By LARISSA JOSEPHINE C. VILA,
Researcher
Consumer confidence, already low in August, further weakened
last month and plunged to its lowest for the year on the back of
rising oil prices and the lack of positive news from the
government. The spectacle of another series of
politically-related congressional hearings and investigations
and the vision of increasing unpopularity of the Arroyo
administration greeted consumers in September. "All of these
undermined the confidence of consumers," said Unicapital
Securities research head Elena Ponceca. Also, the threat of an
impending fiscal crisis still cast a shadow, further raising
consumer pessimism, as shown in the
September 21-27 perception poll done for BusinessWorld by
NOP World Asia (formerly Roper ASW Asia Pacific), which
interviewed 300 Metro Manila consumers.
The consumer confidence index (CCI), a composite measure of
how consumers perceive their present circumstance and prospects
six months down the line, plunged to its lowest for the year at
81.6 points, from 87.5 points in August. "If we have a consumer
confidence like that, it is not a good indicator because
businesses thrive only when people are buying," Think Tank
economist Bienvenido Oplas said. The similarly low consumer
confidence in August was mainly due to higher oil prices, which
resulted in lower income and higher expenses for many
households.
In late September, allegations of corruption and misconduct
by several public officials were revealed, such as the alleged
failure of Government Service and Insurance System (GSIS)
president and general manager Winston Garcia to liquidate cash
advances, and alleged anomalies in the Smokey Mountain
Development and Rehabilitation Project (SMDRP) involving former
President Fidel Ramos. Aside from these, the country faced a
$56.3-billion foreign debt and PhP1.1-trillion debts of
government-owned and -controlled corporations (GOCC). More
consumers believed that the government was doing a worse job,
with 43% of the respondents saying so. Only some 23.6% still
believed in the government's quality of governance. Those who
felt that the government was doing neither better nor worse
accounted for 33.4%. Similarly, more consumers (39.6%) said that
President Gloria Macapagal-Arroyo was not doing a good job. The
52.2% in August who said the President was doing a good job
declined substantially to 34.8% in September. Consequently,
those who said the economy would prosper under Mrs. Arroyo's
leadership declined to 31% from 45.3% in August. More consumers
(40.3%) perceived the economy would not prosper during her term.
However, even with this increased level of pessimism, there were
as many consumers who did not believe in the President's
sincerity as those who believed otherwise (37.1% and 37.6%,
respectively). Mr. Oplas viewed this as really bad. "It means
that the State has become uninspiring to the people."
Meanwhile, with solutions to the country's fiscal problem
still to be ascertained, fewer than four out of 10 (36.1%) said
the economy would worsen over the next six months, compared to
24.3% who believed it would improve. But 39.4%, or four out of
10, believed it would remain the same. Said Mr. Oplas, "When
people hear of a fiscal crisis, they immediately think of
taxation. People are thinking how much more will be taken from
their pockets." In the September poll, consumers were asked
whether they believed that new tax measures would solve the
budget deficit. Half of the respondents (49.4%) said the
measures would not solve the problem, while 30.5% said
otherwise. Only two out of 10 (20%) were not sure. Ms. Arroyo
earlier asked Congress to pass eight revenue enhancement
measures. These, combined with administrative reforms like
trimming the bureaucracy, are expected to earn the government
some PhP100 billion in additional revenues yearly. The tax
measures are the shift to gross income taxation, a two-step
increase in the value added tax (VAT) rate, a tax on "windfall
profits" of telecommunications companies, indexation of excise
taxes on "sin" products to inflation, and a hike in the excise
tax on petroleum. The government also considered tax amnesty,
performance-based attrition, and rationalization of fiscal
incentives. Among the eight measures lined up by the government,
some consumers said the Arroyo administration should give
priority to the indexation of sin taxes, which would involve the
automatic adjustment of taxes every two years to prevent the
value of sin (tobacco and alcohol products) taxes from being
eroded by inflation. More than three out of 10 (35.1%) ranked
sin taxes as the most important measure. This was so because
these were taxes consumers could avoid, Mr. Oplas said. "It's an
avoidable tax. If you do not want it, then don't smoke. People
are relatively indifferent to a hike on these kind of taxes,"
the economist added.
The second to be prioritized, according to consumers, should
be tax amnesty. Some 17% said taxpayers with unpaid national
internal revenue taxes as of December 31, 2003 should be allowed
to apply for amnesty and pay the equivalent of 3% of their net
worth. Only 13.5% believed the government ought to prioritize
the performance-related attrition system. This measure calls for
the transfer or severance from government service of revenue
officials for failure to meet collection targets. The measure
likewise provides incentives for those who perform better than
targets. It also provides for performance standards and review
mechanism for revenue collection agencies. The fourth measure to
be prioritized, according to consumers, should be the increase
in the excise tax on petroleum products, except for LPG,
followed by the phaseout of fiscal incentives that are
inefficient, irrelevant, and redundant The measures that
consumers think should be the least of government priorities are
the shift to gross income taxation from net income taxation on
companies; reimposition of a franchise tax on telecommunications
companies; replacing the 10% VAT and a 2% increase in VAT by
next year. This is understandable, Mr. Oplas said. "The 10% VAT
now is actually high, that's why many sectors asked to be
exempted," he said. Consumers are expected to lobby if the
government goes ahead with raising it, he added.
Meanwhile, no improvement is seen in consumers' income as
half of the respondents (50.9%) see their income remaining at
the same level in the next six months, while jobs are seen to be
more difficult to find. Even the stock market will not get
better, said consumers. The September tally of people who
believed that the bourse would worsen was at a new high, at
44.6%, from August's 36%. Pessimism was likewise felt in the
currency market as confidence in the peso weakened. Almost six
out of 10 (58%) perceived that the peso would weaken in the next
six months, while only 11% believed otherwise. NOP World Asia
now conducts the perception poll every quarter. BusinessWorld
will publish the succeeding CCIs upon the release of the survey
results
.
|
The Department of Finance is not aware of any compromise
between the government and the tobacco industry on excise taxes
on cigarettes for next year, Finance Secretary Juanita D.
Amatong said yesterday. "I do not know that," she replied when
asked to comment on reports that Malacaņang and tobacco
executives on Monday night agreed to cut to 12% the increase in
cigarette taxes in 2005 from the 20% approved early yesterday by
the House of Representatives. Finance previously lobbied for
30.1%. "What I know is what Congress has come out with," Ms.
Amatong said. She also said her office was amenable to the 20%
increase, but Congress should also raise taxes on cigarettes and
liquor every two years based on cumulative inflation.
But Senate ways and means committee chairman Ralph G. Recto
said the House-approved 20% increase in taxes for cigarettes and
liquor by next year, and by another 3% in 2006 and again in
2007, would still be fine-tuned. "There are two choices -- index
sin taxes to inflation, or adopt a specific tax increase all the
way, at the very least to 2010," Mr. Recto told a press
conference. He also said it was too early to conclude that a
"compromise or watered-down version of the sin tax bill" was
being worked out by the government to protect the tobacco
industry. Yesterday the Senate heard the bill filed by Senator
Juan Ponce Enrile that would remove the four-tiered tax
classification system for cigarettes. "Why do we perpetuate this
inefficient tax system?" Mr. Enrile said after he explained his
bill during the hearing. "The taxation system in the country
will worsen with what the House of Representatives did. I will
oppose it." Mr. Enrile also asked the Bureau of Internal Revenue
to detail the profits and tax payments of cigarette companies
for every brand, "to determine whether the current taxes are
equitable or not"
Senate Minority Leader Aquilino Q. Pimentel Jr. added the
nine-man opposition bloc in the Senate would push for Mr.
Enrile's bill. Also at the Senate, Fortune Tobacco Corp.
president Antonio P. Abaya said his company was firm on a 6%-12%
increase in excise taxes. "We are also proposing that after
that, there will be a 3% increase," he said. A government source
said the 12% and 3% increases were among the rates agreed on
when President Arroyo privately met with tobacco executives at
her Forbes Park residence on Monday night. Earlier that day, the
House ways and means committee approved 20% and 3% increases.
For his part, Philip Morris Philippines, Inc. managing director
Chris Nelson reiterated his company's proposal for a unit
specific excise tax rate increase. Fortune and Philip Morris
hold market share of 54% and 35% respectively. British American
Tobacco Philippines commercial director Dennis Belgira added,
"We are fully supportive of the government's plan to index
cigarettes to inflation in the future to help the government in
raising additional revenues. However, we are extremely concerned
that the House bill falls short by not establishing a level
playing field for the industry."
At the House, Minority Leader Francis Joseph G. Escudero of
Sorsogon said Malacaņang should give Congress a free hand in
drafting tax legislation. "The President should not initiate,
her roles are to sign or veto the laws passed by Congress," he
said. Lidy C. Nacpil, secretary-general of the Freedom from Debt
Coalition, added, "The fact that the Executive placed the
interest of tobacco industry players above the interest of the
public, who will bear the brunt of an economic crisis, makes it
condemnable." The House passed yesterday House Bill No. 3174,
which provided for a 20% increase in the tax on alcohol and
tobacco products next year, a 3% increase in 2006, another 3%
increase in 2007, as well as the retention of the multi-tier tax
structure for these "sin" products. The bill also says any tax
due from any brand "shall not be lower than the tax due as of
the date immediately prior to the effectivity of this Act or the
excise tax due as of December 31, 1999." Tarlac Rep. Jesli Lapus,
ways and means committee chairman, said this provision removed
he ambiguity in existing laws that led the Court of Tax Appeals
and the Court of Appeals to grant Fortune Tobacco Corp. a
PhP1.036-billion tax refund. The House bill promised additional
taxes of PhP7.6 billion next year, PhP8.9 in 2006 and PhP9
billion in 2007, or a total of PhP25.5 billion over three years.
Mr. Lapus said the reported compromise rates of 12% increase
next year, 40 centavos in 2006, and 3% increase every year
thereafter until 2010 would also raise the same amount of new
revenues. -- Karen L. Lema,
Carina I. Roncesvalles and Judy T. Gulane
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By JENNEE U. RUBRICO,
Senior Reporter
The first half of the year was basically upbeat for the top
companies, with most showing robust earnings growth. A report
from research company Team Research Services estimates that in
January to June, corporate earnings of the top 20 stocks grew
40% year-on-year on the back of spending in the run-up to the
May national and local elections. Analysts said that the
earnings spurt was led by companies in the consumer and
telecommunications sectors, and the rest followed their lead.
"Everybody performed well because there was election spending.
Consumer groups, which include telecoms, all benefited," said
Joseph Y. Roxas, president of Eagle Securities Inc. Astro C. del
Castillo, managing director of First Grade Holdings, Inc., said
the beneficiaries of the political exercise included food and
beverage giant San Miguel Corp. (SMC) mainly due to higher beer
consumption, and fast-food giant Jollibee Foods Corp.
In its second quarter report, telecommunications major
Philippine Long Distance Telephone Co. reported a consolidated
net income of PhP12.008 billion, for the first half. This
represents a fivefold increase over the restated consolidated
income of PhP1.785 billion in the first half of 2003, the
company said. PLDT said that the increase was principally due to
the net income of wireless subsidiary Smart Communications Inc.,
which contributed a net income of PhP11.635 billion, a 90%
increase in its net income contribution of PhP6.124 billion in
the same period in 2003. There was also a "substantial decline
in other expenses," PLDT said. For its part, Ayala firm Globe
Telecom Inc. posted PhP6.9 billion in net income -- up from
2003's PhP4.368 billion. The increase in profit was attributed
to growing sales and distribution capability to top-up services
such as Autoload Max, Family Autoload, and Share-a-Load, which
were significant contributors to prepaid reload volumes. The
company also introduced innovations to enhance service
affordability and flexibility to a larger market segment, such
as the Call and Text Collect service, the first service of its
kind in the country that enables pre-registered prepaid
subscribers to send SMS (short message service) or make a voice
call to others in the network even when they run out of load
credits. SMC sustained its strong performance in the first
semester with consolidated net income reaching PhP4 billion, up
31% from last year. The improvement largely resulted from higher
beer volumes, the fixed cost containment of the Coca-Cola
Beverage Group, significant improvements of the food group and
the recovery of SMC's beer international operations, the company
said.
Jollibee, meanwhile, posted a PhP850.648 million net income,
up 38% from PhP612.360 million last year. Total revenues grew
22.6% to PhP12.7 billion for the first half compared to the same
period last year. Systemwide sales -- the direct sales to
consumer from both company-owned and franchised stores --
increased by 28.7% to PhP9.2 billion during the quarter, with 6%
provided by the Yonghe King business in China and 22.7% from
established business, mostly in the Philippines, the company
said.
UNSUSTAINABLE
The corporate earnings growth rate during the period,
however, is not expected to be sustained in July-December.
Analysts forecast that companies will continue to grow, albeit
at a much slower pace. "There's no doubt that the corporate
results later this year won't be as good as what we got in the
first half," said AB Capital Securities Inc. senior manager Jose
L. Vistan, who noted that the slowdown started in the second
quarter. The factors for the growth slowdown are the tapering
off of post-election spending, and the inflationary effect of
increasing prices of crude oil in the world market. "Because of
the continued uncertainty brought about by the price of oil in
the world market, the inflationary effects of such movement are
to be a major factor in slowing down the engine of our growth.
That's why we're kind of cautious for the second half of the
year Most investors and consumers of certain products will be
cautious," First Grade Holdings's Mr. del Castillo said.
Some analysts noted a possible pressure on interest rates by
President Gloria Macapagal-Arroyo's admission of a fiscal
crisis, which, in turn, would increase the interest expense of
corporations. "The government's fiscal crisis [pronouncement] is
expected to dampen the country's credit rating. This could lead
to a weaker peso and higher domestic interest rates as portfolio
investments are going to be adversely affected," AB Capital
Securities' Mr. Vistan said. Others, however, said the impact of
the fiscal crisis would likely be more of a concern in 2005.
"We've been saying that the budget deficit is really a major
problem and we've seen how [Mrs. Arroyo] was able to cure such
problem by enhancing revenue collection, putting in more
competent people, and, if this is not properly resolved, if the
government does not cut down on expenditures and improve revenue
collections, it will continue to be a problem. But for now, we
don't think it will be a major problem," Mr. del Castillo said.
SLOW BUT SURE
Still, companies are expected to continue growing -- albeit
conservatively. The Team Research report projects that even with
the slowdown in the second half, corporate earnings for the
whole year is expected to grow by 25% to 30% year-on-year.
Analysts see that the telecommunications sector will continue to
lead the growth, with PLDT and Globe Telecom continuing to
"surprise" the market. "The telecommunications industry is
leading the market right now and I think they will continue to
lead the market for the rest of the year," Mr. del Castillo
said. Analysts said PLDT is expected to match its first half
performance, and to come out with "innovative ideas" that would
attract more frequent use of its landline and mobile services.
Globe is also anticipating an expansion in the market given the
increased affordability of mobile communication products and
services. The company has revised its market access rate
projection of 40% from 33% to 50% from 40% by 2005. Globe noted
that "real" subscriber penetration may be lower, as a portion of
the market subscriber base may be SIM (subscriber identification
module) cards that were activated for single use, and then
abandoned or swapped anew in a rotational cycle.
While remaining committed to its post-paid market, Globe has
also increased its focus on the mass market given the growth
potential of this segment. The company also targets 1,000
additional cellular sites by yearend, which would bring its
total count to 3,600. This is expected to increase Globe's
geographic coverage to almost 70% and its population coverage to
over 85%. Besides the telecommunications companies,
export-oriented companies, in particular, transportation
services firm International Container Terminal Services, Inc. (ICTSI)
are seen to have a positive second half performance. "I think
the company is starting to pick up after the start of operations
of ports in Brazil and Poland. It's starting to bring income,
because the profits are in dollars," Mr. Roxas said. ICTSI
doubled its net profit for the first half of the year to PhP446
million from PhP222 million for the same period in 2003. For the
second quarter, the company posted PhP119 million in profits,
135% higher than the PhP280 million a year ago. While Manila
International Container Terminal still accounted for the bulk of
the company's revenues at 64% of PhP4.2 billion for the first
half of the year, ICTSI said revenues from subsidiaries Baltic
Container Terminal (BCT) in Poland and Tecon Suape SA in Brazil
increased by 22% to PhP1.4 billion, or 34% of total revenues.
BCT revenues grew 78% for the period, ICTSI said, while Tecon
Suape improved by 160%. This is the first time that the
Brazilian subsidiary posted net earnings since it started
operating in 2002.
CONSUMER CONFIDENCE
The food sector is also expected to perform positively on
improved consumer confidence. "This [consumer confidence] will
spill over to Jollibee, San Miguel, and others," Mr. del
Castillo said. SMC, which has been expanding in different
countries in the region, is also expected to meet profit
projections, analysts said. "I think they'll make it. They don't
usually go very far off their range," Mr. Roxas said. SMC has
been aggressively expanding to neighboring countries over the
past six months in line with its thrust to have its
international business increase the contribution to the revenue
mix. In the past few months, it opened facilities in China,
Thailand, Vietnam, and Indonesia. It also acquired a
non-alcoholic beverage company in Australia. SMC projects its
international business's contribution in the revenue mix to
increase to between 40% and 30% from the current less than 15%.
"The company will utilize its strengths in the domestic business
and international orientation as it aggressively builds up its
businesses in the region," it said. In addition, SMC is set to
open its plastics bottle facility in the first quarter of 2005.
Meanwhile, analysts said Jollibee's growth would be driven by
fast-food unit Chowking and by its Yonghe company. Some analysts
noted that higher power costs might increase the expense of
Jollibee, but income from the Yonghe operations will offset the
higher expense. PROPERTYThe property sector is also "starting to
bounce back," Mr. del Castillo said. Mr. Roxas said the SM group
is expected to continue its steady growth, albeit at single
digit rates. DMCI Holdings, Inc., the holding company of the
Consunji group, also expects to double its profits to PhP400
million from PhP190 million in 2003 -- relying on its coal unit,
Semirara Mining Corp., to bring in the revenues. DMCI reported a
consolidated income of PhP168 million for the first half, up
from PhP23 million posted in the same period in 2003, due mainly
to increased activity and continuing improvement in the
construction sector, "flourishing market" in the coal mining
business, and sustained development in the real estate sector.
Semirara is the country's largest coal producer. It used to
supply coal only to the National Power Corp.'s power plants, but
has since widened its market to include other privately owned
power plants and cement plants. Coal prices have increased over
the past year due to the limited supply from main source China.
The Chinese government had recently prioritized supplying
domestic consumption to back up its heating economy.
OIL PRICE CASUALTY
Meanwhile, the direct casualty of the oil price increase is
the transportation sector. Aboitiz Equity Ventures Inc. (AEV),
in particular, admitted that the oil price increases will affect
Aboitiz Transport System Corp. (ATSC). "ATSC operates one of the
more fuel-efficient fleets, but price increases in fuel and
other costs will require some revenue adjustments to
compensate," the company said. AEV President Jon Ramon Aboitiz
said they have adopted cost-cutting measures. In the power
sector, the outlook of Manila Electric Co. (Meralco) is
uncertain. While it enjoyed a robust first half, and a net
income of PhP1.416 billion from PhP66 million in 2003 from 2002,
the income projections are threatened by a recent Court of
Appeals (CA) ruling that barred the distributor from collecting
a 17-centavo per kilowatt-hour average un-bundling rate
increase. The ruling is under appeal. Meralco President Jesus P.
