Thursday, October 14, 2004
Ratings agencies to scrutinize reforms' progress
VAT exemptions cut to yield PhP9B-PhP10B
Finance dep't bucks plea to cut tax amnesty rate
Peso again hits all-time low
Nenaco minority shareholders get tender offer
Regulator eyes sanctions vs Mondragon, subsidiary
Gov't dead-set on 'sin' taxes
Transco public bidding seen to benefit gov't
Foreign donors, DBP ink deal on water projects
Asia dollar bond spreads steady; focus on supply
Cautious investors shun 'heroic' bets
Globe, Sun ink multimedia message linkup
Four foreign firms planning PhP81-B investment in mining
First Pacific sells 930.2M Metro Pacific shares
Gov't reviving plans to sell San Miguel, Meralco stakes
Stocks up as selling pressure eases

Wednesday, October 13, 2004
Peso fall to PhP57:$1 seen sans reforms
Fiscal situation scary, says World Bank executive
Budget balanced by 2009, if ...
Controversial bond issue defended
Palace names new National Treasurer
Central Bank chief gets 'B' grade from
Global Finance
Survey gives GMA failing mark for 1st three months
San Miguel to revive Magnolia ice cream brand
Independent power firms may service light railways
Lack of consultation for medium-term plan hit
Energy dep't sticks to public bidding for Transco
Gov't likely to assume PhP309.8-B debt of 18 BOT projects
Bigger revenues expected from tax amnesty
Sy firm asks high court to lift status quo on SSS deal
PBCom sells assets worth 12B pesos to SPV
PCI Leasing to issue 500M pesos in short-term papers
NBI warns against phishing syndicates
Court dismisses Grand Boulevard Hotel debt rehab petition
First Pacific sells 3.12% stake in Metro Pacific
PSE suspends trading of Asia Amalgamated
PSE given until Nov. 12 to pick independent director
Shell starts auction of $3-B InterGen assets
Oil, ratings weigh down stocks

October 11- 12
October 7 - 8
October 5 - 6




Ratings agencies to scrutinize reforms' progress

Officials of international credit rating agencies will visit the country in the coming weeks to look into the progress of key reform measures necessary to resolve the Philippines' fiscal woes. Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) Governor Rafael B. Buenaventura said the country cannot afford a credit downgrade since this will further increase the government's borrowing costs. "We will have to show some progress [on economic reforms] or face the possibility of a downgrade," he told a press briefing yesterday. A credit downgrade makes it more expensive for the Philippines to borrow as it reflects the country's ability to pay its debts. It also increases the costs of doing business in the country.

Representatives of Fitch Ratings Services and Moody's Investors Services will arrive next week and next month, respectively, to review the progress of the government's reform program, which includes a package of new tax measures. Philippine Investor Relations Office executive director Corazon P. Guidote said credit rating agencies need to see enough improvement in government efforts to raise new revenues before upgrading the country's credit ratings. "Specific reforms are needed. It is a make-or-break situation. If we make it, we may get an upgrade," she told reporters. The Macapagal-Arroyo administration is asking Congress to pass eight revenue measures that are expected to raise PhP83 billion yearly. These are:

  • a shift to gross income taxation;
  • indexation of excise taxes on tobacco and liquor (composed of two separate laws);
  • additional PhP2 excise tax on petroleum products;
  • rationalization of fiscal incentives;
  • general tax amnesty; lateral attrition system;
  • a tax on telecommunications companies; and
  • a review of the value-added tax system.

The new tax bills have met opposition from lawmakers who said the government should first improve revenue collections before asking for new taxes. The House of Representatives, however, has vowed to approve four out of the eight tax bills, while the Senate pledged to act on two proposed measures before the year ends. Moody's downgraded the Philippines' credit rating in January to Ba2, with a negative outlook, from Ba1. A Ba, or speculative grade, rating means a borrower has substantial credit risk, particularly as a result of adverse economic change over time. Ms. Guidote said Moody's "may not be generous this time" since it had already postponed a multiple downgrade early this year.

Fitch, meanwhile, maintains a BB grade with a stable outlook on the Philippines. However, it stressed in July the need to show progress in key reforms by end-2005. Standard & Poor's Ratings Services (S&P), meanwhile, has warned the Philippines of another credit downgrade, citing the lack of progress on key revenue measures that could help address the fiscal deficit. The credit rating agency last week said that President Gloria Macapagal-Arroyo's new term, which began July 1, is already approaching its six-month mark but has yet been unable to push reform measures.

In July, S&P downgraded its credit rating on the Philippines' long-term local currency to 'BBB-', which is the lowest investment grade, from 'BBB', citing the government's fiscal woes. It kept the foreign currency rating at 'BB' or speculative, which means there are substantial credit risks for borrowers. Mr. Buenaventura, who returned to work yesterday after two months in the US both for a medical leave and to lead the US leg of a Philippine road show, said global investors want to see specific milestones in resolving the fiscal problem. "They accept the economic program and are now looking for milestones," he said. Government economic managers led by Mr. Buenaventura, Finance Secretary Juanita D. Amatong and Trade and Industry Secretary Cesar V. Purisima went on a road show in Asia, Europe and the US to convince businessmen to invest in the Philippines. Ms. Guidote said new taxes are necessary for the National Government to push through with its plan to absorb PhP500 billion in debts of National Power Corporation (Napocor). Government estimates show the government will have to start paying PhP34 billion yearly in Napocor interest expenses alone. "We really need to improve the cash flow," she said. -- Iris Cecilia C. Gonzales



VAT exemptions cut to yield PhP9B-PhP10B

The government will earn an additional PhP9 billion to PhP10 billion in revenues if Congress agrees to cut the number of exemptions granted under the value added tax (VAT) regime, Finance Secretary Juanita D. Amatong said in a statement yesterday. This will be on top of the PhP8 billion to PhP12 billion in expected revenues if Congress approves a bill that would repeal provisions in at least 25 laws that grant tax perks and exemptions to businesses and investors, Ms. Amatong added. The Department of Finance (DoF) wants Congress to cancel at least six VAT exemptions, including those enjoyed by doctors and lawyers that were legislated only last year. It submitted to Congress last month a bill that limited exemptions in a bid to increase VAT collection. The bill, however, has yet to find a sponsor. Finance data show the government lost PhP144 billion in potential VAT last year because of collection inefficiency and numerous exemptions.

In its proposed bill, Finance seeks to repeal Section 109 of the 1997 Tax Code, removing VAT exemptions granted to the following activities:

  • sale or importation of coal, natural gas and petroleum products;
  • sale or importation of raw materials used in the manufacture of petroleum products by the buyer or importer himself;
  • importation of passenger and/or cargo vessels of more than 5,000 tons, whether coastwise or oceangoing, including engine and spare parts of said vessel to be used by the importer himself as operator;
  • sales and importation by cooperatives, excluding lending activities of credit and multipurpose cooperatives;
  • sale, importation, printing and publication of books; and
  • services rendered in the exercise of the medical and legal professions.

The Tax Reform Act of 1997 exempts 26 transactions from VAT. The tax exemptions for lawyers and doctors were okayed by Congress only last year. Ms. Amatong said the reduction of VAT exemptions is necessary to plug the loopholes in the system. The move, she added, will widen the base of VAT payers and raise more revenues to help narrow the budget deficit. Changes in the VAT system, as well as the move to amend special laws granting tax perks, are part of the government's effort to address its fiscal problems.

Last month, the DoF asked Congress to revoke fiscal incentives under Presidential Decree 1869, the consolidation of previous decrees granting a franchise to state-run Philippine Amusement and Gaming Corp. It also sought the scrapping of tax provisions in 24 other laws, which include, among others:

  • Republic Act 7308 on the creation of a National Seed Industry Council;
  • RA 7884 on the creation of the National Dairy Authority;
  • RA 8367 on regulation of non-stock savings and loan associations;
  • RA 7354 on the creation of the Philippine Postal Corp.;
  • RA 7925 on the development of telecommunications and the delivery of public telecommunications services;
  • RA 7306 on the creation of the People's Television Network Inc.; and
  • RA 6938 or the Cooperative Code of the Philippines.

The DoF said its proposed bill would address revenue loss; relative ineffectiveness in achieving intended goals to promote social, political and economic objectives; distortions in resource allocation; and the vulnerability of the tax incentives systems to syndicated crimes, graft and corruption. Ms. Amatong has said the grant of fiscal incentives cost the government PhP229.4 billion last year, equivalent to 5.33% of gross domestic product (GDP) or total economic output. The amount includes tax incentives given to foreign and domestic investors by the Board of Investment and the Philippine Economic Zone Authority. The rationalization of fiscal incentives is one of the four measures which the DoF hopes Congress will pass before the end of the year. The other measures are the higher excise taxes on alcohol and cigarettes, a tax amnesty and a lateral attrition system. Ms. Amatong said she is confident the national government will be able to balance the budget by 2009 if it succeeds in raising new taxes. -- Karen L. Lema



Finance dep't bucks plea to cut tax amnesty rate

A proposal by businessmen to lower the tax amnesty rate to 1% from the 3% pushed by the government has been rejected by the Department of Finance (DoF). Finance Secretary Juanita D. Amatong told reporters that the DoF will insist on the 3% tax amnesty rate contained in the Executive's version of the tax amnesty bill. Finance undersecretary Grace P. Tan earlier said the 1% rate is "too low" and that the 3% is already a "compromise". Ms. Tan has said the amnesty tax rate should approximate the tax the government failed to collect, or what is owed the government by the erring taxpayer. In this manner, a tax amnesty would be put in proper perspective and not be misinterpreted as favoring or rewarding the tax cheats.

The Federation of Filipino Chinese Chamber of Commerce and Industry Inc. on Tuesday tried to convince lawmakers to bring down the tax rate to 1%. It said this will entice high-income businessmen to avail of the program. The business group claimed that a 50 taxpayers, each with a net worth of PhP1 billion; 7,500 filers, each with a net worth of PhP100 million; 15,000 filers, each with a net worth of PhP50 million; and some 20,000 filers each with a net worth of PhP1 million are willing to avail of the tax amnesty program if they are charged 1% of their net worth. The total net worth of the 42,550 "first-time filers" of statements of assets and liabilities and net worth (SALNs) would total PhP15.7 trillion, the chamber said. If these taxpayers are charged a 1% tax, then the government will generate PhP15.7 billion in revenues, it added. Ms. Amatong, however, doubted the accuracy of the chamber's numbers, saying "we do not know where they got the figures and that data still have to be verified." She added the chamber has to identify the taxpayers it claims are willing to avail of the amnesty.

Finance undersecretary Emmanuel P. Bonoan told a Senate hearing on Tuesday that the imposition of a 3% tax amnesty rate would yield a low estimate of PhP8 billion in revenues, a medium estimate of PhP13.86 billion and a high estimate of PhP20.4 billion. The revenue estimates were based on a survey of the 2000 taxpayer database, which showed total taxpayer assets of PhP11.8 trillion and total net worth of PhP4.4 trillion. The House of Representatives ways and means committee has approved a bill granting a one-time tax amnesty on all unpaid national internal revenue taxes imposed during the taxable year 2003 and prior years. The bill provides that those who volunteer for the amnesty have to pay 3% of their net worth instead of their outstanding tax deficiencies. The tax amnesty is one of the eight revenue measures President Gloria Macapagal Arroyo wants Congress to pass in a bid to address the country's fiscal problems. -- Karen L. Lema



Peso again hits all-time low

The peso once again hit its all-time low of PhP56.45 to the dollar yesterday on renewed worries over the government's fiscal problems. The currency closed at PhP56.45, touching a record set in March over concerns arising from the upcoming May elections. That low was revisited on September 27, in what traders and monetary officials said was seasonal demand for the dollar. Yesterday at the Philippine Dealing System, the country's electronic currencies exchange, the peso weakened on the average by more than six centavos to PhP56.412 from PhP56.351 the other day. It opened at PhP56.40 and strengthened by only two centavos to cap its intraday high.

The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) denied intervening, but traders polled by BusinessWorld said they felt cushioning during intraday trading. "As much as $25 million was injected when the peso was already at PhP56.40. Demands were too high, though, and supplies did not last," a trader said. The BSP said the peso can be expected to recover starting next month on the back of increased remittances by overseas Filipino workers (OFWs), but said government action on needed reforms is necessary for permanent support. One factor cited for yesterday's fall was the central bank's declaring on Tuesday that the peso could fall to PhP57 starting next year, staying at this level until the government gets a grip on its finances.

