Wednesday, September 15, 2004
Finance dep't keen on limiting VAT exemptions
Gov't debts hit PhP5.9T
Overseas Filipinos sent $4.7B in seven months -- Central Bank
PEA told to draft Manila Bay dev't plan
PNOC, DBP, Sweepstakes officials among top earners in gov't service
Napocor debt plus deficit highlights need for new taxes
Tax bureau tops August target
Three-year T-bond rate rises
Philippine bond risk premiums ease after sell off
LMG to lose PhP1M daily during plant shutdown
Transco to upgrade Biņan-Dasmariņas line
Wind-powered plant also set for upgrade
San Miguel sees $300-M savings thru sourcing tack
Electronic stock registration system to be online by Oct.
Aussie, Canadian firms tie up for RP mine projects
Stocks pause after nine-day climb

Tuesday, September 14, 2004
State tax research body presses for appraisal authority
NSC sale far from over
Palace defends revenue 'pain package'
SEC backs Central Bank circular regulating securities holdings
Clark airport expansion to start soon
PBSP counted among Asia's best NGOs
Senators skeptical over proposed line-item budgeting
Moderate fuel price hikes seen next month
Senators push anti-smuggling task force revival
ADB ready to give more power reform funds
National Treasurer Figueroa resigns over 'policy differences'
Gov't lets T-bill rates move up
PNB seeks PhP17.5-M tax refund
Metrobank to spend 320M pesos to upgrade computer system
BPI using new channels to teach online banking
Maynilad rate hike looms
PNOC bags PhP20.5-M Japan funding for hydropower project
Mondragon defers annual meeting anew
Stocks sustain rise on positive leads

September 7 - 9

September 1 - 3






Finance dep't keen on limiting VAT exemptions

The Department of Finance (DoF) wants Congress to limit exemptions to the value-added tax (VAT) to widen the tax base and raise more money for the government. Finance Secretary Juanita D. Amatong told a Senate hearing yesterday that her office was drafting a bill listing the exemptions to be removed. But she declined to detail them, telling senators Finance was still "studying" them.

The Tax Reform Act of 1997 exempts several transactions from VAT:

  • sale of non-food agricultural products, cotton, copra, and marine and forest products;
  • sale or importation of agricultural marine food products in their original state, livestock, breeding stock and genetic materials;
  • sale or importation of fertilizers, seeds, seedlings, fish, prawn, livestock and poultry feeds;
  • sale or importation of coal and natural gas, petroleum products subject to excise tax;
  • importation of passenger or cargo vessels of more than 5,000 tons;
  • importation of professional instruments, wearing apparel, and domestic animals;
  • services from persons subject to percentage tax: agricultural contract growers, those engaged in medical, dental, hospital, veterinary and educational services;
  • sale by the artist of his art, literary works musical compositions.
  • recently, a new law exempted doctors and lawyers from VAT; and
  • services rendered by the regional or area headquarters of multinational corporations in the country which act as supervisory, communications and coordinating centers for their branches in the Asia-Pacific Region and do not earn income from the Philippines.

Ms. Amatong said too many exemptions prevented the government from collecting more VAT. Revocation of these exemptions will result in higher VAT collections, she added, although she did not say by how much. VAT accounts for as much as 20% of BIR's annual tax collection. It was adopted locally in 1988, replacing 12 different kinds of indirect taxes such as annual fixed taxes and sales tax from manufacturers. It initially covered only the sale and importation of goods, but in 1996 it was expanded to include most types of services. Finance is also proposing to Congress a two-step increase in the VAT rate:

  • to 12% in 2006 if VAT collection does not reach 3.6% of the value of total economic output in 2005; and
  • to 14% in 2007 if VAT collection does not reach 4.1% of gross domestic product in 2006.

The International Monetary Fund reportedly wants the government to raise the VAT rate to 15%, so VAT collection can go up by an estimated PhP10 billion annually. -- Karen L. Lema



Gov't debts hit PhP5.9T

Combined debts of the national government and the public sector reached PhP5.9 trillion as of end-2003, the Department of Finance reported yesterday. Budget undersecretary Laura Pascua said debt continued to pile up because the deficit remained unabated. She said the government was forced to borrow to brigde the fiscal gap and bail out debt-rideen government-owned and -controlled corporations like National Power Corporation. Freedom from Debt Coalition figures show the Arroyo government borrowed PhP958.1 billion between 2001 and 2003. Programmed borrowings for this year alone amount to PhP411.9 billion -- to total to PhP1.328 trillion in borrowings from 2001 to 2004.

In comparison, the Aquino government (1986 to 1992) borrowed PhP383.3 billion; the Ramos government (1992 to 1998) PhP401 billion; and the Estrada government, PhP725.1 billion. Senate committee on finance chairman Manuel B. Villar, Jr. has pushed for a legislative inquiry on the consolidated public sector debt and government debt servicing. This aims to ensure that the cash-strapped government exercises prudent spending. "The Philippines needs to come to grips with the fiscal deficit and the debt problem. The deficit remains unmanageable while the public debt is now calculated to be 80% of the gross national product," Mr. Villar said in a resolution. The government aims to trim the consolidated public sector deficit to 3% of gross domestic product by 2009, from the current 6.7%. -- Karen L. Lema



Overseas Filipinos sent $4.7B in seven months -- Central Bank

Dollar remittances from about eight million overseas Filipino workers (OFWs) rose by 5% or $228 million to $4.7 billion in seven months to July, from about $4.5 billion in the same period a year ago. Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) reported yesterday that in July alone, dollar remittances jumped by 14.5% year on year to $734 million from $641 million. BSP attributed the rise to an increase in the number of Filipino workers abroad. BSP said more Filipinos have left to work abroad because of the lack of gainful opportunities in the country.

Data from the Philippine Overseas Employment Administration showed that the total number of deployed workers as of July rose by 9.2% to 569,877 workers from 521,818 as of end-June. Nevertheless, this growth rate is below the 6% increase that will allow the government to reach its full-year OFW remittance goal of $8 billion, from $7.6 billion last year. BSP is optimistic that remittances will improve as OFWs adjust to stricter transfer requirements by their host countries. "Robust demand for Filipino workers is expected to continue because of their skills and professionalism," BSP officer-in-charge Alberto V. Reyes said yesterday. Filipinos abroad comprise of engineers, caregivers, doctors, nurses, performing artists, managers, and office personnel, among others. BSP said there was an increase in the number of production workers, caregivers, professionals, and service workers in July. Aside from an increase in deployment of workers, BSP said many Filipinos have already adjusted to stricter fund transfer requirements of some countries.

Saudi Arabia in particular, stepped up its anti-money laundering efforts and imposed tougher rules for financial transactions with the Philippines, which remains on an international roster of dirty money havens. "The continuing efforts by domestic commercial banks to expand access to banks by Filipino workers abroad also improved remittances," Mr. Reyes said. Dollar remittances can also pick up in the fourth quarter as offshore workers send money to their families for their Christmas spending, BSP said.

The government counts a lot on dollar remittances from OFWs to help keep the economy afloat. Dollar inflow contribute to economic growth through consumer spending by OFW beneficiaries in the country. OFWs also invest their money in small and medium businesses and real estate. Dollar remittances also form part of the country's current account, a big component of the balance-of-payments, which reflect movements in trade. Actual dollar inflows to the country is estimated to be higher. Central bank estimates that more than $5 billion in remittance pass through informal channels like couriers and moneychangers. Sources of dollar remittances in July include Hong Kong, Singapore, Italy, United States, United Kingdom, Saudi Arabia, and the United States. -- Iris Cecilia C. Gonzales



PEA told to draft Manila Bay dev't plan


The Department of Finance (DoF) has ordered Public Estates Authority (PEA) to come up with a five-year development plan for the Manila Bay Reclamation area. PEA general manager and chief executive officer Teodorico C. Taguinod said his office was already drafting the development map for Bay City, which would be submitted to Finance Secretary Juanita D. Amatong. The directive to put together a master plan for the 1,500-hectare Roxas Boulevard reclamation area was the first official order that the Finance department handed down since it took over PEA. President Gloria Macapagal-Arroyo issued Executive Order No. 329 on July 19, 2004 transferring control over PEA to the Finance department, from the Department of Public Works and Highways. "It will be a blueprint covering 2005 to 2010. It will detail how we envision how the Bay City should be," Mr. Taguinod told BusinessWorld. PEA is the government agency responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the government. Bay City is its main project. Although the development plan is not yet complete, Mr. Taguinod said, the area will be divided into various zones: residential, commercial and office, and even entertainment.

Within the next five years, state-run Philippine Amusement and Gaming Corp. -- another government corporation recently transferred under DoF supervision -- is expected to build an entertainment city that will be the biggest in Asia. The SM Group is also set to wrap up construction next year of its 50-hectare Mall of Asia, which will be one of the biggest shopping and leisure complexes in the region. Mr. Taguinod said the SM mall would also have a coliseum that would be bigger and more modern than the Araneta Coliseum in Cubao, Quezon City. The Mall of Asia is SM Prime's biggest project to date. It is envisioned to become a premier shopping destination and tourist attraction at the Manila Bay-Roxas Boulevard area, which was once a popular tourist and leisure hub. PEA is also planning to put up its own baywalk, similar to the Roxas Boulevard project of Manila Mayor Joselito Atienza. It will located at the Promenade area at the back of the SM property. A seven-kilometer restaurant row will also be put up. Spaces will be leased out to concessionaires, with PEA directly supervising baywalk operations.

Bay City property owners such as SM, the Metrobank Group, Asiaworld Properties, and Manila Bay Development Corporation will also have a hand in overseeing the development of Promenade. "It will be bigger and better than the existing baywalk in Manila. We are putting this up to encourage more traffic into the area," Mr. Taguinod said. Ms. Arroyo had invoked her power under the Administrative Code of 1987 when she transferred PEA under the DoF two months ago. The move was consistent with the government's bid to raise additional income for the government. The Finance department now exercises supervisory powers over the finances of PEA. Under the law, 50% of the net income of government-owned and controlled corporations should be remitted to the national government as dividends. PEA, a government corporation that enjoys fiscal autonomy and does not receive funding from the national government, hopes to make around PhP1.4 billion to PhP2.5 billion from the sale of a five-hectare, 11-lot block at the Manila Bay reclamation area this month. PEA will also sell eight lots, totaling 11 hectares, sometime next year after these will have been duly valued by accredited appraisal companies.



PNOC, DBP, Sweepstakes officials among top earners in gov't service

By KAREN L. LEMA, Reporter

Philippine Charity Sweepstakes Office (PSCO) and Philippine National Oil Company-Energy Development Corp. (PNOC-EDC) officials are among the highest paid in government service based on a Commission on Audit (CoA) report. The heads of the Development Bank of the Philippines (DBP), the Securities and Exchange Commission (SEC) and the Landbank of the Philippines have also the fatest paychecks among government-owned and-controlled corporation (GOCC) officials. Budget Secretary Emilia T. Boncodin made this disclosure yesterday during a Senate hearing based on a 2001 and 2002 COA report. Ms. Boncodin and Finance Secretary Juanita D. Amatong said that they were surprised to learn that salaries of some GOCC and government financial institutions (GFI) heads exceed even those of private sector counterparts not only in the country but also in the region. "They were approved because they were exempted from the salary standardization law," Ms. Boncodin was quoted earlier as saying. While it is "not illegal," Ms. Boncodin said it is "unconscionable to get PhP600,000 a month" when the country is having "financial difficulties."

