act of 2004," the bill aims to:

• ban accounting firms from providing consulting services to companies they are auditing;
• mandate the rotation of an accounting partner overseeing the audit of a specific firm every five years;
• require chief executive officers to certify the accuracy of financial reports under threat of punishment;
• make punishable the shredding or altering records while a company is under investigation with up to 20 years imprisonment;
• make punishable securities fraud - defined as any scheme or artifice to defraud investors - with up to 20 years imprisonment; and
• make illegal the granting of loans to executives of publicly listed firms or companies imbued with public interest such as pension and educational pre-need companies.

The first two provisions are presently covered by Securities and Exchange Commission (SEC) circulars but the Corporate Reform Act will enforce them even more, Mr. Lapus said.

In his explanatory note, Mr. Lapus cited the Enron, world.com and Adelphia cases in the United States; the Best World Resources Corp. (BW) scandal, "educational pre-need companies that are in the red" and the "mismanagement of funds" by the Social Security System and the Government Service Insurance System as reasons why transparency and accountability should be imbedded in corporate practice.

To recall, the BW scam that involved stock price manipulation and insider trading almost led to the collapse of the stock market in 1999. Recently, educational pre-need company College Assurance Plan declared a capital deficit of nearly PhP5.5 billion and a net loss of about PhP2.8 billion as of end-2003, putting it in the red and raising questions on how it can serve those who have purchased educational plans. "There is a need to give the professional practices of accounting, appraisal and actuary a shot in the arm in the Philippines," Mr. Lapus said. "Leaders in the practice agree that their ranks should be cleansed of unethical practitioners."

The bill also proposed the establishment of a Public Company Accounting Oversight Board which will oversee the audit of public companies that are subject to securities laws. It shall operate as a nonprofit corporation. The Board, subject to approval by the SEC, will register public accounting firms that prepare audit reports; establish and/or adopt auditing, quality control, ethics, independence and other standards relating to the preparation of audit reports; inspect registered public accounting firms; and conduct investigations and disciplinary proceedings and impose appropriate sanctions, where justified, on registered public accounting firms and persons associated with these firms. Public accounting firms must register with the Board. Otherwise, it will be unlawful for them to prepare, issue or participate in the preparation of any audit report.

Registered public accounting firms will be required to prepare and maintain for not less than seven years audit work papers and other information related to any audit report. They will also have to provide a concurring or second partner review and approval of the audit report and concurring approval of the report's issuance by an independent reviewer. Financial statements must be accurate, Mr. Lapus said, not only because "transparency and accountability should reign if capitalism is to succeed," but because the effectiveness of new tax measures that the government intends to impose to improve its fiscal situation "will depend on the veracity and integrity of taxpayers' accounting records." The Corporate Reform Act, he added, is a necessary complement to the proposed tax reform bills. "Unless financial statements are accurate, all efforts on simplifying taxation based on profit and loss reports will end nowhere." The proposed law, Mr. Lapus said, has been subjected to hearings and technical working group inputs and enjoys the support of the Philippine Institute of Certified Public Accountants, Management Association of the Philippines, Financial Executives of the Philippines and "various good governance groups." -- Judy T. Gulane

Bearish mood pulls down Phisix

By ROULEE JANE F. CALAYAG

A host of issues yesterday weighed down the stock market, which closed lower for the sixth day of listless trading. On top of a lack of new developments, concerns on the government's budget deficit, the consequences of the decision to pull out troops in Iraq, external factors and indications of a strong bearish market dragged share prices. The decline, analysts told BusinessWorld, was expected as the market tries to test 1,535. The Philippine Stock Exchange composite index (Phisix) slipped by 15.36 points or 0.98% to 1,549.98.

Francisco Liboro, president of PCCI Securities, Inc., said the Phisix's retreat to 1,549 from 1,565 on Wednesday, reflected its bearish direction towards 1,535 points. "The weekly chart is pointing to 1,535. [Yesterday's decline] was just a continuation of the bearish indication. We hope to end at 1,535," he said. Technical indicators point to a strong bearish signal expected to persist through next week. Mr. Liboro and Elena Ponceca, research head at Unicapital Securities, Inc., identified a "rounding-top" formation that indicates a bearish run. "Technical analysis points to a strong bearish bias which may continue next week," said Ms. Ponceca.

FACTORS

Mr. Liboro said there was nothing to excite the market, thus investors took a cautious stance. But he said market players were preoccupied with concerns on the budget deficit and the consequences of the government's decision to reduce the size of its humanitarian contingent in Iraq. Mr. Liboro said the government's inability to reach its budget target may lead to a ratings downgrade, and in turn, pull down the currency.

Also, the administration of President Gloria Macapagal Arroyo recalled eight policemen detailed in Iraq as it scrambled to buy time to save kidnapped Filipino truck driver Angelo de la Cruz from being beheaded by his captors. The softening of the government's position was criticized by the United States as a concession to the demands of the militants. The US expects the Philippines, a close ally, to support its initiatives in Iraq. "The US and other countries may reprimand the government through [the flow of] investments and economic measures [that may be implemented toward the Philippines]. We have to brace for that," said Mr. Liboro. "Hopefully, we will go through this without a scratch," he added. Aware of the implications of this decision, investors exercised caution in trading.

MARKET LEADERS

"Piltel [Pilipino Telephone Corp.] reflects this nervousness. Investors started to sell when Piltel reached the psychological level of PhP2.50 before closing at PhP2.24," explained Mr. Liboro. He said the market weakness was also due to a cyclical trend. "There was weakness in Lopez stocks such as Meralco [Manila Electric Co.], ABS-CBN Holdings Corp., and First Philippine Holdings due to a cyclical trend. These stocks are usually up but a downtrend happens," added Mr. Liboro. "These uncertainties make investors uneasy and cause them to stay away," he added.

Ms. Ponceca, on the other hand, said the market was experiencing listless trading and some consolidation on the back of a trading momentum that continues to go down. "Market leaders Philippine Long Distance Telephone Co., Bank of Philippine Islands and ABS-CBN declined week-on-week by 3.6%, 2% and close to 7%, respectively," said Ms. Ponceca. She also noted that the directionless trading in Nasdaq and Dow Jones, which fluctuated over a five-day period, did not help the Philippine stock market. "We look to overseas markets for cues so the market movement [overseas] did not help," she added.

