Friday, October 22, 2004
Only cheats fear asset statements, businessmen told
High power prices hit firms
Bourse starts Metro Pacific probe
UN report cites RP's potential in IT services
World Bank extends $716,000 grant to help Ombudsman fight corruption
Revenue-collectors scored for opposing performance review
Bill seeks lifting of doctors', lawyers' tax perks
Central bank keeps rates steady
Prospects dim for 'selective' trade pact with US
Regulators soften stance on securities safekeeping
Peso strengthens but buckles in late trade to 56.315
Asia currencies gain as dollar slips
Bourse to boost special fund to protect investors
Speedy sale of government's transmission assets urged
PCI Leasing gets clearance to issue PhP500-M debt papers
Nissan eyeing 28% increase in car sales
Japanese firms keen on buying Napocor plants
Stocks at three-week low; PLDT down

Thursday, October 21, 2004
Big industries, builders buck move to require assets declaration
Gov't overspending below cap as of September
Investment pledges rise to PhP1.61B in August
Regulators plan gradual cut in banking reserves
North Luzon Expressway toll fees to hit PhP200-PhP600
US businessmen offer plan to attract investors
Napocor bailout may force NG to borrow
Fitch to give RP time to pass tax laws
Oil firms to raise prices weekly by P0.35/liter til November
Peso strengthens; steady recovery seen until yearend
Merger of financial market groups may not push through
PNB reports higher bad loan ratio for third quarter
Court okays debt rehab plea of Grand Boulevard
RP telecom execs off the hook in US antitrust suit
Metro Pacific says stock transactions above board
Downstream steel players to sue BSP over Nat'l Steel
BCDA remits PhP670 million to state coffers
Jardine Davies starts move to become holding company
Stocks up on last-minute buying

October 19- 20
October 15- 18
October 13- 14
October 11- 12
October 7 - 8
October 5 - 6





Only cheats fear asset statements, businessmen told

Businessmen have no reason to reject the bill that will require all taxpayers to publicly disclose their assets and networth if they have "nothing to hide," deputy tax commissioner Kim J. Henares said yesterday. At the same time, Finance Secretary Juanita D. Amatong said neither should corporations complain that the filing of statements of assets, liabilities, and networth or SALN would be an "additional burden" to them. She noted that businesses were already required under tax laws to submit financial statements to regulators. At least three big business groups have expressed opposition to a bill in the House of Representatives that will require all taxpayers to file asset statements starting next year. The Federation of Philippine Industries, Chamber of Real Estate and Builders Association, as well as the Chinese Filipino Business Club have written the House ways and means committee to complain that the bill will violate their constitutionally guaranteed right to privacy. But Ms. Henares said, "Why are they afraid if they have nothing to hide, and what privacy are they talking about when their assets could be found in the registries?" She added, "Why would they fear that they would be harassed if what they have declared were true?"

For her part, Ms. Amatong said the National Internal Revenue Code already required businesses to attach their asset statements to their income tax returns. Section 232 of the code states:

"... corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed PhP150,000 shall have their books of accounts audited and examined yearly by an independent Certified Public Accountants, and their income tax returns, accompanied with a duly accomplished Account Information Form, which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties, and the corresponding income therefrom and other relevant statements."

Ms. Henares also said the law prescribed that "if you are a business or corporation, you should file your income tax returns whether or not you are required to pay taxes or not." If corporations and businessmen oppose the filing of asset statements, it goes to show they are "not sincere," and they intend "not to report their right taxes," she said. "It looks like we are not mature enough to give tax amnesty, and the people have not yet learned their lessons and do not want to pay the right taxes," she said. Businesses have also argued that House Bill No. 2895 would likewise violate a taxpayer's right against self-incrimination, as well as his the right to be presumed innocent.

The builders' chamber also claimed that there were no guarantees that submission of asset statements would improve tax collection. It noted that government officials were already required to file asset statements, yet this has not been effective in indentifying tax cheats among them. It also said disclosure of assets could even lead to kidnappings and capital flight. But Ms. Henares said, "Kidnappers need not look at the person's assets to know whether he is rich. All kidnappers have to do is look at the person's house, where he eats, and the person's lifestyle."

Under House Bill No. 2895, by Cavite Rep. Jesus Cripin C. Remulla, taxpayers earning an annual gross income of more than PhP200,000 or owning real or personal properties with an acquisition cost of at least PhP500,000 must file asset statements as of December 31, 2004 at revenue district offices. They must file their first statement on or before April 15, 2005, and on or before the same date in succeeding years. In its letter, the Chinese Filipino Business Club also told Tarlac Rep. Jesli A. Lapus, chairman of the House ways and means committee, that asset statements would violate a taxpayer's right to privacy, and restrain his liberty. "A person's right to contract, right to choose one's employment, and right to labor are within the bounds of one's liberty, which are essential elements of the right to privacy," the club said. "Requiring a person to submit [an asset statement] would give the feeling that [he or she] is being watched, and thus, eventually losing [his or her] right to privacy," it said. "Worse, the information in the [statement] may be summarily used against the individual in any inquiry against [him or her]," it added.


Meanwhile, the Senate ways and means committee said it would seek a legal opinion from the Department of Justice whether the mandatory submission of statements of assets, liabilities and networth would be unconstitutional. An option, senators said, is to revise existing regulations on the filing of income tax returns to cover all the sources of revenues of taxpayers. "We will be seeking the legal opinion of the [Justice department] and some noted constitutionalists on this matter. But offhand, I think this is regular, just like a taxpayer is required to file his [tax return]," said Senator Ralph G. Recto, committee chairman.

Senator Juan Ponce Enrile said the constitutional right against self-incrimination should also be considered. "We will be compelling taxpayers to incriminate themselves through legislation. There might a constitutional issue here if we will be fishing for evidence," he said during a committee hearing yesterday. But Senator Sergio R. Osmeņa III said, "The moment you file the income tax return, there is right against self-incrimination. But we file it," Mr. Osmeņa said. He also said the mandatory submission of asset statements would not guarantee higher tax collection. "There is no country in the world that does that. So there is something wrong. It does not work because there is no direct link between net worth and income. What we tax is income, and not net worth," he said. He also said the expansion of the coverage of tax returns was overdue. He noted he United States requires taxpayers to report all sources of income. "We exempt trading gains in the stock market. Interest payments on deposits in bank accounts are also exempt because you already paid taxes on them. So the income tax returns will not reflect the real income of the taxpayers. We should include income from all sources -- rents, interest, dividends, capital gains, trading gains, and gambling wins," he said.

For his part, Finance undersecretary Emmanuel Bonoan said his office would thoroughly study the bill. He also noted the mandatory filing of asset statements would not directly translate to better tax collection. He also noted that asset statements usually filed by public officials were 30% understated. -- Karen L. Lema with Carina I. Roncesvalles and Judy T. Gulane



High power prices hit firms


Businesses and consumers alike are expected to suffer from recent increases in electricity prices, with industries estimated to shoulder a 2.6% rise in their total production cost, the National Statistical Coordination Board (NSCB) said recently. And in terms of consumer prices, NSCB said households should brace for a 2% average hike on top of the normal inflation rate. The figures came from NSCB's price cost analysis using 1994-based prices, as it aimed to estimate the effects of higher electricity prices on industries as well as consumers. Recently, the Energy Regulatory Commission (ERC) granted a provisional authority to state-run National Power Corporation (Napocor) to raise its prices by an average of 97.98 centavos per kilowatt hour, a 40.09% increment from the present generation cost of PhP2.4438 per kilowatthour. The new rate became effective September 26 and will be reflected in consumers' bills starting November 1.

Based on the study, the industry sector will be the most affected among economic sectors, with an expected 1.95% increment in their total production cost. Among its subsectors, the combined electricity, gas and water, and the manufacturing sectors registered the highest weighted increases of 0.97% and 0.87%, respectively. Specifically under manufacturing, companies engaged in the semiconductor and electronics businesses will be hard hit since these firms are heavy users of electricity. Electric consumption among semiconductor and electronics companies comprise about 41% of their total operating costs. At present, semiconductor firms partly pay or subsidize electricity consumed by residences, hospitals, and street lights, among others through so-called "interclass" subsidies" charged under the law by distribution utilities like Manila Electric Company (Meralco). These cross-subsidies account for an additional 11% to a semiconductor company's average electric bill. Higher electricity rates will also raise total costs of the services sector by 0.59%, with trade, private, and government services posting the biggest increases of 0.21%, 0.15% and 0.08%, respectively, the NSCB study said. "Least affected of the three major sectors is agriculture, fishery and forestry whose cost of production would increase by only 0.10%," added the NSCB.


Despite this, analysts welcomed the latest increase in electricity prices, saying it would help improve the financial viability of the power industry as well as make it and state-run Napocor more attractive to investors. "Companies in the long run would benefit from the adjustment since the additional costs to their production would be lesser compared to the higher taxes they would have been paying if the adjustment was not implemented. In the end, somebody really has to shoulder [Napocor's] losses," said Bienvenido Oplas, economist at Think Tank, Inc. "Eventually, electric rates in the country will correct itself. What's important is for the government to already skip the problem of electric political pricing," he added. In terms of change in production costs, NSCB estimates show the manufacturing of ice, except dry ice, suffered the biggest increase of 13.5% because of higher power prices.


Bourse starts Metro Pacific probe

The Philippine Stock Exchange (PSE) has started its investigation of stock transactions by Metro Pacific Corporation, a listed company that has been accused of insider trading. But PSE president Francis Lim told reporters yesterday there would be no preliminary disclosures on the probe, to protect investors. "The review is ongoing. It is a formal review of all the transactions, a process that is done in due course. But we cannot make preliminary statements that may be misinterpreted by the market," he said. He said an investigative committee would carefully look into figures and data from transactions allegedly tainted by insider trading and stock price manipulation. Only after all records are reviewed will PSE take any necessary action.

Mr. Lim said PSE was constrained by some limitations, including the fact that Metro Pacific's parent company, Hong Kong-based First Pacific Corp., was not listed locally. It was the parent firm that sold stakes in its local subsidiaryequivalent to 930.2 million common shares. "We cannot come up with a definite timetable [on completing the investigation] because it all depends on how things develop," he said. "We will make the review as broad as possible. It will not be limited to disclosure and insider trading." He also said most issues would be addressed at PSE's board meeting next Wednesday.

A foreign brokerage company allegedly handled most of Metro Pacific's transactions a few months ago, as it took advantage of company chairman Manuel V. Pangilinan's optimistic announcements. Some brokers claimed there was collusion between Metro Pacific and the foreign brokerage company, which resulted in insider trading and stock price manipulation. They also claimed Metro Pacific failed to disclose First Pacific's sale of a 5% stake, announcing only after the transaction was completed last week. But Metro Pacific had argued that it did not violate PSE rules. David Nugent, Metro Pacific vice-president for corporate communications, had dismissed as "grossly inaccurate" the allegation that good news about the company were intentionally released to raise share prices. "There were no violations of [the] disclosure [rule]. We do not even have to disclose October trade until next month," he had said. Brokers said PSE should investigate the incident to prevent another BW scandal, which almost crippled the bourse in 2000. -- Roulee Jane F. Calayag



UN report cites RP's potential in IT services

The Philippines can become the preferred location for foreign investors involved in IT-related services and call centers, said a report released recently by the United Nations Conference on Trade and Development (UNCTAD). UNCTAD said in its "World Investment Report 2004" that based on its interviews with transnational companies, the Philippines was cited as a "potential future location" for foreign direct investment projects related to IT services. "Asked about the potential future locations for [foreign investment] projects related to IT services, companies interviewed by UNCTAD mentioned India, the Russian Federation, Bulgaria, Albania, the Philippines, China, Mexico, the Czech Republic and the United Arab Emirates, in that order," the report said. The report also noted that the preferred locations for call centers in the near future would include India, the Philippines, China, South Africa, Mauritius, and the United Arab Emirates.

