Gov't raises growth target

Given the economy's growth in the first half of the year, it will most likely grow at around 6.1% for the whole year, a rate even higher than the government's forecast of 4.9%-5.8%. Socioeconomic Planning Secretary Romulo L. Neri told reporters in a press briefing yesterday that strong growth in the first and second quarters would likely continue for the rest of the year even if the government's finances were shot. "We could post stronger growth if not for the effect of oil prices," he said. He said gross domestic product (GDP), the value of goods and services produced within national borders, could grow by a range of 5.9% to 6.1% this year. It grew by 6.5% and by 6.2% in the first and second quarters, respectively, buoyed by brisk exports and consumption. But while the government has raised its economic growth forecast, it also conceded that higher oil prices remained a major problem.

In its revised economic growth forecast for the year, the government expects three major sectors -- services, industry and agriculture -- to post stronger growth. It expects the services sector to grow by 6.6%-6.8%, industry by 5.3%-5.5%, and agriculture by 5.4%-5.6%. Mr. Neri also said strong economic growth would likely be sustained even next year. He said next year's GDP could expand by 5.3%-6.3%, although he cautioned that the optimistic forecast could still be revised. "Anything can happen between now and 2005," he said. Nevertheless, he said, the economy is likely to be resilient as it has always been, despite the possibility of a fiscal crisis.

The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP), for its part, said it would try to hold off any increase in its key policy rates to help spur economic growth. BSP has kept key policy rates steady for 14 months straight at 6.75% for overnight borrowing and 9% for overnight lending. These rates are used by banks to price their loans, which in turn, influence borrowing and credit activities in the country. The policy-making Monetary Board has been resisting pressures to tighten its grip on money supply, knowing the existing inflation pressures were driven by supply-side factors and were outside the influence of monetary policy. BSP Deputy Governor Amando M. Tetangco, Jr. told the briefing that these inflationary pressures were rising oil and global commodity prices. "Inflationary uptrend is driven by transitory supply-side factors that cannot be addressed by monetary action," he said. As such, he said, BSP would try to keep rates steady because credit activity in the country was modest. He repeated earlier statements that supply-side risks could be addressed by non-monetary measures like importation, as well as encouraging manufacturers to keep prices affordable.

BSP is confident that oil prices will stabilize in the near term, which will in turn stabilize prices of basic goods and commodities in the market. However, Mr. Tetangco conceded that other factors such as an increase in the United States Federal Reserve rates, may influence monetary policy. The Fed is expected to resume its monetary tightening in its September meeting to contain inflation in the growing US economy. Traders in foreign banks have said the US central bank could increase rates by a total of 100 basis points by yearend, on top of earlier tightening of 50 basis points. At present, however, Mr. Tetangco said interest rate differentials -- which are influenced by an increase in central bank rates -- between peso- and dollar-denominated bonds were still comfortable at 400 basis points. BSP is trying to avoid a situation where the interest rate differential becomes too narrow, as this will give investors incentive to invest in dollar-denominated bonds instead. -- Iris Cecilia C. Gonzales

Bonds reopened to fund Napocor

MANILA/HONG KONG -- The Philippines will add $750 million to its $61-billion debt mountain by reopening bonds to fund the National Power Corporation (Napocor), while trying to lease out and sell off parts of the burdensome state company. Banking and market sources said the deal to increase the Philippine 2015 and 2025 bonds was likely to be priced yesterday. The government said the proceeds would complete this year's $1.5 billion in funding for Napocor. Finance undersecretary Eric Recto told reporters in a media briefing that the bond issue was likely to be the government's last of the year, unless it sees an opportunity to issue more debt to pre-fund its 2005 budget.

Analysts were little surprised at the latest borrowing by Asia's most prolific issuer of sovereign debt but said it would make fixing a gaping budget deficit that much harder. "We suspect that it might be difficult for the government to implement the kind of reforms (needed) on the fiscal front," said Tim Condon, the Singapore-based head of Asian financial market research at ING Financial Markets. "Without those reforms, we expect the fiscal deficit is going to cap the upside in Philippine bond prices." Philippine foreign currency debt, which makes up about half of its total obligations, is rated two notches below investment grade by Standard & Poor's. Facing what President Gloria Macapagal Arroyo has called a fiscal crisis, her government is fighting rampant corruption and tax evasion as part of a program to fire up the economy, narrow budget deficits, and improve investor sentiment. Cash-strapped and money-losing Napocor, which owns most of the nation's power plants, puts a heavy drag on state finances with annual funding that is largely used to service its debts of more than PhP520 billion ($9.3 billion). Manila said it plans to take on Napocor's debt to speed up the privatization of dozens of power plants and the nation's electricity transmission grid. Napocor's projected loss this year of PhP115 billion amounts to just over half of the government's 2004 fiscal deficit target.

NOTHING BUT 'BANDAGE SOLUTION'

"The government is just applying a bandage solution," said Song Seng Wun, regional analyst at G.K. Goh Securities in Singapore, adding that previous administrations also lacked the political will to make tough decisions about Napocor. "Until we see that, it will remain an issue for this government and the next government. It will continue to be a strain on government finances." Confirmation of the fresh Philippine debt widened spreads slightly on its dollar bonds. One market source said the government set price guidance on the $750 million deal of 97.75 for the bonds due in 2015 and 106 for the 2025 series. Credit Suisse First Boston, Deutsche Bank and JPMorgan are the lead managers. "I think it is a good time to be doing the issue," Mr. Recto said. "The demand is there and we think that we will have a successful issuance within the next day or so." Manila floats bonds for relending to Napocor because investors are shy about the power firm's paper -- despite its sovereign guarantee -- largely over of its huge liabilities. The previous issue on behalf of Napocor was in June, when the government raised $250 million. Since March, the government has sold three small Napocor hydroelectric plants fora total of $3.35 million. The first major plant put up for sale -- the 600-megawatt,coal-fired Masinloc unit -- has drawn interest from 22 companies. The government also hopes to lease out the electricity grid by the end of this year after two failed bidding rounds. A private operator would be expected to pay around $500 million for the Napocor grid -- which is run by fellow state agency National Transmission Corp. -- and assume $1.5 billion in debt, a source close to the deal has said.

In a move seen as an attempt to make Napocor's assets more attractive, it was recently allowed to raise its charges to electricity distributors by an average of 40%. The industry regulator said that should give Napocor an extra $2 billion each year -- about the amount it lost in 2003. -- Reuters

Bleeding state firms face closure

By KAREN L. LEMA and JENNIFER A. NG, Reporters

Fifteen state-run companies are now under review, and those that will continue to perform poorly will be shut so the government can save money, officials said yesterday. The Department of Finance is evaluating government-owned and -controlled corporations (GOCCs) to decide whether they should be allowed to continue operating. The ballooning budget deficit has been partly attributed to the poor performance of government-run corporations. Budget Secretary Emilia T. Boncodin told an investors' briefing in Makati City that these 15 companies were "losing heavily."

She declined to identify them, but confirmed that National Power Corporation (Napocor) and National Food Authority (NFA) were on the review list. "There will be no sacred cows. If they will have to go, they will have to go. If they need to continue their functions, then we will help them improve their financial problems," Ms. Boncodin said.

In the same briefing, Finance Secretary Juanita D. Amatong said: "We are monitoring the GOCCs now...There are GOCCs that are incurring deficits, and Napocor is one, and NFA...We are looking at their operations." "One reason why they have deficits is because they are doing something that are not part of their core responsibilities...We are looking at the mandates of these corporations...We have started to do some kind of performance valuation," she added.

Ms. Boncodin also said GOCCs were established for three reasons:

• to perform a function that the private sector cannot do;
• the government thinks it can be more effective in doing that function or service; and
• the government has special interest in that function or service.

"If these GOCCs cannot satisfy any of these three reasons, the government is prepared to make the necessary recommendation on what ought to be done with them," Ms. Boncodin said.

There are 76 GOCCs but only 14 are monitored by the government: Philippine National Oil Company (PNOC), Philippine Economic Zone Authority (PEZA), Philippine Ports Authority (PPA), Metropolitan Waterworks and Sewerage System (MWSS), Local Water Utilities Administration (LWUA), Home Guaranty Corp. (HGC), National Housing Authority (NHA), Napocor, National Electrification Administration (NEA), Light Rail Transit Authority (LRTA), National Irrigation Administration (NIA), Philippine National Railways (PNR), NFA, and National Development Company (NDC).

President Gloria Macapagal Arroyo, in her state of the nation address last July, asked Congress to pass the government re-engineering bill that can radically reorganize the bureaucracy. The bill will support a pending executive order that will grant the President authority to reorganize the bureaucracy, including GOCCs, possibly merge offices, and offer incentives to those to be affected by restructuring. GOCC borrowings are usually shouldered by the government in case of default. In some instances, the government even borrowed abroad on behalf of GOCCs, as in the case of Napocor. If Napocor borrowed on its own, it would have paid higher interest because its poor finances would not have made it an attractive borrower. Combined debts of the national government and GOCCs totaled PhP5.39 trillion as of the third quarter last year, with state-run firms accounting for PhP2 trillion.

NO WIN SITUATION

In a research paper, Philippine Institute of Development Studies (PIDS) economist Rosario G. Manasan said GOCCs were to blame for the deteriorating fiscal position of the goverment in the last five years. She also said the government needed to immediately address this if it wanted to avert a fiscal disaster. She said the deficit of the nonfinancial public sector -- GOCCs, National Government and local government units (LGUs) -- could rise to 7.2% of gross domestic product (GDP) or total economic output this year from just 0.6% in 1996. "Consequently, the outstanding debt of the nonfinancial public sector expanded persistently from 75.4% of GDP in 1996 to 103.4% of GDP in 2002," Ms. Manasan said. She noted that the aggregate fiscal position of GOCCs has been weakening in recent years, with the 2002 deficit reaching 1.2% of GDP. It is projected to rise to 2.5% of GDP this year. "Many of these GOCCs suffer from poor cost recovery due to inadequate tariff adjustments. Political interference in tariff setting, often in response to populist clamor, prevents them from increasing their prices to address rising costs," Ms. Manasan said.