US MARKET

As investors wait for corporate earnings, there are also worries that the actual earnings may be less than expected. "Intel released its earnings report [on Wednesday] which was lower than expected. This may cause a domino effect especially on tech stocks," Ms. Ponceca said. The retail data in the US, which declined by 1.1%, may also indicate a weakening of the economic power of the US. Market watchers are closely monitoring signs of weakness in the economic powerhouse because this may spark speculations on US interest rates. Any weakness in the US economy would cause ripple effects in the Philippines because of its trading ties with the economic giant.

LIQUIDITY

Ms. Ponceca said the market was also affected by the presence of too much cash. "The liquidity brought about by the oversubscribed retail treasury bonds affected the market. If the excess cash was funneled to the stock market, it would have been better," she said. The proposal to raise the taxes on oil and sale of goods also raised a specter in the market. Ms. Ponceca said higher taxes pressure companies to raise profits at lower costs and minimize the power of consumers to spend and invest. While the proposals would be good for government coffers, these would limit liquidity and constrain investors.

JOLLIBEE, SAN MIGUEL

Ms. Ponceca said investors who plan to position in the stock market should pick defensive stocks such as Jollibee Foods Corp. and San Miguel Corp. whose fundamentals support consumers. Jollibee sees positive growth in its Yonghe King acquisition in China while San Miguel recently opened a brewery in Indonesia after its foray in Thailand. "Jollibee and San Miguel sustain long-term profitability," added Ms. Ponceca. At the stock market, the all-shares index declined 4.20 points to 998.06. The commercial-industrial index retreated 26.40 to 2,431.87. Property advanced 0.67 to 525.30 and mining rose 15.22 to 1,498.30. Oil shed 0.02 at 1.33, and banking and financial services slid 3.53 to 466.57.

Uniwide payment terms for creditors approved

By JENNEE GRACE U. RUBRICO, Senior Reporter

The Securities and Exchange Commission (SEC) has approved Uniwide Holdings Corp.'s plan to distribute convertible notes to settle debts to unsecured creditors. In a disclosure to the Philippine Stock Exchange, Uniwide Holdings said the SEC approved the plan on July 5. "The SEC has approved the finalized version of the convertible notes scheduled to be distributed to the unsecured creditors pursuant to the approved second amendment to the rehabilitation plan," Uniwide Holdings said.

In the July 5 letter, the SEC said that it approved the issuance of the convertible notes to unsecured creditors following a minor revision made by Uniwide Holdings in the plan. "Uniwide is hereafter expected to comply with the directives earlier set by this Commission relative to the filing of necessary disclosure statements required by the Securities Regulation Code and its Implementing Rules and Regulations for the issuance of the notes," the SEC said.

It said Uniwide Holdings is also required to submit to the commission a list of recipients of the notes, and the actual distribution to the unsecured creditors. Uniwide Holdings wants to restructure PhP2.15 billion it owes to unsecured creditors. Its unsecured creditors include trade suppliers, contractors, non-trade creditors, and private lenders. The firm earlier said that under its plans, half of the exposure of PhP1.08 billion, will be settled by issuing 15-year convertible notes. The remaining balance will be restructured into a 10-year term loan.

Meanwhile, the debt-saddled firm has adopted a dacion en pago (payment in kind) scheme to pay secured creditors, mostly banks, by using properties as payment. As of March 2004, the group owed banks PhP3.68 billion. As of end-2003, Uniwide Holdings said that it was able to reduce its debts by PhP4.18 billion to PhP6.26 billion from PhP10.45 billion by assigning properties to secured creditors. Uniwide suffered from liquidity problems as a result of the economic slowdown. On June 25, 1999, Uniwide Holdings, along with three other members of the Uniwide group of companies, filed for temporary suspension of debt payments and rehabilitation with the SEC.

In December 2002, the SEC approved the second amendment to the rehabilitation plan, which focuses on the dacion en pago scheme and the settlement of unsecured debts through cash flow from retail operations.

Aboitiz Transport to acquire two passenger-cargo vessels

CEBU CITY (central Visayas) -- Shipping giant Aboitiz Transport System, formerly WG&A, will pursue the acquisition of two more roll-on roll-off passenger-cargo vessels despite the "dramatic increase" in the price of the vessels. The two vessels, which have a capacity of at least 2,000 passengers each, will be refurbished and converted into SuperFerry 20 and 21. Aboitiz Transport is also looking at a brand new 4,000-ton vessel for the Cebu Ferries, said vice-chairman Bob D. Gothong. "We will continue with our re-fleeting program in order to satisfy our customers," he said. He said they still don't know how much the vessels would cost in view of the increase in prices. But in a previous interview, he said they were setting aside PhP1 billion for the acquisitions. "We can't get anything firmed up yet until we can get hold of the vessels. We have to go through that process of search, evaluation, and normally, these things take six months to do," he added. He said they have placed the purchase order for the two vessels from Japan. The company will likely buy the vessel for the Cebu Ferries brand from either South Korea or China.

Meanwhile, Mr. Gothong said four vessels under its Super Ferry brand were certified to have complied with the International Ship and Port Security Code by the American Bureau of Shipping last week. These are the Super Ferries 1, 16, 17 and 18. "Remember that we are not required under the International Maritime Organization regulations but Aboitiz Transport still applied for the sake of our customers," he said. -- Jun P. Tagalog

Call center industry to grow despite stiff competition

The call center industry will continue to grow in the next five years despite increasing competition from other Asian countries, call center solutions provider Teledatacom Philippines, Inc. yesterday said. President Danilo S. Cuevas said the call center industry might exceed by about 10% to 20% the Trade and Industry department's projection of an additional 40,000 seats by the end of the year. For this year alone, Teledata targets to put up 12,000 seats for various clients. "The Philippine market is still strong. We do not see it winding down in the next three to five years," said Mr. Cuevas. He said the call center industry would be able to sustain the business since companies find new products to offer to clients who are mostly from the US.