While India was the top destination of foreign investors involved in offshore services, UNCTAD noted that the Philippines was becoming an attractive country for offshoring, particularly of business process. "[This] is partly to its cultural affinity to the United States and American-style English speakers," the report said.


UNCTAD also said the country was enjoying a reputation as a "stable, fast-growing economy" with rapid telecommunication and technological advances. "Although the labor pool is smaller than in India and costs are somewhat higher, [the Philippines], nevertheless, is frequently regarded as the closest competitor to India," the report said. It also said it expected employment in the local call center industry to double from 27,000 jobs created last year. Intel, Microsoft, Safeway and Kodak are among the companies that have opened call centers in the country.

Among developing countries, UNCTAD noted that South and Southeast Asia dominated as desinations for foreign-investment projects related to service offshoring, particularly in the area of IT services. UNCTAD's report discussed the prospects for investment flows in both developed and developing countries, noting the particular shift of foreign investments to services. UNCTAD interviewed 335 of the world's largest transnational companies from developed, developing, and transition economies, and 87 international site-selection experts for the report. -- Jennifer A. Ng



World Bank extends $716,000 grant to help Ombudsman fight corruption

The World Bank is extending a $716,000 grant to the government to boost the Office of the Ombudsman's anti-corruption activities. The grant comes on the heels of a Transparency International's Corruption Index the Philippines landed at the 102th spot in Transparency International's Corruption Index among 146 countries surveyed worldwide. The money was turned over by World Bank country director Joachim Von Amsberg to Finance Secretary Juanita Amatong. The grant will be used to finance an initiative called "Strengthening the Institution of the Office of the Ombudsman for Good Governance." "By strengthening the capacity of the Ombudsman's office, this grant (would) eventually help public institutions to be more accountable," Mr. von Amsberg said in a statement.

Ombudsman Simeon V. Marcelo said the grant would boost the government's efforts to curb graft and corruption in the government, especially through the lifestyle check system. "This grant will help us in our efforts to make corruption a high risk, low reward activity," Mr. Marcelo said. World Bank said in a statement that the money will fund selected technical assistance and capacity-building activities which include:

  • Strengthening the knowledge and skills of field investigators through training and workshops;
  • Providing technical help for the design and development of an electronic case monitoring and tracking system;
  • Establishment of a data-banking system to facilitate the analysis of Statements of Assets, Liabilities, and Net Worth (SALN) of public officials and employees.

The grant is expected to boost the Ombudsman which currently has only 57 full-time litigators, of which half are newly-hired young lawyers, handling more than 2,000 cases. World Bank said the money came from the Asian Financial Crisis Response Fund of the ASEM (Asia-Europe Meeting) Trust Fund which it administers. The ASEM Trust Fund was put up by the European Commission and 11 other countries to help countries recover from and avoid a repeat of the 1997-1998 financial crisis which hit Asia. -- Jennifer A. Ng



Revenue-collectors scored for opposing performance review

Government agencies opposing a proposed system of rewards and punishments for revenue collection performance have virtually admitted that they will not fulfill what will be expected of them in the future, Finance Secretary Juanita D. Amatong said. "If they are opposing it, then they themselves do not expect to perform well," she said in response to the opposition raised by the Securities and Exchange Commission (SEC), Department of Transportation and Communications (DoTC), National Telecommunications Commission (NTC), Land Registration Authority (LRA) Philippine National Police (PNP) and Bureau of Immigration (BI) against the proposed lateral attrition system. "If they do not want to perform...bahala sila (that will be their problem)," she added.

Senator Ralph Recto has filed Senate Bill 1236, which seeks to provide a system of rewards and punishments for excess or failure to meet revenue collection targets. The measure, which is one of eight Palace-backed revenue proposals, will cover the Bueau of Internal Revenue (BIR), Bureau of Customs (BOC) and other revenue-generating agencies with an annual income of at least PhP100 million, except the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) and the Bureau of the Treasury (BTr). Under the proposal, officials and employees of revenue collection agencies who fail to meet collection targets will have to be transferred or removed from government service. It also provides for performance standards and review mechanism as well as incentives to performing collection agency equivalent to 10% of excess of collection over target.

In the House of Representatives, the lateral attrition bill filed by Quezon Rep. Danilo A. Suarez has been approved by the oversight, ways and means, and appropriations committees. Data from the BTr showed that the government earned PhP9.2 billion from the collection of fees and charges during the first half of the year, 3.4% lower than the PhP9.5 billion collected for the counterpart period last year. An adjustment in the rates as well as improvement in collection efficiency are expected to raise much-needed cash for the government to rein in the deficit. This early, however, government agencies bucked the proposal, saying that the collection of fees and charges was only incidental to their main functions of implementing laws and providing services. The DoTC noted that its attached agencies, such as the Land Transportation Office, Manila International Airport Authority and Philippine Ports Authority, were "not primarily mandated to generate income, although they have the capacity to earn revenues because of the volume of their stakeholders."

The NTC and LRA, meanwhile, said the process for the rewards and punishments would be difficult to implement. The NTC noted that it would be laborious to identify officials and employees who contribute to higher revenue collections. The LRA said it could not set a collection target because registration was voluntary. The PNP and BI also said they could not be considered as revenue-generating agencies even if they collect fees and charges. State companies Philippine Charity Sweepstakes Office (PCSO) and Philippine Amusement and Gaming Corp. (Pagcor) also opposed the proposal. They argued that they were not involved in the collection of taxes or levies.

Meanwhile, the Senate ways and means committee yesterday doubled the incentives for the officials and employees of the Bureau of Internal Revenue (BIR) and Customs (BoC) who would exceed collection targets in the proposed lateral attrition bill. Committee chairman Ralph G. Recto said 20% of the excess annual collection over the target will be allocated as incentives for the two agencies from the earlier proposal of 10%. "There is a marked improvement in the bill in that in the past, the reward was just 10%. We have doubled that. Frankly speaking, if the BIR hits the revenue target and surpasses it by about PhP10 billion, they can sahre PhP2 billion of that, which in effect doubles the salaries of the BIR personnel," Mr. Recto told reporters in a news confernec after the hearing on the lateral attrition bill. -- Karen L. Lema with a report from Carina I. Roncesvalles



Bill seeks lifting of doctors', lawyers' tax perks

A bill filed in the House of Representatives seeks to repeal the value-added tax (VAT) exemptions granted to six kinds of transactions, including services rendered by doctors and lawyers. House Bill No. 3105 by Ilocos Sur Rep. Salacnib F. Baterina seeks to repeal Section 109 of the National Internal Revenue Code (NIRC) and put the following transactions under VAT coverage:

  • 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 a passenger and/or cargo vessels of more than 5,000 tons, whether coast-wise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator;
  • sales and importation of cooperatives, excluding lending activities of credit and multi-purpose cooperatives;
  • sales and importation, printing and publication of books; and
  • services rendered in the exercise of medical and legal profession.

Mr. Baterina, a member of the ways and means committee, essentially adopted a Department of Finance (DoF) bill seeking to remove the VAT exemption on these six transactions. Ways and means committee chairman Rep. Jesli A. Lapus of Tarlac said the measure complements a proposal to rationalize or harmonize fiscal incentives. Section 109 of the NIRC presently grants exemptions to 26 kinds of transactions. Three transactions were added to the list only last year:

  • services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries;
  • services rendered by doctors of medicine registered with the Professional Regulations Commission; and
  • services rendered by lawyers registered with the Integrated Bar of the Philippines.

Some transactions will continue to enjoy exemption from VAT, including:

  • sale or nonfood agricultural products, copra, cotton, marine and forest products;
  • sale or importation of agricultural marine food products in their original state, livestock, breeding stock and genetic materials; and
  • sale or importation of fertilizers, seeds, seedlings, fish, prawn, livestock and poultry seeds.


Central bank keeps rates steady

... watches inflation

The Philippine central bank kept interest rates steady on Thursday, as expected, saying it saw no need to tighten policy unless high oil prices sparked demand-led inflation. The central bank has said it wants to keep interest rates conducive for private investment and economic growth as the government deals with persistent budget deficits and a debt load equivalent to about 135% of GDP. "In the absence of clear evidence of demand side effects of supply shocks or mounting demand-side inflationary pressures, monetary authorities have opted to maintain the present settings for monetary policy," central bank Governor Rafael Buenaventura said in a statement. "Nevertheless, the present stance does not mean that monetary action will not be used to counter inflationary pressures in the future," he said after a meeting of the central bank's Monetary Board.

Prices of consumer goods most likely went up faster in the year through October and further slashed the peso's purchasing power, the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) said yesterday. The BSP expects inflation rate to have risen anywhere between 6.9% to 7.4% in October because of runaway oil prices, Mr. Buenaventura told a press briefing yesterday. The lower end of the BSP's inflation forecast for October is the same as the actual inflation in September of 6.9% in September, its highest level in three years on the back of skyrocketing oil prices. The National Statistics Office is expected to release the actual inflation figures for October on November 6. The government hopes to contain the year-end average inflation rate between 4% to 5%, even as the Bangko Sentral has already conceded that upward price swings could reach a high of 5.4% by yearend.

The average inflation rate from January to September already stood at 4.8%, just a few notches shy of BSP's 4%-5% target. Mr. Buenaventura said that if inflation rate averages 7.2% in October to December, the year-end inflation rate could end at 5.4%, in line with the monetary authority's forecast. "Inflation, which is expected to be higher than the 4%-5% target range for 2004 and 2005, is expected to return to the 4%-5% range in 2006," he said yesterday. Despite higher oil prices, the BSP's policy-making Monetary Board kept policy-interest rates unchanged, saying that the movement in prices are caused by shortage in supply rather than excess money in circulation. The policy-making body kept policy rates unchanged at a 12-year low of 6.75% for the overnight borrowing and 9% for the overnight lending. The BSP increases rates to siphon off excess money in the local economy that could be pushing inflation upward and slash the purchasing power of the peso. "For now, it's still largely supply driven," Mr. Buenaventura said yesterday. As such, he said that increasing interest rates will not be effective in addressing inflation. He said the BSP is inclined to keep rates unchanged for the rest of the year to help spur economic growth, but said that monetary authorities will keep a tight watch on demand-side pressures. -- Reuters with a report from Iris Cecilia C. Gonzales



Prospects dim for 'selective' trade pact with US

The prospect of a "selective" free trade agreement (FTA) for the garments sector with the United States appears to be dim, with an official saying yesterday that getting the Americans to agree on such an arrangement would be a "tall order." This is because garments is a sensitive sector in the US, and FTAs usually cover substantially all products, not a selected few, said Jose Antonio Buencamino, Philippine trade representative to the World Trade Organization (WTO) in Geneva, Switzerland.

An industry source earlier said the Philippines would push for a selective FTA with the US for top export sectors such as electronics and garments. Garments and textile are of particular concern because the quota system will expire by the end of the year, ending a regime of guaranteed market access to the lucrative American market. The US accounts for at least 70% of Philippine garments exports. Mr. Buencamino said he was not aware of the progress of such a proposal. "That idea has been floated but there are some problems there because first of all, this sector is very sensitive to the United States," he said. "So just getting the US to say [yes] to that might be a tall order."