World Bank country director Joachim von Amsberg's statements that the country's fiscal situation is scary also contributed, traders said. Mr. Amsberg told reporters on Tuesday "I do feel scared looking at the fiscal situation of the Philippines and I do feel worried about it." "If one country's public sector debt is already at 136% of its gross domestic product and the ratio of its revenues is only at 12%, that's scary," he added. These factors, coupled with earlier statements from financial officers and credit agencies that the country was at a risk of a downgrade, prompted "banks as well as other oil and manufacturing companies ... to hedge their requirements in coming months. The outlook is that the peso is not going to strengthen, they probably made use of the time while the peso is still at such levels," another trader said. Total volume of transacted dollars went up to $166.75 million from $135 million the other day. Oil and other manufacturing companies have to contend with increasing oil prices in the world market, which have hit new highs.


Concerns over the country's fiscal scenario mounted when President Gloria Macapagal Arroyo declared in August that the country was "in the midst of a financial crisis." While this has been described as play-acting to get Congress to act on needed reform measures, traders yesterday said approval of those measures is needed temper the currency's fall. "Ask the ordinary man in the street. They know that we are facing hard times," another trader said.

Song Seng Wun, regional economist at GK Goh Securities in Singapore, said "There is certainly risk that the rating agencies could punish the government, basically telling them they should do a lot more to turn the situation from becoming a much more serious structural problem." "The bottom line here is the administration knows what is needed. Whether they will have the political will to get things implemented or passed remains the key question." The BSP, meanwhile, expects the peso to recover starting next month as Filipinos abroad start sending money home in time for the holidays. BSP Governor Rafael B. Buenaventura, however, said the peso's strength in the long run depends on the immediate passage of key economic reforms. "It's trading range bound and [because of] the spike in oil prices," Mr. Buenaventura told reporters yesterday, as he said the BSP did not intervene to prop up the currency.

Oil prices have been steadily moving up amid uncertainties in oil producing countries such as Nigeria and those in the Middle East. Dubai crude -- the benchmark for local oil prices -- shot up to $40 a barrel yesterday, breaching the BSP's assumption of a yearend average of $34/barrel. HSBC Treasurer Wick Veloso said oil prices have really been putting pressure on the peso. He said there were no signs of BSP intervention in yesterday's trading. Mr. Buenaventura said dollar inflows would help prop up the peso starting next month as the more than eight million OFWs abroad start sending money to their relatives. "There are no inflows yet," he said, adding that these will start coming by November and accelerate in the first two weeks of December.

The BSP expects OFW remittances to grow by 6% billion to $8 billion this year, as Filipinos adjust to anti-money laundering rules of host countries and as the global economy improves. Aside from the usual OFW remittances, Mr. Buenaventura said the implementation of key tax measures will help strengthen the local currency against the greenback. BSP assumptions show the peso could fall to PhP57 against the dollar starting next year, staying at this level until the government gets the economy back on track. Mr. Buenaventura said the BSP expects modest capital inflows if investors do not see enough progress in the government's efforts to fix its finances. Government economic managers are asking Congress to pass eight tax measures expected to raise PhP83 billion yearly to help government balance the budget by 2010. Mr. Buenaventura reiterated that the BSP is maintaining its current assumption of a PhP54-PhP56 to the dollar exchange rate for the rest of the year. -- reports from Ira P. Pedrasa, Iris Cecilia C. Gonzales and Reuters



Nenaco minority shareholders get tender offer

... firm to be delisted

Metro Pacific Corporation is offering to buy out minority stakeholders in its debt-saddled subsidiary Negros Navigation Co., Inc. (Nenaco) prior to delisting the latter under a rehabilitation program. A tender offer, or an offer to purchase some or all of shareholders' shares in a corporation, is required for the voluntary delisting of shares of a listed company. The price offered is usually at a premium to the market price. Trading in Nenaco shares has been suspended since March 29 after the firm sought approval of its rehabilitation program. A Manila court approved the plan last week. A few days ago, Metro Pacific said delisting Nenaco, which had PhP2.5 billion in liabilities as of March, will be advantageous to its minority shareholders.

In a statement, Nenaco yesterday said it will endorse to its minority stockholders a tender offer by Metro Pacific for 2.81% or 85 million of the over three billion common shares which will commence on Oct. 20 and end Nov. 17. David Nugent, vice-president for corporate communications at Metro Pacific, told BusinessWorld the tender offer will be advantageous to the 3,600 remaining minority shareholders of Nenaco, given the 10-year time frame in a rehabilitation plan approved by the Manila Regional Trial Court last week. "Basically, we believe this will be a fair and clear exit mechanism for longstanding shareholders, and Nenaco will be able to do its rehabilitation with greater flexibility as a private company," Mr. Nugent said. Metro Pacific already owns 97.19% of Nenaco's 3.025 billion shares with par value of PhP1 each. Nenaco incurred a net loss of PhP220.8 million in the first half.


Ron Rodrigo, senior analyst at Accord Securities, Inc., said Metro Pacific's decision to buy back the shares of its subsidiary was notable. "The delisting of Nenaco will not affect the market per se. The tender offer of Metro Pacific is the appropriate thing to do by a parent firm given the bad shape its subsidiary is in," Mr. Rodrigo said. He added that Metro Pacific would want to "clean Nenaco first". "It is good for the mother company to carry the burden of Nenaco and try to delist its shares. But it is too early to say whether it will consider listing again. We have to see first if the company can reverse its losses." Metro Pacific has said "Nenaco will benefit from the greater flexibility and options presented to it as a private firm". Nenaco was organized and incorporated on July 26, 1932 to own, maintain, service and operate vessels, and engage in domestic shipping operations. -- R. J. F. Calayag with a report from Reuters



Regulator eyes sanctions vs Mondragon, subsidiary

Listed company Mondragon International Philippines Inc. may have its licence to sell securities suspended by the Securities and Exchange Commission (SEC) over its failure to explain why it failed to meet reportorial requirements and pay the corresponding penalties. The SEC's corporation finance department is set to recommend the suspension along with revocation of the permit to sell securities of subsidiary Mondragon Leisure and Resorts Corp. after the latter failed to explain why it has not paid installment payments for penalties imposed for also failing to meet reportorial requirements. An SEC official said that the recommendation will be issued since the two firms have failed to respond to notices of hearing sent by the SEC

The notice for Mondragon International asked the company to justify why its license to trade securities should not be suspended over its failure to submit its 2003 annual report and its 2004 first quarter report. The company was also fined PhP175,000. The notice of hearing sent to Mondragon Leisure, meanwhile, was for the firm to explain its failure to meet installment payments for the penalties. Mondragon Leisure's permit to sell securities is already suspended. "The next step is to issue a memo to the commission recommending that [the permit to sell securities of] Mondragon International be suspended while [that of] Mondragon Leisure be revoked," the official said. The notice of hearing for Mondragon International was returned unserved to the SEC on October 11, 2004. The notice for Mondragon Leisure was served, but company representatives were absent during the Sept. 1 hearing.

Mondragon International president Jose Antonio Gonzalez, however, said that he is not aware of the move to suspend or revoke his firms' licenses, saying as far as the company is con cerned, it has been talking with the SEC. "We have ongoing communication with them. As far as we are concerned, we are dealing with the right people concerned," Mr. Gonzalez said. He also said he was unaware that the SEC had served a notice of hearing for his company, or that a Mondragon Leisure representative failed to attend the hearing. Mr. Mondragon said he will not comment "on recommendations, only on facts," adding "If there is a final decision, we will let the right people handle it." Mondragon International is a holding company with business interests in the development of resort facilities and gaming. The company was originally incorporated as Mondragon Industries, Inc. on January 28, 1969. Its wholly owned subsidiary, Mondragon Leisure, was incorporated on January 6, 1991 to acquire, manage, own, lease, operate, act as consultant of and/or engage in the business of hotels, resorts, inns, casinos, restaurants and other tourism related activities. The leisure company operates a 36-hole championship golf course, a 304-room five-star hotel, various deluxe furnished villas and a gaming casino, all located within the Clark Special Economic Zone in Central Luzon. Mondragon Leisure derived its income principally from the earnings of its subsidiaries, from rentals and up to 1997, from management fees. -- Jennee Grace U. Rubrico



Gov't dead-set on 'sin' taxes

The government is sticking to a plan to raise taxes on tobacco and other "sin" products by adjusting the tax brackets and their corresponding rates to inflation, despite opposition from cigarette manufacturers and lobby groups who want either a uniform tax increase or a return to the ad valorem system. Trade and Industry Secretary Cesar A.V. Purisima urged lawmakers to immediately pass the "sin" tax bill, which he said was the most important of four priority measures the President earlier asked Congress to approve before the end of the year. The Trade deparment said this was also the position of Finance Secretary Juanita D. Amatong. "It is very important to pass this not in a diluted form," Mr. Purisima said in a press release yesterday. "[The rates] should be indexed to inflation." The Cabinet official said the government wants tobacco taxes hiked by a minimum of 20%.

The "sin" tax measure is important, he stressed, since it could help ease the budget deficit. "Except for the 'sin' taxes, the other three [priority bills] are not revenue enhancing measures. [Without the passage of the 'sin' tax bill, we] may still have problems in [closing] the fiscal gap," Mr. Purisima said. The three other priority legislative measures of the Arroyo administration are lateral attrition, which aims to reduce the number of government employees through a performance-based scheme; tax amnesty; and the "rationalization" of various fiscal incentives granted to investors. Justifying the government's stance, Mr. Purisima said "Indexing the excise tax on cigarettes and liquor will correct the tax rate vis-a-vis the price of these commodities." Malacañang's economic team earlier proposed to hike the four cigarette excise tax brackets by 37.3%, which is the cumulative inflation from 1997 to 2001; and the corresponding tax rates by 22.6%, which is the cumulative inflation from 2000 to 2001.

While tax rates were increased by 12% in 2000, the tax brackets have not been adjusted since the adoption of the National Internal Revenue Code of 1997. For the lowest price bracket of below PhP5.00 a pack, the current tax is PhP1.12/pack. With indexation, the bracket will be adjusted to PhP6.87 and the tax to PhP1.37/pack. Mid-priced brands under the PhP5.00 to PhP6.50 bracket will be taxed PhP6.87/pack from PhP5.60. For high-end brands priced from PhP6.51 to PhP10, the current tax is PhP8.96/pack. Indexation will raise the tax to PhP10.98. Premium brands priced above PhP10, meanwhile, will have a tax of PhP16.48/pack from PhP13.44. Mr. Purisima acknowledged that tobacco prices would increase but it would be the least burdensome for consumers because such commodities are "nonessential." Two competing tobacco firms are against indexation and are proposing alternatives.


In a statement, two lawmakers yesterday said a fixed increase was the "best compromise" between indexation and a return to ad valorem. Meanwhile, a solon said the House committee on ways and means should look at retaining the current structure of taxation on alcohol, cigarette and tobacco products and implement an across-the-board percentage increase given the short time it has before its deadline in December. Quezon Rep. Danilo A. Suarez said this might be the best option, given the variety of proposals currently lodged with the committee on how to increase or restructure the excise tax on alcohol, cigarette and tobacco products, all of which might take too much time to reconcile.

Proposals include a PhP1 to PhP2 uniform increase in the prices of all cigarette brands, a shift back to the ad valorem system of taxation, and increasing the specific tax on alcohol, cigarette and tobacco products and indexing the tax rate to inflation. "Given the shortage of time, the best option might be to maintain the status quo and implement a uniform across-the-board percentage increase. The question is how much," he told BusinessWorld. "It should be acceptable to all players, and should guarantee the targeted revenues for the government." "If we allow a full debate on all the proposals, then senators and congressmen will just come up with many objections, mirroring the objections of the manufacturers of cigarette and alcohol products," he added. "We cannot afford not increasing the tax on sin products." -- Felipe F. Salvosa II and Judy T. Gulane



Transco public bidding seen to benefit gov't

The government's decision to terminate negotiations with prospective investors for the operation of state-run National Transmission Corporation (Transco) and resort instead to public bidding will create a more transparent and competitive environment among interested investors, economists yesterday said. Although changing the rules every so often may discourage some investors, the move may also be beneficial to the government, economist Bienvenido Oplas, Jr. of Think Tank, Inc. said. "Their decision to open it to public bidding may be more beneficial to the government in this case since there would be more bidders. It would be more competitive," he said.

For her part, economist Winnie Monsod said there's no reason to conduct negotiations for the privatization of Transco. "There should be no negotiations. Transco is not losing money. It's not like we are selling it desperately; it is actually making money," she said. She said since there are four consortia that are interested to run Transco, it would be better to conduct a public bidding.

Energy Secretary Vincent S. Perez Jr. on Tuesday announced it has scrapped negotiations with four prospective concessionaires and instead opted to conduct a public auction. Socioeconomic Planning Secretary Romulo L. Neri said the decision to go through a public bidding would make the deal more transparent. He said that negotiations were cancelled because the offers "were too complicated". "So I guess it was difficult to gauge which bid is superior because there were many provisions that would make the bids non-comparable," Mr. Neri told reporters in a chance interview in Malacañang.