The PIDS senior research fellow also said the government's "subvention" policy -- charging fees lower than cost recovery -- has worked to the disadvantage of most GOCCs. "Examples of this may be seen in the case of the [NIA] since the time of the Estrada administration, and the [MWSS], which does not charge for raw water yet finances the development of the water source," Ms. Manasan said. As for deficits of other GOCCs, Ms. Manasan said they were linked to contingent liabilities earlier contracted such as in the case of LRTA and HGC. "In addition, because of the poor incentive structure in the public sector, some of these GOCCs are afflicted with a poor record in collecting fees while others are overstaffed," she said. "By and large, many of them are saddled with a large debt stock that further aggravates their already weak fiscal positions," she added. Of the 14 monitored GOCCs, Ms. Manasan said those contributing most to the deficit were Napocor, NFA, MWSS, LRTA, NIA, HGC, and NFA. In 2000-2002, Napocor accounted for some 37% of the total GOCC deficit; NFA, 14%; LRTA, 13%; HGC, 8%; and MWSS, 6%. In 2003-2004, the bulk (77%-78%) of the deficit was attributable to Napocor.

Solid Cement to shut Antipolo plant

By FELIPE F. SALVOSA II, Reporter

Cemex Philippines has made good its threat to shut the cement plant of its unit, Solid Cement Corp., in Antipolo, immediately east of Metro Manila, a move that will affect about 175 workers. Solid Cement was to shut down the plant last night, for a period "not exceeding six months." The company relayed the closure in a letter dated September 7 to Labor Secretary Patricia A. Sto. Tomas. The letter cited "recent developments affecting the company," in particular the Department of Trade and Industry's August 12 order banning the sale of Solid Cement's Island Portland Cement for allegedly failing to meet government quality standards. "Rest assured that the company shall continue to observe applicable labor laws and regulations," said Maria Virginia Eala, Solid Cement vice-president for human resources. The Trade department's cease and desist order 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."

Trade undersecretary Adrian S. Cristobal, Jr. had said Island Cement failed several mechanical and chemical tests of the Bureau of Product Standards and the Department of Public Works and Highways' Bureau of Research and Standards, particularly minimum comprehensive strength and insoluble residue and loss of ignition -- indicators of the presence of "impurities." Both parties agreed to a new round of tests that began last August 28. A special audit team was supposed to report after seven days or last September 4, but results have yet to be released by Trade officials.

Last week, Mr. Cristobal said the ban would be lifted if the tests showed Island Cement complied with legal standards. Cemex is estimated to be losing PhP9.75 million a day in revenues, given average sales of 3,000 tons or 75,000 40-kilogram bags of cement a day at PhP130 each. Since August 12, losses should have totaled PhP273 million. Cemex has placed its market share in Metro Manila at 40%. Solid Cement earlier said its closure was averted by the Trade department's decision to exclude its "Palitada King" brand of masonry cement from the ban. Solid Cement, however, sells only 500 tons of Palitada King daily, which was not enough to keep it afloat. The company has said the ban was exerting "heavy pressure" on inventory levels considering that the Antipolo plant did not stop production since the cease and desist order went in effect. With warehouses quickly filling up, Solid Cement only had room left for less than 10 days of production and "beyond that, no more," said Jaime Ruiz de Haro, Cemex Philippines president and CEO.

World oil prices expected to fall by yearend

By BERNARDETTE S. STO. DOMINGO, Reporter

SYDNEY, Australia -- World oil prices are now expected to ease by year-end. The Organization of Petroleum Exporting Countries (OPEC) yesterday said oil production was at a comfortable level of 1.5 million barrels a day. OPEC president Purnomo Yusgiantoro also said prices would go down after elections in the United States and Iraq were over. "The US elections will be over by the end of this year. And next year, by the month of January, will be the election in Iraq. We do believe that the election in Iraq will give [stability]. Several factors also will give peace and stability," he said. At present, the world has an oversupply of 2.7 million barrels per day, the OPEC chief said. He noted that oil production in 11 OPEC nations, including Iraq, was 29 million to 30 million barrels a day. He said OPEC oil ministers would meet in Vienna later this month to decide on a new price band. The price range currently in use is $22-$28 per barrel, which was decided in 2000. "We do realize that between year 2000 and now, there has been a change in inflation, depreciation of the US dollar, so there's got to be a different price range today. There are proposals submitted to us," he said. He also said OPEC has a world market share of 40%. "We will meet and see what we can do together to put the price down. We really want to establish good stable oil prices," he said.

In addition, Mr. Yusgiantoro said prices would not be as high as they are today if it were not for geopolitical problems, citing conflicts between the Russian government and oil giant Yukos, and the strike in various parts of the region that pushed up prices. "If we see the balance, the supply and demand balance in the world, right now we have an excess of production 2.7 million barrels per day. If we only use the fundamentals, prices will not be as we see today," Mr. Yusgiantoro said. If prices were based only on supply and demand, they would not have soared to record highs as they did in the past weeks, he said. "So what we're saying is that if the political premium of between $10 and $15 per barrel did not exist in the market, if we remove the non-fundamentals -- geopolitical, tension, and threats -- then we hope that price will be going down to a level of $30 per barrel," he said. World oil demand can reach 115 million barrels a day in 2025, the OPEC chief added. "There is a clear need for increased investment in the oil production capacity to meet the absolute increase in demand and replace resources," he said. "Starting-point for sound investment strategy is market order and stability today, with reasonable, predictable prices. Cooperation will better prepare the industry to meet the challenges that lie before it in the early 21^st century," Mr. Yusgiantoro said.

Investors watch for US Fed rate hint

LONDON -- Financial markets watched keenly on Wednesday for confirmation that US interest rates will go on rising at a moderate pace as US Federal Reserve chairman Alan Greenspan prepared for a congressional address. The dollar gained against major currencies on the prospect of a US rate hike later this month. European stocks were weak and euro zone bond yields climbed slightly. Wall Street looked set to open lower. Most eyes were on Greenspan, who was to testify at the House Budget Committee in Washington. He was not expected to change the Fed's stance that all is essentially well with the economy and rates will rise gently. "Greenspan will likely say that the soft patch in the economy is over and that more has to be done on interest rates," said Lee Ferridge, head of global currency strategy at Rabobank in London.

Rate-watching has been a major activity of investors for most of this year as the Fed has sought to bring them back up to a more neutral level from historic post-Internet bubble lows. The Fed is widely expected to hike 25 basis points at its meeting later this month, a factor that has already been priced in to many markets. Higher rates, meanwhile, impact on different markets in different ways. The dollar, for example, can gain as the result of more attractive returns, while bond prices slip for the opposite reason. The effect on stocks can be mixed. "Dealers are essentially divided...with some believing that an upbeat statement by (Greenspan) could pave the way for higher US interest rates and in turn precipitate a degree of profit taking, whilst others feel that there's still the scope for markets to post some additional gains in the near term," said Matthew Buckland, a trader at CMC Group.

The dollar firmed ahead of Greenspan's comments although traders expected gains to be limited, particularly as some are not sure if the US economy has improved as much as Fed officials have suggested. The euro was at $1.2050, down nearly half a percent and the dollar fetched ù109.58, up about a fifth of a percent. European stocks were generally mixed, with traders in a cautious mood. The FTSE Eurotop 300 index of pan-European blue chips was 0.12% higher while the narrower DJ Euro Stoxx 50 index lost 0.18%. "The only scope for surprise will be if the Fed chairman adopts a more dovish tone. That would almost certainly spur a rally in the bond markets, and buy the equity market some extra time on cheaper liquidity," said Anais Faraj, a strategist at brokerage Nomura in London. -- Reuters

RP business formation process still better than some -- WB

It takes less time to set up a business in the Philippines than in other developing countries, a World Bank report said. In its report "Doing Business in 2005", which compared business regulations and their enforcement in 145 countries, the World Bank said setting up a business in the Philippines required only 11 procedures and 50 days. The top 10 countries with the most number of procedures was topped by Chad with 19 procedures, followed by Uganda, Paraguay and Brazil with 17. And in terms of the number of days to start-up a business, Haiti and the People's Democratic Republic of Lao topped the list. The report said it would take 203 days to set-up a business in Haiti, and 198 days in PDR Lao. The report also noted the large disparity in the way rich and poor countries enforced business regulations. "The countries that most need entrepreneurs to create jobs and boost growth -- poor countries -- put most obstacles in their way," the report read.

In Australia, it takes only two procedures and two days to set up a business, while it takes 17 procedures and 152 days to set up a business in Brazil. "Many countries, especially poor ones, impose additional procedures. More procedures mean more delays and more opportunities for bureaucrats to extract bribes," the report said. The report also found that heavy regulation and weak property rights excluded the poor from doing business. In poor countries, the report noted that the economy was informal.

To spur private investments, especially in poor countries, the report suggested the following steps:

• create single access points for business;
• get out of the courts;
• make registration electronic;
• introduce temporary business licenses;
• impose a "silence is consent" rule in business registration; and
• standardize paperwork.

