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A bill requiring the annual submission of statements of assets,
liabilities and networth (SALN) by all taxpayers beginning next year has
been filed at the House of Representatives. House Bill No. 2895 filed by
Cavite Rep. Jesus Crispin C. Remulla, a member of the House committee on
ways and means, is expected to help expand the country's tax base once
it is passed into law. The Remulla bill is an offshoot of House
deliberations on a tax amnesty bill, which was recently approved by the
House committee on ways and means. That bill will require the submission
of SALN by taxpayers who intend to avail themselves the benefits of
amnesty. The Department of Finance had favored the mandatory submission
of the SALN by all taxpayers, regardless of whether they would avail
themselves of amnesty. However, during hearings on the tax amnesty bill,
ways and means committee members countered the Finance department's
position, noting that the provision on the mandatory submission of SALN
by all taxpayers would be questioned by legislators when the amnesty
bill is presented to them for approval.
Not wanting to delay the passage of the tax amnesty bill, yet
acknowledging the importance of building a taxpayer database, committee
members decided to put out a separate bill that would require the annual
mandatory submission of SALN by all taxpayers. Lawmakers want the
Malacaņan presidential palace to certify the new bill as equally urgent.
But even without Palace backing, Tarlac Rep. Jesli A. Lapus, chairman of
the House committee on ways and means, said House Bill No. 2895 would
also be passed within the year.
Under this bill, taxpayers earning an annual gross income of more
than
PhP200,000 or owning real and or personal properties with an
acquisition cost of at least
PhP500,000 will be required to file their SALN as of December 31,
2004 at revenue district offices of the Bureau of Internal Revenue (BIR).
They will file their first SALN on or before April 15, 2005, and on or
before the same date in succeeding years. The SALN, as proposed by House
Bill No. 2895, will contain a declaration of:
- all assets within or outside the Philippines, whether real or
personal, whether used in trade or business;
- all existing liabilities, which are legitimate and enforceable;
and
- net worth, which is the difference between total assets and
total liabilities.
The declaration in the SALN will be kept confidential by the BIR and
will be utilized in the Information Management Program that will be
established to handle the declared financial information. House Bill No.
2895 proposes the following penalties for non-compliance with its
provisions:
- fine of
PhP50,000 and imprisonment of one to six years for taxpayers who
fail to file their SALN;
- penalties of perjury for taxpayers who underdeclare their
networth by 30%;
- penalties of fraud for taxpayers who fail to declare properties
equivalent to 30% of total value of their assets;
- fine of
PhP50,000 and imprisonment of one to six years for divulgence of
the information in the SALN.
If employees and officials of the BIR or any government office
divulge the information in the SALN, they will be permanently
disqualified from holding public office, voting and participating in any
election, on top of the fine and prison term.
-- Judy T. Gulane
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The country spent $222 million more than it earned in foreign
currency in eight months to August as it made big payments on its
outstanding debts abroad. But this was a big improvement from the same
period last year, when the balance of payments deficit hit $646 million.
The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP)
also reported yesterday that the payments deficit for August alone
totaled $127 million, which added to the $95-million deficit as of July.
BSP attributed the August deficit to large foreign exchange outflows, as
the national government and the Bangko Sentral itself made debt payments
abroad. "There is no breakdown yet, but indications show a shortfall due
to debt service payments," BSP Deputy Governor Amando M. Tetangco, Jr.
said in a press release. "We had more outflows on account of debt
service payments despite the inflows from the reopening of the
government's $425 million global bond issuance in July," another BSP
official said.
The balance of payments or BOP is the record of the country's foreign
exchange transactions with the rest of the world. Closely watched by
investors, the BOP indicates the country's ability to settle
particularly its foreign obligations. Its major components are the
current account, which shows movements in international trade (import
spending and export earnings), and the capital and financial account,
which shows the flow of investments and borrowings.
The country started with BOP deficits for January to February, but
reversed these to surpluses from March to May through dollar inflows
from foreign borrowings. The country incurred a BOP deficit anew in June
as foreign exchange outflows again exceeded inflows. Any transaction
where a Philippine resident makes a payment, like importation or
offshore investment, is a deficit item. On the other hand, any
transaction involving receiving payments, like exports or inward
remittance and investment, is a surplus item. BSP expects next year's
BOP to end at a surplus of $500 million, a marked improvement from the
projected $505-million deficit for this year. Mr. Tetangco said an
improvement in the global economy could lead to better export earnings
and more foreign investments in 2005. --
I. C. C. Gonzales
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The Government Service Insurance Corporation (GSIS) yesterday warned
of its possible financial collapse unless all government agencies
faithfully and completely remit premium payments owed to it. GSIS
president and general manager Winston F. Garcia said nearly all
government agencies still owed his agency around
PhP40 billion, covering their share in the social insurance premiums
of government workers. Government offices including the Department of
Education refuse to pay what they owe, with some back premiums as old as
five years. "The fund cannot be sustained. It will go down," Mr. Garcia
told reporters in a briefing. He declined to list the government
agencies concerned, but conceded that their tight budget could have
caused their failure to settle their premium obligations. Mr. Garcia
also warned GSIS members that unless all obligations were settled, the
state pension fund would continue with its premium-based policy, which
balances members' premium payments with their claims.
Under this policy, GSIS will pay a member's pension only for the
period equivalent to the amount remitted as premium payments. Mr. Garcia
said this policy, adopted last year, has helped cushion the impact of
GSIS' fund shortfall. Aside from this, GSIS will also diversify its
investments, which can include paintings, government securities, and
long-term loans. "If there are more paintings, we will invest in these
because there are alternative investments," he said. GSIS previously
bought a Juan Luna painting in an auction in Hong Kong, a move that
stirred controversy among GSIS employees and members on the back of the
government's fragile fiscal position. Mr. Garcia, however, said national
treasures such as old paintings were worthy investments since their
value appreciate. He also cited as a business decision the recent move
of GSIS to transfer its money from Land Bank of the Philippines to
Aboitiz-led Union Bank of the Philippines.
BusinessWorld earlier reported that GSIS pulled out some
PhP7 billion to
PhP8 billion in deposits from Land Bank to transfer part of it to
Union Bank. GSIS transferred
PhP1 billion after Union Bank won the bid to service GSIS' automated
card, which would serve as a disbursement card for members.
Mr. Garcia said GSIS would pull out its remaining money from Landbank
by the end of the month, to invest it in government securities instead.
GSIS transferred the money after Landbank required a maintaining balance
of
PhP8 billion. GSIS said its earnings from investments reached
PhP12.56 billion as of July 31. GSIS expects to raise
PhP62.33 billion in revenues this year, up slightly from its
revenues of
PhP60.02 billion last year. GSIS data showed its gross revenues
totaled
PhP51.56 billion in 2001. This increased to
PhP60.25 billion in 2002, but slightly dipped to
PhP60.02 billion in 2003. As of end-July, GSIS' net income was
PhP18.9 billion. "We have been implementing our own austerity
measures even before the current fiscal crisis surfaced," Mr. Garcia
said. -- Iris Cecilia C. Gonzales
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American businessmen are concerned over the Arroyo administration's
ability to implement its reform package, warning that the Philippines
will continue to lose out to neighbors in the Association of Southeast
Asian Nations (ASEAN) unless "important issues" such as the ballooning
budget deficit, rising power rates, as well as graft and corruption are
addressed. Officials of the United States-ASEAN Business Council also
said "it's back to business" in the Philippines, while acknowledging
that the spat over the pullout of Filipino troops from Iraq had ruffled
some feathers.
Ernest Z. Bower, head of the business council, noted that the
government has prepared a program to address a number of issues raised
in the past, and appeared to be making progress in some areas. "We find
that President Arroyo not only has a plan, she [and] her team understand
the issues and we have seen progress in some of the issues that we have
raised in the past with her. That makes us believe as practitioners that
this is a good team with a good plan, and progress is being made," he
told reporters.
Mr. Bower led a 43-man delegation of senior US executives to the
Malacaņan presidential palace on Wednesday and has met with key
administration officials and congressional leaders. He said the
government should deliver on commitments to implement tax reform
measures, strengthen anti-corruption mechanisms, and "take care of the
energy problem." The Arroyo administration is aiming to balance the
budget by the end of the President's six-year term through eight tax
measures projected to generate
PhP80 billion in additional revenues annually. "Unless those issues
are addressed, I think the Philippines would really slip back in its
competitiveness within ASEAN and within Asia at a time when [it] could
least afford to do so because the growth is back on and the focus is
coming back to Asia," Mr. Bower said.
The US-ASEAN Business Council president also said Manila must strive
to strike a free trade agreement (FTA) with Washington if it wanted more
investments. Singapore is the first among ASEAN members to seal an FTA
with the US, and Thailand is close to signing one. "I think Malaysia
could beat [the Philippines] to the door [in securing an FTA with the
US]," he said. Mr. Bower, however, said that the business council would
continue to lobby for an RP-US FTA among US trade officials. The US
government, though, appears to have "slowed down" in talks following the
Iraq pullout, he said. Nonetheless, relations between the two countries
remain cordial, said Philippine Ambassador to the US Albert del Rosario,
who accompanied the business delegation.
