By IRIS CECILIA C. GONZALES,
Reporter
The government plans to borrow some
PhP214 billion locally and abroad next year, or about one-fourth of
its entire 2005 budget, so it can refinance its maturing loans. And in
case Congress fails to approve at least two new taxes by the end of this
year, another
PhP50 billion may have to be borrowed as well, or a total of
PhP264 billion. That is, if the government proceeds with its plan to
absorb about
PhP500 billion in debts of state-owned National Power Corporation (Napocor),
to clean the power firm's balance sheet and make it attractive to
private investors. A government official said, on condition of
anonymity, that the additional
PhP50 billion would cover the 10% interest payment on Napocor's
debts for next year. "The government will need
PhP20 billion to
PhP50 billion next year to service the interest payments of Napocor,"
the official said in an interview. Government simulations also showed
that the
PhP50-billion interest payment could bloat next year's budget
deficit to
PhP234.9 billion from the earlier estimate of
PhP184.5 billion, and would put at risk the government target to
eliminate the deficit in five years or by 2009. "Government needs at
least two tax measures this year," the official added.
The Arroyo government wants Congress to approve at least six new
taxes that are expected to raise some
PhP83.36 billion in revenues:
- two-step increase in the value-added tax (to raise
PhP19.9 billion);
- tax on telecommunications (PhP5
billion);
- shift to gross income taxation (PhP16.8);
- rationalization of fiscal incentives (PhP5 billion);
- indexation of excise tax on alcohol and tobacco (PhP7
billion); and
- excise tax on petroleum products (PhP29.7
billion).
The government plans to absorb about
PhP500 billion in Napocor debts before the end of this year so it
can start the state-owned power firm's long-delayed privatization.
Senator Sergio Osmeņa III, one of the authors of the Electric Power
Industry Reform Act (EPIRA), sees no problems in the government's plan
to absorb Napocor's debts. "If the government wants to take on another
PhP500 billion, it can do so," he said in a telephone interview
yesterday. He also said the power reform law allowed the government to
absorb a minimum of
PhP200 billion in Napocor debts. He said, however, that this should
not be used as an excuse by government to push new taxes. "There are
other ways to increase revenue, such as plugging the tax loopholes and
improving tax administration," he said. Government officials, however,
contend that without new taxes, the country may have to borrow at higher
interest rates as investors seek more premium for their money.
The interagency Development Budget Coordination Committee said that
aside from new taxes, the government would also implement administrative
measures, so it could balance the budget by 2009. "To better manage
government spending, the committee pushes for the conduct of an
efficient expenditure management program and the full implementation of
devolved functions following the Local Government Code and related
laws," the commitee said in a statement yesterday. Without the
additional
PhP50 billion for Napocor interest payments next year, the
PhP214 billion borrowing for 2005 is 6.4% or
PhP14 billion lower than the government's
PhP228.6-billion borrowing requirement for this year. "Net
borrowings are expected to drop anew by 6.4% next year as more
short-term debts are retired, along with the other objective of
lengthening the maturity profile of the National Government debt stock,"
the government said in its 2005 Fiscal Program. Based on the program,
the borrowing mix is 22% foreign and 78% local. "The government will
continue to be opportunistic in its borrowing activities in line with
general market conditions," the program stated. The government will
raise financing through project and programmed loans and through the
issuance of sovereign bonds, Treasury Bills and Treasury Bonds. The
Philippines spent 27.4% of its 2003 budget on debt servicing. At the end
of 2003 government debt totaled
PhP3.36 trillion, equivalent to 130% of economic output or gross
domestic product.
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By JUDY T. GULANE, Reporter
The House of Representatives ways and means committee has decided to
consolidate three versions of a proposed tax amnesty into one bill, to
facilitate its approval. The substitute bill will be tackled in a
committee hearings next week. The bill's main feature will be an amnesty
on all unpaid internal revenue taxes for 2003 and prior years, computed
through an amnesty rate of 3% of networth as of December 31, 2003. Those
who can avail of the amnesty are taxpayers with income or properties of
at least
PhP100,000 as of December 31, 2003. They will be asked to file
statements of assets, liabilities and networth (SALN), which will be
used as basis for the Bureau of Internal Revenue's taxpayer database. If
passed into law, the tax amnesty bill is expected to raise a minimum of
PhP9 billion and a maximum of
PhP20 billion in additional tax collections for next year.
Three versions of the tax amnesty bill have been filed at the House
of Representatives by Quezon (southern Luzon) Rep. Danilo A. Suarez and
Ilocos Sur (northern Luzon) Rep. Eric D. Singson, both vice-chairmen of
the ways and means committee, and Cebu City (Central Visayas) Rep. Raul
B. del Mar. A fourth tax amnesty bill has been filed by Antique (Western
Visayas) Rep. Exequiel B. Javier, also a vice-chairman of the committee,
but it was referred to the ways and means only last Wednesday, just as
it started its first public hearing on the bills. The Department of
Finance presented its version also last Wednesday which will be
consolidated with the Suarez, Singson and del Mar bills -- as well as
with the Javier bill if this would be included on the agenda of the ways
and means committee. Finance proposes a 3% amnesty rate or
PhP20,000, whichever is higher, for individual taxpayers, including
resident and non-resident citizens and resident aliens. Also, taxpayers
who have filed financial statements or SALN together with their 2003
income tax returns, but who wish to avail of the amnesty, will be
allowed to amend these statements or SALN and pay an amnesty tax equal
to 3% of the resulting increase in their networth.
The bills filed at the House, on the other hand, propose a 3% or 2%
amnesty rate or
PhP20,000 or
PhP30,000, whichever is higher, for resident citizens; and a 2%
amnesty rate or
PhP15,000, whichever is higher, for nonresidents. Finance further
proposed a 3% amnesty rate or
PhP500,000, whichever is higher, for large taxpayers; a 3% amnesty
rate or
PhP250,000, whichever is higher, for medium-sized corporations; and
a 3% amnesty rate or
PhP100,000, whichever is higher, for small-sized corporations. The
bills filed at the House propose a 2% to 3% amnesty rate, and more or
less the same amounts for large taxpayers, and medium- and small-scale
corporations. To be excluded from the amnesty, Finance proposed, are
taxpayers with cases in court involving assessments for internal revenue
taxes, final and executory assessments, pending cases falling under the
jurisdiction of the Presidential Commission on Good Government, pending
cases involving unexplained or unlawfully acquired wealth, pending cases
involving violations of the Anti-Money Laundering Law, tax cases that
are scheduled for final and executory judgment by the court, and
taxpayers who are liable for fraud, illegal exactions and transactions,
malversation of public funds and properties under the Revised Penal
Code. Withholding agents, with respect to their withholding tax
liabilities, are to be excluded as well. But as ways and means committee
secretary Mauricio R. Pulhin said, the committee was open to extending
the amnesty even to those with unpaid customs duties, pending cases in
court, and final and executory assessments. Finance stressed that the
filing of SALN was mandatory, although it proposed that the filing would
be annually. The House bills, on the other hand, require a one-time
submission of SALN by December 31 this year. In the Finance proposal and
the House bills, the declaration in the SALN will be presumed correct,
unless it will be established that the declaration is understated by 30%
or more. Those who willfully understate their networth will be charged
with perjury.
MIXED SENTIMENTS
The Federation of Filipino-Chinese Chambers of Commerce and Industry,
Inc., in a position paper submitted to the ways and means committee,
said it supported a tax amnesty. However, it proposed to lower the
amnesty rate from 3% to 1% of networth. "This lower amnesty tax rate
will induce more taxpayers to avail of the amnesty," chamber president
Robin C. Sy said in the position paper. "With a wider tax base, BIR will
have a bigger database of taxpayers for future use." But the American
Chamber of Commerce of the Philippines, Inc., in its position paper to
the ways and means committee, said it did not support the proposed
amnesty even if it was sure to increase the government's tax collection.
"House Bill 522 [Mr. Suarez's bill] unduly favors tax evaders and is
disadvantageous to honest taxpayers," said Cirilo P. Noel, chairman of
that American chamber's taxes and tariff commission. Furthermore, the
American chamber said it doubted the capability of BIR to handle the
SALN, that confidentiality might be breached, putting the safety of
taxpayers at risk. "The filing of the [SALN] would just make it easier
for kidnappers and robbers to select their targets," Mr. Noel added.
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By KRISTINE L. ALAVE
The rehabilitation receiver of Negros Navigation Corporation (Nenaco)
has recommended to the court a 10-year corporate rehabilitation program
for the debt-saddled shipping firm. The rehabilitation plan submitted by
receiver Monico V. Jacob to presiding judge Artemio Tipon does not end
with Nenaco paying all its debts and obligations. It is also designed to
help the company, the second-largest shipper in the country, to gain a
bigger share of the market. "The principal goal of the business plan
should go beyond debt settlement; rather it should be to transform
petitioner into a uniquely competitive inter-island RORO [roll on roll
off] leader in the domestic shipping industry," said Mr. Jacob in his
rehabilitation report, which was submitted to the trial court last
September 1. Nenaco filed a petition for rehabilitation at the Manila
court last March 29 after its cash flows proved insufficient to cover
about
PhP2.5 billion in obligations. It is estimated that for Nenaco to be
financially secure, it must generate at least
PhP2.5 billion in gross revenues yearly. Mr. Jacob said that the
rehabilitation plan, composed of three phases, was primarily designed to
help Nenaco tide the critical first two years.
The first phase, from the 2004 pre-rehabilitation year to 2006, is
devoted to firming up and stabilizing Nenaco's present operations -- so
it can meets its daily operational expenses and scheduled debt
settlements. Thus, for the first two years, the company must exceed the
previous year's revenue performance by 10%, Mr. Jacob said. Mr. Jacob
also recommended that, for the first two years, Nenaco should focus on
collection of its cash receivables as well as improve its control of
business and operations. He also urged the company to "rationalize its
overhead costs," maintain strict budgetary guidelines and control, and
provide a "check and balance" mechanism to ensure reliability and
efficiency of ship management, dry docking, and repair, which raise
costs. With Nenaco concentrating on its Manila-Bacolod-Manila routes,
Mr. Jacob contended that it "lacks a steady clientele for its other
routes." Thus, by phase two of the rehabilitation, which is from 2007 to
2010, Nenaco must be ready to devote itself to route expansion. To
realize these goals, the rehabilitation receiver proposed that Nenaco
improve its marketing strategy, so it could attract more clients and
"improve the quality and efficiency of all its shipping vessels."
Further, Mr. Jacob advised the company "to commence its re-fleeting
program such that petitioner will increase the number of its shipping
vessels." The third phase of the financial recovery program is geared at
accomplishing Nenaco's goal of complete debt payment, and transformation
as a "uniquely competitive leader in the shipping industry." For the
period 2011-2015, the "petitioner should have captured at least fifty
percent (50%) of the total passenger market and thirty-five percent
(35%) of the total cargo market in the domestic shipping industry," Mr.
Jacob said. "Finally, this phase should, likewise, be committed to the
completion of Proposed Debt Settlement of petitioner," Mr. Jacob's
report added. Mr. Jacob also proposed the terms and conditions for the
restructuring of Nenaco debts, either through conversion of debt into
equity at par value, or through long-term notes, with a tenor of 10
years inclusive of four years grace period on principal repayment.
Mr. Jacob also proposed the following conditions:
- a cash recapture mechanism will be established and will be
monitored by the Rehabilitation Receiver. It is intended to capture
any excess cash, 50% of which will go to debt servicing
- gradual quarterly payments on interest due and scheduled
principal amortization
- in the absence of equity investment, new money will be borrowed
through medium-term notes with a tenor of three years and six
months, inclusive of grace periods.
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By FELIPE F. SALVOSA II, Reporter
The woes of National Steel Corporation (NSC) are finally coming to an
end, with creditor-banks and the steel firm's buyer closing their deal
on September 10, sources privy to the deal said yesterday. NSC's
Malaysian shareholder, Pengurusan Danaharta Nasional Berhad, has
withdrawn its objection to the sale, agreeing to be paid over eight
years. The Iligan City (Central Mindanao) government, meanwhile, has
settled for at least
PhP171 million, representing the principal amount of backtaxes owed
by NSC. The city government will waive all penalties and charges on
NSC's unpaid real estate taxes, estimated to have ballooned to
PhP928.055 million since 1999. Iligan City councilors are expected
to soon pass an ordinance extending similar arrangements to other
companies with backtaxes, apparently in keeping with the Constitution's
equal protection clause, a source said.
Last month, the Iligan City council threatened to auction NSC's
assets unless its representatives agreed to strike a deal. Iligan
councilors earlier pointed out that while plant assets have been
earmarked by creditor banks for transfer to the steel firm's buyer,
Indian-owned Global Infrastructure Holdings, Ltd., NSC still has
PhP4.502 billion in "other assets" such as real estate in front of
the plant complex and numerous spare parts. But the company's
liquidator, lawyer Danilo L. Concepcion, who was able to secure a stay
order from the Securities and Exchange Commission to prevent the
auction, said the city government could exercise its claim only after an
asset purchase agreement has been signed by creditor-banks and Global.
The conclusion of the asset purchase agreement has been delayed twice,
with a deadline last July extended for another 45 days reportedly due to
the tax issue. Creditor-banks were pushing for full condonation of
backtaxes, which Iligan said would be illegal under the Local Government
Code. Lorenzo V. Tan, president of the Philippine National Bank (PNB),
National Steel's biggest creditor, earlier said neither the banks nor
Global wanted to shoulder the back taxes.
Meanwhile, Danaharta, Malaysia's national asset management company,
withdrew opposition to the sale after being assured of a "fair share" of
the proceeds, a source said. Danaharta used to own more than 80% of the
steel firm after taking it over from Hottick Investments, Ltd., which
failed to support NSC's
PhP12-billion debt. This 80% was diluted to 20% under a debt
restructuring agreement with creditor-banks. Danaharta's $700-million
investment in the steel firm was also reduced to only $40 million in
value. Creditor-banks had contended that Danaharta did not have the
legal right to oppose the sale under a previously signed memorandum of
agreement, since NSC would be sold for more than 80% of its appraised
value. Global, whose mother company Ispat Industries, Ltd. owns one of
India's biggest private steel operations, won the bid for NSC at
PhP13.25 billion, with
PhP1-billion downpayment. Its unit, Global Steelworks International,
Inc., has already begun rehabilitating the plant. NSC owes
PhP5.639 billion to PNB. Its second biggest creditor is Credit
Agricole Indosuez (PhP1.687
billion). Land Bank of the Philippines accounts for
PhP1.17 billion of NSC debts,
PhP160 million of which are in the form of long-term commercial
papers. Other creditors are China Banking Corporation, Rizal Commercial
Banking Corporation, Metropolitan Bank and Trust Co., United Coconut
Planters Bank, Export Industry Bank, Equitable PCI Bank, Bank of
Commerce, Wise Capital Investment and Trust, United Overseas Bank, and
Allied Banking Corporation.
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By RUBY ANNE M. RUBIO, Reporter
China Banking Corporation has approved the organization and
incorporation of a wholly-owned entity that will purchase its
nonperforming assets (NPAs). In a letter to the Philippine Stock
Exchange, China Bank said its special purpose vehicle would have an
authorized capital of
PhP500 million, and paid-up capital of
PhP31.25 million. "It is understood that the bank will divest its
95% ownership as soon as it finds suitable partners to be able to take
advantage of the tax exemptions, fees privileges and other incentives
provided for under the Special Purpose Vehicle Act of 2002," said
Arsenio L. Lim, Jr., China Bank's vice-president and corporate
secretary, in his letter to the stock exchange. Banks that want to avail
themselves of tax perks and other benefits under Republic Act 9182 have
until September 18 to establish and register their special purpose
vehicles or SPVs with the Securities and Exchange Commission, subject to
the approval of the Bangko Sentral's policy-making Monetary Board.