The report estimates that an improvement from the bottom to the top quartile of countries in the ease of doing business was associated with an additional 2.2 percentage points in annual economic growth. The top 20 economies in terms of ease of doing business are New Zealand, United States, Singapore, Hong Kong/China, Australia, Norway, United Kingdom, Canada, Sweden, Japan, Switzerland, Denmark, Netherlands, Finland, Ireland, Belgium, Lithuania, Slovakia, Botswana, and Thailand. -- J. A. Ng

Tokyo still at odds with Manila over labor market row

TOKYO -- Japan and the Philippines ended their three-day free trade talks in Tokyo on Wednesday with no progress in discussions on Tokyo's opening of its nurse market to Filipinas. "Understanding has been deepened on both sides, but we have not reached any particular agreement during the meeting," said a Japanese foreign ministry official. "Both sides have not offered any concrete proposal related to the nurse issue," the official added. Liberalization of labor markets, particularly Japan's acceptance of Philippine nurses, is a focal point in their negotiations on concluding a free trade agreement (FTA). Manila has demanded Japan accept a sizable number of Philippine nurses and caregivers for the elderly, while Tokyo insists passage of national qualifying examinations is a minimum requirement. If agreed, it would be the first time that Japan has accepted foreign workers as part of an FTA. Japan and the Philippines are to hold further talks in Manila in late October. In February, the Philippines' presidential palace said the two countries could forge an accord before the end of the year.

Japan is the Philippines' second-largest trade partner after the United States. Two-way trade in 2002 amounted to $12.52 billion. Japan already has sealed a free-trade accord with Singapore and been also holding bilateral FTA talks with Mexico, Malaysia, the Philippines and South Korea. Meanwhile, Japan is to send a nine-person fact-finding team to investigate human trafficking from the Philippines, a spokesman for its embassy in Manila said Wednesday. Many Filipina entertainers recruited to work in Japan often unwittingly end up as sex workers in brothels and bars, said Shuhei Ogawa, noting that human trafficking can only be stopped from the source. The Japanese team is to meet with Philippine government officials and members of non-government organizations tracking the problem during their five-day mission beginning next week, he said. "Human trafficking is an international organized crime so we need international cooperation. We will exchange views on how to cooperate in the future to abolish these crimes," Mr. Ogawa said. The Japanese team will also visit Thailand, another source of human trafficking victims in Japan.

According to a report by the US government, an estimated 225,000 women and children were victims of trafficking in Southeast Asian alone in 2003. Lack of jobs, a separatist conflict in the southern Philippines and inability of young women to finish schooling contribute to the problem in the Philippines, it said. The foreign department said it had rescued two Filipinas forced to work as prostitutes in Brunei after initially being promised jobs as waitresses. No other details were provided. -- AFP

Meralco defends inclusion of new items in power bill

By JENNEE GRACE U. RUBRICO, Senior Reporter

The four items added in the electricity bill of the Manila Electric Co. (Meralco) were not new charges -- at least, not yet -- but merely added in the bill to comply with the directive of the Energy Regulatory Commission (ERC), a company official said yesterday. Meralco Vice-President Jobert Almazora said the four new items -- "stranded costs of the National Power Corp. (Napocor)," "Napocor contract costs," "distribution utilities' stranded costs," and "equivalent taxes and royalties" -- were among the items the ERC required Meralco to include in its billing following the unbundling, or breaking down, of its rates. "When we initially implemented the unbundling, the four were not included because there were still no guidelines for the computation of the items. But the ERC advised us to include them in the billing starting August," he said. Mr. Almazora noted Meralco had attached an explanation on the bill when it started including the four items. He also said the inclusion of the four items would not yet increase the electricity bills of consumers as these still had no value now. "We have not gotten instructions yet on the computation of these items," the Meralco official said. Mr. Almazora also said the four items are among the universal charges the Electric Power Industry Reform Act (EPIRA) allowed distribution utilities to pass on to end users of power.

The law defines Napocor's stranded debt as payment for the state owned power generator's debts in excess of the amount the national government will assume. Napocor's stranded contract costs, meanwhile, refer to the difference between the contracted costs of electricity from independent power producers and the actual selling price of the contracted energy. Meanwhile, the stranded costs of distribution utilities refer to the excess of the cost of electricity under eligible contracts of the utilities over the actual selling price in the market. The equalization of royalties and tax rates, for its part, is the difference between the royalties and taxes applied to indigenous renewable sources of energy against imported energy fuels, the law states. Mr. Almazora also said the four items were not likely to add to the costs of power for a long time because under the EPIRA, most of them could only be implemented after open access starts.

Open access and retail competition allow end users to choose suppliers of electricity. It will only be implemented if the following prerequisites are met: the establishment of the wholesale electricity spot market; the approval of unbundled transmission and distribution wheeling charges; the initial removal of cross subsidies in power rates; the privatization of at least 70% of Napocor's power plants; and the transfer of the management and control of at least 70% of the total energy output of power plants with Napocor to independent power producers.

For his part, ERC Chairman Rodolfo B. Albano, Jr. said the commission would be willing to go before Congress to explain the inclusion of the four items in the Meralco bill. He noted the four items were allowed by the law to be passed on to consumers. This after Nacionalista Rep. Gilbert C. Remulla of Cavite asked Meralco and ERC to explain the inclusion of the items in the billing statement of Meralco starting August.

Central Bank sees $500-M BOP surplus next year

The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) expects the country to register a balance of payments (BOP) surplus of $500 million next year, a marked improvement from a projected deficit this year, on expectations of more dollar inflows. BSP Deputy Governor Amando M. Tetangco, Jr. said continued improvements in the country's external trade and an increase in foreign investments next year could lead to a stronger BOP position. "We are projecting a BOP surplus of around $500 million," he told reporters yesterday. He said the BSP expects the country's current account -- which reflects movements in exports, imports and services -- to continue posting a surplus next year. This year, the central bank sees a BOP deficit of $505 million, an improvement from its earlier forecast of $660 million.

As this developed, the government plans to reduce its net borrowings next year by 6.4% to PhP214 billion from PhP228.6 billion "as more short-term debt papers are retired." The borrowing mix at the domestic level will also fall 2% but the market is unaffected by its impact. "Their planned 20/80 (20% foreign, 80% domestic borrowing mix) this year did not push through. These are just plans and everything changes. It all depends on how execution comes, how opportunity rises," a trader said. "Let's see how the foreign bond float would fare first." Next year, the target borrowing is at 22% foreign and 78% domestic. The other day, the government said it would issue up to $750 million worth of bonds in the foreign market to finance National Power Corporation requirements.

Customs collectibles worth over PhP4B

To help ease the budget deficit, the government should run after "substantial collectibles" at the Bureau of Customs amounting to over PhP4 billion, a business group said in a statement yesterday. At the same time, the Federation of Philippine Industries (FPI) called on the Department of Finance to launch an investigation on why the collectibles piled up. FPI president Jesus L. Arranza said Customs collectibles range from back taxes or unpaid duties, misdeclaration and undervaluation of imports, and unliquidated bonds posted by importers using customs bonded warehouses. Presenting documents, Mr. Arranza said National Steel Corporation, now Global Steelworks International, Inc., topped the list of companies with back taxes. As of November 2003, National Steel owed the government PhP607.579 million.

Meanwhile, Generic Enterprises and Libert Enterprises were found to have undervalued or misdeclared 15 import entries each and were asked to pay PhP35.063 million and PhP31.710 million respectively, following a Customs audit, the FPI chief said. Unliquidated bonds, meanwhile, amounted to more than PhP4 billion, Mr. Arranza said, quoting a Customs report presented during the last meeting of the defunct National Anti-Smuggling Task Force. "This figure does not include those pending in courts," he added. Documents showed that at the Customs Collection District III at the Ninoy Aquino International Airport, collectibles from closed bonded warehouses as of November 2003 amounted to PhP21.912 million, and from operating bonded warehouses, PhP4.453 million.

According to documents provided by Mr. Arranza, the closed bonded warehouses include Adham Development, Inc., Epic Electronics Industries Corp., Far East Network of Integrated Circuits Subcontractors Corp., Ionios Circuits, Inc., Micro Silvertron Corp., Prosean Industries, and Veterans Electronics Comm., Inc. Active bonded warehouses with obligations include AAI Logistics, FF International Manufacturing Corp., MPI Corp., NSF Technologies, Ramatek Phils. and Shiang Shang. Documents from the FPI also showed the Philippine Investors Customs Bonded Warehouse owes a total PhP15.831 million since October last year, while Keppel Philippines was asked to pay PhP750,000 in warehouse supervision fees for 2002 and 2003.

$600-M renewable energy fund open to developing states

SYDNEY -- Developing countries like the Philippines can count on a $600-million facility from the German government to finance renewable energy and energy efficiency projects, an energy expert yesterday said. "The facility is intended to provide low-interest loans for investments in developing countries over a period of five years beginning 2005," Mohamed T. El-Ashry, former chief executive officer and chairman of the Global Environment Facility (GEF), said. In line with this, he said the GEF also committed to provide a $100 million grant to support renewable energy initiatives of developing economies. The GEF is the single largest financier of renewable energy projects in poor countries. The funds will be put up as part of an international action program meant to mobilize millions of dollars in investments for generating energy from wind, solar, biomass, hydro and geothermal resources. "Reaching these goals will require significantly expanded access to energy in developing countries. It is estimated that up to one billion people can be given access to energy services from renewable sources, provided that market development and financing arrangements can be enhanced," Mr. El-Ashry said. He facilitated the International Conference for Renewable Energies in Bonn, Germany where some 154 countries committed to work together to reduce by half the number of people living in extreme poverty and to achieve environmental sustainability by 2015. "We have adopted three key outcomes on renewable energies such as a political declaration, an international action program, and a set of policy recommendations for renewable energies," he said.