Manila's decision to withdraw a humanitarian contingent from Iraq to
prevent the beheading of Filipino truck driver Angelo dela Cruz has "no
relationship at all" with efforts to begin negotiations for an RP-US FTA,
he said. "We had a principled disagreement with the US. Friends and
allies can disagree but moving forward we can see the alliances growing
stronger," Mr. Del Rosario said. Mr. Bower added, "That's very
reassuring to business people. We don't want to see relationships
downgraded due to misunderstandings." US senior executives made a number
of recommendations to Malacaņang, including:
- accelerated reduction of the approval process for
build-operate-transfer projects to within six months to one year;
- creation of an Information and Communications Technology
department and completion of an online procurement system for all
government agencies;
- effective implementation of the Optical Media Act to combat
pirated CDs and DVDs;
- continuation of deregulation in the power sector;
- early implementation of "open skies" in the airline industry;
- improvements in customs standards and port security systems as
well as the repeal of the new customs brokers law for being
"improper and unconstitutional";
- action against continued importation of used cars; and
- changes in the excise tax scheme on cigarettes.
The delegation was also concerned with the significant decline of
Philippines exports to the US in the last four years, which could worsen
with the abolition of garments quotas by the end of the year as well as
the implementation of new security and biosafety regulations. The
mission included officials of Boeing Company, Citigroup, FedEx, UPS,
Ford Motor Company, General Motors, Microsoft, Oracle Corp., Unisys
Corp., PriceWaterhouseCoopers, Time Warner Inc., and Tyco Integrated
Systems. -- Felipe F. Salvosa II
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The Arroyo administration will continue to push for the congressional
approval of eight priority tax bills despite a survey showing popular
opposition to the new levies, Malacaņang said yesterday. Press Secretary
Ignacio R. Bunye expressed confidence that the more people recognize the
country's financial problem, the more they would be willing to support
the Palace-backed tax proposals in order to avert a full-blown crisis
later. "We understand the resistance of many of our people to new taxes
in the midst of current difficulties," Mr. Bunye said in his regular
briefing. "We are confident that as time passes, more and more people
will recognize the gravity of the situation and the need for greater
sacrifice," he added.
The Palace made the statement in reaction to the nationwide survey of
research group Pulse Asia, which showed that as much as 78% of Filipinos
"see no need to impose new taxes" and that the government should instead
improve tax collection to boost revenues. But Malacaņang chose to be
optimistic and said: "We also welcome the results of the same survey
which says that 30% of the respondents are willing to agree on
additional taxes if it will be for the improvement of government
services."
In her
State of the Nation Address (SONA) last July, the President asked
Congress to approve a comprehensive set of eight tax bills aimed at
raising
PhP80 billion in new revenues and PhP20 billion in government
savings. The new taxes are the PhP2 per liter hike in excise tax on oil
products; indexation of taxes on cigarettes and alcohol; revising the
value-added tax; shift from net to gross income taxation; a tax amnesty;
an attrition system for government agencies; imposition of franchise tax
on telecommunication firms, and rationalization of fiscal incentives.
The President's spokesman stressed that the government was making
sacrifices as well and that "more sacrifice shall be demanded from those
who can afford it." Mr. Bunye said the executive was still working with
Congress on the tax program and that "we are confident it is in the best
interest of the average Filipino in the long term." --
Jeffrey O. Valisno
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The Philippines needs to step up efforts to improve the compilation
of its macroeconomic statistics, make it more transparent and bring it
in line with international best practices, an International Monetary
Fund (IMF) study recommended. The IMF's August 25 Report on the
Observance of Standards and Codes focused on the country's data quality
for national accounts, consumer prices, balance of payments, government
finance and monetary statistics. One proposal is an amendment to the
bank secrecy law, which the IMF study said would give government
statisticians access to other data available only through banks.
Overall, the study recommended the strengthening of coordination
among government agencies to facilitate proper data collection. The
government, it said, must ensure that agencies and units compiling
macroeconomic statistics have adequate computer resources, staff, and
training. Any changes in methodology should also be revealed in advance
to allow the public to adjust to the new system.
On computing the consumer price index (CPI), the study said concerned
agencies must closely monitor consumer markets to identify possible
sources of problems in the measurement of the CPI. Agencies must prepare
a plan to incorporate the treatment of quality change in CPI
calculation. On fiscal data, the study said the government must grant a
Department of Finance entity the authority to coordinate data collection
in accordance with international statistical guidelines. The government
should also disseminate timely quarterly data and improve the
methodology for estimating value added and taxes at constant prices. On
the balance of payments (BOP), the study recommended organizational
changes in concerned agencies . It also noted the need to determine the
value of dollar remittances are channeled outside banks.
"Recommendations on the BOP, the national accounts, and the fiscal
statistic should be addressed with particular urgency," the study said.
-- I. C. C. Gonzales
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By IRIS CECILIA C. GONZALES,
Reporter
Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura will soon
get back to work and lead the US leg of the government's international
roadshow next week. Mr. Buenaventura, who is in the United States for a
medical check-up, is expected to make a sales pitch for the Philippine
economy and present the government's economic program for the next six
years. The government will hold a "no-deal" roadshow on Sept. 20 in
Europe, US and Asia hoping to assure investors and fund managers that
the government is committed to address its fiscal problems. The roadshow
intends to drive up investor confidence in the country. Mr. Buenaventura
said he would be meeting with Filipino-American businessmen to invite
them to invest in the country. "I am joining the roadshow and giving a
speech before the Philippine American Chamber of Commerce as well as the
US-Asean meeting in New York," he said in an e-mail message.
The central bank chief said he is doing well and eager to face
investors, a statement that would douse cold water on speculations that
he is in the US for cancer treatment. He is scheduled to be in New York
from September 27-30 and in Washington from October 4-7. On October 2-3,
he will represent the Philippines in the annual meeting of the
Washington-based International Monetary Fund (IMF) and the World Bank.
Mr. Buenaventura left last month for the US and is expected to be back
in the Philippines on October 12. Aside from the Bangko Sentral chief,
other economic managers and key officials will join the roadshow. They
include Finance Secretary Juanita D. Amatong, Trade and Industry
Secretary Cesar V. Purisima, and central bank Assistant Governor Nestor
A. Espenilla, Jr.
The central bank's Investor Relations Office, which will spearhead
the project, said the roadshow will target fund managers, portfolio
investors and businessmen. Corazon Guidote, who heads the office, said
foreign investors are eager to know the government's fiscal program and
the specific measures it will take to address the swelling budget
deficit. The government team will explain to investors that President
Gloria Macapagal Arroyo's fiscal program includes a set of tax measures,
expected to raise
PhP83 billion yearly. The Department of Finance, which recently
raised $1 billion in new bond issuances, has not ruled out additional
foreign borrowings for the year and thus, may again tap the debt market
after the roadshow.
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By KAREN L. LEMA, Reporter
The Department of Finance yesterday defended the timing of the latest
$1-million bond it has offered in behalf of the National Power Corp. (Napocor).
Finance Undersecretary Nieves L. Osorio told a senate hearing yesterday
that the government had to immediately raise funds for Napocor so that
it could pay off obligations due this month. Ms. Osorio added that the
additional income the Napocor would generate as a result of the Energy
Regulatory Commission's (ERC) decision to grant its request for a rate
increase would be insufficient to pay those obligations. "While it is
true that the ERC approved its request for tariff increase, the inflow
of that would not happen immediately. Now we have obligations for
September which is more than what would be generated from that," Ms.
Osorio explained.
As early as August, Napocor -- in a memorandum submitted to the
Finance department -- sounded off its need for additional funds to be
able to settle payables to independent power producers, Finance
Undersecretary Eric O. Recto told reporters yesterday. Of the $1-billion
bond proceeds, Mr. Recto earlier explained that $750 will be lent to the
cash-strapped power utility thereby completing its 2004 financing
requirements while the rest will be used to fund the national
government's budget requirements next year.
The Philippines on Sept. 9 sold $300 million worth of bonds due in
2015 at 8.875%, and $700 million worth of bonds maturing in 2025 at
10.625%. The government set a price guidance of 98 for the 2015 bonds
and 106 for the 2025 series. "We wanted to make sure that we did not
have too much competition when we were doing the issue," Mr. Recto said
in defense of the timing of the bond offering. Had the government issued
the bonds at a later time, it would have to compete with Turkey, Brazil,
China, Korea, Malaysia, and Indonesia, Mr. Recto said. "When credit is
under pressure, the ability to borrow long term diminishes extensively.
Here we are able to keep the yield curve intact at current levels and we
are still able to borrow twenty plus year money," the Finance official
said.
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Tong Yang Investment Bank of Korea, one of the biggest business
conglomerates in South Korea, has finalized its takeover of Orion
Savings Bank. Tong Yang president Sang Yil Chun recently flew to Manila
for the signing ceremony last Sept. 15 Opened in November 1997, Orion
Bank is a product of the synergy between the Tong Yang Group of Korea,
which has interests in financial services, information technology,
cement manufacturing and construction, and Harigold Assets Inc., a
holding company that has several business interests in the Philippines.