Francisco said a rollback in power rates pursuant to the CA
ruling will deal a blow the company's bottom-line. He noted that
while Meralco was allowed to adjust rates by 17.37 centavos per
kilowatt-hour under the generation rate adjustment mechanism --
a process which allows distribution utilities to pass on to the
consumer higher costs from increases implemented by power
generators -- this could not be considered additional revenue as
it is only a recovery mechanism. Mr. Francisco said Meralco is
pinning its hopes on increased activities among big customers.
"If industry is really picking up maybe we can still make the
gigawatt-hour sales target. But the expected megawatt demand is
not attainable anymore. We are past the summer peak zone. Our
distribution revenue is demand sensitive."
AEV, which is also into the power industry through Davao
Light and Power Co. (DLPC), is more optimistic. In its second
quarter report to the Securities and Exchange Commission, it
noted that the adjustment of the National Power Corp.'s power
rates should improve the profitability of power plants. It noted
that DLPC was allowed to un-bundle its rate, or itemization of
components in the bill, and increase by 19.27 centavos per
kilowatt-hour. AEV expects the un-bundling petitions of Visayan
Electric Co., Inc. and San Fernando Electric and Power Co., Inc.
to be resolved soon. "We're very optimistic that it will be a
good second half. The economy is growing. Our businesses are
doing well. Our second half is normally stronger than our first
half. We have our own targets and we are optimistic that we will
be able to achieve them and we feel that it would be a good
year," Mr. Aboitiz said.
MEDIA OUTLOOK
In media, an official of ABS-CBN Broadcasting Corp., which
posted an increase of 10% in its net income for the first half,
to PhP560 million, said the company can still hit its 10% profit
target for the year. "Barring any catastrophe, I think we can
[attain this]," ABS-CBN vice-president for Finance Randolph T.
Estrellado said. He said the company has allocated PhP1.5
billion for capital spending and acquiring film rights. He
admitted, however, noted the external dampening factors to
attaining the target -- higher interest expense and slowdown in
advertising. ABS-CBN expects interest expense to increase in the
second half when a $120-million loan, of which $100 million was
drawn in June, would be reflected in the financial report.
As for Ayala Corp., it reported a consolidated net income of
PhP2.64 billion for the first half , nearly double the PhP1.39
billion achieved in the same period last year. Its strong
performance reflected of the robust earnings of its key
operating subsidiaries and affiliates. Particularly,
consolidated net income of property arm Ayala Land Inc. grew 7%
to PhP1.18 billion with revenues up 25% to PhP8.1 billion. The
company also said that rental revenues from retail operations
were buoyed by the opening of Greenbelt 4 in Makati City in the
first quarter, which brings more aggressive promotional efforts
and continuous enhancement in merchant mix. "I think [the
companies have] already shelved off their fats, they're now more
focused on their core business. They will perform well except if
the oil situation aggravates and if the fiscal problem
deteriorates," Mr. del Castillo said.
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Any foreign borrowing meant to finance the capital
expenditure program of the National Transmission Corporation
(Transco) will not be shouldered by the National Government,
company president and chief executive Alan T. Ortiz yesterday
said. He said the costs would be assumed by the concession that
will eventually take over the operations of the country's
network of high-voltage power lines. He also said Transco has
been obtaining official development assistance from Japan's
Miyazawa Fund for several of its projects. "Whatever is left or
available, we would like to tap that. But we have been doing
this ever since," he said. The Miyazawa fund, named after
Finance Minister Kiichi Miyazawa of Japan, was created in
October 1998 to help Asian countries through the crisis. The
Finance department reportedly said it would raise $500 million
for the medium-term capex program of Transco which would be
funded mostly out of foreign borrowings in the form of project
loans to be sourced from the Miyazawa Fund. Finance Secretary
Juanita D. Amatong, however, said the government has yet to
determine where it will source the $500-million capital
requirement of the Transco for the next six years. Even the
amount, she said, could still change depending on the decision
of the inter-agency Development Budget Coordinating Committee (DBCC)
next week.
The DBCC is made up of the Finance department, the Department
of Budget and Management, the National Economic and Development
Authority, and the Bangko Sentral ng Pilipinas. "We do not know
[yet] where to tap...and the $500 million is an indicative
figure," she said in a telephone interview. Meanwhile, a finance
official justified the urgency of tapping the international
market to finance the capital requirement of Transco, which
serves as the conduit between companies that produce electricity
and electric companies and cooperatives that distribute
electricity to the public. "There is a need to fill the
requirement capacity of Transco whether somebody is going to buy
it or not. It is an urgent matter because there are projects
that will be covered by this," said the official, who requested
not be named. "We cannot wait, things have to be undertaken
immediately lest you want brownouts," the official said.
The Leyte-Cebu transmission lines for instance need to be
reinforced and upgraded to expand their capacity, the official
added. The government is having a difficult time privatizing the
power sector as investors are still awaiting the passage of a
bill that would grant them a franchise in operating National
Power Corporation's (Napocor) transmission assets. President
Gloria Macapagal Arroyo, in her recent State of the Nation
Address, vowed to prioritize the power sector and address
Napocor's money-losing operations. The state utility remains a
thorn in the government's side, with a funding requirement of
$1.5 billion for 2004 alone. The government has been borrowing
on behalf of Napocor because its financials make it difficult
for the power firm to raise money on its own. In September, the
Philippines launched the sale of $750 million in fresh debt to
complete Napocor's funding needs. Economic managers earlier
decided to cut Transco's capex from $1 billion to $500 million
which would be spread over five to seven years while the company
is undergoing privatization.
The Power Sector Assets and Liabilities Management Corp.
(PSALM), the government firm tasked to privatize the
government's transmission and generation assets, is preparing a
new public bidding for Transco. Transco's privatization is part
of the government plan to raise $4 billion to $5 billion to
reduce its budget deficit. The winning bidder will operate
Transco for 25 years. The contract will be renewable for another
25 years, subject to the concessionaire's performance. The
government had said it would require the winning firm to pay at
least 25% of the enterprise value of the Transco business upon
the close of the transaction. As an incentive, investors have
the option to pay the balance in installments over a period of
up to 25 years. The winning bidder is expected to pay around
$500 million, and assume about $1.5 billion of debts. PSALM
first bid out the transmission assets in July 2003 but after
only one party, Singapore Power, submitted a pre-qualification
proposal, the bidding was declared a failure. A second bidding
in Aug. 2003 also failed after the same company solely expressed
interest to bid. -- Bernardette S. Sto.
Domingo
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The government appears to be giving in to revived National
Steel Corporation (NSC), which has been asking for an increase
in the import duties on steel products. President Gloria
Macapagal Arroyo is set to raise tariff rates on hot-rolled and
cold-rolled coils but on condition that Global Steelworks
International Inc., the new name of NSC, must first be able to
show that it has already begun commercial operations, a
government source said, requesting not to be named. While this
is seen to be favorable to Global Steelworks, the executive
order to be signed by the President will to retain zero tariff
on tin plates in consideration of tin can manufacturers who have
fought the wishes of the revived steel firm. For the increase in
tariff rates to take effect, members of the Cabinet-level Tariff
and Related Matters (TRM) will likely go to the Iligan plant for
an ocular inspection, said the source who is a TRM member. It
would be recalled that the Indian-owned company indicated June
2005 as the start of commercial operations in its application,
but TRM members must first issue a certification. The TRM source
said no guidelines or criteria have been set as basis in
determining whether Global Steelworks has indeed started
commercial operations.
The new tariff rate for hot-rolled coils and cold-rolled
coils is 7%, from the current 3%. Under an executive order to be
released by Malacaņang soon, the rate is 3% marked by an
asterisk and explained in a footnote as follows: "To become 7%
once [Global Steelworks] is in commercial operations upon
certification of the TRM members," the source said. The source
said the government decided not to touch tin plates, used to
produce tin cans, since Global Steelworks is not yet producing
them. "Hot-rolled coils and cold-rolled coils are their only
products," the TRM source said. Hot-rolled coils are used for
flat products like pipes and as base material for liquefied
petroleum gas tanks. Cold-rolled coils, meanwhile, are used for
galvanized iron sheets, household appliances, and cars.
Global Steelworks has so far spent PhP900 million for the
rehabilitation of the steel plant and equipment. Work on the
40-hectare complex began last Feb. 1 and is nearly completed.
The plant has a capacity of 1.5 million metric tons per annum
and it could generate $750 million in revenues annually. The
company announced a trial order shipment of 5,600 metric tons of
cold rolled coils worth more than $3.9 million to China last
month. Downstream steel players earlier urged Socioeconomic
Planning Secretary Romulo L. Neri to stop the issuance of the
executive order raising steel tariffs, arguing that Global
Steelworks has not shown any ability to ensure the quality and
delivery of its products. In a letter, Salvio D. Perez,
president of the Filipino Galvanizers Institute, said the
reliability of Global Steelworks has been put in question with
its recent inability to deliver orders made by member-companies
of his organization. "This tariff increase will aggravate the
already distressed condition of the steel industry and burden
users of these products in the form of higher prices for the
sake of one foreign-owned company that has yet to prove its
capability to supply the quantity and quality requirements of
local industry," he said. -- Felipe Salvosa
II
|
State-owned Philippine National Oil Company (PNOC) has signed
a contract with two private companies to build a $60-million
large-scale cogeneration plant that will make use of bagasse, or
sugarcane waste product. In a statement, PNOC said it has
committed $6 million to the project in Talisay City, Negros
Occidental during the signing of a development agreement with
Bronzeoak Philippines and Talisay Bioenergy Inc. Commercial
operation of the plant is targeted to begin by August of 2006.
PNOC said the bagasse would come from a host mill supplemented
by cane residues and bagasse purchased from other mills. Of the
estimated project cost, 30% or $18 million will come from direct
equity infusion while the other 70% will be financed by banks.
PNOC said it would take on a 30% equity share and as a
development investor, the firm would share the risks involved in
developing the project. "I am proud to say that this is the
first ever cogeneration project in the Philippines to take off.
This project has readily passed the financial study of the PNOC
Investment Appraisal Committee. We are very enthusiastic because
it fits our new mandate of intensifying the utilization of
renewable energy, which is one of the major thrusts of the
government right now," company president Eduardo V. Maņalac
said.
PNOC said a 30-year Power Supply Agreement has already been
signed with the local distribution cooperative, Central Negros
Electric Cooperative (CENECO) to serve Bacolod City and its
suburbs. It added that total annual electricity to be delivered
to the off-taker is estimated at 158 gigawatt-hours. Talisay
Bioenergy is proposing to directly connect to the 69-kilowatt
subtransmission system, which CENECO is planning to purchase,
the state firm said. PNOC first entered into a Memorandum of
Agreement last April 23 with Bronzeoak Philippines and Talisay
Bioenergy Inc. for a possible equity infusion to the project.
-- Bernardette S. Sto. Domingo
|
By RUBY ANNE M. RUBIO,
Reporter
Largest lender Metropolitan Bank and Trust Co. yesterday
placed on the auction block foreclosed assets valued at
PhP165.185 million based on their minimum bid price. "This is
the first ever auction for Metrobank. We want to dispose
properties that are slow-moving especially those PhP2 million
and below," Adelo C. Brabante, Metrobank head of acquired assets
marketing division, told BusinessWorld. "Apparently, we
are able to sell on our own. Rather than keep them and maintain
the carrying costs as far as the bank is concerned, we rather
have it disposed through an auction sale," he added. Mr.
Brabante said the bank is mulling more idle asset auctions
catering to retail investors in its bid to clean its books.
Based on its published statement of condition, the George S.K.
Ty-owned bank as of September has foreclosed properties --
classified as real and other properties owned or acquired or
ROPOA -- worth PhP34.18 billion.
In yesterday's auction dubbed "Auctionfest," Metrobank lined
up 150 properties at prices it called "realistic" and requiring
a flexible down payment, long-term payment scheme at competitive
interest rates. "This is our own way of offering to the public
affordable property investments. I think we will also be
considering other properties for public auction. There are
commercial spaces, vacant lots, residential, among others," Mr.
Brabante said. Metrobank tapped real estate services firm CB
Richard Ellis Philippines, Inc. as its auction manager for the
disposal of its acquired assets. With a strong local and global
network, CB Richard Ellis has been a key player on both property
brokerage and investments. Those that wanted to avail of perks
under Republic Act 9182, or the Special Purpose Vehicle Act of
2002, had until Sept. 18 to establish and register their special
purpose vehicles or SPVs with the Securities and Exchange
Commission before incentives offered to purchasers expire in
April 2005. Incentives include tax perks and reduced transaction
fees. Aside from selling to an SPV -- which would buy banks'
nonperforming assets at substantial discounts, banks may dispose
their idle assets through retail public auctions or negotiated
sales. Jojo Romarx C. Salas, CB Richard Ellis director for
investment and capital markets, earlier said most of the
properties to be auctioned are developed, such as houses and
lots, condominium units and commercial spaces. He pointed out
that these are good investments as property values are expected
to appreciate when the economy rebounds.
|
By IRIS CECILIA C. GONZALES,
Reporter
The Bangko Sentral ng Pilipinas and the Bankers Association
of the Philippines are working on a draft bill creating the
proposed credit information bureau, the bankers' group said
yesterday. We still have to have a legal framework," said
Leonilo Coronel, the association's executive director. In an
interview, Mr. Coronel said although the Bangko Sentral will act
as the bureau until Congress approves a legislation creating
such entity, the central monetary authority still wants to have
a law to institutionalize the borrowers' database in view of the
bank secrecy law. He said the group is already working closely
with the central bank to draft the proposed bill. The bureau
will serve as a data bank for financial institutions on credit
information about corporate and individual borrowers to protect
the banking system from delinquent borrowers. The central bank
has been pressing the banking industry to establish a credit
information bureau, but banks were hesitant to share information
among themselves, especially on good borrowers. Mr. Coronel said
sharing of credit information is only voluntary at present, and
banks are not required to share information on both delinquent
and good borrowers. He said the bureau is necessary, given that
consumer patterns have changed rapidly. It would lessen the
risks for banks as the use of credit cards is becoming more
popular. "In the US, consumerism is so advanced that the economy
is being propelled by plastic cards," Mr. Coronel said.
Alberto V. Reyes, the central bank's deputy governor, has
said that the Bangko Sentral will act as a credit information
bureau until Congress approves a law on its creation. The
central bank is looking at establishing a centralized credit
information system in the first half of 2005. To make the
database possible in view of the bank secrecy law, it will
require banks to secure waivers from borrowers when they submit
their loan application. Central bank officials said the proposed
bill creating the bureau aims to address any conflicts with the
bank secrecy law. Officials said a credit bureau would help
banks and credit card companies fight delinquent card users. Mr.
Coronel said there was no specific timetable yet on the proposed
credit bureau but that Congress may tackle the draft bill after
it concludes deliberations on proposed revenue measures.
|
A greater supply of US dollar provided enough liquidity at
the electronic currencies exchange, strengthening the Philippine
peso ahead of the long weekend. November 1, All Saints' Day, is
a holiday. The peso closed 6.5-centavo stronger at PhP56.325 as
remittances from Filipinos working overseas helped increase
total volume of transacted dollars to $274.6 million from $183.9
million. "There were basically a lot of inflows. The market's
jitters in the last two days was overdone even as there were a
lot of speculative push towards a retest of PhP56.45 per
dollar," said Rovic de Guzman, head of trading at the Union Bank
of the Philippines. The peso slipped against the dollar in the
last two days as the market reacted negatively to the
scaled-down version of the "sin" taxes and discontent in the
military over the alleged corruption at the Armed Forces of the
Philippines. The market also traded long dollar positions in the
absence of requirements from oil and other manufacturing
companies, another trader at a local bank said. "A convention at
the Philippine Dealing System, settlement comes in a day after
the actual trade. Banks are borrowing pesos and lending dollars
for three days. There will be a higher yield for the peso, and
that will push for a negative carry for [dollar profits] due to
some speculative performances," the trader added.
Meanwhile, the weakness of the US dollar against regional
currencies also pushed up the peso. At the Philippine Dealing
System, the peso averaged higher by almost four centavos at
PhP56.351 from PhP56.39 the other day. Its intraday low was at
P56.41, its opening value. Moving within a 10-centavo range, the
peso closed at PhP56.325 against the greenback. Today, the local
unit is expected to range-trade between PhP56.30 to PhP56.35.
-- Ira P. Pedrasa
|
The $25 million equity fund to be set up by Tambunting-owned
Planters Development Bank and Aureos Capital for small and
medium enterprises (SMEs) will be launched by yearend. Maria
Flordelis F. Aguenza, Plantersbank president and chief operating
officer, said Aureos Capital -- a joint venture of the
Commonwealth Development Corp. of the United Kingdom and Norfund
of Norway -- has identified the local companies and SMEs that
can avail of the fund. These include pharmaceutical, graphic
technology and export-oriented firms, and call centers. "The
minimum equity investment parameters will be within $400,000 to
$1.5 million. That will be on the high side of small businesses
and on the low side of the medium enterprises. There are
companies that are highly leveraged already. The local investors
or owners cannot generate anymore [since] they don't have the
capacity to build up the capital. They cannot borrow anymore
because their leverage ratio is high," she said. Leverage ratios
measure long-term debt and the franchisor's ability to take care
of the obligations associated with this type of debt.
Plantersbank chairman and chief executive officer Jesus P.
Tambunting said the equity fund, a first in the Philippines, is
intended to further help the bank's SME clients strengthen their
equity base and boost their competitiveness. "This is something
we have been thinking about the past few years. Coming up with
an SME fund is something important. The SMEs will not be so
dependent on borrowings. If they don't borrow as much, there
will be more stability in their financial position. Our vision
is to be truly the lead bank for the SME sector. What we want to
do is provide as many services to the SMEs that will help them
become more viable and compete," he said. Aureos Capital is a
market-leading risk capital investor in emerging markets.
-- Ruby Anne M. Rubio
|
Solidbank Corp. has accused Marcopper Mining Corp. of trying
to avoid payment of PhP52 million and has even accused it of
embarking on an "alienation spree of all its properties lock
stock and barrel with obvious intention of placing them beyond
the reach of creditors." The bank said Marcopper executed a deed
of assignment on December 28, 1997, after Solidbank filed a case
against the firm at the Manila Regional Trial Court for the
recovery of some PhP52 million. However, in an October 22
filing, Marcopper said the assignment it executed was a "bonafide
and arms length commercial transaction."
The Marcopper properties subject to the deed were mining
equipment and facilities worth $19.6 million or around PhP749
million. Marcopper further said that the deed of assignment was
"made in good faith and for a valuable consideration," referring
to the payment of its outstanding liabilities in the sum of
$19.6 million as of December 21, 1997, inclusive of interest
charges with MR Holdings, Ltd. -- Ma. Elisa
P. Osorio
|
By ANNA BARBARA L. LORENZO,
Reporter
Aggressive marketing expenditures and debt payments in the
third quarter bruised the financials of Ayala-led Globe Telecom,
Inc. as net income fell 34.5% to PhP2.048 billion against
PhP3.13 billion in the year-ago period. Globe said revenues
amounted to PhP13.66 billion, 9.28% higher than last year's
P12.5 billion. Earnings, however, were offset by Globe's
spending on marketing strategies to compete with mobile phone
leader Smart Communications, Inc. "We're hoping that the
financials will be better [in the fourth quarter]. We made some
unusual marketing investments to boost specific services," said
Globe President Gerardo Ablaza. Mr. Ablaza said Globe spent
almost PhP1 billion for the promo on the AutoLoaD Max reloading
service alone, an over-the-air prepaid reloading system which
gives subscribers additional credit on their mobile phones. "We
have more aggressively pursued our strategic imperatives this
quarter, making both financial and marketing investments that
provide Globe with long-term benefits. As a result, our company
is better positioned to fully support mass-market initiatives
going forward," Mr. Ablaza said. Globe also shelled out cash
when it decided to prepay the balance of $220 million in 2009
senior notes on the premise that it would reduce interest costs
on the loan. From January to September, Globe also redeemed
bonds amounting to PhP795 million. "The retirement of notes is
expected to lower interest expense by approximately PhP100
million per month. Had the company not exercised this option,
net income would have been higher at PhP9.7 billion for the
first nine months and PhP2.6 billion for the third quarter,"
Globe said.