An FTA involving a single sector such as garments would also "bring some problem" because "by definition, FTAs cover substantially all trade," Mr. Buencamino added. Earlier efforts by the Philippines to be able to negotiate for a full FTA with the US have been put in the backburner. Visiting US trade officials have said the Philippines does not qualify as a candidate since potential FTA partners must be able to fulfill commitments. This statement was issued right after the Philippines withdrew a humanitarian contingent from Iraq to save the life of a Filipino hostage. -- F. F. Salvosa II



Regulators soften stance on securities safekeeping


The Bangko Sentral ng Pilipinas has given banks some flexibility in dealing with clients who do not want to place their securities with a third-party custodian as required by the regulator. According to the revised rules, banks and other financial institutions under central bank supervision may maintain custody of existing securities of their clients who decline to deliver these to a third-party custodian. The central bank, however, said this would only be allowed provided that the financial institutions meet certain requirements such as if the custody arrangements with clients have been in existence prior to the new rules. It also said the dealing bank or non-bank financial institution must have been "informed in writing by the client that he is not willing to have his existing securities delivered to a third-party custodian." Bangko Sentral Governor Rafael B. Buenaventura said this provision makes sure that clients know the move they're taking when they choose not to have their securities delivered to a third-party custodian.

In a recent circular, the Bangko Sentral said a regulated institution shall not enter into securities transactions with a client who has outstanding securities not delivered to a central bank-accredited third-party custodian. It added that it is the institution's responsibility to satisfy itself that the person purchasing securities from it has no outstanding securities that were not delivered to an accredited custodian. The responsibility for restricting the trading activities of noncomplying clients will fall squarely on the banks. The central bank has earlier issued Circular 392, which required banks and other financial institutions under its supervision to entrust to accredited third-party custodians the registration and safekeeping of "all securities, sold, borrowed, purchased, traded and transacted in the Philippines." Bangko Sentral is pushing for the securities registry as it would serve as a check and balance for government securities and debt instruments currently traded in the secondary market. The measure seeks to prevent a repeat of the BanCap scam in the 1990s, which involved the secondary but double sale of Treasury bills. This affected several banks and institutions. Some securities traders, however, have said the rules would just restrict capital market growth. "They infringe on the investor-dealer relationship primarily anchored on trust and confidence; and their effectivity and implementation are imperilled not only by practical and operational details, but by basic legal and constitutional infirmities," traders have said in a position paper.

Starting November 16, all holders of debt securities are mandated to lodge their investments with independent custodians. Custodians are firms which keep and manage, on the clients' behalf, their holdings of marketable securities like government bonds and commercial papers into stocks. So far, the bank regulator has approved the custodianship licenses of the Bank of the Philippine Islands, the local units of HSBC, Standard Chartered Bank, Deutsche Bank and Citibank. The Philippine Depository and Trust Co. has also received provisional approval from the central bank.



Peso strengthens but buckles in late trade to 56.315

The Philippine peso yesterday rode high on the euro and other regional currencies' appreciation due to overall dollar weakness but buckled down in late trade, traders said. "As soon as the peso reached PhP56.27, corporate players bought the cheap price, and eventually it went back to current levels," a trader at a local bank said. Hitting an intraday high of PhP56.27, the peso finished at PhP56.315 against the US dollar. The Japanese yen, a mover of Asian currencies, again strengthened against the dollar at 107.50, coming from 108. The euro, a commodity currency, was at 1.2637 from 1.24 in earlier trade. "We are not the only one dealing with fiscal problems, the United States is also battling its trade deficit," a trader said, explaining the dollar's weakness.

Traders also said dollar inflows steadied the peso-dollar exchange rate. The other day, the central bank said dollar inflows, led by foreign exchange remittances from Filipino overseas workers, have started to come in. "Some banks also brought back their dollars in the afternoon for profit purposes when they saw that the peso was inching its way down," another trader said. The volume of transacted dollars was at $108 million in the morning and only $65 million in the afternoon, but higher from the previous day's total of $171 million. Traders also said the central bank's decision to again hold off increases in overnight rates affected the peso only toward the end. At the Philippine Dealing System, the country's electronic currencies exchange, the peso strengthened by almost three centavos to average at PhP56.295 from PhP56.322. It capped its intraday high at its opening value of PhP56.27. Hovering within a 5.5-centavo range, the peso slipped to as low as PhP56.325. It closed weaker by less than two centavos to PhP56.315 from PhP56.30 the other day. -- Ira P. Pedrasa



Asia currencies gain as dollar slips

SINGAPORE -- The Taiwan dollar rose to a three-month high yesterday and the Singapore dollar and South Korean won held near six-month highs as the US dollar extended its fall against major currencies. The Indonesian rupiah was the only loser among major Asian currencies after President Susilo Bambang Yudhoyono surprised investors by naming Jusuf Anwar, a lesser known economist, as the finance minister in his new cabinet. Asian currencies have been on an uptrend since last week, led by the yen, as the US dollar has been undermined by worries about its widening trade deficit and the impact of record oil prices on an economy already showing signs of softness. The yen strengthened to around 107.80 against the dollar, its highest in more than three months, while the euro surged to its highest in eight months. "The market is focused on the dollar," said James Malcolm, Deutsche Bank's currency strategist in Singapore. "Very few people are disappointed by the dollar's decline."

Only interventions by the region's currency regulators, and a drop in share prices in South Korea and Taiwan, held back the currencies from matching the gains in the yen against the dollar, he said. At current levels, the trade-weighted Singapore dollar probably traded at the top end of the central bank's undisclosed policy band, while the South Korean authorities have intervened in the market in the last few days by buying dollars to stem again in the currency, Mr. Malcolm said. Should the won break its April highs near 1,140 per dollar, it would be trading at four-year highs. Similarly, if the Singapore dollar rallied through its April high it would be trading at its strongest in almost five years.

Asian currencies were also supported by recent data from Japan, the region's largest economy, that showed record profits at some of its biggest companies helped by an economy that was recovering from decade-long deflation. Even record high oil prices, which climbed back to $55 per barrel, failed to dampen investor sentiment toward the yen. Although Japanese authorities have warned about the negative impact of high oil prices on the economy, Mr. Malcolm did not expect them to intervene to halt the yen's gains unless the dollar weakened past 105 yen. In Indonesia, President Yudhoyono's new cabinet included business tycoon Aburizal Bakrie as the chief economics minister. Bakrie's companies ran up more than $1 billion in debt at the height of the Asian financial crisis in the late 1990s. "Everybody's scratching their head a little bit," said Mr. Malcolm. -- Reuters



Bourse to boost special fund to protect investors


The Philippine Stock Exchange (PSE) is bent on putting behind the ghosts of the BW Resources fiasco and Asia Capital Equities, Inc. by enhancing the provisions of a fund, effectively insuring the public's stock market investments. The so-called Securities Investors Protection Fund (SIPF) is meant to assure stock investors they will be able to recoup some of their investments in case their stock broker closes shop. With the fund, stock investments are insured up to a certain amount should a stock brokerage firm be declared insolvent or is forced to close down.

PSE President Francis Lim said a more efficient way of compensating customers for their claims will encourage investors to put their money at the bourse. "We want to clean up the house and put those issues to rest. In fact, we are working on changing some rules to ensure that claimants are paid even before a broker is declared judicially as bankrupt," said Mr. Lim, noting that he is pushing for a provision that ensures a front-end payment to assure investors that they are protected. "This will bring back confidence of investors in the local market." He said the PSE expects the approval of the revised rules by the general membership on Nov. 18. "The mechanics are there," he said, referring to provisions that will cushion investors from insolvencies of trading participants and serve as recourse for claimants.

The Securities and Exchange Commission (SEC) is reviewing the revised rules and regulations of the fund, which works like the Philippine Deposit Insurance Corp. of banks. The contributions of the 180 member stockbrokers at the PSE are channeled to the fund, where each pays PhP10,000. Monthly dues, determined by the fund's board, are also put into the fund. Part of the revised rules submitted by the bourse to the SEC is that the fund will only be available to claims of customers arising from obligations incurred by a trading participant when it was still a fund member of good standing. The fund will be used to pay such claims equivalent to a customer's total claim but not exceeding PhP100,000. The fund could only compensate claimants after the PSE has used the liquid assets of the broker to cover the liabilities. The fund will pay in full claims of PhP5,000 or less. However, for claims more than PhP5,000 but less than PhP100,000, it can only pay 20% of the claim or PhP5,000, whichever is higher. Customers with claims of PhP100,000 or more will receive PhP20,000 as payment from the fund. Subject to the limitations provided in the rules, the fund shall pay the remaining balance of the claims originally endorsed by the PSE once the assets of the trading participants are exhausted.



Speedy sale of government's transmission assets urged


Industry players yesterday called for a speedy sale of the National Transmission Corp. (Transco), saying its privatization could lead to better efficiency and lower transmission charges. The state firm's privatization through a 25-year concession agreement is critical to the whole electricity privatization program, First Gas Power Corp. Chief Executive Peter D. Garrucho, Jr. said. "A privatized Transco should be able to introduce efficiencies that could bring transmission charges down so that final electricity costs are more aligned with international prices. Eventually, that should help sustainability," he said. He said the active participation of a strong, capable and independent operator will ensure the sale of National Power Corp.'s power plants will be done in a least cost manner. Mr. Garrucho also cited the need for substantial investments to support the country's transmission system. "Government, despite its limited resources, has accomplished much, but if we want dramatic improvements in adequate lines, redundant systems, lower systems losses, interisland connections, major players have to enter this sector of the industry," he said.

As this developed, Transco yesterday said it will increase the reliability of its power supply to major load centers in the Laguna area once it commissions a 100-mega volt amps (MVA) transformer by mid-November. Transco President and Chief Executive Alan T. Ortiz said the commissioning of the transformer is part of Transco's plan to transfer the Makban switchyard to a new location to minimize the impact of environmental degradation to the facility. The state firm said the Makban switchyard is situated in the "path of steam" coming from the Mak-Ban power complex. "A decision was made to relocate it to avoid similar incidences such as this week's power interruptions which hit portions of Laguna and Batangas," the firm said.

Several areas, including Los Baņos and Calamba, experienced power shortages last Wednesday when the 100MVA transformer bogged down, but power was restored within 24 hours after the Manila Electric Co. shifted some of the load through its secondary lines. "It is just unfortunate that this incident happened before we can operate the new transformer in the new location. However, it underscored our concerns about the Makban switchyard which we have now addressed by relocating it and boosting its load capability," Mr. Ortiz said. The new transformer is expected to become operational from Nov. 5 to 15, Transco said. The relocation of the Makban switchyard, which provides the power requirements of Tanauan and Malvar in Batangas as well as industrial customers in the Batangas-Laguna area including Philtown Industrial Complex, UP Los Baņos, International Rice Research Institute, and Canlubang Sugar Estates, is part of the PhP9.8-billion Batangas reinforment transmission project set to be completed next year. The project is aimed at providing relief to power plants in Batangas which are having problems in transmitting electricity by putting up higher capacity lines, building new substations, and boosting the capability of associated substations to handle bigger loads. Its key components include the construction of 230 kilovolt lines connecting the San Lorenzo switchyard to the Batangas substation; the Batangas substation to the Makban "A" switchyard; the Makban switchyard to the Calamba Tower No. 50; and tower 50 to the Biņan substation.



PCI Leasing gets clearance to issue PhP500-M debt papers


The Securities and Exchange Commission (SEC) has allowed publicly listed finance company PCI Leasing and Finance, Inc. to register PhP500 million worth of short-term commercial papers, paving the way for their sale. In a resolution approved by the commission en banc yesterday, the SEC said that PCI Leasing has met all the requirements for the registration of the papers. "Considering the company has complied with the registration requirements of the Securities Regulation Code and its implementing rules and regulations, it is hereby recommended that the registration statement of PCI Leasing and Finance, Inc. for the registration of short-term commercial papers worth PhP500 million be rendered effective," the SEC said.