Teledata is building an office in Baguio City where its client, ClientLogic operates a call center. Teledata is a member of the Singapore-based Teledata Group. "It [Teledata] contributed about 10%-11% of the group's total revenue last year. But this is not indicative since we had the SARS [severe acute respiratory syndrome]. It was a difficult year for all the businesses," said Aston Chui, chief executive. Mr. Cuevas said Teledata contributed about $2 million in revenues last year. While Teledata officials said the outlook for the firm is "rosy" for the year, they refused to give solid projections. -- Anna Barbara L. Lorenzo

PNOC unit to build Isabela power plant

The exploration unit of state-owned Philippine National Oil Co. (PNOC) is eyeing talks with potential partners from India to build a power plant beside a mine in Isabela. Rafael E. Del Pilar, PNOC-Exploration Corp. vice-president, said they will meet with Indian companies for a possible tie-up before the end of third quarter. "Towards the end of the year, we should have spoken with all potential partners," he told reporters. He said they are evaluating the results of feasibility studies conducted by a Chinese consortium that earlier expressed interest to partner with PNOC. "They [Chinese consortium] submitted their feasibility study to us we are in discussion on how we can participate them," Mr. Del Pilar said. He said the group is led by a "major" Chinese power firm, but declined to identify members of the consortium.

PNOC-EC earlier announced it is looking at building a power plant at the mouth of the Isabela mine. The plant, which will have an initial capacity of 50 megawatts (MW), will get coal supply from the coal mine beside it. "There's a big prospect there, enough reserve there of lignite, a low-rank coal for at least 150 MW, but our plan is just to start with 50 MW to supply the requirements of the Cagayan Region thru Isabela Electric Cooperative, Inc. I and II," Rufino B. Bomasang, PNOC-EC president, earlier said. He said the supply can be expanded as the demand grows, pointing to the significance of tapping an indigenous source. "We're having problems with imported coal that have continued to surge over the last few months at the same way oil prices have also been rising. It now becomes more imperative for us to develop our own indigenous resources- -- this is one of the indigenous resources, which we have known since the 1980s," he said.

PNOC-EC is also looking at developing projects in Surigao, which Mr. Bomasang said also has coal that can be used for mine mouth power generation. "It is not as advanced as Isabela and we need to do further exploration," he said. -- Bennet S. Sto. Domingo

PBCom to sell 12B pesos in idle assets by end-August

By LEILANI M. GALLARDO, Senior Reporter
and RUBY ANNE M. RUBIO, Reporter

Midsize commercial bank Philippine Bank of Communications (PBCom) expects to unload some PhP12 billion in bad assets from its books by the end of next month. In an interview with reporters, PBCom president Isidro C. Alcantara, Jr. said the bank will send out formal invitations to investors today for the planned bidding and sale of its bad assets scheduled on the third and fourth week of August. The asset sale will be arranged by KPMG Laya Mananghaya. Mr. Alcantara said out of the total asset portfolio that will be put on the auction block, 50% will be composed of nonperforming loans while the remaining half will be nonperforming assets, or those classified as real estate and other properties owned or acquired (ROPOA). "We will open the data room next week for due diligence. We're optimistic about the planned sale because there are investors that have already expressed their interest [to buy the assets]," he said.

Once the asset sale is completed, the bank expects at least PhP3 billion in additional funds to beef up its capital. Mr. Alcantara also said PBCom is confident that it can meet the September deadline set by the Bangko Sentral ng Pilipinas (central bank) for local banks to sell their bad assets to a special purpose vehicle (SPV) to avail of the tax perks under the SPV law. Mr. Alcantara said with fresh funds coming in from the asset sale, the bank now has a healthy capital level and would no longer need additional assistance either from its shareholders or government institutions.

Early this year, PBCom received PhP7.6 billion in financial assistance from the Philippine Deposit Insurance Corp. (PDIC) on the condition that its major shareholders would put in first PhP3 billion in fresh capital. The financial aid came in following heavy withdrawals that threatened the bank's viability. As a result of the financial assistance, PDIC now has four representatives in the bank's board of directors. Last month, the bank announced that it repaid a PhP3-billion loan from the Bangko Sentral ng Pilipinas. Bank officials had said the fresh capital, along with a successful sale of bad assets, could raise the bank's capital adequacy ratio to 22%.

2004 INCOME FORECAST

Meanwhile, PBCom expects to post PhP200 million in net income this year, or lower by 6.53% than last year's PhP213.98 million. "We are looking more or less at PhP200 million. This is the last year of cleaning up everything. We will continue to return profit. The other activities will continue to provide profitability," Mr. Alcantara after the bank's annual stockholders' meeting yesterday. "Basically, we are affected by what happened last year. We had to use our position in treasury for liquidity. Our trading income went down. However, we already made money during the months of April and May. We expect that to climb up. We expect to end the year with profits," he said.

During the first quarter, PBCom incurred a net loss of PhP200.72 million from PhP192.81 million a year ago due to higher funding costs and lower trading gains. The bank earlier said it expects a significant improvement in net interest income and a rise in trading gains in the second quarter that could reverse the bank's negative showing. PBCom, which is listed at the local stock exchange, is controlled by three Chinese-Filipino families, namely: the Luys who hold 36% of the bank's total shares, the Nublas who account for 28%, and the Chungs who hold 26%. The Chung family also owns La Suerte Cigar and Cigarette Co., while the Luy family is involved in the coconut industry. "In the second quarter, the bank will be benefitting from the infusion of PhP3 billion in fresh capital by major shareholders last March 26 and a possible completion of the intended sale of nonperforming assets to a special purpose vehicle," the medium-sized commercial bank reported earlier to the Securities and Exchange Commission.