Still, analysts expect Globe's performance to improve in the
fourth quarter as people buy new mobiles with their Christmas
bonuses. "The headline profit numbers look awful. However, the
rest of the results actually do not look as bad," said Jojo
Gonzales, managing director of Philippine Equity Partners. He
noted that operating profits rose 8% and revenues were up 9% in
the quarter. Globe's total expenses amounted to PhP11.29 billion
from July to September from last year's PhP9.738 billion. As of
Sept. 30, Globe's revenues stood at PhP41.28 billion, 13.75%
higher than the PhP36.29 billion it booked in the same period
last year. Net profit for the nine-month period amounted to
PhP8.96 billion, 19.47% higher than the PhP7.50 billion reported
in 2003. Earnings before interest, taxes, depreciation and
amortization climbed to PhP24.9 billion.
As of end-September, Globe's total wireless subscriber base
reached 11.7 billion, 45% higher than last year, with a gross
subscriber additions of 3.6 million. Globe said that for the
period, it had 1.2 million net additions, or the number of new
subscribers to its service. The number would have reached 2.1
million if the firm did not change its policy in counting
subscribers. According to Reuters Estimates, analysts expect
Globe's net profit this year to rise to PhP14.2 billion from
PhP10.3 billion in 2003. Globe shares jumped 33% in the third
quarter, outperforming the stock market's 11.5% rise.
-- with Reuters
|
The Philippine Stock Exchange (PSE) received technical
assistance from the International Finance Corp. (IFC) in the
form of an independent third-party assessment. The IFC, the
private sector arm of the World Bank, presented last Tuesday the
findings of third-party consultant Alberto Cybo-Ottone, who
assessed the current situation of the PSE. Mr. Cybo-Ottone
reportedly presented measures that would revitalize the bourse
and how the PSE can play a stronger role in pump-priming the
economy. He also evaluated recent and planned changes and their
viability in addressing the challenges the bourse faces.
BusinessWorld tried to get the details of the
recommendations but the IFC said it has yet to finalize the
results which should be disseminated by next week. The findings
reportedly covered areas such as the PSE's market liquidity and
investor demand, its management, financial strength, ownership
structure and corporate governance practices. There was also an
analysis of the country's corporate, legal and regulatory
environment and their impact on the stock market. IFC Executive
Vice-President Peter Woicke commended the PSE leadership "for
improving the standing of the exchange and taking initiatives to
implement several changes to try to reactivate the equity
market". "I am very much aware that the PSE has witnessed a
complete transformation -- strengthening the professionalism in
its business operations, increasing transparency, improving the
country's competitive global position, and optimizing its
financial performance," Mr. Woicke told some 70 stockbrokers,
officials of listed companies, investors and the Securities and
Exchange Commission, who participated in the dialogue.
-- R. J. F. Calayag
|
By ROULEE JANE F. CALAYAG,
Reporter
The Philippine stock market was off to a healthy close
yesterday driven by stabilizing oil prices and satisfactory
quarterly results of some blue chip companies. The benchmark
Philippine Stock Exchange composite index (Phisix) rose
significantly--six times its 5.56-point gain last Wednesday--as
it leapt 33.15 or 1.87% to 1,807.89, breaching the 1,800
resistanc level. All the indices, except for the small and
medium-scale enterprise (SME) counter, ended in positive ground.
Dianne Sy, research associate at Unicapital Securities, Inc.,
said market worries were eased by positive developments in the
global front as well as in the local corporate scene.
HIGHER US OIL SUPPLY
"The market's good performance resulted from a correction in
oil prices in the world market and the positive results for the
third quarter which signified good quarter-on-quarter growth,"
said Ms. Sy. Crude oil futures reached their lowest levels in a
fortnight. An increase in inventories in the United States
appeased consumers who were worried that a supply crisis may
result from the cold Northern Hemisphere winter. The US
Department of Energy reported that inventories of crude oil grew
by four million barrels -- twice the increase expected by Wall
Street -- to 283.4 million barrels last week. As this eased the
tension over oil supply and stabilized the world economic
outlook, the Philippine frontier also got some positive
development that triggered heavy buying among investors.
BLUE CHIPS
Blue chip companies, such as Manila Electric Co. (Meralco),
property developer Ayala Land, Inc., Ginebra San Miguel, Inc.
and Banco de Oro Universal Bank, released quarterly reports that
gained the nod of discerning investors. This development
encouraged immense buying despite earlier reservations over the
long weekend -- due to the All Saints Day holiday on November 1.
Lopez-led Meralco, the country's biggest distributor of
electricity, reported a 45% increase in its third-quarter net
income to PhP831.8 million from PhP574 million during the same
period last year. Meralco yesterday said quarterly earnings rose
largely because of a 3.8% increase in sales, representing an
annualized return-on-rate base of 4.16%. In spite of the
double-digit growth for the quarter, Meralco said it continues
to be weighed down by financial issues such as its refinancing
plans, refund payments and other obligations.
Ayala Land also posted positive results as its net profit for
the period climbed 13% to PhP684 million from PhP604 million
last year. The property developer said its profits grew mainly
because of higher rental revenues and improved take-up of its
residential units. Its net profit for the nine months to
September climbed 9% to PhP1.86 billion while its revenues
improved 17% to PhP4.14 billion from PhP3.54 billion in 2003.
Ayala Land is the sixth largest company in the country.
Another contributor to the positive market sentiment was
Ginebra San Miguel, the hard liquor unit of food and beverage
giant San Miguel Corp., which posted a 5% increase in its net
profit as of September PhP1.31 billion from PhP1.25 billion last
year. For the third quarter alone, its net income grew 10.2% to
PhP356.4 million. Banco de Oro, the banking unit of retail
tycoon Henry Sy, Sr., also drew attention as its nine-month net
income advanced almost 41% to PhP1.36 billion from PhP965.17
million a year ago. The bank attributed its performance to
improved lending and investment portfolios.
TOP PICKS
"The top picks are blue chips which released positive
third-quarter results," said Ms. Sy. Only the price of one of
the 20 actively traded stocks ended lower while two were
unchanged. The rest of the issues were up. Ayala stocks blazed
the way with Ayala Corp. snatching first place, finishing higher
at PhP6.50. Ayala Land was second, which also closed higher at
PhP7.20. Philippine Long Distance Co. (PLDT), the country's
telecommunications giant, slipped one notch lower to third
although it made a respectable close at PhP1,410, up PhP35. It
will release its earnings report next week. Its American
Depositary Receipts listed in New York were up $0.54 or 2.23% to
$24.80. Ayala's Bank of the Philippine Islands, followed
closely. It ended up at PhP47.
The Sy's SM Prime Holdings, Inc., however, closed lower at
PhP7.50. The Philippines' leading fastfood chain, Jollibee Foods
Corp., was upbeat as it finished higher at PhP30. Despite the
initial disappointment over its single-digit third-quarter
growth, Jollibee assured that this did not dent its whole-year
target. The "B" shares of San Miguel Corp. as well as the shares
of Petron Corp. and DMCI Holdings, Inc. also made it to the list
with closing prices at PhP71.50 which was unchanged, PhP3.10 and
PhP3.40. Globe Telecom, Inc., the Ayala Group's
telecommunications subsidiary, completed the top 10, finishing
higher at PhP1,055. The firm said its subscriber base grew 45%
to 11.7 million as of September. Its net income for the recent
quarter stood at PhP2 billion. Sentiment was bullish as
advancers left behind decliners at 66-25. Unchanged issues
totalled 28. "We expect the Phisix to rise week-on-week and for
it to sustain the momentum," Ms. Sy said.
|
By FELIPE F. SALVOSA II,
Reporter
'It's an everybody happy compromise.'
The Executive, Congress, and cigarette companies have reached
a compromise on "sin" taxes in a deal that will leave rivals
Philip Morris Philippines and Fortune Tobacco Corp. both
satisfied, a government source has bared. The new tax formula,
which is different from that approved by the House of
Representatives ways and means committee last Monday night,
proposes only a 12% increase in cigarette taxes next year,
followed by a uniform 40-centavo increase for all brands in
2006, and a 3% increase every year thereafter until 2010, a
senior official said. "It's an everybody happy compromise," the
source added. The source also said Tarlac Rep. Jesli A. Lapus,
head of the House committee, and his Senate counterpart, Senator
Ralph G. Recto, have agreed to push for the compromise, which
was hatched after Monday night's meeting between President
Gloria Macapagal-Arroyo and some officials with top executives
of cigarette companies. Mr. Lapus's committe approved for floor
deliberations a 20% increase in cigarette taxes for next year,
followed by 3% in 2006 and another 3% in 2007. Taxes will then
be adjusted every two years thereafter, depending on inflation
or the increase in the price of cigarettes. The compromise
formula and the Lapus committee's version departed from the
Finance department's earlier proposal for a 30% increase in
cigarette taxes.
Both Philip Morris and Fortune Tobacco opposed this, as well
as the plan to set taxes according to price increases. Cigarette
taxes were last adjusted for inflation in 2000. Philip Morris
wants a uniform PhP1 increase in taxes for all cigarette brands,
warning that a percentage-based increase will penalize
higher-priced brands and result in market distortions and "downtrading"
-- forcing consumers to switch to lower-priced brands. Philip
Morris brands include Marlboro and Philip Morris. But Fortune
Tobacco, which sells Hope, Winston, More, and Champion
cigarettes, claim a uniform increase will kill its low-priced
brands. Dave Gomez, Philip Morris spokesman, said the goal of
the Monday night meeting at the President's Forbes Park
residence was to find a middle ground "that will combine all the
elements of both our proposal and our competitors' while
weighing in the national interest." "[The President] explained
the rationale why we need to increase the tax rates on sin
products and we all agreed to that," he added. The consensus is
that "percentage increases should be moderate [and] at the same
time [for] the succeeding years there should be an element of
specific fixed increases, so as not to widen further the gaps
[between the tax classifications]," Mr. Gomez said.
Under the compromise formula, the current tax of PhP1.12 per
pack for brands priced below PhP5 will be raised to PhP1.25.
Mid-priced brands under the PhP5 to PhP6.50 bracket will be
taxed PhP6.27 per pack from PhP5.60. High-end brands priced from
PhP6.51 to PhP10 will be taxed PhP10.04 per pack from PhP8.96.
Premium brands priced above PhP10 will be taxed PhP15.05 per
pack from PhP13.44. Trade and Industry Secretary Cesar A.V.
Purisima lauded the House ways and means committee for working
"double time" in legislating the Arroyo administration's
proposed tax-related measures. "We welcome the initiatives of
the ways and means committee chaired by [Mr. Lapus], which has
passed its version of the bill increasing the taxes on alcoholic
beverages and tobacco for deliberation at the plenary level.
This will facilitate an early transmission to the Senate for
further action on the bill," he said. Mr. Purisima said he hoped
the sin tax bill would be passed before yearend, "to address the
growing concerns about the prospects of the country's fiscal
situation."
Senators, meanwhile, expressed opposing views on the 20%
across-the-board increase in taxes for cigarettes and liquor
approved by the House ways and means committee. They noted the
tax bill still has to go a long way before it becomes law.
Senator Recto said Congress should legislate an increase in the
excise tax on vice products until 2010, and not just for three
years. He also said senators have no unified position yet on sin
taxes, but the bill that would raise at least PhP7 billion in
additional revenues for the government next year would likely
get approved. "If we could generate PhP7 billion, then it will
be okay. The target is PhP7 billion, based on the Executive's
proposal to Congress. I have not seen the numbers, but my
objective is to raise at least PhP7 billion incremental
revenues. This seems to be the magic number requested by the
President, reflecting the needs of creditors and ratings
agencies," Mr. Recto told BusinessWorld. The senator also
backed the House committee's retention of the current tax
classification of vice products. "I don't know yet in the Senate
what the pleasure will be, but I think that there should be
classifications for it to be progressive," he said. Senator
Sergio R. Osmeņa III also supported the sin tax bill approved by
the House ways and means committee. "That is okay by me. That is
what the House approved, nothing wrong with that," he said in a
separate interview. The lawmaker, however, said the excise tax
increase would not automatically result in substantial revenues
for the cash-strapped government. "All these products are
subject to the law of supply and demand. If you raise taxes, you
raise prices. If you raise prices by so much, there will drop in
demand, so total tax collection will be less. This happened in
1996, when we shifted from ad valorem to specific taxation and
we raised the tax rates. There was a drop in the collection of
the government," Mr. Osmeņa said.
'A BIG JOKE'
But Senator Juan Ponce Enrile said he was disappointed with
the bill approved by the House committee. "It is better not to
pass that tax anymore and just continue with the present one.
That is a big joke. The people who are supposed to be
responsible to repair the financial crisis of this country are
not really serious. These people are just fooling the country,"
Mr. Enrile said in an interview. He also criticized government
officials who met tobacco executives Monday night. "Why are they
talking to the taxpayers? Even the senators and congressmen had
dinner with the taxpayers. Bakit pa kami mag-hearing dito ng
mga tungkol sa buwis kung nagmamano ka sa mga tao na dapat
magbayad ng tunay na buwis [Why are we conducting hearings
on taxes when the Executive bows to those who should be paying
the right amount of tax]?" Mr. Enrile said. The senator has
filed a bill that will adjust the excise tax on cigarettes and
peg the highest tax at PhP13.50 per pack for six years. He noted
the current four-tiered tax system for cigarettes did not yield
significant revenue gains as tax collection from the tobacco
products accounted for only 0.46% of total economic output last
year.
Meanwhile, Tarlac Rep. Jesli A. Lapus countered claims that
his ways and means committee approved a "watered down" version
of the Finance department's proposal for higher excise taxes on
liquor and cigarettes. In his sponsorship speech to House Bill
No. 3174 last night, Mr. Lapus said the 20% increase next year
was higher than the 11.3% cumulative inflation for sin products
between 2001 and 2003, and also the 16% cumulative inflation
between 2001 and 2004, assuming a 4% inflation for liquor and
cigarettes this year. He also reiterated that the 20% increase
was the rate requested by the Department of Finance itself, down
from the original 30.1%. The resistance level of tobacco firms,
he said, was 12%, but they were convinced to accept the 20%. "We
told them they were inside a sinking ship and when the ship does
sink, then their businesses will be affected," he said. "We were
able to convince them to contribute, to carry more taxes." Aside
from the PhP7.6 billion the bill, once passed into law, will
generate in 2005, there will be a "spillover on value-added tax
collections, which uses selling price as tax base," Mr. Lapus
said. A delay in the passing of the bill by the 13th Congress
can result in a credit downgrading for the Philippines -- "a
risk which has dire consequences on both our short- and
long-term economic status...a risk we could not afford," he
said. "The passage of this bill will send the much needed and
much-awaited signal to the whole world that the 13th Philippine
Congress, is indeed, responding vigorously to the demands of the
difficult times," he added. The House of Representatives is
expected to pass the Lapus committee's sin tax bill today.
'FOUL'
British American Tobacco on Wednesday cried foul over
proposed excise taxes on tobacco and alcoholic products in the
Philippines, which the global cigarette giant charged
discriminated against smaller players in the domestic market.
The proposed law indexing excise taxes on these products for
inflation is a centerpiece of President Gloria Arroyo's attempt
to boost state revenues and avert a looming fiscal crisis. While
supporting the proposed law on principle, the commercial
director of BAT here, Dennis Belgira, said the emerging version
of the legislation would perpetuate "the existing
discrimination" against newer players like his company. The
House of Representatives bill "allows the existing unlevel
playing field to continue by classifying existing brands based
on 1 October 1996 prices, whilst classifying new brands based on
their current prices." He warned that this provision was against
non-discrimination provisions of international trade agreements.
"We sincerely hope that this vital point will be considered in
finalizing the bill in the bicameral committee" made up of House
and Senate representatives, Mr. Belgira added. Ms. Arroyo met
representatives of the tobacco lobby on Monday to call on them
to accept higher taxes for the sake of the national interest.
Representatives of BAT, which has a small share of the local
market for cigarettes, were not at the meeting, the company
said. Ms. Arroyo's spokesman, Ignacio Bunye, said Wednesday that
due to the meeting, the President "broke the impasse in the
matter of taxes on alcohol and tobacco." He added: "Our economic
managers will continue to work with lawmakers to optimize the
terms and conditions of the proposed tax measure in the interest
of fairness to business and maximum adherence to our revenue
targets."
BE AN ECONOMIST
Businessmen want Ms. Arroyo to start acting more like an
economist than a politician as her government tries to avoid a
looming Argentina-style fiscal crisis, the head of a prestigious
business school said Wednesday. Former Finance Secretary Roberto
de Ocampo, president of the Asian Institute for Management,
remarked that "there has been more political maneuvering than
actual economic measures," even though Ms. Arroyo is a
US-trained economist. "People in the business community are
really waiting for her to display a higher percentage of being
an economist rather than...being a politician," Mr. De Ocampo
told the Foreign Correspondents Association. He cited her
populist decision in 2002 to cut power rates -- a move that
caused the state-run National Power Corporation to incur huge
losses, contributing to the worsening fiscal situation. Ms.
Arroyo would have to do some "resolute nonpolitical whipcracking"
to implement measures that would boost revenues, shrink the
budget deficit, and attract foreign investment to convince the
business community, Mr. De Ocampo said. Concern at the fiscal
crisis had changed the country's mood so that "a strong call to
minimize politics from the leadership...would be heeded" as long
as the President sets an example, Mr. De Ocampo said. The
President has been pushing for the passage of eight revenue
measures to avert the fiscal crisis but only four are likely to
be passed before year-end, Congress leaders say. Mr. De Ocampo
warned that international credit rating agencies could give the
Philippines a downgrade in two months if they do not see proof
that the government is taking the necessary measures. "She will
have to do something convincing," he said.
-- with reports from Carina I. Roncesvalles,
Judy T. Gulane, and AFP
|
PNOC-Energy Development Corp., a unit of state-run Philippine
National Oil Co., yesterday opened its plant for the production
of cocodiesel, an automotive fuel that could reportedly reduce
the country's use of fossil fuel as well as pollution. Company
president Paul A. Aquino also said his company would sell to
farmers for PhP50,000 the technology to build their own
cocodiesel plant. "This project has been carried out to
demonstrate the viability of fabricating a small scale [coconut
methyl-ester or CME] plant with a 200-liter output per day,
which can be replicated in rural areas where coconut resources
are abundant," the company said. Mr. Aquino said the production
process would also yield by-products such as glycerine, which
could be used for making soap. CME production uses coconut oil
and methanol as major raw materials. It is made through
transesterification -- mixing coconut oil with methanol in high
temperature, and using catalysts to produce ester and glycerol.