In 2001, PCSO chairman Maria Livia Singson, sister of former Ilocos Sur Governor Luis "Chavit" Singson was the highest paid GOCC official at that time getting PhP9.8 million in annual salaries. The amount, Ms. Boncodin said is inclusive of allowances. Second on the list is the PCSO general manager Virgilio Angelo, with PhP6.5 million. He is followed by DBP President Remedios Makalincag who got PhP5.3 million in salaries in 2001. With PhP5.2 million in annual salaries, then SEC chair Lilia Bautista was number four on the list followed by PCSO general manager Ricardo Golpeo with PhP4.1 million. In 2002, PNOC-EDC chairman and president Sergio Apostol ranked first with PhP92 million. From number seven in 2001, DBP Chief Operating Officer Edgardo Garcia became the second highest paid GOCC official in 2002 getting PhP7.5 million, up from his 2001's pay of only PhP3.8 million.

Third on the list is PNOC-Exploration Corp. President and Chief Executive Officer (CEO) Rufino Bomasang with PhP6.1 million. He is followed by the DBP President and CEO Victor Villar with PhP6.6 million. Trailing him are Thelmo Cunanan, then President and CEO of PNOC with PhP6-million, DBP executive vice-president Pancer Tumangan with PhP5.9-million, DBP senior vice president Elizabeth Ong with P5.9-million, Government Service Insurance System President and General Manager Winston Garcia with P5.6 million, DBP executive vice-president Rolando Geronimo, with P5.5 million, and Vivencio Macapagal, also an Executive Vice-President of DBP with PhP5.3 million. Ms. Boncodin said such high paychecks should no longer be allowed now given the government's fiscal problems. "We just would like to call attention to the fact that we are all in this together and hindi pwedeng may anak ng Diyos (there can't be no exemptions)," she added. With the release of the CoA report, Ms. Boncodin hopes that those named would voluntarily have their fat paychecks cut.

Ms. Boncodin earlier told reporters the government is studying the possibility of capping the salaries of officials and employees of GFIs and GOCCs if only to reduce state expenses as well as the budget deficit. She said that the exemption from salary standardization was also under review because it was being "abused." The National Power Corp., DBP, GSIS are some of the institutions that are exempt from the law's coverage. After reading the CoA report, Senate finance committee chairman Manuel B. Villar, Jr. proposed the rationalization of the salaries and benefits of top GOCC officials. "Poor management should not be rewarded with fat salaries. If these officials were in the private sector, they would have been fired," Mr. Villar said. "The heads of GOCCs must be held accountable for the state firms' financial troubles. There is a need to look into the fiscal prudence of our public debts. The government should determine the weakness in its fiscal management and address them immediately," he added.



Napocor debt plus deficit highlights need for new taxes

The national government's deficit reduction schedule may have to be extended in case the government absorbs PhP500 billion in National Power Corporation (Napocor) debt and none of the Palace-proposed revenues are passed by Congress. As long as all eight revenue measures are passed, the government will be able to wipe out its budget deficit by 2009 even if it absorbs all of Napocor's debts, a Finance department executive told reporters yesterday. Malacaņang has said these new taxes will help earn the government PhP80 billion in annual revenues. "The government could pay off the debts of Napocor by raising the deficit and pay it through borrowings or raising enough funds through new taxes to cover the additional obligations," Budget undersecretary Laura Pascua said in a chance interview.

Senator Sergio Osmeņa III yesterday said during a Senate hearing that the absorbing the cash-strapped utility's debts would mean an additional PhP36.7 billion interest expense next year, PhP45.5 billion in 2006, PhP48.8 billion in 2007, PhP53.2 billion in 2008, PhP61.2 billion in 2009 and PhP66.3 billion in 2010. The government's proposed PhP907.6-billion budget for 2005 already covers PhP301.69 billion in interest payments, excluding those of Napocor. Budget Secretary Emilia T. Boncodin said it is crucial that Congress enacts the new taxes to help the government earn additional income. If Congress fails to do so, she said the government might be "delayed" in meeting its target of balancing the budget by 2009. Finance Secretary Juanita D. Amatong admitted that she is unsure of convincing Congress to pass the new tax laws. This is the reason why the Department of Finance this early is looking at alternative measures by which it could raise additional income, like taxing overseas Filipino workers.


During the Senate hearing, Senate President Franklin M. Drilon expressed concern over the policy direction outlined by Socioeconomic Planning Secretary Romulo L. Neri. "That the government will assume PhP500 billion in Napocor debts is already a policy? Is that the decision of the economic managers or you are just talking at the top of your head?," Mr. Drilon asked Mr. Neri. Mr. Neri said the policy for achieving energy independence already includes the absorption of the state-run utility's debts. This was confirmed by Finance Secretary Juanita Amatong. Mr. Osmeņa scored the government economic managers for giving a "false picture" on the Executive department's plan to Napocor's financial burden.

The opposition lawmaker also expressed doubts on Mr. Neri's projection that the private sector will invest in the power sector starting next year until 2006, a point echoed by Mr. Drilon. "The Department of Energy said we need more than $5 billion in capital for the power sector. We need this next year so by 2008 the new generating plants will be in place," Mr. Drilon told reporters after the briefing. But with the projection that investments will start pouring only by next year, the new power plants will be completed by 2009 since the plants require a four-year gestation period. "I would suggest that a review should be made on this macroeconomic forecast," Mr. Drilon said. -- K. L. Lema and C. I. Roncesvalles



Tax bureau tops August target

Revenue collection targets were surpassed in August, the Bureau of Internal Revenue (BIR) said in a statement yesterday. The BIR said collections for the month hit PhP43.128 billion, slightly over the PhP43.114-billion target and PhP4.693 billion above collections in July last year. Total collections for eight-month period reached PhP311.211 billion, exceeding by PhP29.803 billion collections for the January to August period in 2003. The tax bureau said it is optimistic that it will meet its PhP477-billion year-end target despite poor tax collections in the first semester. The BIR, which accounts for over 80% of government's revenues, is under pressure meet its revenue goals to allow the government to keep the 2004 budget deficit below a programmed PhP197.8-billion cap.

The tax bureau attributed its positive performance to its continuing Tax Compliance Verification Drive and special operations geared to enhancing taxpayer compliance . The Bureau's Large Taxpayer Service, which surpassed its PhP24 billion target by PhP927-million, likewise contributed to the bureau's successful collection performance in August. It has recently stepped up it campaign against tax evaders and filed series of tax evasion cases against more than 20 business establishments who have allegedly cheated the government of hundreds of millions of pesos by underdeclaring value added tax payments. The BIR has admitted the huge amount of money lost to tax evasion has contributed to the deficit problem. Several lawmakers have claimed that the government can do without new tax measures. They said that improving tax efficiency should be more than enough to solve the country's fiscal woes. -- Karen L. Lema



Three-year T-bond rate rises


The government yesterday rejected most of the bids for its reissued three-year Treasury bonds, saying it was maximizing all fund sources and that its borrowing plan was still on track. At yesterday's auction, the T-bonds fetched a yield-to-maturity rate of 11.594% or up by 59.4 basis points when it was last auctioned on March 9. "We are still on program. We are maximizing all sources such as revenue collections, over-the-counter placements, and the auction. We will borrow when we need it. We don't want a negative carry; that's basic for a treasurer," Deputy Treasurer Eduardo S. Mendiola said after the auction.

Indicating strong market appetite, total tenders reached PhP11.224 billion against a public offering of PhP4.5 billion. The auction committee accepted only PhP2.2 billion worth of bids. "We capped the rate at 11.625%. Comparing it at the secondary market at [11.7733%] and the best bid at 11.625%. We still got cheaper; the average is much lower," Mr. Mendiola said. A trader said, "It's obviously higher, but the rates are already here." "The market took the cue from the two-year bonds which was awarded at 10.75%. We are looking for further developments. The Federal Reserve is expected to raise interest rates again, and the inflation is still there," a trader added.

The United States Federal Reserve is expected to raise US benchmark rates by another 25 basis points next week to fend off inflationary pressures. The market is also awaiting leads from the next Philippine inflation report. The trader said even if the Fed keeps rates steady, the Philippine market will still be on the losing end as it will be facing higher inflation. Another trader added that the yield curve of government securities was already steep. "Until when will the central bank sustain its overnight rates? This is really the trend now. We are looking at a negative real interest rate," the trader added, referring to rates adjusted for inflation.

Meanwhile, some traders also said the resignation of National Treasurer Mina C. Figueroa put additional pressure on the market. "You can't take away the negative connotation over her resignation at a time when we have the fiscal burden to overcome. You can't help but speculate," another trader said. Citing a "personal deficit" and her intention to move back to the private sector, Ms. Figueroa gave her letter of resignation dated September 10. Her resignation takes effect on October 15. She denied rumors of policy disagreements over the government's borrowings. Her decision also caused as a knee-jerk reaction from the peso the other day. Yesterday, however, the Philippine unit strengthened by almost five centavos against the US dollar, following the rally from regional currencies. The Thailand bath emerged as the big winner at 41.30 coming from 41.50. The peso was previously compared to the Thai currency. The Japanese yen, at last count, was at 109.70 from below 110.30. "The market can't seem to break the PhP56.25 resistance [level]. The dollar was already long over-bought," a currency trader said. At the Philippine Dealing System, the country's local currencies exchange, the peso averaged weaker by almost three centavos to PhP56.196 from PhP56.169. The local unit posted its intraday low at its opening value of PhP56.24. It finally settled at its intraday high of PhP56.165.



Philippine bond risk premiums ease after sell off

HONG KONG -- Philippine sovereign dollar bonds traded firmer yesterday, a day after these were sold off on Treasurer Mina Figueroa's resignation, while the regional market held mostly steady ahead of a flurry of new issues. Ms. Figueroa said on Monday she had resigned and would leave her post next month, adding to market concerns about the government's ability to manage a gaping $3.5-billion annual budget deficit. Philippine sovereign dollar bonds eased, following the news of her resignation.

On Tuesday, Philippine sovereign dollar bonds due in 2014 rose 0.5 point to 97.50/98.00 in price terms, while Philippine '25s also gained 0.5 point to 107/50/108.00. "With Philippine sovereigns still cheap versus the broader emerging market debts and with the repo market indicating still substantial short positions in most Philippine sovereign bonds, we maintain our recommendation for overweight portfolio positions and also recommend buying the RoP 2015, 2025 sovereigns," Barclays Capital said in a client note on Tuesday. Five-year Philippine credit default swaps -- a form of insurance contract for bondholders against debt default by the issuer -- were unchanged at 435/445 basis points (bps). Asian borrowers are expected to sell US$1.6 billion worth of fresh debt this week, following nearly US$2.2 billion of new issues being priced in the past week. The main focus of the primary market is a US$1 billion sovereign bond issue by South Korea. The South Korean government is expected to price the 10-year sovereign issue on Wednesday. The deal, lead managed by Barclays Capital, Citigroup, Deutsche Bank and JP Morgan, has so far attracted US$400 million of orders, a market source said.