It was reported last month that the policy-making Monetary Board has
approved the plan of Tong Yang Group to take full control of Orion Bank
where it previously held a 60% stake.
With an authorized capital of
PhP1.2 billion and paid-up capital of PhP350-million, Orion Bank
is focused on retail banking particularly salary loans and other
consumer lending. It wants to establish a foothold in the growing Korean
community in the Philippines.
In an earlier interview, Orion Bank president Young T. Kim said the
thrift bank aims to improve its earnings performance in preparation for
listing at the Philippine Stock Exchange in three years. "The Filipino
shareholders asked Tong Yang to purchase their shares. We need to
improve the earnings and to pay dividends. So far, our business target
is not big enough to produce adequate level of earnings. We need to fix
our business," Mr. Kim told BusinessWorld. The largest merchant
bank in Korea, Tong Yang Investment Bank's asset base is estimated to be
PhP227 billion (4.6 trillion won) with stockholders' equity of PhP22
billion (455 billion won). A significant trade partner of the country,
Korea has been an important source of investment, trade and development
assistance aside from an important source of tourists for the
Philippines with a monthly average of 10,000 visitor arrivals.
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The local savings bank of US-based American Express Bank is vying for
leadership in the credit card business by offering a peso-denominated
credit card. American Express Bank Philippines, Inc. (A Savings Bank),
Inc. president and chairman Ian T. Fish said yesterday the American
Express Peso Platinum credit card complements the bank's existing
portfolio of premium US dollar-denominated American Express card.
"American Express pioneered the world's first platinum card in 1984 in
the United States. Over the years, the product is often referred to as
the "ultimate plastic" because of its exclusive and valuable benefits,"
he said in a press briefing. "With the launch of the American Express
Peso Platinum credit card, we are bringing the best rewards program and
privileged recognition for cardmembers. We are confident that we bring
the market unparalleled service and prestige. Our long-term commitment
to the market is clearly reflected in the sophisticated infrastructure
credit card for the new card."
Patty Pronove Henson, marketing head for card products, said the
bank's latest product offering "brings the world's best to the
Philippines by providing world-class customer service, the best rewards
program, access to local and international experiences and privileged
recognition to cardmembers." "It is true that we have a portfolio of
dollar-denominated cards but Amex Peso Platinum credit card addresses a
different need. We want this to be the card preferred for spending in
the Philippines and abroad. For our members whose finances are more in
pesos, this is a very important facility for them," she told reporters.
David Cronin, regional head of marketing and business development, said
the high-end segment of the market is "under served" by the current
credit card business. -- R. A. M. Rubio
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Security Bank Corp. has "gone live" after the first-phase
implementation of an IT-based solution called SmartVista Suite that
provides single and combined platforms to process local and
international credit and debit cards. "The solution enables Security
Bank ATM cardholders to use their ATMs further than just for the common
ATM functionalities. SmartVista will eventually transform their ATMs
into complete financial machines for the bank's ATM and credit card
products," said Daniel Yu, Security Bank first vice-president and head
of IT group, in a statement. The first phase of Security Bank's in-house
processing center was the installation of the SmartVista transaction
switching system (SmartVista Front-End), which enabled the bank to use
the SmartVista software to drive its expanding network of ATMs and
Internet merchants, and support mobile banking.
Following the certification of SmartVista solution with ATM network
consortium Bancnet's payment scheme, business solutions provider Banking
Production Center (BPC) migrated the ATM cards into the new system. This
is seen to boost efficiency by consolidating its transactions from
multiple channels and payment networks through a single system.
Subsequent phases of the SmartVista implementation for Security Bank
include: integration of credit and debit cash switch and management
functionality, unifying the bank's acquiring and issuing functionality
and providing full acquiring and issuing of MasterCard and Diners Club
card products, including M/Chip cards.
By bringing down the cost of card operation through fewer running
platforms, and tedious maintenance and upgrades, SmartVista aims to
provide higher profitability for the bank and better service for
clients. Alexey Domidov, BPC International chief operating officer, said
the relationship with Security Bank "represents a significant entry into
Asia-Pacific financial services marketplace and has opened existing
opportunities for us in the region." "In today's complex banking
environment, Security Bank's requirements for the card processing and
management systems that are able to address both traditional and
emerging forms of financial services are essential. SmartVista solution
is designed to integrate the bank's diverse processing architecture into
a single platform, while providing flexibility and potential to add
emerging technologies like EMV [Europay-MasterCard-Visa]-compliant
cards," he said. The EMV system uses chip-based technology for cards to
ensure safe electronic payments. -- Ruby Anne M.
Rubio
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By ROULEE JANE F. CALAYAG
The stock market yesterday eased into negative territory and entered
into a third session of "healthy corrections," following nine days of
heavy gains, traders said. "There was continued profit-taking on blue
chips," said Astro del Castillo, managing director of First Grade
Holdings, Inc. Despite bargain hunters' moves toward second-line stocks,
Mr. del Castillo said a healthy correction was experienced in
yesterday's session. MDR Securities, Inc. analyst Benson Te shared the
same view. "Profit-taking activities continue to hound the market and
were mostly concentrated on the blue chips as the Phisix [the Philippine
Stock Exchange composite index] closed 14.22 points or 0.83% lower on
moderate volume of
PhP647.70 million or $11.54 million," said Mr. Te. Although the
drop in the benchmark index was greater yesterday, dealers said this was
normal especially as the market tries to cool down.
MINING
Mining was the only index that remained in positive territory. MDR's
Mr. Te said the mining index, up 57.33 at 1,833.80, was buoyed by trades
in Manila Mining "A" shares, which were up 14.28% and "B" shares that
rose 5.88%. Banks and financial services slid 0.42 to 484.98.
Commercial-industrial lost 27.88 at 2,696.21. Property dropped 3.19 to
569.95. Oil was unchanged at 1.61. The all shares index dipped 6.76 to
1,065.93. Of the 124 traded issues, decliners gained slight headway over
advancers at 38-35. Unchanged issues had the highest number at 51.
Trades improved slightly at 2,904 for 2.63 million shares priced at
PhP647.70 million. Mr. Te said foreign selling dictated the performance
of the market yesterday with the domestic market registering PhP97.13
million ($1.73 million) worth of outflows that represents about 15% of
the day's cumulative turnover.
Philippine Long Distance Telephone Co. (PLDT), the country's
telecommunications leader, led the decline in share prices. "[The
outflows] were centered mostly on heavy caps PLDT, down 1.45% and San
Miguel Corp. B, down 2.14% and also in second-tier Phisix component
issues," said Mr. Te.
AEV
In other corporate news, Aboitiz Equity Ventures (AEV) told
BusinessWorld on Wednesday that its subsidiaries which were named in
a tax scandal are not guilty of the charges. Jojoff Escobal, AEV
vice-president for corporate communications, said the Aboitiz companies
"legitimately purchase and apply tax credits on a regular basis in the
normal course of business, and only after the transactions have been
approved by the proper authorities." The graft charges that will be
filed against three of AEV's subsidiaries stemmed from the alleged
illegal sale and transfer of tax credit certificates of Uniden
Philippines to Pilmico Foods, Pilmico-Mauri Foods Corp., and Visayan
Electric Co. The National Bureau of Investigation forwarded the
recommendations for legal action against the concerned individuals to
the Department of Finance.
Meanwhile, listed firm Republic Glass Holdings Corp. declared a cash
dividend of PhP0.15 per share. The record and payment dates have yet to
be announced. Jolliville Holdings Corp. told the stock exchange that it
filed a case against the Philippine British Assurance Co., Inc. at the
Makati Regional Trial Court. Jolliville said the complaint is for the
collection of claims which the insurance company reportedly denied.
Aside from the insurance claims, the firm also wants to collect
exemplary damages and attorney's fees totalling PhP37.86 million. As the
market draws to a close for the week, analysts see the support level at
1,680. "That [level] will be good," noted First Grade's Mr. del
Castillo, adding that the market is poised for greater gains in the next
few days.
OIL PRODUCTION
"We are likely to see a stronger market in the coming days after the
OPEC [Organization of Petroleum Exporting Countries] moved to increase
oil production," he said. Increased production is seen to ease the
pressure on oil prices. "Lower crude oil prices will benefit the local
economy as it removes the uncertainty," he added. Mr. del Castillo noted
that selling at the stock market began to taper off although some
bargain hunters continued to gobble up second-liners and other issues.
POSITIVE LEADS
As the Chinese ghost month winds down, the retail market is expected
to perk up and shift to a new level. Measures aimed at ensuring higher
tax collections may also bode well for the market as it is poised to
breach the current resistance level. "The market will only react to the
tax measures when they are already implemented but now we see that it is
becoming receptive to fiscal measures," concluded Mr. del Castillo.
MDR's Mr. Te was equally upbeat as he sees a revival of broad market
activities in the coming sessions. "The Phisix could still founder over
the interim with corrections from the major protagonists or see them
move sideways although the thrust of the activities will center on the
second- and third-liners," he said. The other scenario, he said, would
be a resumption of buying activities in both the blue chips and the
second liners.