Transesterification products can match the properties of
commercial diesel fuel, thus CME can be blended with diesel and
then used without any engine modification.
PNOC-Energy Development Corp. claimed consumers could save at
least 46 centavos per kilometer by mixing cocodiesel with
regular diesel fuel. Other benefits include cleaner emissions,
better power and acceleration, cleaner engine, and lower
maintenance cost, the company claimed. "Based on increased fuel
efficiency, there will be an estimated PhP13.51 billion worth of
displaced diesel, which translates to a $239.82 million
equivalent savings in dollar reserves," it added. CME will also
contribute to the reduction of greenhouse emissions, the company
claimed. Mr. Aquino said the use of CME as a blend for diesel
fuel could also create additional demand for high-value
coconut-based products, as well as generate livelihood
opportunities in rural communities.
President Gloria Macapagal-Arroyo wants the country to reduce
its dependence on imported fossil fuel. She has ordered the
government to increase its use of alternative fuels such as
compressed natural gas or CNG and cocodiesel. By 2005, the
government expects about 60% of about 1,500 buses in Metro
Manila to run on CNG. About 5% of all land vehicles are also
expected to use cocodiesel by 2006. Government vehicles now use
a 1% blend of cocodiesel. --
Bernardette S. Sto. Domingo
|
eTelecare International, a call center company, wants to go
public locally and in the United States possibly next year so it
can raise more money for debt payment and acquisition of more
call centers here and abroad. "We are positive to both. If we
can do it [initial public offer] simultaneously, it will be
better. But it's too early to say," eTelecare chairman Alfredo
I. Ayala told reporters yesterday. He said listing at the local
and foreign stockmarkets can raise about $50 million to $ 100
million for a company of eTelecare's size. "Proceeds will be
used to retire debt and for acquisitions in the Philippines,
India or the US, depending on where it makes sense to acquire,"
Mr. Ayala said. But he gave no details on his firm's debts.
eTelecare is a provider of call center services for technical
support, customer service, and sales. Its 7,000 call center
agents here and abroad serve 30 companies based in the US. Last
June, it bought Arizona-based Phase Solutions, which employs
2,900 customer service agents in 10 call centers in the US.
eTelecare said it expected revenues this year to reach PhP7
billion, with 40% to come from Philippine operations. Mr. Ayala
said the listing of eTelecare shares was still under study. "We
are first focusing on growing the business. Tapping the capital
market will follow," he added. From 4,000 workers in the country
today, eTelecare expects to grow this to 8,000 by 2006, and to
15,000 by 2009. Before the end of the year, eTelecare will open
a 1,100-seat call center in Cebu City, which will be the biggest
in the area. eTelecare used to be a subsidiary of SPI
Technologies, Inc., a locally listed company, until it was spun
off last year. Its equity investors include foreign firms
Crimson, AIG, Electra, as well as local firm A. Soriano Corp.
-- A. B. L. Lorenzo
|
PCIJ Report
By TESS B. BACALLA
Philippine Center for Investigative Journalism
Conclusion
Luxury vehicles are not uncommon at the Bureau of Customs (BoC),
where officials and employees like to drive fancy cars, even if
most of them cannot explain how they bought these, given the
salary scales at the BoC. But assistant customs section chief
Ildefonso Almero does not even have a car. Just five years away
from retirement, he also does not own a house, but rents an
apartment where he lives with his family. Mr. Almero also seems
bent in making sure the government collects the right duties and
taxes -- something that businessmen and Customs insiders alike
say no longer interests many bureau personnel. For years, Mr.
Almero has been calling the attention of his superiors to review
the bureau's 1998 reclassification of two petrochemical
products, low-density polyethylene (LDPE) and linear low-density
polyethylene (LLDPE), as copolymers. Both had been classified as
homopolymers for more than 20 years, he argued in a position
paper. The 1998 reclassification, however, subjected the two
kinds of imported petrochemicals, specifically the Dow Chemical
Co. and Elite brands, to a lower tariff rate of 3%, instead of
the 15% duty they merited under the original classification. As
a direct result of this misclassification, wrote Mr. Almero, the
government has run up huge revenue losses amounting to millions,
if not billions, of pesos in the last six years. The resulting
loss, he argued, is "so massive it has contributed to the
impending collapse of our $1-billion local (petrochemical)
industry." Jose Sereno, executive director of the Association of
Petrochemical Manufacturers of the Philippines (APMP), and who
read Mr. Almero's paper just recently, describes the Customs
official's analysis as "excellent." Yet Mr. Almero's own agency
seems less impressed and so far has been unmoved by his
arguments.
BUREAU INFILTRATED
Business groups are not surprised. They say they have had to
endure the same lack of enthusiasm whenever they ask Customs to
implement specific reforms to curb smuggling. "Very slow ang
response time," complains an industry representative. "You
cannot but suspect if delay is deliberate. You can't readily
point an accusing finger. Administrative lapses, yes." Other
observers, though, are more forthcoming in pointing out what
they believe to be the real reason behind the bureau's
foot-dragging. Says one: "They (smugglers) are always one or two
steps ahead of us, and part of the syndicates are the personnel
of the bureau. They are the ones advising importers what to do."
Customs insiders themselves admit as much, adding that some
technically smuggled goods are "packaged from the top,"
involving no less than powerful politicians or their cronies.
This may help explain why it took the Federation of Philippine
Industries (FPI) years before it gained access to the inward
foreign manifests (IFMs), the shipping documents containing all
the vital information about the cargo that comes into the
country. The information in the manifests include the
description of the goods contained, the names of the consignees,
the ports of lading, and destination.
Access to these documents, the FPI believed, would enable it
to assist the bureau in preventing smuggling, since it would
allow detection of any irregularity in a foreign shipment even
before the goods reach the Philippines. "FPI has contended that
these documents are public and should be accessible. We
submitted our legal arguments to the Bureau of Customs, but our
request was turned down for the reason that access to these
might give an undue advantage to some companies," wrote FPI
secretary general Joseph Francia. "The reply to this argument is
that if everybody had access to the shipping manifests, no one
would have undue advantage over anybody else." Customs
eventually did release the manifests to the National
Anti-Smuggling Task Force (Nastaf), which was created last
March. The task force headed by current local governments
secretary Angelo Reyes promptly allowed industry organizations
to view the electronic copies in its headquarters, since it
needed their expertise to make sense of the data.
An industry representative says this proved to be a big help
in their efforts to curb smuggling and protect local industries.
Using the data from the IFMs, they were able to alert Nastaf
about incoming vessels with questionable cargoes. But then,
technical smugglers began diverting their shipments from the two
Manila ports covered by the IFMs to other ports such as Subic.
Volumes of resin shipments, for example, went down significantly
in the Manila port even as, an industry representative says,
"they were having a deluge (of resin) in Subic." Access to the
IFMs meant that some of the affected industries no longer had to
rely too much on insiders to get confidential information on
irregular shipments. In the past, that information was obtained
in exchange for an outright fee or some favors. The fee, says
one businessman, amounts to "a few thousand pesos," which is
handed out if the information is proved to be correct.
Businesses also had to keep their contacts happy by small tokens
of appreciation such as cellphone loads or pocket money if the
Customs insider was traveling abroad.
SHORT-LIVED TRANSPARENCY
But the industries' access to IFMs was short-lived, lasting
only until Nastaf was dissolved last August upon President
Arroyo's oral instructions for it to cease operations. "Now we
have to rely again on our contacts inside the bureau," says an
industry representative, acknowledging that Customs insiders
providing them with information are not exactly doing it out of
goodwill and probably have their own vested interests and other
groups to protect. Industry groups hit hard by technical
smuggling lost access to the IFMs when Nastaf was dissolved.
They also lost the momentum brought on by the task force's
efforts to bring about coordination among the various government
agencies whose functions are vital in containing smuggling.
"Before Nastaf (was created), we just wound up frustrated
because everything was piecemeal," says an industry
representative. "If the agency will not cooperate, nothing more
can be done."
Indeed, some agencies sometimes act as if they are not part
of the same government as the other state bodies. Earlier this
year, for example, Columbian Grains Foods Corp. was found to
have misdeclared 180,000 bags of iodized salt as natural salt.
Yet it claimed to have secured an Authority to Release Imported
Goods or ATRIG from the Bureau of Internal Revenue (BIR). The
issuance of this authority exempts an importer from payment of
VAT and facilitates the release of the shipment. When asked by
the Anti-Smuggling, Intelligence, and Investigation Center (ASIIC),
Nastaf secretariat, for a certified true copy of Columbian
Grain's ATRIG, the internal revenues bureau invoked Section 70
of the National Internal Revenue Code in its refusal to release
the document. "We will be able to affirm the authenticity of the
ATRIG in a proper forum like a court of competent jurisdiction
which subpoenas us to testify," BIR deputy commissioner Jose
Mario Bunag said in a letter to ASIIC. A government official
would later observe that the BIR had granted the ATRIG without
first checking with Customs regarding Columbian's shipment.
"Instead of protecting government's interest, it's compromising
(it)," he said.
The accumulation of huge uncollected customs bonds (the
figures vary: PhP5.7 billion as of September 2003, as reported
by Customs to Nastaf; PhP1.27 billion covering the period
2000-2003, based on Customs-furnished data) also highlights the
absence of coordination among government agencies. It was only
recently that the Insurance Commission announced that it would
issue a circular saying it would not renew the Certificates of
Authority to issue surety bonds of companies with unsettled
accounts of at least 70% of their outstanding obligations to the
customs bureau. It was also only recently that the issue of
getting the Commission on Audit to do an audit of all
outstanding customs bonds came about.
BELATED ACTION
It seems only now, too, that the Department of Finance, given
its oversight functions over Customs, has seen it fit to look
into the customs-bond issue through a subcommittee on
unliquidated bonds headed by Undersecretary Emmanuel Bonoan. In
addition, the finance official heads the subcommittee on
customs-bonded warehouses, yet another source of massive
technical smuggling at Customs. Both subcommittees were created
as a result of the regular meetings of the Cabinet Oversight
Committee on Anti-Smuggling. There is actually supposed to be a
Congressional Oversight Committee for Customs, the creation of
which is mandated by Republic Act No. 7650 to monitor the
implementation of this law on the physical examination of cargo.
The committee is supposed to be composed of the chairpersons of
the committees on ways and means and both houses of Congress,
plus four additional members from each house. A check with the
two chambers indicated that the committee does not exist. RA
7650 was enacted in 1993. Such legislative aberration may also
be seen in the newly enacted Republic Act 9280, which has not
been fully implemented to this day in the absence of approved
implementing rules and regulations. This after many legitimate
brokers waited some 25 years, according to Vis-Min Customs
Brokers Association president Felix Romano, before the law was
finally passed last March.
The law, "An Act Regulating the Practice of the Customs
Brokers Profession," is expected to professionalize the ranks of
brokers, often tagged as principal accomplices in the commission
of technical smuggling. Among others, it requires customs
brokers to sign import entry declarations under oath. This
measure is designed to put a stop to some of the malpractices
among brokers, including signing of blank entries, and
connivance with non-brokers to facilitate the irregular
importation of goods, thus abetting technical smuggling. Mr.
Romano says that because of the law, "brokers will have to think
twice before conniving with importers" in making irregular
shipments. Mr. Romano is among those actively pushing for the
approval of the draft implementing rules and regulations for the
law. Another legislative measure deemed vital to discouraging
smuggling is a law that would declare smuggling, whether
technical or outright, a heinous crime and an act of economic
sabotage. As of September 3, three bills that would more or less
do this have been filed in Congress. Similar bills had been
filed in the previous Congress, though, and nothing ever came
out of those.
EVEN THE SMALL FISH ARE FREE
Many industry representatives note that no one has been
convicted of smuggling despite the damage it has wrought on
local industries and the tremendous amounts of potential revenue
the government has lost because of it. Recently, Customs
released a list of 112 names of individuals it claims to have
sued, including suspected smugglers. But a broker who claims to
be an expert in "facilitating" the importation of "problematic"
cargo scoffs at the list, saying that the number one "is not
even a small fish." Conspicuously absent in that list at least
is a name that an industry source recalls was mentioned
specifically by President Arroyo in a 2002 meeting with the
business groups. According to an industry source, the president
told those present, "We know who the smugglers are," and cited
one particular smuggler by name.
In the meantime, amendments to the Tariff and Customs Code
are also being sought, since many believe it is no longer
responsive to the needs of the times, especially where smuggling
is concerned. But some industry representatives and government
officials say other state agencies besides Customs to be
stricter in issuing the various permits needed by traders to
bring in goods, and to scrutinize more closely all the documents
presented by importers. Last August, Mount Zion Cargo Express (Mozex)
was found to have obtained import permits from the Plant
Quarantine Service of the Department of Agriculture by using
fake documents. Mozex had been regularly importing broccoli from
Australia, supposedly from a company called Scholastic Australia
Pty. Ltd. To facilitate the release from the port, Mozex
presented phytosanitary certificates, which are guarantees
issued from the exporting country that an agricultural product
is free from pests and diseases. Acting on tips that the company
was bringing in "questionable cargo," ASIIC wrote to the
Australian Quarantine Inspection Service (AQIS) regarding the
authenticity of 12 phytosanitary certificates supposedly issued
to Mozex. AQIS denied having issued them and added that it had
no record of Scholastic P/L exporting farm produce. Scholastic
Australia turned out to be a children's book publisher.
|
By CARMELITO Q. FRANCISCO,
Correspondent
DAVAO CITY (Southern Mindanao) -- The government might resort
to applying the service contract scheme if the Supreme Court
stands pat on its decision to disallow foreign companies from
wholly owning a mining firm in the country. Demetrio Ignacio,
Department of Environment and Natural Resources (DENR)
undersecretary for planning and policies, said this could be the
scenario if the High Court will not rule in favor the petition
of the National Government to reconsider its earlier decision.
He said the government could implement a service contract
agreement patterned after those that were signed with foreign
companies in developing the power sector, particularly in
exploring fuel deposits. However, Mr. Ignacio said he could not
give any details of the service contract agreement offhand
because this has not been discussed yet at the national level.
"We will have to implement also the 60-40 sharing arrangement if
the Supreme Court refuses to reconsider its decision," he added.
In January, the High Court ruled as illegal the provision of
the Philippine Mining Act of 1995 that would have opened the
mining industry to foreign ownership, particularly the provision
on the Financial and Technical Assistance Agreement. On June 29,
the DENR made an oral argument as to why the High Court should
reconsider its ruling which the government viewed as a stumbling
block to the revitalization of the mining industry. Mining
industry leaders were worried the decision would scare some of
the big foreign investors and that it would stop the growth of
the industry considering that it is "cash intensive". Benjamin
Philip Romualdez, who joined Mr. Ignacio as speakers in the
First Mindanao Mining Technology Forum here, said the
revitalization of the mining industry hinges on what the High
Court will do with its earlier decision.
In his previous visit to the city last month to attend the
Mindanao Business Council, Mr. Romualdez, Chamber of Mines
president, said there is about $7 billion in investments waiting
for the SC to reverse its decision over the issue of ownership.
Mindanao business leaders have been batting for the
rehabilitation of the industry because, according to Romeo Serra,
Mindanao Business Council vice chairman, who said this will help
the poor areas where mineral deposits are located. Another
aspect needed for revitalizing the industry, said Mr. Ignacio,
is for government to "streamline" its bureaucratic processes.
Edgar Martinez, Mindanao Association of Mining Industry
president, said at present a mining applicant needs at least 108
signatures for approval thereby significantly delaying flow of
investments in a new mining project.
|
Electricity bills should start reflecting lower rates once
the government privatizes its 14 existing small power utilities
group (SPUG) areas to meet the growing power requirements of
large island provinces. State-owned National Power Corporation (Napocor)
formally opened the first wave of SPUG areas to private sector
participation with the signing of an agreement with the
Marinduque Electric Cooperative, Inc., Tablas Electric
Cooperative, Inc., and Romblon Electric Cooperative, Inc. Energy
Secretary Vincent S. Perez stressed that the privatization would
reduce the charges being subsidized by Napocor which are in turn
passed on to the consumers. At present, Napocor-SPUG operations
are funded by the revenues from electricity sales in missionary
areas and from the universal charge, a component of the power
bill charged to all electricity consumers. The subsidies granted
by Napocor are in turn passed on to consumers.
Napocor-SPUG earlier announced that 14 out of the 74
missionary areas under its control are open for private sector
participation. Marinduque, Tablas and Romblon emerged as pilot
projects, the Energy department said. Records show that
electricity requirements in these areas have been steadily
growing. In Marinduque, current peak demand is at 9.4 megawatts
(MW); Tablas, 3.2 MW; and Romblon, 1 MW. The newly inked
agreement also formalized the assistance of the government to
the electric cooperatives through the International Finance
Corporation (IFC) as the transaction advisor. As a transaction
advisor, IFC is expected to develop a best practice model for
greater private sector participation that will protect and
advance the interests of electric cooperatives and its members,
Mr. Perez said. It will provide technical, financial and legal
assistance to ensure the success of the project. The Energy
chief also said the entry of new players will address the
increasing power requirements of growing island provinces and
cut down losses of Napocor.
The Department of Energy recently issued Circular 2004-01-001
setting the rules and procedures for the inflow of private
capital in missionary electrification. He said private sector
participation could take the form of a takeover of the supply of
electricity to any existing Napocor-SPUG area, either through
outright purchase or lease of existing Napocor-SPUG assets. The
private sector could also install new power generating
facilities including associated power delivery systems. Mr.
Perez said a competitive bidding process would be conducted in
the selection of new companies to ensure that prospective
players have the financial and technical capability to supply
electricity. In particular, new players are expected to pursue
projects that would address the lowest long-term cost of power
and services, environmental compatibility with the local area
and the most advantageous implementation schedule, he said. Upon
entry of a new player, Napocor-SPUG would cease operations in
the area and dispose the particular assets in the area through
competitive bidding process or redeploy them, Mr. Perez said.
-- Bernardette S. Sto. Domingo
|
The government yesterday defended its 2004-2010 Medium-Term
Philippine Development Plan (MTPDP), saying it will not cause
the fiscal deficit to balloon. Socioeconomic Planning Secretary
Romulo L. Neri also told critics of the 2004-2010 MTPDP to read
the plan "carefully and thoroughly". "Maybe [the critics] see
the Plan as a forecasting exercise. It's not. It [was drawn up]
to articulate the government's visions and the strategies to
attain those visions," Mr. Neri said. He also belied the
critique of economists from the University of the Philippines
(UP) that the plan will increase the assumed liabilities of the
government. "I don't think the MTPDP will do that. In fact, the
MTPDP includes detailed strategies on how the government can
resolve its fiscal deficit," he said. Former National Economic
Development Authority (NEDA) director-general and UP economist
Solita C. Monsod said on Tuesday that the MTPDP has eight flaws,
one of which will cause the assumed liabilities of the
government to expand. The plan of the government to create more
government-owned and -controlled corporation (GOCCs) that will
implement the strategies of the MTPDP such as the social Housing
Finance Corp. and the Philippine Infrastructure Corp., she said,
may contribute more to the fiscal problem of the government.
"These, plus the government's plan to triple loans to small- and
medium-enterprises are disasters waiting to happen," Ms. Monsod
said.