Incentives offered by law to buyers of nonperforming assets expire in
April 2005.
Last July, Ayala-led Bank of the Philippine Islands inked a deal with
Morgan Stanley Emerging Markets, Inc. for the sale of
PhP8.6 billion in bad loans. The sale is expected to be completed
within the year, after complying with regulatory requirements. Yuchengco-led
Rizal Commercial Banking Corporation is mulling more SPV transactions,
to cover about
PhP10 billion to
PhP11 billion worth of nonperforming loans (NPLs). Last month, it
signed a sale and purchase agreement with Lehman Brothers covering
PhP3.9 billion in bad loans. Mid-size commercial bank Philippine
Bank of Communications is also reviewing three bids for
PhP12.5 billion worth of foreclosed properties and bad loans.
State-led Land Bank of the Philippines, meanwhile, has called on
interested parties to apply for prequalification and to bid for about
PhP17.8 billion in idle assets in an auction next month. Equitable
PCI Bank, the country's third largest lender, also plans to sell an
estimated
PhP5 billion to
PhP10 billion worth of idle assets and bad loans. Semi-private
Philippine National Bank, meanwhile, is awaiting board approval as to
the exact composition and size of the asset pool for sale to an SPV.
The Bankers Association of the Philippines (BAP) has drafted a bill
extending by two more years the deadline for banks to set up SPVs, or
entities that buy banks' idle assets. "The BAP has voiced the need to
extend the deadline set by the
SPV law so we can have another leeway for the next two years. We are
requesting for an extension of the law. This is a combined effort of the
banks," BAP president Cesar E.A. Virata has said. "It depends on a great
deal on Congress. But we have prepared a very simple bill. We have
identified supporters for the bill to extend the time for another two
years. We hope they can see its benefits to the banking system," he
added. BusinessWorld earlier reported that Chinabank's net income
fell by 21.74% to
PhP1.35 billion in the first six months of the year from
PhP1.73 billion in the same period last year. Fee-based revenues
fell by 63.99% to
PhP1.03 billion from
PhP2.86 billion.
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By JEFFREY O. VALISNO, Reporter
President Gloria Macapagal-Arroyo yesterday reaffirmed the
Philippines' commitment to stick to the "One-China Policy." In her
one-on-one dialogue and bilateral talks with Chinese President Hu Jintao
in Beijing, Mrs. Arroyo vowed that the Philippines would continue to
adhere to the policy, which has been in force since the 1970s. Press
Secretary and Presidential Spokesman Ignacio R. Bunye said the One-China
Policy referred to the People's Republic of China's position of only one
Chinese sovereign nation and that other Chinese territories claiming
sovereignty were to be recognized as mere provinces of China. The policy
particularly impacts on Taiwan, which has been waging a campaign for
international recognition as a sovereign country. The Philippines
maintains economic, but not diplomatic, relations with Taiwan. "We only
maintain diplomatic relations with one nation, and that is People's
Republic of China. We have placed China on the top of our diplomatic
agenda," Mr. Bunye explained in a briefing in Malacaņang. For his part,
the Chinese president pushed for expanded economic and trade
cooperation, and improved trade commodity ties, Malacaņang said.
Expansion of trade and economic relations was one of the four
proposals raised by the Chinese president during the one-on-one dialogue
between the two leaders. He also proposed:
- that the two governments maintain high-level contacts, dialogues
and exchanges, at all levels, by stepping up consultation and
cooperation, and the holding of an appropriate ceremony next year
marking the 30th anniversary of the forging of diplomatic ties
between the two countries.
- the strengthening of bilateral exchange and cooperation in
culture, education, tourism and other related fields, and also in
the security and judicial aspects to crack down more effectively on
cross border crimes.
- that the two countries hold bilateral discussions on all
concrete issues that may arise and that they remain good neighbors,
friends and partners.
China-Philippine trade soared to $9.4 billion last year, a 78.7% jump
from the previous year, figures released by the Chinese government
showed. Beijing was the second leg of Mrs. Arroyo's state visit to China
on the invitation of President Hu. She arrived in Guangzhou in South
China's Guangdong province early Wednesday en route to Beijing. From
Beijing, the President made a brief side-trip this morning to Xi'an,
capital of northwest China's Shaanxi province, and the old capital of
China. She later met with Chinese Central Military Commission Chairman
Jiang Zemin, and Chinese Prime Minister Wen Jiabao at the Zhongnanhai,
the Communist Party of China. Later in the evening, the President also
met members of the Filipino community in China at the Kerry Centre in
Beijing. The President is scheduled to deliver a keynote speech today at
the Third International Conference of Asian Political Parties, in her
capacity as head of the ruling Lakas-Christian Muslim Democrats party.
FIVE AGREEMENTS
Meanwhile, Mrs. Arroyo and Mr. Hu witnessed Wednesday night the
signing of five vital cooperation agreements between their two
countries. The five agreements include a visa waiver for the two
countries' respective government and diplomatic officials, a joint
marine seismic undertaking, an accord on fisheries cooperation, a
tourism cooperation pact, and the North Luzon Railway Project agreement.
The visa waiver accord was signed by Foreign Affairs Secretary Alberto
G. Romulo and his Chinese counterpart, Chinese Foreign Minister Li
Zhaoxing. The agreement is expected to be expanded shortly to cover
tourists, and thus enable Manila to tap into China's vast tourist
potentials. The fisheries cooperation agreement was signed by
Agriculture Secretary Arthur C. Yap and China Agriculture Deputy
Minister Zhang Baowen. The accord seeks to address the problem of
poaching and illegal fishing in the South China Sea, where the
Philippines and China have overlapping territorial claims. The tourism
cooperation pact was signed by outgoing Tourism Secretary Roberto M.
Pagdanganan and He Guangwei, chairman of the China National Tourism
Administration.
The Joint Marine Seismic Undertaking accord was signed by Philippine
National Oil Co. president and chief executive officer Eduardo Maņalac
and his counterpart, Fu Chiang You, president of China National Offshore
Oil Co.. Secretary Silvestre C. Afable, Jr. clarified that the agreement
was merely a joint study on the oil potentials of the South China Sea
area claimed by both China and the Philippines. The agreement on the
North Luzon Railway project was signed by North Luzon Railway Corp.
president Jose Cortez and Ren Hongbin, chairman of the China National
Machinery and Equipment Group. Under the accord signed, China has
committed to extend a $400-million loan to the first phase of the
railway project spanning the stretch from Caloocan City in northern
Metro Manila to Malolos, Bulacan in Central Luzon. The agreement also
provides that China will provide another loan package for the project's
second phase, from Malolos to the Clark Special Economic Zone in
Pampanga, subject to its satisfaction over the economic and technical
feasibility of the project.
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Tax collections for the month of August are expected to reach
PhP43 billion as targeted, contrary to reports that the Bureau of
Internal Revenue (BIR) may have missed its monthly collection goal by
some 31%. Albay (southern Luzon) Rep. Jose Clemente S. Salceda, who had
said a missed BIR target imperilled the fiscal program, took back his
words yesterday but rebuked the BIR for submitting an incorrect report
to Congress. BIR Deputy Commissioner Kim J. Henares yesterday said the
tax agency is just a few notches away from reaching its revenue goal as
it has so far collected
PhP41 billion, which is already
PhP3.04 billion or 7.92% higher than last year's revenue take. The
figures, she said, are still preliminary and the bureau has yet to
include in its computations revenues that came in at the end of August.
BIR Commissioner Guillermo Parayno said the biggest collection comes on
the 30th when second quarter income tax payments covering April, May and
June should be paid. Mr. Salceda, in a statement, said he was invited to
breakfast yesterday by Mr. Parayno, who explained that the BIR report on
which Mr. Salceda made his claim was based on incomplete data on August
collections.
The report, submitted to the House of Representatives ways and means
committee during an August 31 hearing, was not dated nor annotated but
actually reflected BIR collections as of August 27. The report was
prepared August 30. Mr. Parayno, said Mr. Salceda, told him that around
PhP10 billion -- to add to the
PhP29.77 billion figure reflected in the August 27 report -- would
come in only in the remaining days of August because of "late regional
reporting, month-end rush of payments to beat deadlines and frantic
collection effort." Mr. Salceda said he accepted Mr. Parayno's
explanation and "gently suggested to the BIR Commissioner to be more
careful in his official submissions to Congress, since sound
policymaking can only be based on timely and correct information." He
added that information on BIR collections is of paramount public
interest, especially to the country's investors and creditors, "in this
period of a fiscal crisis." BIR's incomplete reporting, he said, should
not be repeated since its reports are used by Congress for drafting tax
policy. He added that if there is a constructive outcome from BIR's
incomplete reporting to Congress, then it is for more public pressure
for BIR to exercise greater collection efficiency and greater
transparency and visibility in its tax effort.
Ms. Henares, meanwhile, said the tax agency is confident it will meet
its August target as a result of the over-performance of the Bureau's
Large Taxpayer Service, which she said has already surpassed its
PhP24 billion target by "more than a hundred million." Preliminary
data shows that the large taxpayers unit collected 22% higher that its
revenue take last year, Ms. Henares said, adding the 19 BIR regional
offices nationwide are also showing positive developments. The BIR's
July collections hit
PhP38.890 billion,
PhP869 million more than the
PhP38.021-billion target. If BIR meets its revenue target for
August, total collections for the eight months will top
PhP311 billion. This means the tax agency will have to collect
PhP166 billion for the four remaining months of the year to achieve
its
PhP477-billion year-end goal. The BIR, which accounts for over 80%
of government's revenues, is pressured to meet its revenue goals, given
the need to keep the 2004 budget deficit below
PhP197.8 billion. -- Karen L. Lema and
Judy T. Gulane
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State-owned Philippine National Oil Company (PNOC) has inked an
agreement with China National Offshore Oil Corporation (CNOOC) to
conduct joint research on potential petroleum reserves in the South
China Sea. In a statement, the Department of Energy (DoE) yesterday said
the agreement covers a three-year joint marine seismic undertaking by
PNOC and CNOOC of petroleum resources in certain areas of the South
China Sea. The two firms signed the agreement in Beijing, China. "It
will be a pre-exploration study solely to collect, process and analyze
seismic data. No drilling or development is covered under the study,"
the DoE said. The DoE did not say how expenses for the research venture
would be divided between the two firms. It stressed the joint
undertaking was a result of years of consultations between the
Philippines and China. The DoE added it was the first concrete step
after the Association of Southeast Asian Nations (ASEAN) and China
adopted the ASEAN-China Declaration on the Conduct of Parties in the
South China Sea, which was signed in Phnom Penh in November 2002.
Discussions between PNOC and CNOOC intensified after CNOOC President
Fu Cheng Yu visited Manila last year upon the Philippine government's
invitation. Under President Gloria Macapagal-Arroyo's five-point energy
independence agenda, the Philippines will actively develop its
indigenous oil and gas resources using PNOC as its lead agency to form
strategic alliances with other countries like China. The Philippines and
China have been eyeing joint projects like natural gas exploration in
the Spratlys to build trust and confidence between the two countries and
resolve border issues in the South China Sea. Early this year, Malaysian
national oil company Petronas, sealed a joint venture with PNOC for an
offshore oil exploration project in the Philippines.
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DAVAO CITY (Southern Mindanao) -- The region's fruit growers have
remained silent on a campaign to pressure Australia to open its market
to local bananas. But sources said the Pilipino Banana Growers and
Exporters Association, composed of more than a dozen major exporters
with its main office here, is working on an issue raised by the
Australian Banana Growers' Council (ABGC) that a disputed Import Risk
Analysis (IRA) draft had statistical errors. In a memo released last
Friday, Biosecurity Australia said a revised version of the IRA will
soon be available, and the Australian banana industry believes it will
go in its favor after citing "mistakes committed" in the first draft.
"Australian Banana Growers' Council (ABGC) chief executive officer Tony
Heidrich said the nation's 2000 growers noted Biosecurity Australia's
commitment to getting the science right with regard to the five
Philippines banana diseases and two pests of serious quarantine
concern," the ABGC said in a statement issued on Monday.
A representative from the local growers said they fully support
actions taken by the government, which has decided to elevate the issue
to the World Trade Organization. One official said the local banana
group simply wants firm and consistent statements from the Philippine
side. Some growers admitted in earlier interviews that the Australian
market is not that big but said the entry of Philippine bananas will be
a major achievement in the industry's drive to diversity its market as
well as boost the chance of other tropical fruits from Mindanao to gain
new markets. Based on Biosecurity Australia's memo, the IRA team "will
present a further revised Draft IRA Report after full consideration of
all comments received during the current consultation period (which
closes on September 15)." It added that a 60-day consultation period
will apply to the revised report. "ABGC has identified statistical
errors in the mathematical formula used in the current report that led
Biosecurity Australia to profoundly underestimate the risk of Moko and
Freckle diseases, and has serious concerns about the science
underpinning the risk assessment for key quarantine pests and diseases,"
the ABGC said.
Local growers have insisted that the diseases the ABGC has used in
its arguments to block Davao's bananas have long been eliminated in over
35,000 hectares of plantations in Davao as well as in neighboring
regions. Japan, which has much stricter environmental standards than
most countries, buys two-thirds of its Cavendish banana consumption,
estimated to be over $200 million annually, from Mindanao. Based on
current estimates, the island exports $350 million worth of bananas
annually. While it prices its Cavendish banana exports at an equivalent
of 20 US cents per kilo, Australian Cavendish are priced from three to
five times more based on official Australian government figures.
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The Energy Regulatory Commission (ERC) is set rule on the National
Power Corporation's (Napocor) petition for a
PhP1.87 per kilowatt-hour increase in generation rates. ERC chairman
Rodolfo B. Albano said in a statement yesterday that commissioners are
still deliberating the petition, but added "the latest we will settle
this will be tomorrow (Friday)." If granted, the proposal will increase
Napocor's rates to
PhP4.56 per kWh from
PhP2.57 per kWh in Luzon; to
PhP4.59 per kWh from
PhP2.82 per kWh in the Visayas; and to
PhP3.13 per kWh from
PhP1.80 per kWh in Mindanao. The petition, which Napocor filed
together with the Power Sector Assets and Liabilities Management
Corporation, also moves for a time-of-use mechanism.
The proposed rates are expected to allow Napocor to break even and
achieve an 8% return on rate base. The ERC has until September 5 to
issue a provisional authority for Napocor to increase its rates. Power
distributor Manila Electric Company buys the bulk of its power from
Napocor and the balance from its independent power producers First Gas
Power Corporation, and Quezon Power Philippines, Ltd. Militant groups,
for their part, have staged various protest actions against Napocor's
petition, saying the increase, if granted, will cripple consumers.
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A Development Budget Coordination Committee (DBCC)-recommended
package of measures aimed at balancing the budget by 2009 are up for
inclusion in the Medium-Term Philippine Development Plan (MTPDP) for
2005-2010. The National Economic Development Authority (NEDA) said in a
statement yesterday that some of the revenue-generating measures put
forward by the committee will have to be further discussed as the NEDA
refines the MTPDP. "We need to discuss not just the figures, but the
approaches and specific activities to support the revenues we are
targeting. We should not only say we want to achieve
PhP38 billion to
PhP50 billion earnings in exports, we need to devise ways to achieve
that goal," NEDA assistant director-general Margarita Songco said in the
statement.