Based on its published statement of condition as of March 23, PBCom's ROPOA reached PhP6.41 billion, down by 1.84% from PhP6.53 billion the same period last year. Aggressive efforts to build up the deposit base pushed interest expenses by 16.65% to PhP526.10 million from PhP451 million in line with the overall funding strategy of front-loading liquidity requirement prior to a possible uptick in interest rates in the second quarter. This resulted in a lower net interest income of PhP76.38 million, down by 6.93% from PhP82.07 million last year. The decline in trading gains led to a 29.66% drop in net interest income to PhP108.9 million from PhP154.84 million. "Increasing upward pressure on interest rates lessened opportunities for trading on government securities during the first quarter. Miscellaneous income partially offset the decline in trading gains primarily due to higher rental income from leased units in PBCom Tower and gains on sale of acquired assets," the bank said. Operating expenses improved by 12.88% to PhP359.65 million from PhP412.84 million due to manpower cost savings, cost-reduction efforts and one-off charges. PBCom reported its total asset base rose 14.34% to PhP52.68 billion from PhP46.07 billion due to an increase in investment in bonds and other debt instruments from the purchase of government securities to support the intended sale of idle assets to a special purpose vehicle. It said its capital adequacy ratio -- a measure of a bank's ability to shoulder risks -- stood at 16.76%, well above the 10% regulatory requirement.

Consumer confidence falls to lowest for 2004

By D'LAARNI A. ORTIZ
Assistant Research Head

Consumer confidence in June fell to its lowest for the year as the official canvass of the presidential election dragged on for most of that month. President Gloria Macapagal-Arroyo and Vice-President Noli L. de Castro were proclaimed by Congress on June 24. And given the dearth of positive news to boost sentiment at that time, the BW-ASW consumer confidence index (CCI) slid by 6.4 points to 96.5 points from 102.9 in May, the latest perceptions poll conducted for BusinessWorld by NOP World Asia Pacific (formerly RoperASW Asia Pacific). The last time the CCI was below 100 was in November 2003, when it hit 87.4 points on concerns over crime and election-related political tension.

Consumer confidence, also a barometer of future spending, declined by a big margin of 14 points in May amid delays in the canvass of election results and higher oil prices. Consumers again confronted the same issues last month, causing their gloom to deepen during the survey period. The survey respondents -- 300 randomly selected individuals in Metro Manila who are at least 18 years old -- were queried on their sentiment just as Congress was wrapping up the presidential and vice-presidential canvass. The survey period was June 22-25. Ms. Arroyo was proclaimed winner of the presidential election just a day before the survey ended. "I would have shared the same sentiments that the consumers had because of all the uncertainty... there were even talks that the proclamation would not push through," said Doreen Mijares, investment officer at IGC Securities, Inc. She added that consumer confidence could strengthen this month and in succeeding months with Ms. Arroyo back in office. Positive business developments are also expected to induce optimism among consumers. "We just had an exports growth of 15.3% in May, and that is a good indicator of economic direction," she said.

Last month, consumers were also burdened by higher oil prices. In early June, oil companies raised fuel prices for the seventh time this year. It has been up about 25% year on year, resulting in higher prices for commodities, transportation, and other services. Prices of goods and services rose by 5.1% last month, its fastest rise since November 2001, the National Statistics Office reported. Metro Manila's minimum wage earners, meanwhile, obtained some relief last June 25 via a PhP20 increase in their daily emergency cost of living allowance. This increase, though, was below the PhP65 to PhP75 increase sought by Metro Manila-based labor groups.

In the same survey, respondents were asked to give their opinion on who or what was to blame for oil price increase. Although almost half blamed the US-Iraq war and its after-effects, a sizable number also held the government responsible. Further, an overwhelming mahjority felt that oil prices would continue to rise in the near term. While believing that consumer confidence would start to stabilize this month, Grace Crisostomo-Cerdenia, chief operating officer of online brokerage 2Tradeasia.com, said any increase in crude prices could hinder a recovery in confidence in the near term. "It should be noted that there are three factors at play here: first is the OPEC, they have yet to decide on whether to increase prices; two is the production stoppages that occurred due to strikes; and three is the bombing of Iraq's crude pipeline," Ms. Cerdenia said.

In the June round of the CCI, dissatisfaction over government's performance was evident, with ratings dipping for the third consecutive month to 2.6 points from 7.9 points in May. The ranks of those who believed that government was doing a worse job climbed. Ms. Arroyo's performance rating also suffered in the June survey with only 39.6% of those polled saying that the President was doing a good job, against 47.5% the previous month. In June, almost a third were also frustrated with the President's performance, while another third were noncommittal. Fewer people also believed that the economy would prosper under Ms. Arroyo's presidency. The CCI represents consumers' perception of their present circumstance and their prospects six months down the line as reflected in its two components: the present situation index (PSI) and future expectations index (FEI).

While most Metro Manila residents felt positively about current business conditions, over a third still said that business was bad during the period. Another third said current business conditions were neither good nor bad. With the poor showing of government, the PSI failed to reverse its earlier downturn and ended at 106.3 points in June from 107 points a month before. Consumers also looked negatively at the future, with the FEI also slipping to its lowest level for the year at 90.6 points from 100.5 points in May. In particular, fewer respondents believed that jobs would be easier to find in the next six months as more felt that job opportunities were growing scarce.

Family income is largely seen by most to remain at the same levels over the next six months, but a third of the respondents still felt that family income would fall in the near term. Further, the present pessimism over the state of the business environment spilled over into doubts of a better economy in the next six months. Almost half of those polled predicted that the economy would remain about the same six months down the line while only a third said that it would improve. On the stock market, 46.1% said that the composite index would stay at its present level and another 30.7% surmised that it would head south. Lastly, 43.3% of those polled saw the value of the peso remaining the same in the near term, while 39.1% said that it would depreciate.

New code protects electricity consumers' rights

The government outlined recently the legal rights of residential electricity consumers so they could be more critical of their access to quality, reliable, affordable, safe, and regular supply of electric power. The Energy department also said consumers should be accorded courteous, prompt, and non-discriminatory service by electric companies.