Likewise, Finance undersecretary Eric O. Recto said the
government's medium term plan outlines a more realistic target
than what is being suggested by some economists. "We desire to
balance the budget sooner than what has been presented and this
desire is shared by everyone in the economic team, however being
foolhardy about setting too aggressive targets is not an
activity that will benefit us at this time," Mr. Recto told
reporters yesterday. In fact, Mr. Recto said the economic team's
"internal targets" are really high but "collectively we have
find a common denominator which manifest itself in the six year
plan we have outlined." Mr. Recto said the government believes
that PhP100-billion in additional savings and revenues yearly
would be enough to achieve its fiscal policy objectives,
foremost of which is to wipe out the budget deficit by 2010. Mr.
Recto also contested claims that the creation of the Philippine
Infrastructure Corp. will become another source of assumed
liabilities. He explained that the Philippine Infrastructure
Corp will be financed through "borrowings, hopefully non
recourse borrowings and asset based financing."
The Philippine Infrastructure Corp. is supposed to be a
wholly owned subsidiary of National Development Company, which
will infuse PhP20 billion in capital partly from of the proceeds
of the Economic Recovery through Agricultural Productivity or
ERAP bonds sold during the Estrada administration, he explained.
The new government corporation will reportedly undertake at
least 10 major infrastructure projects through outsourcing,
starting with the South Luzon Expressway (SLEx) to the Southern
Tagalog Arterial Road (STAR). It will be tasked to "jumpstart
certain projects which will be taken over at the very early stag
by the private sector," Mr. Recto said. Aside from these two
flaws, she noted six other flaws in the MTPDP. These include:
- The large "disconnection" between the plans and actions;
- failure to prioritize government programs in light of
fiscal problems;
- "internal inconsistencies" in the strategies and
programs contained in the MTPDP;
- ambiguity on the possible changes in the guidelines of
NEDA's Investment Coordination Committee;
- lack of articulation on the government's population
policy to reduce population growth; and
- use of the Plan as a "policy advocacy tool" where agenda
such as constitutional reform has been included.
Ms. Monsod also said with the flaws in the 2004-2010 MTPDP,
it is highly possible that the government will only "muddle
through" and fail to resolve the fundamental economic problems
of the country. -- Bernardette S. Sto.
Domingo
|
Fourteen Philippine companies are set to join the first
China-ASEAN Expo next month in Nanning, China, the Center for
International Trade Expositions and Missions (CITEM) said. Trade
undersecretary Thomas G. Aquino said in a statement that the
Philippine participation should "open up exciting prospects for
both the Philippines and China in bilateral and multilateral
cooperation." The Philippine mission will also join the
China-ASEAN Business and Investment Summit. With Mr. Aquino in
the business mission are 43 members of the Federation of
Filipino Chinese Chamber of Commerce and Industry, Inc. and
around 27 Mindanao businessmen. The expo aims to promote the
China-ASEAN Free Trade Area expected to dramatically increase
China-ASEAN trade volume, which has continuously exceeded the
projected annual growth rate of 15% over the last 10 years.
China is the Philippines' sixth major trading partner in 2003,
accounting for 5.38% of Philippine trade, a significant increase
of 58% over the previous year. It is the country's No. 8 export
market, and accounts for 5.99% of total Philippine exports
($2.14 billion). Companies joining the expo are Oceanic Exports
(Manila) Inc., AAMC Foods Corp., El Coco Mfg., Inc., Mabuhay
2000, Superstar Coconut, Camel Appliances Mfg. Corp., Euromed
Laboratories, Inc., Philippine Coco Forest, Viviendo
Philippines, Inc., Club Panoly Resort, Morning Star Travel and
Tours, Inc., DOT Travel Service Philippines, Incorporated, Jeron
Travel and Tours and Philippine Airlines.
Meanwhile, an economist from the Asian Development Bank (ADB)
said the Philippines needs to identify its specializations and
niches within manufacturing production chains if it wants to
remain competitive against China. ADB director-general for its
Southeast Asia Department Shamshad Akhtar said the manufacturing
sector should show it could manage technology, improve
productivity and skills of employees and enforce effective
governance and rule of law if the Philippines want to bring back
foreign investors. "China's very diverse domestic economy, with
large coastal provinces that have achieved middle-income status,
and a steady flow of labor from inland provinces that are still
low income, poses challenge to virtually economies in East
Asia," Ms. Akhtar said in a presentation entitled "East Asian
Integration: Trends, Challenges and Opportunities." "To remain
competitive in manufacturing vis-a-vis the PRC, middle-income
ASEAN economies, such as Indonesia and the Philippines, will
need to identify their specializations and niches within
manufacturing production chains," she stressed.
Local economists earlier pointed to the search of
manufacturers for cheaper labor as the reason behind the move of
some companies to China. Bienvenido S. Oplas Jr., an economist
from private research group Think Tank Inc. earlier said that
labor in China and India cost only about one-third or one-fourth
of what is being paid to workers here in the Philippines. Former
National Economic Development Authority (NEDA) director-general
and University of the Philippines economist Felipe Medalla also
believes that the departure of some manufacturing firms from the
country is mainly due to the high of cost of production. "We're
not exactly a cost-competitive country," Mr. Medalla earlier
said.
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Largest lender Metropolitan Bank and Trust Co. finalized
yesterday the purchase of 18,360,686 shares of its thrift bank
arm Philippine Savings Bank (PSBank) from First Metro Investment
Corp., the bank told the Philippine Stock Exchange. This will
increase its stockholdings in PSBank to 74.237% from 64.008%.
PSBank president Pascual M. Garcia III said this was a good
indication of confidence in its subsidiary and the prospects of
the thrift bank. "There will be no change in our business
strategy and program. There is no significant change in the
ownership structure," he said.
PSBank, the country's second largest savings bank in terms of
assets, posted an 11% growth in net income to PhP197.2 million
during the first semester due to higher loan and deposits
volumes, and higher average rates. As a result, earnings per
share improved to PhP1.10 from PhP0.99 for the same period last
year. PSBank reported a 27% drop in nonperforming loans for the
third quarter to PhP1.19 billion from PhP1.63 billion in the
previous quarter. It reported its bad loans comprised 4.67% of
total loans as of September, down from 6.64% in the second
quarter. General provisions for loan losses were at PhP214.7
million while specific provisions were at PhP659.91 million.
-- Ruby Anne M. Rubio
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By IRIS CECILIA C. GONZALES,
Reporter
International Finance Corp. (IFC), the World Bank's private
sector investment arm, has invested $1.5 million in
Filipino-owned Paramount Life and General Insurance Co. Peter
Woicke, IFC's executive vice-president, said the investment --
equivalent to a 20% stake in Paramount -- would enable the
insurer to become a major player in the local insurance market.
Paramount is a Filipino-owned company, engaged in both life and
non-life insurance businesses. Its principal shareholders
include the Go family, the Chu family from Cebu and the Tahija
family from Indonesia.
Patrick L. Go, Paramount's chief executive officer, said
IFC's investment would help position the company among the
country's top 10 insurance firms in the country. "The
partnership with IFC will help us in consolidation. We would
become bigger and hopefully, hit the top 10," he told reporters
yesterday. Mr. Go said although it is not entirely focused on
its ranking in the industry, the company is working to improve
its place, currently at the 12th spot among 120 insurance
companies in the Philippines. "The IFC partnership will provide
critical support for our company to distinguish itself and to
further strengthen our financial resources to continue its path
of combined internal and external growth," he said. Mr. Go said
the insurance industry still needs a lot of support both from
government and the private sector, in terms of capitalization.
"Essentially, what is needed is to strengthen the industry by
increasing capitalization and by better monitoring what each
company is doing," he said.
At present, the company has 27 branches in Metro Manila. It
has focused its business principally on personal lines and on
small and medium-scale enterprises in the provinces. Paramount's
net worth stands at PhP300 million with assets of over PhP1
billion, latest company data showed. The gross premiums written
for its general business stands at PhP515 million. IFC, for its
part, has been investing in the Philippines in the past 40 years
mostly to help spur private sector development. In its fiscal
year that ended June 2004, IFC committed $90 million in loans
and equity to five investment projects. These investments
included infrastructure projects in the power, water and
telecommunication sectors. Aside from helping the local
insurance industry, IFC is also assisting in the development of
the domestic capital market by providing third-party assessment
and analysis of the bourse's current situation. Vipul Bhagat,
IFC country manager for the Philippines, said IFC hopes to
increase its investments in the country in the coming years, but
this depends on government efforts to improve the business
environment.
|
The Philippine peso once again buckled against the US dollar
by five centavos as the market yielded to more economic jitters.
Traders said the peso's weakness was triggered by the
government's inability to clear revenue measures, making a
credit downgrade more probable. The House ways and means
committee voted for a compromise version of the "sin" taxes bill
to the disappointment of Finance officials.
At the Philippine Dealing System, the country's electronic
currencies exchange, the peso dropped by more than six centavos
to average at PhP56.39 from PhP56.326. The local unit capped its
intraday high at its opening value of PhP56.37. After trading
within a four-centavo range, the peso finally settled at
PhP56.39, five centavos weaker against the dollar.
-- I. P. Pedrasa
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Banco de Oro Universal Bank's nine-month net income surged by
40.9% on improved lending and investment portfolios. In a
statement, the Henry Sy-led bank said income during the period
reached PhP1.36 billion from PhP965.17 million a year ago. The
country's eighth largest lender said net interest income grew by
26.52% to PhP3.53 billion from PhP2.79 billion due to higher
level of loan and investment portfolios. Non-interest income
went down by 4.71% to PhP1.82 billion despite improved trading
gains, foreign exchange, trust and other fees. Operating
expenses, however, grew by 4% to PhP3.53 billion, primarily due
to higher manpower and occupancy costs of business expansion.
Year-to-date return on equity hit 11.9% while the bank's capital
adequacy ratio -- a measure of its ability to cover for risks --
hit 20.89%.
Total resources as of end-September stood at PhP158.27
billion, up by 18%. Deposits increased by 11% to PhP108 billion
while bills payable grew to PhP27.8 billion due to the
$150-million senior notes issued in October 2003. Banco de Oro
set aside provisions of PhP548.6 million and its loan coverage
ratio stands at 72%. Its nonperforming loans represented 6.7% of
its total loan portfolio. Loans that were at least 90 days past
due hit PhP4.73 billion. Net loans grew by 3.3% to PhP57.4
billion while capital funds amounted to PhP15.7 billion.
-- Ruby Anne M. Rubio
|
By BERNARDETTE S. Sto.
DOMINGO, Reporter
Lopez-led Manila Electric Co. (Meralco) yesterday said
third-quarter net income rose to PhP831.8 million, 45% higher
than PhP574 million in the same period last year. Still, Meralco
expressed concern on several financial issues such as its
refinancing plans, refund payments and other obligations. In a
disclosure to the Philippine Stock Exchange, the company
attributed the profit rise to the 3.8% increase in sales volume.
The figures represent an annualized return-on-rate base of
4.16%. "This is precisely the reason why, despite our net income
which was achieved through prudent financial management, our
financial obligations continue to put a financial strain on our
overall fiscal situation," Vice-President for Corporate
Communication Elpi O. Cuna, Jr., said.
In its report, the firm said the commercial sector posted the
highest growth rate at 5.6% compared to the same period last
year, logging 2,276 million kilowatt-hours (kWh) followed by the
industrial sector with 1,852 million kWh for a 4.3% growth. The
residential sector showed a slight 1.7% rise at 2,230 million
kWh. Mr. Cuna said the estimated cash outlay for customer
refunds until yearend of at least PhP1.3 billion and PhP3.5
billion in 2005 is another "financial burden" for the company.
Phase 4 of the refund is still pending, the firm said. Meralco
said it is in the final stages of a refinancing plan to enable
it to manage debts for the coming years. Debts reached PhP23.8
billion as of end-September. Of this amount, some PhP8.2 billion
is due in the last quarter of the year, including short-term
debts amounting to PhP4.8 billion. Mr. Cuna stressed that apart
from its financial obligations and refund payments, the firm has
to contend with improvements in its system through much-needed
capital expenditure program. For this year alone the company is
expected to spend around PhP5.75 billion for its capital
expenditures, he said.
Meralco earlier said its capital expenditure program is
necessary since this will ensure the quality of service expected
by customers. "To give the public a better appreciation of the
efforts undertaken by Meralco to improve its overall service,
our company during the period from 1994 to 2002, invested PhP60
billion in plant and equipment to keep up with the growth in
customers and demand," Mr. Cuna said. "However, our net income
for the same period of about PhP29 billion was wiped out by the
retroactive rate rollback ordered by the Supreme Court when it
decided to rule against us," he added.
|
By CECILLE S. VISTO,
Sub-Editor
Listed property developer Ayala Land, Inc. yesterday reported
a third-quarter net profit of PhP684 million, up 13.3% from last
year's PhP604 million mainly driven by higher rental revenues
and take-up of residential units. Ayala Land said in the nine
months to September net profit rose 9% to PhP1.86 billion from
PhP1.7 billion in the same period last year. Revenues for the
third quarter totaled PhP4.14 billion, up 17% from PhP3.54
billion the year earlier. Consolidated revenues from January to
September totaled PhP12.21 billion from PhP9.99 billion a year
ago. The country's sixth largest company, in a report to the
Securities and Exchange Commission (SEC), said rental properties
remained the firm's main revenue driver during the nine-month
period, contributing PhP2.87 billion or 24% of total earnings.
Rental revenues rose 8% year on year owing to higher sales by
merchants in its shopping malls. It noted Ayala Center's
occupancy remained high at 93% and that its merchant replacement
program continued. "Pushing shopping center rentals up were
additional spaces due to the opening of SM Makati's expansion
area at the tailend of 2003, Greenbelt 4 (first quarter of 2004)
and Market! Market ! (third quarter of 2004). As of
end-September, Phase 1A of Market! Market! was 85% leased out.
Its 45,000-square meter department store and supermarket, Metro
Gaisano and additional merchants, will commence operations in
the coming weeks," Chief Finance Officer Jaime E. Ysmael said.
Condominium and high-end residential unit sales reached
PhP2.22 billion, 64% higher year on year and accounting for 18%
of the top line for the period. High take-up of One Legazpi
Park, The Residences at Greenbelt and Serendra was noted. Mass
housing unit Laguna Property Holdings, Inc., meanwhile,
contributed PhP1.36 billion to consolidated revenues. Land sales
at the Ayala Westgrove Heights and Ayala Greenfield Estates in
Laguna represented 15% of total revenues. The high revenue
growth was partially offset by costs and expenses which rose
17.6% to PhP3.43 billion in the third quarter from PhP2.92
billion last year. Expenses increased to PhP10.37 billion for
the first three quarters from PhP8.25 billion a year ago.
HIGHLY LIQUID
"The company remained highly liquid with cash reserves of
PhP5.5 billion A total of PhP450 million worth of short-term
commercial papers [SCTP] were issued in the third quarter,
bringing year-to-date SCTP issuance to PhP815 million," Mr.
Ysmael said. He said sales of nonstrategic assets enabled the
company to pare debt. It earlier sold its 28% stake in Pilipinas
Makro and a gas station site in Alabang, generating PhP1.1
billion. Profits are expected to improve further in the fourth
quarter, when most buyers close real estate deals and rentals
from shopping malls are boosted by Christmas spending.
"Third-quarter growth is very encouraging because typically the
fourth quarter is the strongest," said CLSA Philippines, Inc.
Research Head Alfred Dy. "We saw across-the-board increases in
rental revenues, property sales and hotel revenues. We're seeing
strong topline growth. This is an indication of renewed interest
in the property sector," he added.
Ayala and other real estate firms have gained from rising
demand for property from the millions of Filipinos working
overseas and a ballooning industry in call centers and back
office operations serving American and European companies. But
the prospects for recovery in an industry still suffering a
hangover from the 1997 Asia financial crisis are clouded by
concerns that soaring crude oil prices could dampen demand by
pushing up interest rates. At the end of yesterday's trading,
Ayala Land was unchanged at PhP7 per share, although 13.42
million shares changed hands. Meanwhile, Ayala Land director
Francisco Licuanan III formally resigned from the company board.
President Gloria Macapagal Arroyo recently appointed Mr.
Licuanan, who was Ayala Land's president before his retirement,
as the chairman of the Subic Bay Metropolitan Authority,
replacing Felicito Payumo. -- with Reuters
|
Ayala-led Globe Telecom, Inc. is mulling the increase of its
public offering to increase its liquidity at the stock market as
interest in equities is picking up. The firm currently has 20%
of its shares available to the public at the Philippine Stock
Exchange (PSE). "Globe is committed to increase the float to 30%
from the current 20%. But this is a medium-term goal and not on
the near term," said Delfin C. Gonzalez, chief finance officer.
After a drought at the PSE, the equities market is regaining its
composure with investors' interest coming back as they take on
promising stocks. Telecom stocks like Globe have been among the
drivers of positive performance for the PSE due to their
profitability and sustainability of operations. "There has been
a significant pickup in the RP market and our intention is to
make sure we have access and our stock is liquid," Mr. Gonzalez
said.
Globe initially floated 15% of its shares before European
investor Deutsche Telekom AG sold its shares in 2004. Deutsche
Telekom said it had to sell its shares to retire some debts it
acquired after an expansion binge in the 1990s. Globe currently
has 27 million shares available for public trading. "The
increase in the float is always an option. We will do this at an
appropriate time but there are no specific plans at this point,"
said Andrew Buay, Globe chief operating advisor. He also
represents the Globe board Singapore Telecom, which owns 40% of
the local telecommunications firm. Globe will announce the
results of its third-quarter performance today. The firm banks
on subscriber take-up, voice, messaging and other services for
strong revenues. -- Anna Barbara L. Lorenzo
|
TAIPEI, Taiwan -- Intel, the world's largest chipmaker
expects to see continuous growth in demand for all its products
over the next years. In a speech delivered at the Intel
Developer Forum here, Anand Chandrasekher, vice-president and
general manager for Intel's mobile platforms group, said the
increased demand for Intel products will be driven by
innovation. "We expect a surge in all the products what
consumers measure is now shifting. Performance still matters,
but there is a shift to value-added services," he said. Among
these value-added services, Mr. Chandrasekher said, is greater
wireless capability. To this end, Intel is set to incorporate
the WiMax technology in Intel's Centrino branded chips by 2006,
he said. "We are already shipping samples of the WiMax silicon."
WiMax is a standards-based technology that allows the
delivery of last mile wireless broadband access as an
alternative to cable and DSL. It will provide fixed, nomadic,
portable and, eventually, mobile wireless broadband connectivity
without the need for direct line-of-sight with a base station.
In a cell radius deployment of three to 10 kilometers, WiMax
systems can deliver capacity of up to 40 mbps per channel for
fixed and portable access applications, enough bandwidth to
simultaneously support hundreds of businesses with T-1 speed
connectivity and thousands of residences with DSL speed
connectivity. Mr. Chandrasekher also said that Intel is pursuing
parallelism, which will allow users "to drive more capability in
a more seamless manner."
Meanwhile, he said Intel's desktop computer market segment
will continue to grow with the entry of entertainment PCs in the
market by the fourth quarter. The entertainment PC is a compact
disc/digital video disc player and recorder, stereo and music
server, and personal video recorder rolled into one. The product
is based on Intel Pentium 4 processors supporting
hyper-threading technology and the Intel 915 chipset. Mr.