PCI Leasing said it will use PhP400 million of the PhP500 million for re-lending and PhP100 million for payment of maturing obligations. It said the issuance of the short-term commercial papers will be underwritten by PCI Capital Corp., its affiliate. The papers will have a maturity of one year from the date of approval of the SEC. They will have a minimum maturity value of PhP300,000. "The short-term papers will be available for sale by the selling agent, subject to the minimum purchase amount with interest rate and maturity terms based on prevailing market conditions. Delivery of the commercial paper will be made upon full payment of any purchase from the selling agent," PCI Leasing said. The company has secured the approval of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) for its plan to issue the commercial papers. Under the approval, the total number of lenders of PCI Leasing should not exceed 19 because the company has no quasi-banking authority.

PCI Leasing has a PRS1 rating from Standard and Poor's affiliate, Philippine Rating Services Corp. The rating considered the company's strong liquidity position, as evidenced by well-matched receivables and maturity; large absolute size and stable quality of its capital; its fair asset quality; support from its parent company, and the improving growth of finance companies. PCI Leasing is an 84%-owned subsidiary of Equitable PCI Bank. Its principal business is to provide leasing and financing products to commercial clients. Its leasing products include direct leases, sale and leaseback arrangements, and dollar-denominated leases. Its financing products, meanwhile, include commercial and consumer loans, installment paper purchases, employee personal loans, and receivables discounting and factoring. Assets finance include automobiles, trucks, office equipment, industrial, agricultural and office machinery, real property, and financial assets such as receivables. It sources 40% of its revenues from its leasing business and 60% from its financing business. As of June 30, the company's assets hit PhP2.041 billion while liabilities stood at PhP5.44 billion. Last year, the company issued short-term commercial papers amounting to PhP100 million, half of which was used to finance maturing obligations and other other half for re-lending.



Nissan eyeing 28% increase in car sales

Nissan Motors Philippines, Inc. is eyeing a 28% increase in sales by 2005 as car sales are expected to pick up, particularly in the sport utility and passenger vehicle segments. Out of a 4,700-unit sales target for the year, head for marketing and production planning Raymond Tribdino said Nissan and its partner Universal Motors Co. had already sold 3,500 units.

After lowering the projection for industry sales this year to 87,000 units, he said the Chamber of Automotive Manufacturers of the Philippines, Inc. is eyeing a recovery back to the sales level of about 100,000 units next year. "The growth is seen particularly on the SUV [sport utility vehicle] segment because costs are going down, there's a variety of models out in the market, and diesel engines are also more available. These factors will help increase the market," he said. He said the introduction of new models for passenger vehicles are also expected to drive sales. "For the SUV segment, we're looking at a growth of 12%, and for passenger cars, it's 8%." He added that Nissan's test drive program, which was launched yesterday, is also expected to help boost the sales. "This is a global awareness campaign to bring vehicles closer to the market," Mr. Tribdino said. The Nissan group worldwide targets to sell one million units, gain an 8% growth, and cut debts down to zero in three years' time. "The Philippines will contribute 6,000 units to the total sales next year," Mr. Tribdino said. -- Anna Barbara L. Lorenzo



Japanese firms keen on buying Napocor plants

Several Japanese firms are keen on the ongoing privatization of the generation assets of state-owned National Power Corp. (Napocor), Energy Secretary Vincent S. Perez, Jr. yesterday said. Some 11 "big names" in Japan's electricity industry, which he did not identify, have indicated willingness to participate in the government's privatization efforts, the Energy chief said in a statement. The firms also expressed interest to take part in the development of the country's geothermal fields. State-run Power Sector Assets and Liabilities Management Corp. (PSALM) has successfully bid out four hydroelectric power plants such as the 3.5-megawatt Talomo in Bukidnon, the 1.6-MW Agusan in Bohol, the 1.8-MW Barit in Camarines Sur, and the 0.4-MW Cawayan in Sorsogon.

PSALM is the government company tasked to oversee the privatization of Napocor and its spin-off firm, the National Transmission Corp. Mr. Perez said PSALM is working on an accelerated privatization program with about 70% of Napocor's total assets in Luzon and Visayas sold by end-2005. He said three Japanese firms have signified intention to take part in the geothermal bidding round set next month. The Energy department said among the geothermal fields open for bidding are the: Manito-Kayabon and Rangas-Tanawon in Sorsogon; Biliran in Eastern Visayas; Amacan in North Davao; Dauin, Negros Occidental; Natib, Bataan; Mabini, Batangas; Montelago, Mindoro Oriental; Kabalian in Leyte and North Cotabato (Mindanao optimization). Initial estimates show these fields could yield as much as 300-470 MW in additional capacity, Mr. Perez said. The Philippines is considered the world's second largest geothermal producer with an installed generating capacity of 1,932 MW, next to the US. -- Bernardette S. Sto. Domingo



Stocks at three-week low; PLDT down


Philippine share prices yesterday closed at a three-week low as a confluence of events, weighed down by a growing impatience among investors, overshadowed earlier gains. "Overall, the market was weak. The decline was broad-based, led by PLDT [Philippine Long Distance Telephone Co.]," said Jose Vistan, Jr., research director at AB Capital Securities, Inc. PLDT, the country's telecommunications giant, was down to PhP1,375 from its previous close of PhP1,425. The market's breadth was also weak at 5:1, said Mr. Vistan. Losers ruled as they overturned gainers at 53-15. Unchanged issues totalled 49. Trades totalled 2,802 for 696.2 million shares worth PhP724.3 million. The benchmark Philippine Stock Exchange composite index (Phisix) slipped 18.33 or 1.03% to 1,766.60. Only property floated, up 2.63 or 0.40% at 658.76. Oil was unchanged at 1.71. The rest were down. The commercial-industrial dropped 34.19 or 1.22% to 2,776.91. Mining slumped 28.86 or 1.40% to 2,034.12. The banks and financial services index dipped 6.64 or 1.33% to 492.76. The all-shares index went down 3.60 or 0.32% to 1,110.71.


Mr. Vistan attributed the decline largely to the market's impatience which resulted from various factors. "The market was impatient because share prices were unable to sustain previous rallies. The continuing rise in oil prices was the deterrent for the market to rally to the 1,900 to 2,000 level," said Mr. Vistan. He said a rising market and rising oil prices "could not coexist." He remarked that "one has to be flat or down for the other to be up." The heavy sentiment, he said, was hindering the market from testing new levels. "The conditions [for a new rally] are not there due to some factors," he added. He said negative factors abound, preventing the market from staging a rally that could replicate last month's gains. "There are the crude oil price [that keeps increasing] and the slowness in legislating tax measures to avoid a [credit ratings] downgrade," explained Mr. Vistan.


But these are not the only obstacles. There is also the effect of the corporate earnings results on the investors' mood, he said. "Corporate earnings must either be in line or better [than expectations] or another Jollibee experience will [ensue]," said Mr. Vistan, referring to the market's immediate reaction to the lower-than-expected earnings report of the country's leading fastfood chain. Jollibee Foods Corp. managed to post a 6% increase in net profit to PhP317 million for the third quarter. But investors were unimpressed as they were expecting to see at least a double-digit growth. The stability of the Armed Forces of the Philippines (AFP) is also a concern as investors monitor the investigation on AFP comptroller Major General Carlos Garcia, who is alleged to have amassed billions of pesos at the expense of the military. "The stability of the military situation is also a factor," said Mr. Vistan. The massive decline in markets abroad such as the Dow Jones Industrial Average which shed 10.69 at 9,886.93 and Japan's Nikkei which dropped 92.95 to 10,789.23 also triggered some selling among local investors. These exacerbated negative sentiments that filtered through the Philippine market as individual foreign companies felt some pinch in their operations resulting from escalating oil prices.


Mr. Vistan said the market is now at an oversold level after "being flat for a while." "If it bounces back, it will purely be technical and not a reversal or a sign for a resumption of a rally. The short-term is a negative bias, zigzagging a downward trend," added Mr. Vistan. Investors and the market, in general, must decide on what they have to do as early as now, advised Mr. Vistan.

Although its price declined, PLDT remained the top actively traded stock. PLDT is the parent firm of Smart Communications, Inc., the country's market leader in mobile communications. Investors are gauging how its rival, Sun Cellular of the Gokongwei family's Digital Telecommunications Philippines, Inc. (Digitel), will affect Smart's operations. Digitel, also down at PhP1.32, recently launched a 24/7 service allowing for cheaper calls at all times of the day. The company told Mr. Vistan that "it was too early to say if the new service [not a promo]" was doing well since it was only two weeks in the market. But it seems that the new service has already attracted a number of Smart's subscribers to shift to Sun Cellular. Some observers said if claims by Sun Cellular on its new service prove to be true, more mobile phone users may consider switching to the firm.

Ayala stocks secured their positions as among the widely traded stocks. Ayala Land, Inc. followed PLDT as the second most active stock as it closed unchanged at seven pesos with 12.32% share of the market. Parent Ayala Corp. was fourth. It was also unchanged at PhP6.30 but with only 8.4 million shares transacted for PhP52.9 million. Its market share was 7.3%. The Bank of the Philippine Islands, which is a part of the Ayala group, completed the top five most active stocks. But BPI was down to PhP46 with 6.75% market share. SM Prime Holdings, Inc. (SMPH) of retail tycoon Henry Sy has not retreated from the race as it ended third most active stock, up at PhP7.30 with almost 10 million shares traded worth PhP72.6 million.

Meanwhile, Marita Limlingan, PSE director and investor education committee chairman, said despite the decline in the Phisix, the market is still poised for a bull run. "Those are only technical corrections. The market is always bound to correct and the decline is not a reflection of the fiscal situation in the country," she said.



Big industries, builders buck move to require assets declaration

By JUDY T. GULANE, Reporter

Manufacturers and housing contractors oppose a bill now pending in Congress that will require all taxpayers to submit statements of assets, liabilities and networth to the Bureau of Internal Revenue starting next year. These businessmen, through their respective industry associations, told the House of Representatives ways and means committee yesterday that House Bill No. 2895 would violate a taxpayer's right to privacy, and would impose an additional burden on businesses. The Chamber of Real Estate and Builders' Association, Inc. (CREBA) submitted to the committee a position paper signed by its national president, Purita S. Soliven.

Meanwhile, the Federation of Philippine Industries (FPI) was represented in the ways and means committee hearing by the chairman of its finance committee, Napoleon Cabello. CREBA said House Bill No. 2895 also violated a taxpayer's right against self-incrimination as well as his the right to be presumed innocent. "Every person must be entitled to keep private his assets and other valuables and he or she must not be compelled to disclose them compulsorily under pain of penal action," CREBA said. "No person should be compelled to a witness against himself or herself. [House Bill No. 2895] will unduly put a taxpayer in a position where his own declarationcan be used by unscrupulous revenue officials to harass the taxpayer," it said. "The premise of [the bill] already presumes that the taxpayer is guilty of tax evasion or fraud, thus presuming the corresponding imposition of penalty for any mistake or error in the [asset statement," it added.

Mr. Cabello, meanwhile, said the filing of an asset statement would unduly burden corporations that must also prepare balance sheets and income statements, and foundations that were not required to pay taxes. He also said there were no guarantees that submission of asset statements would improve tax collection. He noted government officials were already required to file asset statements, yet this has not been effective in indentifying tax cheats. There are also concerns of "selective application of the law," that the asset statements will be used against taxpayers, Mr. Cabello said. This can lead to kidnappings and capital flight, he added. The government, as it is, already has a lot of information at its disposal if it wants to verify whether the correct taxes are being paid, he said. These information are with the Securities and Exchange Commission, Land Transportation Office, and Land Registration Authority. CREBA also suggested that the submission of asset statements be voluntary, and be made attractive with incentives. During the committee hearing, Marinduque Rep. Edmund O. Reyes Jr. said the timing of the bill was "bad" since it would additionally burden taxpayers who would also deal with new taxes.