South Korea began investor roadshows in Singapore on Monday and will continue in London on Tuesday and in New York on Wednesday. Spreads on South Korean sovereign dollar bonds due in 2013 were steady at 70/67 bps over US Treasuries. "In near term, the upside potential of Asian benchmark credits could be limited due to the supply risks concern, despite the continuous strong demand on Asian credit derivatives," BNP Paribas said in a report. Meanwhile, Malaysian casino and power group Genting Bhd. is expected to price a US$300 million, 10-year bond later on Tuesday at a spread of 132 to 134 bps above comparable US Treasuries.

Genting tightened the price guidance from an initial 137 bps over after the offering was six times oversubscribed, another market source said. HSBC and Citigroup are the joint bookrunners. The deal comes a day after Telekom Malaysia Bhd. sold US$500 million of 10-year bonds. The issue was heavily oversubscribed, attracting orders worth US$5 billion. The Telekom bonds due in 2014 were quoted at 109/106 bps over comparable Treasuries, tighter than the launch price of 112 bps over, as investors chased the issue in the secondary market. Malaysian issuers have raised nearly US$2.5 billion worth of dollar-denominated debt this year.Ports-to-telecoms conglomerate Hutchison Whampoa Ltd.'s bonds due in 2014 were stable at 165/163 bps over comparable Treasuries, while PCCW Ltd.'s bonds due in 2013 were steady at 130/120 bps over. -- Reuters



LMG to lose PhP1M daily during plant shutdown

By CECILLE S. VISTO, Sub-Editor and ROMMER M. BALABA, Reporter

Listed LMG Chemicals Corp. said it will lose at least PhP1 million daily as a result of the temporary closure of its plant in Pasig City. The plant will remain indefinitely closed until a multipartite monitoring team tasked to study the case deemed it safe to allow the resumption of its operations. In an interview, LMG Chairman and Chief Executive Antonio M. Garcia said the firm's 400 to 500 employees will be retrenched if the Pasig City government makes good its threat that it will no longer allow the plant to operate.

Moreover, some of the company's major clients -- including water utility Manila Water Co., which buys its water purification chemical from LMG and a number of food firms -- will also be adversely affected by government's refusal to lift the cease and desist order. LMG, an affiliate of Chemical Industries of the Philippines, Inc. (Chemphil), supplies clients with chemicals crucial to their products and services. "We ask the Pasig government and its mayor, Vicente Eusebio, to be rational. We create jobs and pay our taxes. We've been here since the 1960s and a small accident like this should not be used as basis to shut down the plant. Besides, there were neither injuries nor fatalities," Mr. Garcia told BusinessWorld. He estimated that it will take some two weeks before Pasig City government and the Department of Environment and Natural Resources could decide whether the plant should resume operations.

In the meantime, he said the company will abide by the government's order to hold all plant activities until further notice. However, the Environmental Management Bureau yesterday said it is "indefinitely" suspending operations of the sulfur plant. To recall, Mr. Eusebio ordered the facility closed on Monday after finding it "an imminent threat to life, health and property." Residents and pupils of nearby elementary schools complained last Friday of dizziness, nausea, difficulty in breathing and vomiting due to persistent sulfur acid-like odor coming from the plant. It was later discovered that at the time of the accident, LMG was replacing its acid circulating pump and that there was a leak in its heat exchanger.

In a cease and desist order, Mr. Eusebio said it will not allow LMG to reopen the plant until it installs additional control devices and review the possible sources of leaks. Environment and LMG officials met yesterday to discuss the company's alleged violations. Mr. Garcia said it will take at least two years for LMG to build another plant in case the Pasig City government makes good its threat that it will no longer allow the company to operate within its jurisdiction. "They [LMG] could not resume operations unless they have complied with the requirements," Environmental Management Bureau director Julian D. Amador told BusinessWorld yesterday. Mr. Amador however said the Pasig government had already issued an earlier cease-and-desist instruction and the bureau's closure order was just a reiteration to prevent further environmental and health effects until the company has remedied the situation. "We issued the order since they purportedly violated some provisions of Presidential Decree No. 1586. They have 10 days to file a motion for reconsideration, but they would remain closed," said Sixto E. Tolentino, Jr., the bureau's National Capital Region director, in another interview.

Presidential Decree No. 1586 provides for the establishment of environmental management-related measures. "We still have not imposed any penalties, just the closure order, as the monitoring team continues to study the area. The company nonetheless has admitted there was technical problem that resulted in the release of fumes in the area," Mr. Tolentino explained. LMG is involved in manufacturing, trading and chemical bulk storage. It is the largest sulfuric acid producer in the country, and the only domestic producer of detergent alkylate. The firm manufactures alkyl benzene, sulfuric acid, detergent sulfur and other industrial chemicals. A similar incident happened at the LMG factory about three years ago due to malfunction on its sulfur feed, emitting toxic fumes.



Transco to upgrade Biņan-Dasmariņas line


State-owned National Transmission Corp. (Transco) is shutting down the 230-kilovolt Biņan-Dasmariņas line to upgrade transmission capacity by 900 megawatts and address transmission line congestion in Luzon's generation hub. Alan T. Ortiz, president and chief executive, said in a statement the line will remain closed until yearend. Once upgraded, the capacity will be enough to meet the requirement of the Philippine Grid Code and transport the power generated by power plants in Southern Luzon, the Transco chief said.

Southern Luzon is host to the country's biggest power plants, from the baseload coal plant in Calaca and the Mak-Ban geothermal plant to the facilities running on natural gas harnessed from Palawan, Transco said. The concentration of mega power plants in the area, however, has put considerable strain in the capacity of the transmission network to transport power to major load centers in Luzon, it added. "Once the line upgrade is finished, the Ilijan gas-fired facility in Batangas can be dispatched up to 1,200 megawatts which is a significant increase compared to its current dispatch of 600 megawatts. By providing enough transport capacity to the power generated by the country's gas-fired plants, we are making significant progress in our effort to minimize our dependence on oil," Mr. Ortiz said. He added Transco will allow the Visayas region to reclaim about 400 megawatts of capacity which is exported to Luzon. This 400 megawatts will be enough to secure electricity supply to the entire Visayas. The line should have been upgraded five years ago but plans were not drawn up until Transco started operating independently in 2003, Mr. Ortiz said. "Ultimately, unclogging this bottleneck will optimize the use of Malampaya gas by allowing the gas-fired plants of Sta. Rita, San Lorenzo and Ilijan to be dispatched at their minimum energy quantity," he said.

Meanwhile, a congressional action is not needed in order to sell Transco, Justice Secretary Raul M. Gonzalez yesterday said. In a press briefing at the Department of Justice, Mr. Gonzalez said "unless you sell Transco, you will never be able to sell the assets. It's like selling farm in the mountains without any roads." Earlier reports said the government expects to raise up to $5 billion by end-2005 from the sale of the power plants and grids owned by the debt-strapped National Power Corp. -- with Ma. Elisa P. Osorio



Wind-powered plant also set for upgrade

The Northwind Power Development Corp. (NorthWind) is looking at upgrading the proposed 25-megawatt wind power plant in Bangui, Ilocos Norte to a 40-megawatt facility to improve power supply in the Luzon grid, the Energy department yesterday said. Energy Sec. Vincent S. Perez, Jr. yesterday said the firm made the decision following the recent ruling of the Energy Regulatory Commission granting National Power Corp., an average of 97 centavos per kilowatt hour increase in generation rates. Mr. Perez said the rate adjustment had encouraged investors to infuse money for capital-intensive projects. "The 40 megawatts committed by NorthWind will certainly beef up the generating capacity in the province to meet its growing electricity demand," he said in a statement. He said the construction of the plant will make the Philippines the first and largest wind power producer in Southeast Asia. The plant is seen to provide additional capacity to Ilocos Norte Electric Cooperative and improve the reliability and stability of supply in the region, he added. It is expected to become operational by early next year. Mr. Perez said the firm recently inked an agreement with international bank ABN-Amro, to finance the project, while Philippine Export and Import Bank guaranteed the loan.

Recently, the Energy department has released the Philippine Wind Power Investment Kit, which outlined the country's wind energy program as well as prospects and opportunities for the development, utilization and commercialization of wind power. It also unveiled some 16 wind power project areas in the country which have a total wind power capacity of 345 megawatts of electricity. Mr. Perez said investors are entitled to incentives such as waiver of production bonus on the first project and payment of production bonus to the government only after the project has fully recovered pre-operating expenses as stated under Executive Order 462, the law encouraging private sector participation in the exploration and development of ocean, solar, and wind energy resources.

Other incentives include income tax holiday, reduced duty rates for imported capital equipments, and other Board of Investments mandated incentives. Investors may also avail of financial assistance from the Development Bank of the Philippines, the United Nations Development Programme-Global Environment Facility and PhilEximBank. -- Bernardette S. Sto. Domingo



San Miguel sees $300-M savings thru sourcing tack


Food and beverage giant San Miguel Corp. said that it will save $300 million annually once it starts sourcing its raw material requirements from local farmers. In a statement, the company said that it spends "millions of dollars every year" from importing raw materials from the US, Argentina, and India. San Miguel imports raw materials for its feeds, liquor, and soft drinks businesses. It heavily imports cassava, corn, soybeans and sorghum. San Miguel Chairman Eduardo M. Cojuangco, Jr. said San Miguel's new raw material sourcing program -- which will source raw materials from local farmers -- will help farmers in the countryside as well as the government in terms of dollar savings. "We hope to develop these high-value crop growing sectors into a base for self-sufficiency, at least for San Miguel," he said. The company also said the program is expected to generate one million jobs over a five-year period.

Mr. Cojuangco said other companies should follow the lead of San Miguel and source their raw materials from local farmers. "In doing so they help themselves, they help the government and most important, they help alleviate poverty in rural Philippines. With three out of four poor Filipinos living in rural areas, we need to do our part in countryside development." The program, San Miguel said, provides farmers with a steady and assured long-term market for their produce. There are three components to the program: training and technology transfer, financing, and the provision of a steady, assured market characterized by stable pricing. The program has been introduced in Bukidnon, Zamboanga del Sur, South Cotabato, the CARAGA region, Negros, Panay in the Visayas, Central Luzon, Cagayan Valley and Ilocos.

The company said it imports 50% of its cassava, 40% of its corn and 100% of its soybean and soybean meal requirements. Once the program is in full swing, San Miguel anticipates acquiring 100% of its raw materials from local sources. The company is hoping to fully implement the program in three to five years. The raw material sourcing program is one of several components of San Miguel's Integrated Agro-Industrial Zone growth model. It clusters in one area several operations starting from raw material sourcing to processing. San Miguel hopes to put up several agro-industrial zones in Central Luzon, Northern Mindanao, Southern Tagalog, Northern Luzon and Visayas.