Meanwhile, Justice Secretary Raul M. Gonzalez said he is not intent on issuing another legal opinion regarding the negotiations to operate Transco because the President wants it bid out. "President wants it bid...why will I issue another opinion?" Mr. Gonzalez told reporters yesterday. Earlier, Mr. Perez said the government would no longer proceed with negotiations to operate the country's nationwide network of electricity transmission lines through a concession agreement because Transco will now be awarded through public bidding. However, Mr. Gonzalez said, legally,a bidding is not needed anymore since there was already two failed bids. "There is no need for another bidding. After two failed bids you can already negotiate. If bidding failed, you cannot keep on continuing bidding," Mr. Gonzalez said. The Power Sector Assets and Liabilities Management Corporation (PSALM) first bid out the transmission assets in July 2003. It was declared a failed bidding.

Earlier this week, the Energy Secretary said the they have decided to terminate negotiations with possible investors, noting that the terms and conditions given to PSALM can be described as highly unique and complex. -- Jennifer A. Ng, Jeffrey O. Valisno and Bernardette S. Sto. Domingo



Foreign donors, DBP ink deal on water projects

Private funds will be mobilized for the first time to initiate water and sanitation projects in Philippine rural communities, foreign donor agencies said. Last Tuesday, the Japan Bank for International Cooperation (JBIC), the United States Agency for International Development (USAID), and the Development Bank of the Philippines (DBP) forged a memorandum of understanding with private sector-led LGU Guarantee Corp. for a syndicated loan to jumpstart two long-term water-related programs.

The two schemes -- named the Philippine Water Revolving Fund and the Municipal Water Loan Financing Initiative -- are under the Clean Water for People Initiative, a joint endeavor between the governments of Japan and United States launched in 2002 to provide safe water supply and sanitation to the world's poor, improve watershed management and raise water output.

JBIC chief representative Osamu Murata said the initiative is the first time a collaboration between JBIC and USAID has been realized. "At long last we were able to realize it here in the Philippines by obtaining strong supports and active participations from our local partners for utilizing their current facilities and structuring a co-financing scheme," he said in his speech. The revolving fund is expected to encourage funding from private financial institutions, which have stayed away from investing in water and sanitation projects of local government units and water districts, by reducing the investment risk through the guarantee facility. These projects will be financed though an existing program of JBIC and DBP, wherein DBP funds up to 50% of project costs while private financial institutions shoulders the other half and guaranteed by the LGU Guarantee Corp. via a USAID program.

The loan term for a project under the revolving fund is up to seven years for private financial institutions and up to 15 years for DBP, inclusive of a common grace period. A total of PhP1.02 billion is available under such fund equally allocated by the existing JBIC program and LGU Guarantee Corp. DBP president and chief executive officer Reynaldo G. David said the bank looks at each water project using three basic dimensions: environmental protection, economic development, and social safeguards.

While the country is seemingly endowed with abundant water resources, there is a "looming water crisis" in urban areas. Many rural areas remain unsupplied with piped, clean water. Centralized sewerage and treatment facilities cover only parts of Metro Manila. "The signing is a major first step toward attaining sustainable water for everyone. Today, there is need to do more with regard to resource conservation, conflict management, efficient allocation, and water quality, rather than just simply focusing on water supply infrastructure," Mr. David said. The revolving fund is expected to be modelled after the State Revolving Fund of the US and incorporate Japanese expertise in such projects accumulated under JBIC's official development assistance or ODA project in the country. Mr. David said the increasing role being played by the private sector in bulk water supply and the management of water services diminishes the need to rely exclusively on government projects. "The private sector continues to provide efficient technologies on water use and waste water treatment. Outsourcing of water supply operations for cost efficiency is also being done lately. Government's role is now shifting toward providing a proper balance of regulation and incentives. It is thus very evident that public-private partnership plays a very important role in this endeavor," he said. Originally created in the US to finance water supply and sanitation projects, the revolving fund will need cooperation from the Philippine government to make the scheme sustainable. -- Ruby Anne M. Rubio



Asia dollar bond spreads steady; focus on supply

HONG KONG -- Asian debt spreads were broadly stable yesterday but traders said the mood was cautious ahead of new issuance later this week and following upbeat corporate results from US companies. Activity was low-key as investors chose to ignore the brief rally in US Treasuries overnight. "Spreads have tightened to very low levels and investors have an eye on the supply calendar," said a Tokyo-based dealer. He said besides issues from China and Korea Development Bank later this week, there were expectations of issues from other Korean companies looking to finance redemptions due early next year.

Ports-to-telecoms conglomerate Hutchison Whampoa Ltd.'s bonds due in 2014 were quoted at 178/172 basis points (bps) over comparable US Treasuries and China sovereign dollar bonds due in 2013 were steady at 71/68 bps over. Beijing is due to begin marketing a US$1.7 billion-equivalent, dual-tranche bond issue on Friday. KDB is due to price a US$500 million floating-rate note later in the week, marking its third dollar-debt offering this year, market sources said. Strong earnings from technology bellwether Intel Corp. and Internet media company Yahoo Inc. were also moving the focus away from the safety of US Treasuries. "If US Treasury yields rise, we could see some profit-taking in our markets, but the broad trend is one of range-bound movement until the end of the year," said Ben Yuen, Hong Kong-based bond fund manager with First State Investments.

Analysts said they were still watching oil prices, despite Tuesday's fall. "If oil prices remain higher on a sustained basis, we could see some impact on bonds because governments will then have fiscal challenges," Yuen added. Bonds from telecoms firm PCCW due in 2013 were trading steady at 138/33 basis points. In credit derivatives, traders said bids were steady and there was some switch-trade activity in the Korean and Philippines credits. Five-year Philippine credit default swaps -- insurance-like contracts that offer protection against debt default or restructuring -- were unchanged at 445/460 bps. Traders expect activity to taper off over the next couple of weeks as the year-end approaches. -- Reuters



Cautious investors shun 'heroic' bets

LONDON -- No heroics, none but the brave, wait and see. These are the new watchwords. Investors are treading so carefully as the fourth quarter gets underway and next year looms that few seem willing to take the kind of aggressive positions that could knock financial markets out of their trading ranges. Soaring oil prices, a slowing US economy, rising interest rates, fears of inflation or, indeed, stagflation, worries about China crashing, Middle East turmoil and the US election -- these are all combining to put strategists in a highly defensive mood. And with the exception of the US election, there is little sign of any of them disappearing in the short term. "Now isn't the time to make heroic market calls," Mike Felton, head of UK high alpha equities at Britain's F&C Asset Management said in a recent outlook, summing up what appears to be investors' order of the day.

Successive Reuters asset allocation polls and other surveys such as Merrill Lynch's soundings of fund managers have shown widespread caution for months. Risk aversion has been routine throughout the year in such gauges as State Street's and JP Morgan's investor confidence indices, albeit with the odd upward blip. "No large positions. That's consensus. It's not an environment to be exceptionally brave," said Emiel van den Heligenberg, head of asset allocation at Fortis Investments. The Belgo-Dutch firm's stance typifies that of the cautious investor -- mildly underweight equities, neutral bonds, overweight cash. Others switch the emphasis, but few seem willing to step forward aggressively. "We are still overweight equities, but it is as much because we don't like any of the other asset classes," said Michala Marcussen, associate director of strategy at France's Societe Generale Asset Management. The repercussions of this mood on the financial markets are clear. Equities continue to take on the appearance of a corrugated roof, rising and falling but never quite finding a long-term direction. -- Reuters



Globe, Sun ink multimedia message linkup

Ayala-led Globe Telecom, Inc. and the Gokongweis' Sun Cellular have recently agreed on a multimedia messaging service (MMS) connection. The carriers are testing their networks for the MMS service among their subscribers, said the National Telecommunications Commission common carrier authorization division. Globe and Sun Cellular subscribers can send and receive MMS while both operators test their networks, but full interconnection will start next month. Subscribers will be able to exchange MMS, or messages with graphics and audio through their cellular phones by November when Globe and Sun Cellular have already agreed on the access charges. "They still have to come up with an agreement on the charges before MMS interconnection between the two is commercially activated," an NTC official said. He said operators are considering a charge of 10 centavos for every kilobyte of MMS successfully sent.

The NTC asked Globe to pursue the interconnection with Sun Cellular, as the Ayala-led carrier said it would only consider the link after Smart Communications, Inc. approves the same agreement with the Gokongweis' cellular brand. Smart and Sun Cellular have been conducting network tests for MMS since last month after agreeing on the interconnection. "Both parties are now configuring their networks. Smart has agreed to open up its network for Sun Cellular. They are both expected to turn in results within the month," the source said. The MMS service allows the exchange of graphic and audio messages among subscribers, unlike the short messaging service (SMS) which only transmits text messages. It took Globe and Smart two years to open their networks for SMS interconnection. -- Anna Barbara L. Lorenzo



Four foreign firms planning PhP81-B investment in mining


DAVAO CITY in Southern Mindanao -- Four foreign companies plan to invest PhP81 billion in mining projects in southeastern Mindanao, Edgar Martinez, president of the Mindanao Association of Mining Industry, yesterday said. Mr. Martinez declined to identify the companies but said two are Australian, one American and one Canadian. However, the companies are still waiting whether the Supreme Court would reverse its earlier ruling on the restriction on foreign ownership in mining projects, specifically the Financial and Technical Assistance Agreement, a scheme that allows 100% foreign control of a mining project.

Last month, Canadian Ambassador to the Philippines Peter Sutherland said global players are looking at how the Philippine government, particularly the Supreme Court, would address the ownership issue as many foreign companies are ready to invest here. Mr. Sutherland said many of the foreign companies were eager to invest, but the Supreme Court ruling has forced them to rethink planned investments. President Gloria Macapagal Arroyo has pushed for the entry of foreigners into mining by calling for the revitalization of the industry. Progressive organizations claimed that the entry of foreigners into the industry was among the reasons why the government was pushing for constitutional change. "The constitutional amendment might result in the removal of the protectionist provision of the Constitution," said Bayan Muna Rep. Joel Virador.


Mr. Martinez said Mindanao has a large mineral deposit that is waiting to be tapped, but because of the Supreme Court ruling, the industry's growth has been stunted. He said only foreign companies have the interest and capability of developing the country's mining industry, so they should also be given the chance to put in the investments. The Mindanao Business Council has moved for the revitalization of the mining industry, saying the development of 25 mining sites, or about PhP730 billion in investments, will result in about PhP55 billion in annual taxes, PhP1 billion in community development and another PhP3 billion in royalties to communities of indigenous peoples where these mining areas are located. "The minerals industry is a very viable solution to the crisis we are now facing, but divergent perspectives have kept the potentials of the industry in limbo for years. The equitable and sustainable development of this industry should act as lever for development, utilizing our vast mineral resources for the greater good," said Antonio Santos, council chairman, said in a statement.



First Pacific sells 930.2M Metro Pacific shares

First Pacific Co. of Hong Kong yesterday completed the sale of 930.2 million common shares or 5% of its stake in subsidiary Metro Pacific Corp. This came after First Pacific sold a total of 581.1 million common shares, representing a 3.12% stake in Metro Pacific between Sept. 13 and Oct. 11. First Pacific yesterday sold 349.1 million common shares of Metro Pacific equivalent to a 1.88% stake. It did not disclose the sale price. Metro Pacific's share price closed higher at PhP0.47 from PhP0.46 after the sale.

Metro Pacific informed the exchange that it does not expect any more sales. With the completion of the sales, Metro Pacific's total issued common shares now stand at PhP17.7 billion, less than a billion short of the 18.6 billion common shares it had as of June 30. "We understand there will be no further sales of shares of stock beyond what has now been accomplished." The firm "regards this one-time sale of shares, with its benefit of raising additional capital for the company, as a significant demonstration of support for its ongoing business transformation and restructuring efforts." Metro Pacific said the net proceeds from the sales will be used to fund its general corporate requirements, including the rehabilitation of its debt-saddled unit Negros Navigation Co. A part of the net proceeds will also be used for new business initiatives. -- Roulee Jane F. Calayag



Gov't reviving plans to sell San Miguel, Meralco stakes

The National Government is expected to revive a plan to sell its equity in top corporations like San Miguel Corp. and Manila Electric Co. (Meralco) to raise additional cash to help the government fix its financial woes. Finance Secretary Juanita D. Amatong said the sale of government's San Miguel and Meralco stakes is still included in the privatization program aimed at propping up state coffers. Prior to this, Finance Undersecretary Eric O. Recto, also head of the Finance department's Privatization Office said the government is open to proposals for the sale of state-owned and sequestered television channels as a means to generate much needed revenues.