Under House Bill No. 2895, by Cavite Rep. Jesus Cripin C. Remulla, taxpayers earning an annual gross income of more than PhP200,000 or owning real or personal properties with an acquisition cost of at least PhP500,000 must file asset statements as of December 31, 2004 at revenue district offices of the Bureau of Internal Revenue. They must file their first statement on or before April 15, 2005, and on or before the same date in succeeding years.



Gov't overspending below cap as of September

While the government again spent more than it earned in nine months to September, it claims to have better managed its finances during the period to keep its overspending below the limit. Its expenses rose substantially particularly in the third quarter (July-September) because of large interest payments on foreign loans that period. It also made big advances to government-owned and -controlled corporations, which have been losing money, since the start of the year until last month.

For January-September, the government's budget deficit totaled PhP141.907 billion, which was just PhP2 billion shy of the PhP143.341-billion deficit ceiling for the period, the Finance department reported yesterday. The state earned PhP516.39 billion and spent PhP658.3 billion during the period. In the third quarter alone (July-September), the deficit totaled PhP61.78 billion, also below the PhP63.76-billion limit for the period.

For that quarter, interest payments on foreign loans was PhP30 billion higher year on year as it rose to PhP78.025 billion because of the peso's depreciation. The government had to raise more pesos for every dollar in interest to be paid, since what was earlier budgeted for payments was only PhP74.49 billion. Its lending to state-run firms in nine months to September was also unexpectedly high. Advances to these firms totaled PhP8.9 billion, while what was earlier budgeted was only PhP1.1 billion. These firm included big losers like the National Power Corporation, National Irrigation Authority, Light Railway Transit Administration, and Philippine Nationa Railways. Around PhP2.7 billion was also used to pay for obligations from the Casecnan irrigation project. But Finance Secretary Juanita D. Amatong told reporters in a press conference she was still "almost certain" the government would keep to its PhP197.8-billion deficit ceiling for the year.

Claiming that the government was better managing its finances, she said she was confident it could also maintain its credit ratings. "The deficit level in the last two years are very good indicators of how we practice fiscal discipline," she said. "This is a very good performance for the third quarter, and the second year of good fiscal performance measured by the actual results versus the programmed targets," she added. Socioeconomic Planning Secretary Romulo L. Neri also said he was confident the government would not breach its budget deficit ceiling for the year. "We may even do better," he said in a telephone interview, noting that the deficit may end 2004 even below the ceiling of 4.2% of total economic output or gross domestic product. Ms. Amatong also said advances to Napocor totaling PhP500 million were expected to be paid within the year.

International creditors have expressed concern over the government's ability to control the deficit, given its record of failing to meet targets. Ms. Amatong earlier said she was optimistic the government would balance the budget and eliminate the deficit by 2009 by raising taxes and cutting expenditures. The Finance chief said the government has long recognized the urgency of legislating new taxes to solve its fiscal problem. The Department of Finance hopes Congress will pass at least four tax-related measures by yearend. -- Karen L. Lema with inputs from J. A. Ng



Investment pledges rise to PhP1.61B in August

The Board of Investments (BoI) and the Philippine Economic Zone Authority (PEZA) approved PhP1.61 billion in new investment pledges for August, up 50.47% from PhP1.07 billion in the same month last year. Data released by the Trade department yesterday also showed that in eight months to August, investment pledges totaled PhP146.57 billion, up substantially from PhP25.53 billion in same period last year. Manufacturing investments accounted for PhP838 million or 52% of August investments, while information technology or IT services contributed PhP451.24 million or 28% of the total. Year-to-date, manufacturing and IT services comprised 24.06% of total investments, but Elmer C. Hernandez, Trade and Industry undersecretary and BoI managing head, said they were expected to account for almost all of new jobs to be created at 47,333. Investments in manufacturing and services are expected to create 6,120 and 1,154 jobs, respectively, for August, which brings the January to August total to 47,834.

Trade Secretary Cesar A.V. Purisima noted that foreign investments went up 38.55% to PhP1.08 billion in August. Local businessmen, meanwhile, put up 81.09% more investments at PhP530.28 million. "Increased foreign capital infusion is a signal that foreign business confidence on the Philippines is on the rise and we expect more offshore firms to make their firm commitment to locate here before the year ends," Mr. Purisima said. Still, the amount of investments to the Philippines is "meager" when compared to that of neighbors in the Association of Southeast Asian Nations as well as India and China, the Cabinet official said. "The government intends to correct this situation by making the country a preferred [foreign direct investment or FDI] destination, and one way is through the incentives rationalization plan of the government," Mr. Purisima said. "We have to make our incentives at par or even better than our Asian neighbors if we intend to attract the big ticket projects that are going to the Asian region."

While the government wants to compete with other countries in attracting FDIs, it is still making sure that the grant of tax and other incentives is justified, Mr. Hernandez said. "The government does not just easily give incentives; it has stringent criteria for projects to pass before these are given. Aside from employment generation and the amount of capital being infused, criteria for giving incentives include the impact of the project to the community/country and the appropriateness of the technology being introduced," the BoI managing head explained. Mr. Hernandez said that it is important for the Philippines to hike infrastructure investments. "Infrastructure lays down the necessary platform from where firms can establish their operation. The better the infrastructure the more chances the country can attract business," he said. "But it is in manufacturing and services that the country can generate more jobs for the population. In infrastructure, most jobs are generated during the construction phase while jobs in manufacturing continue as long as the firms are operational," Mr. Hernandez added.

Top investors for August include Pilipinas Kyoritsu, which is embarking on a PhP237.27-million wiring project in the Southern Tagalog region; and the Property Company of Friends, which registered a PhP101.54-million mass, low-cost housing project. Two garments companies, Scrap Heap International Corp. and Gweng Woo Garments Co., Inc., poured in PhP193.78 million and PhP87 million, respectively. "These investments dispel the notion that the garments industry is on the downtrend. Our industry has competitive advantages that make it an ideal manufacturing base of garments such as its quick turn-around production time and skilled manpower. These advantages allow our industries to have strong presence in the export market," Mr. Purisima said.

NUCOMM International Philippines is setting up a PhP110 million contact center, bringing total investments in the sector for the year to PhP4.18 billion. Investments in IT services reached PhP5.34 billion from January to August, up 46.01% and creating 11,338 jobs. IT projects totaled 56, higher than last year's 44. "Our outbound investment missions have been successful in promoting the country to prospective investors. Furthermore, the successful operations of existing notable firms in the country served as powerful testimonial to foreign firms that profitable business can be made in the Philippines," Mr. Purisima said. At yesterday's meeting of the American Chamber of Commerce of the Philippines, however, John D. Forbes, chairman of the organization's legislative committee, cited the need to distinguish between actual investments and investment pledges recorded by agencies like BoI. Mr. Forbes said the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) records not only actual investments, but also net FDI, or investment inflows minus investment outflows. Net FDI for 2003 reached only $319 million, BSP data showed. This is an 82% decline from 2002's $1.792 billion. In 2001, net FDI reached $982 million. -- Felipe F. Salvosa II



Regulators plan gradual cut in banking reserves

Banking regulators plan to gradually lower over the next six years the amount of deposits banks are required to set aside as reserves if only to encourage them to put more money in a wider variety of investments. This way, they can limit the risks to their investments, better manage their finances, and give more protection to their depositors, Bangko Sentral (Central Bank) Governor Rafael Buenavantura said in a forum yesterday. Freeing more deposits from vaults will also allow banks to help develop the capital market through their investments in equities or stocks, corporate debt papers, bonds, and government securities, among others. This, in turn can help them reduce their risks as alternative modes of financing become available to businesses and consumers. More money will also be released into the financial system for possible lending to the cash-strapped government, to reduce its dependence on foreign borrowings. "Over the medium-term, we hope to effect a phased generalized lowering of reserve requirements, to be more competitive with low reserve requirement regimes found in most other countries," Mr. Buenaventura said. This would give banks "greater flexibility in managing and redistributing [their] risks via the capital market, particularly through securitization and hedging," he added.

Right now, local banks must keep at least 19% of deposits in their vaults as reserve requirement. Other Asian central banks require only 3%-6% of deposits. Bangko Sentral Deputy Governor Amando M. Tetangco, Jr. said countries with healthy capital markets have kept their reserve requirement at below 10%. Bangko Sentral Assistant Governor Diwa C. Guinigundo noted that every one percentage point change in reserves could free up to PhP15 billion in bank deposits and make them available for either lending or investment, and consequently encourage business of economic activity. Mr. Buenaventura said the gradual lowering of the reserve requirement could apply to a number of transactions and financial products, to create more profit opportunities for banks. Bangko Sentral's reserve requirement is currently high to better secure deposits as well as to control money supply amid high inflation or fast-rising consumer prices. Mr. Buenaventura noted the need to develop the capital market also to encourage more people to save.

Data shows Philippine savings at only 20.1% of total economic output or gross domestic product, compared with 31.6% in Hong Kong, 33.1% in Thailand, 42.9% in Malaysia, and 46.7% in Singapore. Mr. Buenaventura said the central bank would push for more reforms in the financial sector, including a special law for a strong credit reporting system and more balanced bankruptcy rules. "We particularly attach great importance to the amendment of the [Bangko Sentral] charter. Unless we are able to properly police the banking system with sufficient powers, we will be constantly plagued by a vulnerable banking system," he said. -- Iris Cecilia C. Gonzales



North Luzon Expressway toll fees to hit PhP200-PhP600

Toll fees at the North Luzon Expressway will be four times more expensive once its repairs will have been completed before the end of the year. From PhP41 currently for cars and jeepneys entering the Balitantawak, Quezon City gate and exiting at Mabalacat, Pampanga, the toll fee will go up to PhP200. Buses and light trucks now paying PhP82 will be charged PhP500, while heavy trucks now paying PhP123 will be charged PhP600.

The tollway's contractor, Lopez-owned Manila North Tollways Corporation, said yesterday it would petition the Toll Regulatory Board for the higher fees after it will have completed the expressway's rehabilitation by the end of next month. Company president Jose P. De Jesus said repairs were 92% done. He also said the toll increase was based on computations approved as early as 1998, which were included in the tollway operation agreement between the government and his company. Factors affecting toll prices include changes in consumer prices as well as the peso's depreciation against the US dollar. But Mr. De Jesus said only seven out of 10 tollway users actually travel the full length of the highway, so the higher fees should not significantly burden the public. "The average payment of [tollway] users is only PhP75 because the average length of travel is only 31 kilometers," Mr. De Jesus said. In turn, however, the improved road system will result in less vehicle wear and tear and less fuel consumption for motorists.

North Luzon Expressway last raised toll fees in December last year. The $371-million repair of the 82.62-kilometer highway started in February last year, under a joint venture agreement between state-controlled Philippine National Construction Corp. and Manila North Tollways Corp. The repairs include the construction of 138 new lane kilometers, to accommodate more vehicles and reduce traffic congestion. Four new interchanges were also added to the existing 10. -- Beverly T. Natividad



US businessmen offer plan to attract investors

American businessmen in the country are offering their own "road map" to raise foreign investments and improve the economy, listing six "broad areas of recommendation" for the government. John D. Forbes, chairman of the American Chamber of Commerce of the Philippines' (AmCham) legislative committee, said that to attract more foreign investments, the country should modernize infrastructure, improve governance, slow population growth, accelerate legal reform, reverse the declining proficiency in English, and improve security. Also, the government should soon move on five issues that all foreign chambers view as an "immediate action priority," namely:

  • rehabilite the South Luzon Expressway and its connection to the Southern Tagalog Arterial Road all the way to the Batangas port;
  • open the Manila international airport's Terminal 3;
  • upgrade power transmission grids;
  • pass tax-related bills, specifically higher taxes on "sin" products; and
  • stop the importation of used motor vehicles.