Electric consumers' legal rights include:

• consumers must informed and given adequate access to matters affecting their electric service;
• distribution utilities must post major announcements on bulletin boards, such as rate schedules and any changes, other service charges, terms and conditions of service, standard rules and regulations governing their operation, and general information on metering;
• distribution utilities must announce any scheduled power interruptions two days ahead, through print or other means of interactive media;
• for disconnections due to nonpayment of electric bills, a written notice must be sent to the customer 48 hours before disconnection;
• disconnections must not be done on any weekday beyond 3 p.m, on Saturdays, Sundays and official holidays, or when one of the permanent occupants is sick and dependent on a life support system requiring electricity, during the funeral wake of a deceased permanent resident of the premises, or if a customer indubitably proves he did not receive a statement of account or disconnection notice.
• in case of disconnection because of nonpayment of electric bills, the utility must immediately reconnect within 24 hours from payment;
• a distribution utility must not refuse or discontinue service to an applicant who is not in arrears to the distribution utility, even if there are unpaid bills due from the premises occupied by the applicant on account of an unpaid bill of a prior tenant; and
• in case of regular electric bills or billing adjustments due to stoppage or failure of the meter to register the full and correct amount of energy consumed, or due to use of illegal use of electricity, the consumer shall have the right to pay under protest for purposes of continuous supply of electricity by the utility without prejudice to a complaint to be filed by customer against the imposition of the bill or billing adjustment.

Energy Secretary Vincent S. Perez, Jr. said consumers deserved to be protected from any discriminating or anti-competitive practices by distribution utilities, and must not be deprived of electric service without due process.

RIGHTS AND OBLIGATIONS

Under the "Electricity Consumers' Code of Rights and Obligations" drafted by the Energy Regulatory Commission months ago (the final copy of the code was not available to BusinessWorld as of presstime yesterday), electricity consumers have four basic rights, four basic obligations, 19 specific rights, and eight specific obligations. The code also details the privileges of electric consumers. For instance, those who feel their rights have been violated can seek redress with ERC, which can hear the case. ERC can then impose sanctions, if any, based on violations to the code.

The four basic rights of consumers under the code:

• to have quality reliable, affordable, safe, regular and uninterrupted power;
• to have courteous and prompt service by the electricity provider;
• to have transparent, non-discriminatory and reasonable price of electricity and adequate access to information on matters affecting electric consumers; and,
• to choose an electricity provider once retail competition and the wholesale electricity spot market starts its permanent run.

The four basic obligations of consumers:

• observe the terms of the contract, particularly in the prompt and honest payment of monthly bills;
• allow the record of consumption to be accurately and faithfully in the electric meter;
• allow the distribution utility's employees or representatives access or entry to the customers' premises to inspect, install, read, test, remove, replace or dispose of the utility's watt-hour meter; and,
• participate in programs that promote the wise and efficient use of electricity.

On the specific terms, the draft details 19 rights of consumers. Consumers have the right to be connected to a distribution utility for electric power service, provided that the consumer complies with the requirements of the distribution utility. Should a distribution utility refuse to service a particular area within its franchise, another service provider will be allowed to enter the area. Customers also have the right to an adjustment and a refund of deposits for bills and electric meters. Bill deposits can increase or decrease depending on subsequent charges within six months from service connection. The bill and meter deposits will be refunded, with interest, within one month from the termination of the service provided that the accounts have been settled and the metering facilities are returned in good condition. The customers have the right to an accurate watt-hour meter; only meters that are tested, certified and sealed by the ERC will be installed. The consumer has the right to require the service provider to test -- free of charge -- the accuracy of the installed meter. ERC can also be asked to test the meter -- for a fee. If the meter is found inaccurate, the customer can ask for a replacement, or have it calibrated to restore accuracy "closest to the condition of zero error." Customers are also entitled to prompt investigation of complaints. Distribution utilities are required to come up with a report on the complaint and the actions taken within 10 days of receipt. Distribution utility employees also need to display their identification cards conspicuously and properly at all times when dealing with customers on electric service. Distribution utilities are also required to extend or install additional lines at their own expense if these are needed to service additional customers within their franchise.

The guidelines state that customers should be informed of scheduled power interruptions; the distribution utilities are required to post the schedule in consumer bulletin boards and announce power outages either through print or broadcast media two days before schedule. Service providers also have to come up with a consumer hotline or short message service (commonly called text massage) facility. Customers also have the right to a transparent billing, which is defined as the billing format approved by ERC, and should receive billing statements on a monthly basis. The guidelines also specify that customers have a right to due process and prior notice should the service be discontinued. Disconnections can be done for delinquent accounts within a given time frame or if the connection is illegal.

For disconnection due to nonpayment of bills, customers must be given a written notice 48 hours before the disconnection. However, the bill deposit will not be returned to the customer as it would serve as "guarantee for the payment of future bills after service is reconnected." For cutting illegal connections, meanwhile, distribution utilities are required to serve a written notice at least one day before the disconnection is made. Disconnections cannot be done before noon of Fridays and weekends or official holidays, will be delayed if the customer or the representative is unavailable or if one of the occupants is sick and depending on a life support system which requires electricity.

The exemption for sick occupants, however, shall only be valid for two months, and only if a medical certificate shows that the termination of the electric service would be dangerous to the patient's condition. Disconnection shall also be suspended during funeral wakes, provided that a death certificate is shown and the delay will not exceed one month. Disconnection can also be delayed if the customer has proved failure to receive a disconnection notice, or if there is only one billing statement that covers more than a month's consumption. Customers who are given one billing statement covering several months of consumption must pay the amount due only under the current billing cycle. They are also required to draw up with the distribution utilities a staggered payment scheme within a time frame equivalent to the unpaid bills.

As a last-minute option, customers can pay outstanding charges to the employee or agent of the distribution utility who is tasked to effect the disconnection at the time that the service is set to be terminated, the representative of the distribution utility is required to accept the payment, issue a temporary receipt and cancel the disconnection. The distribution utility cannot refuse service to a good-standing customer on account of unpaid bills by a previous tenant (in case the place is rented) unless evidence is given to show that the previous and present occupants are colluding to defraud the utility company. For customers who have paid their arrears, distribution utilities are required to reconnect the service within 24 hours of payment. For confiscation of metering facilities due to illegal connections, the act should be witnessed by the customer, law officer or a representative from the ERC. The confiscated meter will be subject to laboratory testing at the ERC or at the distribution utility.