Electronic stock registration system to be online by Oct.


The Philippine Association of Stock Transfer and Registry Agencies (PASTRA) is ready to launch its electronic direct registration system in October. If the plan goes through, it will be ahead by a few months than the clearing and settlement system of the Securities and Clearing Corp. of the Philippines (SCCP) which will be launched in January. PASTRA officials said though there will be no "turf war" between their group and the SCCP which is a subsidiary of the Philippine Stock Exchange. "Ours is a transfer and registry system and not a clearing and settlement system," PASTRA Chairman Jenny Serafica told BusinessWorld. "It will be central, serving as a network that will link all transfer agents. We will only be one entity that will offer the best [services]," she added. "The transfer agencies will not compete with each other. The competition will only be in terms of the service."

The new system will bypass the Philippine Central Depository, thereby doing away with a layer in the stock registration process. Internet-based, the system could be accessed only by legitimate stock owners. The system "is cheap and offers added value. It is the first one-stop shop [of its kind] in the country," she added. "Users only need to log in to the website and they will be linked to the issuers and the SCCP." PASTRA expects to generate added income from the site through the issuers who may want to put out some ads in the web site. Ms. Serafica said that even SCCP Chairman William Ang had shrugged off speculations of a possible competition. Although the launch was delayed for a few months, PASTRA officials said they are at the final stage and are ironing out the minor glitches to ensure the system will run smoothly.



Aussie, Canadian firms tie up for RP mine projects

Australian miner Medusa Mining Ltd. has entered into a joint venture with Canada's BachTech Mining Corp. to look for mining projects in the Philippines. In a letter to publicly listed Dizon Copper-Silver Mines, Inc., Medusa said the joint venture, wherein Medusa and BachTech will own a 50% stake each, is for an initial period of three years and will start with test work on tailings from Dizon's drillings. Under the deal, BachTech will provide its technology on an exclusive basis to the joint venture for the treatment of gold-copper ores.

BachTech has a patented technology in treating refractory ores and concentrate to enhance the recovery of gold, silver, and base metals. The company has a 55% stake in Tonkin Springs LLC, the owner of the Tonkin Springs gold project in Nevada. The company has also entered into agreements for participating in the Chinese gold industry through equity and project participation. Medusa said the joint-venture firms will investigate gold, silver, and copper sulphide mineralization projects that would be suitable for application of BachTech's "bioleaching technology." -- Jennee Grace U. Rubrico



Stocks pause after nine-day climb


Share prices ended lower yesterday due to a much needed technical correction. But despite the market's sharp drop, analysts were not worried. They said it was long awaited given the market's strong nine-day rally that saw the Philippine Stock Exchange composite index close at a 53-month high. Rommel Macapagal, chairman of Westlink Global Equities, Inc., said a continuous rally could not go on because the market needs a breather. "It was a much needed correction. The pulls of exhaustion finally caught up with the bulls," he said. Profit-taking was heavy as investors cashed in gains in the past nine days. The correction was expected, said some analysts. One of them said it was even surprising that the correction came only yesterday when it was projected to come on Monday.


The sudden resignation of National Treasurer Mina C. Figueroa also triggered the correction. "The resignation could also have accelerated the decline," said Mr. Macapagal. Ms. Figueroa reportedly quit her post due to differences over policies on the borrowing tack of the Department of Finance. What reportedly made up the national treasurer's mind to resign was the $1-billion global bond issued last week. The offering signified the government's boldness to face the international market only two weeks after admitting its weak fiscal situation. Ms. Figueroa allegedly felt that the Arroyo administration was shelling out more money than it was supposed to under its borrowing program. The other issue that allegedly ticked off the national treasurer was the 350-million-euro bond offering in July. She took over the post of Sergio Edeza in February after serving as deputy treasurer since August 2001. Some months earlier, she had signified her desire to go back to the private sector. She served as vice-president of Security Bank Corp. before joining the National Treasury three years ago.

An analyst said the resignation of the national treasurer dampened sentiment especially with the threat of a fiscal crisis. But some observers said the resignation was only used as an excuse by some groups to pocket gains from the market because the correction had already been projected since last week. "We will know the extent of the correction [today] and see where the market stops. There may even be an early rebound," said Mr. Macapagal.


The Phisix plummeted 41.71, closing at 1,717.45. Transaction volume was thin at 1.1 billion shares worth PhP712.1 million. "It was good that there was not enough volume when the market corrected," he added. The market, said Mr. Macapagal, will be building base at the moment. He plots the support level at 1,680 to 1,700 and the next resistance at 1,760. The all shares index went up by 4.37 to 1,071.1. Mining stood strong, rising by 6.06 to 1,830.13. Commercial-industrial went down 72.04 to 2,742.70. Banking and financial services was down 4.66 to 489.36. Oil continued its decline, dropping by 0.02 to 1.64. The property index bled 13.74 at 572.28. Trades dropped to 2,978 from over 4,000 on Monday. Advancers numbered only a third of the decliners at 19-63. Issues that were unchanged totalled 32. The correction resulted in foreign net selling of PhP7.4 million.


After drawing investors for most of the nine-day rally, telecom stocks failed to hold their sway over the market. Although telecommunications heavyweight Globe Telecom, Inc. still dominated the market, its price declined by PhP45 at PhP1,045. The industry's giant, Philippine Long Distance Telephone Co. was also weak as it slipped by PhP60 to PhP1,385.


Just when everyone was beginning to think that the Philippine stock market was invincible, defying all forces expected to plunge it to new lows this month, it reversed its direction. Although some dealers were disappointed by the significant drop in the Phisix yesterday, most remained optimistic. They believe that profit-taking will only last for a day or two during the trading week. After that, the market will again be ready to attack like a bull and perform better than expected. With ongoing reforms both at the Philippine Stock Exchange and the government, dealers see no reason why the market would slump. But as uncertainty is the only certain thing in the market, which is driven by developments on the corporate and economic scenes, investors may dwell on the sidelines while thinking of their options.

At the moment, their eyes will be trained on the new stock exchange president Francis Lim -- whether he will deliver the reforms he promised and how these will translate to better trading volumes. Mr. Lim will be taking over his post tomorrow after deferring for more than two months. With his professional obligations fully dispensed with, Mr. Lim could focus on the immediate tasks of drawing in more investors.



State tax research body presses for appraisal authority


The National Tax Research Center, a unit of the Department of Finance, is proposing the formation of a National Appraisal Authority that will set standards to minimize "political interference" in property and asset valuation. In a draft bill for the proposed Real Property Appraisal and Assessment Reform Act, the center noted the lack of uniformity in property appraisal. It noted there was no single agency that could ensure that valuations and appraisals were done according to internationally accepted standards. Its proposal seeks to rationalize, develop, improve and regulate the appraisal and assessment of real property, as well as establish a single, realistic value for specific real properties being appraised. The draft bill proposes the establishment of a specialized agency that will provide uniform standards for the valuation of real property and separate the function of valuing real properties from the administration of taxes from these properties. "There being no adequate technical supervision on valuation matters, local assessors generally operate independently, thereby spawning a lack of uniformity and equity in real property appraisal among different provinces and cities," the draft bill stated. "The multiplicity of systems and methods of property appraisal has created confusion in the public mind and a lack of confidence in the system, especially when different values are attributed to the same property," it added.

The bill noted that at least 23 national government agencies did real property appraisal, and that each used its own system and methodology. It also noted that appraisal practices of local government units also varied greatly. The bill also noted political interference in the appraisal practices of local governments, with officials allowing only minor increases in property values over previous value levels. It added that there was "selective and subjective increases on valuations," and frequent deferment of the general revision of property assessments, contrary to the Local Government Code's provision on assessing properties once every three years. "The main objective of a general revision of real property assessments is to update real property values for taxation purposes as these change over time. Because of the frequent deferment of the general revisions, valuations used by [local governments] are out of date and do not reflect the changes occurring within the market from time to time," the bill stated. The use of a single valuation base, it noted, "will remove confusion and provide a sound reliable basis" for the assessment of real property taxes as well as "reduce costs of duplications." Under the draft bill, the proposed National Appraisal Authority will be attached to the Department of Finance. It will be the primary agency of the government on matters concerning the appraisal of real properties.

The proposed authority will set and maintain valuation standards that are consistent with internationally accepted standards, regulations, and specifications for real property appraisal, for tax purposes.

The draft bill also stated that the proposed appraisal authority would:

  • review and approve the "schedule of market values" prepared by provincial, city, and municipal assessors;
  • coordinate or conduct the appraisal of special purpose properties;
  • provide technical assistance on real property appraisal matters to government agencies;
  • provide "leadership and direction" to local government units, national government agencies, private sector institutions, and individuals on matters pertaining to appraisal;
  • recommend the appointment of qualified persons for local government assessors;
  • develop and maintain a database of real property transactions and prices of materials for buildings and other structures and machineries; as well as
  • determine, fix, and collect reasonable amounts to be charged as administration fees, fines, and penalties relative to the implementation of the provisions of the draft bill.

A board composed of representatives from the government and the private sector will also be formed to advice the National Appraisal Authority in the preparation, review and approval of the schedule of market values, and in the setting, maintenance, and compliance monitoring of the valuation standards. The draft bill also provides for the development and maintenance of a real property database on the sale, exchange, lease, mortgage, donation and all real property transactions in the country, and on the prices of materials for the construction or renovation of buildings and other structures, and on prices of machinery. The amount needed to finance the initial implementation of the proposal will be charged against the appropriations of the Bureau of Local Government Finance's Real Property Assessment Division and Local Assessments Operations, and other divisions of the agency, the draft bill states. "Thereafter, such funds as may be necessary for the continued implementation of this Act shall be included in the annual General Appropriations Act," the draft bill added.



NSC sale far from over

and CECILLE S. VISTO, Sub-Editor

A crucial document finalizing the sale of National Steel Corporation (NSC) to an Indian-owned company was signed last Friday as scheduled, but two more conditions need to be met to close the PhP13.25-billion deal, the steel firm's biggest creditor clarified yesterday. John Deveras, Philippine National Bank (PNB) senior vice-president, confirmed that the group of creditor banks and the winning bidder, Global Infrastructure Holdings, Ltd., have sealed an asset purchase agreement, but this was only one of three documents that needed to be signed. "The transaction did not close last Friday. Certain conditions have to be met," Mr. Deveras stressed.

The two "pre-closing" conditions are:

  • a certificate of eligibility from the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) on the deal's compliance with the Special Purpose Vehicle (SPV) Law; and
  • an agreement among secured creditors and the National Power Corporation (Napocor) on how outstanding liabilities would be paid.

When these conditions will have been met, the parties will sign the last two documents:

  • an omnibus agreement that will secure all payments to be made by Global; and
  • a sharing agreement that will outline how proceeds of the sale will be apportioned among the creditors banks.