The package of measures involve increasing revenues, managing
government expenditures and debts, and reducing the deficit of
government-owned and controlled corporations. The DBCC has reportedly
agreed to implement revenue administrative reforms which are expected to
generate a 14% increase in revenues by 2010, if accompanied with
legislative measures. The interagency committee has also pushed for the
passage of tax measures such as the indexation of sin taxes, a two-step
increase in the expanded value-added tax rate, granting of general
amnesty and the rationalization of fiscal incentives. Ms. Songco said
the Committee is expected to present the package of strategies and
activities to the Senate within the month. President Gloria Macapagal-Arroyo
has given the NEDA 100 days to finish the 2005-2010 MTPDP. The final
draft of the plan is expected to be published within October.
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The Bangko Sentral ng Pilipinas said yesterday it will no longer
appeal the latest decision of a regional trial court on the case
involving the Banco Filipino Savings and Mortgage Bank. The Makati
Regional Trial Court has affirmed its earlier ruling that the Bangko
Sentral can be accountable in the
PhP18.8-billion damage suit filed against the defunct Central
Bank by Banco Filipino over its closure in 1985. Banco Filipino contends
that the regulator can be held liable, claiming that the Bangko Sentral
is the "successor-in-interest" of the old Central Bank. Bangko Sentral
lawyers have filed last year a separate motion seeking for the dismissal
of Banco Filipino's claims. Juan de Zuņiga, Jr., the central bank's
general counsel, said yesterday they will just wait for the regional
trial court's decision on its motion instead of appealing this
particular court ruling. "We have our own motion to dismiss Banco
Filipino's appeal. It is still pending so we will just wait for that,"
he said. He explained that the Bangko Sentral has "no personality" in
the latest court decision as it was the old Central Bank-Board of
Liquidators that filed the motion. The case stemmed from the inclusion
in September last year of Bangko Sentral and the present Monetary Board
in Banco Filipino's PhP18.8-billion damage suit against the defunct
Central Bank led by the late Governor Jose "Jobo" Fernandez. The savings
bank has noted that under the new Bangko Sentral charter, the old
central bank would exist at the Central Bank-Board of Liquidators for
another 25 years.
In a decision dated last July 20, the regional trial court junked the
motion for reconsideration filed by the Central Bank-Board of
Liquidators to dismiss the case. Once the top local thrift bank, Banco
Filipino experienced heavy deposit withdrawals starting November 1983,
the heaviest of which occurred in June 1984. The bank sought the
assistance of the Central Bank for non-emergency loans, which the latter
released on a staggered basis. When the then Central Bank refused to
release cash on the guarantee of the bank's government securities, Banco
Filipino was forced to declare a bank holiday on July 17, 1984. Upon the
order of the Central Bank, the bank was closed on Jan. 25, 1985. On Dec.
11, 1991, the Supreme Court declared the bank's closure as illegal for
having been carried out arbitrarily and with grave abuse and discretion.
It ordered the Central Bank to allow the bank to resume operations. The
bank formally reopened on July 1, 1994. -- Iris
Cecilia C. Gonzales
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By IRIS CECILIA C. GONZALES,
Reporter
The Bangko Sentral ng Pilipinas has scored a victory after the
Supreme Court dismissed an appeal filed by Urban Bank officials seeking
to reverse an earlier court order that junked the suspension order on
central bank officials. The case stemmed from the closure of the bank in
April 2000 which led to a legal battle between Urban Bank officials and
the Bangko Sentral executives. "The Court resolved to deny the petition
for failure of the petitioner to show that a reversible error had been
committed by the appellate court," the Supreme Court said in a decision
dated July 26, 2004 but made public only yesterday. "This is a victory
for us," said Juan de Zuņiga, Jr., the central bank's general counsel.
Urban Bank officials, led by its president Teodoro Borlongan, filed with
the Supreme Court a motion that sought to reverse an earlier order by
the Court of Appeals.
Last June 4, the Court of Appeals dismissed Urban Bank's
administrative complaint against several officials of the central bank,
effectively dismissing the suspension order on Bangko Sentral Governor
Rafael B. Buenaventura and other top executives. The apellate court's
special division also unanimously rejected the motion for
reconsideration filed by former Urban Bank president Teodoro Borlongan,
seeking the dismissal of the central bank officials. In its amended
decision, the Court of Appeals ruled that the dismissal of the
administrative charges against Mr. Buenaventura and Mr. Zuņiga by the
Ombudsman is final and unappealable. Mr. Borlongan, however, filed a
petition for review with the Supreme Court but this was denied by the
court's third division. The Bangko Sentral closed Urban Bank a day after
it declared a banking holiday in April 2000. The bank was then placed
under receivership to protect its depositors and the general public, and
facilitate the takeover of its assets and liabilities by a new investor.
In 2001, Export and Industry Bank took over Urban Bank and merged the
two banks' operations. In its decision, the Court of Appeals said Mr.
Borlongan was in no position to sue considering that the owners of the
majority stock of Urban Bank themselves decided against challenging the
Monetary Board resolutions. The Court of Appeals also said the
receivership of Urban Bank has firm legal basis under the Bangko Sentral
charter and that recommendations to place it under receivership were
based on adequate and constant monitoring and examination of the bank's
records over a period of time.
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Midsize commercial bank Philippine Bank of Communications (PBCom) is
reviewing three bids for
PhP12.5 billion worth of foreclosed properties and bad loans that
were offered in an auction last Aug. 24. "The bank is currently in the
process of reviewing the bids submitted and evaluating its options,"
PBCom said in a disclosure to the Philippine Stock Exchange. Half of the
total asset portfolio put on the auction block are nonperforming loans
while the remaining half are nonperforming assets or those classified as
real estate and other properties owned or acquired. The bank earlier
said 14 local and foreign investors led by Bank of America, Deutsche
Bank, Ayala Corp. and Robinsons Land Corp. were keen on its idle assets.
The bank confirmed yesterday reports that only three bids were submitted
during the public auction of the assets while eight groups conducted due
diligence. PBCom is confident that a significant improvement in its
revenue base will be achieved for the second half of the year resulting
in increased profitability.
After incurring a net loss of PhP200.72 million during the first
quarter, the publicly listed bank swung to profit with PhP9.7 million in
the succeeding quarter largely because of higher interest income on
investments. This came after a PhP3-billion capital infusion by major
shareholders last March and interest income from PhP7.64 billion in
government securities put in by the Philippine Deposit Insurance Corp.
relative to the auction of the bank's PhP12.5 billion worth of
foreclosed properties and bad loans. Banks that want to take advantage
of the perks under Republic Act 9182 or Special Purpose Vehicle (SPV)
Act of 2002 have until Sept. 18 to establish and register their SPVs
with the Securities and Exchange Commission. The incentives, which
include tax perks and reduced transacton fees, are available to idle
asset buyers until April 2005. -- Ruby Anne M. Rubio
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The Philippine peso yesterday recovered from another bout of
fluctuations as US dollar buying eased. Trading at the PhP56.20 levels
in the morning, it bounced back in the afternoon with the absence of
corporate demands, traders said. "What happened the other day was [corporates]
took off from their month-end obligations. There were dollar-buying
follow-throughs," a trader said. Oil and manufacturing firms usually set
their bulk dollar buying during the end of the month. "The market the
other day also tried to forcefully break the central bank barrier, with
no avail. At this point, the volume only shows a regular transaction.
The market was only buying and selling," another trader said. The volume
of transacted dollars rose to $220 million from $210 million the other
day. At the Philippine Dealing System, the country's electronic
currencies exchange, the peso averaged stronger by almost two centavos
to PhP56.179. It closed 12.5 centavos stronger at PhP56.125.
-- I. P. Pedrasa
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The Bangko Sentral ng Pilipinas has shelved an earlier plan to give
banks two years to shift their existing common trust funds into more
transparent investment instruments. It earlier planned to give banks at
least two years to comply with a new set of guidelines that would pave
the way for the creation of the so-called unit investment trust funds or
UITF. However, a central bank official yesterday said the policy-making
Monetary Board has decided to leave it to banks when they will shift
their existing trust funds to safer and more transparent investment
instruments. The official said monetary authorities recognize the
difficulty of imposing a deadline on banks, saying that the shift to a
UITF will most likely be influenced by market conditions. Last week, the
Bangko Sentral gave the green light to the creation of the UITFs, which
is an "improved version" of the existing CTFs. --
Iris Cecilia C. Gonzales
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Tapping the international capital markets this month, Union Bank of
the Philippines (UnionBank) said yesterday the $150-million senior debt
issuance will be used for lending and to refinance maturing obligations.
The issuance marks its first foray into the foreign debt market.
International ratings firm Moody's Investors Services has assigned a Ba2
rating to the senior unsecured debt. "The negative outlook is in line
with the revised outlook for the country's sovereign ceilings and is not
reflective of bank-specific issues," Fe B. Macalino, UnionBank first
vice-president and corporate secretary, said in a disclosure. She also
said Moody's cited the following strengths of the bank: extremely strong
capitalization, above average profitability, lucrative cash management
and payment services franchise providing underlying stability to
earnings, low funding costs, and progressive and professionally managed.
Moody's has assigned UnionBank first time ratings as follows:
- senior unsecured debt -- Ba2, with negative outlook
- long-term deposit rating -- Ba3, with negative outlook
- short-term deposit rating-- Not Prime, with stable outlook
- bank financial strength rating -- D, with stable outlook
Ms. Macalino earlier said the bank's management has approved the
hiring of an arranger to undertake the issuance of the senior debt, or
borrowings that sit high in the repayment hierarchy. --
Ruby Anne M. Rubio
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By ROULEE JANE F. CALAYAG
Naysayers were proved wrong as the stock market yesterday surpassed
the critical 1,600 level in a month considered by investors as the
worst. Accumulating gains for the second day in a row, the Philippine
Stock Exchange composite index (Phisix) was up 21.26, or 1.3%, at 1,614
-- its highest closing level in three years. It last broke the 1,600
level on March 5, 2001 when it finished at 1,616.54. Telecommunications
powerhouse Philippine Long Distance Telephone Co. (PLDT) led the
technical rally as gains of its American Depositary Receipts (ADRs) in
New York spilled to the local market. Its ADRs rose $0.47 or 2.07% to
$23.14. Boosted by the gains of its ADRs, PLDT went up by PhP35 to
PhP1,320. After becoming a mobile virtual network operator in
Hong Kong recently, telecommunications giant is mapping plans that may
further leave behind the Davids of the local industry. PLDT's parent
firm, Hong Kong-based First Pacific Co. said its next target will be the
overseas Filipino workers in the United States, Middle East and Europe.
But it will not be putting up new facilties. By tapping other existing
telecommunication companies (telcos) in these countries, PLDT can widen
its reach and hoist its leadership to a higher level.
GOOD FUNDAMENTALS
Roberto Cano, senior analyst at BPI Securities, said telecom stocks
governed the market as PLDT, mobile phone subsidiary Pilipino Telephone
Corp. (Piltel) and competitor Globe Telecom all closed higher.
"Investors are still buying issues with good fundamentals," said Mr.
Cano. Net foreign buying was significant for PLDT, Ayala Corp., First
Philippine Holdings, SM Prime Holdings, Inc., and Megaworld Corp. Dianne
Sy, research associate at Unicapital Securities, Inc., said trading on
second liners, which propped up the market during the past sessions,
weakened and was downplayed. This bolstered the market although some
bargain hunters still trooped to a few oversold second liners. "Trading
on second liners was relatively weaker compared to previous sessions in
the past weeks although DMCI Holdings, Inc. is still one of the top
traded stocks," said Ms. Sy. She said the market drew its strength
generally from PLDT, Lopez-led power distributor Manila Electric Co. (Meralco)
and Metro Pacific Corp., an investment and management company of First
Pacific Group.
Metro Pacific said the other day that work is underway in its
subsidiary, Metro Strategic Infrastructure Holdings, Inc., to develop a
business plan for integrating various tollway systems in the country. As
the second most actively traded stock, Metro Pacific rose PhP0.09 to
PhP0.44. Next most active was the "B" shares of Meralco, which advanced
PhP0.50 at PhP22.25. In line with rosy projections, eight of the top 10
actively traded stocks were up while two were unchanged.
MOST INDICES UP
The return of confidence in the market was also reflected in the
indices where all but two were back on track. Together with oil, the
banks and financial services counter slipped. The commercial-industrial
led the counters, up 46.01 at 2,596.11. Mining followed, snatching 11.19
to close higher at 1,757.02. Property advanced 2.89 to 528.24. Banks and
financial services lost 0.45 at 455.99 while oil was marginally lower by
0.01 at 1.59. The all-shares index gained 6.4 at 1,031.09. Trading
volume was at 2.7 billion shares amounting to
PhP639.7 million. Even the number of trades looked pleasing with
3,943 -- almost twice higher than Tuesday's. Gainers overtook losers,
55-25. Issues that were unchanged totalled 45.
THE NEXT LEVEL
Now that the base-building phase is over, the stock market looks set
to challenge another level. But BPI Securities' Mr. Cano said while it
was good that the Phisix reached a new closing high so far this year and
for the last few years, the resistance level was still at 1,620. "The
Phisix broke the 1,600 psychological level. This is positive since it
also established a new high close for the market at 1,614. If the market
can sustain the move above 1,620.37, which was the intraday high for the
year, this would establish a new high for [2004]," added Mr. Cano. Some
market watchers said the bourse is ready for a technical climb as
indicators show. However, others chose to remain cautious, preferring to
wait for the market to complete a cycle. But the government's move to
rein in the country's fiscal problem may succeed in luring back
investors to the market.
BOI-REGISTERED FIRMS
Talks of boosting the capital market gained currency recently after
the Department of Trade and Industry set out on a campaign to push 5,000
firms registered with the Board of Investments to list at the stock
exchange. Trade and Industry Secretary Cesar Purisima said it was
important to review the firms that avail of the incentives under the
Omnibus Investments Code and see if these were complying with its
provisions. Under Executive Order 226 or the Omnibus Investments Code of
1987, registered enterprises must list their shares at the exchange or
sell at least 10% of their capital stock to the public within 10 years
of registration. So far, the Trade department said only a handful of
these registered firms have taken an active step to fulfill this
obligation.
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By KAREN L. LEMA, Reporter
The government's race to avert a fiscal crisis looming within the
next two years has put the spotlight next on religious groups' tax-free
status. A government official, who requested anonymity, said yesterday
that the Catholic church and other organized religions should be made to
pay taxes, or at least the government should "limit" their tax
privileges. "We don't know if this is being abused or not," the official
said. Some health organizations, the official noted, were claiming
religious exemption to avoid taxes on imported medical equipment.
Under the 1987 Constitution, charitable institutions, churches,
convents, mosques, charities and non-profit cemeteries are exempt from
real property taxes. The National Internal Revenue Code also exempts the
church from income and donor's taxes. Moreover, the official said, the
church should agree to have its finances audited and scrutinized. "They
are the ones advocating transparency...why don't they open their books
and report to their parishioners where they use their money...we don't
really know what activities they get into," the official said. "They
want us to be transparent, but are they practicing the same principles
they are advocating? We don't know where their money go because their
books are not open," the official added. But Bureau of Internal Revenue
(BIR) Deputy Commissioner Kim J. Henares said this proposal was
impractical. "In a theoretical sense, it looks attractive, but in a
practical sense I am not sure because churches claim than if we collect
taxes from them it would (adversely) affect the performance of their
functions," she said. Although taxing churches would be a big help
because "if there is no exemption to anyone, it is easy to do tax
administration," she added. For his part, tax lawyer Jaime Soriano said
the Constitution limited the church's exemption to real property taxes.