Chandrasekher said there are growth opportunities in the digital
office segment, with companies becoming more dispersed. --
Jennee Grace U. Rubrico Mr. Chandrasekher said there are growth
opportunities in the digital office segment, with companies
becoming more dispersed. -- Jennee Grace U.
Rubrico
|
By ROULEE JANE F. CALAYAG,
Reporter
Philippine share prices ended higher yesterday, buoyed by the
improved performance of major markets, particularly in the
United States. Trading was brisk with the benchmark Philippine
Stock Exchange composite index (Phisix) closing 5.56 or 0.31%
more at 1,774.34. Rommel Macapagal, chairman of Westlink
Securities, Inc., said the Phisix was higher at mid-session. "It
broke through the 1,780 resistance but later pulled back," he
said. The Phisix opened at 1,767.98 which was also its intra-day
low. Its highest level for the day was 1,786.61.
OPTIMISTIC
Mr. Macapagal is optimistic that the market will be able to
sustain its momentum in the last few trading sessions before a
prolonged weekend. November 1, All Saints Day, is a holiday. "We
hope to break that [the 1,780 resistance] before the long
weekend," Mr. Macapagal said. But if the market pulls back to
the 1,730-1,750 support level, he said investors could expect to
see some month-end window dressing on expected earnings reports.
"There may be some buying as well as selling ahead of the
release of third-quarter results," he said, while assuring that
the market has not deviated from general expectations of a
bullish quarter. "The market is in line with the expectations."
Continuing on the stock market's previous gains, the Phisix
cruised to the positive side as it gained over five points.
While this is not as big as the gains on Tuesday, it still
indicates a return of positive investor sentiment.
MINING
Mining advanced 22.68 or 1.13% at 2,032.38. It reversed
previous losses and made a turnaround, which is consistent with
projections that investors will be snapping up mining stocks as
a hedge for rising oil prices and other concerns weighing down
the world economy. Property gained 8.99 or 1.36% at 670.34. The
commercial-industrial rose 8.84 or 0.32% to 2,782.32. The banks
and financial services shed 2.94 or 0.59% at 493.74. Oil was
unchanged at 1.68. All shares went up by 12.82 or 1.17% to
1,110.20. Over two billion shares exchanged hands at the bourse
for PhP1.5 billion. However, the market's breadth was bearish as
decliners toppled advancers, 42-32. Unchanged issues totalled
58.
RFM
RFM Corp. rose 4.17% to close at PhP0.75. The food and
beverage firm told BusinessWorld that it agreed to sell
69.2% of its shares in Integrated Global Low Temperature
Operations (Iglo) Philippines, Inc. for PhP105 million to
Malaysia's Iglo International Ltd. Iglo is in the business of
multi-temperatured cold storage services. It is said to be the
market leader in Southeast Asia for third-party
temperature-controlled logistics. Losers were mostly of
second-tier and mining stocks.
CALL CENTER
Meanwhile, Fil-Hispano Holdings Corp. yesterday completed its
acquisition of Advanced Contact Solutions, Inc., a call center
firm previously owned by Hong Kong's All-Asia Customer Service
Holdings, Ltd. The acquisition makes Fil-Hispano the first
listed call center operator at the Philippine Stock Exchange.
With the completion of the acquisition, the firm also unveiled
plans to have a secondary placement of up to 70 million of its
shares at the bourse and conduct a stock rights offering next
year to create liquidity and raise more funds for the continuing
expansion of its call center business.
BANKING STOCKS
For the third day, banks overshadowed leading issues such as
Philippine Long Distance Telephone Co. (PLDT), the second most
actively traded stock. After Metropolitan Bank and Trust Co. (Metrobank)
and later Banco de Oro Universal Bank wrestled the top spot in
the list from heavyweight PLDT, Philippine Savings Bank (PSBank),
a subsidiary of Metrobank, also had its day yesrterday. PSBank
closed the day at PhP33 with a market share of 39.7%. PLDT was
also up at PhP1,375 on 124,000 shares traded for PhP172.1
million. Its market share was 11.27%, less than a third of the
pie held by the thrift bank. Banco de Oro followed in the list,
higher at PhP19 on 7.6 million shares traded for PhP138.2
million. Ayala Land, Inc. was unchanged at seven pesos. The
property developer released its third-quarter results yesterday.
The fifth actively traded stock was SM Prime Holdings, Inc. of
mall king Henry Sy. It was up at PhP7.70. Ayala Corp. bled at
PhP6.30, and subsidiary Bank of the Philippine Islands also
declined at PhP46. The "B" shares of San Miguel Corp., Southeast
Asia's food, beverage and packaging company, rose at PhP71.50.
CORPORATE NEWS
In other news, Vivant Corp., formerly Philstar.com, Inc.,
announced that it is withdrawing its bid for the proposed sale
of the 1.2-megawatt Loboc Hydroelectric Plant in Loboc, Bohol.
Bacnotan Conslidated Industries, Inc., on the other hand, said
its directors resolved that the executive committee be
authorized and empowered to approve an additional investment in
Phinma Property Holdings Corp. in such amount as will raise its
ownership to 35% of the expanded capital. Hence, the approval of
additional investment by Bacnotan Industries in Phinma Property
Holdings valued at PhP77.5 million.
In the same resolution, the executive committee was given
authority to approve an investment of PhP181.4 million to
acquire up to 50% of the Asian Plaza building at Sen. Gil Puyat
Avenue in Makati City. With only two days before the long
weekend, investors may be hunting for bargains as they take
positions in stocks of companies that they expect to report
robust earnings for the past quarter, especially as some leading
firms already presented satisfactory reports.
|
The International Monetary Fund (IMF) hopes the government
can still raise as much taxes as it previously expected from the
"sin" tax bill, now that the House Ways and Means committee
passed a compromise version of it. Similarly, the National
Economic and Development Authority (NEDA) Investor Relations
Office (IRO) said the version endorsed by the committee would be
a temporary solution because it would not index taxes on alcohol
and cigarettes to inflation. Securities analysts, for their
part, said the committee's "watered-down" version of the bills
was a "recipe for a credit downgrade." "This is a recipe for a
downgrade. Investors looking at the Philippines will now lose
their appetite with this first tax thing. They will no longer be
excited with the next two bill with the railroading of the first
legislation," said Astro del Castillo, head of the Association
of Securities Analysts of the Philippines.
Former Finance undersecretary Milwida Guevarra, a tax expert,
also said the new bill would raise only PhP5.7 billion a year,
way below the previous estimate of PhP14 billion. IRO executive
director Corazon Guidote said the bill was also a short-term
solution to the fiscal problem. "I am surprised. This is really
not a permanent solution. This bill will not address the intent
of stabilizing the tax base," she said. Without any follow
through, the bill can again cause the erosion of the tax base,"
she added. The Department of Finance plans to press the Senate
to raise the taxes on cigarette and liquor every two years,
based on cumulative inflation for these products for the two
preceding years. A Finance official said department was unhappy
with House ways and means committee decision to remove the
provision on indexing "sin" taxes to price increases. Aside from
raising the sin tax by 20% next year, the committee wants it
raised by 3% in 2006, and another 3% in 2007. It will also be
adjusted every two years thereafter, using the cumulative
inflation for these products in the two immediately preceding
years. "Allowing indexation of rates will ensure that the tax
rate on said products is maintained at their original levels
despite the impact of inflation. The process of indexation will
be made transparent and clear to ensure that it is fair and
equitable to all products, whether these are brands existing in
1997 or new brands that have emerged since then," the Finance
department said.
Meanwhile, House ways and means committee senior
vice-chairman Herminio G. Teves of Negros Oriental said his
committee's bill would just make "cigarette smokers shift to
low-priced and low-taxed brands." Hence, the percentage increase
in taxes will not generate more revenues. A combination of
increases in price cutoffs and in taxes will better ensure a
level playing field for companies, he said. "This will avoid the
misconception that Congress favors a particular player," he
added. Instead of a 20% increase across all four tax brackets
for cigarettes, he said the price of "premium" brands should be
raised to PhP15 from PhP10, and their tax to PhP18.75. For
"high-priced" brands or those with net retail price between
PhP6.50 and PhP10, which are taxed PhP8.96 per pack, Mr. Teves
proposes a price of PhP12.50 and a tax of PhP12.50. For
"medium-priced" brands or those with net retail price between
PhP5 and PhP6.50, which are taxed PhP5.60 per pack, Mr. Teves
said the price must be raised to PhP10 and the tax to PhP7.50.
And for "low-priced brands" or those priced below PhP5 and taxed
PhP1.12 per pack, Mr. Teves said their price must be raised to
PhP7 and the tax to PhP3.50. Mr. Teves also wants part of the
excise tax collection to go the Department of Health's treatment
of tobacco-related diseases and rehabilitation of smoking
addicts. President Gloria Macapagal-Arroyo has certified as
urgent the House committee-approved "sin" tax bill.
-- Iris Cecilia C. Gonzales, Karen L. Lema, Judy T. Gulane
and Jeffrey O. Valisno
|
Some businessmen yesterday cautioned the government from
favoring any particular company or industry in its drive to
raise more taxes, particularly from cigarette and liquor makers.
The influential Makati Business Club, through its executive
director, Guillermo Luz, noted that firms were very sensitive to
tax increases. "The government cannot look like it is favoring
any company on an issue as sensitive as tax. It certainly has to
be careful; people would read into the signs," he told
reporters. The club reacted to reports that President Gloria
Macapagal-Arroyo and several government officials met with
owners of the biggest cigarette and liquor companies at a
private dinner at her Forbes Park residence on Monday night.
This was hours after the House ways and means committee voted
for just a 20% across-the-board increase in taxes for cigarettes
and liquor starting next year, which was lower than what was
earlier proposed by the Finance department. "[The] so-called
meetings and dinners ongoing, these things become public
knowledge. Eventually, people form perceptions around them,
rightly or wrongly. But they are perceptions and you can't
ignore perceptions," he added.
WRONG SIGNAL
Former National Economic and Development Authority (NEDA)
chief Solita C. Monsod said the Forbes Park meeting sent a wrong
signal to the public. "Instead of speaking to the executives of
cigarette and liquor companies, the President should have spoken
to the congressmen because they are the ones who pass laws," Ms.
Monsod said at the sidelines of the 5th Annual Philippine
Business Outlook Conference in Makati City. "What is the message
being sent when you are speaking with them [executives]? That
the ones controlling Congress are the cigarette and liquor
executives and not the solons themselves," she stressed.
University of Asia and the Pacific (UA&P) economist Victor
Abola added that what was crucial was the discussion that
transpired during the dinner. "What's important to find out is
what the President got of out the meeting," he said in an
interview. He said the meeting could have been a "useless
exercise" if the President conceded to reduce the taxes that
could be collected on cigarettes and liquor. But Jesus L.
Arranza, president of the Federation of Philippine Industries,
said there was nothing wrong with the President consulting with
certain personalities and companies on policy from time to time.
He also said his group would want Congress to immediately pass
the "sin" tax bill since it would pose the least burden to
consumers, and would discourage smoking. Bienvenido S. Oplas
Jr., economist from private research group Think Tank Inc., said
the meeting could have been okay if the government had managed
to get the support of the executives for the "sin" taxes. "The
meeting has its advantages and disadvantages. It would have been
positive if both sides have been able to clarify their
respective positions," he said. Press Secretary Ignacio R. Bunye
defended the dinner meeting saying the President had to
"personally explain" to Fortune Tobacco Corp., and Philip Morris
International the need to adjust excise taxes on tobacco
products. "The President met with officials of Fortune Tobacco
and Philip Morris, which will be affected by the proposed taxes
on tobacco and alcohol, to discuss the vital national interest
involved in the revenue program of the government," Mr. Bunye
told reporters in a press briefing at the Palace. "While the
bill has been explained in the media, it is important for the
President to personally explain to industry representatives the
rationale and the importance behind the proposed measure being
pushed by the President," he added in the vernacular. He also
clarified that Fortune Tobacco owner Lucio C. Tan was not at the
dinner.
The Press secretary also claimed that no concessions were
given to the two tobacco companies in exchange for their support
for the "sin" tax bill at the House. "The topic of the dinner
meeting was about the tax measures being pushed by the
government. No concession has been discussed," Mr. Bunye said in
the vernacular. "The meeting was cordial and constructive and
did not involve any legislation, which is best left to
Congress." He also expressed confidence the President managed to
secure the support of the tobacco firms for the bill.
Tarlac Rep. Jesli A. Lapus, House ways and means committee
chairman, also confirmed President Arroyo's meeting with tobacco
executives. Also at the meeting were Mr. Lapus himself, Senate
President Franklin M. Drilon, House Speaker Jose C. de Venecia
Jr., Senate ways and means committee chairman Ralph C. Recto,
Trade and Industry Secretary Cesar A.V. Purisima, Finance
Secretary Juanita D. Amatong, and Bureau of Internal Revenue (BIR)
Commissioner Guillermo Parayno. Fortune Tobacco Corp. was
represented by its chairman, Harry Tan Sr.; Philip Morris
Philippines Manufacturing, Inc. by its president, Chris Nelson;
and Asia Brewery Inc. by its chief operating officer, Michael G.
Tan. Earlier news reports said also at the dinner was San Miguel
Corp. Chairman Eduardo Cojuanco Jr., the chairman of Mr. Lapus'
political party. Mr. Lapus said the tobacco companies reacted
positively to the proposed 20% increase in taxes, although the
discussion dwelled not so much on the rate of increase but how
much the increase would generate. "We are fixed at PhP7.6
billion [in the first year of implementation of the bill]," Mr.
Lapus said. "The Senate agreed to this figure as well." Mr.
Lapus also said the meeting was proper, because a concensus on
the tax was achieved. "A law will not pass if it is injurious to
the [tobacco and alcohol companies]," he said. "At the end of
the day, we must come up with a doable law, otherwise, the
industry players will take extreme positions," he added. Quezon
Rep. Danilo A. Suarez said the meeting with tobacco and beer
companies was proposed by the so-called Economic Managers Group,
the informal economic advisory body of the President reportedly
composed of Mr. Suarez, presidential adviser Tomas Alcantara,
Albay Rep. Jose Ma. Clemente Salceda, and Finance undersecretary
Eric O. Recto. The meeting was important, Mr. Suarez said, so
the companies could ask their allies in Congress to pass the
"sin" tax bill. "Otherwise, members of Congress will just
quarrel and we will have no law to pass," he said.
IMPROPER
But House Minority Leader Rep. Francis Joseph G. Escudero of
Sorsogon said the meeting was "improper, to say the least."
"More so that there is a pending PhP1-billion reimbursement [to
Fortune Tobacco]," he said. The Court of Appeals recently
granted Fortune Tobacco a P1.037-billion tax refund -- a
decision the government will appeal to the Supreme Court. "It
further gives the impression that the passage of the sin tax
bill is in accordance with the wishes and design of big
business," Mr. Escudero said. "The President should be more
circumspect to remove doubts as to her motives." For Bayan Muna
party-list Rep. Teodoro Casino, a member of the House ways and
means committee, it was inappropriate for the President to meet
with tobacco executives. "It was inappropriate because Congress
is now deliberating on the measure," he said. "It was not
necessary either because the measure, as it is, is clearly meant
to avoid stepping on either player." Mr. Casino noted that the
"sin" tax bill failed to reform the most substantial issue on
liquor and cigarette taxes -- their multi-tiered structure. "It
was a compromise bill that is clearly meant to favor the
players," he noted. Mr. Lapus admitted it was a compromise bill,
but stressed that there was no more time to perfect the tax
structure. "[After 2007], there will be leisurely time to debate
on the players' positions," he said. "But now, we must pass a
law and collect the taxes without risking the viability of the
[tobacco and alcohol industries]," he stressed.
-- Felipe F. Salvosa II and Jennifer A. Ng
with Jeffrey O. Valisno and Judy T.
Gulane
|
Raising PhP81.7 billion annually from new taxes will not be
enough to help the government avert an "economic disaster," an
economist from the University of the Philippines said yesterday.
Professor Solita C. Monsod, former National Economic and
Development Authority chief, said the government needed to raise
revenues or cut expenditures by at least PhP125 billion yearly
so it could solve its money problems and at the same time fund
its 2004-2010 Medium-Term Philippine Development Plan. The
PhP125 billion represents about 2.9% of the country's total
economic output or gross domestic product (GDP) last year, which
was valued at PhP4.3 trillion. "The government needs a primary
surplus of about 4% of [GDP] if it wants to avoid disaster," Ms.
Monsod told the 5th Annual Philippine Business Conference
Outlook at Makati City. Ms. Monsod was one of 11 economists from
the state university who warned that the economy could collapse
unless the government could fix its money problems in two to
three years. The government must raise more taxes, she said,
especially given the activities it wants to finance under its
2004-2010 development plan. "Even if the additional PhP80
billion was successfully raised, it will not be enough to fund
all the additional programs and activities contained in the
[plan]," Ms. Monsod said.
In her critique of the development plan, she pointed out its
eight flaws, which could even result in more liabilities for the
government. "Elements of the plan, if followed, may be the next
biggest source of assumed liabilities," she said. These include
the creation of more government-owned and -controlled
corporations such as the proposed Social Housing Finance Corp.
and Philippine Infrastructure Corp. "These, plus the
government's plan to triple loans to small and medium
enterprises are disasters waiting to happen," Ms. Monsod said.
She noted other flaws:
- The large "disconnection" between plans and actions;
- Failure to prioritize government programs in light of
fiscal problems;
- "Internal inconsistencies" in strategies and programs;
- Ambiguity on the possible changes in the guidelines of
the Investment Coordination Committee;
- Lack of articulation on the government's population
policy to reduce population growth;
- Use of the plan as a "policy advocacy tool" where agenda
such as constitutional reform has been included.
Ms. Monsod said that with these flaws in the 2004-2010
development plan, it was possible the government would just
"muddle through" and fail to solve fundamental economic
problems.
NO SHORTCUT
Visibly irritated by Ms. Monsod's presentation, Trade and
Industry Secretary Cesar A.V. Purisima said "it does not take a
Ph.D. in economics" to solve the economy's woes. "I am not an
economist, I am an accountant. But I have experiences in the
real world with real economists," he said. Mr. Purisima was
chairman of SGV and Co. before joining the Cabinet He defended
the government's medium-term plan, saying it was a "valid plan."
"I don't believe in the term[s] wrong assumptions and correct
assumptions because they are all assumptions. What is important
is we are pointing the economy and the programs of government in
the right direction," Mr. Purisima said. "I don't think we
should debate about the plans." "The challenge really is in
execution. If you ask any successful businessman, it's 99%
execution. That's why our challenge here is executing the
program that we have and the President is committed to making
things happening," he added. He also said the President has
raised the fiscal situation to the national level, which is the
"right signal to the investor and financial communities that
we're going to work out this fiscal situation." "There is no
shortcut," he said. "It's going to be a road to a better fiscal
health. Taking the measures one at a time at the right direction
is what's needed, rather than an effort to try and solve it
overnight. Doing so would choke the economy than solve
problems," he added.