Before the proceeds are distributed, NSC's obligations will first be deducted, Mr. Deveras said. NSC owes PhP171.2 million in real estate taxes to Iligan City in Central Mindanao, and PhP270 million to Napocor. Global will be required to pay the previously agreed PhP1 billion downpayment only when all three documents will have been signed. So far, Global has deposited, in escrow, $6.5 million. In dollar terms, the downpayment amounts to $17.857 million, the PNB official said. As part of "security arrangements," Global also executed a PhP250-million standby letter of credit, which the creditors will withdraw if the Indian firm reneges on payments. Global will not be allowed to offset from the PhP1-billion downpayment the expenses it incurred in rehabilitating NSC's plant. Global, whose mother company Ispat Industries, Ltd. owns one of India's biggest private steel operations, won the bid for NSC at PhP13.25 billion payable in eight years. "If the deal does not close, that's their risk," Mr. Deveras said.

The PNB official also said compliance with the SPV Law, which allows banks to unload nonperforming assets from their books, was needed as it offered a number of incentives. For instance, losses over the transaction are recognized and may be amortized for a period of 10 years. Mr. Deveras said he was optimistic the pre-closing conditions would be met. On the reported last-ditch effort of NSC's second-biggest creditor, Calyon (formerly Credit Agricole Indosuez) to block the sale, Mr. Deveras said the matter was for the Securities and Exchange Commission (SEC) to decide. "From day one [it has] been opposing [the deal]," he noted. So far, SEC has not issued a restraining order. A hearing has been set on September 16 to decide on the petition filed by Calyon, which is contesting SEC's jurisdiction. The conclusion of the asset purchase agreement was delayed twice because of backtaxes due to Iligan City. Before settling for PhP171.2 million, the city government demanded PhP928.055 million consisting of the principal amount and penalties.

Pengurusan Danaharta Nasional Berhad, Malaysia's national asset management company, withdrew opposition to the sale after being assured of a "fair share" of the proceeds. Danaharta used to own more than 80% of the steel firm after taking over from Hottick Investments, Ltd., which failed to support NSC's debts.

NSC owes:


Meanwhile, SEC may have no choice but to dismiss Calyon's opposition to NSC's sale. In lieu of a restraining order, the SEC will have to rule on the legality of annulling all its orders on the liquidation of NSC, as sought by Calyon Corporate and Investment Bank. "What has been done cannot be undone. But Calyon can still seek the annulment of all previous orders of the corporate watchdog on the SEC liquidation, which is a long shot," a source from one of the creditor-banks told BusinessWorld. But another executive from a bank that has considerable exposure in NSC said Calyon's request for an injunction was still a "pending incident." "It is still a pending incident because the core issue is whether SEC had the jurisdiction to issue orders relating to the liquidation of NSC in the first place ... It is still on the table, but it will be difficult to take back what has transpired," the bank executive said. Both bank officials also said Calyon must wait for other NSC creditors to comments on its injunction petition as well as for the decision of SEC general counsel Vernette Umali-Paco on the case. The controversy can be elevated to the Court of Appeals if SEC rules against Calyon and maintains that it legally liquidated NSC.

Calyon, with a PhP1.69-billion exposure in Asia's oldest steel company, is its second biggest creditor after Philippine National Bank. It tried in vain to block the closure of the PhP13.25-billion sale last Friday, claiming SEC has "no jurisdiction" over the liquidation of NSC. Calyon, in asking SEC for an injunction, said the commission could not preside over the liquidation of NSC. It noted that while the commission has the power to issue orders to facilitate liquidation, it was not authorized under Presidential Decree 902-A to preside over the process of folding a company. PD 902-A is the law that empowers SEC to oversee corporate disputes. NSC's liquidation receiver Danilo Concepcion had said Calyon had lost its right to question the liquidation plan for corporation, having joined the lengthy negotiations for the sale of its assets. With SEC refusing to issue a restraining order, the NSC deal was finally closed last September 10.



Palace defends revenue 'pain package'

President Gloria Macapagal Arroyo yesterday defended the government's "pain package" of new taxes, saying her administration needed more money to beat a fiscal crisis as well as to grow the economy. "Our strategy is to avert a larger financial crisis down the road, sustain economic growth and protect the welfare of the most marginal sectors," the President said in a statement. "This is a moment of sacrifice as it is a moment of truth, when we have to come to terms with the past and present and decide to win back national stability and survival over the long term," she added. The President made the statement following the presentation by Albay (southern Luzon) Rep. Jose Clemente S. Salceda of his proposed "pain package" that was expected to raise PhP215 billion for the government in the next three years.

In his 31-page analysis of the country's fiscal situation, Mr. Salceda said the country needed to embrace "painful" measures, including more taxes, higher costs of public utilities and consumer goods, and bigger spending cuts to get the country out of the debt hole. The President yesterday urged leaders in the public and private sectors to "set the example" of helping the government deal with its fiscal problem. "I ask our leaders in government and the private sector to find in themselves the moral resources to set the example and take this fight to the finish," Ms. Arroyo said. "The world has taken attention of our efforts and we must wield the political will and determination to push through with our plans," she added.

Press Secretary Ignacio R. Bunye also said the Chief Executive has ordered the review of the performance of all government-owned and controlled corporations to determine which ones would be abolished to stem the bleeding of much-needed state funds.At the same time, Mr. Bunye said the Palace would match Congress sacrifice by giving up its "discretionary funds," the same way members of the House of Representatives have decided to abolish their Priority Development Assistance Funds, derisively referred to by the public as "pork barrel." -- J. O. Valisno



SEC backs Central Bank circular regulating securities holdings

The Securities and Exchange Commission (SEC) insists that the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) circular that limits to several local and foreign banks the registration and safekeeping of all securities does not usurp its powers. SEC chairman Fe Barin said in a press release yesterday that while the central bank's Circular No. 428 on third-party custodians covered securities transactions as defined by the Securities Regulation Code (SRC), it would actually involve only transactions by banks and non-bank financial institutions (NBFIs) that were part of their securities custodianship and securities registry operations. "The circular does not encroach on the SEC's powers because the circular is only for third-party custodianship. The circular is just to make sure that the securities you're dealing with, if there is no physical delivery, it will be in the hands of a third party. This is for the protection of the public," said Ms. Barin, who used to be part of the central bank's policy-making Monetary Board. She also said that SEC "must have been consulted" before the Bangko Sentral passed the circular. "I'm very sure that if there is even the smallest doubt that it [circular] encroaches someone else's authority, there would have been appropriate consultations. They must have consulted the SEC," she said.

Circular No. 428 allows banks and non-bank financial institutions to act as securities custodian and registry after getting prior Monetary Board approval. Among others, a securities custodian functions as the safekeeper of the securities of a client; holds title to the securities in a nominee capacity; represent clients in corporate actions in accordance with the direction provided by the securities owner; and acts as a collecting and paying agent. A securities registry, meanwhile, maintains an electronic registry book; delivers confirmation of transactions and other documents within agreed trading periods; issues registry confirmations for transfers of ownership as it occurs; prepares regular statement of securities balances as frequently as may be required by the owner of the securities but not less frequent than every quarter; and follows appropriate legal documentation to govern its relationship with the Issuer.

Section 2 of the circular states that the rules cover all the securities custodians' and registry operators' transactions in securities as defined by Section 3 of the SRC, where at least one of the parties is a bank or an NBFI. Section 3 of the SRC defines securities as shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether written or electronic in character. It includes shares of stock, bonds, debentures, notes, evidences of indebtedness, asset-backed securities; investment contracts, certificates of interest or participation in a profit sharing agreement, certificates of deposit for a future subscription; fractional undivided interests in oil, gas or other mineral rights; derivatives like option and warrants; certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments; and proprietary or non proprietary membership certificates in corporations. NBFIs are reportedly concerned by the perceived usurpation of SEC powers by the central bank.

NBFIs earlier also expressed concern that Ms. Barin, who was with the Monetary Board for a long time, might "think like a bank regulator" and stifle capital markets. NBFI officials noted that the banking industry was heavily regulated, while the capital markets were given enough leeway to be "creative" with their products. If SEC started regulating the capital markets the way the central bank regulated banks, it "might stifle the creativity and dynamism" of the industry, as it has a higher risk appetite than the banking sector, NBFIs officials said. But Ms. Barin said she has "a tendency to think where I sit." "I do what I'm supposed to do. When you accept a responsibility, you make sure you understand what those responsibilities are. And you understand the reason behind the laws and regulations. If 'creativity' is what is called for, as long as it is within the laws [it's alright]," she said. -- Jennee Grace U. Rubrico



Clark airport expansion to start soon

Clark International Airport in Pampanga, Central Luzon will spend about PhP2 billion starting this year to convert itself into a world-class facility by 2006. And to finance its expansion, PhP1 billion will come from the airport itself, while another PhP1 billion will come from the Manila International Airport Authority (MIAA). "We will try to avoid borrowing as much as possible, as ordered by Malacaņang. The construction will take two years and it will start immediately," MIAA general manager Alfonso Cusi said yesterday. The expanded Clark airport aims to attract low-cost airline companies that will fly tourists and businessmen to the Central Luzon area. It will also target airlines that fly routes to the Middle East carrying overseas Filipino workers.

MIAA, under Executive Order No. 341 signed by President Gloria Macapagal-Arroyo last month, was granted full authority to supervise all international airports in the country. These include Clark airport, which is in the President's home-province. MIAA previously handled only the operations of the Ninoy Aquino International Airport. The executive order effectively puts Mr. Cusi, former chief of the Philippine Ports Authority, in charge of international airports in Clark, Laoag, Subic, Mactan-Cebu, Davao, General Santos, and Zamboanga. In a statement, MIAA said the Clark airport's expansion was in line with Ms. Arroyo's plan to decongest Metro Manila and to spur economic activity in the provinces. Mr. Cusi has discussed the expansion project with Clark International Airport general manager Adelberto Yap. The two officials will lead the capsule-laying ceremony for the expansion in Clark on September 28. -- A. B. L. Lorenzo



PBSP counted among Asia's best NGOs

Eight nongovernment organizations (NGOs) are vying for the coveted title of "Asia Pacific NGO of the Year" in the 2004 Asia Pacific NGO Awards, the first-ever region-wide search for the best NGOs to be held in Manila this Thursday, September 16. The awards will recognize and reward the professionalism and excellence in the non-profit sector. The search is open to NGOs from eight countries, namely: Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

To qualify, NGOs must have demonstrated good management, transparency, accountability, and a strategic approach to resource mobilization. Organizations with political and/or religious purpose were excluded.

Out of a total of 76 entries, the following NGOs have been chosen as finalists (one per country):

  • Hong Kong Society for the Aged (Hong Kong);
  • Institut Dayakologi (Indonesia);
  • Shelter Home for Children (Malaysia);
  • Philippine Business for Social Progress (Philippines);
  • Singapore Children's Society (Singapore);
  • Corporation Leftovers Love Sharing Community (South Korea);
  • Garden of Hope Foundation (Taiwan); and
  • The Foundation for Child Development (Thailand).