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By KAREN L. LEMA, Reporter
and CECILLE S. VISTO, Sub-Editor
The National Bureau of Investigation (NBI) has recommended to the
Department of Finance (DoF) the filing of graft charges against
stockholders, directors and officers of three subsidiaries of the
Aboitiz Group of Companies, who allegedly connived with tax officials to
illegally secure and use
PhP42.5 million worth of fraudulent tax credit certificates last
year.
In its recommendation to DoF, the NBI identified the would-be
respondents as:
- comptroller Eugene O. Gozon, chief finance officer Stephen A.
Tan, and marketing consultant Licerio L. Cabahug -- all of Pilmico
Foods Corporation;
- Visayan Electric Company, Inc. (VECO) financial assistant Nelson
V. Perez and chief economic analyst Zoilo M. Cortez;
- Alvin Arco, finance officer of Davao Light & Power Corp., was
also on the list, although the electricity distributor was not among
those that allegedly obtained and used fake tax credit certificates;
- NBI also recommended charges against officials of the Bureau of
Internal Revenue (BIR): lawyer Lirio A. Cabsaba, Carolina P. Pineda,
Ma. Angeline L. Gatchalian, Rosita P. Fernandez, Ernesto Q. Hiansen,
Grace Flaminiano, Melda Ribas, and Ma. Emelita Tizon;
- NBI Director Reynaldo G. Wycoco also sought the prosecution of
May B. Reyes, lawyer Ernesto S. Araneta, Fidel R. Najera, and
Roberto A. Varquez for alleged violation of Republic Act 3019 or the
Anti-Graft and Corrupt Practices Act.
The criminal charges stemmed from the allegedly illegal sale and
transfer of tax credit certificates of Uniden Philippines to Pilmico
Foods, Pilmico-Mauri Foods Corp., and VECO. NBI said the transfer in
2003 was made through the use of allegedly spurious documents. VECO is
the country's second largest power distribution utility after Lopez-led
Manila Electric Company. Pilmico Foods is also among the biggest local
flour milling corporations, while its unit, Pilmico-Mauri, is a
processor of specialty baking products. The Aboitiz units used the tax
credits between April 10 and May 23 last year to trim their tax
liabilities. "The recommendation would be evaluated by the Special
Presidential Task Force 156, which is investigating the multi-billion
tax credit scam," NBI-Anti-Organized Crime Division chief Jose Justo S.
Yap told BusinessWorld.
Uniden, the tax certificates' seller, was not recommended for
prosecution. Uniden closed its manufacturing plant in Taguig, southern
Metropolitan Maninla in 1999 due to a plunge in market demand for its
analog products, but it continues to produce cordless telephones in its
Cabuyao, Laguna facility just south of Metro Manila. If the charges are
approved, Misses Pineda and Reyes, as well as Messrs. Araneta and Najera
will also face nine counts of falsification for "forging and using a
total of nine documents to support the fraudulent transfer of the
purported [tax credit certificates] of Uniden." The forgeries led to the
issuance by DoF and BIR of new tax certificates in favor of Pilmico,
Pilmico-Mauri, and VECO. Ms. Pineda will also be prosecuted for
usurpation of authority, for signing and approving the transfer of three
fake certificates that led to the issuance of five new credit
certificates to the three Aboitiz subsidiaries, without Mr. Cabsaba's
approval.
NOT TRUE
Jojoff Escobal, Aboitiz Equity Ventures (AEV) vice-president for
corporate communications, said the Aboitiz units, along with numerous
other corporations, "legitimately purchase and apply tax credits on a
regular basis in the normal course of business, and only after the
transactions have been approved by the proper authorities."
"Unfortunately, it seems that some of the tax credit certificates
purchased by these companies are being questioned. Pilmico,
Pilmico-Mauri and Visayan Electric Company are confident that their use
of these particular tax certificates will ultimately be proven correct
and legal," he told BusinessWorld. AEV is the holding and
investment management company of the Aboitiz Group. It is engaged in
various businesses, with power and banking as core. It was the first
time that units of a publicly listed company were ever implicated in a
tax credit scandal. In the past, oil companies Petron Corp. and
Pilipinas Shell and a number of garments firms were reported to have
been involved in the anomaly. Mr. Escobal said the Omnibus Investments
Code, through the Board of Investments (BoI), provided for tax
incentives for qualified investors. Some investors, however, have unused
tax credits, which can pay for value added tax and import duties. "The
BoI, in conjunction with the Department of Finance and the Bureau of
Internal Revenue, created a market for the legitimate buying and selling
of tax credits," Mr. Escobal said, stressing that the Aboitiz Group did
not do anything illegal.
The tax credit scandal involved the issuance of some
PhP5.3 billion in fraudulent tax credits to oil companies in
connivance with top finance officials. But officials are now under fire
for allegedly "bungling" the court cases against companies involved.
Publicly listed Aboitiz Equity Ventures posted a net income of
PhP1.23 billion in the first half, 4% higher year on year on better
performance of its transport and food units. Aside from Veco, Davao
Light, Pilmico and Pilmico-Mauri, the Aboitizes also own Union Bank of
the Philippines and City Savings Bank. Aboitiz Transport System Corp.,
formerly WG&A, is also controlled by the Aboitiz family.
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If the government fails to sell state-run National Power Corporation
(Napocor) to private investors soon, then it will have to borrow at
least $16 billion annually for three years just to keep the power
company afloat. Documents submitted to the Senate energy committee,
which has been holding hearings on Napocor's finances, also showed that
the power firm's borrowings for this year would total $10.78 billion.
But this could balloon to $16 billion every year from 2005 to 2007 if
Napocor would not raise its prices, sell its assets, or pass off its
debts to the government. Napocor's operating loss for this year already
totals
PhP36 billion, compared to
PhP5.35 billion a year ago. The documents showed the losses were due
to the 40-centavo per kilowatt-hour cap on purchased power cost
adjustment, which resulted in under-recoveries of
PhP4.18 billion from January to June.
Other factors blamed were unrecovered natural gas fuel expenses of
about
PhP8.15 billion, and
PhP18 billion in contracts with independent power producers still
pending approval by the Energy Regulatory Commission (ERC). Another
factor was the mandatory rate reduction of 30-centavos per kilowatthour
for household consumers under Republic Act 9136 or the Electric Power
Industry Reform Act of 2001, which resulted in a deficit of
PhP1.71 billion; subsidies for missionary electrification that led
to a
PhP1.74-billion loss; and eligible stranded contract costs and
interest expense which led to losses of
PhP4.62 billion and
PhP14.69 billion, respectively. The government said it aimed to
raise $4 billion to $5 billion from the sale of Napocor's power plants
and transmission facilities by end-2005. To date, the government has
sold three mini-hydro power plants. It will auction the 600-megawatt
Masinloc coal-fired power plant on October 27. For his part, Napocor
president Rogelio M. Murga said his resignation would not derail the
privatization of Napocor. "The fundamentals [of the privatization] are
already set. It's just a matter of implementing it. Anyway I will still
be here until December," he told reporters.
The government is preparing to sell the generation and transmission
assets of Napocor as part of the deregulation of the power industry. For
its part, militant group Bagong Alyansang Makabayan urged the government
not to let Mr. Murga "off the hook" amid controversies surrounding the
power firm. "Both Mr. Murga and the national government have a lot of
explaining to do regarding the financial situation of the Napocor. Our
problem is that in the past, no official of the Napocor or the national
government has been made accountable for any of its financial woes,"
said Bayan secretary general Renato M. Reyes, Jr.
ALREADY IN CRISIS
At the Senate, Energy Secretary Vincent S. Perez Jr. again warned of
power crisis starting next year in Mindanao unless more power plants
were put up. "In some areas, we are already experiencing a crisis, like
in Panay, Cebu and Mindanao. We can avoid declaring a crisis situation,
but it is the reality. The energy crisis may begin next year," Mr. Perez
told a hearing of the Senate energy committee. Committee chairman Miriam
Defensor Santiago urged the Energy chief to recommend to President
Gloria Macapagal-Arroyo the declaration of a power crisis, to allow
Congress to pass a resolution for the establishment of additional
generating capacity. Ms. Santiago attributed the looming power crisis to
the anomalous contracts forged between the government and independent
power producers, as well as the mounting debts of Napocor. She noted
that former President Fidel V. Ramos signed the most number of power
supply contracts, which cost $7.3 billion. She added that former
President Corazon C. Aquino approved 13 contracts worth $ 2.3 billion,
while Ms. Arroyo signed a $450-million contract. Deposed President
Joseph E. Estrada did not approve any power supply contract. "President
Ramos has been warned by the World Bank that he was signing too many
contracts, which will result in high electricity rates, which is now
happening," Ms. Santiago said. But Senate Minority Leader Aquilino Q.
Pimentel Jr. scored as "bureacratic word play" Mr. Perez's declaration
of a looming power crisis.