Mr. Forbes said the country would need at least $3 billion in investments annually, but has been getting only about $1 billion. Data from the United Nations Conference on Trade and Development showed that foreign direct investments to the Philippines reached $1.1 billion in 2002, slightly higher than Thailand's $1.07 billion but lower than Vietnam's $1.2 billion and Malaysia's $3.2 billion. "China is emerging as a major threat," added Robert W. Blume, chairman of AmCham's trade and investment committee and director of the American Desk at the Board of Investments. He also noted three clear investment trends developing in the country:

  • migration of manufacturing to other countries but retaining marketing;
  • maturity of a large information technology or IT manufacturing sector such as electronics and semiconductors; and
  • the emergence of fast-growing IT-enabled services such as contact centers.

Overall, "new foreign investment inflow is inadequate and declining," Mr. Forbes said. Not enough foreign investments is one reason the Philippines remains poor, he added, also citing that per capita income "is barely growing." While per capita income grew by 14% from 1975 to 1999 to $647, this is still considerably low compared with China's 235% ($887), Thailand's 220% ($1,780), and Malaysia's 153% ($3,175), he said. Mr. Forbes also warned that a downgrade in sovereign ratings by credit ratings firms Fitch, Moody's and Standard and Poor's would cost the government PhP20 billion more in foreign debt servicing, aside from dampening foreign investments. "Implementing our road map will bring more foreign direct investment. A status quo could cause foreign investors to relocate," he said.

A Gallup survey commissioned by AmCham this year listed nine main concerns of American investors in 17 business sectors. These are corruption, unstable political system, infrastructure, laws and regulations, tax structure, new business incentives, local protectionism, personal security, and the free movement of goods, Mr. Blume said. But there are also two areas of satisfaction: trained personnel and office lease costs. Mr. Blume said the country should strive to improve competitiveness to arrest its decline in rankings, as shown in the separate reports of the World Economic Forum, the World Competitiveness Yearbook, Transparency International, and the Index of Economic Freedom. Mr. Forbes also called for slower population growth by intensifying family planning, passing the reproductive health bill, a national advocacy for smaller families, and providing incentives to poor parents with only two children. If population growth is not contained, there can be 100 million Filipinos by 2011. "We cannot reduce poverty or achieve strong [economic] growth with a 2.36% population growth rate," he said. -- Felipe F. Salvosa II



Napocor bailout may force NG to borrow

The National Government will be forced to borrow to pay off the PhP200-billion debts of the National Power Corporation (Napocor) if lawmakers fail to approve any of the Executive department's proposed taxes, Finance Secretary Juanita D. Amatong told reporters yesterday. She explained that the Napocor debt to be assumed by the government beginning next year will have to be paid out of the expected income to be generated from the eight revenue measures now pending in Congress. "If there will be no new taxes, the National Government will have to go borrowing," Mrs. Amatong told reporters yesterday.

President Gloria Macapagal Arroyo issued on Oct. 12 Executive Order No. 370, allowing the government to directly assume PhP200 billion of the PhP500 billion debt of Napocor to speed up its privatization. The remaining PhP300-billion Napocor debts, Ms. Amatong said, would have to be funded through the proceeds that will be generated from the sale of its transmission and generation assets, which is expected to earn for the power firm PhP200-billion. Napocor has trimmed its projected losses to PhP106 billion from PhP113 billion after it was allowed by the Energy Regulatory Commission a provisional rate increase of an average 98 centavos per kilowatt-hour. Napocor had earlier asked for an average increase of PhP1.87 per kilowatt-hour. The new rate is expected to earn Napocor an additional PhP37-billion in revenues. "The increase in the tariff rate of NPC [Napocor] will stop the bleeding of NPC, otherwise NPC will go into debt," Ms. Amatong said. The Finance chief added that Napocor's financial requirements for next year will significantly be reduced given the debt-absorption order and the favorable ruling it got from the ERC.

Congress mandated the debt assumption when it passed the Electric Power Industry Reform Act (EPIRA) in 2001. "The National Government shall directly assume a portion of the financial obligations of Napocor in an amount not to exceed PhP200 billion," states Section 32 of the power sector reform law. Last June, the government said it plans to assume Napocor's debts of PhP500 billion to help smoothen its privatization. The DoF has repeatedly stated that the government's move to assume the debts of Napocor as prescribed by the law is expected to boost the participation of the private sector in the country's energy industry. The debt transfer is one of the commitments made by the government to Napocor's major creditors -- the Asian Development Bank, World Bank, and Japan Bank for International Cooperation -- to help facilitate the privatization of the energy sector. But several lawmakers have questioned the timing of the debt-assumption order issued by the President, citing the poor state of the government's finances. Ms. Arroyo recently said that the government is in a midst of a fiscal crisis.

Senator Manuel Roxas II has called for a public accounting of Napocor debts before the government assumes them. He called for a review of how the debts were incurred, why they were borrowed, and for what exact purposes they were contracted. The debt-assumption order, Executive Order No. 370, took effect Oct. 15, immediately after it was published in a newspaper of general circulation. No announcement, other than the newspaper ad, was made about it. Under the order, the DoF, in consultation with the Department of Budget and Management and the Commission on Audit, will work out the details on how to go about the debt absorption. But a Finance official, who requested anonymity, defended the dept-assumption order issued by the Malacaņan presidential palace, saying: "It is a law, therefore, there are extensive debates that will show the reasons why the government needs to shoulder Napocor's debts." Moreover "what we are doing today is not different with what we have to do later on," the official said.

Napocor, like other government-owned and -controlled corporations (GOCC), was granted automatic guarantee privileges under its corporate charter. This means that in case the firm defaults, government has to assume the payments of its debts. And such a scenario is likely given the precarious financial situation of the state-run power firm. If the government will not assume payment of Napocor's debts "the repercussions will be, unfortunately exactly the same with what we are confronted with today," the official said. -- Karen L. Lema



Fitch to give RP time to pass tax laws

The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) told a visiting team from credit ratings firm Fitch Ratings that the Macapagal-Arroyo administration is committed to pass revenue measures designed to help rein in the budget deficit by yearend. BSP Governor Rafael B. Buenaventura, who met with officials of the agency, surmised that Fitch would be closely watching whether Congress would be able to pass some of the proposed revenue measures soon after it resumes session on October 25. He told Fitch officials that lawmakers have said that the approval of the proposed measures is as good as done. He conceded, however, that nobody could guarantee the passage of the measures except both houses of Congress. "I think [Fitch] will give us time. They will probably see what's going to happen after the recess [of Congress]," he said yesterday. Mr. Buenaventura said the country cannot afford a credit downgrade since this move would further shoot up government's borrowing costs. He conceded that it was difficult to say whether the Philippines would get another credit downgrade, since Fitch has yet to review "the numbers."

Senate ways and means committee chairman Ralph G. Recto said Congress has a timetable to pass revenue-enhancement measures to ease the financial burden of the government. Mr. Recto noted that the Senate ways and means committee will submit a report next month on the results of the initial deliberations on tax amnesty and performance-based lateral attrition. The committee will conduct another hearing on the two revenue measures today. Mr. Recto noted that this should fast-track the discussion on the revenue measures. The chairman of the House of Representatives ways and means committee, meanwhile, is appealing to his members to expedite the passage of the measure indexing the excise tax on alcohol, cigarette and tobacco products to inflation to avert a credit downgrade for the Philippines. "I plead with members of the committee, let us not make the 13th Congress the scapegoat (once this downgrade happens)," Tarlac Rep. Jesli A. Lapus said yesterday. -- Iris Cecilia C. Gonzales, Carina I. Roncesvalles and Judy T. Gulane



Oil firms to raise prices weekly by P0.35/liter til November


Oil companies would implement a weekly increase of 35 centavos a liter for diesel products to recoup under-recoveries of between PhP2 to PhP3 per liter, an official of the Independent Philippine Petroleum Companies Association (IPPCA) yesterday said. Glenn Yu, president of Seaoil Philippines, Inc. and IPPCA vice-president, yesterday said oil companies would have to impose an additional PhP2.00 per liter increase until November on a staggered basis. This was confirmed by IPPCA Chairman Fernando L. Martinez, noting that high prices of oil in the world market were pushing local prices up. Mr. Martinez is also the president of Eastern Petroleum Corp. "It is highly possible that (price increases may extend until next month), unless the trend in the world market is reversed," he said in an interview. This developed as small oil retailers which account for 15% of the local oil market, yesterday increased diesel and kerosene prices between 12:01 a.m. to 6 a.m., citing continued increase of prices in the world market.

Eastern Petroleum, Seaoil, and Unioil Philippines raised diesel and kerosene prices by 35 centavos a liter effective 6 a.m. yesterday. Flying V increased diesel and kerosene prices by 45 centavos at 12:01 a.m. Total Philippines Corp. and Caltex Philippines, Inc. also increased diesel and kerosene prices Tuesday by 35 centavos a liter for diesel and kerosene. Early this week, Total and Caltex also raised prices of liquefied petroleum gas by 50 centavos per kilogram. For its part, oil refiner Pilipinas Shell Petroleum Corp. also announced that it has diesel and kerosene prices by 35 centavos a liter effective 12:01 a.m. yesterday.

Energy Sec. Vincent S. Perez Jr. on Tuesday asked oil companies to limit any price increase even as he warned of higher fuel prices in the coming months. The tight supply of diesel, which is used as heating fuel in the winter months in the United States and Europe, has kept its price on steady uptrend, Mr. Perez said. There were also disruptions in production because of an oil workers' strike and threats of rebel attacks in Nigeria, production losses in the Gulf of Mexico due to several hurricanes, continuing violence in Iraq, and the ongoing legal and financial problems of Yukos, Russia's largest oil company.


As this developed, Seaoil yesterday launched Bio Exceed, a diesel-enchancing product aimed at providing 25% improvement on diesel engine efficiency translating to cost-savings of more than PhP1 per liter of fuel for motorists. Seaoil has 88 gasoline stations nationwide and has a 3% market share in terms of stations. "If for example, customers are paying PhP22.50 per liter for diesel but if Bio Exceed is blended as an additive, it's as if they are paying only PhP21.50 because it gives improved mileage, better fuel efficiency and longer engine life," Mr. Yu said during a product launch. He said Seaoil was looking at expanding production and possibly exporting the product to Japan. "We are proud to offer the Filipino public a product that not only helps cut down fuel costs but also helps uplift the country's economy as a whole. With the current trend of increasing oil prices, we found it necessary to look into alternative sources of energy to reduce our dependence on imported fuels," Mr. Yu said. The new product does not require engine modification and can be used at once, he said. Bio Exceed is made from trans-esterified coconut oil or coco methyl ester. It can be used as an enchancer of diesel fuel or as a total substitute for it.



Peso strengthens; steady recovery seen until yearend


Dollar inflows helped the Philippine peso's rally in yesterday's trade, creating enough liquidity in the country's electronic currencies exchange. The peso strengthened by almost six centavos to PhP56.30 from PhP56.355 previously, following other regional currencies' reaction to the weakness of the US dollar. For the rest of the year, the Bangko Sentral ng Pilipinas expects the peso to steadily recover because of strong dollar inflows. Amando M. Tetangco, Jr., deputy governor of the central bank, said the inflow of dollars began ahead of expectations. The central bank had expected this in early November and to continue throughout December in anticipation of the Christmas season. Mr. Tetangco said the three sources of dollar inflows are remittances from overseas Filipino workers, sales of exporters and equity investments.