Based on yesterday's closing prices, the government can earn PhP27 billion from its holdings in San Miguel and PhP1.89 billion from its stakes in the power utility firm. The government has been trying to find a way to dispose of its 27% stake in San Miguel and its 20% stake in Meralco -- 10% held by the government with another 10% held by two government asset disposition entities. The government is in desperate need for cash to finance the budget deficit and pay for maturing loans. The government aims to wipe out the budget shortfall by 2010 through a combination of revenue and expenditure reforms. -- Karen L. Lema



Stocks up as selling pressure eases


The selling pressure at the stock market subsided yesterday, pushing the main index to the positive side. The market was buoyed by a change in tack among investors who began buying shares again after two consecutive days of losses. The benchmark Philippine Stock Exchange Composite Index (Phisix) rose 5.82 to 1,790.73. The all-shares index jumped 4.71 to 1,122.24. The commercial-industrial advanced 8.52 to 2,846.79, and property went up by 5.30 to 624.34. But other counters were not as enthusiastic. Mining slumped 3.38 to 1,916.60. Following on its tracks were banks and financial services, and oil, which shed 0.16 to 503.27 and 0.04 to 1.73, respectively. The number of gainers and losers were equal in number at 33 issues each. Unchanged issues were higher at 52.


Trades packed some strength at 4,639 as 2.4 billion shares exchanged hands for roughly PhP1.2 billion. Even the net foreign trade was upbeat. Net foreign buying rose to PhP271.2 million. Total foreign buying amounted to PhP516.3 million, more than twice total foreign selling of PhP245.1 million. With the improving indicators in yesterday's session, investors may be encouraged to step up their buying. Although it made a rebound, Ron Rodrigo, senior analyst at Accord Securities, Inc., said the market is still likely to experience some corrections. "More corrections are expected as the market consolidates," said Mr. Rodrigo. He noted that traditionally, October is not a good month for the stock market. "Global markets are often down in October," Mr. Rodrigo said, referring to "Black Monday" -- the Oct. 19, 1987 stock market crash where the Dow Jones Industrial Average recorded its largest one-day decline of 22.6%.

This slump was mirrored all over the world, particularly in major markets such as Australia, Canada, Hong Kong, and the United Kingdom. "This is also the time when analysts reassess their forecasts. With October signalling the start of the fourth quarter, analysts try to see if their forecasts are achievable," explained Mr. Rodrigo, adding that the results would be taken by the market as a cue. "It is safe to say that we are betting on history," he said.

In addition, oil prices in the world market continue to fluctuate and demand for the commodity is expected to intensify during the winter season. These developments may affect the Philippine market. But investors are advised to keep a close eye on events in the domestic scene and weigh the overall situation to arrive at a sound and decisive investment judgment during these times. "It will be good if the market will not go lower," said Mr. Rodrigo, who is optimistic that the market will regain its strength despite the temporary weakness. Projections for various listed companies, he said, are all "in line," indicating that these firms may even exceed expectations. "This could offset a major downturn in the stock market," added Mr. Rodrigo.


Meanwhile, Hong Kong-based First Pacific Corp. yesterday completed the sale of 5% of its stake in subsidiary Metro Pacific Corp. It sold in the open market the remaining tranche amounting to 1.88% or 349.1 million common shares. This brings the total common shares sold to 930.2 million. The sale spurred investors to snap up shares of Metro Pacific, which bested 19 other top actively traded stocks. Net foreign buying for the stock amounted to almost PhP286 million. It closed higher at PhP0.47 with a market share of 52.70%. Its 1.5 billion shares fetched a total of PhP620 million. The firm also confirmed its plan to delist the shares of its debt-saddled shipping subsidiary, Negros Navigation Co., Inc.

David Nugent, vice-president for corporate communications of Metro Pacific, told BusinessWorld that the firm offered to buy back 2.81% of the more than three billion common shares of Nenaco from 3,600 remaining minority shareholders. The tender offer will commence on Oct. 20 and end on Nov. 17.


Ayala Corp. was also up at PhP6.30 with 17.6 million shares traded for PhP111.1 million. Philippine Long Distance Telephone Co., another unit of First Pacific, was unchanged at PhP1,450. Other gainers include the Digital Telecommunications Philippines, Inc. (Digitel) of the Gokongweis, up at PhP1.48; the "B" shares of San Miguel Corp., which closed higher at PhP73; and Ayala subsidiary Globe Telecom, Inc., which slipped to PhP1,040. San Miguel's plan to revive its ice cream business seemed to have boded well for its stock as buyers flocked to its "B" shares. The rest of the most actively traded stocks were sister companies of the top performers. There were also some second-tier stocks that made it to the list.



Peso fall to PhP57:$1 seen sans reforms


The peso could fall to PhP57 to the US dollar starting next year and may stay at this level until the government finally balances its budget and gets the economy back on track. The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) said the local currency may weaken on the back of modest capital inflows but can easily recover if the government gets a grip on its fragile fiscal position. "For the period 2005-2010, we propose an assumption of PhP55-PhP57," BSP Deputy Governor and Officer-in-Charge Armando L. Suratos said in a briefing paper submitted to the House of Representatives yesterday. The assumption implies a nominal depreciation of 1.8% relative to 2004. "Conditions for capital flows to the country may continue to be modest over the medium term, depending on the pace of implementation of key economic reforms," he said. He said investors are awaiting specific milestones from the government on its proposed measures, the same message relayed to fiscal planners who attended the government's recently concluded international road show. "However, it also recognizes the possibility of having more vigorous capital inflows premised on a credible government policy on the fiscal and power sectors and a more stable political situation," the BSP deputy chief said.

Government economic managers are asking Congress to pass eight tax measures that would raise PhP83 billion yearly to help government balance the budget by 2010. Based on the medium-term plan, the government will cut the budget deficit to at most PhP197.8 billion this year, PhP184.5 billion next year and a "negligible level" of PhP14.4 billion by 2009. It is targeting a zero deficit by 2010. For this year, however, the BSP is maintaining its current assumption of a PhP54-PhP56 to the dollar. Mr. Suratos said the peso is likely to stay at this range this year on expectations that the interest rate differentials between peso and dollar-denominated bonds will remain at comfortable levels. The interest rate differential between the BSP's policy rates and the US Federal Reserve rates narrowed to 500 basis points as the US central bank raised its rates to 1.75% last September 21.

A narrowing differential affects peso- and dollar-denominated bond rates and could influence decisions of fund managers and investors to shift their assets to economies that offer higher interest rates such as the US. Monetary authorities are trying to hold off any increase in the BSP rates despite rising global interest rates, saying inflationary pressures continue to come from the supply side. The local currency has been trading at the PhP56 level in recent weeks. It fell to a record low of PhP56.45 on September 28 as importers bought more dollars from the spot market for month-end and quarter-end payments.

Sought for comment, traders said the local currency could see further weakness this year if Congress fails to pass new tax measures. Although some agree with the BSP's assumptions, they said that the peso could further weaken beyond PhP57 if the no new measures are passed. "If no new measures are passed the peso will be stressed," a trader at a foreign bank said. The trader explained that investors are awaiting the new measures before they make new investments or even decide to keep their funds in the country.

Another trader shared a similar view, saying that Congress should recognize the urgency of passing new measures. "Without the measures, investors will get the message that we are not serious with our reforms. They would rather stay in other countries." London-based Standard Chartered Bank regional economist Mike Moran, who met with cental bank officials late Monday, also said slow progress in proposed reforms means that the peso will remain soft and retest the PhP57 level. At the PhP55-57 level, the government may still meet its economic growth target of 5.3%-6.3% next year, traders said. A BSP official said any adjustments in the government's growth projections will depend on National Economic and Development Authority (NEDA). This year, NEDA expects the economy to grow by 4.9%-5.8%.



Fiscal situation scary, says World Bank executive

The World Bank yesterday expressed concern over the government's current fiscal situation, citing the need for the country to immediately move away from debates to decisive action. "I do feel scared looking at the fiscal situation of the Philippines and I do feel worried about it," World Bank country director Joachim von Amsberg told reporters yesterday. "If one country's public sector debt is already at 136% of its gross domestic product (GDP) and the ratio of its revenues to GDP is only at 12%, that's scary," Mr. Von Amsberg said. He also expressed concern over the seeming lack of consensus on how to resolve the country's fiscal problems. "I think the government understands, the President understands [the problem]. What surprises me is how quickly the debate degenerates into a political debate on the specific measures and their cost and benefits," Mr. Von Amsberg said. "That is where I see the risk right now: that people will get bogged down on debates on specific measures and may lose track of the real objectives," he stressed.

Mr. Von Amsberg said he agrees with the sentiment of market analysts on to the need to implement concrete revenue-generating measures within the year to increase competitiveness and regain some market confidence. "If the measures announced by the President are implemented, it will send a strong signal [to the international community]. [But] if the country waits for another year, [the proposed measures] wouldn't be enough anymore," he said. Mr. Von Amsberg said, however, that he remains hopeful given the fact that the government has acknowledged the problem and has come up with prescriptions. He also said the Bank would like to encourage loans that will finance the priority programs of the government and to move away from project-based financing as a way to help the country manage its debts. "We really want to make sure that the Bank's loans would finance expenditures that the government has prioritized that are particularly promising and particularly important," he said. -- J. A. Ng



Budget balanced by 2009, if ...

Finance Secretary Juanita D. Amatong appears to be more optimistic than the other government economic managers as she expressed confidence the government will be able to wipe out its budget deficit by 2009. "As far as I am concerned, we could still balance the budget by 2009 if we raise new taxes," Ms. Amatong told reporters yesterday. She issued the statement even as the government has officially decided to push its balanced budget goal back by a year to 2010. Based on the government's targets, it assumes a drop in the budget deficit numbers to PhP161.769 billion or 2.9% of gross domestic product (GDP) by 2006 from 2005's target of PhP184.526 billion or 3.6% of GDP. The government then hopes to trim the shortfall to PhP126.999 billion or 2.1% of GDP in 2007, PhP79.032 billion or 1.2% of GDP in 2008. and PhP14 billion or 0.20% in 2009 and finally to zero in 2010. Ms. Amatong said the government can easily reduce the numbers to zero in 2009 by raising taxes, reducing expenditures, or a combination of both.

The government aims to raise PhP80 billion in annual revenues from the eight Palace-proposed revenue measures, she said. But in case Congress fails to approve the proposals, "we have to be ready with other bills that will generate PhP80 billion," she said. Ms. Amatong earlier said the DoF is studying the possibility of taxing the income of overseas Filipino workers (OFWs) to raise additional revenues. However, she stressed that lifting the tax exempt status of OFWs is just an "alternative" and will be proposed only in case Congress thumbs down many of President Gloria Macapagal Arroyo's proposals.

The Finance chief said the government has long recognized the urgency of passing new taxes to address the fiscal problem even before credit rating agencies like Standard & Poor's warned of a possible downgrade. The Department of Finance hopes both houses of Congress will pass at least four measures by yearend: the rationalization of fiscal incentives, higher excise taxes on alcohol and cigarettes, a tax amnesty and a lateral attrition system. The other Palace-proposed measures are a shift to gross income taxation, additional PhP2 excise tax on petroleum products, a tax on telecommunications companies, and a review of the value-added tax system. Ms. Amatong said she is confident Congress will be able to deliver and that President Gloria Macapagal Arroyo "will be pushing for that." "People should start thinking about this country [rather] than themselves," she stressed. -- Karen L. Lema



Controversial bond issue defended

Finance Secretary Juanita D. Amatong yesterday defended the government's recent $1-billion bond issuance against criticisms it had jeopardized the country's future borrowings. Reports have said that Bangko Sentral ng Pilipinas (Central Bank) Investor Relations Office executive director Corazon P. Guidote, who tendered her resignation last week effective October 31, cited the alleged ill-timed bond issuance as a major reason for leaving her post.

Even the resignation of National Treasurer Mina Figueroa was earlier tied to the controversial bond offering, as she reportedly felt that the cost of the $1-billion global bond issued last September was higher than prevailing market rates. Ms. Figueroa, however, has denied this, saying she left to fix her own "personal deficit." Ms. Figueroa, who is leaving Oct. 16, yesterday also denied that she had reprimanded Finance officials over the bond float. "I only advised them that I can't be involved in the issuance because I was out for an investor briefing," she told reporters after the regular auction of government securities. Ms. Amatong maintained that there was nothing irregular with the government's decision to tap the international market at that time. "The policy is made by the DoF (Department of Finance) and not anybody else...not the Treasurer," Ms. Amatong said in a telephone interview. "So lower people have no business complaining about it."

Despite the perceived "internal conflict" between Finance undersecretary Eric O. Recto and Misses. Figueroa and Guidote, Mr. Recto said "I don't think we are in a disarray." "In my case, work is getting done. In the case of the other DoF deliverables, work is getting done, bills are being filed, hearings are being held," he told reporters yesterday. "It is unfortunate that this has become more public than its should have."