In a privilege speech, Mr. Pimentel noted that the situation of the
energy sector needed thorough study. "The energy or power problem that
we now face as a nation requires understanding of its nature and causes
through diligent study and the concomitant courage to do what is right
regardless of what powerful, vested entities might have to say on the
issue," he said. Senators Sergio R. Osmeņa III and Juan Ponce Enrile
also took turns in tracing Napocor's problems to Ms. Arroyo's "political
decision" to reduce the purchased power adjustment (PPA) to 40 centavos
per kilowatt hour from the approved
PhP1.25. Mr. Osmeņa also noted that the PPA reduction actually resulted
in PhP75 billion in operating losses for Napocor, and not just
PhP16 billion as claimed by Mr. Perez.
WINDOW DRESSING
The opposition senators also accused Messrs. Perez and Murga of
"window dressing" Napocor's books, to hide actual losses it incurred due
to Ms. Arroyo's order. "We are going deeply into this. You have to show
us your computation that Napocor lost only
PhP16 billion with the 85-centavo rate reduction, while you were
waiting for the approval of the 40-centavo universal charge by the ERC.
I think that for 28 months that the reduction was implemented, you had
PhP75 billion in losses because of the political decision of the
President to be popular," Mr. Osmeņa said. Mr. Enrile said Energy
officials should reveal the actual losses incurred by Napocor since
1998. Ms. Santiago also said the energy committee was not convinced of
the integrity of the figures presented by the Energy secretary. She
added that another public hearing would be set later this month to press
officials of the Energy department, Napocor, ERC, National Transmission
Corporation, and Power Sector Assets and Liabilities Management to give
the true picture of the energy sector. The lawmaker also noted that
another public hearing would be conducted to look into the power supply
contracts signed by Mr. Ramos. Ms. Santiago earlier delivered a
privilege speech alleging that Mr. Ramos violated anti-graft and
anti-plunder laws for favoring businessmen at the expense of electricity
consumers.
Meanwhile, Senator Panfilo M. Lacson challenged Cabinet members on
the Napocor board to give up their perks. "How many board seats are
given to Cabinet members? How much do they get in perks and privileges?
They should give up the perks," Mr. Lacson said. He noted that the
Napocor board included Mr. Perez, Finance Secretary Juanita D. Amatong,
and Budget Secretary Emilia T. Boncodin.
-- Bernardette S. Sto Domingo and Carina I.
Roncesvalles
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D'LAARNI A. ORTIZ
Assistant Research Head
Job seekers had more success finding work from April to July this
year than last year, resulting in a drop in the unemployment figure for
the period. The National Statistics Office (NSO) reported yesterday that
the unemployment rate slid to 11.7% in July from 12.6% a year ago, and
13.7% in April. In terms of actual number of workers, those without jobs
fell to 4.207 million from 4.399 million a year ago, and from five
million in April. Almost half of the total unemployed were 15 to 24
years of age. The labor supply or the labor force (those 15 years old
and above whether working or actively seeking jobs) expanded by just
2.8% in July to 35.83 million from 34.85 million a year ago. With the
increment in labor supply, the labor force participation rate or the
proportion of persons in the labor force to the total population aged 15
and over ended a tad higher at 67.1% from 67% a year ago. Jobs creation
rose faster than workers' supply thus the decline in the unemployment
rate.
Normally, unemployment figures rise in April when new graduates join
or enter the labor force, and tapers off in July after many of these
graduates land jobs. The ranks of the employed reached 31.623 million in
July, up by 3.8% from 30.451 million a year ago. Specifically, more jobs
were created in the agriculture and services sectors during the period
while industries reported cuts in their work force. Agricultural workers
totaled 11.444 million in July, up by 5.7% from 10.831 million a year
ago. Services, though, continued to draw the majority of the country's
workers with 15.246 million in July from 14.648 million a year ago. With
the onset of the rainy season, job cuts were seen in construction,
bringing down the total employed in the industry sector to 4.93 million
workers in July from 4.97 million a year ago.
For Banco de Oro economist Jonathan Ravelas, the July figures should
provide an additional boost to consumer confidence since new jobs would
translate to more spending power. "Ideally, unemployment should be below
10%, but at least we are getting somewhere," he said. For Mr. Ravelas,
what will be crucial in the near term is the government's ability to
deliver on its promise to create over 1.53 million jobs every year for
six years. The economist also believes that the government should work
on a scheme that will help solve the mismatch between available jobs and
the skills of workers trying to land jobs. In October, Mr. Ravelas said,
the unemployment rate could, at best, go down to 10.5%, or at worst, end
at 11.5%. "There should be a job season [in the coming months] but what
is of concern is the rising crude prices," he said. "If we see continued
increase in oil prices, which could translate to higher inflation and
interest rates, then unemployment could likely balloon to 12%." In July,
the ranks of the underemployed (those who desired more hours of work)
declined by 744,000 to 5.6 million from 6.3 million a year ago.
Accordingly, the underemployment rate dropped to 17.6% from 20.7% a year
ago.
NSO also released yesterday unemployment figures based on standards
set by the International Labor Organization (ILO). The ILO follows three
criteria in classifying persons as unemployed: he should be without
work; currently available for work; and is actively looking for work.
Thus, persons not available for work, and those available for work but
are not looking for work, are stricken-off the unemployment list and the
labor force. In contrast, the Philippine classification includes persons
not available for work, as they are seeking jobs. Also, the country
adopts a more relaxed definition of the "seeking for work" criterion,
such that persons available for work but were not looking for work
during the survey period -- for reasons such as belief that no work is
available, temporary illness or disability, bad weather, awaiting
results of job application -- are considered unemployed. Under the ILO
concept, the total labor force actually totaled 34.193 million in July
or down by 1.6 million from the Philippine standard. Consequently, the
unemployment rate was only 7.5% under the ILO definition, an improvement
from 7.8% a year ago. The number of jobless persons, at 2.57 million,
was almost half that recorded under the Philippine system accounting for
the labor force. A total of 2.587 million people were jobless last year,
under the ILO concept.
Meanwhile, Socioeconomic Planning Secretary Romulo L. Neri said the
July 2004 Labor Force Survey showed that the economy was getting
stronger, despite fiscal woes. He noted that about one million jobs were
created between July 2003 and July 2004, and that some 190,000 jobless
persons found work during the period. But he also noted the failure of
industry to sustain its five-quarter-long job creation trend as it shed
36,000 jobs in July, down from 276,000 jobs created in the same period
last year. Former National Economic and Development Authority (NEDA)
chief Cielito F. Habito, who is now with the Ateneo de Manila
University, said that while the July jobs figure was a welcome change,
it should be taken with caution. "In my experience as former NEDA chief,
the timing of the survey is crucial. For example, if the survey was
taken at the peak of the harvest season, naturally there would be an
increase in employment in the agriculture sector," Mr. Habito said. In
the July labor survey, the farm sector was the biggest contributor to
the rise in employment for the month, as some 613,000 jobs were created
in the sector for the period. "We have to take these numbers with a
grain of salt. This is something that can be vey volatile," Mr. Habito
said. -- with Jennifer A. Ng
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The President has declared a fiscal crisis, lawmakers are squabbling
over how to curb the country's massive debt, and pricey oil is hurting
the economy. It must be time to buy Philippine stocks. That seems to be
the view of many investors, whose buying has pushed the Manila stock
index up around 10% since late August to touch its highest closing
levels since April 2000. With a total gain this year of 18.3%, the small
market ranks as the third-best performing in Asia, after Vietnam and Sri
Lanka. A net $60.5 million flowed into the country's markets in August,
up from $18.3 million a year earlier, reflecting renewed foreign
interest in the wake of May national elections. The bull's case was made
last week in a report by ABN-AMRO bank, which cited relatively cheap
valuations and signs that President Gloria Macapagal Arroyo is serious
about cutting the yawning budget deficit as reasons to keep buying.
One problem, however, is that the market's small size and a lack of
liquidity in even the big companies' shares mean that conditions can
quickly get overcrowded. Total market capitalization is less than a 10th
of the Hong Kong stock exchange. "It doesn't take much liquidity these
days to move the Philippine market. We haven't changed our outlook or
holdings there," said Andrew Gillan, a fund manager at Aberdeen Asset
Management in Singapore. "Normally across the region, liquidity isn't a
constraint for us, but the Philippines is one exception." Monday's
turnover of around $18 million, up from lows around $5 million earlier
this year, was dwarfed by the Thai market's $620 million.
Still, ABN-AMRO regional investment strategist Ben Rudd said there
was a good chance for strong gains given relatively low valuations and
the fact that investors have virtually ignored the Philippines for years
due to political and economic worries. "Clearly, it does not rank as
being particularly liquid compared to most of the other markets, but
that partially just reflects how bad a performer it has been and how
underheld it has been by foreign investors," he told Reuters from Hong
Kong. Manila, which boasted one of Asia's first stock markets in 1927,
now has one of the sleepiest, reflecting the economy's steady decline
relative to its Asian tiger neighbors. Trading ends each day at
lunchtime after only more than two hours of business.