The best five NGOs will be announced on September 16 during awarding ceremonies to be held at the SGV Conference Hall at the Asian Institute of Management Corporate Center in Makati City. The first-prize winner, adjudged "Asia Pacific NGO of the Year," will receive a cash prize of $10,000 (around PhP550,000), and will be sent on an all-expense paid trip to the International Workshop on Resource Mobilization in Bangkok, Thailand in May 2005. The second-prize winner will get $5,000, and the three runner-ups will have $1,000 each. The 2004 Asia Pacific NGO Awards is sponsored by Citigroup, the pre-eminent global financial services company; and organized by Resource Alliance, a United Kingdom-based organization with expertise in resource mobilization. Citigroup believes the competition will help promote best practices and provide training to NGOs.

Seeing tremendous opportunities in partnering with non-profits to serve communities more effectively, the global bank is giving out more than $5 million this year to the non-profit sector in Asia and the Pacific. "Nongovernmental organizations are growing in importance in the Asia-Pacific region, and are increasingly inserting themselves, both into the workings of our communities and into the policy making process," a press release quoted one of the judges, Kenneth Fagan, general counsel for the Asia Pacific Region, Citibank N.A., as saying. -- R. M. Balaba



Senators skeptical over proposed line-item budgeting


Senators are skeptical over the plan of the House of Representatives to remove pork barrel funds from the proposed 2005 budget and shift to line-item budgeting. Administration and opposition senators noted that the plan still has to prove its worth. Senate President Franklin M. Drilon said the Upper Chamber will make its judgment on the positive news announced by House Speaker Jose de Venecia, Jr. when the Lower Chamber submits the proposed PhP907.6-billion General Appropriations Act (GAA) for 2005. The House panel is scheduled to start with budget hearings on September 20. "Let us see whether or not the amount allocated for the pork barrel is removed from the budget because that will reduce our budget deficit to the extent of the pork barrel being totally deleted as proposed," Mr. Drilon said in an interview. Congressmen over the weekend promised to scrap pork barrel funds from the proposed 2005 budget to reduce government expenditures and ease pressure on its ballooning deficit. In exchange, the Lower House wants to adopt the line-item approach. This will mean that every single government project and its corresponding cost will be identified to the last peso and centavo in the national budget.

The current budget uses the lump sum system, where chunks of funds for specific purposes are appropriated without detailing all the activities that will be funded. This year, Senators got an annual pork barrel fund of PhP200 million while Congressmen got PhP70 million. But under the 2005 budget submitted by the Department of Budget and Management, pork barrel funds have been reduced to PhP120 million and PhP40 million for Senators and Congressmen, respectively. Administration Sen. Joker P. Arroyo noted that the plan to forego the Priority Development Assistance Fund or pork barrel funds and adopt the line budgeting system will be an "interesting game of power play." "This will be a very good game about scrapping the pork barrel and line item budgeting. Watch this interesting game of positioning between the Executive department and Congress," Mr. Arroyo said in a separate interview.

Senate Minority Leader Aquilino Q. Pimentel, Jr. backed the decision of the Lower House to use line-item budgeting even as he challenged Mr. de Venecia to stand firm on his plan. "It remains to be seen whether they will be fulfilled by JDV [Mr. de Venecia]. To see is to believe," Mr. Pimentel said. He also clarified that the proposed system will not give too much power to legislators. "If we do line-item budgeting, every Congressman and Senator who will propose a particular project for funding in the GAA will have to justify it in open debates. There will be no insertions of new items," Mr. Pimentel said. He also urged President Gloria Macapagal-Arroyo to give up her PhP5-billion pork barrel funds to manifest her sincerity in implementing austerity measures. These funds, he said, include the PhP2 billion calamity fund, PhP1 billion contingency fund, PhP1 billion social fund, PhP500 million intelligence fund and other confidential discretionary funds.

Administration Sen. Miriam Defensor Santiago also cautioned the possible window-dressing of the pork barrel funds if only to convince the public that the belt-tightening measures have Congressional support. "There is much to be investigated on the terms agreed upon. The pork barrel may assume another name," Ms. Santiago said, noting that the annual budget remains hounded by technicalities that only experts can understand. Members of the Lower House also yesterday pushed for line-item budgeting for debt servicing, noting that the government's debt payments will take up the largest allocation in the proposed 2005 national budget. Makati Rep. Teodoro L. Locsin, Jr. said the national budget must "detail each and every indebtedness" while Bayan Muna party-list Representative Teodoro Casiņo, Jr. in a statement said line-item budgeting for interest payments in the national budget is in line with the clamor for "greater transparency and integrity in the budget process."

Debt service payments comprise a total of PhP301.7 billion or 33.24% in the proposed 2005 national budget. It will be the first time in the Philippines' fiscal history that debt service payments overtake personal services as biggest budgetary priority. Line-item budgeting for debt service payments, Mr. Casiņo said, will require an itemized list of debt expenditures, as well as annexes showing the purpose for which the loans were contracted and how these loans were actually utilized. "Should the executive department fail to justify the grounds for repaying certain unutilized or questionable loans, then this ground can be used by Congress to deny or reduce specific allocations under the debt servicing budget," he added. How viable line-item budgeting for debt service payments will be remains to be seen, with Mr. Locsin warning as early as now that "big businesses will say there will be no time for this... because they're the ones who stole the money." Elaborating, he said, these business were the ones that contracted commercial loans during the Marcos time -- loans that were eventually assumed and are continued to be paid by the government.

Under the 2005 proposed national budget, debt service payments are not itemized but are allocated a lump sum of PhP301.7 billion. Republic Act 6670, which provides a "modified performance budgeting," only asks line-item budgeting for personnel services. But even this particular provision is limited to line item budgeting up to division chiefs and second lieutenants only. Salary for casual or temporary employees is expressed in a lump sum. Meanwhile, the Senate Committee on Finance will start today the deliberations on the proposed 2005 national budget. Committee chairman Sen. Manuel B. Villar noted that the national allocation submitted by the Department of Budget and Management (DBM) to Congress is 5% higher than the PhP861.6-billion budget this year. Mr. Villar added that the 2005 General Apropriations Act (GAA) consists of PhP446 billion in new general appropriations and PhP496 billion in automatic appropriations. The budget deliberations will be attended by Budget Secretary Emilia Boncodin, Finance Secretary Juanita Amatong, Socioeconomic Planning Secretary Romulo Neri, Customs Commissioner George Jereos, Internal Revenue Commissioner Guillermo Parayno and National Treasurer Mina Figueroa.



Moderate fuel price hikes seen next month

There will be moderate increases, or even a rollback, in local pump prices next month following August's peak world oil price levels, businessman Raul T. Concepcion said in a press release yesterday. Oil companies, he said, are expected to stagger increases on a weekly basis in October, as requested by President Gloria Macapagal Arroyo, the Energy department, and the Consumer and Oil Price Watch (COPW) which Mr. Concepcion heads. "While it is still early, COPW is optimistic that we have reached the peak levels of oil prices in August and the increase in October will be moderate or even a rollback," he said.

Energy Secretary Vincent S. Perez Jr., meanwhile, urged oil companies to hold pump prices at current levels to reflect world market trends. "We don't see any increase in pump prices for the rest of this month," he said in a separate statement, noting that global oil prices have shed more than $3 per barrel in recent weeks due to an oversupply. "Computations show that there are still unrecovered costs on the part of the oil companies after world oil prices skyrocketed last few months. We expect the oil companies to keep their prices at steady level," he said. Mr. Concepcion also said that with the decision of oil refiner Petron Corporation not to raise prices for the rest of the month if international prices continue to ease, new oil players will likely hike prices for diesel and not gasoline. Any increase will be calibrated to reflect the drop in oil prices, he added.

Dubai crude, the benchmark used by oil companies in setting pump prices, has fallen 12 times in the last 14 trading days after hitting a record high of $41.26 a barrel on August 20. The Department of Energy (DoE) said the average price of Dubai crude from September 1 to 9 dropped to $35.22 a barrel from $38.54 on oversupply reports. DoE data also showed unleaded gasoline based on the Mean of Platts Singapore (MOPS) benchmark dropped to an average of $47.99 a barrel from $51.49 in August. MOPS-based diesel, meanwhile, remained volatile, averaging $51.86 a barrel from $51.66 last month. The COPW last week announced that oil refiners Petron and Pilipinas Shell Petroleum Corp. will increase diesel prices by 91 centavos a liter and roll back prices for gasoline by 63 centavos this month.



Senators push anti-smuggling task force revival

The Senate trade and commerce and economic affairs committees yesterday pushed for the reconstitution of the National Anti-Smuggling Task Force (NASTF) as smuggling continues to imperil local business activities. During a joint Senate inquiry, committee chairman Manuel A. Roxas II scored the Bureau of Customs (BoC) for its alleged inefficiency to curb the illegal entry of goods, which he said hit a volume of PhP525 billion last year. "The committee is disturbed with the passive approach of the BoC. At the same time, we are impressed with the achievements of the NASTF and recommend to the President the reconstitution of NASTF until it becomes evident that the BoC can perform the work of NASTF," Mr. Roxas told a news conference after the hearing.

Agriculture and food committee chairman Sen. Ramon B. Magsaysay Jr. also called for the reconstitution of the NASTF to ease the rampant smuggling of farm products. "The 40 containers of smuggled onions at the Bureau of Customs which I inspected recently are merely tip of the iceberg. How many more of these illegally shipped containers are released day by day to the market, killing our local industry and pushing us to the brink of economic difficulty?," Mr. Magsaysay asked in a statement.

Opposition Sen. Juan Ponce Enrile urged President Gloria Macapagal Arroyo to lead efforts to strengthen the antismuggling campaign. "I am requesting the President, through her people in the Senate and the members of the bureaucracy to think about the solutions proposed by the NASTF ... I hope she will consider this request, otherwise this will affect our decision to approve the new taxes since revenues were lost due to smuggling," Mr. Enrile told reporters in a separate news conference. Former presidential antismuggling adviser and Interior and Local Government Secretary Angelo Reyes said the NASTF worked for the collection of PhP48.2 million in additional revenues, filing of 62 cases and release of the inward forward manifest to track down the illegal entry of goods during its five-month term.

He said that when the NASTF was abolished last month, it gave several recommendations such as:

  • the enactment of a law to make smuggling a heinous crime;
  • extensive gathering of information on imports of raw materials for exports which are duty-free;
  • reduction of the number of custom-bonded warehouses;
  • identification of existing custom-bonded warehouses and their subsidiaries;
  • computerization of the operations of the BoC;
  • immediate auction of seized smuggled goods; and
  • random inspection at 15 ports nationwide.

Mr. Roxas asked the BoC to name the top smugglers in the country in a bid to boost the government's campaign. Customs Commissioner George Jereos replied that the agency has a watch list of 20 smugglers which cannot be revealed yet since he still has to consult the BoC legal department.