However, a Bureau of the Treasury (BTr) official yesterday said investor concerns have apparently not been limited to the $1-billion bond issuance but also includes a 300-million eurobond offer in July. This is in contrast to citations received by Philippine bond issuances last year, said the official, who requested anonymity. Both Euro Money and Asia Money cited the government's PhP74.3-billion retail treasury bond issued in June 2003 as the "Best Domestic Bond Deal in the Region." In November that year, the two publications also awarded the government's global bond issue amounting to $1 billion as the "Best Offshore Sovereign Bonds". "These garnered international recognition largely on the account of successful float amid challenging times," the citations said, referring to the political uncertainties during the period.

Given the criticisms received by the government following its latest bond issuance, the BTr official said "It's really embarrassing because in the past, we used to get awards." Last September 8, the government sold $300 million worth of sovereign bonds due 2015 at 8.875% and $700 million worth of bonds maturing in 2025 at 10.625%. It set a price guidance of 98 for the 2015 bonds and 106 for the 2025 series. Underwritten by Credit Suisse First Boston, Deutsche Bank and JP Morgan Chase, the bonds were four times oversubscribed, which meant that orders reached as much as $4 billion. Based on the prevailing price at the time, the government gave a discount of about a point when it sold the bonds. The next day, prices of 15- and 25-year bonds went up by as much as two percentage points. This meant the Philippines lost about $20 million. An official who attended the government's recent economic road show said global investors also raised concern on the issuance of the euro-denominated bonds immediately after a supposedly no-deal road show. -- Karen L. Lema, Iris Cecilia C. Gonzales and Ira P. Pedrasa



Palace names new National Treasurer

Former PCI Leasing and Bankard board member Rolando Jose L. Macasaet has been named the new National Treasurer, the Malacañan presidential palace announced in a press release yesterday. But his appointment, announced by the office of Executive Secretary Eduardo Ermita, was immediately followed by unconfirmed reports that it had been recalled. Palace officials, however, insisted that his papers had been signed by President Gloria Macapagal Arroyo. Mr. Macasaet, who also served as president and chief executive officer of the Philippine National Construction Corporation (PNCC) during the Estrada administration, will replace Mina C. Figueroa who leaves her post this Friday.

Traders said they were unfamiliar with Mr. Macasaet, with one saying "We can only hope that he communicates with us." A reversal of the appointment, they added, would hardly stir the market. "The market is simply looking for the real Treasurer who would direct the market. Maybe there are other candidates who can do better or that this guy has a better position that would fit his qualities. The issue would always revolve around a Treasurer who knows when to reject or award our bids," a trader said.

Another trader said that while Mr. Macasaet was not on the market's list of possible candidates, "it is unfair that we [should] already judge him. We should wait." "We keep on reiterating, a treasurer can only do so much to curb whatever we are facing right now. He might be tough enough to hold down rates, but it is still the initiative of the rest of the government to enact revenue-generating measures," another trader said. Ms. Figueroa said she does not know Mr. Macasaet and is unfamiliar with his record. Ms. Figueroa, who resigned last September 10 and will serve the Treasury until October 16, had explained that a "personal" deficit had prompted her to leave. She denied reports that she quit over disagreements with the way the Finance department handled a $1-billion bond float early September which has been called by some as disadvantageous to the government.

Mr. Macasaet graduated from the University of the Philippines with a bachelors degree in Business Economics, and a masters degree in Business Administration. He also underwent professional development programs in Columbia, and Harvard. He was a business partner of San Juan mayor Jose Victor Ejercito in Foremost Credit Resources, Inc., a lending company formed in 1995. He also served as board member of Traffic Control Products Corp., Tierra Factors Corp., and Dasmariñas Industrial and Steelworks Corp. He was also a board member of the Manila North Tollways Corp. Mr. Macasaet was chosen to be the new head of the Bureau of Treasury over Finance undersecretary Nieves L. Osorio and Deputy Treasurer Eduardo Mendiola, who were reportedly being considered for the said post. -- Jeffrey O. Valisno and Ira P. Pedrasa



Central Bank chief gets 'B' grade from Global Finance

New York-based Global Finance Magazine has given Bangko Sentral ng Pilipinas (Central Bank) Governor Rafael B. Buenaventura a grade of 'B' for 2004, down from the 'A' he received in the past two years. Mr. Buenaventura returns to work today after spending two months in the United States both for a medical leave and to lead the US leg of the government's international road show.

In its yearly Central Banker Report Cards, Global Finance credited Mr. Buenaventura for bringing the country's inflation under control since he became governor in 1999. The publication noted, however, Mr. Buenaventura's apparent policy differences with President Gloria Macapagal-Arroyo recently, an assessment which the BSP chief did not agree with. "While he is credited with bringing the country's inflation bogey under control since taking office, Rafael Buenaventura is facing new challenges that may be a bit harder to deal with," the publication said.

It said that among the BSP chief's problems are a mounting fiscal deficit and a debt load that remains high. "Part of the problem is that Buenaventura does not appear to see eye to eye with President Gloria Macapagal-Arroyo on key issues," it said. It particularly noted Mr. Buenaventura's position that the sovereign debt load remains serviceable, in contrast with Ms. Arroyo's announcement last month that the Philippines was in the midst of a fiscal crisis. "While Buenaventura suggests the government tap international capital markets if foreign direct investment continues to drop, the president wants to plug the shortfall by raising taxes," Global Finance said.

Reacting to the publication's assessment, Mr. Buenaventura said he has been a strong advocate of reducing the budget deficit and has been consistent with the President's policy of getting domestic support to raise revenues. "We have been warning about debt sustainability and the need to increase revenues. The president's call is to bring it to the people to get support for the increase in revenues," the BSP chief said. Central bank governors of Norway, Sweden, Australia, Indonesia and Malaysia got an 'A', while the governor of South Africa got an 'A-'. Ten other central bank governors from Switzerland, India, Japan, Poland, Israel, South Korea, Taiwan, Poland and New Zealand received a grade of 'B'. Central bank governors of Chile and Turkey got a 'B+' while those from Mexico got a grade of 'B-'. Seven governors received a 'C', including US Federal Reserve chairman Alan Greenspan and the governors of the Czech Republic, United Kingdom, China, Thailand and the European Union. The Central bank governors of Argentina, Hungary and Russia received the lowest grade of 'D'. -- Iris Cecilia C. Gonzales



Survey gives GMA failing mark for 1st three months

President Gloria Macapagal Arroyo has been given a failing mark for her performance during her first three months in office by an overwhelming majority of business executives surveyed by a consultancy firm. Peter Wallace of the Wallace Business Forum presented the results of the survey during yesterday's Philippine Economic Update 2004 at the Asian Institute of Management in Makati City which was also broadcast live in Canberra, Australia.

Details of how the survey were not discussed during the videoconference, but Benvenuto Icamina, vice-president and chief economist of the Wallace Business Forum, later told BusinessWorld the survey was conducted last month during the quarterly roundtable of the Philippine Corporate Update Program which was attended by executives of multinational corporations and some members of the diplomatic community. More than 100 survey forms were handed out, of which half responded. Details of who responded to the survey were not released, but among the companies represented were, according to a list provided by Mr. Icamina, were SGV & Co., Hongkong & Shanghai Banking Corp., Abbot Laboratories (Phils.), Inc., BNP Paribas, Cisco Systems, Coca-Cola Far East, Ltd., General Electric Phils., Inc. and General Motors Phils., Inc.

During the videoconference, Mr. Wallace claimed a measly 12% of the 50 chief executives who responed expressed satisfaction with Ms. Arroyo at the helm given the increased number of problems besetting the country. "More than 88% of the businessmen who participated in the survey said she is not doing enough. The Philippines has now become a land of crisis -- oil crisis, foreign direct investment crisis, an electricity crisis, fiscal crisis and even a volatile leadership," he said. Vested interests, uncontrolled population growth, weak educational system, corruption and inadequate infrastructure, said Mr. Wallace, were among the top problems that plague the Philippines. He also cited the Catholic Church, which is "negative rather positive", and the security situation which is marred by alleged links of local rebels to international terrorists. "The government must have the political will to institute changes and these reform should be done now. Otherwise, this country will never achieve its proposed growth rate of 7%," Mr. Wallace added. "The bottom line is that the Filipino people are good, but the government is not. The peso is declining rather rapidly, and corruption is becoming more institutionalized," he said.

A study conducted by the Asian Development Bank, he added, predicted that the Philippines will lag behind Vietnam seven years from now if fiscal issues are not addressed. Mr. Wallace said the government should capitalize on agriculture, mining, tourism, information technology, and healthcare to boost the economy. The Philippines, he added, continues to have a competitive advantage in terms of English language proficiency, labor quality and low labor cost. -- Ma. Eloisa P. Calderon



San Miguel to revive Magnolia ice cream brand

Food and beverage giant San Miguel Corporation is looking at reviving its Magnolia ice cream brand and plans to build a production plant in a multi-product industrial park in Sta. Rosa, Laguna, just south of Metro Manila. In a statement, San Miguel said reviving Magnolia ice cream responds public demand. "The option and opportunity for San Miguel to reenter the market is open, as in the minds of consumers, Magnolia ice cream never left the market. People have always known Magnolia as a quality brand of ice cream. Loyalty to the brand is strong because it is part of our heritage," San Miguel chairman and chief executive officer Eduardo M. Cojuangco said. San Miguel said Magnolia is "one of the most recognizable and enduring brands in the country."

San Miguel stopped selling Magnolia ice cream in 1998 to honor a "non-compete" clause contained in the terms of the divestment of its entire stake in Nestlé Philippines. San Miguel, however, retained the Magnolia brand. The agreement to not compete in the ice cream sector was for a period of five years and lapsed in November last year. San Miguel is expected to resume selling its ice cream brand in the middle of next year, a source from the company said. This would dovetail with the commercial operations of the ice cream plant that San Miguel would put up in Laguna, the source added.

San Miguel, through subsidiary Magnolia Inc., has a processing plant in Cavite for its main business lines. Magnolia currently manufactures and markets butter, cheese and margarine. San Miguel said Magnolia accounts for nine out of every 10 non-refrigerated margarine products in the Philippines and four out of every five refrigerated margarine products.

 In 1998, the company completed a nationwide distribution selling system that made Magnolia products available in all parts of the country. Besides the ice cream production plant, San Miguel said it is also planning to build two other production facilities for other "value-added food segments" in the industrial park, which will be located near its Coca Cola Bottling Plant in Sta. Rosa. "The industrial park will house manufacturing and packaging plants primed for new products that San Miguel is set to roll out next year," it added. The plan to put up an industrial park in Sta. Rosa is part of San Miguel's expansion and modernization program that involves a PhP15-billion investment in the Philippines for the next three years.

Earlier, San Miguel said that, as part of its PhP15-billion program, it is building an alcohol distillery in Misamis Oriental in Northern Mindanao which will produce up to 75,000 liters of hard liquor a day to support its export operations. It is also expanding its existing distillery in Negros Occidental in Western Visayas to meet domestic demand for hard liquor. "We aim to continue to grow in revenue and income by double digits, and we believe the Philippine economy is strong enough to stimulate the growth of consumer goods companies like San Miguel," Mr. Cojuangco said.

San Miguel is Asia's largest food and beverage conglomerate. It is aggressively expanding in the Asia-Pacific region, with its acquisition of, among others, facilities in Thailand and its purchase of a 50% stake in Australia's Berri Ltd. earlier this year. The company reported a consolidated net income of PhP4.76 billion for the period of January to August, up 28% from PhP3.72 billion in the same period last year. -- Jennee Grace U. Rubrico



Independent power firms may service light railways

At least three independent power producers (IPPs) have expressed interest in supplying the power needs of Metro Rail Transit 3 (MRT3), the Department of Transportation and Communications (DoTC) said in a press release yesterday. The DoTC has been scouting for other means to cut power costs after the Manila Electric Company (Meralco) denied its request for a 15% discount on the rates charged on the MRT3 and two light rail transit (LRT) lines. Of the three IPPs, the DoTC said only Chase Power Management Philippines, Inc. has submitted its proposal. Chase Power proposed to supply MRT3 by building a 17.4-megawatt power plant under a build-operate-transfer agreement. As a rule of thumb, one megawatt requires $1 million in capital, hence the project is expected to cost around $17 million. "This is [an] unsolicited [proposal], so it will be subject to a Swiss challenge. The plan is only for MRT3, but it might include Lines 1 and 2 [of the Light Railway Transit]," said DoTC assistant secretary Robert Castañares.