BAGASSE-FUELLED PLANT

The Philippines, seeking to cut its reliance on imported oil and avert electricity shortages, will start work next year on its first sugar-fuelled power plant, one of the investors in the project said on Tuesday. The 30-megawatt plant, which will use bagasse from a mill in Talisay City, Negros in Western Visayas, will be built by a unit of Britain's Bronzeoak Ltd. and state-owned Philippine National Oil Company. Bagasse, left behind when sugar cane is crushed, is already used by the country's sugar mills to generate steam that powers turbines for electricity. The proposed PhP3-billion bagasse-fired plant in Talisay is expected to be the first of many that will be set up alongside sugar mills, most of which are on Negros in the central Philippines. "Bronzeoak Philippines is in various stages of talks with five other sugar mills throughout the country to develop and generate up to 170 megawatts of electricity," managing director Jose Maria Zabaleta told Reuters. Including the Talisay plant, the six could generate a total of about 200 megawatts and bring investments of more than $250 million to rural areas, he said. Mr. Zabaleta said the Talisay plant will take two years to build and is likely to sell electricity to the power distributor on Negros from 2007. "The new plant will be built alongside the First Farmers sugar mill and refinery and will generate steam and electricity for both the factory and the local power grid," Mr. Zabaleta said. Negros produced about half the country's estimated 2.34 million tons of sugar in the 2003/04 crop year. The Philippines is promoting renewable energy from sugar, coconut oil, the sun, wind and water to reduce its dependence on oil as high global crude prices ramp up its import bill. -- Bernardette S. Sto. Domingo with Reuters

Philippine risk premiums rise on new debt issuance

HONG KONG -- Spreads on Philippine sovereign dollar bonds widened yesterday after the government said it planned to sell US$750 million of fresh debt for cash-strapped National Power Corp. (Napocor). The broader regional market held steady as players hugged the sidelines ahead of key testimony by US Federal Reserve Chairman Alan Greenspan later yesterday. The market has already factored in a quarter percentage point rate rise on Sept. 21 after positive US payrolls data last week, but there is uncertainty over whether the US economy will continue to grow and whether the Fed will need to raise rates aggressively. The Philippine government, the most active sovereign debt issuer in Asia, said yesterday it planned to raise an additional US$750 million for state-owned Napocor by reopening its existing 2015 and 2025 bonds. "After the announcement, bond prices dropped one point on the long-end of the curve," a Manila-based trader said.

Spreads on Philippine sovereign dollar bonds due in 2015 widened by 20 basis points (bps) to 491 bps over interpolated US Treasuries, while Philippine '25s moved out by 13 bps to 484 bps over. Banking and market sources said the deal was expected to be priced later yesterday. Credit Suisse First Boston, Deutsche Bank and JP Morgan are the lead managers for the bond sale. September is set to be one of the busiest months for Asian dollar bond issues this year, with US$4 billion worth of fresh debt hitting the market as regional borrowers try to take advantage of recent spread tightening to lock in funds ahead of the expected rate hike on Sept. 21. "With absolute yield so low, there is no mystery why issuers are coming to the market now," said Tim Condon, head of Asian financial market research at ING Financial Markets. Asked whether the flurry of new issues would push Asian spreads wider, Mr. Condon said it would depend on what happened to the US Treasury market. "If the US Treasury yields remain at this level, then the grab for yield is going to continue," he said.

Market sources said South Korea would launch marketing of a planned US$1 billion, 10-year sovereign bond issue next Monday. The roadshows would be held in Singapore on Sept. 13, London on Sept. 14 and New York on Sept. 15, and pricing is expected shortly after, sources said. Barclays Capital, Citigroup, Deutsche Bank and JP Morgan are the lead managers for the planned bond issue. Spreads on South Korean sovereign dollar bonds due in 2013 were steady at 74/65 bps over Treasuries. ICBC (Asia), a Hong Kong-listed mid-size lender, is also expected to price a planned US$300 million, five-year bond later yesterday at a spread of 90 to 95 bps over comparable US Treasuries. The A2-rated deal, lead managed by Goldman Sachs, HSBC and JP Morgan, has attracted orders worth US$600 million.

TELEKOM MALAYSIA

Apart from the sovereign bond issue by the Philippines and South Korea, state-controlled Telekom Malaysia will launch marketing of a 10-year dollar-denominated bond yesterday, its first global bond issue since 2000. Traders and analysts expect the offering by Telekom,Malaysia's largest fixed-line telephone provider, to be for US$500 million. The roadshows will begin in Singapore before moving to Hong Kong on Friday and London on Sept. 13, and pricing is expected shortly after, a market source said. Deutsche Bank, CIMB and UBS are the lead managers for the proposed transaction. Ports-to-telecoms conglomerate Hutchison Whampoa Ltd.'s bonds due in 2014 were steady at 165/161 bps over comparable US Treasuries. -- Reuters

BPI catches market attention after PhP235-million block sale

Shares of Ayala-led Bank of the Philippine Islands (BPI) drew strong interest yesterday following the sale of 5.6 million shares at a special block transaction. The deal, which amounted to PhP235.2 million, caught the attention of market watchers especially after a worrisome weekend that saw its employees threatening to stage a strike. The bank earlier said employees and management were drawing nearer to closing their collective bargaining agreement which is renewed every three years.

Deutsche Regis Partners, Inc. handled the block sale which was made up of 12.8% of market transactions. Dealers said interest in the stock got further boost from the bank's declaration of a one-peso per share special cash dividend which will be paid on Oct. 3 to stockholders on record as of Sept. 18. He said stockholders who have more than enough BPI shares may just want to balance out their losses by selling their holdings before the payment of the cash dividend. He surmised that these sellers would buy back their shares after the payment date at a lesser price. But Rommel Macapagal, chairman of Westlink Securities, Inc., said the special block sale may have resulted from various reasons. "Right now, I see no reason behind the special block sale of BPI but it could be due to an entry of new investors, a change in ownership or big client order," said Mr. Macapagal. But Joseph Roxas, president of Eagle Equities, Inc., believes that the transaction was mainly due to foreign buying. -- Roulee Jane F. Calayag

Ayala-Campos group sells PhP2.6B worth of lots in Fort Bonifacio

Since takeover from Metro Pacific Corp.

By JENNEE GRACE U. RUBRICO, Senior Reporter

Property developer Fort Bonifacio Development Corp. (FBDC) has raised PhP2.6 billion in the sale of 35 lots in Bonifacio Global City. Bobby Dy, head of commercial operations, said the amount covers lots the firm had sold as of end-August from the time the Ayala-Campos group acquired the controlling stake in FBDC in 2003. He said FBDC expects to generate an additional PhP200 million to PhP250 million for the remainder of the year. "This would cover four to five more lots that will be sold within the year," he said. Ayala Land, Inc., the country's largest property developer, partnered with the Campos group, which has interest in pharmaceuticals, food, and real estate to acquire the controlling stake of FBDC from Metro Pacific Corp. The 35 lots which were sold from April 2003 to August 2004 range from 941-5,908 square meters in size, FBDC said. Mr. Dy said Global City still has over 50 hectares of saleable land, most of which could be used for commercial or residential spaces, depending on the developer. He said developers of residential and office projects, commercial and service establishments led in investing in Bonifacio Global City, where land prices are between PhP45,000 and PhP230,000 per square meter. He added that Bonifacio's luxury residential buildings "have served as attractive homes" to expatriates, businessmen and top executives.

Call centers and business outsourcing firms are also interested in the Philippine Economic Zone Authority-accredited E-Square district, Mr. Dy said. The accreditation gives locators incentives like reduced taxes and duty-free imports of capital equipment. Mr. Dy said Bonifacio Global City's development would likely step up with the opening of Market! Market! this month. He said the Ayala-Campos group has not significantly deviated from the master plan for Global City. "The base master plan remains fairly intact. We did not deviate too much. We looked for improvements on how to basically work on the fringes of the master plan," he said. Among others, the group is studying the flow of traffic in the area as well as vehicular slope, he said. "We've looked at ways. We're looking at plans of which streets will be one way, and which would be made two way [streets]. But the plan is to make it a central business district of the future," he said. Mr. Dy said the company is not yet looking at new projects or new phases, but said the company has allocated PhP500 million in capital expenditures for the completion of the Bonifacio Ridge, the McKinley Park, and partly for the PhP200-million Bonifacio Triangle, which is set to be completed in 2006. Mr. Dy said the company has PhP1.4 billion in total obligations, reduced from PhP2.7 billion last year. He said that for this year, the company no longer has any maturing obligations, while next year, it would service PhP15 million in debts. The rest of the debts, Mr. Dy said, would be serviced over the medium and long term.

Energy chief hints gov't may cut more jobs at Napocor

State-owned National Power Corp. (Napocor) has cut its work force by almost half from 12,000 employees to some 7,000 workers in the past two years resulting in savings for the government, Energy Secretary Vincent S. Perez, Jr. said yesterday. He hinted that government may cut more jobs at the state-owned power firm, but declined to provide details on when and how many more employees may be retrenched. "I feel there's more room," he told reporters when asked if the government will lay off more people. He said the move to reduce the power firm's work force has resulted in PhP700 million in savings a year the past two years. "These are all part of our cost-cutting measures," he said. He said the National Electrification Administration has also reduced its work force from 7,000 employees to only 215 workers at present. He said the Department of Energy will continue to support initiatives of the Department of Finance to streamline government agencies and government-owned and -controlled corporations. The government had said Napocor, which has PhP500 billion in debts, is a major burden to the government. -- Iris Cecilia C. Gonzales

Bourse aiming to tighten tie-up with Asian peers

The Philippine Stock Exchange (PSE) is keen on strengthening its cooperation with other Asian bourses. The bourse believes that by doing so, it can make its presence count in the league of leading stock exchanges, while keeping up with advances in technology and other aspects that could boost trading. Striking a stronger bond with other bourses in the region would also pave the way for greater cooperation which can be turned into opportunities for growth and partnerships. PSE Chairman Alicia Rita M. Arroyo told BusinessWorld in an interview the stock exchange has opened its doors to the other exchanges in the region when it offered to host an event for investors and market leaders some time ago. From then on, Ms. Arroyo said, other exchanges had become open to the PSE, inviting its people to visit their respective bourses and share with them information that could be used to enhance operations at the exchange. Ms. Arroyo cited the PSE's relationship with the Thailand Stock Exchange.