"Constitutionally, there is no prohibition on the power of Congress to
impose taxes on income. So if Congress will impose income tax on the
church, it can do so. But the question is, will it do so?" Mr. Soriano
told BusinessWorld. Mr. Soriano also said that the Supreme Court,
as part of its decision upholding the constitutionality of the value
added tax, ruled that the sale of religious articles was subject to tax
because this did not necesarily limit the free exercise of religion.
"Proceeding from that, therefore, other forms of taxes, other than real
estate maybe imposed on the church...it only takes political will if we
want to impose it," Mr. Soriano said.
Congress can pass a bill amending the tax code provision on tax
privileges for the church and organized religion, he added. During the
Ramos administration, then Senator Gregorio Honasan and Senator Juan
Flavier also pushed a resolution on lifting the property and income tax
exemptions of organized religions. The senators had said the money could
be used for social programs to "improve the lives of all Filipinos." In
justifying the resolution, Mr. Honasan had said the government must
seriously consider looking at sectors that were benefiting from tax-free
privileges "so we may offset this and support viable government
programs." For his part, Mr. Flavier had wanted to go after what he
called as "fake churches" that collected donations in the "name of
religion." He claimed there were around 50,000 groups that have declared
themselves tax-exempt. As expected however, the Catholic Church had
opposed the senators' resolution by invoking the constitutional
separation of church and state. Catholic Church leaders warned that if
taxes were levied against the Church, it would have to close schools,
leprosy clinics, dispensaries, credit unions, and so on. The tax's
latest proponent said, however, "If the church meddles in the affairs of
the state, why can't the state meddle in their affairs."
For his part, Catholic priest Roberto P. Reyes said transparochial
groups should be taxed, instead of the Catholic Church, since these
organizations were moneyed. "Taxing the Church creates, at this point,
bad blood. There are other ways the Church can help the government. They
can partner in poverty alleviation not only in the rich parishes but
even in the poor ones," Mr. Reyes told reporters. He noted that
transparochial organizations like El Shaddai, the Couples for Christ, or
the Love Flock have amassed money through tithing, and yet they have not
been taxed since collections were put in foundations. Mr. Reyes also
claimed that donations from parishioners would not even pay for
parishes' day-to-day operations. He admitted however that some parishes
have huge coffers, especially those located in affluent communities like
Forbes Park and Greenhills. "We could be the government's important ally
in asking help from the people. But if we are going to be punished for
something we did not do, then the government would lose an important
ally," Mr. Reyes added. Catholic Church officials are set to discuss in
a plenary council of the influential Catholic Bishops' Conference of the
Philippines (CBCP) this month the proposal to impose tax church
properties. Catholic charismatic group El Shaddai is also expected to
release a statement on the tax proposal today.
-- with inputs from R. M. Balaba and K. L. Alave
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By JENNIFER A. NG, Reporter
The National Economic and Development Authority (NEDA) expects the
recent round of price increases for petroleum products, as well as
rising food prices due to recent typhoons to cause August inflation to
hit a range of 6.3% to 6.6%. A NEDA executive said yesterday that even
the decision of small oil firms to raise their pump prices by 30
centavos per liter on Tuesday would put further pressure on inflation.
"Inflation for August may move up due largely to the recent increase in
oil prices. Also, the increase in food prices due to the recent typhoon
may contribute more inflationary pressures," a NEDA official told
BusinessWorld in an interview.
NEDA earlier estimated inflation for August to hit 6.1%-6.3% due
largely to hgiher oil prices in recent months. Beginning 2004, the price
of gasoline has increased nine times, and diesel eight times. Inflation
rate for July was 6%. Year-to-date inflation that month was 4.3%. The
government earlier said inflationary pressures last month came mainly
from higher transport fares as well as the rise in food prices.
For August, food prices are also expected to contribute to
inflationary pressures. While typhoons Marce and Nina did not directly
hit the Philippines, they brought monsoon rains that caused heavy rains
and floods in Luzon, which damaged crops. The Department of
Agriculture's (DA) Bantay Presyo monitoring team on Tuesday said farm
commodities coming from Northern Luzon such as vegetables registered
higher prices after heavy flooding limited deliveries. The Bureau of
Agricultural Statistics has noted a
PhP50 increase per kilogram of carrots to
PhP120, from
PhP70 prior to the monsoon rains. Other highland vegetables such as
cabbage and potato went up by around
PhP15 per kilogram. The government earlier said the 4%-5% inflation
target set for 2004 could be breached because of unabated increases in
oil prices.
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By Ma. ELISA P. OSORIO, Reporter
The government will meet with the operator of the Ninoy Aquino
International Airport Terminal 3 next week in what could be the first
step to finally open the controversial airport. Solicitor General
Alfredo L. Benipayo yesterday said officials would meet with executives
of Philippine International Air Terminals Company (Piatco), the airport
operator, and its German partner, Fraport AG, to discuss NAIA-3's
inspection. In an interview at the Department of Justice, Mr. Benipayo
said there would be no settlement talks until NAIA-3 was deemed safe.
"We have to make sure we can operate it; make sure it will work," he
said. Along with the inspection is the assessment or valuation of the
facility by an independent airport engineer, he added.
The Office of the Solicitor General (OSG) said earlier there were
three "indispensable preconditions" to any settlement:
- NAIA-3 is structurally sound and can be used for its intended
purpose;
- NAIA-3 must be safe and secure; and
- NAIA-3's actual and reasonable cost must be independently
determined and audited based on verifiable evidence.
"Any settlement here would have to follow these conditions," Mr.
Benipayo said. "Let's see it first before we talk about payment." Just
like buying a house, he said, the buyer should not tender payment
without first inspecting it. Last August 20, Mr. Benipayo and retired
Supreme Court Associate Justice Florentino Feliciano, the Philippine
counsel in the international arbitration of the NAIA-3 case, belied as
"totally false, irresponsible and deplorable" reports that the
government has settled with Piatco and Fraport. Yesterday, OSG admitted
that Mr. Benipayo had "met with Piatco and Fraport officials in
Washington D.C. to hear out their proposals." But it also said "the
government has not made any proposal for settlement with Piatco and
Fraport, as indeed the government does not owe anything to either of
them." Neither did Piatco nor Fraport submit any proposal for a
settlement, Mr. Benipayo said. "The government rejects any settlement
that will put to risk the safety of passengers and employees at the
terminal or will require the government to pay a centavo more than the
terminal's actual and reasonable cost," he said. "The government will
not allow any duplicitous, sham or unaudited payments for the terminal."
Mr. Benipayo noted that "Piatco has locked out the government from the
facility.
Despite government's repeated requests, Piatco has to date refused to
allow inspection of the terminal or to open its financial books." "If
the government will at all spend taxpayer's money on the terminal, it
will consider doing so only after determination of the true condition or
Terminal 3 and of what actually and reasonably went into the
construction thereof, and the requirements of the best interests of the
country and in the spirit of full transparency and accountability," the
OSG said. The National Bureau of Investigation is also investigating
whether cases should be filed against officials of Fraport AG at the
Justice department for alleged violation of the anti-dummy law.
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Set to quiz Transco
execs
By CARINA I. RONCESVALLES,
Reporter
The Senate committee on energy yesterday echoed Manila Electric Co.'s
(Meralco) defense that the 17.37 centavos per kilowatt-hour rate
adjustment approved by the Energy Regulator Commission (ERC) would not
translate into profits for the Lopez-controlled utility, adding the real
culprit for the rate increase was the National Transmission Co.
(Transco). This after Senate Committee on Energy chairman Miriam
Defensor Santiago led the legislative inquiry on the cost recovery
mechanism which took effect yesterday. "The committee found no evidence
that Meralco is going to profit from the 17.37-centavo increase. It has
the justification for doing so," Ms. Santiago told a news conference
after the hearing.
Meralco vice-president and head of utility economics Ivanna G. de la
Peņa said the 17.37-centavo rate adjustment would not boost the
utility's profits. She added that the money would be used to settle what
the consumers owed Meralco from February to May in the generation charge
accounting for 60% of the total Meralco bill. The three other components
of the utility's bill are the transmission charge, distribution charge
and cross-subsidies, which account for 17%, 19% and 4%, respectively.
Ms. de la Peņa added the generation cost had increased due to the higher
generation charges of the National Power Corp. (Napocor), which provides
majority of Meralco's power requirements, the rising cost of oil and the
fall of the peso. Ms. Santiago further said the committee will call on
Energy Secretary Vincent S. Perez and Transco President Alan T. Ortiz to
explain why the rate increase was being passed on to consumers instead
of having the "profitable" Transco absorb the costs. "It appears Meralco
and other distribution utilities will not profit from the increase,
because it merely reflects the cost of generation. If so, then it should
not be the consumer but Transco that should absorb the increased cost,
because Transco can very well afford to do so," Ms. Santiago said. She
noted Transco was the main culprit for the high electricity rates in the
country. "The transmission function is the most profitable component of
the electricity problem. In the whole world, our transmission charges in
proportion to the total electricity bill is largest in the Philippines.
Now, if somebody has to absorb the increase, why the consumers and not
the Transco?"
Opposition Sen. Juan Ponce Enrile also said the electricity rate
adjustment could have been mitigated if Transco showed willingness to
trim down its profits which account for a 16.6% return on rate base,
higher than the legally allowed 12.3%. "There was a decision made which
imposes the burden to the public. It is the responsibility of everyone
to see to it that the burden is mitigated. We have to arrive at a
reasonable level of power rates," Mr. Enrile said, noting the Transco
had remained a "cash cow." Transco raked in
PhP7.7 billion in net income for the first half of the year. The
firm enjoyed a net income of PhP15.38 billion last year.
For his part, Energy Regulatory Commission (ERC) Chairman Rodolfo G.
Albano, Jr. said even if Transco registered Ph P15 billion in net income
last year, there was no law that would compel it to shoulder the rising
generation charge. "There should be a law to call on Transco to absorb
the cost. Right now, the law only allows us to order the recovery of the
cost of power," Mr. Albano said in a separate news conference. He noted
that existing regulations, particularly the generation rate adjustment
mechanism (GRAM) and incremental currency exchange recovery mechanism
only provide rate adjustment mechanism. Mr. Albano added the ERC would
review the GRAM mechanism whose main goal is to keep generation rates
close to the true electricity cost. GRAM also serves as a cost recovery
mechanism for changes in fuel and purchased power costs which can be
availed by the distribution utilities once every three months. Mr.
Enrile also called for a comprehensive review of the existing government
regulatory practices to the energy sector amidst the rising costs of oil
and electricity. He noted the legislative inquiry should involve the
officials of the Department of Energy, ERC, Napocor, Transco and Private
Sector Asset and Liabilities Management, oil companies and independent
power producers. "Both the Oil Deregulation Law and Electric Power
Industry Reform Act promised free competition and reforms in the oil and
electric power industry supposedly to make cheaper fuel and electricity
available to the public. It is clear that the reverse has happened and
we need to identify the reasons behind this failure and urgently find
solutions," Mr. Enrile said.
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... But tax chief questions House
economist's numbers
Bureau of Internal Revenue (BIR) collections last August will be
significantly below target, threatening government efforts to address a
looming fiscal crisis, a legislator yesterday claimed. Albay (southern
Luzon) Rep. Jose Clemente S. Salceda, chairman of the House of
Representatives committee on economic affairs, said preliminary figures
show the BIR was able to collect only
PhP29.77 billion last month, 30.94% below its target of
PhP43.11 billion. "This would bring the 2004 shortfall to
PhP18 billion for the first eight months, which is not encouraging
for the full-year deficit target of
PhP197 billion, unless the government scrapes further an already
skeletal spending for 2004," he said. The charge was immediately
rejected by BIR Commissioner Guillermo Parayno, who said Mr. Salceda's
statements were irresponsible at a time "when everyone is worried about
the country's fiscal situation." Mr. Salceda said the BIR was able to
collect a total of
PhP268.08 billion from January to July versus a target of
PhP272.77 billion, but Mr. Parayno said the legislator's figures
were merely preliminary and do not take into account May-to-July income
tax collections. "As of now, we have already collected about
PhP40 billion, but we will know the actual figures by the middle of
this month," he told BusinessWorld. Mr. Salceda, he said, must be
citing the BIR's report as of August 27, when said it had collected only
PhP27.7 billion or 64% of the target. Quarterly income tax
collection had not been added to this figure at the time, Mr. Parayno
said. He admitted, however, that January-to-July collections are 1.78%
below target. "But this is not too far," he said.
SYSTEMIC FLAWS
As this developed, the Bureau of Customs (BoC) yesterday admitted to
a maximum of 50% losses in its import duty collections while the BIR
blamed tax policy as the single biggest reason for a drop in the tax
effort from 1997 to 2002. Officials of the two revenue-generating
agencies issued the statements during a House of Representatives ways
and means committee hearing yesterday. Acting BoC Commissioner George
Jereos admitted that even if the bureau has been consistently meeting
targets, an estimated 20% to 50% of potential import duty collections
has been lost due to its inability to validate the declared shipment
value under the transaction value system. The BoC adopted the
transaction value system as basis for import valuation in 2000 in line
with World Trade Organization rules. This system makes use of
transaction values, which refer to the actual amount quoted for a
shipment of goods. It allows an importer to collect his goods at a port
based on his declaration of the value of the shipment. A post-audit
entry is supposed to give the BoC a safeguard against misdeclarations.
Mr. Jereos, however, said the BoC does not possess the reference values
to countercheck the value of goods declared. A book of reference values
for various commodities used in counterchecking is very expensive,
costing $48,000, he said. For the January-to-June period, Mr. Jereos
said, the BoC collected a total of
PhP70.9 billion against a target of
PhP63 billion. The monthly performance of BoC this year, he added,
was also consistently above target.
The BIR's Parayno, meanwhile, said tax policy more than tax
administration is to blame for the fall in the bureau's tax effort from
1997 to 2002. The overall tax effort (both BIR and BoC), or the ratio of
collections to gross domestic product (GDP), was highest in 1997 at 17%
but has gone down since then to 12.5% in 2002. The BIR's tax effort went
down from 13% in 1997 to 9.96% in 2002. Mr. Parayno, citing the findings
of economist Rosario G. Manasan of the Philippine Institute for
Development Studies, said the cause of the fall was due to tax policy
(46.5%), increased evasion (46.2%) and economic structure (7.3%). The
comprehensive tax reform package that was passed in 1997, he said,
raised personal income tax exemptions and decreased corporate income tax
rates from 34% in 1998 to 32% in 2000. Congress also failed to pass
measures such as a law indexing the excise tax on sin products to
inflation and placed many products on a VAT (value added tax)-exempt
list.
The single largest source of the fall in BIR's tax effort between
1997 and 2002, Mr. Parayno said, was a fall in excise, income and VAT
collections. The Asian financial crisis, merger of several banks,
downsizing of big firms or corporate taxpayers, temporary shutdown of
oil refinery operations; increase in importation of finished oil
products; and a slowdown in the manufacturing sector between 1997 to
2002 were also behind the fall in the BIR's tax effort, he said. Mr.
Parayno, however, noted that collection performance has begun improving,
with tax effort rising to 10.06% in 2003 and seen at 10.1% this year.