In a Swiss challenge, other parties are welcome to bid for the project, but Chase Power has the right to adjust its price to match the best bid. Chase Power operates turnkey cogeneration power plants in the Philippines. Mr. Castañares said the DoTC as asked Chase Power to submit a feasibility study, adding that two other IPPs are set to submit their own proposals. He did not disclose the names of the two other firms. "We are entertaining the idea, but we still don't know whether the project is feasible or not," Mr. Castañares said.

Meralco rejected the power discount request, saying it is only a power distributor and that the MRT3 should seek assistance from the National Power Corporation (Napocor) instead. MRT3 officials dropped the plan, given Napocor's fiscal constraints. Metro Manila's elevated railway systems are powered by electricity and officials said this eats up 30% of operating costs. Meralco vice-president Ivanna Dela Peña refused to comment on the issue, saying it would be premature to issue any statement getting more details on how the DoTC and the potential power suppliers will go about the project. High operational costs have prompted MRT3, LRT1 and LRT2 to file fare hike petitions, which are still awaiting the approval of President Gloria Macapagal-Arroyo. -- Anna Barbara L. Lorenzo



Lack of consultation for medium-term plan hit

Economists have criticized the government for its failure to hold widespread consultations for the formulation of its growth blueprint, arguing that this flaw could lead to lack of "ownership" and difficulty in gaining support. President Gloria Macapagal Arroyo, on the other hand, has stressed that the Medium Term Philippine Development Plan (MTPDP) is the country's "last hope" to improve the economy in the next six years. She has asked for public support for the said blueprint, especially its unpopular measures. "This is our last chance, and we must swim together or sink together," the President said in a statement.

Former National Economic and Development Authority (NEDA) director-general and Ateneo de Manila University economist Cielito F. Habito noted that the process observed by the government in drafting the MTPDP was not "consultative." "I have not read the entire MTPDP, but compared to the MTPDP of the Ramos administration, the current plan did not seek the inputs of civil society," Mr. Habito said in a telephone interview. Mr. Habito, who was the NEDA chief during the time of President Fidel V. Ramos, said the government undertook extensive consultations for the 1993-1998 MTPDP. "We even launched two road shows for it. But in the current MTPDP, the government (merely) created committees to draft it," he said. Mr. Habito explained that prior consultations were essential if the government would like to muster enough support for it. "When there's weak ownership (of the MTPDP) especially (by) the civil society, it will be difficult to muster support for it," he said.

Dr. Fernando T. Aldaba, dean of the Ateneo school of economics agreed with Mr. Habito. "The consultations [on the MTPDP] were more participatory, with more sectors being invited to join committees especially during the time of Mr. Ramos," Mr. Aldaba said. "If you want a lot of stakeholders pushing for your goals, you need to consult [more sectors]." An economic adviser of the Arroyo government hailed the plan for presenting "out-of-the-box" solutions to the fiscal crisis. At the same time, however, Albay Rep. Jose Clemente S. Salceda noted that the MTPDP, which was unveiled on Monday, did not benefit from public consultations. Without a sense of collective ownership or support from stakeholders, execution of the MTPDP might get impraired, he warned. "From an analytical standpoint, we see the logic of the promised legacies of the Arroyo administration plus the Millennium Development Goals embedded in the MTPDP," Mr. Salceda said. "However, the framework must be validated with the business sector and other stakeholders." "It is the job of NEDA (National Economic Development Authority) to rigorously test-market and vigorously pre-sell President Arroyo's inputs," he stressed.


Mr. Salceda said the MTPDP might have been rushed, because no consultations were made with regional development councils, nongovernment organizations and even Congress. This presents another problem because it jeopardizes balanced regional development. For the Bicol Region in southern Luzon, for example, he said that inputs have to be submitted to the regional development council before submission to the NEDA secretariat. A fiscal road map that Mr. Salceda has drafted looks at a balanced budget by 2008 and a surplus by 2009. The latest medium-term plan adjusts the deadline for a balanced budget to 2010. Still, he said that this fiscal road map "remains a workable road map" of the Arroyo administration.

The House of Representatives committee on economic affairs, which Mr. Salceda heads, will scrutinize the MTPDP and enhance it with more inputs. But University of Asia and the Pacific (UA&P) economist Victor A. Abola said that while consultations with certain sectors of society on the MTPDP is important, he said the government does not have to undertake consultations unless it is introducing major policy shifts. "I don't see any real major policy shifts, only perhaps a greater emphasis on poverty alleviation, a provision that was also included in the 2001-2004 MTPDP," he said.

The President is scheduled to formally present the plan to the public on October 26, to mark her first 100 days in office under her new six-year term. Ms. Arroyo expressed confidence that the ambitious plan would prosper with the public's support. "We are now in an inexorable course towards greater national stability and prosperity. But the government cannot do this alone," she said. "It will require sacrifice and supreme acts of service, and supreme efforts at honest enterprise, on the part of every institution and citizen," she added. The President told skeptics that the government would remain committed in attaining its "clear and concrete" targets despite the expected opposition from various camps. "Doomsayers and vested interests will be ever present to deter our efforts and push back the clock of reform and progress, but we must resist, forge on and stay the course," she said.

Some observers earlier warned that the government would not be able to afford financing the MTPDP, which Socioeconomic Planning Secretary Romulo L. Neri said would cost PhP300 billion. Budget Secretary Emilia T. Boncodin vowed to implement the President's programs under the MTPDP, including Ms. Arroyo's directive for the deployment of key Cabinet departments to the regions. "The relocation of key departments will push through in full transparency, and consultation," Ms. Boncodin said in a statement. "These rationalization programs are being done to bring government closer to the people, and deliver optimum service at less cost," she added.

The President earlier announced her decision to transfer the Department of Transportation and Communications to Clark Field, Pampanga in Central Luzon to enable it to directly monitor the government's plan to transform the former US bases as the premier logistics hub of the region. Ms. Arroyo also wants to transfer the Tourism Department to Cebu City in Central Visayas, and the Agriculture Department to Iloilo in Western Visayas in line with her government's thrust to decongest Metro Manila, and distribute the development to the other regions. The Budget official assured that the government employees who might be dislocated with the transfers would be given the option to retire under the government's streamlining program. -- Jennifer A. Ng, Judy T. Gulane and Jeffrey O. Valisno



Energy dep't sticks to public bidding for Transco

The government will no longer proceed with negotiations to operate the country's nationwide network of electricity transmission lines through a concession agreement, Energy Secretary Vincent S. Perez Jr. told reporters yesterday. In a talk with reporters, he said the concession for the operation of state-run National Transmission Corporation (Transco) will now be awarded through public bidding. "We decided to terminate the discussions with the investor groups because the terms and conditions, including the price of their proposals submitted to the Power Sector Assets and Liabilities Management Corporation (PSALM), are highly unique and complex," Mr. Perez said. "Hence, it would be in the best interest of all concerned to award the concession through public bidding." He said PSALM, the government firm tasked to privatize debt-saddled National Power Corporation's (Napocor) transmission and generation assets, is set to immediately start the bidding preparations.

The government, Mr. Perez said, would also try to meet the December 2004 target for the Transco's privatization. "It's good that they (investor groups) still have a chance to bid because in a negotiated deal, only one will be chosen. We hope all investor groups will participate," the Energy chief said. He also said the decision to go on a public bidding has nothing to do with the legal opinion which is set to be released by the Department of Justice (DoJ). "The legal opinion will give us guidance on how to proceed, but we would rather have a public bidding even with the DoJ opinion. It was difficult for us to select proposals and the appropriate investor group to negotiate with. The term offers were so different that it was difficult to compare," Mr. Perez said. Four investor groups have submitted proposals to operate Transco, a spin off firm of state-run Napocor. While the government has terminated discussions with several interested investors for a negotiated award, Mr. Perez said the groups are still welcome to participate in the bidding. PSALM president Raphael Perpetuo M. Lotilla earlier said a favorable opinion from the Justice department should be secured before going into formal talks.


The price offers submitted by the four groups on October 6 indicated a sustained and serious interest in Transco, the government earlier said. Mr. Lotilla said should PSALM pursue formal negotiations, the term sheets and price offers submitted will not bind PSALM; hence, it may negotiate for better terms and conditions. The privatization of Transco through a concession agreement allows government to retain ownership and control of strategic transmission assets, pending award of franchise, and gain maximized revenues as investors are expected to bid a price as if they had permanent ownership of assets.

Transco's privatization is part of the government plan to raise $4 billion to $5 billion to reduce its budget deficit. The winning bidder will operate Transco for 25 years. The contract will be renewable for another 25 years, subject to the concessionaire's performance. The government will require the winning firm to pay at least 25% of the enterprise value of the Transco business upon the close of the transaction. As an incentive, investors have the option to pay the balance in installments over a period of up to 25 years. The winning bidder is expected to pay around $500 million, and assume about $1.5 billion of debts. PSALM first bid out the transmission assets in July last year. But after only one party, Singapore Power, submitted a pre-qualification proposal, the bidding was declared a failure. A second bidding barely a month later also failed after the same company expressed the sole interest to bid. -- Bernardette S. Sto. Domingo



Gov't likely to assume PhP309.8-B debt of 18 BOT projects

The National Government is likely to assume PhP309.85 billion in financial obligations owed by 18 build-operate-transfer (BOT) projects to creditors, the chairman of the House of Representatives committee on appropriations said in a press release yesterday. Based on a Department of Finance report submitted to his committee, Camarines Sur (southern Luzon) Rep. Rolando G. Andaya, Jr. said in a press release yesterday that the amount arises from government guarantees that are now deemed likely to be assumed by the government.

Topping the 18 BOT projects is the NAIA International Passenger Terminal 3, with its contingent liability of PhP94.25 billion or $1.71 billion. It is presently the object of a three-way dispute involving the government. Mr. Andaya said that no matter which party wins, "the public that will use the airport will have to ultimately foot the bill...I just hope that the projected income was accurately made so that the government will not end up paying for the difference, if a proviso to that effect is embedded in the contract."

Other big-ticket BOT projects are:

  • Casecnan irrigation project of the National Irrigation Administration, with its contingent liability of PhP63.81 billion;
  • Metro Manila Skyway project of the Toll Regulatory Board, PhP43.87 billion;
  • Leyte Geothermal Project of PNOC-EDC, PhP34.39 billion;
  • Metro Rail Transit 3 of the Department of Transportation and Communication, PhP31.26 billion; and
  • the West Zone Concession of the Metropolitan Waterworks and Sewerage System (MWSS), PhP17.73 billion.

Mr. Andaya noted that the National Government has assumed and paid PhP11.57 billion of Metro Rail Transit's contingent liability, and will likely assume and pay the additional PhP31.26 billion contingent liability. The project has incurred losses -- which the National Government has guaranteed to cover -- because of peso devaluation.

Other BOT projects whose contingent liability the National Government will mostly likely assume include: LRTA Extension 1 of the Light Rail Transit Authority South Luzon Expressway and Manila-Cavite Expressway Projects of the Toll Regulatory Board, North Luzon Expressway Project of the Philippine National Construction Company, Southern Tagalog Arterial Road of the Department of Public Works and Highways, Civil Registry System of the National Statistics Office, Database Infrastructure and IT System of the Land Transportation Office, Machine Readable Passport and Visa of the Department of Foreign Affairs, Land Titling Computerization Project of the Land Registration Authority, MWSS East Zone Concession, Subic Water of the SBMA, Olangapo City Water District and the Mindanao Geothermal Project of the PNOC-EDC. -- J. T. Gulane



Bigger revenues expected from tax amnesty

The Finance department yesterday revised its revenue collection target from the tax amnesty bill to a range of PhP8 billion to PhP20 billion from the previous PhP9-billion estimate, but the Senate committee on ways and means remained unconvinced. Finance undersecretary Emmanuel Bonoan said the imposition a 3% tax amnesty rate would yield a low estimate of PhP8-billion revenues, a medium estimate of PhP13.86-billion revenues, and high estimate of PhP20.46 billion. "After conferring among ourselves, we err on the more conservative side to the low of PhP8 billion to a high of PhP13.86 billion," Mr. Bonoan told a Senate hearing on the proposed tax amnesty.

The Finance official explained that the revenue estimates were based on a survey of the 2000 taxpayer database, which showed total taxpayer assets of PhP11.8 trillion and total net worth of PhP4.4 trillion. Mr. Bonoan added that from the PhP4.4-trillion total net worth, 90% or PhP3.96 trillion belongs to large taxpayers, while 10% or PhP440 billion belongs to medium and small taxpayers. He further said the large taxpayers failed to pay PhP54.052 billion in corporate income tax and PhP180.3 billion in value added tax over the last five years. The two taxes account for 5.5% of the PhP3.96-trillion total net worth of large taxpayers. This means the taxable amount reached PhP217.8 billion. The application of a 3% amnesty rate will mean PhP6.53-billion revenues for the government. Mr. Bonoan added that medium and small taxpayers failed to pay PhP26.696 billion in professional income tax and PhP4.578 billion in compensation income tax.