'WISHFUL THINKING'
But other economists from the University of the Philippines
yesterday said the government's plan to achieve an economic
growth rate of 7% to 8% may not be doable, given the emerging
problems confronting the country today. "Among these emerging
problemas include the deterioration of the world environment and
the mounting pressure of public sector debt and deficits," UP
economist Emmanuel S. de Dios said in a presentation yesterday
at the 5th Annual Philippine Business Outlook Conference held in
Makati City. "The 7% to 8% growth target were pinned on
assumptions when global conditions were better," UP economist
Solita C. Monsod said. Mr. De Dios said the "modest performance"
of the economy for the past three years was due largely to a
number of favorable global conditions. "Circumstances were
favorable between the years 2001 and 2004," he said. "[At that
time], global interest rates were low, oil prices were at their
historical low coupled with high overseas remittances." These
caused inflation and interest rates to remain at low levels and
ensured the stability of the country's foreign exchange, Mr. De
Dios said. But he said the sharp increases in oil prices
recently, the increase in global interest rates as well as the
mounting debt problems of the government could slow down the
country's economic growth.
Under the 2004-2010 Medium-Term Philippine Development Plan (MTPDP),
the government plans to grow the country's gross domestic
product (GDP) to 6.3%-7.3% by 2006. By 2008, the government
expects the economy to grow to 7%-8%. The government said that
the growth will be "export- and investment-led" to support
industry and services. In the 2004-2010 MTPDP, the government
plans to increase exports to more than $50 billion in two years,
increase investment to GDP ratio to as much as 28% by 2010,
balance the budget by 2010, and reduce to 1% by 2010 the ratio
of the consolidated public sector deficit to GDP.
ON TRACK
For this year, the country is on track in attaining a 6%
economic growth due to sustained recovery in agriculture,
resurgence of exports to Japan, the US, and China; and the
resiliency of the service sector, Bank of the Philippine Islands
(BPI) said yesterday. Herbert Glen P. Arabelo, head of equity
investments unit of BPI Asset Management, said the list of
positive factors such as greater chances of long-term fiscal
reforms, improved political outlook, recovering economies of
trading partners outnumber the negatives. Thus, maintaining
business and investor sentiment in the financial markets. "We
view the admission of the President of the country's fiscal
difficulties as an opportunity to address the issue squarely
with concrete measures rather than applyin g mere palliatives as
had been the practice in the past. For next year, we believe
that the P184 billion deficit target is also realizable,
especially if new revenue measures are passed and come on line,"
he said.
Recognizing the threat if measures are not undertaken, BPI
believes Congress will muster the required statesmanship and
recognize the dire needs of the present. "Thus armed with new
laws to stave off a real fiscal crisis, implementation will then
require creativity and political will on the part of the
Executive to plug the leakages in the system and finally resolve
the chronic fiscal deficit," Mr. Arabelo said. BPI expects
inflation rate to remain moderate, averaging around 5.8% for the
rest of the year and 6.5% in 2005. The bellwether 91-day
Treasury bill rate may average around 7.3% this year, and about
8.3% in 2005 as a result of monetary policy intervention on the
part of the Bangko Sentral ng Pilipinas by the first semester of
next year. "As a result of the spurt in inflation, the fiscal
issue, and rising US interest rates, we are looking at a higher
interest rate environment. Market liquidity is still seen as a
mitigating factor in tempering the uptrend in interest rates,"
he said. BPI is standing by its forecast average exchange rate
of about P56 to the dollar and close at the same level of
P55.50. However, it sees a slight depreciation in 2005 with a
full-year average of about P56.50 to P57.00. Performing much
better this year, the peso depreciated by only 1.5% as of
mid-October compared with 4.4% for the whole of 2003. Mr.
Arabelo attributed to the resolution of political uncertainties
that had clouded the investment picture in the months leading to
the elections last May. He added, "It may be noted that neither
the fiscal crisis nor the surge in global crude oil prices made
a significant impression on the forex market."
The Ayala-led bank is looking at 2,000 as the target for the
Phisix by year-end or by the first quarter of 2005, having
already broken above our original target of 1,700. Investors in
the stock market appear to share this optimism and have been
buying up the market since the second half of last year despite
current uncertainties. "Looking at the long-term chart of the
Phisix, the bullishness becomes more evident. For the first time
in seven years, the index has broken above the bear market
trendline. This is a positive development as it strengthens the
view that the long downtrend has ended and the market now has
plenty of upside potential. Any price corrections, such as the
one currently taking place, may thus be viewed as opportunities
to position and accumulate investments in the equities market
for the lo nger term," he said. --
Felipe F. Salvosa II and Jennifer A. Ng
with inputs from Ruby Anne M. Rubio
|
By IRIS CECILIA C. GONZALES,
Reporter
Bangko Sentral ng Pilipinas (Central Bank of the Philippines,
or BSP) officials are not ruling out the possibility of tapping
anew the international debt market to refinance an estimated
$400-million loan that will mature next month and to pre-fund
requirements for next year. The question now is when. "There is
no final decision yet," BSP Deputy Governor Amando M. Tetangco,
Jr. said yesterday. Another BSP official, however, said the
monetary authority may borrow $400 million next month to finance
the maturing loan. "It will most likely be in November. It is
not a matter of borrowing at the right time but it is a matter
of servicing a need," the senior BSP official said. The local
and foreign markets expect the Bangko Sentral to borrow before
the year ends despite its claim of having already completed its
borrowing requirements for the whole year. Early this year, the
central monetary authority raised some $500 million from the
debt market to finance its maturing obligations but data showed
that BSP has to settle $830 million dollars in maturing loans
this year.
BSP Governor Rafael B. Buenaventura had earlier ruled out any
more borrowings, at least for the remainder of the year. "Most
likely, we will no longer borrow [this year]," he earlier said.
However, he added that if the country's dollar reserves fall at
an uncomfortable level, the BSP may have no choice but to tap
the market again. Latest BSP data showed that the country's
gross international reserves (GIR) had dipped to $15.908 billion
as of end-September from $16.001 billion in August due to the
debt service requirements of the government. The latest figure
is still within the BSP's dollar reserves projection of $14
billion to $15 billion for the year. Dollar reserves consist of
the BSP's gross foreign currency holdings, gold reserves,
special drawing rights from multilateral institutions and
foreign investments. It is an indicator of the country's ability
to service the foreign exchange requirements of the economy.
Sought for comment, market traders said it would be "relatively
good" for the Bangko Sentral to borrow at this time despite
investors' concerns on the country's fiscal health. "The market
had already priced in uncertainties," a treasurer at a foreign
bank said. Another trader at a local bank said that it may be
easier for the BSP to tap the debt market compared to the
National Government, which has yet to resolve its fiscal crisis.
"There's really no problem for the BSP at this time," the trader
said. International Financing Review Asia, a publication
analyzing capital markets, debt issuers and bond issuances,
expects Bangko Sentral to borrow some $500 million by yearend.
|
By KAREN L. LEMA, Reporter
The Department of Finance wants to reduce the income tax rate
for self-employed individuals and corporations to 28% from the
current 32%, but at the same time limit allowable deductions.
This proposed simplified net income tax system is meant to
simplify tax administration and reduce potential harassment by
tax examiners, Finance Secretary Juanita D. Amatong told a
gathering of business groups in Makati yesterday. At present,
corporations are levied a 32% tax on net income -- gross income
less allowable deductions. But the state allows the taxpayer to
deduct such expenses as travel and recreation expenses from
taxable income. Self-employed individuals are taxed on a
graduated tax rate where the maximum rate is 32%. The DoF has
said business expenses are being "overstated", which has "unduly
narrowed the income tax base."
In 2003, Bureau of Internal Revenue (BIR) data on large
taxpayers showed that total deductions (both direct and indirect
costs) across all industries reduced gross revenues by 98%,
leaving only 2% as taxable income. According to Ms. Amatong, the
DoF's proposal will also specify allowable deductions for
different businesses. Analysts earlier warned against this
practice saying it would complicate the present way of taxing
business and net income of professionals. Under the DoF's
simplified net income tax proposal, self-employed individuals
will also be given an option to deduct a maximum of 40% from
their gross income without having to substantiate it with
receipts. With the proposed revenue measure, tax compliance will
be improved because of a simple structure and business in the
underground will be encouraged to toe the line, Ms. Amatong
said.
TELECOM FRANCHISE TAX
Meanwhile, Ms. Amatong said the Executive would be pushing
for a 7% franchise tax on gross receipts of telecommunication,
radio and television companies, higher than its original
proposal of 3%. The reimposition of a franchise tax on
telecommunication firms has been suggested by the government's
economic managers and is part of a tax reform package that is
estimated to yield P80 billion. Before telecommunications
companies were covered by value added tax (VAT), they used to
pay a 5% franchise tax equivalent to 5% of gross revenues. This
was replaced by a 10% VAT on gross sales in 1994 when Congress
passed Republic Act 7716 which expanded the coverage of the 1988
VAT law. Lawmakers said the franchise tax is more acceptable
than a tax on text. It it will also yield more revenues for the
government since it will be easier to collect than VAT. These
are all part of a package of reform measures that the Macapagal-Arroyo
administration is pushing for to raise additional revenues
needed to address the chronic budget deficit.
|
By BERNARDETTE S. STO.
DOMINGO, Reporter
as well as ROBERT LEONORAS and SARWELL Q. MENIANO,
Correspondents
The United States' Export-Import Bank (Eximbank) has raised
two conditions for sustaining investments in the Philippine
power sector and expressed uncertainty on the strength of the
Philippines on both counts. Eximbank is an independent agency
that supports financing of US exports through loans, guarantees,
and credit insurance programs. It loans and guarantees an
average of $2 billion a year, with almost $1 billion allocated
for the Philippine power sector. In a position paper, Eximbank
said that historically, there are two solutions to sustaining
investments in the power sector -- strong private sector or
strong government support. "The Philippines wants to minimize
government support but can't do so without strong off-takers
[distribution utilities]," the bank said. It said its initial
observation on the Philippine scenario is the government wants
to lessen subsidies but could not move on due to weak
off-takers. In the same paper, Eximbank said if the government
wants to lessen government interference and subsidies, then it
should have a strong private sector composing of distribution
utilities or off-takers for power. The government, however,
cannot continue giving subsidies given its fiscal situation.
QUESTIONS
For his part, First Gas Power Corporation chief executive
officer Peter D. Garrucho, Jr. signaled the need to reinvigorate
distribution utilities. He said distribution utilities have
suffered judicial and regulatory setbacks which have weakened
their creditworthiness and limited their capital expenditure
projects. "If a utility's credit ratings are substandard, it
becomes more difficult and expensive to finance a power plant
that would serve the utility's market. Magnify that problem over
the Philippines as market demand grows and you have a scenario
for shortages," he said in a position paper. Mr. Garrucho said
that with the passage of Republic Act No. 9136 or the Electric
Power Industry Reform Act of 2001, state-owned National Power
Corp. has been prohibited from generating or contracting for new
power.
Distribution utilities were envisioned to contract and buy
the power from generators for sale to their markets. "The road
to recovery for the distribution utilities has to be paved with
improved rates and regulatory stability. The distribution
utilities have been weakened and they have to be fortified for
the industry to move forward with new investments," Mr. Garrucho
said. In the same paper, Eximbank also identified key off-taker
considerations such as volume, price, credits and government
support. Among others, the bank raised questions on who will
make off-take commitments and what regulatory clarity will be
needed to encourage these commitments. On price, the bank
expressed concern on how to formulate the best method to achieve
competitive prices while on credits, it raised queries on what
needs to be done to enhance creditworthiness of off-takers and
if too much was being asked of the Manila Electric Company. On
government support, Eximbank raised questions on what type of
government support is needed to support "most disadvantaged
parties."
INEFFICIENT COOPERATIVES
Meanwhile, a report from Ormoc City, Leyte in Eastern Visayas
quoted President Gloria Macapagal Arroyo as blaming inefficient
electric cooperatives for the high power rates in some parts of
the country. She said she would ask concerned government
agencies like the National Electrification Administration (NEA)
to look into the management of these cooperatives. "We will have
to look [into this] case by case. We do not have one formula for
all [electric cooperatives]," Ms. Arroyo said in a press
conference held on the sidelines of the 57th charter
day celebration of this city last Wednesday.
Studies have shown that systems losses in the Philippines,
caused by inefficient management, are the highest in East Asia.
Power consumers in Leyte and Samar islands have been complaining
of high power rates. Ironically, Leyte is a major source of
geothermal power. Some 60% of the total power generated in the
Tongonan Geothermal Power Plant in Kananga, Leyte is exported to
other provinces. The Cebu-Negros-Panay grid, for instance, gets
200 megawatts from the Tongonan plant. At present, the National
Power Corporation (Napocor) charges PhP2.0837 per kilowatt-hour
(kWh) to electric cooperatives in Eastern Visayas. Some 21
electric cooperatives in the Visayas, however, have asked the
Energy Regulatory Commission (ERC) to allow them to increase
their rates to recover the taxes that they pay to local
government units (LGUs).
BRACING FOR HIGHER RATES
In a related development, power users in the northern towns
of Negros Occidental province are bracing for higher power
rates. The Victorias-Manapla-Cadiz Rural Electric Service
Cooperative, Inc. (VRESCO) has announced a 29-centavo/kWh
increase in power rates that will be reflected in the October
2004 billing period. The cooperative services the cities of
Cadiz, Sagay, Escalante and Victorias and the towns of Toboso,
Calatrava and Manapla. The electric cooperatives used to enjoy
tax breaks, but the Supreme Court ruled last year that they pay
local taxes as provided in Republic Act 7160, or the Local
Government Code. Only the five electric cooperatives that are
registered under the Cooperative Development Authority (CDA)
continue to enjoy tax exemption.
Antonio Magno, VRESCO finance manager and assistant general
manager, said they would impose a PhP0.2214 increase in rates,
following the removal of a third of the interclass subsidy from
commercial entities as well as an increase of PhP0.3539/per kWh
in the generation charge and PhP0.0092/per kWh in the
transmission charge. But VRESCO will also implement the final
rate reduction of 29 centavos as a result of the condonation of
their loan. "Our rate increase on generation and transmission
plus the PhP0.2214 interclass-cross subsidy total PhP0.5845,
minus the rate reduction of PhP0.2922, the actual power rate
increase is PhP0.2923 per kWh," Mr. Magno said. VRESCO filed
before ERC an application for approval of rates reduction in
compliance to Sec. 60 of RA No. 6139. ERC then issued a
provisional authority for VRESCO to reduce its rates due to loan
condonation.
|
President Gloria Macapagal-Arroyo yesterday approved the
proposed
PhP3.02-billion Integrated Infrastructure Development Project in
Metro Manila aimed at reducing traffic and decongesting the
metropolis. During the 3rd joint National Economic Development
Authority (NEDA)-Cabinet group meeting in Malacaņang, the
President instructed the Metro Manila Development Authority (MMDA)
to immediately begin construction of foot bridges, waiting sheds
and urinals. The project, financed through official development
assistance from Japan, would be simultaneously implemented in
seven major thoroughfares including Commonwealth Ave., Radial
Road 10, Circumferencial Road 5, Epifanio delos Santos Avenue,
Quezon Avenue, Marcos Highway, and McArthur Highway. Aside from
constructing foot bridges, waiting sheds, and urinals for
pedestrians, the MMDA would also construct overhead signs or
gantries to guide motorists, and emergency bays to remove
obstructions or stalled vehicles on the road. The MMDA would
also construct sidewalk fencing to keep people off the road, and
loading and unloading bays to control commuters and public
utility vehicles.
Meanwhile, the President ordered the MMDA, as well as other
government agencies to fast-track the relocation of informal
settlers along the rail road tracks to pave the way for the
implementation of the North Rail project. Vice-President Noli L.
de Castro, chairman of the Housing and Urban Development
Coordinating Council, said 926 out of the estimated 38,206
families along railroad tracks from Caloocan City to Clark
Field, Pampanga have been relocated. Out of those relocated 626
families were moved to the government resettlement project in
San Jose del Monte, Bulacan, while 300 were transferred to
Barangay Bignay, Valenzuela City. To encourage informal settlers
to transfer, Mr. de Castro said the government was offering
PhP50,000 for each family as "housing assistance grant" to allow
affected families to pay for land equity in their provinces, or
for livelihood assistance. The Vice-President said the
government has earmarked PhP912.5 million for the program,
coming from the financial assistance of China for the North Rail
project. -- Jeffrey O. Valisno
|
Yuchengco-owned Rizal Commercial Banking Corp.'s (RCBC) board
of directors approved the issuance of $150 million to $200
million in senior notes next month. In a letter to the
Philippine Stock Exchange, RCBC corporate information officer
Cynthia P. Santos said the issuance is subject to central bank
approval. The bank did not say where it will use the proceeds of
the issuance. Bank officials were unavailable for comment as of
press time. Senior notes are owed money that rank first in
claims on the borrower's assets. These rank below secured debt
but above subordinated debt in the repayment hierarchy. The
seventh largest bank will also infuse an additional capital of
PhP400 million in RCBC Capital Corp. It also approved the
provision of call center support services to RCBC Savings Bank.
RCBC will release PhP189.9 million in cash dividends to
shareholders as it declared a fixed cash dividend of 30 centavos
per share. RCBC and subsidiaries' net earnings registered a
13.33% growth during the first six months at PhP1.19 billion
from PhP1.05 billion a year ago.
Reversing a decline during the first quarter, the bank's
profits accelerated in the April-June period by 70.5% to
PhP832.14 million from PhP488.05 million the earlier year. "The
bank's overall performance continued to show marked improvement
from a year ago... It reflected the gains achieved from its
efforts to strengthen its balance sheet, improve efficiencies
and concentrate on profitable market segments," it said earlier.
Net interest income rose 9.33% to PhP2.45 billion during the
first semester from PhP2.241 billion due to better market yields
and higher volume of deposits available for earning loans and
other investments. -- Ruby Anne M. Rubio
|
Bids for the government's newly issued five-year bonds fell
short of expectations in yesterday's auction even as traders
said the market remains very liquid. The new issue of the
five-year Treasury bond fetched a coupon rate of 12.375% or up
by 50 basis points from 11.875% last August 10. The Bureau of
the Treasury offered five-year zero coupon bonds on August 31 at
a higher rate of 12.75% due to their special feature. At the
secondary market, the five-year debt instrument was traded at
12.4633%. Traders said although the issuance was oversubscribed
at PhP4.357 billion against a PhP4-billion public offering, this
still fell short of estimates because of the market's liquidity.
They said they estimated around PhP11 billion of debts maturing
as of today. A week ago, tenders for the four-year Treasury
bonds reached PhP8.595 billion at a coupon rate of 11.875%. "It
was really disappointing. There were so much maturities and then
all of a sudden it went low like this? The current rate is
already irrelevant. We should think of the bids," a trader at a
foreign bank said. The auction committee accepted only PhP1.937
billion of the total bids.
Deputy Treasurer Eduardo S. Mendiola said the bureau "had a
long discussion on balancing the requirement for funding at the
same time the cost of funding, or the interest rate we're
paying, as well as the money we're getting." "A 50-basis-point
increase was already quite a jump from the last, but liquidity
is still there that we can tap," Mr. Mendiola said. Another
trader said the market was just realigning yesterday's rate with
that of the four-year paper last week. "Of course, there are
still indications that the market is still uncertain over the
fiscal scenario," the trader said. While the government is
rushing to pass at least three tax bills in Congress,
speculations again arose on its ability to clear such
revenue-generating measures. As such, the trader said the market
would remain on a wait-and-see mode and banks would stay
excessively liquid.