A PSE staff is currently in Bangkok to engage in a number of activities launched by the Thailand Stock Exchange to spur trading. The event runs for over a month and includes other participants from various regional bourses. Ms. Arroyo said there is an ongoing effort to clinch accords with other stock exchanges to facilitate the flow of information. She is optimistic that significant results would be derived from these measures designed at forging stronger ties. Ms. Arroyo also expressed hope the bourse would be able to launch activities in the near future and serve as a venue for wider participation from exchanges like the Jakarta Stock Exchange, Singapore Stock Exchange and neighboring bourses in Hong Kong and Korea. "It would be good to share the reform measures that we are implementing and which the IFC [International Finance Center] says puts us light years ahead of other exchanges," Ms. Arroyo said. The IFC is the private sector lending arm of the World Bank. -- Roulee Jane F. Calayag

NTC gives firms until Sept. 30 to pay PhP900-M dues

The National Telecommunications Commission (NTC) said telcos, broadcast, and cable television operators owe it PhP800 million-PhP900 million in regulatory fees. It said the firms should pay by Sept. 30. "After the said date, the commission will aggressively continue to collect late payments of the [fees], including statutory required 50% penalty fine," the NTC said in a public notice. The NTC added that if dues are not paid within 60 days, the penalty will be increased by 1% for every month of delinquency. Failure to settle the dues could also mean the suspension and revocation of the firms' licenses. "Nonpayment of any NTC collectible fees shall subject holders of certificates, provisional authorizations and/or licenses and permits to administrative sanctions to include suspension or revocation of their authorizations," the NTC said.

NTC Deputy Commissioner Jorge Sarmiento said the commission collected PhP550 million in fees from June to July. Among telcos, the NTC said Pilipino Telephone Co. (Piltel) has the highest dues of PhP1 billion. Piltel is yet to settle the fees as it contests the computations made by the regulatory body. Piltel and sister firm Smart Communications, Inc., which are both subsidiaries of Philippine Long Distance Telephone Co., are also seeking refund for alleged excess payments made to the NTC in the previous years. Mr. Sarmiento said Piltel no longer has any excuse not to pay its obligations. "Until last year, they [Piltel] were suffering from losses. But this year wala na silang (they no longer have an) excuse not to pay," he added. -- Anna Barbara L. Lorenzo

Market hits largest trade in 7 years

By ROULEE JANE F. CALAYAG

The stock market yesterday posted its largest single-day transaction in over seven years, taking the financial circle by surprise. Aside from the strong gains in the counters, the transaction volume and value were a breakthrough. Keeping an optimistic beat since Sept. 1, the Philippine stock market has been snapping up gains. Going against the grain, the local bourse proved strong in a month considered as the worst by investors as it is usually bedevilled with anemic market participation due to the observance of the Chinese ghost month which promotes inactivity. The Philippine Stock Exchange composite index (Phisix) soared 56.69 to 1,728.45, as it smoothly crossed the critical 1,700 level. It also turned in 4.9 billion shares worth PhP1.95 billion, almost twice the amount on Tuesday. As it was, yesterday's volume was a fitting display of the market's improving condition as it jolted investors from their slumber and urged them to run like the bull. For years, the stock market kept attempting to surpass the PhP1 billion mark but it was a dream that proved elusive until Tuesday when it breached the target. What amazed the investing public was how the market managed to almost double the volume in less than 24 hours.

TECHNICAL BUYING

Analysts believe that technical buying spurred the momentum which pushed the benchmark index to its highest close in less than a decade. "The market broke the critical level on technical buying, especially on blue chip stocks," said Joseph Roxas, president of Eagle Equities, Inc. "[The technical buying] caused the strong climb in the Phisix," he added. The removal of the documentary stamp tax for stock exchange transactions early this year made some stocks cheaper, explained Mr. Roxas. This accounted for the surge of interest in second- and third-liners early on. Some observers have said that the strong rally was driven mainly by undervalued stocks that have attractive fundamentals. But Mr. Roxas argued otherwise. He said the fundamentals are inherent in stocks. "It is always there," he said, referring to fundamentals. "Investors were just waiting for time."

Apparently, as the carpet for the bull is gradually laid out, investors are securing their positions by spreading their interests on such stocks and pouncing on those that come at attractive and affordable prices. Expectations of a bull run are growing stronger each day, supported by the market's impressive daily gains. "There can be corrections but the market will still be on an uptrend," said Mr. Roxas. Rommel Macapagal, chairman of Westlink Global Equities, Inc., that the market is all set for a bull run. "The sentiment is becoming bullish," said Mr. Macapagal, who plots the market's momentum target at 1,750 and 1,800. Like Mr. Roxas, he sees a spurt of technical corrections any time until the end of the week. "Sometimes, the corrections are observed during the intra-day [trading]," said Mr. Macapagal. These corrections, he explained, are often seen by some investors as opportunities to buy.

INDICES

At the stock market, the indices kept up their impressive performance since Tuesday, sticking to their previous spots but with better gains. The commercial-industrial blazed the way, clocking in 72.28 at 2,758.49. Mining gained 59.45 at 1,870.74. Property snatched up 31.19 at 590.05. The banks and financial services index also snapped up gains, rising 20.40 to 485.20. Ayala-led Bank of the Philippine Islands sold 5.6 million shares at PhP42 on a special block transaction worth PhP235.2 million. The sale accounted for 12.08% of the market. The all shares index was up 20.92 at 1,056.55. Gainers left losers behind, 87-13 with 31 issues sticking to their previous price levels. Even the number of trades rose significantly to 7,367, a far cry from less than a thousand in the past few weeks. The Sy family's SM Prime Holdings, Inc., a leading mall developer and operator, was the most actively traded stock. It finished at PhP6.40 with almost 40 million shares amounting to PhP246.93 million.

ANOTHER TEST

Although the spectre of corrections looms, Mr. Macapagal is hopeful that the strong rally will continue. He said today will be another test for the market, especially after investors digest the results of a briefing by the administration's economic managers.

Price increases hit 3-year peak

By ERNESTO B. CALUCAG, Researcher

High oil prices locally and abroad in August pushed up local consumer prices to their peak in three years, with food and transportation at their most expensive so far. And relief does not seem to be in sight just yet, with the country's headline inflation rate rising sharply last month to 6.3% year on year, the National Statistics Office (NSO) reported yesterday. NSO said consumer prices rose an average 6.3% last month from 6.0% in July, based on 1994 prices. And under the new 2000 base year, inflation went up to 6.8% from 6.6%. The August inflation figure was in line with the Bangko Sentral ng Pilipinas' (Central Bank of the Philippines, or BSP) forecast of 6.0%-6.6%, as the central bank anticipated its rise because of unabated increases in global oil prices. The government, through the National Economic Development and Authority (NEDA), earlier targetted 6.3%-6.6% inflation for August, noting that food costs would also contribute to inflationary pressures.

All commodity groups posted an increase in prices, led by food, beverages and tobacco, with average prices going up by 6.5% year on year in August from 6.1% in July. NSO said heavy rains last month resulted in supply bottlenecks for major food products such as fruits, fish and vegetables. Only housing and repairs recorded slower inflation last month, at 3% from 3.2% in July. "The spike in inflation was brought about by increase in food prices. In general, it was more of a consequence of the cost of living increasing primarily due to higher transportation, fuel, and electricity costs. The higher food prices were exacerbated by passed-on costs, mainly due to these factors," said AB Capital economist Jose Vistan, Jr. Inflation rose steadily this year, spurred by the continued rise in oil prices. But unlike in previous months, economists said the August figure was actually more the result of the spillover effect of previous oil prices increases. "We're seeing some tapering off of inflationary pressures, although I think the recent increases in electricity and LPG plus the lingering effects of typhoon on agricultural commodities for September can push up prices," said NEDA assistant director Scholastica D. Cororaton. The benchmark Dubai crude traded at $36.16 a barrel this week, a substantial drop from $41 more than a week ago. Average for August was $38.54 per barrel, from $34.65 per barrel a month ago. Since the start of the year local gasoline prices have gone up nine times by a total of PhP5.30 to PhP5.45 a liter, while diesel prices went up eight times by PhP4.25 to PhP4.40 a liter.

WORST OVER?

"We have already seen the worst in oil prices. But the spillover effects are driving increases in prices. Normally, price movement is rigid, it's easy to go up but hard to go down. So we would continue to feel the effects. Given that the base last year was low, inflation would remain high for the rest of the year," Mr. Vistan said. As of August, year-to-date inflation was 4.5%, still within the government's full-year target of 4.0%-5.0%. But there are expectations of inflation trending higher in coming months. "This is not a blip. We expect inflation to peak sometime in the fourth quarter. As such, the government may breach its full-year target. My projection for this year is around 5.5%," Mr. Vistan said. BSP said it was not keen on raising policy interest rates despite rising inflation, noting that inflationary pressures were supply-driven. But Mr. Vistan said the pressure could become too heavy for BSP. "The pressure is building up because the real return, or the spread between the money market rates and inflation, is already thinning, so the benchmark rates become less effective as a monetary tool. They may be forced to raise rates, but will try as much as possible to put it on hold," he added.