These two figures, plus the PhP180.3-billion value added tax, account for 11.17% of the total net worth of medium and small taxpayers, or a taxable amount of PhP49.1 billion. When applied a 3% amnesty rate, the government will earn PhP1.47 billion in revenues from the medium and small taxpayers. The low revenue estimate from large, as well as medium and small taxpayers of PhP6.53 billion and PhP1.47 billion, respectively, totaled some PhP8 billion. The same formula was used while the tax amnesty coverage was stretched to get medium and high revenue estimate of PhP13.86 billion and PhP20.46 billion, respectively. Committee chairman Sen. Ralph G. Recto said the annual tax gap totaled PhP265.626 billion, which when stretched to five years, meant that the tax gap hit around PhP1.3 trillion. This figure, when multiplied to the proposed 3% amnesty rate, would mean more than PhP39 billion in revenues in five years. "You are using data for five years, but the tax amnesty will not only cover five years, but from 2001 and prior years. The moral hazards should be weighed by the high revenues from the tax amnesty. Please review again your estimates," Mr. Recto said. Opposition Sen. Juan Ponce Enrile also asked the Finance department to give a "well-studied proposal."


Mr. Bonoan said limited records prevented them from giving the complete picture of the tax base and foregone taxes over the last years. He added that the mandatory filing of the of statements of assets, liabilities and net worth (SALN) was designed to address the documentary problem. For his part, Filipino Chinese Chamber of Commerce and Industry (FCCCI) representative Guillermo de Joya said lowering the tax amnesty rate to 1% will encourage more taxpayers to avail of the amnesty. Mr. De Joya noted that the organization has 50 members with at least PhP1-billion net worth who might avail of the amnesty program. He added that 7,500 members have at least PhP100-million net worth; 15,000 members with PhP50-million net worth; and 20,000 members with PhP1-million net worth. "We will now concentrate on the potential of how much we can collect out of this exercise. On a very conservative estimate, we just estimated there will be 50 filers on a billion bracket," Mr. De Joya said. "With these items -- when you add it up -- you have PhP1,570,000,000 and at 1% percent, it will be PhP15.7 billion. This far exceeds the estimate of the Department of Finance when they said their estimate is only PhP9 billion," he added.

When asked by Opposition Sen. Sergio Osmeña III to reveal the names of the billionaires who failed to pay the right taxes, the businessman refused. "We got this information from a very confidential and best effort basis and we have that privilege communication and we cannot and I don't think we can reveal it. Yes, they are very willing to come out and file," Mr. De Joya said. At the Senate, Mr. 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. The tax amnesty bill is the first revenue measure that has been passed by the House ways and means committee. President Gloria Macapagal Arroyo has certified the bill as urgent.



Sy firm asks high court to lift status quo on SSS deal

By Ma. ELISA P. OSORIO, Reporter

Henry Sy-owned investment house BDO Capital & Investment Corp. asked the Supreme Court to lift the status quo order issued on the sale of the stake of the Social Security System (SSS) in Equitable PCI Bank. In an October 11 filing, BDO Capital said there was nothing irregular in the sale of the Equitable PCI shares as there was already a valid and binding agreement between the Sy group and the SSS. It cited the Letter of Agreement dated December 30, 2003. SSS agreed to sell 188 million shares or approximately 25.84% of the outstanding capital stock of Equitable PCI at PhP43.50 apiece. "At the outset, it should be stressed that if there is a party who is placed at a disadvantage by reason of respondent SSS's decision to sell its [Equitable PCI] shares through a public bidding, it is respondent BDO Capital," the 61-page comment read.

BDO Capital inisisted that there is no need for a public bidding. It said Commission on Audit guidelines on public auction indicate that a public bidding is not necessary in the disposal of merchandise or inventory held primarily for sale in the regular course of business. SSS, as a fund manger, engages in investment activities. It regularly trades shares of stock in the course of its business, the firm said. "[The Equitable PCI shares] clearly fall under the term 'merchandise or inventory held for sale in the ordinary course of business' such that the sale is exempted from the requirements of COA Circular No. 89-296 [circular on public auction]," BDO Capital said. BDO Capital added that the commission is of the opinion that the SSS and BDO Capital transaction can be classified as a "stock exchange transaction." It also cited a Department of Justice opinion, penned by then Acting Secretary Ma. Merceditas N. Gutierrez, which stated that "it found nothing legally objectionable with the provisions" of the share purchase agreement forged between public respondent SSS and respondent BDO Capital.

BDO Capital further explained that the sale of the shares was not disadvantageous to the government. It said the complaint of Senator Sergio R. Osmeña III was anchored on the wrong premise that the shares could fetch a price of PhP60 each. BDO Capital, however, said the last time the shares hit the PhP60 mark was in 1987, adding that the price even fell to PhP16 in 2002 but managed to climb to PhP34 last year. "There is no disadvantage that is caused to public respondent SSS because the [shares] were bought at a premium of 30% of the market price," it said. BDO Capital claimed that "the only reason it is at PhP40 level is because of the market's response to BDO Capital's price at PhP43.50." Also, it said SSS chief executive officer and president Corazon de la Paz has already issued a statement saying that after four years, SSS has yet to realize any return on its Equitable PCI investment because the bank has not paid dividends since 2000.

Last October 5, the Supreme Court ordered SSS to stop the sale through a "Swiss Challenge" -- an option resorted to by the pension fund, following opposition from many sectors over the deal with BDO Capital. The status quo order was issued upon the allegation of Mr. Osmeña that the government could potentially lose at least PhP3 billion if the method of sale will be through the Swiss Challenge. Mr. Osmeña said the Equitable PCI shares may be sold for PhP60 instead of PhP43.50 per share, the offer of BDO Capital, if properly bid out. Last October 1, Mr. Osmeña filed a petition before the Supreme Court questioning the sale of SSS' equity stake in Equitable PCI through a Swiss Challenge procedure. Mr. Osmeña, together with Senators Juan Flavier, Rodolfo Biazon, Alfredo Lim and Ana Consuelo Madrigal, asked the court to prevent SSS from selling the shares through this method because it is "simply a scheme to sell the shares to BDO Capital without a public auction."

In a statement, Mr. Osmeña said SSS insists on pushing through with the October 20 Swiss Challenge in spite of objection raised about its illegality. "It is a case of granting BDO Capital the privilege of purchasing the shares at its own price even if other buyers are willing to pay a higher price," Mr. Osmeña said. The senator said BDO Capital will be given the chance to match the highest price if it is within the price range contemplated by it. He said the "Instruction to Bidders" have provisions that unduly favor BDO Capital and even discourage the participation of other bidders. First, he said BDO Capital, under certain circumstances, was allowed to match the second highest bid. Second, in case there were no bidders or the prospective bidders do not qualify, SSS was bound to automatically offer the shares to BDO Capital. Third, all bidders, with the exception of BDO Capital, must acknowledge that title to the shares may be affected by at least two civil cases pending before the Regional Trial Courts of Makati and Mandaluyong. Fourth, all bidders except BDO Capital, were required to waive their right to sue SSS for any defect or irregularity in the sale. Mr. Osmeña likewise said BDO Capital has not paid any consideration for the preferential right to match.

SSS, in the case filed before the Mandaluyong court, said there was still no perfected and binding agreement between the pension fund and BDO Capital over the shares. Mr. Osmeña further said the Swiss Challenge violates public policy because the fundamental method of disposing government assets is through public bidding. "The Swiss Challenge is not a mode of bidding but a mechanism for awarding government contracts on negotiated basis," said Mr. Osmeña in a statement. He added that "by using a Swiss Challenge, SSS may even have violated penal and anti-graft statutes."



PBCom sells assets worth 12B pesos to SPV

Philippine Bank of Communications (PBCom), a midsize commercial bank, concluded yesterday the sale of PhP12.156 billion worth of idle assets to Unimark Investments Corp., bank corporate secretary Edmundo L. Tan told the Philippine Stock Exchange. PBCom officials were not available for comment as of presstime. Unimark Investments Corp. was one of the 36 special purpose vehicles (SPVs) registered at the Securities and Exchange Commission (SEC).

Except for one, all of the SPVs registered at the SEC have complied with the law's minimum authorized capital of PhP500 million, minimum subscribed capital of PhP125 million and paid-up capital of PhP31.25 million. Only Unimark Investments Corp. had a PhP2-billion authorized capital and PhP500-million paid-up capital. Stockholders of the SPV include Robin C. Sy, Hilarion P. Uy, William Chi Eng S. Co, Peter P. Ong and Adriano Tio Chua. Banks that want to take advantage of the perks under Republic Act 9182 or Special Purpose Vehicle (SPV) Act of 2002 have until September 18 to establish and register their SPVs with the SEC. The incentives, which include tax perks and reduced transaction fees, are available to idle asset buyers until April 2005.

PBCom earlier disclosed it was reviewing three bids after it auctioned PhP12.5 billion worth of foreclosed properties and bad loans last August 24. Half of the total asset portfolio put on the auction block are nonperforming loans while the rest are nonperforming assets or those classified as real estate and other properties owned or acquired. Only three bids were submitted during the public auction of the assets while eight groups conducted due diligence. PBCom is confident that a significant improvement in its revenue base will be achieved for the second half of the year, resulting in increased profitability. After incurring a net loss of PhP200.72 million during the first quarter, the publicly listed bank swung to profit of PhP9.7 million in the succeeding quarter, largely because of higher interest income on investments. This came after a PhP3-billion capital infusion by major shareholders last March and interest income from PhP7.64 billion in government securities put in by the Philippine Deposit Insurance Corp. relative to auction of the bank's PhP12.5 billion worth of foreclosed properties and bad loans. -- Ruby Anne M. Rubio



PCI Leasing to issue 500M pesos in short-term papers

PCI Leasing & Finance Inc. confirmed yesterday its proposed PhP500 million in short-term commercial papers representsa significant increase from the company's previous PhP100-million line for 2003 to 2004. "The amount is being increased in the light of expansion in the volume of bookings and an increase in the company's portfolio," PCI Leasing vice-president Marlo R. Cruz said in a disclosure to the stock exchange.

Philippine Rating Services Corp. recently gave PCI Leasing a rating of PRS 1, which is defined as "strongest capability for timely payment of debt instrument issue on both interest and principal." PCI Leasing is a majority-owned subsidiary of Equitable PCI Bank, the country's fourth largest lender.



NBI warns against phishing syndicates

The National Bureau of Investigation (NBI) yesterday warned the public of the existence of "phishing" syndicates that are victimizing clients of banks and financial companies. Phishing involves spoofing or sending a fake email to convince a bank client or customer to "confirm" online their account information and passwords. According to the authorities, they are now working on tighter filtering systems for banks' internet transactions. NBI is now closely coordinating with Internet Service Providers and bank officials in an attempt to bust the ring. Citing information reaching them, NBI agents said a newer browser software would prevent fake sites from being accessed even if the user clicks on the email message. "Not only do we need stricter software, but we also need a publicity drive so people will be aware of this scam. We hope the banks and financial institutions can do their part by informing not just their clients but also the general public," said a senior official at the NBI, who requested anonymity. However, the NBI official said the work should not rest completely with the government. Banks also need to help disseminate anti-Phising information since syndicates have started using banks' logos and spoofing their websites.

In one instance, the source said, a syndicate even managed to copy the logo and website of a financial consultancy firm affiliated with US-based CitiGroup. "Such a racket has been going on in past years in the United States and Europe. Many phishing emails have been traced to syndicates in Russia," the source said. In one particular email of the syndicate, it showed that it originated from the Smith Barney Group, a subsidiary of CitiGroup Global Markets Inc., owned by universal bank Citibank. The sender had a supposed customer service reference number (, and bore the subject line "Please Read This Message." "Dear Smith Barney Customer, Technical services of the Smith Barney are carrying out a planned software upgrade. We earnestly ask you to visit the following link to start the procedure of confirmation of customers' data," the letter said. An Internet hyperlink ( followed the first two sentences. "This instruction has been sent to all Smith Barney customers and is obligatory to follow. Customers support service," the email added. Upon closer inspection of the email however, it would show that the message itself was a link that did not lead to the Smith Barney website.