-- Judy T. Gulane
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Four business partnerships were signed on day one of
President Gloria Macapagal Arroyo's state visit to China, Trade and
Industry Secretary Cesar A. V. Purisima said in a press statement
yesterday. Mr. Purisima said Filipino businesses "benefited heavily"
from strengthened economic ties between the two countries. The Trade
department identified the agreements as:
- A supply contract of at least $1 million worth of coco fiber
products between Cocotechnologies Corporation (Cocotech) and
Guanzhou Rivers Enterprise Co. Ltd. Cocotech will supply coconut
fiber geotextile products to Guanzhou Rivers which it will use
within a two-year period for riverbank repairs in Guandong, Pan
Pearl River Delta, and other areas in China.
- A supply contract for baled coco fiber or coir products between
Philippine Environmentech Products Corporation (PEPCO) and Guangzhou
Tiahe Yi Xin Fiber Product Company. Under the two-year contract,
PEPCO will sell Yi Xin 100 to 300 tons of baled coconut fiber every
month, with an option to increase deliveries.
- A memorandum of agreement between the Philippines' Kemwerke,
Inc. and Akzo Nobel Coatings of China. Kemwerke will supply 400
metric tons of short oil alkyd resin, polyol resin, and related
products every month to three Akzo factories.
- An agency agreement between Kemwerke and China's New Trump
Enterprises Ltd., under which the latter will sell, market, and
promote Kemwerke products. New Trump Enterprises Ltd. will also
search for potential customers in China and develop a stable market
clientele for Kemwerke.
Except for the $1-million agreement between Cocotechnologies
Corporation and Guanzhou Rivers, the statement did not provide specific
figures for the contracts. Mr. Purisima said he has directed foreign
personnel in China to "look for more opportunities for our local
companies to sell their products." "Our partnerships aim to gain from
the economic prowess of this vast Asian country," he added.
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Warning of power shortages and rising oil prices, a visiting US
official has urged the government to reform the Philippine power sector.
Failure to ensure a stable energy supply will lead to "economic
destabilization", United States assistant secretary of State for
Economic and Business Affairs Earl Anthony Wayne said during a recent
visit to the Philippines. "The prospect of power shortages and rising
fuel costs already looms over the Philippine economy ... Any large
external shock, such as a sustained increase in world oil prices, or a
sharp fall-off in workers' remittances, or ironically, even rapid growth
that would cause the import bill to rise, would make the country
increasingly vulnerable to economic destabilization," he added.
Noting that fuel accounts for almost 10% of Philippine imports, Mr.
Wayne said the country can establish a secure energy supply through more
foreign investments. He said, however, that investors are shy of putting
their money into the Philippines as it has yet to create a competitive
energy sector climate. He cited the case of the National Power
Corporation (Napocor), saying that while the Philippines has tried to "unbundle
generation, transmission and distribution assets, and to privatize these
businesses" through the Electric Power Industry Reform Act, the country
has fallen short of showing progress in the implementation of this law.
"Foreign power companies, many of them in the US, that would seem
'naturals' to participate in Napocor's privatization, have shown little
interest. Some who might be interested are put off by the likelihood of
bureaucratic interference, corruption, an uncertain regulatory
environment and the lack of viable tariffs for power," the US official
added. Stressing that initiatives in reforming the power sector should
come from the Philippine government, Mr. Wayne said Washington would
work together with the Arroyo administration in enhancing energy
security.
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By RUBY ANNE M. RUBIO, Reporter
The Manila Regional Trial Court has junked the motion for
reconsideration filed by the Bangko Sentral ng Pilipinas, thus affirming
its earlier ruling that the financial regulator should be accountable
for the
PhP18.8-billion damage suit filed by Banco Filipino Savings and
Mortgage Bank against the defunct Central Bank of the Philippines over
the savings bank's closure in 1985. "This court resolves to give due
course to the motion to admit second amended or supplemental complaint
to avert a miscarriage of justice. For judicial cases do not come and go
through the portals of the court of law by the mere mandate of
technicalities. Wherefore, there being no cogent reason to disturb the
order of January 27, 2004, this court hereby denies the motion for
reconsideration filed by the Central Bank Board of Liquidators (CB-BoL),"
Judge Rebecca R. Mariano of Branch 136 said in a four-page decision.
In Sept. 2003, Banco Filipino included the Bangko Sentral and the
present Monetary Board in its PhP18.8-billion damage suit against the
defunct Central Bank led by late Governor Jose "Jobo" Fernandez. The
savings bank has noted that under the new Bangko Sentral charter, the
old central bank would exist as the CB-BoL for another 25 years. Judge
Mariano said, "The analytical study made by the court on the facts and
arguments of the parties are extant on the records of these cases
finally pointing out that the [Bangko Sentral] is indeed the
successor-in-interest of the old Central Bank under Republic Act No.
7653." Francisco A. Rivera, Banco Filipino executive vice-president,
said this is "another victory" for the bank and its depositors. "This
further rectifies the past injustice done to the bank and its clients.
We are now well on our way to restoring Banco Filipino as one of the
most stable and trusted banks in the country," he said in a statement.
Mr. Rivera said the damage claims may exceed PhP100 billion considering
the present values and interest charges and the continuing delay by the
Bangko Sentral's legal actions. Lauding the "swift action" of the court,
Mr. Rivera said the decision "benefits the depositors of Banco Filipino
who have been patiently waiting for this for so many years. He added,
"This also signals a triumph for the Philippine banking industry."
Following the passage of the New Central Bank Act of 1993, Banco
Filipino filed a motion for the court to admit its second
amended-supplemental complaint impleading the Bangko Sentral as party
defendant. The Makati trial court earlier ruled that the transfer of
assets from the Central Bank to the Bangko Sentral, while the cases were
pending in court, "constitutes the latter as a transferee pendente lite."
This means the Bangko Sentral is fully responsible for the payment of
Banco Filipino's damage claims. Once the top local thrift bank, Banco
Filipino experienced heavy deposit withdrawals starting November 1983,
the heaviest of which occurred in June 1984. The bank sought the
assistance of the Central Bank for a non-emergency loan, which the
latter released on a staggered basis. When the Central Bank refused to
release cash on the guarantee of the bank's government securities, Banco
Filipino was forced to declare a bank holiday on July 17, 1984. The bank
was closed on Jan. 25, 1985 upon the order of the Central Bank. On Dec.
11, 1991, the Supreme Court declared Banco Filipino's closure as illegal
for having been carried out arbitrarily and with grave abuse of
discretion. It ordered the Central Bank to allow the bank to resume
normal operations. Banco Filipino formally reopened on July 1, 1994
under Monetary Board Resolution No. 427, resuming business as a full
service savings bank with trust operations.
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By IRIS CECILIA C. GONZALES,
Reporter
The Bangko Sentral ng Pilipinas (central bank) will no longer allow
top-level bank officials in the country to hold key positions in their
banks' subsidiaries and affiliates. The policy-making Monetary Board
recently approved the new rules on interlocking bank officerships at the
top level, namely: bank presidents, chief operating officers, chief
executive officers and chief finance officers. "These positions cannot
be held concurrently," said Nestor A. Espenilla, Jr., central bank
assistant governor He said the move aims to strengthen banks through
better management, following a string of bank failures, some of which
were traced to officers with conflicts of interests. Based on existing
rules, interlocking directorships are prohibited but there are
exemptions. He said these new rules will no longer allow exemptions
unless approved by the policy-making board. "Generally there are no
exemptions, but this will depend on a case-to-case basis," said Mr.
Espenilla, a Monetary Board member. He said the new rules aim to clarify
existing rules on interlocking directorships that were subject to
confusion.
According to a circular issued last March, the Monetary Board allows
interlocking directorships between a bank and not more than two of its
subsidiary financial institutions, or between two banks and one of their
subsidiary non-bank financial intermediary. The central bank also allows
bank executives to occupy multiple officer positions between banks or
between a bank and a non-bank financial intermediary, other than an
investment house. But this is subject to a condition that at least 20%
but less than majority of the equity of each of the banks or
intermediaries is owned by a holding company. "Interlocking arrangement
must be necessary for the holding company or the bank to provide
technical expertise or managerial assistance to its affiliates," the
circular said. Another condition for this is that the positions to be
held by an officer should not involve any functional conflict of
interest. Earlier, central bank Deputy Governor Alberto V. Reyes said
the Monetary Board did not want the financial health of banks
compromised by directors with conflicting interests. He said directors
should act as true fiscalizers and champion shareholder interest.
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The central bank is set to issue tougher rules for banks and credit
card firms that would require them to improve their collection methods
and address numerous client complaints. The move aims to improve the
viability of credit card firms following the continued increase in past
due receivables. The proposed rules will amend an existing circular
governing credit card operations of banks and subsidiary credit card
companies. Nestor A. Espenilla, Jr., central bank assistant governor,
said consumers have been complaining about the humiliating collection
methods of credit card firms, which all the more, discourage them to pay
their obligations. -- Iris Cecilia C. Gonzales
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Union Bank of the Philippines is tapping the international capital
markets to issue $150 million senior debt issue this month. Fe B.
Macalino, UnionBank first vice-president and corporate secretary, said
the issuance marks the bank's first foray into the foreign debt market.
In a disclosure to the stock exchange, she said the bank's management
has approved the hiring of an arranger to undertake the issuance of the
senior debt, or borrowings that sit high in the repayment hierarchy.
"The board of directors of UnionBank in a referendum [yesterday]
approved the proposal of the management... to secure necessary
regulatory approvals and execute all contracts and other documents
necessary for the issuance of the debt under terms of the offering which
will be subject to further confirmation and approval of the board," said
Ms. Macalino, who is also the general counsel of the bank. Aboitiz-led
UnionBank did not say how it will use the proceeds from the issuance.
In the first half, UnionBank saw a 36% drop in net earnings to
PhP1.1 billion from PhP1.71 billion a year ago. It said in an
earlier filing with the securities regulator that the decline was
largely because 2003 figures included the hefty trading gains of PhP1.16
billion achieved when the bank took profit on the rally of prices in the
bond market. It added that a "similar opportunity did not present itself
in the first half of 2004, given the business conditions of the period,
when trading gains of the bank amounted to only PhP0.24 billion." The
bank said its loan portfolio was "almost flat" at PhP14 billion from
last year's PhP16.27 billion as lending remains slow. Its credit
risk-adjusted capital adequacy ratio improved to a high of 50.73% as of
end-June from 42.2% as of end-2003. -- Ruby Anne M.
Rubio
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After a short-lived correction, the Philippine peso fell back to more
unstable ground as worries over the country's finances and high US
dollar demand weighed down the local unit. "The market bought back their
dollars in the end when it became apparent that the bias of the market
was still for the dollar," a trader said. Different measures from
lawmakers to cut their pork barrel failed to calm the jittery market.
"That was supposed to be a good indication, however, when you look at
the inflow of dollars, you will see that there were still the corporate
demands. Since that was their behavior, the market followed suit, the
risks are still there and you can see that there is no quick solution,"
another trader said.
Beyond their import obligations, oil and manufacturing firms buy
dollars to caution against currency risks. These firms have already
cleaned up their inventories in time for the holidays, the trader said.
The trader added that when the peso appeared to slip beyond PhP56.25,
the central bank came in to intervene. He said the regulator accounted
for the $50-million to $70-million turnover at the PhP56.25 level. "It
has calmed the market for now. Let's see if it will come again to
provide liquidity," the trader added. Total volume of transacted dollars
was still little changed at $210 million from $215.9 million the other
day.
At the Philippine Dealing System, the peso averaged weaker at
PhP56.197 from PhP56.147 previously. Opening at PhP56.145, the peso
rallied toward PhP56.13. But when banks bought back dollars, the local
unit ended at its intraday low of PhP56.25. -- Ira P.
Pedrasa
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Hong Kong-based First Pacific Co. Ltd., the parent of Philippine Long
Distance Telephone Co. (PLDT), is exploring telecom markets overseas for
a possible expansion even without rolling out telecommunications
facilities. First Pacific Managing Director and Chief Executive and PLDT
Chairman Manuel V. Pangilinan said the firm is looking at options for
penetrating other telecom markets after the telco entered Hong Kong last
month through a partnership with HK CSL. Aside from replicating the
strategy it applied in Hong Kong, where it became a mobile virtual
network operator (MVNO), Mr. Pangilinan said First Pacific can also
invest in an existing telecommunications firm. "Italy and Singapore
allow MVNO, so they are natural targets. We are also checking on the US
and the Middle East," Mr. Pangilinan said.
If the Hong Kong strategy won't be allowed in other markets, Mr.
Pangilinan said it would just enter the market by selling prepaid cards
through local dealers. He said PLDT is already studying potential
markets as part of the regional expansion of First Pacific. PLDT unit
PLDT Global offers a Filipino SIM (subscriber identification module)
through Smart 1528, which it launched on Aug. 29. PLDT Global President
Al Panlilio said expansion would focus in countries where there are
Filipino contract workers such as the US, Europe and the Middle East.
"We are exploring other markets to replicate the service, but it's not
necessarily where PLDT Global is present. The international business has
been one of the bedrock of our business. We can derive revenues in
currencies that are stronger than the peso." -- Anna
Barbara L. Lorenzo
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Food and beverage giant San Miguel Corp. yesterday said local beer
sales in the first seven months reached
PhP2.47 billion, up 21% from
PhP20.8 billion during the same period last year. In a statement,
the company also said operating income for the month rose 24% to
PhP335 million, putting the seven-month total at
PhP4.33 billion. Sales volume for the month, meanwhile, improved
17%. "As of end-July, San Miguel Beer's trade inventory was maintained
at about two weeks equivalent sales, one of the lowest recorded levels
in the last three years," the company said. It said that it "has
maintained its focus on retail sales, kept effective relations with its
dealers and improved product availability, leading to this year's
favorable numbers." It added that San Miguel also benefits from improved
distribution system, right product portfolio and entry of new drinkers
into the market.
San Miguel is the country's largest publicly listed company. For the
first six months, the company posted a consolidated net income of
PhP4.0 billion, up 31% versus the same period last year. This
increase was driven by higher beer volumes, the fixed cost containment
of the Coca-Cola Beverage Group, significant improvements of the food
group and the recovery of its beer international operations. Also for
the period, domestic beer's operating income rose 25% to PhP4 billion
while revenues jumped 22% to
PhP18.3 billion on a beer volume growth of 19% over last year.
-- J. G. U. Rubrico
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Philam Asset Management, Inc. (PAMI) remains firm in its commitment
to meet clients' investment goals by diversifying its fund portfolios
amid economic uncertainties hounding the financial markets. According to
data culled by BusinessWorld, PAMI was able to cap the first half
of the year with over
PhP20.576 billion assets under management, up 46.35% from
PhP14.059 billion in the same period last year. These are the
financial resources available to fund managers for investment. For the
rest of 2003, the company was able to generate
PhP17.007 billion in managed assets. "Confidence is back, yet it
is something that the average man on the street and an ordinary investor
will not realize or may refuse to believe. Hence, it is a major
challenge for investment companies to counter public perception through
which businessmen and investors form their ideas based on what they read
in the papers and see in the news," the company said.
PAMI manages mutual funds including the Philam Fund, Inc. which is an
open-end, balanced fund. Philam Fund posted a net yield of 24.12% last
year, the company said. Net asset value per share rose to
PhP4.2124 from
PhP3.3937 the year before. Inputs from the fund include a
consolidation of equities and fixed-income securities. Another feature
of the fund is that 20% of its total assets can be invested in foreign
securities, taking advantage of more opportunities in other markets.