Ironically, Ms. Arroyo's description of the country as being in a
fiscal crisis on August 23 seems to have been the catalyst for the
market's latest run-up after a knee-jerk fall the following day. Rather
than signalling a looming collapse, the alarm spurred hope that
lawmakers would pass a series of tax bills proposed by Ms. Arroyo that
are seen as crucial to cutting the $3.5-billion annual budget deficit,
the biggest drain on investor confidence. Then the government allowed
debt-saddled state power firm National Power Corporation to raise its
charges by 40%, spurring hope that Ms. Arroyo is willing to take
politically unpopular decisions in order to fix the government's
finances. "I think part of the reason the market is up is that investors
might think that recent comments by the government and the action on,
for instance, increasing generation rates are all part and parcel of
concrete signs of reform," said Jojo Gonzales, managing director of
Philippine Equity Partners. None of the tax bills has been passed yet
and opposition to some of them remains fierce, but Mr. Rudd said Ms.
Arroyo's statement had signalled a change from years of ignoring the
growing deficit. Even so, a bumpy ride is possible given the lack of
liquidity and unpredictable politics. Manila failed to take full
advantage of last year's global stock rally as an aborted military coup
and pre-election political tension raised investors' blood pressure.
A virtuous cycle of a rising peso and falling debt costs feeding
through to higher stock prices is the best-case scenario. But the peso
remains close to record lows hit against the dollar in March and
international ratings agencies are still waiting for concrete signs that
the country has turned the corner. "Absolute performance will be much
more driven by what happens in terms of the risk premium and that will
be much more closely tied to Arroyo's success or lack of success," Mr.
Rudd said. But he noted that Philippine stocks in the MSCI global index
were priced at around 12 times forecast earnings per share, the lowest
price-earnings (PE) ratio since 1998, despite expectations of strong
profit growth in 2005 on the back of an improving economy. Still, there
are cheaper markets in Asia. Taiwan, Thailand, Indonesia and South Korea
trade at PEs of between 6.6 and 9.8, according to Reuters Estimates. Mr.
Rudd recommended stocks expected to benefit from the strengthening
consumption and property sectors, including dominant telecoms firm
Philippine Long Distance Telephone Co., retailer SM Prime Holdings, and
property firm AyalaLand Inc. But Aberdeen Asset's Gillan was more wary
of the telecoms sector, despite its strong mobile potential, preferring
to hold Ayala Land and fastfood chain Jollibee Corp. "I don't think
Philippine telcos are particularly attractive on valuation grounds," he
said, noting that some regional counterparts had similar PE ratios and
higher dividend yields. -- Reuters
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The combined debts of the national government and the public sector
are expected to drop to 100% of gross domestic product (GDP) from the
current 137% once the government will have completed its computation of
the outstanding public sector debt using an International Monetary Fund
(IMF) formula. This means the
PhP5.9-trillion public sector debt recorded in 2003 could go down to
PhP4.3 trillion once the government excludes in the computation
intra-government holdings of securities and bonds, or government
securities held by social security institutions and those held by
government sinking funds. The IMF recommendation has made it easier for
the Arroyo Administration to meet one of its fiscal policy objectives:
trimming down the public sector debt to 90% of GDP in 2009. "This would
reduce the total public sector debt as we currently report it," a
finance official who requested anonymity said. The official added that
the IMF formula will "give us a truer picture of the financial standing
of the public sector."
Excluding government securities held by the Social Security System (SSS)
and the Government Service Insurance System (GSIS), government sinking
funds alone will result into a substantial decrease in the ratio of
total public sector debt to GDP of 137.5% to only 111.2% in 2003. The
government's debt problem is a major concern not only for government
economic managers but also for interested investors and multilateral
institutions like the IMF. Economic managers have drawn up
administrative and legislative measures aimed at generating
PhP100-billion in revenues and savings. The IMF has stressed the
need to implement new revenue-generating measures. Among the proposals
presented by economic managers are the indexation to inflation of taxes
on tobacco products and alcohol drinks, rationalization of fees and
charges, a shift to gross income taxation, rationalization of fiscal
incentives, franchise tax on telecommunication companies and two step
value added tax increase. -- Karen L. Lema
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The government will have to pay more to service its debts because of
rising global interest rates, Bangko Sentral ng Pilipinas (Central Bank
of the Philippines, or BSP) estimates showed. A BSP document showed that
the country's debt service burden will increase by $185 million this
year. Based on the government's schedule debt service schedule, it will
have to shell out $7.8 billion in 2004 for principal and interest
payments. BSP Assistant Governor Diwa C. Guinigundo said this is the
likely scenario if the London Interbank Offered Rate (Libor) increases
by one percentage point. "But these are just estimates," he said. The
Libor, currently at a six-month average of 1.8%, is the rate at which
top-quality banks charge each other for loans. As a result, it is often
used by banks as a base for calculating the interest rate they charge on
other loans. Mr. Guinigundo said an increase in the Libor will also
influence movements in the US Federal Reserve's interest rate. He said
the US Fed usually tracks the Libor rate.
Global interest rates have been on an upward trend as central banks
try to head off inflation in a growing world economy. The Philippines,
however, is having difficulty getting a grip on its finances given its
fragile fiscal position. A huge chunk or 30% of its budget goes to debt
servicing, meaning insufficient funds for social services and
infrastructure that would help attract investors. Data from the
Department of Finance showed that the National Government's outstanding
debt stood at
PhP3.355.1 trillion as of end-2003. As of June 2004, outstanding
debt climbed to
PhP3.536.8 trillion.
Last year, debt service payments of
PhP470 billion accounted for 10.9% of the country's gross domestic
product. Total external debt, which comprise debts of both the National
Government and the private sector, stood at $56.7 billion as of end
March-2004. The BSP documents said the central bank will continue to
ensure that external debt policy remains focused on debt sustainability.
The BSP said short-term debt accounts for only 13.2% of total external
debt, while medium- to long-term maturities are well spread out over an
average of 17 years.
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Some of Malacaņang's proposed tax measures will boost economic growth
in the long run, especially if approval leads to increased investor
confidence, the National Economic Development Authority (NEDA) said. In
a presentation at the Senate, Socioeconomic Planning Secretary Romulo L.
Neri discussed the impact of the indexation of sin taxes, an increase in
the excise tax on petroleum products and an increase in the value-added
tax (VAT) rate on the economy. "In the long run, it is expected that the
indexation of sin taxes will increase GDP (gross domestic product) by
0.03 percentage points due to higher personal and government consumption
and total investments," Mr. Neri said. "These increases in demand are
positive repercussions of higher investments in the short run and much
lower long-run interest rates." Mr. Neri said an increase in the prices
of tobacco and alcohol products due to higher taxes will have a
"negligible" effect on inflation. "This is due to the very small share
of tobacco and alcohol products in personal consumption expenditures and
the country's basket of consumption goods," he said.
The NEDA chief has pushed for the immediate passage of a bill that
will increase taxes on tobacco and alcohol products, saying it will
serve as a "litmus test" on the government's resolve to address its
fiscal woes. "The indexation of sin taxes is the most important from the
government standpoint because it is the one closely monitored by both
foreign creditors and credit rating agencies," Mr. Neri earlier said. As
for an increase in the excise tax of petroleum products, he said it will
result in 0.11% increase in GDP and a 1.13 percentage points increase in
inflation due to higher government spending arising from higher
revenues. "However, the effect of the measure on inflation is expected
to decay over time, resulting in tamer 0.15 percentage points increase
in inflation in the long run." The NEDA said higher investor confidence
resulting from the passage of a bill on increasing taxes on petroleum
products will result in a 1.08 percentage point increase in GDP in the
long run. The initial increase in VAT from 10% to 12%, Mr. Neri said,
may raise inflation by 0.23 percentage points in the short run but will
cause the economy to grow by an average of 1.13 percentage points in the
long run, especially if investors gain more confidence. "[W]ithout an
increase in investor confidence, the estimate will yield a 0.01
percentage points decline in GDP," Mr. Neri said.
WRONG WAY?
American-owned Philip Morris Philippines Manufacturing, Inc.
yesterday expressed opposition to a government plan to index "sin"
product excise taxes to inflation, saying this will result in price
distortions. Following President Gloria Macapagal Arroyo's meeting
yesterday with representatives of the US-ASEAN Business Council, Philip
Morris managing director Chris J. Nelson said the government will
generate less revenues in the long run since price distortions could
affect sales. "We are not in agreement with indexation. We recognize
that the government needs additional revenues, but we are looking for [a
revenue measure] that would not distort the market or the industries,"
Mr. Nelson told Palace reporters.
Currently pending since 2001 at the Lower House is a proposal to
increase the excise taxes levied on alcohol and tobacco products and
index them to inflation. The taxes were last adjusted in 2001 and he
government hopes to generate between
PhP8-10 billion in additional revenues. Instead of indexation,
Philip Morris said taxes on tobacco should be unit specific, which
determines the tax rates based on how tobacco products were sold (per
20-stick pack, for example). Under the proposed indexation of sin taxes,
taxes on more expensive tobacco and alcohol products will be higher.
Under the unit-specific proposal, products with the same packaging
weight or unit would be taxed the same. The President ordered the
Finance department to study the cigarette firm's proposal. Ms. Arroyo
also advised Philip Morris to present a position paper to the House of
Representatives and Senate committees hearing the proposed tax measure.