Recently, economists noted the sustained rise in the benchmark 91-day Treasury bill rate has already reflected de facto tightening. The 91-day paper fetched a rate of 7.438% at the auction last August 30, from 7.183% in the previous auction. "The cost of borrowing would go up. In terms of gross domestic product growth, the government may feel the pressure. It would be hard to achieve certain growth targets for some sectors because the private sector is also feeling the pressure," Mr. Vistan said. NSO noted other commodity groups also posted higher inflation last month. Inflation for clothing went up to 2.2% in August from 2.0% in July; fuel, light and water to 7.2% from 6.9%; services, 11.3% from 10.8%; and miscellaneous items, 2.3% from 2.2%. On a monthly basis, upward price adjustments generally eased by 0.6% to 0.5% last month from 1.1% in July. Except for clothing items, price increases recorded in all the commodity groups slowed down during the month. Core inflation, which takes out food and energy items, advanced by 0.2% to 6.2% after rising by 6.0% in July.

NEDA bucks price controls

The National Economic and Development Authority (NEDA) is against price controls and legislated wage increases as measures to help the public cope with inflation, which reached a three-year high of 6.3% for August. Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP), meanwhile, said even monetary tightening would not address inflation caused by supply-side pressures. Socioeconomic Planning Secretary Romulo L. Neri said price controls could backfire as producers could cut back and further worsen inflationary pressures. Poultry raisers earlier proposed price ceilings, to stabilize farmgate prices of farm commodities. Mr. Neri said the government should instead guard against profiteers who could take advantage of rising consumer prices in the coming months. "In addition to vigilance against profiteering, implementing a better logistics system through improved transport network would be another appropriate policy response in dealing with inflation," Mr. Neri said in a statement.

The NEDA chief is also not keen on legislated wage increases, noting that the wage orders in August in many regions were already likely to exert inflationary pressures in coming months. Monetary tightening, he said, will also not be an appropriate policy response. "We support the position of the Bangko Sentral ng Pilipinas that monetary tightening is not the appropriate policy response in dealing with the inflationary pressure that is building up due to cost-push factors," Mr. Neri said. NEDA noted that both food and non-food items exerted pressure on inflation in August. It said prices of all major food items went up that month because of a combination of domestic and foreign pressures. "The lean month of August caused the price of rice to move up while heavy rains brought by typhoons Karen, Lawin, and Marce pushed up prices of fish. Meanwhile, prices of cereal and dairy products went up due to high prices of imported raw materials. The increase in transport fares, wage, and fuel may also have been a factor in jacking up the prices of miscellaneous items like cooking oil, coffee, sugar and spices," Mr. Neri said. He also said he expected inflation to increase in coming months due to high world oil prices. NEDA assistant director Scholastica D. Cororaton said the recent price increase for liquified petroleum gas (LPG) and electricity from state-owned National Power Corporation (Napocor) could exert inflationary pressure in coming months. "Given the new round of increases in the Napocor rate, in LPG and pump prices of petroleum products, inflationary pressures for fuel, light and water could increase," Ms. Cororaton said in an interview.

Ateneo de Manila University's Cielito F. Habito said in a telephone interview that August inflation rate was expected, given the unabated increases in oil prices. "The latest inflation figure is within expectations. But on a month-on-month basis, you will notice that the increase in the prices of basic commodities have slowed down a bit," Mr. Habito said, noting that price increases peaked in June and July. He said however, that if oil prices would continue to increase in coming months, inflation for 2004 could hit 6%, higher than the 4%-5% government target. BSP officer-in-charge Alberto V. Reyes said monetary authorities would keep a close watch on the inflationary environment for future monetary action. BSP attributed inflationary pressures to skyrocketing oil prices and rising world commodity prices, which it said were largely outside the influence of monetary policy. BSP is trying to hold off any increase in its policy rates at least for the rest of the year, to keep borrowing costs low and to help spur economic growth. For the 14th straight month, BSP's policy-making Monetary Board has kept interest rates steady at a 12-year low of 6.75% for overnight borrowing and 9% for overnight lending. Ms. Cororaton said BSP should keep a close watch on businesses engaged in excessive profiteering. "We should also continue mechanisms to improve transportation logistics," she said, referring to the need to improve major roads.

Both BSP and NEDA concede that the government's 4%-5% inflation target for 2004 can be breached because of rising oil prices. To mitigate the impact of rising oil prices on food prices, government agencies should implement non-monetary interventions to stabilize supply in the market, BSP officials said. These include timely importation, distribution and delivery of certain commodities, as well as fuel-conservation measures by the Department of Energy. -- Jennifer A. Ng and Iris Cecilia C. Gonzales

OPEC sees oil price falling as uncertainties start to fade

JAKARTA -- Crude oil prices are expected to fall over the coming two months as supply uncertainties fade and markets settle on the expectation of a smooth US presidential election, OPEC's president said yesterday. But in Sydney, Australia, an energy expert told the World Energy Congress that the price of oil was even expected to gradually rise to about $50 per barrel in the world market, to the detriment of poor countries like the Philippines. "Future trading for September-October indicates a trend toward a drop in prices and this is good news," Purnomo Yusgiantoro, who is also Indonesia's energy minister, told reporters. He said prices would begin to slide ahead of the US presidential vote in November, which is expected to proceed without a hitch, and the resolution of problems with Russian oil giant Yukos.

In London, the price of benchmark Brent North Sea crude oil for delivery in October fell 34 cents to $41.23 a barrel on Friday. New York's reference contract, light sweet crude for October delivery, dipped seven cents to $43.99 a barrel at Friday's close on the New York Mercantile Exchange. Oil prices have fallen from record levels of almost $50 per barrel in New York in August, when the market spiked over supply fears partly centered on Russia's Yukos. Yukos is locked in a legal battle with the Russian authorities while its founder Mikhail Khodorkovsky is on trial for tax evasion and fraud. The firm recently cut its output forecast for 2004. OPEC members are scheduled to meet on September 14 in Vienna, where they will consider raising the cartel's price band to between $28 and $30 a barrel, Qatar's energy minister, Abdullah bin Hamad al-Attiyah, was quoted as saying Saturday. OPEC's current price range is between $22 and $28 a barrel, above or below which it can adjust production. The cartel agreed at a previous meeting in June to raise its output ceiling by 2.5 million barrels a day in two stages in an effort to curb high world prices. A rise of two million barrels per day (bpd) went into effect in July and another of 500,000 bpd on August 1.

A SERIOUS CONCERN

In Sydney, an energy expert told the World Energy Congress that the price of oil was expected to gradually rise to about $50 per barrel in the world market, to the detriment of poor countries like the Philippines. "The impact of high prices on developing and oil exporting countries, especially those without nuclear power, is a serious concern," World Energy Council secretary general Gerald Doucet told reporters in a press briefing. He also said that the prices of gas and coal were likewise expected to escalate. And a problem with the spare capacity of OPEC can also result in a possible supply crisis, Mr. Doucet added. He noted that some OPEC members have already gone looking for other energy sources.

For his part, the World Energy Council Chairman Antonio del Rosario said there was a need for more exploration since many of the world's large oil reserves, such as in the North Sea and the United States, were being depleted. "There is a need for more exploration in these areas. Even [discovery] of smaller deposits could make substantial difference," he said. But he also said a global supply crisis was still far-fetched. "It's far from that. There are still a lot of reserves that need to be developed. Investments are also needed, and the cost needs to be recognized," Mr. del Rosario said.

Some 96 countries are attending the World Energy Congress to discuss energy sustainability and ways to deliver energy to at least two billion people who are deprived of it. Mr. Doucet also urged countries to keep all energy options open such as nuclear and hydroelectric power, fossil fuel and renewable energy, among others. "If we take anything off the table, we'll have a more difficult time. We are working on delivering sustainability and bringing energy to the two billion people in the world who doesn't have it at all," he said. -- AFP in Jakarta, with Bernardette S. Sto. Domingo in Sydney

Gov't plans new borrowing for Napocor before yearend

Officials yesterday confirmed that the government could again borrow to refinance debts of state-owned National Power Corporation (Napocor). "The government may borrow anytime before the end of the year," a source said. But the source also said the government would first gauge before selling new bonds. An increase in the US Federal Reserve's interest rates can make the borrowing more costly. The government reportedly plans to borrow at least $750 million through a bond offering. Yesterday, an official said this could go up to $1 billion if the National Government would be made to absorb about PhP500 billion in Napocor debts by yearend. "Government will have no choice but to borrow for Napocor if there will be no new tax measures by yearend," the official said.

The government wants Congress to approve eight new taxes that will raise PhP83 billion yearly. The official also said that unless the government could raise new money, it could not absorb the Napocor debts. Next year's interest payment on those debts already total PhP50 billion. Four banks are reportedly underwriting the government's new bond offering: Credit Suisse, First Boston, Deutsche Bank, and JP Morgan Chase. The new offering will reportedly involve the reopening of oustanding issuances, similar to three previous bond floats this year. -- I. C. C. Gonzales

Spratly claimants to discuss oil survey plan of RP and China

China and the Philippines will discuss their plan to map potential oil deposits in the South China Sea with other claimants to the Spratly Islands, Foreign Affairs Secretary Alberto G. Romulo said yesterday. China and the Philippines last week announced a three-year project by their state oil companies to gather data on petroleum resources in parts of the sea. The Spratlys are also claimed in whole or in part by Brunei, Malaysia, Taiwan and Vietnam. Mr. Romulo said there had been no objections from other claimants to the survey. The joint undertaking could be a "step towards possible future discussions between and among claimants on provisional cooperative arrangements" in the disputed area. "There will be discussions with other claimants (and a) meeting at the middle of this month with all parties," he said, without giving further details. Mr. Romulo said the project was a "common desire to obtain knowledge" in the area, which would include collecting, processing and analyzing seismic data. "Let me declare that there is no exploration part here, much less development," he told reporters, adding he believed it "does not encroach on any claims in the South China Sea."