Should the electric meter fail to register the correct amount of consumed electricity, customers are still required to pay, but under protest. Customers have the right to file a complaint with the ERC for alleged violations, provided there was former consultation with the ERC consumer welfare desk, and provided that the meeting results in a deadlock. The consumer, meanwhile, should pay the bill and meter deposits and allow the inspection, installation and removal of metering facilities by properly identified distribution utility employees.

For infrastructure, "The customer shall further grant the right to use a suitable space for the installation of necessary metering equipment in order that such equipment will be protected from damage by the elements or through the negligence or deliberate acts of any person," the guidelines state. Just compensation will be given to the host-customer. The customer is required to pay adjustments in charges should the meter fail to reflect the right consumption. For the computation, "The customer shall be billed for such period based on his average use of energy for the immediately preceding six month of like use or the registration of a check meter subject to the approval of the ERC," the guidelines state.

The following acts are considered illegal:

• presence of a bored hole on the glass cover or the back portion of the electric meter;
• salt, sugar or other elements that may cause inaccuracies in the reading of the meter;
• a wiring connection that can affect accuracy;
• tampered, broken or fake ERC seal on the meter;
• use of a reversing transformer, jumper, shorting or shunting wire, loop connection and other devices;
• mutilation, alteration, disconnection, bypassing or tampering of instruments, transformers and accessories;
• destruction or attempt to destroy the metering device box; and
• bribery of the distribution utility employee.

Violators will be required to pay a differential billing that will be computed by the distribution utility, on top of penal sanctions. -- Bernardette S. Sto. Domingo and Jennee Grace U. Rubrico

Bangko Sentral notes 165% rise in investments as of April

By IRIS CECILIA C. GONZALES, Reporter

Foreign investments registered with the Bangko Sentral ng Pilipinas (BSP) increased by 165% in the first four months of the year as investors continued to park funds in the country despite election-related jitters. Data showed foreign investments -- direct equity and portfolio investments registered with the central bank -- totaled $1.461 billion for January to April, a substantial increase from only $551 million during the same period last year.

A BSP official said several factors contributed to the rosy investment figures. "We are still benefiting from the global economy recovery," the official said. She said the retention of the Philippines in the list of permissible investment sites by a United States pension fund also improved the country's image to investors. The $165-billion California Public Employees' Retirement System in April decided to keep the Philippines in its investment list. However, the foreign business community is awaiting President Gloria Macapagal-Arroyo's economic program for the next six years, the official, who requested anonymity, said. Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura has said the new administration needs to hit "the ground running."

For the January to April period, direct equity investments totaled $407 million, 91% higher than the $213 million in the same period last year. Portfolio investments, meanwhile, rose by 212% year-on-year to $1.054 billion from $338 million. Direct foreign equity investments are investments by nonresidents in shares of stock: in local companies that are not listed at the stock market or in foreign companies licensed to do business in the country. These investments can be in cash, as assessed and appraised by the BSP, or in the form of expenses incurred by foreign firms working on government-approved service contracts. Portfolio investments are investments by nonresidents in shares of stocks listed at the Philippine Stock Exchange, in government securities and in peso bank deposits with maturity of at least 90 days.

The United Kingdom topped the list of investor countries with a total of $344 million in investments for January to April. Singapore ranked second with an investment of $332 million during the period.

First semester tax take just short of target - BIR

The Bureau of Internal Revenue (BIR) collected PhP35.942 billion in June, just short of the PhP35.975 billion target for the month. It brought the bureau's six-month tax take to PhP229.042 billion, PhP5.6 billion shy of its first semester goal of PhP234.74 billion but 12.2% higher than the revenues posted during the same period last year. June marked the fifth time that the BIR has faltered in its collections since the start of the year. The only the monthly target surpassed was in March. The Large Taxpayers' Service contributed PhP20.489 billion for the month, a bit over the PhP20.43 billion target. Regional offices, meanwhile, took in PhP15.452 billion, short of its goal of PhP15.545 billion.

The BIR, however, remains confident it will meet its PhP477-billion revenue goal for 2004 given measures such as motel taxation, an audit of firms in economic zones, and administrative measures. The government has set a PhP197.8-billion deficit target for 2004 towards the goal of wiping out the shortfall and trimming the consolidated public sector deficit (CPSD) to 3% of the total value of the economy's output by 2009. Finance department data showed first quarter CPSD at PhP51.1 billion from PhP44.6 billion in the same period last year. It was, however, lower than the PhP65.6-billion ceiling.

Debt yields rise, retail bonds drain liquidity

Philippine debt yields rose yesterday, pressured higher by a government retail bond offering which traders said had drained liquidity. Dealers said banks were cautious about buying debt on worries the central bank might raise its overnight interest rates due to rising inflation. "Bids and yields are higher in the market today. I think the overall sentiment is still bearish due to expectations of higher inflation," the first dealer said. The dealer said the two-year paper was done at 10.45% to 10.5% while the five-year bond was bought at 11.85% to 11.95%. Dealers said most banks expected an increase in the central bank's overnight interest rates after inflation rose 5.1% in the year through June, its fastest rate since 2001.

The central bank has left overnight rates unchanged since July 2003. The overnight borrowing rate is at 6.75% while the overnight lending rate, at 9%. A second dealer said the government's offering of retail treasury bonds, which ended yesterday, had drained some of the market's liquidity. National Treasurer Mina Figueroa yesterday said the government had raised PhP37 billion from its first sale of retail Treasury bonds this year, three times the minimum it wanted to get to help plug a gaping budget deficit. "We're still consolidating. We have right now about almost PhP37 billion," Ms. Figueroa said. The Treasury offered three- and five-year bonds to the public from July 7 to 13 to raise at least PhP10 billion. The three-year bond carries a coupon of 11% and the five-year, a coupon of 11.75%. They were sold to the public in denominations of PhP5,000.