Another fund is the Philam Strategic Growth Fund, Inc., an open-end
equity mutual fund invested in listed or soon to be listed issues at the
local bourse. Like the Philam Fund, 20% of total assets can also be
invested in foreign securities. A portion of the fund may also be
applied in government securities as a liquidity measure. In 2003, Philam
Strategic claimed to have posted the biggest one-year net yield of
31.64%. PAMI manages other mutual funds such as the Philam Bond Fund and
the Philam Dollar Bond Fund. -- Ira P. Pedrasa
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Renting a store space in Metro Manila's major commercial districts is
expected to cost 10% higher by yearend compared with end-2003 levels, a
study done by multinational property consultant Colliers International
show. "Our forecast for rents by end-2004 is an average of
PhP1,135 per square meter in Ayala Center and
PhP900 in Ortigas. A year on year increase of roughly 10%,"
Colliers said in its Philippine property market review for July. The
expected increase in rents for commericial or retail space will be
fueled by improving consumer sentiment as well as increased spending on
"discretionary items." The firm noted that in the second quarter,
effective rents in Ayala Center in Makati City posted a slight quarter
on quarter increase of nearly 1% to an average of
PhP1,070 per square meter (m2) per month due to election
spending.
At Ortigas Center in Pasig City, rents are estimated to have
increased to PhP840/m2/month, up by less than 2% quarter on quarter.
"While election spending aided in improving in improving effective
rents, we believe that spending is still focused on small-ticket
discretionary items," the company noted signifying the continued
positive sentiment for the retail industry. For the whole of 2004,
Colliers said it expects retailers to use up an additional 215,000 m2 of
commercial space in Metro Manila. This will be absorbed by the opening
of three large commercial shopping centers scattered in three different
areas. Colliers said an additional 266,775 square meters of leasable
commercial space will be available by the end of the year once Ayala
Land's Market! Market!, Araneta Center's Gateway Mall and Robinson's
Metro Gateway Mall open in time for the Christmas season. In the second
quarter of the year, available store space for retailers in Metro Manila
increased by 2% due to the completion of SM Makati's expansion project.
But Manila-wide vacancy rate remained steady at 14.3% quarter on quarter
since additional space at SM Makati has been fully taken up by its own
department store. Colliers said the completion of the three more
commercial centers should push the vacancy to nearly 15% by the end of
the year.
DAVAO PROPERTY DEV'T
Meanwhile, property development in Davao City has started to pick up
as another housing company is looking at investing around
PhP200 million in setting up another residential subdivision in
the city, the Davao City Investment Promotion Center said. Roberto Teo,
investment center chief, said the company has applied with the Home
Mutual Development Fund, or Pag-IBIG Fund, to finance the project, which
will involve nine hectares of land in Catalunan Pequeņo district. Mr.
Teo said his office has yet to approve the application considering that
there are still some issues that need to be addressed such as
discrepancies in its feasibility study. Another housing developer has
also signified its intention to develop the second phase of its housing
program after investing around
PhP400 million last year. "It has not finalized its second phase,
so we are still waiting for the plan," said Mr. Teo. The property
development sector, particularly the motel industry, has perked up as
another 47-room "businessman's hotel" is set to be finished in the Maa
district, he added. Earlier, another motel was built in Cabaguio Ave. in
Agdao district, where most motor-hotels are located. These were roughly
PhP715 million worth of investments during the first eight months
of the year, said Mr. Teo, adding that his office could easily surpass
its target of
PhP1.2 billion in investments this year.
The housing development sector experienced a slump in 1997 at the
height of the Asian financial crisis. Early last year, some housing
developers banked on the arrival of some overseas Filipino workers who
have the money to invest in property development. Mr. Teo said the bulk
of investment this year will be in manufacturing, particularly food
processing, as another local company has started to make an evaluation
on whether it is wise to invest in the city. Earlier, the investment
center approved the
PhP426-million investment of an oil mill in the southern part of
the city and the PhP100-million seaweed processing plant.
-- with a report from Carmelito Q. Francisco in Davao City
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By ROULEE JANE F. CALAYAG
Weighed down over the past two trading sessions, the stock market
made a surprise turnaround yesterday. It bolted from a dreary losing
streak with the Philippine Stock Exchange composite index (Phisix)
leaping by 12.91 points or 0.817% at 1,592.74. Over one billion shares
were traded at
PhP928.7 million. Rommel Macapagal, chairman at Westlink Global
Equities, Inc., said the market was basically building base in the early
sessions. "It was base-building for the past days. The market was
looking at the resistance of 1,580, which is now the support level, as
it concentrated on the second- and third-liners," said Mr. Macapagal.
BIGGER VOLUME
New attempts would be made to challenge the 1,600 level after the
market breached the 1,580. Bargain hunting on select blue chip stocks,
said Mr. Macapagal, is "leading the attempt" for the Phisix to surpass
the new target. "The attention is now on buying on blue chips," he
added, especially as all look to how the American Depositary Receipts (ADRs)
Philippine Long Distance Telephone (PLDT) perform in New York.
"Hopefully, by next week, the Phisix will be above the 1,600 level,"
said Mr. Macapagal, who underscored the need to raise the trading
volume. "Bigger volumes, more than the 900 million shares [traded
yesterday], are needed to make a convincing follow through in the
market," he added.
UPTREND
At the bourse, the counters were balanced with the revived interest
in other indices. The commercial-industrial sustained earlier gains,
sealing its lead with a 19.76 edge at 2,550.10. Property also turned
around from an earlier loss. It closed higher by 13 at 525.35. The
performances of the banks as well as mining counters were reversed, with
oil still in the red. Banks and financial plunged 3.12 to 456.44 while
oil lost 0.03 at 1.6. Mining led the losers, shedding 11.27 at 1,745.83.
The all shares index rebounded, tugging in 14.49 at 1,024.69. Trades
improved to 2,327 with advancers taking a significant lead over
decliners, 41-33, while 42 issues were unchanged.
TELECOMS
Shares of Ayala-led Globe Telecom were the most actively traded,
rising five pesos at PhP880 and trading 481,000 shares valued at
PhP423.7 million. Globe's market share was 45.63%, over 20% higher than
PLDT's which managed to corner only 25.34%. PLDT was up at PhP1,285 for
183,000 shares worth PhP235.33 million. The industry leader earlier
showed its resilience even as the National Telecommunications Commission
bared its plan to relax the rule on giving other telecom players access
to its service areas. PLDT chairman Manuel V. Pangilinan downplayed the
threat posed by this move to PLDT's market leadership. He just said
"there should be some competition."
WEAKER
Bacnotan Consolidated Industrial, Inc. dropped at PhP24.75 with more
than one million shares traded for PhP28.5 million. Only five of the 20
most actively traded stocks dipped and three held on to their previous
prices. Aside from Bacnotan, the stocks that held some promise on
Tuesday hit low points. These included Bank of the Philippine Islands
and Metropolitan Bank and Trust Co., both considered trailblazers in the
banking industry. Share prices of Ionics, Inc. and International
Container Terminal Services, Inc. also weakened as they closed PhP2.14
and PhP4.30, respectively. Mobile phone firm Pilipino Telephone Corp. (Piltel)
was unchanged at PhP2.50. DMCI Holdings, Inc. and San Miguel Corp. "A"
also clung to their Tuesday price levels. With the Phisix and most of
the counters generally up, the equities market looks promising.
MOODY'S
A statement by credit ratings agency Moody's Investors Service may
also add to the reasons that support an optimistic outlook for the
market. Moody's said the Philippines is not in a fiscal crisis as was
earlier declared by President Gloria Macapagal Arroyo that sparked some
jitters among investors last week. The credit ratings agency was more
concerned about moves to solve the country's worsening problems,
government officials said. Early this year, Moody's downgraded the
country's long-term foreign currency rating to Ba2 from Ba1. The credit
ratings agency said it lowered the rating because the government may be
unable to balance its budget by 2009. A Ba2 rating is below investment
grade with negative outlook. This means that the debt issuer has
substantial credit risk, particularly as a result of adverse economic
change. Another inspiration could come from US stock markets.
As the Philippines patterns its trading decisions on Wall Street, the
nice spurt of buying observed in the last trading hours before the close
of August could lend added strength to the local bourse. But this may
not be enough as the market moves to September, considered the worst
month of the year for investors. How the market survives this month will
test its strength, both here and abroad. The Chinese Ghost Month, which
had caused some inactivity among investors over the past month, is
moving to its last stages. As investors set aside their worries over
this tradition, they may now rev up their participation in the market to
make up for the inactivity.
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The Philippines is not in a fiscal crisis according to Moody's
Investors Service but officials said the credit ratings agency is
looking for bold measures from the government to address the country's
problems. The call for reforms was echoed yesterday by a visiting US
official. US Assistant Secretary of State for Economic and Business
Affairs Earl Anthony Wayne said his government will support President
Gloria Macapagal Arroyo as she urges Congress to pass measures aimed at
wiping out the deficit during her term. "We believe that efforts to
increase revenues by broadening the tax base and improving tax
administration could help deal the immediate problem of low government
revenues. We believe it is critical that reform proposals to reduce
fiscal deficit be enacted and vigorously implemented soon," Mr. Wayne
said in a lecture at the Asian Institute of Management in Makati.
Meanwhile, Moody's said in a letter to the Bangko Sentral ng
Pilipinas' (Central Bank of the Philippines, or BSP) Investor Relations
Office (IRO) that it does not consider the Philippines in a fiscal
crisis as the country continues to have access to the debt market.
Moody's comment came at the heels of President Gloria Macapagal-Arroyo's
declaration last week that the Philippines is already in the midst of a
fiscal crisis, a statement that sent local markets roiling. Moody's said
it only considers a country in a crisis if fiscal trends are
unsustainable, leading to the inability of the government to issue new
debt. The firm also said it considers a country in a fiscal crisis if
the government is forced to unilaterally change the terms of its
obligations. "A crisis for us is when we think default is likely within
a twelve month period," the credit rating agency said in its letter
dated August 30. It said this was not the case with the Philippines even
as Moody's downgraded its credit rating on the country early this year.
Moody's lowered the Philippine's long-term foreign currency rating to
Ba2 from Ba1 in January primarily due to concerns on whether the
government would meet its target of balancing the budget by 2009. A Ba2
rating is below investment grade with negative outlook, which means that
the debt issuer has substantial credit risk, particularly as a result of
adverse economic change. But this rating also means that despite the
credit risk, business or financial alternatives may be available to
allow financial commitments to be met. Moody's said this rating is
several steps above a C or DDD rating which means that a country is
already in default and is negotiating for a possible debt write-off as
in the case of Argentina. A credit downgrade makes it more expensive for
the Philippines to borrow as it reflects the country's ability to pay
its debts.
Asked if another downgrade by Moody's looms given Mrs. Arroyo's
statements, the IRO said the ratings firm's analysts said they were not
bothered about it. "They said that they're not inclined to come out with
a study at this point," IRO executive director Corazon Guidote said. She
said Moody's has long acknowledged the country's problems and is now
awaiting specific measures from administration on how it will address
the problem. The government wants Congress to pass several tax measures,
including higher taxes on alcohol and cigarettes, a tax on
telecommunication firms, and the rationalization of tax incentives.
Government economic managers have said the tax measures, aside from
raising revenues, will help avert a credit rating downgrade. Last month,
Standard & Poor's Ratings Services downgraded its credit rating on the
Philippines' long-term local currency to 'BBB-' from 'BBB,' citing the
government's fiscal woes. S&P, however, maintained its long-term foreign
currency rating at 'BB,' two notches below investment grade, given the
government's "satisfactory external liquidity position."
REFORM PACKAGE
Meanwhile, Mr. Wayne called on both the executive and legislative
branches to quickly hammer out the reform package as "the international
economic environment is relatively benign, global purchase increasing,
and interest rates are low". "The time to act is now. As President
Arroyo pointed out in her inaugural address, the sooner the reform
effort begins, the better it will be for the Philippines. Delay in
implementation would only make the problems harder ... It's the urgent
challenge now before the national leadership of the Philippines to forge
a consensus around a comprehensive and viable reform package," Mr. Wayne
said. He was quick to clarify that Washington would not "dictate" what
the reform package should be, noting that far more important is the move
to put the new measures in place. "For our part, the US government would
do what we can to assist the Philippines. We'll offer best advice and
our encouragement and provide targetted assistance. But the decision to
tackle the Philippine's deficit and the task of implementing the needed
reforms lie in the hands of the Philippines ...This is really a moment
for leadership," Mr. Wayne said. He said the US could help the
Philippines in World Trade Organization negotiations, continued
discussions on the Trade Investment Framework Agreement, and assessing
the country's eligibility to the Millennium Challenge Account which is
on top of other development assistance. The US official also urged the
country to continue working with international organizations including
the International Monetary Fund on economic reform. "The United States
wants the Philippines to succeed in this difficult economic challenge.
Poor response risks the Philippines falling behind ... The task of
implementing policies must be done by the Philippines. But we are
partners," Mr. Wayne said. -- reports from
Iris Cecilia C. Gonzales and Maria Eloisa I. Calderon
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The Bureau of Internal Revenue (BIR) aims to issue a revenue
regulation allowing banks to settle a portion of unpaid taxes on
offshore banking unit (OBU) and foreign currency deposit unit (FCDU)
income and transactions "under certain conditions." BIR Commissioner
Guillermo Parayno told reporters that the BIR has already submitted the
draft regulation to the office of Finance Secretary Juanita D. Amatong
for approval. "Essentially we would like to make them avail of a middle
ground solution so we don't have to go to court," Mr. Parayno said. This
should not be perceived as a weakness on the part of the BIR because
"when we settle there is a recognition of liability," Customs Deputy
Commissioner Kim J. Henares said.
The settlement offer will only be given for a certain period, she
said. If banks fail to avail, the BIR will have to collect the unpaid
taxes in full. She said the BIR needs to balance the interest of the
state and the banks considering that the latter has claimed that if "we
insist on collecting the taxes many of them will close down."
The banking community, including local commercial banks and thrift
banks, has claimed that additional taxes will serve as a disincentive to
foreign investments and transactions. Foreign banks operating in the
country threatened to sue the BIR after it directed them to pay
assessments for gross receipts tax (GRT), documentary stamp tax (DST)
and value added tax (VAT) for their OBU and FCDU income or transactions
from 1998 to 2003 They argued that OBUs and FCDUs are still exempt from
all other taxes as was the case before a 1997 amendment to the National
Internal Revenue Code was passed. The Department of Finance (DoF) and
BIR had hoped to collect at least
PhP31 billion worth of unpaid income taxes from FCDUs and OBUs after
Congress corrected a provision of the law that imposed double taxes on
banks. Mr. Parayno said the order will only cover unpaid GRT, VAT and
DST which comprise some
PhP11-billion of the PhP31 billion they owe the government. The
other PhP11 billion are branch profit remittance taxes and the rest are
interests, surcharges and penalties arising from the non-payment of
taxes. Mr. Henares said the banks are still contesting the BIR's
assessment for their branch remittance taxes but said the BIR's
computation was made based on the banks' financial statements.
-- K. L. Lema
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Fuel prices are up anew after independent oil firms yesterday
announced the first adjustments in gasoline, diesel and kerosene prices
for the month of September. Eastern Petroleum Corp., Seaoil, Unioil
Phils. and Flying V, members of the Independent Philippine Petroleum
Companies Association (IPPCA), said they will increase gasoline prices
by PhP0.30 per liter and PhP0.45/liter for diesel and kerosene.
Eastern's increase was to take effect as of 12:00 a.m., Seaoil's at
12:00 p.m, while Unioil pegged the effectivity of its increase at 6:00
a.m. As of press time, Flying V had yet to disclose a schedule. IPPCA
members account for about 15%-20% of the local market. Fernando L.