The agreement, dubbed as the RP-China Joint Marine Seismic Undertaking, was signed by state-owned Philippine National Oil Co. and China's National Offshore Oil Co. last week in Beijing when President Gloria Macapagal-Arroyo went to China for her first state visit since she got a fresh six-year term. The pact binds the two national oil firms to conduct joint research on the Spratly islands to determine the presence of oil, gas, and other mineral deposits. Mr. Romulo assured that the agreement would not supersede the declaration as it "does not address the issues of territorial claims." The project will also not violate a 2002 agreement on a code of conduct to maintain peace in the Spratlys, where deadly clashes among claimants have occurred in the past, he said. "There is no circumvention here and all claimant countries respect each others claims. I do not see any objection to this. What we aim is for the sea of conflict to become a sea of cooperation in the near future," he told a press conference yesterday. He said Chinese President Hu Jintao accepted an invitation by Mrs. Arroyo to visit Manila in June next year to mark the 30th anniversary of the establishment of diplomatic relations.

Meanwhile, the Foreign Affairs chief dismissed speculations that Ms. Arroyo's state visit was aimed at focusing more on boosting bilateral ties with China in a bid to make the United States "jealous" of the Asian superpower after a row over Iraq policy. "Our strengthening of ties is not exclusive to China because the same is done with the US and Japan. In fact, I think these go side by side and reinforce one with the other," Mr. Romulo said. He, however, admitted that the state visit capped the "highest point" of Philippine-China diplomatic relations established in 1975. Mr. Romulo expressed optimism that the $20-billion target in trade volume by 2009 would be met noting that this year alone, trade volume between the two countries reached $7 billion for the period of January to July. -- AFP and Ma. Eloisa I. Calderon

House body bucks proposed assets statement filing

The mandatory filing of statements of assets, liabilities and net worth (SALNs) by taxpayers constitutes an invasion of privacy, legislators said yesterday. The House of Representatives ways and means committee has been deliberating a substitute bill for four measures that propose a tax amnesty. Section 1 provides for the mandatory filing of SALNs by "every person, natural and juridical" deriving gross income of at least PhP100,000 or owning properties with an acquisition cost of at least the same amount. Antique (Western Visayas) Rep. Exequiel B. Javier, committee vice-chairman, said the filing constitutes an invasion of privacy and taxpayers will be essentially producing evidence against themselves. He was seconded by Ilocos Sur (northern Luzon) Rep. Salacnib F. Baterina, who said taxpayers will in effect be admitting they evaded taxes.

Finance undersecretary Grace P. Tan stressed during the committee hearing yesterday that the mandatory filing will be useful in building a taxpayers' database. The DoF has proposed not just a one-time submission but an annual submission of SALNs. She was supported by Quezon (southern Luzon) Rep. Danilo A. Suarez, author of one of the four tax amnesty bills, who said the tax amnesty will go beyond generating revenues as it will also serve as a tool -- together with a lateral attrition program -- in improving tax administration. -- Judy T. Gulane

Philippine bonds steady after talk of new issuance

HONG KONG -- Asian dollar bond spreads tightened a tad yesterday after a modest improvement in the US job market, while Philippine sovereign dollar bonds held steady following a sell off last week on talk of fresh supply. Activity was muted because of the US Labor Day holiday. The US economy created 144,000 new jobs in August, just below analysts' forecast of 150,000 and not enough in the market's view to make the Federal Reserve raise interest rates more aggressively. A market source said on Friday the Philippines had mandated Credit Suisse First Boston, Deutsche Bank and J.P. Morgan to sell a dollar-denominated bond. The source gave no further details, but the market speculated the proposed bond issue would be US$500 million to US$1 billion in size and would have a 25-year maturity. Philippine sovereign dollar bonds due in 2014 were steady at 96.25/97 in price terms, but they fell almost one point compared with Friday's levels. "There had been some selling, but so far the selling has been contained," said a trader at a US bank. It is also not clear whether the proposed bond by the Philippines would be raised on behalf of debt-laden National Power Corp. (Napocor). Apart from its own financing needs as it battles a yawning budget deficit, Manila needs to raise a further US$750 million for Napocor in 2004.

The Philippines was expected to hold calls with investors early this week to soothe their concerns after recent comments by President Gloria Macapagal Arroyo of a fiscal crisis. "The Philippines has a bit of work to do in terms of explaining the situation to investors and giving them confidence in the strategy to address the fiscal deficit," said a sovereign analyst who declined to be named. "After comments by Arroyo, investors want to know exactly what's the status in terms of public sector debt and what the government intends to do in the near term." The Philippine government, the most active issuer of sovereign bonds in Asia, last raised 350 million euro through the reopening of its existing 2010 bonds in late July.

The government wants to cap the deficit this year at P197.8 billion (US$3.53 billion), or 4.2% of gross domestic product, slightly less than last year's P199.9 billion. For the first seven months of the year, the budget deficit was P99.41 billion. Five-year Philippine credit default swaps -- insurance-like contracts that offer bondholders protection against debt default -- widened by five bps to 450/460 bps. Spreads on ports-to-telecoms conglomerate Hutchison Whampoa Ltd.'s bonds due in 2014 narrowed by two to three bps to 166/160 bps over comparable US Treasuries. PCCW Ltd.'s bonds due 2013 moved in by two to three bps to 128/122 bps over, in line with the broader market, despite a report that a plan to sell its core business to a mainland Chinese carrier may fall apart as the two have so far failed to agree on a valuation. Traders said the report had no immediate impact because the market had not expected a deal till October or November. ICBC (Asia), a Hong Kong-listed mid-size lender, launched marketing for a US$300 million, five-year bond in Hong Kong on Monday. The roadshows will move to Singapore today and London on Wednesday, and pricing is expected shortly after. Goldman Sachs, HSBC and J.P. Morgan are the lead managers for the proposed bond sale.

September is expected to be a busy month for Asian dollar bond issues with analysts expecting US$4 billion worth of fresh debt to hit the market. South Korean sovereign dollar bonds due in 2013 were steady at 70/65 bps over Treasuries, despite Fitch Ratings saying that the country's economy faced more downside than upside risks such as a prolonged slump in domestic demand, whose recovery relies in large part on a pick-up in employment. -- Reuters

BPI cash dividend gets nod

Bank of the Philippine Islands stockholders as of Sept. 18 are entitled to a special cash dividend of one peso per share. The Bangko Sentral ng Pilipinas has approved the said cash dividend on the outstanding common shares of the capital stock of the country's second largest lender. "In accordance with our board of director's resolution, the said cash dividend is payable to the said stockholders on Oct. 3," the bank said in a disclosure to the Philippine Stock Exchange.

The Ayala-led bank's net earnings rose 32% to PhP3.5 billion in the first semester from PhP2.6 billion last year. Total revenues grew by 21% to PhP5.7 billion driven primarily by a 30% increase in net interest income. It is the only local bank to be accredited as independent custodian and the first bank which will act as such through its Asset Management and Trust Group. As the group manages over PhP130 billion, the bank believes its experience in this field will certainly place the second largest lender in the forefront of the custodianship business.

Maynilad given until Oct. 4 to submit revised rehab proposal

By CECILLE S. VISTO, Sub-Editor

Lopez-led Maynilad Water Services, Inc. is treading on dangerous grounds and risks the dismissal of its rehabilitation case if it fails to come up with a fresh corporate recovery plan by Oct. 4. Although Quezon City Regional Trial Court Judge Reynaldo B. Daway has given Maynilad until next month to come up with a new strategy to return the company to financial profitability, he stressed the case will be dismissed in the event the utility does not meet the deadline. Mr. Daway said court rules on rehabilitation provide that an acceptable recovery blueprint must be submitted within 180 days from the first hearing "otherwise the case will be automatically dismissed." Maynilad sought debt reprieve and rehabilitation in November. Creditors appeared in court for the first time on Jan. 7. The 180-day deadline will lapse on Oct. 4.

In August, the water concessionaire was given until Sept. 5 to come up with a new rehabilitation plan following the decision of the state-run Metropolitan Waterworks and Sewerage System (MWSS) to draw its entire $120-million performance bond and abandon the debt-to-equity swap agreement it earlier inked with Maynilad. The utility was supposed to file a new rehabilitation plan yesterday to supplant the original strategy of allowing the government to take over Maynilad, pave the way for the exit of the Lopez Group from the corporation and converting into long-term loans the firm's debts to several banks. However, the company's lawyers sought a 90-day extension in the guise of allowing the trial court to resolve other pending incidents relating to the case. It noted, among others, that there were still other Maynilad creditors who want to be included as parties to the case.

Maynilad counsel Joshua Paraiso, in seeking the extension, said Maynilad has "demonstrated by convincing and compelling evidence that it may be successfully rehabilitated." "The resolution of these issues cannot be rushed considering the number of parties involved, the complexities of the issues being discussed and dealt with and the occurrence of supervening events and circumstances beyond the control of the parties and the concurrent obligation of this court to afford all parties due process," Mr. Paraiso said. BusinessWorld sources, however, said as of the last board meeting on Aug. 20, Maynilad President Fiorello Estuar had no concrete details on the alternative rehabilitation plan. Bank creditors added discussions had been limited between Maynilad and MWSS and their lawyers. The new recovery plan must be acceptable to at least majority of the creditors. MWSS accounts for some 40% of Maynilad's PhP18-billion unpaid debts, mostly in unpaid concession fees. Not wanting to throw the case outright, Mr. Daway granted the plea of Maynilad for additional time to come up with a rehabilitation blueprint. "This Court finds that the ends of justice shall be served better if the same [referring to the request for extension] is granted," Mr. Daway said.