The proceeds from the retail bond offering will be used to plug the government's budget deficit, which it aims to cap at PhP197.8 billion this year. "Interest rates are really moving up and down, [this is] a natural movement," Deputy Treasurer Eduardo S. Mendiola said. At the secondary market yesterday, the three- and five-year debt papers rose to 11.2289% and 12.0423% from 11.1117% and 11.9233%, respectively. "A good take-up in the retail bonds will mean tighter liquidity as PhP37 billion has just been drained out of the system, which will pressure rates higher in the short term as there is less cash supply," said Forecast analyst Danny Suwananpruti. "However, now that the Treasury's cash position is better, it should mean less supply ahead and bond yields should ease back down over the medium term." Another trader said other factors affected the market's liquidity and that the retail debt was just one them.

TAX COLLECTION

He cited, for instance, the government's failure to meet its first-half tax collection target. News circulated yesterday that the government fell short by 2.3% on its tax take. "We are now facing real problems. The feel-good factor, which is the President's fresh mandate, is wearing off," the trader said. Jonathan Ravelas, Banco de Oro Universal Bank market strategist, said President Gloria Macapagal Arroyo should focus now on revenue enhancement. He said the President has the capability to "concretize" her 10-point agenda since she holds the majority support of the Congress.

Meanwhile, last Tuesday's fully awarded 10-year Treasury bonds, which fetched a coupon rate of 12.75%, fuelled talk that the government is gearing toward more domestic borrowing to support the budget. "So we're keeping our premium risks on the uptrend," another trader said. Based on market data, the government's series of rejections or partial awards on bids for debt reached PhP38.3 billion in the first semester against a public offering of PhP87.5 billion. -- Reuters and Ira P. Pedrasa

Mirant to spend $300M for 2 Cebu plants

By JUN P. TAGALOG, Correspondent

CEBU CITY in Central Visayas -- Mirant Philippines is setting aside $300 million to build two 75-megawatt coal-fired power plants in Toledo City, around 50 kilometers west of this city. Mirant President Edgardo Bautista told members of the Cebu Chamber of Commerce and Industry in a closed-door meeting last Tuesday afternoon the first plant will be completed in 2008 and the second in 2011. Former chamber president Carlos Co said they were appreciative of Mirant's expansion plans in Cebu. But they asked Mr. Bautista to accelerate the construction of the two plants to avert a supply shortage here.

TARGET DATE

The target completion in "2008 is quite late considering that we are faced with a power crisis. We asked them if they can finish the first plant in 2007 and the second plant in 2009," he told BusinessWorld. He said Mr. Bautista vowed to speed up the implementation of the project, but did not make any commitments. Mr. Bautista also told Cebu businessmen that Mirant will build a 1,300-megawatt coal-fired plant in Pagbilao and another 75-megawatt coal-fired plant in Panay. Mirant has ownership interest in eight plants in the Philippines.

Among others, Mirant operates the Pagbilao and Sual generating plants, the largest in the country which provide electricity to the Luzon power grid. Mirant acquired the 81-megawatt coal thermal unit in Sangi and the 40-megawatt diesel unit in Carmen, both in Toledo City, in 2002. The two units were purchased from the Toledo Power Co. for $24 million. Mirant is the second foreign investor that announced plans to invest in the power generation sector in Cebu. Earlier, the Korean Electric Power Corp. said it will build a 200-megawatt coal-fired plant in Naga town to address the rapidly increasing power supply requirements in the Cebu-Negros-Panay grid.

Auction for 600-megawatt Masinloc power plant open

By BENNET S. STO. DOMINGO, Reporter

The Power Sector Assets and Liabilities Management Corp. (PSALM) is opening the auction floor for companies wishing to bid for the 600-megawatt (MW) coal-fired power plant in Masinloc, Zambales. In an invitation to bid published yesterday, PSALM said interested parties can submit their letters of interest on or before July 27. The due diligence, pre-bid conference and the deadline for submission of bids are on July 19, Sept. 1, and Oct. 27, respectively. PSALM is tasked to sell state-owned National Power Corp.'s (Napocor) generating assets and use the proceeds to settle a portion of the power generator's debt.

The power plant in Masinloc is one of the biggest Napocor power plants up for bidding. The firm had said at least four local and foreign companies, including listed Aboitiz Equity Ventures, have shown interest to bid for Masinloc. "The bids and awards committee reserves the right to accept or reject any interested party or bidder or proposals or bids therefrom, or any part thereof, and/or to waive any defects contained therein and accept the offer most advantageous to the government without offering any reason whatsoever," PSALM said. The firm said interested parties will be required to post a bid security equivalent to 10% of the total bid price in the form of an irrevocable letter of credit, confirmed by a local bank and acceptable to PSALM's bids and awards committee.

PSALM added that before giving out the bidding package, interested parties must execute a confidentiality agreement and an undertaking pursuant to Section 78 of the Electric Power Industry Reform Act of 2001, and pay a nonrefundable amount as participation fee. The bidding package that includes the bidding procedures will be issued from July 19 to 28 at the PSALM office. "Only interested parties who have been issued the bidding package will be allowed to participate further in the privatization of the asset," PSALM said. PSALM earlier said it expects to privatize 70% of Napocor's assets by 2005. "We have a target of 70% of generating assets of Napocor to be privatized to trigger open access so by yearend, hopefully we'll have 30%," PSALM Vice-President Froilan A. Tampinco said in a previous interview.

Other plants up for sale are Napocor's 22.0-MW Bohol plant and the 1.2-MW Loboc hydroelectric plant by September and the 620-MW combined cycle power plant in Limay, Bataan by December. The 850-MW Sucat thermal plant could be placed on the auction block earlier than the February 2005 schedule, Energy Sec. Vincent S. Perez Jr. earlier said. He said the same is true for any of the 32 remaining Napocor plants that PSALM had lined up for privatization up to the end of next year. To date, PSALM has sold three Napocor plants, all hydroelectric, to private sector investors: the 3.5-MW Talomo plant in Davao; the 1.6-MW Agusan plant in Bukidnon; and the 1.8-MW Barit plant in Camarines Sur. The fourth asset lined up for privatization, the 0.4-MW Cawayan plant in Sorsogon, should have been sold on June 29, but a bid failure was declared after none of the participants met the floor price that PSALM had set for the plant.