The general weakness of the dollar, attributed to election-related concerns in the United States, has also helped strengthen the peso, he said. He also said demand for dollars have eased compared with the third quarter when importers had to settle their quarter-end obligations. "Demand is not as strong as in the third quarter," he said. Bangko Sentral Governor Rafael B. Buenaventura has said the peso can recover to below PhP50 from the current PhP56 against the dollar, if the Macapagal-Arroyo administration delivers its package of revenue measures. Otherwise, central bank projects the peso to fall to PhP57 against the dollar, starting next year and stay at this level until reforms are in place.

At the Philippine Dealing System, the country's electronic currencies exchange, the peso averaged at PhP56.322 against the dollar yesterday, higher by more than five centavos than PhP56.376 on Tuesday. After opening at PhP56.33, it hovered within a seven-centavo range, following the upward momentum of strong Asian currencies. The yen was higher at 108.20 per dollar, coming from the 109.20 level. A trader at a foreign bank said the peso went to as high as PhP56.28 as soon as the yen jumped. The peso then went to as low as PhP56.35 and finally settled at PhP56.30 against the greenback. Total volume of transacted dollars increased to $171 million from $115.5 million, which traders said indicates a "push and pull" from dollar inflows and corporate demands.


"We felt the impact of remittances, and I think we have outgrown any possible downgrading from credit agencies," Rovic de Guzman, head of trading at the Union Bank of the Philippines said. He added that a negative result from such agencies was already assumed. Representatives from Fitch Ratings Services are in town this week to look into the country's performance in generating a healthy cash flow.

Earlier, Standard & Poor's Ratings Services also warned the Philippines of another downgrade if Congress fails to enact revenue measures. A credit downgrade makes it more expensive for the country to borrow as it reflects its ability to pay debts. It also increases the cost of doing business in the country. Traders expect the peso to remain steady at PhP56.25 to PhP56.35 today, partly because of the dollar's weakness as the US struggles to trim its trade deficit. "Add to that the round of oil price hikes which is dragging down its trade connections," the foreign bank trader added. The trader also said "a stronger peso should not be in place yet. Remember that the month-end requirements of oil and manufacturing companies is nearing. They would rather buy now while the dollar is still relatively cheap."



Merger of financial market groups may not push through

A merger may not be in the works for the Money Market Association of the Philippines (MART) and the Financial Markets Association ACI Philippines due to differing operational frameworks. MART president Asterio L. Favis, Jr. told BusinessWorld that "each [group] felt that a merger might cause a diffusion" of definite obligations. MART is the umbrella organization of government securities eligible dealers, or financial institutions that are allowed to purchase government-issued debt instruments from the Bureau of the Treasury. At present, MART has a total of 68 member institutions, or 90% of dealers in the market.

Formerly Forex Philippines, ACI Philippines is composed of individual currency traders. It is under the umbrella organization of the international financial market organization Association Cambiste International (ACI). "It's not yet official, in fact, we will meet again next week. Even if we are separate entities, we will still coordinate closely with ACI," Mr. Favis said. The two groups signed a memorandum of agreement last December, creating an ad hoc committee to study and recommend the feasibility of a merger. The unification was supposed to take place by 2005. One entity was seen to focus on the total financial market. Officers of both MART and ACI Philippines in the past said a unification would be suitable especially with market developments in the global front which has blurred the distinction between their definite obligations. This would also present a more efficient and economical group. "The plan has been discussed on and off for years. Maybe this is not the proper time for the two organizations to merge as much as we like" them to, a bond trader said. The trader added that there may be some operational problems that the unified organization could face later on. "Probably, there are issues that have yet to be addressed like which one would absorb the other in terms of specific roles. There are members of ACI doing money market businesses, [while] the MART can't. ACI has its own international standards and conventions," the trader added. A foreign exchange trader said, however, that "ACI is not being elitist. The work is almost the same. Perhaps, it's really not the time."

Meanwhile, MART will celebrate its 33rd anniversary this November. A series of educational briefings and television interviews will jumpstart the celebration, followed by a convention on November 12 to 14. On November 9, the organization will also conduct a briefing on fixed-income or government securities market for the Economic Journalists Association of the Philippines.



PNB reports higher bad loan ratio for third quarter

Philippine National Bank (PNB), the country's sixth largest bank in terms of assets, reported a higher level of non-performing loans for the third quarter as more borrowers defaulted on their obligations. In its published statement of condition, the semiprivate bank said loans that were at least 90 days past due represented 46% of its total loan portfolio, up two percentage points from June's 44%. Nonperforming loans (NPLs) grew by 6.46% to PhP47.79 billion as of Sept. 21 from PhP44.89 billion in the second quarter. Total assets of the bank hit PhP214.78 billion, growing less than 1% from PhP212.71 billion. Liabilities inched up by 1.04% to PhP190.84 billion from PhP188.87 billion before the end of the first half of the year.


State-run Development Bank of the Philippines' NPLs rose by 2.45% to PhP9.59 billion from PhP9.36 billion against general provision of PhP2.86 billion and specific provision of PhP4.2 billion. Sy-led Banco de Oro Universal Bank's NPL ratio slightly went up to 6.81% from 6.73%. Bad debts amounted to PhP5.04 billion, while aggregate loan loss reserves stood at PhP3.34 billion. China Banking Corp. bad debts represented 13.30% of the its total loan portfolio, shrinking from the previous quarter's 14.65% level. Bad loans stood at PhP9.42 billion, increasing by 2.06% from PhP9.23 billion in June. General provisions for loan losses was at PhP2.5 billion while specific provisions stood at PhP4.56 billion. Export and Industry Bank, Inc., the country's 22nd bank, reported a 7.69% increase in NPLs to PhP2.1 billion from PhP1.95 billion in the second quarter. Its NPL ratio of 19.35% was slightly higher than the 19.26% registered. Earlier this week, government bank Land Bank of the Philippines said its NPL ratio increased to 14.7% in August from 13.4% the earlier month. It also said its coverage ratio was at 77%. -- R. A. M. Rubio



Court okays debt rehab plea of Grand Boulevard


A Manila court granted Grand Boulevard Hotel's petition for suspension of debt payment last Monday, giving the hotel a "breathing space" to come up with a plan to pay for $19 million worth of debts. The order, signed by Manila Regional Trial Court Branch 24 Judge Antonio M. Eugenio, Jr. on Oct.18, also appointed Celso P. Vivas to be the rehabilitation receiver of the Panlilio-owned hotel, formerly Silahis Hotel, Inc. Mr. Vivas must post a bond of PhP1 million upon his acceptance of the post, according to the order. As it undergoes rehabilitation, the court directed the hotel "from making any payment of its liabilities outstanding as at the date of the filing of the petition." It also prohibited Grand Boulevard from "selling, encumbering, transferring, or disposing" any of its properties, except in the ordinary course of business.


For the hotel to be in operation during the rehabilitation, Mr. Eugenio's ruling also forbids its suppliers from "withholding the supply of goods and services in the ordinary course of business for as long as the debtor makes payments" after the order's effectivity. An initial hearing on the petition is scheduled on Dec. 8. This is the second time Grand Boulevard filed for corporate rehabilitation and suspension of debt payments. On Oct. 13, another Manila court, Branch 46, junked its petition for rehabilitation. In his ruling, Branch 24 Judge Artemio S. Tipon said the hotel owners failed to come up with a detailed rehabilitation plan fair to all stakeholders. He said the owners were not willing to sacrifice to save their business. Instead of submitting a motion for reconsideration, the company took their rehabilitation petition to Branch 24 two days later. The hotel owes a syndicated loan worth $19 million to Export and Industry Bank, Land Bank of the Philippines, Security Bank, and United Overseas Bank. However, due to the 1997 Asian financial crisis, the hotel was unable to pay amortizations and negotiate to restructure the loan due to the stiff penalties imposed by the banks, the hotel said in its petition.



RP telecom execs off the hook in US antitrust suit


A US court has nullified the subpoenas served on 30 Philippine telecom executives that required them to testify on an antitrust investigation by US federal authorities, President Gloria Macapagal Arroyo yesterday said. The executives were attending an international conference in Honolulu last January when the subpoenas were served. "In an amicable resolution of a hard profile case between the Philippines' biggest and inherited telecommunications companies and American companies, the US court of Hawaii has nullified subpoena served on several Filipino businessmen," the President said in a speech during the ceremonies marking the 60th anniversary of the Leyte Landing. She didn't give other details, but welcomed the development, saying that the nullification of the subpoenas is a prime example of the Philippines' "economic partnership with America," which was "forged in the flames of war." The Filipino telecom executives were served summons by the US Justice department and have been told to appear before a US grand jury on Jan. 15, 21, 26 and 29 on alleged violation of US antitrust laws.


Among those who were served summons while attending the Pacific Telecommunications Council Conference and exhibition in Hawaii were 10 officials of the Philippine Long Distance Telephone Co. (PLDT), including senior vice-president Alfredo Panlilio; seven from Globe Telecom, Inc. -- senior vice-president Gil Genio along with Fernando Cruz, Manuel Maceda, Robert Martinez, Grace Castillo, Jesus Romero and Hedley Serrano; two from Bayan Telecommunications, Inc. (BayanTel) -- chief consultant Tunde Fafunwa and Sherry Ann Suplena of the company's international carrier division; Perla Ignacio of Digital Telecommunications Philippines, Inc (Digitel); two from Smart Communications, Inc., one of them legal head Rogelio Quevedo; Capwire Chief Operating Officer Maureen Santiago; and Eastern Telecommunications Phils., Inc. President Nenita Cruz.

The issue stemmed from a dispute between US telcos, AT&T and MCI, and six Philippine telcos. The row started after local carriers increased termination rates early last year to 12 centavos per minute from 8 centavos for landline calls, and 16 centavos per minute from 12 centavos for mobile calls. AT&T and MCI opposed the rate increase and filed a case at the Federal Communications Commission (FCC) for protection from whipsawing in the Philippines-US route. The FCC later ruled local carriers disrupted the US-Philippine networks of AT&T and MCI. It thus ordered the two US carriers to suspend payments to the Philippine carriers pending restoration of their US-Philippine circuits. The dispute was settled late last year after Philippine carriers closed interim agreements for termination rates with AT&T and MCI. FCC also lifted the suspension of payment order against BayanTel, Digitel, Smart, PLDT, and Globe.



Metro Pacific says stock transactions above board

Metro Pacific Corp. did not violate any Philippine Stock Exchange (PSE) rules in relation to the sale of Hong Kong parent First Pacific Co. Ltd.'s 5% stake in the local firm, it said yesterday . The firm is facing an investigation from the PSE concerning the sale. But Vice-President for Corporate Communication David Nugent said allegations they attempted to inflate share prices by floating good news about the corporation are "grossly inaccurate." Mr. Nugent said First Pacific's sale of 930.2 million Metro Pacific shares was aboveboard. "There were no violations of [the] disclosure [rule]. We don't even have to disclose October trade until next month," he said. "People claimed it was [a] pump and dump [strategy], that is categorically not true. The misconception that Metro Pacific tried to hide this trade is also inaccurate," Mr. Nugent said. He said even at the onset of 2004 they already disclosed much of the planned activities of the corporation. "If people are buying, then they are buying on a level of confidence that we are not giving them," he said.