Martinez, IPPCA chairman and Eastern chief executive officer, said the
firms have agreed to impose a 10-day moratorium on price increases
following the latest hike. "After this increase, we won't have any
increase for the next 10 days. We will still evaluate after that. Any
price hike would then depend on behavior, on what the trend will be in
the international market," he said in an interview.
Oil giants Petron Corp., Pilipinas Shell Petroleum Corp., and Caltex
Philippines, Inc., as well as new player Total Philippines, Corp., have
yet to announce new price movements. Mr. Martinez earlier said IPPCA
members have yet to pass on to customers under-recoveries for July to
August totaling about PhP1.40 per liter. Energy department data showed
that the price of benchmark Dubai crude had softened to $37 per barrel
from the highest peak price of $41 in the last three trading days. The
average price for August, however, is still high at $38.66 per barrel
from $34.65 in July. Mean of Platts-based gasoline has averaged $51.65
per barrel in August from $26.52 in July while diesel has jumped to
$51.76 per barrel from $46.25 in July. For his part, Energy Secretary
Vincent S. Perez, Jr. reminded oil companies to follow earlier calls to
implement smaller and frequent adjustments in a bid to cushion the
impact on consumers.
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By JEFFREY O. VALISNO, Reporter
Gloria Macapagal-Arroyo is set to explore new areas of political and
economic cooperation with China during her three-day state visit to the
communist country starting today, her first foreign visit after she won
a fresh six year term in the May 10 elections. Accompanied by her
husband, First Gentleman Jose Miguel T. Arroyo a "lean" delegation and a
group of businessmen, the President is scheduled to leave 6 a.m. for
Guangzhou at the Villamor Air Base, Pasay City aboard special flight
A330 of the Philippine Airlines. Mrs. Arroyo will have a brief stopover
in Guangzhou to have a briefing with Guangdong Gov. Huang Huahua on how
the Chinese government handled the cases of severe acute respiratory
syndrome or SARS that hit the country last year. The President will then
proceed to Beijing where she is expected to witness the signing of major
agreements, including China's commitment to finance the North Rail
Project between Manila and Pampanga; an energy cooperation and joint
development agreement in some areas in the South China Sea; and a
fisheries cooperation accord.
Tomorrow, the President is set to hold bilateral talks with Chinese
President Hu Jintao, Premier Wen Jiabao, and former President Jiang
Zemin, now chairman of the Central Military Commission. During these
meetings, the Philippines and China are expected to discuss issues
concerning the Spratly group of islands, including the Chinese facility
in the Panganiban Reef, and the arrest of Chinese poachers.
On Friday, Mrs. Arroyo will address the Third International
Conference of Asian Political Parties as head of the administration
party Lakas-Christian Muslim Democrats. After the conference, the
President will have a bilateral meeting with Thai Prime Minister Thaksin
Shinawatra on increased economic cooperation between the two countries.
Later that day, the President will witness the signing of investment
agreements and commercial contracts, including the setting up of a
$312-million glass manufacturing facility at Subic Bay, Olongapo City,
and $30-million iron ore processing plant in Camarines Norte. The new
investments are expected to create at least 30,000 jobs. Mrs. Arroyo
will also witness the signing of the contract that would provide a
credit line facility for pharmaceutical and hospital products worth $25
million, as well as for the sale of 100 Chinese-manufactured buses that
run on compressed natural gas.
The credit facility is expected to allow government hospital access
to less expensive medicines manufactured in China, while the new buses
are expected to provide an environment-friendly alternative to the
public transport system in Metro Manila.
Other agreements expected to be reached during the three-day visit
include:
- technology transfer for the propagation of high-yielding hybrid
corn variety; China having been the source of the hybrid rice, which
has considerably increased the harvest of Filipino farmers;
- assurance of continued supply of Chinese coal for power
generation;
- setting up of linkages in the field of information and
communications technology;
- enhancing tourism among Chinese nationals;
- expanding air services between the two countries; and
- promoting Chinese investments in Mindanao, particularly in the
Brunei Indonesia Malaysia Philippines-East ASEAN Growth Area (BIMP-EAGA).
The Philippines is seeking a more comprehensive partnership with
China, the country's sixth biggest trading partner, with $9.4 billion in
total trade in 2003. The Philippines enjoyed a trade surplus of about
$3.2 billion in 2003, with exports valued at $6.3 billion as against
imports of only $3.1 billion. Aside from the First Gentleman, the
President' son Pampanga Rep. Juan Miguel M. Arroyo, and brother-in law
Negros Occidental Rep. Ignacio T. Arroyo would join the trip to China.
The other members of the President's delegation include: House
Speaker Jose C. de Venecia, Jr.; Foreign Affairs Secretary Alberto G.
Romulo; Philippine Ambassador to China Willy C. Gaa; Trade Secretary
Cesar V. Purisima; Agriculture Secretary Arthur Yap; Opposition Senator
Aquilino Q. Pimentel, Jr.; Bukidnon Rep. Juan Miguel F. Zubiri; Misamis
Oriental Rep. Augusto H. Baculio; Palawan Gov. Mario Joel T. Reyes;
Presidential Envoy for Chinese Affairs John K. C. King; Energy Secretary
Vincent S. Perez; and outgoing Tourism Secretary Roberto M. Pagdanganan.
Presidential Spokesman and Press Secretary Ignacio R. Bunye said the
President has instructed Vice President Noli L. de Castro to be the
government's caretaker while she is in China.
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By FELIPE F. SALVOSA II, Reporter
The Board of Investments (BoI) has approved
PhP352.076 million in investments for August, top-billed by a new
PhP110-million call center in Ortigas Building in Pasig City to be
put up by a Canadian firm. NuComm International, one of Canada's "50
Best Managed Companies" last year, will begin operations next month with
an initial capacity of 100 seats, which will be expanded to 750 seats
within five years, BoI said in a statement. NuComm, headed by Canadian
businessman Real Bergevin, will offer customer care and billing,
in-bound and outbound sales, customer technical and service support,
data mining and management, customer self-service, and e-mail chat and
web support. The BoI said the country remains an attractive site for
contact centers considering the industry's "value proposition," which
eliminates two entire project phases -- cross-cultural training and
language training.
While the call center industry caters heavily to the North American
market mainly on the country's "affinity with US culture," it is also
"strongly emerging as a support base for Asian market requirements," the
agency said. There are 60 operating call centers with 32,000 agents
handling mostly in-bound calls. The number of seats has grown to 20,000
from less than 1,000 four years ago. Existing operations include
Convergys, Sykes, Teletech, APAC, ICT and West all of which have clients
among Fortune 500 companies.
EXPANSION
The BoI also said it has approved the
PhP35-million expansion project of Philippine Auto Components, Inc.,
a manufacturer of fuel pump sets to meet increasing demand from the
Association of Southeast Asian Nations (ASEAN). ASEAN groups Cambodia,
Brunei, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,
Thailand, and Vietnam. Sales for motor vehicles in Indonesia, Malaysia,
and Thailand jumped 23% to 1.3 million units last year, and demand is
expected to grow 7%, 8%, and 9% in 2004, 2005, and 2006, respectively,
the agency noted. The BoI said the company would increase its capacity
by 216%, or 250,000 sets annually which is equivalent to 1.2 million
units a year of pump parts and accessories.
Meanwhile, Southern Philippines Coco Charcoal, Inc. plans to export
325 metric tons of coconut charcoal briquettes to Korea and other Asian
countries at a project cost of
PhP15 million. Two canned fish projects were also approved by the
board. Gen. Santos City-based Celebes Canning Corp. is investing
PhP58 million and will hire 1,700 new workers to expand its canned
tuna production to 15,600 metric tons. This is almost twice the current
output of 8,383 metric tons. Also in Gen. Santos, Golden Genesis Marine
Resources Corp. will invest
PhP16 million for a fleet of boats expected to catch 1,800 tons of
canning-quality skipjacks, mackerel, and sardines annually. The project
aims to provide capacity for canning operators, which have been
utilizing less than half of production capacity due to limited fish
supply. The BoI said the annual demand is at 177,600 tons, but only
99,000 tons is supplied by existing fish producers.
Other approved projects include Southern Plastics, Inc.'s
PhP16.5-million packaging project for cavendish banana exporters in
Panabo, Davao del Norte, and two low-cost housing ventures in Imus and
Carmona, Cavite worth
PhP101.54 million. Property Company of Friends will put up 770
housing units of 30 to 36 square meters each, to be sold through the
government's Pag-IBIG financing for half a million pesos per unit. Since
mass housing was included in priority investment areas in 2000, 1,987
low-cost housing units have been built in Rizal, Cavite, Iloilo,
Bukidnon, and Negros Occidental, the BoI said.
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The money supply in July rose 6.4% to
PhP1.71 trillion from a year ago, data from the Bangko Sentral ng
Pilipinas (BSP) showed. On a monthly basis, money supply, or domestic
liquidity, grew 0.5% in July, slightly higher from the 0.4% growth in
June. Domestic liquidity, the broadest measure of money supply, sums up
all assets in the financial system, including cash-at-hand, demand
deposits, savings deposits ,and time deposits. The central bank traced
the money supply growth to an increase in net foreign assets of the
monetary system and increase in public sector borrowings.
BSP officer-in-charge Alberto V. Reyes attributed the money supply
growth to the 10.6% expansion in net domestic assets, fuelled mainly by
the growth in credits to the public sector, accounting for 20.7%. The
central bank said continued improvement in the domestic liquidity
reflects the overall trend of improving economic activity, and buoyed by
an increase in the value of production index. Public sector borrowings,
which fuelled credit activity, rose 20.7% in July, while credits to the
private sector expanded only by 4.2%. Rising domestic liquidity relative
to demand for money mirrors and expanding economy, but a too fast growth
could also cause inflationary pressures and could prompt the central
bank to use tools to control liquidity.
On the other hand, a weaker expansion in money supply indicates
sluggish economic activity and slower job creation. The BSP said
monetary authorities would keep a tight watch on money supply to ensure
that liquidity remains supportive of the low inflation growth target. He
said the increased pace in consumption and investment spending buoyed
the demand for money during the period as the economy grew strongly in
the first semester. "Monetary authorities will continue to provide an
environment that will promote increased credit activity, while
monitoring and assessing carefully the evolving developments, both in
the domestic and external fronts, to ensure price stability," Mr. Reyes
said. -- Iris Cecilia C. Gonzales
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The government was able to produce a good turnout for its five-year
zero coupon bond offering amid a rising interest rate scenario. Total
tenders for the paper reached
PhP5.824 billion despite market fears that a large amount of
money would be locked in for five years. Zero-coupon bonds or zeroes are
debt papers sold at a deep discount from their face value. Bondholders
are paid a large premium when the debt matures. The issuer does not make
periodic interests or coupon payments to investors. At the auction
yesterday, the Bureau of the Treasury made a partial award, accepting
only PhP4.665 billion at a yield-to-maturity rate of 12.75%. "Some
institutions who joined the bidding would perhaps sell it to retail
investors and even insurance companies, since there were no reinvestment
risks for zero-coupon bonds," National Treasurer Mina C. Figueroa said.
A bond trader said the features of the offering "were really appealing."
"It was properly priced and it entailed a widespread distribution across
all sectors such as retail, insurance and investment entities. Besides
completely lacking reinvestment risks, its duration or exposure was
compared to a seven-year coupon-bearing paper," the trader added. The
market compares a regular five-year coupon-bearing debt instrument to
another with a tenor of around 3.5 years due to interest payments done
every six months. For zeroes, payment is made after maturity.
At the secondary market, the five-year zero-bond paper is compared to
the seven-year tenor which fetched a 13.09% rate. "The rate for the
offering was still within market expectations, within the normal
conditions. Of course, debt yields are still high because we are looking
at the inflation risk and the Federal Reserve's new moves to raise their
[benchmark rates after preliminary figures in the United States proved
positive," another bond trader said. The market is vigilant of these key
economic data as these would normally prompt the central bank into
taking positions that could affect monetary policies. Thus far, the
central bank said that there will be no adjustment for overnight rates
even as it forecasts inflation to average at 6% to 6.6% in August, up
from the 6% registered in July following hikes in oil prices.
The zero-coupon bond offering comes a day after debt papers traded in
the secondary market officially passed through the central bank's
real-time payments and settlements system. Called the Philippine
Payments and Settlements System or Philpass, the facility allows the
bank regulator to monitor liquidity positions of participating banks
throughout the day on a per-transaction basis, thus settlements are made
only when banks have sufficient funds. "We have just started [the other
day] the real-time gross-settlement facility with the central bank. The
first transaction was at 10:15 in the morning. Securities are delivered
and payment is done at the same time. Before, we were netting at the end
of the day, now it's trade for trade. Much of the credit goes to the
central bank which has provided a facility for cash settlement and we're
happy that it will eliminate risks in trading," Deputy Treasurer Eduardo
Mendiola told reporters after the regular auction of debt instruments
the other day. Philpass, a real-time gross settlement payment launched
in December 2002, involves transactions of 93 participating banks which
reach around P200 billion a day. The Bangko Sentral ng Pilipinas, the
Treasury, and the Money Market Association of the Philippines forged a
deal last July 5 to link debt paper settlement to Philpass.
PESO
At the currency market, the Philippine peso recovered lost ground as
it closed five centavos stronger per dollar. "There was really no
intense trading today despite the volume, banks were selling in the
morning and bought back their dollars in the afternoon," a trader said.
Total volume of transacted dollars was little changed at $215.9 million
against $215 million previously. At the Philippine Dealing System, the
country's electronic currencies exchange, the peso averaged stronger by
almost seven centavos to PhP56.147 from PhP56.216 the other day. Opening
at PhP56.19, the local unit bid stronger toward PhP56.08. It slipped
back to PhP56.16 in the afternoon. -- Ira P. Pedrasa
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China Banking Corp. posted a 21.74% decrease in consolidated net
income of
PhP1.35 billion during the first six months from PhP1.73 billion
in the same period last year, the bank told the Securities and Exchange
Commission. Fee-based revenues plummeted 63.99% to PhP1.03 billion from
PhP2.86 billion in spite of the growth in service charges, fees and
commission, foreign exchange gain and miscellaneous. "As most of the
government securities inventory were sold in 2002 and 2003, income from
trading gains dropped by 92.22% from PhP2.17 billion in the first
semester of 2003 to PhP168.89 million," China Bank said.
The fifth largest bank in terms of capital accounts registered a
double digit return on average equity -- a measure of its profitability
representing net income expressed as a percentage of equity -- of 16.34%
and capital to risk assets ratio of 28.83%. Interest income grew by
10.58% to PhP3.97 billion from PhP3.59 billion as interest income from
loans "made up for the decline in low-risk investment securities."
Boosted by higher lending rates, interest income improved by 29.14%
to PhP1.95 billion from PhP1.51 billion. "As most of the high-yielding
government securities inventory were sold off last year, interest income
from trading and investment securities declined by 3.76% to PhP1.79
billion from PhP1.86 billion," it said. Interest expense dipped 12.64%
to PhP1.59 billion from PhP1.82 billion as interest cost on deposit
liabilities went down by 15.38% to PhP1.43 billion. This was attributed
to the phaseout of high-cost deposit products and the lower interest
cost on dollar deposits. Lower revenue-based expenses translated in a
5.17% decline in operating expenses to PhP1.65 billion from PhP1.74
billion. The bank's subsidiaries and affiliates include CBC Insurance
Brokers, Inc., CBC Forex, Inc. and CBC Properties and Computer Center,
Inc. These comprised only about 0.22% of consolidated resources, the
bank said. -- Ruby Anne M. Rubio
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By ANNA BARBARA L. LORENZO,
Reporter
The Philippine Long Distance Telephone Co. (PLDT) is unfazed by the
National Telecommunications Commission's (NTC) plan to relax its rule on
giving other telecom players access to its service areas. PLDT Chairman
Manuel V. Pangilinan said the government is welcome to open up service
areas to increase competition among telecom firms and have
communications facilities more available to the public. "There should be
some competition. The industry has moved on much further than your
regulatory framework," he said.