Based on PSALM's privatization timetable, 11 more plants should be privatized before the end of the year. The sale will pave the way for the implementation of the open access transmission service which will allow large power users to use the National Transmission Corp.'s transmission lines for their power distributor of choice.

Australia's Medusa Mining inks deal to study revival of Vulcan's Isabela mine

By ROULEE JANE F. CALAYAG

Vulcan Industrial and Mining Corp. said it had signed a deal with Australia's Medusa Mining Ltd. to study the feasibility of reviving its Marian gold mine in Isabela province. The deal for a six-month option allows Medusa to assess the project, Vulcan disclosed to the Philippine Stock Exchange (PSE). If satisfied, Medusa will exercise its option to enter into a mines operating agreement with Vulcan.

The Marian gold mine is northeast of Manila and near Santiago City in Isabela. It was operated by Vulcan as a narrow vein underground between 1978 and 1984. Vulcan milled 264,000 tons containing 63,600 ounces of gold at an average mine head grade of 7.5g/t gold. Medusa, listed at the Australian Stock Exchange, is involved with the revival of the Dizon project in Zambales and Saugon project in Mindanao, which is near the Co-o Mines of Banahaw. Under the deal, Medusa will undertake at its own cost, data collation, validation and database entry of available underground and surface records. It will also undertake a three-dimensional modeling and evaluation of the mineralization. Once Vulcan's ownership of the Marian Gold Mine is established by an independent consultant, Medusa will pay Vulcan a signing fee of $10,000.

CONVERSION

On exercise of the option, the exploration deal will be converted into a mines operating agreement under which Medusa and Vulcan will form a joint venture. Each party will have 50% equity in the project or the permissible equity sharing at the time of the mines operating deal, but Vulcan will have the right to contribute or dilute to a 3% net smelter royalty. Medusa is given two years under the joint venture to establish the project's commercial viability. It is authorized to commence the development of the mine within the period if it finds the project viable. The deal gives Medusa an opportunity to acquire another "near-term" project in addition to its Saugon project that could be developed into a profitable operation. "The narrow vein mining expertise available at Saugon gives Medusa the opportunity to expand its activities in a niche sector of the market," said Vulcan Executive Vice-President and General Manager Patrick V. Caoile in the disclosure. Mr. Caoile added that Medusa has another opportunity in Marian which "has the potential to be readily developed with low capital exposure and a rapid payback period."

Waterfront to start tender offer for minor Acesite shares

By LEILANI M. GALLARDO, Senior Reporter

Hotel chain Waterfront Philippines, Inc. will start on Monday its tender offer for minority shares in recently acquired Acesite (Phils.) Hotel Corp. In a disclosure to the Philippine Stock Exchange, Waterfront corporate secretary Arthur R. Ponsaran said the company's board had approved the terms and conditions of the tender offer in compliance with the rules and regulations of the Securities and Exchange Commission (SEC). Acesite owns and manages the Manila Pavilion Hotel. "In compliance with the SEC rules and directive on mandatory tender offers, the Board approved the terms of the tender offer to the minority shareholders of Acesite at PhP1.74 per common share of Acesite," he said. Acesite's common shares were last traded at PhP1 per share.

On Feb. 17, the SEC told Acesite to conduct a tender offer for its minority shares but the firm asked for a reconsideration since it still had to settle the company's ownership issue. Mr. Ponsaran said the tender offer period will start on July 19 and end on Aug. 16 and will be subject to other terms which will still have to be announced. "The Board directed Management to file the required tender offer reports and comply with the applicable rules and procedures of the SEC and the Philippine Stock Exchange," he added.

Last month, the Gatchalian-led Waterfront gained majority control of Acesite from its parent Acesite Ltd. This was done after Waterfront representatives were elected as directors of Acesite during its stockholders meeting on June 24. The transfer of the control followed an earlier order by a Makati regional trial court for the Rizal Commercial Banking Corp., the stock transfer agent of the firm, to transfer 74,889,231 shares belonging to Acesite Ltd. under the name of Equitable PCI Bank. Acesite Ltd. owns shares representing 75% of Acesite Philippines but it had pledged the shares as security for a loan from Equitable to affiliated companies of its parent firm, the Sino-i.com group. The latter defaulted on the loan thus Equitable foreclosed on the shares used to secure the loan. The shares were then bought by Waterfront from Equitable through cross sales at the bourse. This happened even if Acesite officials said they were not aware that their shares were pledged to the bank, and said they did not receive any notice of default or foreclosure from Equitable.

Favila touts measure to boost PSE liquidity

Opening a securities borrowing and lending (SBL) facility will make the Philippine Stock Exchange (PSE) regionally competitive. PSE Officer-in-Charge and incumbent Director Peter Favila said an SBL facility will boost liquidity in the market and strengthen the bourse's "competitiveness with peers in the region." An SBL facility is a mechanism that allows the loan of securities by a lender to a borrower who needs the securities to support settlement obligations or trading strategies.

Under the SBL facility, shares are transferred from one party to another without change in beneficial ownership, thus improving settlement and liquidity of the market with the subsequent replacement of the borrowed securities. Mr. Favila said the stock exchanges of neighboring Hong Kong, Singapore, Thailand, Korea, Japan, Indonesia and Malaysia have all adopted the SBL facility to prevent failure in the settlement of trades, thus improving the liquidity of their respective markets. "We have been pushing for the creation of this facility since 1997 -- even ahead of Thailand. But look who is teaching who now," Mr. Favila said. He added the PSE is the only stock exchange in East Asian that does not have an SBL facility.

The enactment of Republic Act 9243, which formalizes the securities borrowing and lending activities in the stock market and exempts these from documentary stamp tax, opened the doors to the facility's implementation. Mr. Favila said the PSE is just awaiting the rules and regulations on the tax-exempt status of SBL transactions from the Bureau of Internal Revenue (BIR) before the facility can finally be implemented. The law was passed in February through the efforts of the stock exchange, the Department of Finance, the Securities and Exchange Commission, the BIR and both houses of Congress. The law laid the groundwork for the facility's implementation. -- Roulee Jane F. Calayag