Court dismisses Grand Boulevard Hotel debt rehab petition


A Manila court yesterday dismissed the petition for corporate rehabilitation of the Panlilios' Grand Boulevard Hotel, formerly Silahis International Hotel, after deeming the firm was not doing its best to come up with a rehabilitation plan that would be fair to all stakeholders. The court also recalled the "stay order" which allowed the company to suspend payments to all of its obligations, making it now vulnerable to the demands of its creditors. In a seven-page ruling, Manila judge Artemio S. Tipon hit the corporate rehabilitation plan of the hotel describing it to be "manifestly undesirable." The "management, directors and stockholders of the Hotel are not proposing to take sacrifices in rehabilitating the Hotel," the judge said. Mr. Tipon said for a corporate rehabilitation to succeed, "there must be a change in management or at least management style; the obligations (liabilities side) must be reduced, while additional funds (assets side) must be brought into the business; and there must be common sacrifices among all parties concerned." The hotel's proposed plan, the judge stressed, failed to address these three main components.

According to the order, the rehabilitation plan submitted by the company stipulates that the management will remain in place "presumably for the entire 18-year period proposed as the pay-back period." The 18-year-pay back time, the judge noted, was "extraordinarily long." The company also did not give the court assurance that it would work for additional capital infusion despite its intentions to renovate and refurbish the hotel. The court also criticized the stockholders of the hotel for making little effort in alleviating the company's financial woes. While the hotel proposed to convert its PhP20-million debt into equity, "there is no offer on the part of the stockholders of the Hotel to give up their controlling interest under the Plan" even if it maintained that it "still has more than sufficient assets to answer for all its debts."

Further, the provision in the rehabilitation plan on the settlement of secured obligations was not detailed and ambiguous, Mr. Tipon pointed out. He added there was no firm signal from the company's board of directors and stockholders that they have "irrevocably approved and/or consented to," to rehabilitate the firm. The court also felt the hotel was trying to shut out the creditors for saying that there was a revaluation increment in the hotel's properties worth PhP255.29 million. Revealing this would effectively deny creditors from opposing the plan and make their objections "manifestly unreasonable." Mr. Tipon also scored the hotel for insisting that rehabilitation receiver nominee Patrick V. Caoile was qualified for the post. Mr. Tipon rejected Mr. Caoile and assigned the job to lawyer Manuel Yngson Jr. Mr. Caoile was unable to articulate his qualifications and answer sufficiently his questions regarding the rules of rehabilitation, Mr. Tipon said. He stood by his decision to appoint Mr. Yngson, stressing he answered eloquently in matters pertaining to rehabilitation matters and was the unanimous choice of the creditors. Mr. Tipon advised the appointed receiver, Mr. Yngson, to urge the hotel to revise their rehabilitation plan immediately. "Otherwise, there may not even be a ghost of a chance for the rehabilitation to succeed," he added. The hotel owes around PhP1.06 billion to various banks. It blamed the 1997 Asian financial crisis and the eight-month strike in 1999 for the slowdown of its operations.



First Pacific sells 3.12% stake in Metro Pacific


Hong Kong's First Pacific Co. has sold 581.1 million common shares, equivalent to a 3.12% stake in unit Metro Pacific Corp. Subject to market conditions, First Pacific plans to sell an additional 349.1 million shares or 1.88% of Metro Pacific's total issued common shares. "The intention is to sell into the market, in aggregate, no more than 5% of Metro Pacific's total issued common shares," Jose Ma. K. Lim, Metro Pacific president, said in a statement. Metro Pacific has 18.6 billion common shares as of June 30. Before the sale, First Pacific had about an 80% stake in Metro Pacific. Part of the proceeds will be used to help Metro Pacific unit Negros Navigation Co. (Nenaco), which is under rehabilitation. First Pacific sold the 581.1 million common shares from Sept. 13 to Oct. 11.

The share price of Metro Pacific moved at a tight range of PhP0.50 to PhP0.59 before closing lower at PhP0.46 yesterday after the sale was announced. The stock traded at PhP0.55 when the sale commenced on Sept. 13, dipped to a low of PhP0.50 on Sept. 20. It reached its highest close of PhP0.59 on Sept. 24. Mr. Lim told the exchange that a significant portion of the sale proceeds will be used to fund the general corporate requirements of Metro Pacific. He said these include, but not limited to, a funding support to implement the rehabilitation plan of Nenaco.

The Manila Regional Trial Court approved last week the rehabilitation plan of the debt-saddled shipping firm, enabling the management to pay debts and restructe the business. Metro Pacific had made it clear the sale proceeds will be put to "better use", specifically in helping Nenaco with its rehabilitation plan, said Astro del Castillo, managing director of First Grade Holdings, Inc. However, this may cause some selling pressure which could eventually pull down the price of Metro Pacific stock. "The sizeable number of shares to be sold may possibly [trigger] a move to sell," Mr. del Castillo said. Metro Pacific was reportedly considering the stock delisting of its shipping subsidiary.

In a statement, Metro Pacific yesterday said it is confident of being able to "assist in accelerating the implementation of the rehabilitation program" of Nenaco. "Metro Pacific believes that Nenaco will benefit from the greater flexibility and options presented to it as a private firm. We also understand that given the 10-year time frame for rehabilitation, many of Nenaco's remaining minority shareholders may prefer to exercise a clear and fair exit mechanism for their investments in Nenaco shares which have depreciated in value over the years," it said in a statement. The stock reached a closing high of PhP0.59 last Sept. 24 with PhP1.2 million worth of net foreign selling. Most of the trading sessions during the period saw a number of net foreign selling in the stock. It was only last Oct. 6 that there was net foreign buying of PhP6.2 million. The stock was the third actively traded stock yesterday. Metro Pacific has substantial interests in Lanco Pacific Corp., Nenaco, and Pacific Plaza Towers.



PSE suspends trading of Asia Amalgamated

The Philippine Stock Exchange (PSE) yesterday suspended the trading of shares of publicly listed Asia Amalgamated Holdings Corp. after the Securities and Exchange Commission (SEC) said it is set to suspend the company's permit to sell securities.

"Please be informed that the Exchange was advised by the Securities and Exchange Commission of its impending issuance of a suspension order of the registration to sell securities and permit to sell securities of Asia Amalgamated Holdings Corp. In view of the foregoing, the exchange shall issue an indefinite trading suspension of [the firm's] shares effective 9 a.m. of Oct. 12," the PSE said in a circular. The SEC is set to suspend the company's license to sell securities and registration of securities after it failed to meet reportorial requirements and failed to pay the fine imposed by the commission, an SEC official said.

The suspension order is set to be signed tomorrow, she added.

Asia Amalgamated was incorporated in 1970 as Sulu Sea Oil Development Corp. to engage in the business of hydrocarbon, petroleum and oil exploration. In 1981, its name was changed to The Energy Corp. Its name was again changed to Asia Amalgamated after the change in majority ownership. -- Jennee Grace U. Rubrico


PSE given until Nov. 12 to pick independent director

The Securities and Exchange Commission (SEC) has given the Philippine Stock Exchange (PSE) until Nov. 12 to name the independent director who would replace PSE President Francis Lim. In a letter to the PSE, the commission said the Nov. 12 deadline is "non-extendable." This was after the PSE asked the SEC to extend the Oct. 1 deadline for the bourse to find Mr. Lim's replacement. "In a meeting on Oct. 7, the SEC decided to grant PSE's request. They were given until Nov. 12 to elect an independent director. The deadline is non-extendable," SEC director Jose Aquino said. If the PSE fails to name an independent director after the Nov. 12 deadline, Mr. Aquino said, the SEC "will take the necessary action."

Under the Securities Regulation Code, the PSE is required to have three independent directors. Of the 14 directors that the PSE has, two are independent. This is because Mr. Lim stopped being the third independent director of the PSE when he became president. As president, Mr. Lim is now a non-broker, non-independent director, taking the slot of former PSE President Cayetano Paderanga. The PSE, however, could not give the slot that Mr. Lim vacated to Mr. Paderanga because the SEC said that while he could remain as a director, the former PSE president could not qualify as an independent director. -- J. G. U. Rubrico



Shell starts auction of $3-B InterGen assets

SINGAPORE -- Royal Dutch/Shell, the world's third-largest oil company, has kicked off an auction of its InterGen power joint venture under a strategy to focus on production and exploration. Shell and its partner, US building firm Bechtel, are trying to sell their global power assets in one swoop, rather than piecemeal, sources close to the deal said on Tuesday. The assets are valued at $3 billion including debt, one source estimated. The company also is considering the sale of its liquefied petroleum gas business, valued by analysts at $2 billion. Goldman Sachs Group, Inc. and private equity firm Kohlberg, Kravis Roberts plan to bid for the LPG business, the Financial Times reported.


Last month, Shell unveiled plans for major disposals and new production in its bid to move beyond a reserves scandal that rocked the group. Shell said it planned $10 billion to $12 billion of asset sales for 2004 to 2006. InterGen, set up in 1995 and 68% owned by Shell, runs power plants around the world with total capacity of 16,200 megawatts -- about a fifth of the UK's total. InterGen's power plants, including those under construction, are in the US, Britain, the Philippines, Colombia, Mexico, China, Egypt, Turkey, Australia, the Netherlands, Spain and Singapore. -- Reuters



Oil, ratings weigh down stocks


Investors played safe yesterday as a host of factors shook share prices at the Philippine stock market. "Investors locked in on their gains as they were still reeling from the continued increase in oil prices, concerns on possible rise on domestic rates as well as a [threat of a credit] downgrade," said Astro del Castillo, managing director of First Grade Holdings, Inc. US light crude oil soared to $53.80 per barrel at the New York Mercantile Exchange. As if this were not enough to rattle investors, the London Brent crude exceeded $50 on worries of prolonged disruptions in supply from Nigeria and Norway. This was the first time in the 16 years since the contract began trading that it soared beyond $50.

With the dependence of the Philippines on the world market for its oil needs, it will not take long before the recent round of oil price increases spills into the country, making it even more difficult for Juan de la Cruz to have a decent meal in a day. It is likely that the inflation rate may rise in reaction to rising pump prices. The Bangko Sentral ng Pilipinas may also review interest rates and implement some necessary adjustments. Although the benchmark Philippine Stock Exchange composite index (Phisix) slumped 37.06 or 2.03% to 1,784.91, the market remains sound, said Mr. del Castillo. "It was a healthy correction. The market is still strong," he said, adding that the Philippine stock market is at an overbought level.


For a second consecutive trading day this week, the commercial-industrial fell. It dropped 65.45 to 2,838.27 yesterday, more than thrice its losses the other day. Property went down by 12.49 to 619.04. Mining reversed its gains, losing 9.29 at 1,919.98. Banks and financial services declined 4.89 to 503.43. Oil settled at 1.77 after slipping by 0.06. The small and medium enterprise counter was unchanged. The all-shares dipped 7.65 at 1,117.53. Trades were reduced to 4,511 for over two billion shares worth PhP927.3 million.

Decliners outnumbered advancers at 86-10, indicating that the bears were moving in faster than expected. Issues that kept to their previous levels totalled 38. The prices of only two of the 20 most actively traded stocks were up and five were unchanged. The rest suffered a decline. The Bank of the Philippine Islands (BPI), the banking arm of the Ayala Group, was the most active stock, edging out the telecom stocks which led trading previously. BPI closed lower at PhP47.50, with 4.1 million shares worth PhP198.7 million accounting for 21.42% of trades.

Philippine Long Distance Telephone Co. followed with its price down at PhP1,450 from P1,480. Metro Pacific Corp. came in third, with its stock price down to PhP0.46. The holdings firm of First Pacific Co. Ltd. told the exchange that 581.1 million of its common shares were sold between Sept. 13 and Oct. 11. Metro Pacific president Jose Ma. K. Lim said in a statement that subject to market conditions prevailing from time to time, an additional 349.1 million shares representing 1.88% of the firm will be sold. Mr. Lim explained that the intention is to sell to the market not more than 5% of the company's total issued common shares. The holdings firm has 18.6 billion common shares as of June 30. The net proceeds of the sale will be used for its corporate requirements and to support the rehabilitation plan of subsidiary, Negros Navigation Co., Inc.

Other telecom stocks Globe Telecom of the Ayala Group, Digital Telecommunications Philippines, Inc. (Digitel) of the Gokongweis and PLDT subsidiary Pilipino Telephone Corp. (Piltel) were also actively traded. Globe was down to PhP1.045. Digitel and Piltel also finished lower at PhP1.30 and PhP2.55, respectively. Confidence of foreign fund managers in the Philippine market was back. Net foreign buying regained strength at PhP148.3 million with total foreign buying at PhP446.3 million against total foreign selling of PhP298 million. In other news, Philippine Savings Bank, which was unchanged at PhP28, will pay a cash dividend of PhP0.20 per share starting Nov. 10 to stockholders on record as of Oct. 26.

Although the market swerved to the negative side for a second day, Mr. del Castillo is confident that the situation would not persist for long and would not hurt market prospects for the last quarter of the year. "The earnings season is just around the corner. This could cushion the impact [of the bearish sessions]. Investors remain bullish of the prospects of companies as they take positions in those that promise substantial earnings," he added.