-- Jennifer A. Ng and Jeffrey O. Valisno
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The House of Representatives is confident that a lateral attrition
measure will be approved by the Malacaņan presidential palace, this time
with a provision on due process included in present drafts. President
Gloria Macapagal-Arroyo vetoed a consolidated lateral attrition bill
passed by the previous Congress because it did not include a provision
on due process. Quezon (southern Luzon) Rep. Danilo A. Suarez, chairman
of the House committee on oversight that heard the lateral attrition
measure for the first time yesterday, said this gap has been addressed
in three bills filed in the House.
The bills -- filed by Mr. Suarez, Ilocos Norte Rep. Imee R. Marcos
and Baguio City Rep. Mauricio G. Domogan -- state that:
"The system of lateral attrition shall be applied only after careful
and proper review by the Revenue Performance Evaluation Board ...
and after compliance with the substantive and procedural due process
as required by the civil service laws; Provided ... That an
official/officer/employee affected by lateral attrition shall be
given the right to appeal with the Civil Service Commission in
accordance with civil service laws and rules."
Mr. Suarez noted that lateral attrition is an unorthodox measure to
improve tax collection, but a necessity given the huge tax gap, or the
difference between potential tax and actual tax collected, and declining
tax effort.
The average tax gap on value added tax, individual income tax and
corporate income tax between 1998 and 2000 stood at
PhP127 billion, he said, while the combined tax efforts of the
Bureau of Internal Revenue (BIR) and Bureau of Customs (BoC) decreased
to 12.5% in 2003 from 17% in 1997. A lateral attrition law, he said,
will institutionalize a system of rewards and penalties to boost revenue
collection. It is one of three measures aimed at boosting collections;
the other two are the creation of the Court of Tax Appeals and a tax
amnesty for delinquent taxpayers. The Court of Tax Appeals, which will
hasten the resolution of tax cases, is already established, while a tax
amnesty measure has been recently approved at the committee level at the
House of Representatives.
A lateral attrition measure, Mr. Suarez said, will address the
practice of negotiation between taxpayer and tax assessors -- a practice
that has cheated the government of billions of pesos and has "become a
way of life." Covered by the lateral attrition measure will be the BIR,
BoC, the Land Transportation Office and 33 other agencies that earn
PhP100 million or more annually.
Among these agencies are the Securities and Exchange Commission, Air
Transportation Office, Land Registration Authority, Commission on Audit,
Professional Regulatory Commission, Supreme Court and lower courts,
National Printing Office, Energy Regulatory Commission, National Bureau
of Investigation, National Telecommunications Commission, Philippine
Overseas Employment Administration, Commission on Higher Education,
Bureau of Food and Drugs, National Statistics Office, Bureau of
Immigration, and the Departments of Energy, Foreign Affairs,
Transportation and Communications, Environment and Natural Resources,
Education, Health, National Defense, Trade and Industry, Public Works
and Highways, Interior and Local Government and Agriculture, among
others.
To be affected are employees and officers of these 36 agencies who
are involved in the assessment, licensing, examination and collection of
taxes, tariffs, charges, duties, fees, penalties and other payments.
Penalties or sanctions if these employees and officers fall short of
their targets or when there is evidence of graft and corruption include
transfer, reassignment and separation. The incentive, when they collect
beyond their targets, is 10% of the excess collection, to be shared
among employees and officials in the local and national agencies. They
will be entitled as well to bonuses, citations, local and foreign
scholarships, among others. A Revenue Performance Evaluation Board will
review cases of employees who did not attain their targets and decide on
the appropriate form of lateral attrition. -- Judy T.
Gulane
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The Philippines can become the software capital of the world by 2010
if local software companies are modernized and companies focus on
creating "innovative products". Joey Gurango, Webworks OS chief
executive officer, said in a recent statement that transforming "coding
sweatshops" into modern engineering companies and focusing on the
creation of pioneer products will "secure" the Philippines' competitive
advantage in the global industry. Webworks OS is a local software
engineering company which provides commercial grade software services on
the Microsoft.NET development platform. "If we succeed in truly
professionalizing the industry and introducing innovative pioneer
products, then the Philippines will be able to establish itself as the
obvious choice for software development outsourcing. We already have a
globally recognized IT workforce -- we just need to put in place today
measures that will secure our competitive advantage in the future," Mr.
Gurango said.
To modernize engineering firms, he said these companies should meet
global standards and raise the quality of locally-produced software. It
is important for the local software industry to produce pioneer software
products and services that will give them "first-mover" advantage, he
said. "There will be a tidal wave building up over the next few years
driven by technologies such as SMS/MMS (short message service/multimedia
messaging service), Wi-Fi, XML (Extensible Markup Language) Web
services, internet search engines, and radio frequency identification or
RFID (radio frequency identification). Pioneer products and services
will harness the tidal energy of these technologies to fuel phenomenal
growth for the companies that provide them," Mr. Gurango said.
The Philippines' global market share for software currently stands at
0.2% while India has a 2.1% market share, a study by IT consulting and
research firm XMG Global Inc. showed. The study also forecasts that the
Philippines' software and IT services will be close to US$1 billion by
yearend 2005, and account for roughly 2% of the Philippines' gross
domestic product. The country currently has around 300 software
development companies, Webworks said, making the sector the largest in
the e-services industry in terms of number. These companies offer a
range of services, from system design and analysis,
application/middleware/firmware development, testing and quality
assurance, software maintenance, and software project management. Mr.
Gurango's said that in six years, he expects the Philippine software
industry to employ over 250,000 people and contribute about 5% of GDP,
with 90% of industry revenues coming from exports. "The demand will
always be there as changing times and dynamic markets force many large
corporations to constantly update their information systems to remain
competitive," he said. "Although offshore outsourcing started with
labor-intensive projects such as legacy software maintenance, low-level
coding projects, and Y2K bug fixes, the global trend towards e-commerce
has opened up opportunities for offshore developers to work on
higher-end projects such as Web applications, XML, and software design
and architecture work," Mr. Gurango added. " This is what we want to be
doing on a significant scale in the near future," he said.
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DAVAO CITY (Southern Mindanao) -- The region's banana industry is
optimistic of a favorable recommendation from Biosecurity Australia (BA)
when it issues a new import risk analysis in the coming weeks. The risk
analysis report will serve as the basis for an Australian government
decision whether to allow the entry of Philippine bananas. The Pilipino
Banana Growers and Exporters Association, a group of banana exporters
based here, told BusinessWorld local experts have adequately
answered issues raised against Philippine bananas. A formal report was
submitted by the Bureau of Plant industry and the Department of
Agriculture to BA.
The Philippine report, it was underscored, was completed as early as
two weeks ago to meet the Australian's government's September 15
deadline for comments before a final draft is released. Although not a
huge market compared with Japan and the Middle East, Australia --
estimated to have consumption worth US$55 million -- provides an
off-season market for tropical fruits including bananas, local
agribusiness exporters said. While the banana export application to
Australia was filed as early as four years ago, decision on the request
has dragged due to opposition by Australian farmers. The arguments
raised are based mainly on alleged Philippine banana pests and diseases
that could destroy domestic banana farms.
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The interagency Anti-Money Laundering Council (AMLC) yesterday
assured members of the Philippine Insurance Club that the council is
doing everything to have the country delisted from the Financial Action
Task Force (FATF) watchlist. AMLC Executive Director Vicente S. Aquino
told the insurance industry players during a luncheon meeting yesterday
that the council has recorded 62 money-laundering and other related
cases so far.
As of August 31, 2004, the council held 31 money laundering cases,
five petitions for extension of freeze orders, 23 civil forfeiture cases
and three bank inquiries. "We are doing everything without fear or
favor, and we have been accused as being 'nasisindak'. This is an
unfounded accusation, we are not being cowed by anyone," Mr. Aquino said
responding to allegations the AMLC has not been doing its work. "It is
not the business of AMLC to reveal what it is doing, to disclose its
moves. If the country is in the watchlist, we are also in another list.
We occasionally receive threats. While you do not hear what we've been
up to, we are doing something," he added.
Last week, Sen. Ramon B. Magsaysay, Jr. called on members of the AMLC
to deliver results within six months or risk losing their posts. But Mr.
Aquino said the council has already accomplished much noting that it has
returned around three-fourths of the
PhP1 billion worth of frozen funds to pyramid-scam victims. He
added that the AMLC has put up desks for complaints and reports in every
government agency. "We [the Philippines] don't deserve to be in the
[non-cooperative countries and territories] list anymore. In fact we
have been commended by different countries for our assistance. There are
59 international requests for assistance including jurisdictions such as
the United States, United Kingdom, Switzerland, Taiwan, Japan, Canada,
Hong Kong," he said. He also likened the AMLC to the Finland task force
where analyses along with the proper prosecution processes are combined
to combat dirty money transactions. He said the council had also passed
40 resolutions directing all covered institutions to report suspicious
transactions and assets. It has also asked the Supreme Court to come up
with anti-money laundering courts. "We are working. Just give us time to
pursue our database system to track millions of potential and suspicious
movements," Mr. Aquino said. He also challenged the insurance industry
to comply with the know-your-customer policy which was questioned for
some stringent measures.