At the bourse, new President Francis Lim refused to comment on the case as it may prejudice the parties involved. But he assured investors the BW stock-rigging scandal that almost crippled the bourse will not happen again. "We are taking the appropriate action on this issue which is under the juridistion of the market integrity board and the market regulations office. Such allegations are serious so we will carefully act on it. We will do everything it takes to prevent another BW fiasco," Mr. Lim said.

A group of brokers had said Metro Pacific shares had been moving briskly "for several months between July and August." "One foreign broker sold 610 million shares of Metro Pacific in a day before the issuer made the disclosure and it continued selling massively causing prices to drop from PhP0.55 to PhP0.30 before these were sold to PhP0.60 each -- more than double the PhP0.30 share price," said a broker who refused to be identified. The source said the transaction, which he described was a "strategic move" on the part of Metro Pacific, was made between Aug. 10 and Oct. 10. "It was a hype and dump [strategy]," added the broker as he urged the PSE to look deeper into the issue. "The PSE is doing something on it but it has to investigate more. These [matters] concern a lack of disclosure and ethical issue." The broker said the pronouncements made by Metro Pacific Chairman Manuel V. Pangilinan about the company's plans in recent months might have been done to boost the price of its shares in view of the massive sale that took place over the past few months. The charges of insider trading and stock price manipulation were floated as the newly created integrity board, tasked to strengthen integrity at the exchange by establishing stronger relationships with brokers, began to work last Tuesday.

Astro del Castillo, managing director of First Grade Holdings, Inc., said it is "hard to say" that there was stock price manipulation. "The market was on an upsurge during those times that even speculative issues went up. A bullish wave caused prices to move up north although there may be relevant information," he said. First Pacific sold 5% of its stakes or 930.2 million common shares in the local firm over the past few weeks to help its shipping subsidiary Negros Navigation Co., Inc. (Nenaco) to implement a court-approved rehabilitation plan. It completed the transaction when it sold 1.88% or 349.1 million shares of the total issued common shares of Metro Pacific last week. Metro Pacific's share price closed higher at PhP0.47 from PhP0.46 after the sale. -- Roulee Jane F. Calayag and Beverly T. Natividad



Downstream steel players to sue BSP over Nat'l Steel

Downstream steel industry players threatened to sue the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) and the Indian buyer of National Steel Corp., claiming the PhP13.25-billion sale of the steel firm is tantamount to plunder. The Roque, Butuyan Law Office, representing downstream industries, claimed the Bangko Sentral committed a mistake when it certified the National Steel transaction as eligible under the Special Purpose Vehicle (SPV) law. "The sale is tantamount to plunder," said lawyer Romel B. Bagares of the law firm handling the matter.

Last Friday, the Indian-owned Global Group said it had already completed the requirements for the acquisition of the steel complex in Iligan City. This finally closes the sale of the steel firm to the Indian-owned company. The PhP13.25-billion price tag is to be paid in full within eight years with the next installment due on Oct. 15, 2005. "This is a PhP13.25-billion transaction involving government assets any citizen of this country should be concerned about. We believe an illegal transaction of this nature courts a suit for plunder of the nation's coffers. The last time we checked the Plunder Law, the threshold amount for plunder was still only at PhP50 million," Mr. Bagares said. He claimed there was nothing in the asset purchase agreement signed between the Global group and its creditors to support the Bangko Sentral's contention the transaction involved is a "true sale" as defined by the SPV law.


The Bangko Sentral, however, said the sale is a legitimate special purpose vehicle transaction and a true sale. "We wish to clarify that the transactions in issue involve the sale of nonperforming loans of secured financial creditors of National Steel to two SPVs," said BSP Assistant Governor and General Counsel Juan de Zuniga. He added the transactions fall under the implementing rules of the SPV law. "Moreover, the selling financial institutions including banks, will sell absolutely and unconditionally, their NPLs [nonperforming loans] to the SPVs. The absolute and unconditional sale of the NPLs does not include any buyback arrangement by which said NPLs would revert to the creditors," Mr. de Zuniga had said. As such, he said the transaction is a "true sale," contrary to the claims of the law firm.

The Global group, for its part, said the transaction already met all the necessary approvals including those of the Bangko Sentral, the Securities and Exchange Commission, the National Power Corp., and the local government of Iligan. -- Iris Cecilia C. Gonzales



BCDA remits PhP670 million to state coffers

The Bases Conversion Development Authority (BCDA) yesterday said it had remitted PhP670 million to the Treasury as of October, bringing the agency's total contributions to PhP26.8 billion. In a statement, BCDA President Rufo Colayco said the remittances came from the sale of military camps. "BCDA is one of the few self-sustaining, self-liquidating [state-owned firms] which does not receive a single centavo from the National Government," he said. BCDA contributes to the military and police modernization program, the National Shelter Fund and the National Health Insurance Program, Mr. Colayco added. It also contributed more than PhP532 million in infrastructure projects in Bulacan, as well as the former American bases Clark and Subic, Camp John Hay in Baguio, and Fort Bonifacio. These include the PhP251-million squatter relocation for the Northrail project, and Phase 2 of the Angeles City Friendship Bridge costing PhP60 million.

BCDA also contributes operating funds for subsidiaries such as the John Hay Management Corp., Poro Point Management Corp., Bataan Technology Park, and North Luzon Railways. BCDA issued the statement following a Commission on Audit report showing that it incurred a PhP419-million net loss last year. Mr. Colayco explained that the BCDA charter requires that revenues from the sale of military lands should be capitalized instead of being treated as income. "From the revenues generated from the disposition of military lands, only 27.5% is retained by BCDA. Yet, had the revenues received from the BCDA disposition program been credited as income, BCDA would have posted a net income of PhP66 million for 2003," he said. -- Felipe F. Salvosa II



Jardine Davies starts move to become holding company

Jardine Davies Inc. will transfer its business and related assets and liabilities worth some PhP415 million to two wholly owned subsidiaries as part of an internal reorganization. The company told the exchange its board approved the transfer at a special meeting yesterday, paving the way for the conversion of the company into a pure holding entity whereby only shares of stocks in its subsidiaries are held as assets. The operating assets of Jardine Davies, which consist of its distribution business and related assets, will be housed in one of its wholly owned subsidiaries. Jardine Davies assured there will be no material difference in the rights of security holders due to the transfer. The per unit value of Jardine Davies shares will not change as the assets are intended to be transferred at net book value to wholly owned subsidiaries. The internal reorganization process includes incorporating the agrochemical distribution business, which currently operates as a division of Jardine Davies. As a result, the company's business and related assets and liabilities will be transferred to Jardine Distribution, Inc. (formerly Jardine BS International, Inc.), a 100%-owned subsidiary of Jardine Davies.

Jardine Davies Investments, Inc., another wholly owned subsidiary, will have the remaining assets of Jardine Davies. The company said it will seek the consent of the stockholders at a meeting on Dec. 6. The transfer of its agrochemical distribution business and related assets and liabilities to Jardine Distribution at a price not exceeding its unaudited net asset value as of Sept. 30 will be made in exchange for shares in Jardine Distribution. The transfer value is estimated at PhP75 million. The assets to be transferred consist of agrochemical distribution business, fixed assets, trade receivables, non-trade receivables, inventories, club shares and debentures, and others. Jardine Distribution is a local company with an authorized capital stock of PhP13.5 million. -- Roulee Jane F. Calayag



Stocks up on last-minute buying


Last-minute buying yesterday pushed share prices to close higher and resume their bullish thrust. But this development was not enough to give investors an idea on which direction the Philippine stock market will move in the coming days. Rommel Macapagal, chairman of Westlink Securities, Inc., said while last-minute buying propped up the market, a low trading volume caused the main index to hover at the 1,780 level. "The market still lacks direction. It has no leads as to where it will go because of low trading volume," said Mr. Macapagal.

The Philippine Stock Exchange composite index (Phisix) rose 6.08 or 0.34% to 1,784.93. Over 800 million shares were traded for only PhP667.6 million, back to the pre-bullish trading level of less than a billion pesos. As earlier projected, the market is following a cycle this week -- where it sheds a number of points in a day, gains a little than its previous loss the next day, and then reverts to a negative mode. Trades totalled 2,476, with losers outnumbering gainers at 38-25. Unchanged issues have not yet relinquished their lead at 49.


Results of the indices improved with only two finishing lower. The all shares closed higher, up 0.32 or 0.03% to 1,114.31. The banks and financial services index was up 6.57 or 1.33% to 499.40. Commercial-industrial climbed 1.57 or 0.05% to 2,811.10. Property also sustained its upward momentum as it improved 3.72 or 0.57% at 656.13. Mining, however, bled 33.71 or 1.61% at 2,062.98 while oil shed 0.05 or 2.84% at 1.71.

Mr. Macapagal said given the state of things at the market, the Phisix may try to hold on to the 1,780 level in the coming weeks. If circumstances improve and positive corporate earnings reports come in, there may be a chance that the benchmark index will try to test the 1,800 level, some traders said. However, this remains to be seen because aside from these factors, the stock market also gets its cue from the US markets. "A drop in the Dow Jones, the same as last week, and a lack of buying support may [fix] the Phisix at 1,750 level [temporarily]," added Mr. Macapagal. The Phisix weakened last Friday after the Dow Jones, Nasdaq and Standard & Poor's 500 all posted significant declines. The Dow Jones shed over 100 points.


Despite a gloomy atmosphere, some investors kept on buying select blue-chips while some took to bargain hunting. Philippine Long Distance Telephone Co. (PLDT) was the undisputed market king, taking over 27.60% of the market at PhP184.3 million for 130,000 shares but its price was unchanged at PhP1,425. The stock was resilient although its American Depositary Receipts (ADRs) in New York had a lackluster performance. PLDT's ADRs dipped 0.17 or 0.67% to $25.28. Trading of property developer Ayala Land, Inc. and its parent, Ayala Corp., was feverish, as their transactions accounted for 14.37% and 12.06% of the market, respectively. Both stocks were unchanged at seven pesos and PhP6.30 each.

Metro Pacific Corp., which is under the same First Pacific Corp. umbrella that PLDT belongs to, clung to the fourth slot. It was unchanged at PhP0.45 on PhP91.7 million shares worth PhP39.9 million. It cornered only 5.97% of the market. Some brokers have cried foul over the alleged insider trading involving the shares of Metro Pacific. A foreign brokerage company allegedly took the lion's share of the transactions equivalent to 930.2 million common shares or 5% stake of First Pacific in Metro Pacific. The brokers said the foreign brokerage should be investigated for insider trading and Metro Pacific for stock price manipulation. Citing the earlier announcements of Metro Pacific chairman Manuel V. Pangilinan on the company's interest in the South Luzon Expressway, the parties surmised that these were trumpeted to puff up the price of the stock after it slid to its lowest during the sale.

Other stocks that had significant transactions included DMCI Holdings, Inc., Bank of the Philippine Islands (BPI), Digital Telecommunications Philippines, Inc., SM Prime Holdings, Inc. and ABS-CBN Holdings Corp. Philippine Deposit Receipts. Except for ABS-CBN Philippine Deposit Receipts which was down at PhP20.25, the other four were up with BPI closing respectably at PhP47.


Meanwhile, Jardine Davies, Inc. told the exchange that it is transferring all its assets and liabilities to two wholly-owned subsidiaries as part of an ongoing internal reorganization. The process includes incorporating the agrochemical distribution business, which currently operates the division of Jardine Davies. With this setup, the business and related assets and liabilities of Jardine Davies will be transferred to Jardine Distribution, Inc., formerly Jardine BS International, Inc., a 100%-owned subsidiary. The remaining assets of Jardine Davies will be transferred to Jardine Davies Investments, Inc., another wholly owned subsidiary.