A big group of employers yesterday called on the Arroyo administration to conduct a "full consultation" on new tax proposals, warning of a number of "repercussions" on Filipino industries. In a statement, the Employers Confederation of the Philippines (ECoP) said the government should first run after smugglers and delay the reduction of tariffs under various free trade arrangements. "It is not correct to impose arbitrary tax measures just to solve the fiscal crisis," ECoP president Rene Y. Soriano said. He noted that previous tax measures, such as the overhauled excise tax scheme for motor vehicles, "achieved the opposite" as additional taxes tend to shrink the market. Mr. Soriano said Filipino industries must be "strengthened" by making the taxable sector "grow and expand." "To be able to collect more taxes, we need to have more and stronger industries able to compete nationally, regionally and globally. Taxation can lead to the weakening of competitiveness," he stressed. Mr. Soriano pointed to smuggling as a leading source of revenue losses. Low valuations, he noted, lead to low value-added tax collections. "This is unfair to the locals and this is a major contributor to the collapse of many domestic industries," he said.

Moreover, lower tariffs, under the ASEAN Free Trade Area for example, "do not make sense," he argued. Former Finance Secretary Jose Isidro Camacho noted that substantial revenues have been lost because of the government's decision to reduce tariffs at a rate even faster that neighboring countries in Southeast Asia, Mr. Soriano said. In effect, lower tariffs are tantamount to a government subsidy on imports considering that customs handling, inspections, and other administrative functions cost money, Mr. Camacho added.



ADB ready to give more power reform funds

The Asian Development Bank (ADB) may extend more technical and financial support to the government in the latter's effort to restructure the power sector and improve its fiscal position. The power reform agenda being pursued by the government, ADB director-general for Southeast Asia Shamshad Akhtar said in a statement, is "appropriate." "[The reform agenda] is an ambitious and complex task, given the prevailing economic environment. It requires close coordination, spread over a relatively long period of time, on the legislative, regulatory and policy measures," Ms. Akhtar said. "The agenda addresses issues of ownership, industry structure, competition, pricing and regulation and we are seeing progress in each of these areas. "ADB is keen to work closely with the government and other development partners to facilitate the process which is essential if the country is to meet its broader development objectives," she stressed. Ms. Akhtar issued the statement following a dialogue with the Energy department on issues faced by the power sector.

During the meeting, Energy Secretary Vincent S. Perez Jr. confirmed the government's commitment to pursuing reforms in the power sector, as mandated by the Electric Power Industry Reform Act. Mr. Perez emphasized the need to immediately undertake reforms in the power sector given the growing burden that the National Power Corp.'s losses place on the national budget. The Philippines is considered as among the first of ADB's developing member countries to implement the privatization of power generation assets, concessionaire agreements for the operation of transmission assets and the introduction of a wholesale electricity spot market. As the lead financing agency in the country's power sector, the ADB said it will continue to hold consultations and dialogues with the government and review the power sector reforms and privatization process. It underscored the need to restore the financial viability of the power sector and hasten this industry's restructuring and privatization.



National Treasurer Figueroa resigns over 'policy differences'

By NORMAN P. AQUINO, Senior Reporter

National Treasurer Mina Figueroa yesterday quit her post following "policy differences" with the Finance department's borrowing tack. Specifically, the national treasurer felt the government was paying more than it should under its borrowing program, a highly placed source told BusinessWorld. Ms. Figueroa reportedly disagreed with Finance Undersecretary Eric Recto on the cost of the $1-billion global bond that the government issued last week, which she felt was higher than prevailing market rates. "She also felt the government paid higher fees for its 350-million euro bond offering last July," the official pointed out. BusinessWorld tried to contact Ms. Figueroa but she would not answer calls. Finance Secretary Juanita Amatong, who was attending a hearing at the House of Representatives, claimed she was not aware of the resignation. BusinessWorld also tried to get in touch with Mr. Recto, who likewise denied he knew that Ms. Figueroa had quit her post.

The Philippines issued 350 million euros worth of bonds in July to refinance maturing debts this month. It also raised $1 billion in overseas debt last Wednesday through the sale of additional 2015 and 2025 global bonds to bridge a financing gap at beleaguered National Power Corp. The Philippines sold $300 million worth of bonds due in 2015 at 8.875%, and $700 million worth of bonds maturing in 2025 at 10.625%. Mr. Recto said the government had set a price guidance of 98 for the 2015 bonds and 106 for the 2025 series. The successful sale of the bond, he added, was a proof that "we are still able to access the international market." Deutsche Bank, JP Morgan and Credit Suisse First Boston were the lead managers for the sovereign debt issue. Napocor needs $1.5 billion to fund its operations and settle maturing debts this year. The government has been borrowing on behalf of Napocor because the power firm's mounting losses make it too costly for it to raise money on its own in the global debt market. The global bond offering came after comments late last month by President Gloria Macapagal Arroyo that the country is in a fiscal crisis. The funding exercise completed the government's stated goal of $1.5 billion for the year for Napocor and helped prefund the government's borrowing requirement to fill a projected budget deficit of 184.5 billion pesos next year.

Early last week, the government said it planned to raise about 22% of its 2005 financing need from overseas sources including multilateral lenders and 78% from the domestic market. It said an equivalent of about PhP84 billion will be raised via offshore bonds. Mr. Recto said the government decided to go ahead with its quick offer to avoid competing with the issues that will be launched by other sovereign and corporate borrowers. The Philippines will use a portion of its newly sold $1 billion global bond to help fill the government's funding gap for 2005, Mr. Recto earlier said. He also said the bulk of the bond proceeds would be used for the financing requirements of state-owned Napocor for this year, but about $200 million will be used for the government's need for 2005.

Last month, think tank Congressional Planning and Budget Department said the government is putting its fiscal position in greater risk by increasing its foreign borrowings in the first half of this year. In its analysis of the government's cash operations, the department noted that the government's gross borrowings for the first semester totaled PhP228.1 billion, of which 37% or PhP83.3 billion were loans from foreign sources. This was inconsistent with the programmed borrowing mix of 16-84 in favor of domestic borrowing. It further noted that 80% of the total foreign borrowings were long-term commercial loans that are subject to higher interest rates. Program or project loans, in comparison, are subject to concessional rates.



Gov't lets T-bill rates move up

The government still allowed interest rates to move up but warned banks to sell the debt papers to clients or else be delisted as an eligible dealer. "I wouldn't believe the secondary market anymore. When you talk to institutional clients, there are no done deals at those levels," National Treasurer Mina C. Figueroa said. During yesterday's auction, the Treasury partially awarded the 91-day and 364-day paper but fully rejected the 182-day paper as total bids of PhP3.26 billion fell short of the PhP3.5-billion public offering. The three-month paper was up by 28 basis points to 7.718% while the one-year instrument moved up by 20.4 basis points to 9.975%. For both papers, tenders reached as high as PhP12.945 billion against a combined offering of PhP7.5 billion. The Bureau of the Treasury accepted only PhP6.385 billion. "We set the cap for the 91-day at 7.75% and the 364 at only 10%. The six-month was only a throwaway as it was really undersubscribed," Ms Figueroa added.

If the auction committee had accepted bids, the 182-day paper would have been at 8.954% or up by 49.9 basis points from the last auction. "We will look at the last one-and-a-half-year performance of the GSEDs [government securities eligible dealers]... We plan to categorize them into primary dealers and ordinary GSEDs. Those primary dealers would be able to ask for rates while ordinary GSEDs can only bid at noncompetitive levels. Hopefully, we can put it out at the end of the year," Ms. Figueroa said. "I talked to the [Money Market Association of the Philippines] officials over this already. I promised that I would still discuss with them first," she added. -- Ira P. Pedrasa



PNB seeks PhP17.5-M tax refund

The Philippine National Bank asked for a PhP17.5-million refund from the Commissioner of Internal Revenue for taxes which it said were wrongfully imposed on interest income. In a September 8 filing before the Supreme Court, the bank said "the 20% final withholding tax on interest income should not form part of a bank's taxable gross receipts for Gross Receipts Tax (GRT) purposes." "Such amended quarterly percentage tax returns of petitioner thus reflected a reduced amount of taxable gross receipts and GRT liabilities resulting in an overpayment by petitioner of GRT when compared with previous returns," the 12-page motion read.

From June 30, 1994 to March 31, 1996, the bank paid PhP981.42 million in taxes when it should have paid only PhP963.92 million, it said. On May 12, 2003, the Court of Appeals reversed a Court of Tax Appeals decision partially granting the bank's claim for refund and awarded the bank PhP13.79 million, representing overpaid gross receipts tax. "No error could be attributed to the findings of the [Court of Tax Appeals], and thus, should not be disturbed," it said, adding that that "being a court of special jurisdiction," the Court of Tax Appeals' findings and conclusions should be accorded great weight. The bank said since such court is a special court primarily created to review tax cases, the Supreme Court should only reverse a decision when there is an abuse of authority.

To support its case, it cited a court decision on the Collector of Internal Revenue versus Manila Jockey Club. In the said case, the Court of Appeals ruled that the commission never became the club's property because it was earmarked by law for the Board on Races. As such, it did not form part of the club's gross receipts and thus not subject to the 20% amusement tax. In this case, the bank said "the earmarking in favor of the government of 20% final withholding tax on the bank's interest income was required both by the National Internal Revenue Code and the Revenue Regulations." As such, the 20% "should not form part of the bank's taxable gross income as it never formed part of the bank's income as it is already earmarked at the outset in favor of the government," it said. -- Ma. Elisa P. Osorio



Metrobank to spend 320M pesos to upgrade computer system

Largest local lender Metropolitan Bank and Trust Co. will likely spend PhP320 million for capital expenditures on technology this year. In a report filed with the Securities and Exchange Commission, the bank said the outlay -- to be sourced from its working capital -- will include upgrades of personal computers, central processing units, automated teller machine tandem hosts, corporate local area network, servers, and on-line back-up recovery centers as required by the Bangko Sentral ng Pilipinas (central bank). "Given that product and delivery channel homogeneity is already highly pronounced, the bank shall continue to drive for higher standards of customer satisfaction with critical support from technology upgrades," it said.

Aiming to strengthen its hold on established markets, the bank will continue embarking on the development of its several electronic banking initiatives such as pursuing ATM interconnections for its 670 electronic tellers similar to earlier arrangements with international ATM giants Cirrus-Maestro and VISA Plus, so as to provide customers with access to ATMs worldwide. "It intends to continue supplementing its phone-banking, mobile-banking, and Internet-banking facilities to allow customers to perform real-time bank transactions over a distinct array of electronic channels," the bank said. Sustaining its focus on expanding its consumer base, the bank is harnessing a comprehensive database of target clients for its current and future offerings. "It also offers a wide range of retail banking products to the employees of its corporate customers and to owners of small- and medium-sized businesses which are customers of its various branches," it said. The bank saw a 10.9% increase in net income to PhP1.73 billion during the first semester from PhP1.56 billion in the same period in 2003. -- Ruby Anne M. Rubio



BPI using new channels to teach online banking

Second largest lender Bank of the Philippine Islands (BPI) is teaching potential and new clients on how to use the bank's alternative banking channels. Yesterday, the bank launched a tutorial center called Express Learning Center, which is very accessible to both office workers and students alike since it is situated in a mall. The first center is right beside the convenience banking center in Park Square I at the Ayala Center in Makati City. The bank has emabarked on different innovations ranging from electronic to on-line banking services offered to Filipinos here and abroad. It introduced electronic banking in the country through asynchronous transfer mode technology through BPI Express Teller. "BPI continues its tradition of leadership as it introduces new offerings to serve its clientele. These channels offer customers the convenience of 'anytime, anywhere' banking, and allows them to do a wide array of banking transactions from their home or office," the bank said in a statement.