The NTC earlier said it had been given the go-signal by the Supreme
Court to decide on allowing carriers to operate in certain service
areas. The fixed-line service area scheme started during the Ramos
administration where new landline operators were allowed to operate only
in designated areas. Only two telcos are allowed to do business in a
certain city or province. Mr. Pangilinan said this scheme is not
working. "This fixed-line service area scheme, is it working? Why not
junk it," he said, adding that in the new scheme the NTC is welcome to
allow other players in the service area. He said the only reason PLDT
filed an objection versus Innove, the fixed-line business of competitor
Globe Telecom, Inc., was because the law prohibits more than two
operators in one area. Mr. Pangilinan added that PLDT would not object
if the government decides to officially change its policy on the service
areas given to operators. He said the government should start taking the
reins and regulate the telecommunications industry. "I think they should
debunk this deregulation policy as a general policy of the government.
It doesn't make sense. What we need is a managed economy," Mr.
Pangilinan said. He said the only beneficiaries of the deregulation were
the foreign banks and suppliers who came in when the telecom sector was
liberalized.
According to the NTC, some telcos in certain areas failed to operate
the number of lines they were required to roll out, while others could
not expand due to the restriction. With the Supreme Court decision, the
NTC said it might revoke licenses of firms who fail to roll out
facilities in their designated areas so that new players can come in.
The NTC said only 3.2 million phone lines were subscribed as of
end-2003, while 6.5 million lines were installed. The 73 fixed-line
operators nationwide were required to establish some 300,000 lines. PLDT
is the only carrier which is allowed to operate its fixed-line business
nationwide. It has three million subscribers. Globe's Innove is also
applying for the same license as it plans to shell out
PhP5 billion for expansion until 2007. Lopez-led Bayan
Telecommunications, Inc. is also asking for wider coverage areas in the
Visayas and Mindanao as it has allocated
PhP3.6 billion for expansion in the next three years. It services
Quezon City, Navotas, Malabon and Manila.
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The Philippine Airport Terminals Co. (Piatco) said it would allow an
audit on its expenses only when the government finally comes up with a
decision on what it intends to do with the mothballed airport. "We are
not opposed to an audit. But we are waiting for the government's
intention in so far as Terminal 3 is concerned. We will have no
obligation to anyone on the cost of the facility until and unless the
government says it is definitely taking over," said Moises Tolentino,
vice-president for public affairs. Piatco, which developed the Terminal
3 of the Ninoy Aquino International Airport with German firm Fraport AG,
wants the government to refund at least $525 million to cover the amount
it spent for the construction. Mr. Tolentino said there would be other
claims like damages since the terminal has not operated for two years,
and is therefore not earning for the developers. He declined to reveal
figures since it would be used as evidence in an international
arbitration court. "If the government is bent on taking over, we can sit
down and agree on the parameters of just compensation and then agree on
the economics of audit," Mr. Tolentino said. He added the compensation
would entail the cost of the facility and the reasonable rate of return
for the project. While Piatco is claiming $525 million, its partner
Fraport AG is claiming $425 million from the government and has also
filed for arbitration at the World Bank Center for Settlement of
Investment Disputes. -- A. B. L. Lorenzo
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Two orders issued by the Department of Trade and Industry (DTI) over
the weekend have averted the shutdown of the Antipolo plant of Cemex
Philippines, whose Island Portland Cement was banned from the market on
Aug. 12 for allegedly being "substandard." A clarification issued by the
DTI's Office of Legal Affairs last Friday indicated that the ban no
longer included the "Palitada King" brand of masonry cement, Cemex's
unit Solid Cement Corp. yesterday said. DTI had prohibited Solid Cement
from "selling, distributing, delivering and disposing of Island Cement
or any brand manufactured by the Solid Cement plant in Antipolo, Rizal
to customers, dealers, and distributors, including batching plants and
hardware stores." Paul Victor Aquino, Solid Cement spokesman, said the
move lessened the pressure for the Antipolo plant to stop operations.
"Given this development, we see some light at the end of the tunnel," he
said. Cemex was also poised to shut down Solid Cement last Monday if not
for the DTI's order for a new round of quality tests on Island Cement.
Mr. Aquino said the result of the tests, which began last weekend, would
be out by Saturday. Trade Undersecretary Adrian S. Cristobal, Jr.
earlier said the ban could be lifted in a day or two if Island Cement
passed government standards, reiterating the Aug. 12 cease and desist
order issued by the legal affairs office was only a preliminary measure
that could be lifted anytime. But Mr. Aquino said there was still "no
guarantee" that Solid Cement would continue to operate. He said there
was still heavy pressure on inventory levels considering that Solid
Cement has not stopped production since the ban went in effect. But the
pressure was "not as much as before" with the ban on Palitada King
"lifted." "The market return of Cemex Palitada King will ease plant
warehouse inventory and provide space for storage of Island Cement while
the tests are being conducted," Solid Cement said.
Solid Cement sells 500 tons of Palitada King daily, although this is
small compared with Island Cement's average of 3,000 tons or 75,000 bags
a day. Introduced in the market last July, Palitada King is slightly
cheaper than Island cement and is used for wall plastering, hollow block
filling and bricklaying. It is lighter than other cement types, making
application easier; does not crack as easily as ordinary plaster; and
bonds faster and stronger to walls. Cemex has contested the Island
Cement ban before the Court of Appeals, disputing quality tests
conducted by the Public Works department which the DTI used in
justifying the cease and desist order. -- F. F.
Salvosa II
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Fe Barin, the newly appointed Securities and Exchange Commission
(SEC) head, is set to assume her post today. In a talk with reporters at
a cocktail party sponsored by the Philippine Stock Exchange the other
night, Ms. Barin said the first job she would do when she reports to the
SEC is to look at pending matters in the commission. "When I finally
report at the SEC, I will look at pending matters and the priorities
they have set. There are a lot, but I will not be alone. There is the
commission and there are almost 10 departments working on different
areas of responsibility," she said. Mr. Barin will replace Lilia R.
Bautista, who was in turn appointed Philippine Ambassador to Belgium.
Ms. Bautista assumed her post as SEC chairman in 2000.
In an earlier talk with reporters, Ms. Bautista said that among her
"unfinished business" which Ms. Barin will have to address is the matter
of pre-need company College Assurance Plans Philippines, Inc.'s trust
fund deficiency. She said that among the priorities of SEC is allowing
the online filing of general information sheets and financial statements
by companies; the demutualization of the Philippine Stock Exchange;
amendments to the Securities Regulation Code; and the development of the
alternative trading system. Ms. Barin said she is willing to work with
the Philippine Stock Exchange in addressing their concerns. She said
that having been with the Monetary Board for a long time, she has
learned to "listen."
Ms. Barin served as secretary of the Monetary Board, the policy and
rule-making body of the Bangko Sentral ng Pilipinas (Central Bank of the
Philippines). She distinguished herself for having worked closely as
secretary to the Monetary Board with six of the nine (to date) Bangko
Sentral governors, from former Governor Gregorio Licaros to Governor
Rafael Buenaventura. From August 2001 to 2002, she was chairman of the
Energy Regulatory Commission. -- Jennee Grace U.
Rubrico
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Noel G. Reyes
As everyone knows by now, since the headlines blared the news
yesterday, the domestic economy grew, once more, by a startling 6.2% in
the second quarter. In contrast to the quarter before it, the latest
quarter saw a sharp slowdown in growth in the agriculture sector, which
had led the prior period's growth. In its place, industry and services
took the lead as these sectors took their growth cues from
election-related spending. To analysts, economists and businessmen,
these national income account numbers come like the latest NBA
basketball scorecards -- these will be the talk of the town for a few
more days, as every pundit and kibitzer tries to put his or her own spin
on the numbers.
A number of analysts in the equities industry have already put in
their two cents' worth. Most choose to run with the herd, saying the
spectacular second-quarter growth would not be sustainable in the second
semester. This herd mentality run their slowdown reasoning on the
grounds of the present high price of crude oil in the world market.
Others point out to the fact that the Philippine economy is not
"structured" to grow at more than 6% for a long period of time; on the
other hand, the fact remains that it can do so for a short run before
inflationary pressures start to set in.
More peculiar and a bit bizarre is the contention of Socioeconomic
Planning Secretary Romulo L. Neri that they are not revising their
earlier forecast of a 4.9% to 5.8% growth this year. In terms of plain
arithmetic, that low-ball target range would be "difficult" to achieve.
The first semester had an average growth of 6.3%. For the annual average
to sink towards 5.8%, which is the top of the government's growth range,
growth in the second semester would have to abruptly drop to 5.2% or
less. As an implicit declaration of where the economy is headed, Mr.
Neri's avowal to maintain the annual target at 4.9%-5.8% should sound
alarming, if one failed to quickly realize that he knows not what he is
saying.
Fortunately, the Bangko Sentral's economist came to the government's
rescue. "We expect around 6% growth in the third and fourth quarters,"
said Diwa C. Guinigundo, managing director of the BSP's department of
economic research. He said growth would be driven by sustained
activities in construction, transport, finance, and private services.
BSP (Central Bank of the Philippines) officials, however, acknowledged
that rising crude oil prices could push inflation beyond the year's
official forecast of 4% to 5%, thus putting a question mark on the
economy's growth prospects.
But for now, the BSP maintained its key interest rates for the last
14 months at 6.75% and 9% for overnight borrowing and lending,
respectively. "These should help support an environment conducive for
more investments for the rest of the year," said Mr. Guinigundo.
Finally, someone makes economic sense.
Indeed, while it is true that personal consumption makes up
two-thirds of aggregate demand and that these expenditures grew 6% in
the second quarter, investments in the country are starting to revive
and participate in the growth equation. Capital formation -- which
includes investments in construction, durable equipment, and breeding
stock and orchard development -- in the first two quarters of the year
grew by 10.1% and 8.5%, respectively. The economy apparently is moving
in the right direction, despite the threat of oil-induced inflation and
the gaping budget deficit. Random Walker again declines to run with the
herd. This columnist's growth picture has been spelled out in previous
columns, and at this point there is no reason to modify the scenario.
Under this original scenario, a momentary dip would occur in the
second quarter from the first quarter's relatively higher growth plane.
This dip has already occurred, as gross domestic product growth dipped
from 6.5% in the first quarter to 6.2% in the second quarter. Now, the
scenario calls for a resumption of growth higher than the second
quarter's. Thus, the third and fourth quarter growth rates are seen to
range from 6.5% to 7.0%. Overall, the year's growth would average near
6.5%. This year's growth is already in the cards, no need to worry.
Worry about next year instead.
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By ROULEE JANE F. CALAYAG
Financial and select commercial-industrial stocks yesterday buoyed
the stock market which was on the lookout for for fresh leads. Although
share prices were down for the second day this week, analysts were not
worried. "It was more or less anticipated that the market will round up
in a flat session," said Grace Cerdeņa, senior officer at stock portal
2tradeasia.com. She said investors were weighing the fact that growth in
the second quarter was good, as gross domestic product (GDP) rose 6.2%
for the period, although worries on the country's debt woes linger. In
light of these developments, investors are expected to step out and take
new positions. "[The market decline] was not as bad as anticipated,"
assured Ms. Cerdeņa, compared with Wall Street's anemic performance.
Investors were reportedly repositioning themselves in the equities
market, snapping up issues that have strong fundamentals.
SECTORS
Mining stocks also spurred activity in the market. It lent support to
the market as it advanced 10.93 at 1,757.10. The commercial-industrial
sector rose 3.29 to 2,530.34 while the banks and financial sector jumped
3.25 to 459.56. Property slumped 8.33 at 512.35, followed by all shares
which dipped 2.69 at 1,010.2 and by oil which dropped 0.02 at 1.63. The
Philippine Stock Exchange composite index (Phisix) was slightly weaker
as it declined by 0.58 to 1,579.83. There were 971.3 million shares
worth
PhP374.6 million that exchanged hands out of 2,706 trades. Losers
beat gainers, 39-33 but 48 issues clung to their previous levels.
ACTIVE STOCKS
Leading the list of most actively traded stocks was
telecommunications giant Philippine Long Distance Telephone Co. (PLDT)
which started to blaze its way to regional expansion as it launched
recently a service targetted at Filipinos working in Hong Kong. It was
unchanged at PhP1,265 with 74,000 shares worth PhP94.4 million. It took
the lion's share of the market with 25.19%. The "B" shares of Manila
Electric Co. (Meralco) ranked third. Its price plummeted to PhP21.25,
trading 1.45 million shares for PhP31.1 million.
Other stocks that suffered a decline included mall developer and
operator SM Prime Holdings, Inc. which slipped by PhP0.10 at PhP5.70;
Metro Pacific Corp., down at PhP0.34; and Sun Life Financial, Inc.,
which declined at PhP1,505. Support came from Ayala-led Bank of the
Philippine Islands (BPI) which rose by PhP0.50 to PhP41.50, driven by
its positive earnings prospects. Ms. Cerdeņa said Universal Robina Corp.
(URC) was a surprise, landing as the 11th most actively traded stock.
"URC surprisingly moved up PhP0.40 at PhP8.50," she said while noting
that investors may have been lured by the resilience of the company's
consumer-branded products.
International Container Terminal Services, Inc. (ICTSI) also showed
positive results, securing the 12th slot, with its price up PhP0.05 at
PhP4.35. Ms. Cerdeņa said ICTSI's good performance may be due to its
better first-half results. ICTSI doubled its profits for the first
semester due to the positive performance of the Manila International
Container Terminal and its foreign subsidiaries. It posted net profits
of PhP446 million in the first half, 101% higher than the PhP222 million
it posted for the same period in 2003.
Lopez-owned First Philippine Holdings Corp. (FPH) bucked the trend,
as it closed higher at PhP24.25. The ongoing bidding for the Masinloc
power plant and the rosy prospects for the power generation sector may
have pulled in investors to FPH, noted Ms. Cerdeņa. The "A" shares of
San Miguel Corp. were also up at PhP58.50, boosted by the double-digit
growth of subsidiary Ginebra San Miguel, Inc. The hard liquor subsidiary
reported a net income of PhP135 million in July, up 23% from PhP110
million a year ago.
WEAK PARTICIPATION
"Trading participation was not healthy in synchronization with global
equities market and concerns of possible terrorist threats, arising from
the Republican National Convention," said Ms. Cerdeņa. With this
situation, the market is expected to keep its wait-and-see status while
it looks for significant developments that will propel stocks to new
levels during the last four months of the year. "It will be waiting for
a cue on when the next price adjustments will be and what contingency
measures are being prepared by fiscal and monetary authorities," said
Ms. Cerdeņa. But she lauded monetary officials for keeping the lid on
interest rates. The other day, however, Treasury bill rates across all
maturities rose with the benchmark 91-day paper rising 25.5 basis points
to 7.438% from 7.183% a fortnight ago. The 182-day debt paper rate also
climbed 24.7 basis points to 8.455% from 8.208%. The 365-day debt paper
rate moved in the same direction as it rose 49 basis points to 9.771%
from 9.281%.
PESO
Yesterday, the Philippine peso recovered lost ground as it closed
five centavos stronger versus the greenback although the volume of
transacted dollars was little changed at $215.9 million against $215
million previously. For now, investors may just be content to wait for
anxieties to subside.
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