PESO AVERAGES WEAKER
Meanwhile, the Philippine peso slipped by almost five
centavos against the US dollar yesterday despite an early rally
following the regional currencies' movement. "There were dollar
requirements from oil companies, more or less," a currency
trader said. With the heightened dollar demand, the total volume
of transacted dollars increased to $153 million from $109.8
million. At the Philippine Dealing System, the country's
electronic currencies exchange, the peso averaged lower by
almost five centavos to PhP56.326 from PhP56.279. The peso
opened at PhP56.32 but strengthened toward PhP56.305 against the
dollar. After hovering within a four-centavo range, the peso
closed a half centavo stronger from its intraday low to PhP56.34
per dollar. -- Ira P. Pedrasa
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HONG KONG -- Most benchmark Asian dollar bonds were trading
steady yesterday, but Philippine spreads widened on concerns the
sovereign is facing a ratings downgrade and due to a sell-off in
other emerging markets. South Korean subordinated bank debt
tightened around five basis points (bps) in response to strong
demand for Chohung Bank's $400-million sub-debt issue which was
priced on Monday. However, South Korean sovereign bonds due in
2014 were trading steady at 81/79 bps over comparable
Treasuries. The Chohung deal, aimed at replenishing the bank's
capital base, attracted an order book of some $4 billion and was
the first subordinated bond offered by a Korean lender since
National Agricultural Cooperative Federation and Industrial Bank
of Korea tapped the market in June. The 10-year issue comprised
$200 million each in upper tier 2 and lower tier 2 securities,
with both tranches having call options after five years. The
lower tier 2 tranche was priced to yield 4.55% or 133.5 basis
points over five-year US Treasuries, while the upper tier 2
tranche carried a yield of 4.7%, or 148.5 bps over.
Philippine sovereign credit spreads widened about five to
seven bps reacting to a sell-off in global emerging markets as
investors looked to move out of high-risk assets on fears that
near record high oil prices would threaten global growth.
Emerging market debt spreads moved out sharply on Monday, with
country spreads on the JP Morgan Emerging Markets Bond Index
Plus (EMBI+) widening nine bps to 428 bps over US Treasuries.
Total returns fell about half a percent. Traders said the belief
that a downgrade of the country's credit rating is all but
inevitable was also undermining demand for Philippine paper. "I
think [the widening's] still driven by offshore sentiment on the
possible ratings downgrades and the slow movement on the tax
measures," said a trader in Manila. Standard & Poor's, which has
a BB long-term foreign currency rating on the Philippines,
hinted earlier this month that unless key reforms aimed at
increasing government revenues were passed by the year's end it
would likely cut its stable outlook. Moody's Investors Service,
which rates the Philippines Ba2, already has it on negative
watch and is due to visit the country as part of its credit
review process next month.
Philippine sovereign bonds were down about one percent from
the Asian close on Monday, although much of that move occurred
during New York trading hours, traders said. The ROP '14s were
trading at 95.25/95.75 in price terms yesterday, while the ROP
'25s were quoted at 103.625/104.375. Elsewhere, Hutchison
Whampoa bonds due in 2014, among the most liquid of Asian dollar
bonds, were trading steady at 180/177 bps over, as were PCCW
'13s which were quoted at 144/139 bps over. China bonds due in
2013 were also roughly unchanged at 66/61 bps over Treasuries.
State-run Export-Import Bank of Korea is expected to price a 300
million euro, five-year floating-rate note later yesterday or
today at a spread of 40 bps over the Europe Interbank Offered
Rate.
-- Reuters
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The Money Market Association of the Philippines or MART said
it supports the central bank's objectives relating to circulars
on third-party securities custodians despite comments from some
bond traders that such rules would restrict capital market
growth. A statement issued by the association's board of
directors said MART has been working with the central bank,
"highlighting and resolving operational concerns and
limitations, as well as investor concerns and rights, to ensure
a smooth implementation" of said circulars. The rules in
question -- Circular 392 and 428 -- required banks and nonbank
financial institutions under central bank supervision to entrust
to accredited third-party custodians the registration and
safekeeping of all securities sold, borrowed, purchased, traded
and transacted in the Philippines. Some traders have earlier
questioned the legal and operational implications of creating
third-party custodians.
In its statement, MART said the association shares the
regulator's thrust to "raise capital markets to the level of
global standards." MART is the umbrella organization of
government securities eligible dealers, or financial
institutions that are allowed to buy debt instruments from the
Bureau of the Treasury. Separately, the local banking industry
yesterday urged bond traders to give the third-party custodian
setup a chance to work, saying that it would be good for
investors. The Bankers Association of the Philippines said banks
are amenable to the regulation, which will be implemented on
November 16. "There are some sectors out there saying a
different thing but for us, this is finished. There has been a
lot of discussions and not everyone reached a consensus. But
banks have agreed to give it a chance and move forward with it,"
the association's executive director Leonilo Coronel said in an
interview.
Bangko Sentral is pushing for the securities registry as it
would serve as a check-and-balance mechanism 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 that
the rules would just restrict capital market growth. They said
the central bank should let investors decide who they want as
guardians for their securities. Mr. Coronel said any reform
meets resistance but he said concerned parties and the central
monetary authority had already engaged in several discussions
and debates in the past. "The banks already agreed. What we're
saying is that we should now move forward with it," he said,
alluding to traders who are reportedly opposed to the new rules.
Bangko Sentral has already eased its stance on the issue and
gave banks some flexibility in dealing with clients who do not
want to place their securities with a third-party custodian.
According to the revised rules, banks may maintain custody of
existing securities of their clients who declined to deliver
their securities to a custodian. Bangko Sentral, however, said
this would only be allowed provided that banks and other
financial institutions meet certain requirements such as if the
custody arrangements with clients have been in existence prior
to the new rules. Bangko Sentral said the dealing bank or
nonbank 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."
-- Iris Cecilia C. Gonzales and Ira P. Pedrasa
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Largest lender, Metropolitan Bank and Trust Co. (Metrobank),
tapped CB Richard Ellis Philippines, Inc., a real estate
services firm, as auction manager for the disposal of acquired
assets. Jojo Romarx C. Salas, CB Richard Ellis director for
investment and capital markets, said public auctions have been
scheduled to attract institutional and private investors.
Metrobank will auction 150 properties on Thursday at realistic
prices, flexible downpayment, long-term payment scheme, and
competitive interest rates in what has been dubbed as "Auctionfest."
"Most of the properties to be auctioned are developed, such as
houses-and-lots, condominium units and commercial spaces. As
such, they are good investments as property values are expected
to appreciate when the economy rebounds. They are also suitable
for end-use purposes," he said in a statement. With its local
and global network, CB Richard Ellis has been a key player in
property brokerage and investments. Having a strong track record
in managing public auctions, it was also appointed by Security
Bank Corp. in unloading over PhP100 million of acquired assets
in two auctions this year. The bank disposed approximately 40
properties and is now considering more auctions.
Security Bank appointed CB Richard Ellis as its auction
manager to gauge the viability of a public auction as a
sustainable property disposal method. "While public auction is
becoming a popular disposal method among the local banks,
Security Bank tries to differentiate its products and
positioning in the market. It is tapping the PhP5-million to
PhP20-million segment and is adjusting its offering accordingly.
Apart from attractive interest rates, Security Bank is giving
additional discount for cash payers," Mr. Salas said. Those that
want to take advantage of perks under Republic Act 9182 or
Special Purpose Vehicle Act of 2002 had until Sept. 18 to
establish and register their special purpose vehicles or SPVs
with the Securities and Exchange Commission before incentives
offered to purchasers expire in April 2005. Incentives include
tax perks and reduced transaction fees. Aside from sale to an
SPV -- a firm that would buy banks' nonperforming assets at
substantial discounts, banks may dispose their idle assets
through retail public auctions or negotiated sales. With the
acquisition of Insignia ESG, CB Richard Ellis was recently named
the largest real estate service provider in the world with
annual revenues of approximately $1.6 billion.
-- Ruby Anne M. Rubio
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By MA. ELOISA I. CALDERON,
Reporter
Aside from Hong Kong's First Pacific Co. Ltd., a number of
Spanish firms have expressed interest in joining the consortium
that will rehabilitate and connect three major highways in
Southern Luzon. Jose Miguel Cortes, Economic and Commercial
Counselor of the Embassy of Spain, said most of the Spanish
businessmen, who are now in Manila to participate in the trade
show "Espaņa Exporta," are considering investing in
infrastructure projects particularly in the South Luzon
Expressway (Slex). "Some of those 25 companies are interested in
forging BOT [build-operate-transfer] contracts. They are
actually discussing with the local counterparts. They are
looking into investing on Slex and other infrastructure," he
told BusinessWorld.
State-run Philippines' National Development Co. (NDC) earlier
approved "in principle" a plan to rehabilitate and connect Slex,
Skyway, and STAR to cut the travel time from Metro Manila to the
Batangas Port. The integrated highway will have a single toll
system, which would be run by a single operating authority.
Finance officials had said NDC would sell bonds to finance the
highway project which is said to cost about PhP12.5 billion. The
Spanish government, in terms of per capita, is said to be the
largest investor in infrastructure worldwide with an average of
8 billion euros every year. Over the last two years, Spanish
firms, Mr. Cortes said, have renewed their interest on
build-operate-transfer projects in road, water, and waste
management in the country. Trade relations between the two
countries, he added, has been improving as it hit an all time
high of $340 million in 2003, making Spain the 29th largest
trading partner of the Philippines. Mr. Cortes said Spanish
engineering firms would be holding seminar on innovations in
infrastructure as part of the first ever trade show Spain has
launched in Asia. But while Spanish firms had been investing in
the Philippine's business sector, the Spanish official said
there had been no build-operate-transfer contracts yet forged
between the two countries.
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The government has postponed by a month the first auction of
a major power plant owned by debt-strapped National Power Corp.
(Napocor), part of a sale the government hopes will raise up to
$5 billion to cut its ballooning deficit. The delay in public
bidding for the 600-megawatt coal-fired plant would allow
prospective buyers more time to conduct due diligence, a
privatization official yesterday said. Bidding for the Masinloc
plant on the northern island of Luzon had been scheduled for
today. Sources said foreign firms interested in Masinloc include
YNN of Australia, Malaysia's YTL Power, Japan's Marubeni Corp.,
US power firm Mirant Corp. and Korea Electric Power Corp.
STRUGGLING
The government, which is struggling to cut its budget
deficit, hopes to raise $4 billion to $5 billion from the sale
of dozens of Napocor power plants and its nationwide power grid.
It has so far sold four small hydroelectric power plants. "The
Masinloc bidding was moved to November 25 to accommodate
investors' request for more time to conduct due diligence,"
Froilan Tampinco, vice-president at the state-run Power Sector
Assets Liabilities and Management Corp., told reporters. Mr.
Tampinco said the 14 foreign firms and four local ones that have
expressed an interest in bidding for Masinloc have yet to
complete their due diligence. The power plant initially drew
interest from 22 groups but four of them had dropped out for
unknown reasons, he said.
The Philippines needs to attract private capital to the power
sector to stave off electric shortages forecast to hit some
parts of the country as early as next year. Early this month,
the government said it would no longer allow Filipino-owned
firms to match the winning bids of foreign firms in the sale of
the Napocor plants. Foreign firms had complained about the
original rules, under which a local bidder could secure a
contract by matching the winning bid of a foreign company.
Sources said the local bidders were expected to include First
Gas Power Corp, Aboitiz Power Corp. and Trans-Asia Power
Generation Corp. Despite the resolution of the right-to-match
issue, there are still obstacles to a smooth sale, an official
at a local power firm said. -- Reuters
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A Filipino-owned outsourcing operation plans to invest PhP142
million for a venture that will serve as an offshore facility
for North American, Japanese, and European clients, the Trade
department yesterday announced. Pointwest Technologies Corp.
started commercial operations this month at the Citibank
Corporate Center. At full capacity, it can employ 478
information technology or IT workers. Services include
application development through combinations of onsite, offsite,
and offshore project management and development activities, in a
portfolio consisting of software development and code
enhancements. The operations are designed to "rapidly improve
the efficiency and effectiveness of the applications development
environment" of clients "by leveraging its investment in
methods, processing tools, architecture and its people."
Trade and Industry Secretary Cesar A.V. Purisima said the
Philippines is already considered one of the largest offshore
destinations for business process outsourcing or BPO, due to
advantages such as cultural affinity with the US and English
language proficiency. He said the country is on the way to
becoming Asia's "e-services hub" as a major outsourcing services
provider for American, European and Japanese firms.
-- Felipe F. Salvosa II
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By JENNEE GRACE U. RUBRICO,
Senior Reporter
TAIPEI, Taiwan -- The world's largest chip maker expects the
entry of entertainment PCs in the market to boost revenues. In a
talk with reporters yesterday, Tim Bailey, regional marketing
manager for desktop and mobile platforms for Intel Asia Pacific,
said the entry of the entertainment PC is "gaining momentum."
The entertainment PC is a compact disc/digital video disc player
and recorder, stereo and music server, and personal video
recorder rolled into one. The product is based on Intel Pentium
4 processors supporting hyper-threating technology and the Intel
915 chipset. "The momentum for entertainment PC has started now.
It will continue next year. We put a major effort for this year
and next year and we're investing a lot in the technology," Mr.
Bailey said. He said as use of digital devices, such as digital
cameras, increases, demand for entertainment PCs will also grow.
Mr. Bailey said the product is designed for content consumption
and that its target market would be "consumers who keep digital
photos, and have children that are interested in games and
music." He said the product would give consumers flexibility,
since it allows them to do several things from a single product.
"The consumers want that type of flexibility," he said.
Anand Chandrasekher, vice-president and general manager for
Intel's mobile platforms group, said the entertainment PC will
also boost demand for desktop computers. The product is
available in selected countries, including Taiwan, China, Korea,
and some countries in Southeast Asia. Mr. Bailey said that each
unit is sold at $800 and above. Intel, the largest chip maker in
the world, manufactures computer, networking, and communications
products. Intel officials are in Taiwan for the two-day Intel
Developer Forum for the Asia Pacific Region. The forum, which is
held in multiple locations around the world, aims to serve the
systems and solutions communities. Each conference is tailored
to provide region-specific technical content and includes a
technology showcase that features participants from local,
regional, and multinational companies.
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Fastfood firm Jollibee Foods Corp. is on course to hit its
2004 net income estimate of around PhP1.5 billion ($27 million)
despite pressure from high oil prices, a senior company official
yesterday said. "It's still achievable," Ysmael Baysa, chief
finance officer, told Reuters on the sidelines of a business
meeting. The company, which vastly outsells McDonalds and KFC in
the Philippines, said earlier this year it was likely to post
10%-15% growth in 2004 net income from PhP1.255 billion in 2003.
Consumer spending related to the May 2004 elections boosted the
firm's profits in the first half. But Jollibee recently said its
third-quarter earnings -- up just 6% to PhP317 million from a
year earlier -- were dampened by increased operating costs as
oil prices hit new record highs. For the January-September
period, Jollibee's net profit reached PhP1.17 billion, up 28%
from a year ago. Jollibee shares climbed PhP1 or 3.64% to
PhP28.50 on Tuesday as the main index gained 1.91%.
-- Reuters
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By ROULEE JANE F. CALAYAG,
Reporter
Interest in the market was back yesterday, causing share
prices to end higher, after the benchmark index on Monday
recorded one of its biggest losses in a day. Renewed bargain
hunting spurred a technical rebound that helped the Philippine
Stock Exchange composite index (Phisix) recover more than what
it lost the other day. The Phisix was up 33.09 or 1.91% at
1,768.78. The market was expected to recoup its losses after a
major slump last Monday. Some analysts said a move up was the
only way to go for the market which had been down for a period.
BARGAIN HUNTING
Mylene Crucena Mercado, investment analyst at 2tradeasia.com,
said it was renewed bargain hunting that lifted the bourse. "The
bourse regained composure [yesterday] after declining for two
straight sessions in a row. Market gauges finished 33 notches
higher at 1,768.78, up 1.91% day-on-day," said Ms. Mercado.
Concerns over the oil price increases and rumors of a coup plot,
and fears of an interest rate hike and credit downgrades fizzled
out and left the fronts quiet for a while. This encouraged
investors to step out of the sidelines. Forsaking their earlier
decision to hold on to cash in view of the long weekend (Nov. 1
is a holiday), investors snapped up shares and froze a selling
spree that packed some weight on the day's trading value. Over
1.5 billion shares were traded at a healthy level of PhP1.8
billion, more than twice the PhP731.8 million made the other
day. Advancers gained back their lead over decliners at 48-24.
Issues that clung to their previous levels totalled 28. Most of
the indices were up. The commercial-industrial rose by 55.77 or
2.05% to 2,773.48. Mining advanced 25.37% or 1.28% to 2,009.70.
Property was up 15.38 or 2.38% to 661.35. Oil kept to 1.68. The
small and medium enterprise (SME) counter was also unchanged.
All-shares slipped 4.81 or 0.44% to 1,097.38. Odd lot
transactions saw 174,022 shares traded for PhP210,156. Most of
the transactions were in the main board where 148.1 million
shares worth PhP1.3 billion were traded.
FOREIGN BUYING
Confidence of foreign funds in the Philippine stock market
spiralled to a new high as net foreign buying amounted to over
PhP1 billion. Total foreign buying rose to PhP1.4 billion
against total foreign selling of PhP312.3 billion. Banco de Oro
Universal Bank cornered the biggest share of the market at
58.79%. The issue closed unchanged at PhP18.25. Philippine Long
Distance Telephone Co. remained the second most actively traded,
up PhP20 to PhP1,360. Ms. Mercado said the stock's rise may have
something to do with the release of the analysts' projections of
a 50% earnings growth for the third quarter. The Bank of the
Philippine Islands slid from first to third place. Its price
rose PhP0.50 tp PhP46.50. Digital Telecommunications
Philippines, Inc. was higher by PhP0.08 at PhP1.30. Other
gainers included DMCI Holdings, Inc. which advanced PhP0.40 to
PhP3.25; Ayala Corp. which gained PhP0.20 at PhP6.40; and Globe
Telecom, Inc., an Ayala subsidiary, up PhP45 to PhP1,030.
Property developer Ayala Land, Inc. closed higher at seven pesos
on possible healthy third-quarter profits. The firm will hold a
media briefing on its third-quarter results this afternoon.
BANKING
Meanwhile, Rizal Commercial Banking Corp. (RCBC) declared a
cash dividend of PhP0.30 per share. It has not yet announced the
record and payment dates. Since Monday, banking issues were
leading the market. The optimism from the banking sector and the
cash dividend declaration of RCBC may signify a slowly
stabilizing outlook for the industry as it moves toward the last
leg of the year, raising speculations that it may yet end the
year with a bang. The stock portal 2tradeasia.com expects
follow-through buying today. "Follow-through buying might spill
over [today], following the market's recovery from a base of
1,730 above the 1,750 level," it said, citing expectations that
the bourse may have already discounted some pressing anxieties.
The belief thus far, noted the stock portal, is that the
bourse may have already discounted much of earlier anxieties
associated to crude prices' unabated rise, as focus reverts to
the expected release of favorable corporate earnings for the
third quarter. "The only question over the near-term is whether
positive psychology can be maintained to boost gauges near its
most recent high at 1,850," it added. But in case this will not
pull through, 2tradeasia.com said activity could stay
range-bound between 1,750 and 1,800. It advised investors to
trade selectively and start looking into promising counters that
would do well in rising commodity prices. Some say, however,
that investors may base their decision on developments that may
come up over the long weekend.
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