The Ayala-led bank added that clients who go to the center can learn online banking in one easy session. "They can also be tutored in phonebanking, which has an extensive menu for self-service transactions, whether you are a deposit client, a credit card holder, or have loans or remittances with BPI," it said. The learning center also offers a special module on financial advise that can be given to overseas Filipino workers and their families or beneficiaries. Backed by higher revenues, the bank's net earnings rose by over 30% to PhP3.5 billion during the first six months of 2004 from P2.6 billion a year ago. -- Ruby Anne M. Rubio



Maynilad rate hike looms


Customers of the debt-saddled Maynilad Water Services, Inc. should brace for higher water rates starting next month if a Quezon City court approves the company's rehabilitation plan which calls for the hike. Although the government had said it will not allow the debt-saddled company to implement new water rate hikes, it stressed it will not prevent Maynilad from finally implementing increases previously approved by the state-run Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS-RO). But while it is inclined to allow the Lopez-led firm to increase the average tariff or the per cubic-meter charge for its customers starting next month, the actual amount of additional charges is still to be determined. Maynilad wants to increase rates to PhP26.98 per cubic meter from only PhP19.92.

Former Government Corporate Counsel and Justice Undersecretary Manuel A. J. Teehankee said one of the conditions that MWSS had set before approving the revised rehabilitation plan for Maynilad is that there should be "no special rate increases" for west zone consumers. The regulatory authority, he added, also required that water services should not be interrupted. "This rehabilitation plan does not contemplate special rate increases except for the rate rebasing of every five years as provided under the concession agreement. It is hinged on the fact that there will be no new rate applications for Maynilad customers in the meantime," Mr. Teehankee said. Maynilad, based on its 1997 concession contract, was entitled to a rate rebasing starting January 2003. A rebasing scheme is allowed every five years.

The MWSS-RO approved in January 2003 a PhP6.84 increase spread over five years. Of the amount, only PhP4.40 was supposed to be charged in 2003, with the remainder to be charged in the next four years. Maynilad postponed the implementation of the rate hike as its early concession termination dispute with MWSS was then pending arbitration. Maynilad, in its proposed corporate recovery blueprint submitted last week, indicated that it will finally implement the rebased rates. It added: "recovery of all approved tariffs is indispensable" to get Maynilad back to financial profitability. "Since the recovery of all approved tariffs is indispensable to the revised rehabilitation plan, Maynilad and MWSS are discussing the terms by which the approved 2003-2007 tariffs will be implemented, with Maynilad undertaking not to file applications for additional tariff increases," it said. Notably, the tariff projections of Maynilad and MWSS were different.

Even as Mr. Teehankee said only the previously approved rebased rates will be allowed, Maynilad's projections also included the implementation of a so-called special transitory mechanism and higher environmental charge. The mechanism was designed to allow the concessionaire to collect foreign exchange losses and missed revenue arising from the late implementation of the rate rebasing adjustment. MWSS deferred the implementation until next year.



PNOC bags PhP20.5-M Japan funding for hydropower project

State-owned Philippine National Oil Co. (PNOC) recently acquired a PhP20.5-million funding from the Japan External Trade Organization (Jetro) for the conduct of a feasibility study on the proposed 19-megawatt Sicopong hydropower project in Sta. Catalina, Negros Oriental. The project is part of key strategies earlier unveiled by President Gloria Macapagal Arroyo to develop renewable energy sources to achieve energy independence. "We have enough water resources and we want to harness their full potential so we are aggressively developing them into hydropower projects, and Negros Oriental is one significant area to tap," PNOC President Eduardo V. Maņalac said. The state-owned firm inked a memorandum of agreement with West Japan Engineering Consultants, Inc., the company tasked to evaluate the technical, social, financial and environmental viability of the project.

Hydropower experts from West Japan Engineering have done field visits and preliminary surveys in Sicopong, which was found to have good potential, PNOC said. It said provincial leaders have been pushing for the conduct of the feasibility studies to look at the site's viability, noting their optimism the output would ease the power supply problem of the province. Mr. Maņalac said that Negros is now becoming the renewable energy center of the country as it is home to PNOC's 112.5-megawatt Palinpinon I and the 80-megawatt Palinpinon II geothermal fields, and its tie-up with British firm Bronzeoak for a 30-megawatt bagasse-powered cogeneration project in Talisay. West Japan Engineering has also completed the feasibility studies for PNOC for the 23.5-megawatt Timbaban Hydropower project in Panay and the 18-megawatt Catuiran Hydro project in Mindoro. The results are now being evaluated for eventual implementation, the PNOC said. -- Bennet S. Sto. Domingo



Mondragon defers annual meeting anew

Mondragon International Philippines, Inc. yesterday postponed for another six months the holding of its stockholders' meeting to give time for prospective investors to finish their due diligence on the firm's assets. "The investors wanted more time to complete their due diligence. Until such time that they are finished with their studies, we cannot hold a meeting. But we hope that they can finish their studies soon, or within six months," Jose Antonio U. Gonzalez, chairman and chief executive, told BusinessWorld. "While we have been holding negotiations with the investors, they have asked for more time in view of what they call political uncertainty and country risk."

In a disclosure, Mr. Gonzalez said that "the meeting was rescheduled to allow the company enough time to pursue negotiations with concerned entities as well as with investors who will provide additional funds." These funds, he said, would be used to settle the company's obligations to the government and "normalize operations within Mimosa," its leisure estate in Clark. He said the company postponed its stockholders' meeting to March 14, 2005, "exactly six months" from now. The company last convened its stockholders' meeting three years ago. "I want this to be settled for the benefit of stockholders. The company only wants to protect their interest," he said. He declined to name the investors but claimed many are interested. "They want to remain confidential," he said.

Wholly owned unit Mondragon Leisure and Resorts Corp. used to manage the 235-hectare Mimosa leisure estate inside the former Clark air base in Pampanga. While there are reportedly investors looking at Mimosa, most of them were apparently turned off with the present setup since state-owned Clark Development Corp. runs the estate. "They want to deal with a private entity," said Mr. Gonzalez, referring to the investors who are looking at the estate. -- Roulee Jane F. Calayag



Stocks sustain rise on positive leads


A host of factors converged to further strengthen the performance of the Philippine stock market which started the week in positive territory. Contrary to expectations of a possible decline in the Philippine Stock Exchange composite index (Phisix) due to some stocks reaching overbought levels, the benchmark index continued to soar, closing 7.02 higher at 1.758.62. "The [expected technical] correction was overshadowed by the higher-than-expected global bond float and the drop in world crude oil prices over the weekend," said Mylene Crucena Mercado, investment analyst at A fortnight after President Gloria Macapagal Arroyo declared that the country was facing a fiscal crisis, the government said it was again ready for the international capital market with at least $750 million in bond offering. This was later raised to $1 billion, following a healthy demand for the sovereign bonds.


The decrease in the world crude oil prices also boosted the stock market and prevented an early bout of technical correction. The market marched on with its gains also through the pullback in oil prices to $42.81 per barrel from $43.99 inspired local investors. "The Phisix moved seven points up at 1,758.62, following crude oil futures' biggest decline in three months at $42.81, down by 4%, as well as Petron Corp.'s decision to keep product prices unchanged, despite smaller firms' rate increase. Government's higher-than-expected $1 billion funds from its global bond offering also aided sentiment," explained Ms. Mercado. The Oil Petroleum Exporting Countries will be meeting this week in Vienna to look into oil output and prices. An uneventful observance of the third anniversary of the Sept. 11 terror attacks likewise helped the market sustain its forward move. And last but not least, the follow-through buying in select stocks expected to record strong gains in the financial front also buoyed sentiment and increased investors' appetite.


At the stock market, the number of losers was twice the gainers, 56-28 while 32 issues clung to their previous prices. Four counters were down and only two sustained their gains. "Among sectors, only commercial-industrial ended in green, up 0.79% day-on-day, led by telcos. Erstwhile high-performing property was down 30% and financials, down 1.4%, finished weaker owed to much-needed technical breathers," added Ms. Crucena. Commercial-industrial gained 22.05 or 0.79% at 2,814.74. The banks and financial services sector dipped 7.18 or 1.43% to 494.02. Mining recorded the biggest decline of 35.58 at 1,824.07. Property slid 1.75 to 586.02. Oil lost 0.09 or 5.14% at 1.66. The all shares index was up 2.67 or 0.25% at 1,066.73. Value turnover declined to slightly over PhP1 billion from a spectacular level of almost PhP2 billion last week. There were 4,188 trades for 2.89 billion shares that exchanged hands in yesterday's session.


Globe Telecom, Inc. was still the top traded stock, closing at PhP1,090 with 214,000 shares valued at PhP232.9 million. The market continued to focus on other Ayala stocks such as Bank of the Philippines Islands (BPI), Ayala Corp., and Ayala Land, Inc. BPI, the banking arm of the Ayala group, was the third most actively traded stock although its price dipped to PhP46. The stock price of conglomerate, Ayala Corp., also dropped but it still managed to rank as the fourth top traded stock. It closed at PhP6.30. Philippine Long Distance Telephone Co. remained the closest challenger to Globe in the second spot. It closed higher at PhP1,445, cornering 21.57% of the market with 157,000 shares worth PhP227.8 million.


With the improving economic climate, spruced up by government's widespread efforts to stamp out its fiscal deficit, foreign fund managers kept their hard-earned investments in the local equities market. Foreign net buying amounted to PhP125.6 million yesterday. As the market enters into its tenth trading day this month, investors remain upbeat about the prospects at the bourse. They expressed hope that the upward trend will be sustained until the end of the year. Although it is still a long way to go before the year draws to a close, some investors have already began to plot a fruitful rally for the next three months. They said there was no stopping the bull from reigning as the domestic stock market defied all expectations early on. The stock market staged spectacular gains, with value climbing to less than PhP2 billion in one session last week. It also closed to a record 53-month high. The drive to conquer the bearish mood that has been weighing the market for years rages on and investors are heartened by this seeming single-minded commitment to reverse the fate of the local bourse. Dealers expect sideways trading to prevail today, with some technical corrections. But while the market readies for these corrections, investors will also be monitoring other developments which could offer pockets of opportunity for them. Generally, traders said the market will be moving smoothly except for a few dips in some stocks.