Napocor claiming PhP3B from 3 gov't agencies

The National Power Corp. (Napocor) is seeking some PhP3 billion in debt payments from three government agencies for which it made debt service advances for an infrastructure project.Government document showed that in 1998, Napocor provided PhP3.05 billion for the construction of the San Roque multipurpose project in behalf of the other proponents of the project. These are the Departments of Agriculture (PhP2.073 billion), Environment and Natural Resources (PhP937.28 million) and Public Works and Highways (PhP39.27 million). Napocor raised the amount in behalf of the three agencies as it would be easier for a government-owned and controlled corporation to disburse funds compared to a government agency.

As such, the three agencies sought the financial assistance of Napocor and provided PhP3.05 billion for the San Roque multipurpose project. The three agencies signed a memorandum of agreement with Napocor, committing to appropriate funds to pay the state utility firm gradually. According to a government document, however, Napocor said it had not been able to collect from the three agencies even as they earlier committed to pay their obligations. The San Roque dam was one of the flagship projects of the Ramos administration. In 1997, Napocor entered into a deal with the San Roque Power Corp. to build, operate and maintain the project for 25 years, within which time it would sell its generated power to Napocor. -- Iris Cecilia C. Gonzales

Waterfront confident Pagcor will renew casino lease pact

CEBU CITY in Central Visayas -- A top official of Waterfront Philippines, Inc. expressed confidence that the Philippine Amusement and Gaming Corp. (Pagcor) will renew its contract of lease of casino venues at Waterfront hotels. Waterfront Chairman Renato B. Magadia said the lease contract will expire in December 2008 unless shortened or renewed by both parties sooner. "Our hotels were built for casino operations. There's an automatic clause [in the lease contract] that we are co-terminus. If Pagcor renews, then we will renew," he said. Pagcor and Waterfront signed an amended lease contract in January last year, which revoked the exclusive right of Waterfront to provide the venue for land-based casinos in Cebu. So far, Pagcor has opened a slot machine arcade at Garwood Hotel at Fuente Osmeña rotunda aside from the casinos at Waterfront Cebu City Hotel and Waterfront Mactan Casino Hotel. Pagcor was earlier reported to be conducting due diligence on the idle Cebu Plaza Hotel, a potential site for another casino.

Meanwhile, Mr. Magadia said they were prepared to resume their gaming operations as soon as customer traffic improves. Waterfront suspended the operations of subsidiary Club Waterfront International, Ltd. last year due to a decline in customer traffic. Club Waterfront is tasked to handle international marketing and promotion of hotels and casinos. "This was one very negative development last year. It was a major setback. But we are slowly recovering," Mr. Magadia said. The downturn in customer traffic was blamed on the political instability in the country. As a result, gaming operations contributed only 8% to Waterfront's total revenues last year. Relatedly, Waterfront hotels are preparing for the influx of Chinese tourists in view of the reported lifting of visa restrictions for Chinese nationals. Patrick C. Gregorio, president of Waterfront, said they support the thrust of the Department of Tourism to attract more Chinese tourists to the country. But he said there's a need to lower marketing costs. -- Marites S. Villamor

Internet firm to venture into depot business

Internet and telecommunications firm Island Information & Technology, Inc. will venture into a container yard depot project. Serafin B. Linda, corporate secretary, informed the exchange in a disclosure that their board approved the proposal of their chairman, James Shih, to enter into the business. Aside from the container yard depot, Island Information & Technology will also explore other related businesses like trucking, hauling and handling. "[The board of directors] believed that the establishment of these projects at this point in time is proper and timely due to the voluminous shipments that are coming in and out of the country every day," Mr. Linda said. He said the country's container yards are inadequate to facilitate shipments, while many are ill-equipped.

Based on the disclosure, the company also cited the personal and business connections of owners of cargo shipping vessels, mostly from Taiwan and mainland China. "The personal and business connections] would be a big help to make these projects very viable," said Mr. Linda in the disclosure. - - R. J. F. Calayag

Jardine Davies to create wholly owned subsidiary

Listed firm Jardine Davies, Inc. is setting up within the month a wholly owned subsidiary that will operate as a holding firm. Based on the company's disclosure to the stock exchange, the new firm, to be named Jardine Davies Investments, Inc., will have a minimum capitalization of the peso equivalent of $200,000, roughly PhP11.2 million. A company official told BusinessWorld they will soon be filing incorporation papers at the Securities and Exchange Commission (SEC). Jardine Davies' board of directors approved the proposal yesterday. "We hope to do so in the next two to three weeks," the official said. The subsidiary to be formed will be a holding company. Its incorporators will mainly be the directors of Jardine Davies, Inc., who are all residents of the country, added the source.

The directors of Jardine Davies, Inc. as of May 28 include Timothy T. Bennett, Aloysius B. Colayco, Gil E. Cortez, Ben Keswick, Euney Marie Mata-Perez, James Riley, Geoffrey D. Thomas and Frances Fidelis C. Ignacio. Mr. Colayco took over as chairman and president of Jardine Davies, Inc. last June 4. The company is one of the oldest and most diversified firms in the country. It is into marketing and distribution of agricultural chemicals in the Philippines. Jardine Davies also manages building and industrial materials, middle income housing, financial services, corporate services, agricultural supplies and sugar milling through its wholly owned units, subsidiaries and associates. It has branches in Cebu, Davao, Bacolod, and Iloilo. In June, the board of directors of Jardine Davies approved the increase in the company's capital stock to PhP1.36 billion, almost six times as much as the previous PhP200-million level. -- R. J. F. Calayag

Stocks end higher for fourth day

By ROULEE JANE F. CALAYAG

Excitement filled the stock market yesterday as share prices closed higher for the fourth straight session, dousing fears of an early end to a most-awaited rally. Early on, anxiety began to gnaw on investors as share prices kept sliding through most of the session.

TELECOM

Telecom stocks held the fort with Pilipino Telephone Corp. (Piltel) and parent Philippine Long Distance Telephone Co. (PLDT) among the top traded stocks. Piltel, the second most active stock, closed at PhP2.85 with over 22.2 million shares traded for PhP63.1 million. Telecommunications giant PLDT followed, closing at PhP1,340 with 43,000 shares worth PhP58.4 million. Earnings prospects for Piltel and PLDT propped up the market. Piltel is optimistic of cornering a bigger market share as sister company Smart Telecommunications, Inc. completes the acquisition of 92% of its stake this month. Hong Kong-based independent telecommunications specialist Bain Consultants is reportedly looking at a sharing agreement that will favor Piltel. Napoleon L. Nazareno, Piltel chairman and Smart president, said Piltel's Talk 'N Text sales may increase once the revenue-sharing agreement is completed. Half of Piltel's revenues currently go to Smart for the use of its network. Given this relationship with Smart, Piltel's earnings will likely grow, Mr. Nazareno said.

BUILDING BASE

Rommel Macapagal, chairman of Westlink Global Equities, Inc., said the market moved sideways as it built base. This explained the shockwaves that reverberated in the market that almost dampened sentiment. Although some technical corrections were expected, the market was hoping that this would not happen too soon. Investors were primed to experience corrections toward the later part of the week. "It was good that the market made a strong close, reaching a 13-week high, after moving sideways," said Mr. Macapagal. He said the market was only building base when it launched into a sideways movement that led to an initial wave of declines in share prices. Amid the euphoria of what some say as a slowly unfolding stock market bull run, Mr. Macapagal expressed hopes that this would continue. "We will be waiting in a few days to see if there will be a follow through and if volumes will keep coming in," he added.

PHISIX

At the stock market, the Philippine Stock Exchange composite index (Phisix) advanced 5.58 to 1,633.54. Trades improved at 3,401 with volume turnover of over 3.3 billion shares valued at only a little over half billion, or PhP556.7 million. Gainers and losers were equal in number at 31 each. However, there were more stocks that held on to their previous prices at 50. The commercial-industrial index led the counters, up 13.22 at 2,624.64. Mining followed suit, up 11.27 at 1,754.38. Property managed to jump into the wagon, snatching 2.12 at 540.62. Oil lagged behind, marginally up by 0.02 at 1.61. Meanwhile, banks and financial services slipped 2.79 to 461.18. The all shares was down 0.64 at 1,026.96.

Second-liners were actively traded in the session. "This shows that local market players are active," said Mr. Macapagal. These included Metro Pacific Corp., which was the most actively traded stock, Bacnotan Consolidated Industries, Inc., DMCI Holdings, Inc., Omico Corp. and Manila Mining Corp. With expectations hinged on the market's extended rally, Mr. Macapagal sees the support level within the range of 1,600 and 1,620. "We will try to attempt to overcome 1,650 if we sustain the momentum," he said.

FACTORS

A confluence of other factors also helped sustain interest in the market. Among these was the statement of Economic Planning Secretary Romulo Neri. He said despite the rise in inflation to 6.3% in August from 6% in July, the Bangko Sentral was right when it decided to keep interest rates unchanged. The statement reportedly helped buoy investors' sentiment which was about to weaken due to concerns on rising inflationary pressure. The improved economic outlook of investment bank Morgan Stanley for the country was also critical in pushing the index to a new high. Daniel Lian, economist for Southeast Asia at Morgan Stanley said in a paper: "The Philippine economy has performed better than we expected in the first half [of 2004]... Despite our belief that economic deceleration is already underway in the third quarter, we are raising our full year 2004 GDP [gross domestic product] forecast from 4.5% to 5.6%." Mr. Macapagal noted that the government's moves to address fiscal concerns also help in slowly building the confidence of investors. The rally may cut to a temporary halt next week as part of expected technical corrections. But Mr. Macapagal is keeping his hopes up that the stock market will be able to recover immediately, especially as the Chinese ghost month winds down later this month. The ghost month of September is a tradition which promotes inactivity to avoid encounters with ghouls. It is observed generally by the Chinese, who comprise many of the investors at the local bourse. "With the ghost month almost over, we hope to get better trading volumes soon," said Mr. Macapagal.