The policy requires companies to identify and monitor their clients
with purchases even below the threshold of PhP500,000. Some companies
sell even below PhP20 worth of insurance products. "The law is clear
that everyone should comply. As for exceptions, you can communicate
these to us," Mr. Aquino added. Congress passed the Anti-Money
Laundering Act or Republic Act 9160 on October 17, 2001 after the
Paris-based FATF threatened to impose sanctions on the country if it
fails to enact measures against dirty money. The task force is the
anti-money laundering arm of the Organization for Economic Cooperation
and Development. -- Ira May Joyce P. Pedrasa
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By RUBY ANNE M. RUBIO, Reporter
With over 25 years of distinguished service to Bank of the Philippine
Islands (BPI), Xavier P. Loinaz is relinquishing his post as president
of the country's second largest bank. At its board meeting yesterday,
the bank's board of directors elected Aurelio Montinola III to succeed
Mr. Loinaz as president effective Jan. 1. "This movement is in line with
traditional retirement practices in BPI and forms part of the normal
succession process," the bank said. In order to ensure a high level of
continuity, Mr. Loinaz will continue to serve as a director and member
of the executive committee. Under his leadership, BPI has consistently
been named as the best bank in the Philippines for the last six
consecutive years by leading financial publications like Euromoney,
Finance Asia and Global Finance. "BPI continues to be the
largest bank in the country measured in terms of earnings and market
capitalization. It is also presently the undisputed leader in electronic
banking as well as in corporate and consumer banking," the bank said.
Mr. Montinola brings over 20 solid years of experience to the
Ayala-led bank. He was the president of thrift bank subsidiary BPI
Family Bank. Last May, he was elected in the commercial bank's board as
senior executive vice-president and chief operating officer. Jaime Zobel
de Ayala stepped down as chairman and director of BPI after the bank's
annual stockholders' meeting last March 25 "in line with his desire to
pursue other interests which require his travels outside of the country
for considerable periods of time." Mr. Zobel, who turned 70 years old in
July, has served as director of BPI for 24 years and as chairman for 19
years. Backed by higher revenues, the bank's net earnings rose nearly
35% to
PhP3.5 billion as of June from PhP2.6 billion a year ago. The
Ayala-led bank is the country's second largest lender with a total loan
portfolio of PhP192.41 billion as of the second quarter.
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The country's banks lent out more loans to various sectors in July
compared to the same month last year, the Bangko Sentral ng Pilipinas
reported yesterday. Data showed that commercial banks' outstanding loans
in July went up by 3.6% to
PhP1.486 trillion from PhP1.434 trillion in 2003. Based on the
report, the manufacturing and services sectors remain the major
borrowers, while agricultural and fishing, social and service sectors
also accounted for the increase in total loans for the period. Other
sectors also showed improvement in lending such as retail trade,
electricity, gas and water. Transportation, storage and communication
also helped boost lending expansion. Banks' lending to the manufacturing
sector was 26.5% of total loans, real estate sector made up 25.6% and
commercial services accounted for 14.8%.
The wholesale and retail sectors took 14.3% of the July loans while
those for the agriculture, fisheries and forestry sectors represented
5.8%. Electricity, gas and water industries accounted for 5% of the
total loans. Loans to other industries such as real estate and business
services remain sluggish. The central bank, however, is confident that
lending will improve toward the last three months of the year as
domestic demand strengthens. Bangko Sentral officials have said they
will try to hold off any rate increases in key policy rates to support
credit activity in the country and help spur economic growth.
-- Iris Cecilia C. Gonzales
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By ANNA BARBARA L. LORENZO,
Reporter
The Metro Rail Transit Corp. (MRTC) has lost the exclusive right to
bid for the extension of the Metro Rail Transit Line 3 (MRT3) as the
Transportation and Communications department has decided to open the
bidding to the public. Transportation Secretary Leandro Mendoza said the
documentation would be completed and the bidding may be finalized within
the year. The construction is expected to start by the first quarter of
2005. "We are now preparing the bidding documents. It will be an open
bidding. There will be no more Swiss challenge," Mr. Mendoza told
reporters yesterday.
In a Swiss challenge, other parties would be invited to bid for the
project. The MRTC, being the initial contractor of the MRT3, will have
the right to match the price of the best public bidder. The Sobrepeņa-led
MRTC earlier asked the government to speed up the decision on the
extension of MRT3. It also argued that under its initial contract with
the government, the MRTC will build the extension of the MRT3 from North
Avenue in Quezon City to Monumento in Caloocan within 18 months after
the first phase of the project was completed. The extension was stalled
for four years.
LEGAL ISSUES
"There were a lot of legal issues. The Department of Justice said the
contract is not valid," Mr. Mendoza said. He added that the MRTC has
already agreed to the public bidding. It will be welcome to submit its
bid. The Justice department had opined the firm's existing contract
doesn't cover the extension work because it is an entirely new project.
The MRT3 carries a maximum of 400,000 passengers daily in 13 stations
from Taft Avenue in Pasay City to North Avenue in Quezon City. It has 73
coaches. The additional three stations in Muņoz, Quezon City, and
Balintawak and Monumento in Caloocan City are expected to increase
ridership to 750,000 everyday. MRT3 General Manager Roberto Lastimoso
earlier said the expansion will result in higher ticket sales of about
PhP180 million a month from the current
PhP120 million. The two-year construction will cost an estimated
$198 million. With the extension, MRT3 is expected to acquire 48 new
coaches, with each car costing roughly $1.2 million.
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By RUBY ANNE M. RUBIO, Reporter
United Coconut Planters Bank (UCPB), Sta. Lucia Realty Development,
Inc. and a private landowner have agreed to jointly develop a
12.25-hectare property in Tagaytay City worth some
PhP108 million into a middle-income residential subdivision. The
tie-up is the first of several joint ventures that the bank is working
on to speed up the disposal of its idle assets or real estate and other
properties owned or acquired (ROPOA). "We see excellent prospects for
this joint venture project given the huge unfilled demand for housing in
the middle-income market segment," UCPB Vice-President Christine Y.
Carandang said.
Under the agreement, UCPB and the Lugtu family, represented by Ruben
Lugtu, Jr. and Ruben Lugtu Sr., will put up the land, while Sta. Lucia
will shoulder the development cost over four years. UCPB owns 8.08
hectares of the property, while the Lugtus own the remaining 4.17
hectares. The family owns finance company Asialink Finance Corp. A
source said the cost is yet to be finalized as plans are still being
developed. The residential subdivision project will target middle-income
families, primarily overseas Filipino workers, mid-level executives and
retirees in the National Capital Region and Region 3.
In its published statement of condition, UCPB's bad loan ratio hit
33% of its total loan portfolio as of June 23. Nonperforming loans -- or
loans that are at least 90 days past due -- amounted to
PhP18.75 billion, while ROPOAs hit
PhP21.96 billion. Ms. Carandang, who heads the bank's asset
management and disposition division, said UCPB is also in advanced talks
with another property developer to develop bank-acquired assets in Metro
Manila. "Joint venture with other private investors is just one of the
modes of asset disposition in UCPB's idle asset reduction program. The
bank has been very successful in disposing its ROPOA through public
auctions and direct retail sales," she said. UCPB, the country's 12th
largest bank in terms of assets, had sold
PhP1.4 billion worth of idle assets including commercial and
residential properties through public auction and retail sales. UCPB
plans to conduct two more public auctions before the year ends and
expects to sell
PhP500 million more acquired properties through the auctions.
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By FELIPE F. SALVOSA II, Reporter
Pennsylvania-based outsourcing firm ICT Group yesterday opened a
second call center at the Ortigas business district, expanding its
capacity to 1,600 seats to service growing demand for customer services
among US Fortune 100 companies. John J. Brennan, chairman of the Nasdaq-listed
firm, said this brought total investments to the Philippines at about
$10 million. The new contact center at the Union Bank building has 850
seats. The additional investment amounts to about
PhP250 million, said Karen V. Batungbacal, president of ICT
Asia-Pacific. ICT Group also said it planned to expand next year and
invest in a smaller contact center preferably outside Metro Manila.
Aside from Luzon, sites being considered for the third, 500-seat call
center include Panay and Iloilo, Ms. Batungbacal said. Officials said
they expected the total work force to reach 5,000 in 2005.
ICT Group opened its first Philippine call center, which has a
capacity of 750 seats, at Makati's RCBC building in May 2003 -- one of
the company's major offshore expansions. It now has 10 clients in 16
sales and services programs from only three last year. Ms. Batungbacal
said Philippine operations serve mostly North American financial
services clients such as credit card and mortgage companies. Agents also
handle technical support for consumer electronics. Volume is expected to
be 50% outbound telesales and 50% inbound customer care, she added.
Outside the US and Canada, ICT Group already has operations in
Europe, Australia, Mexico, and the Caribbean, employing over 11,000
employees. The company has done work for the likes of Wells-Fargo,
Verizon, and Pfizer. With the expansion program, about 15% of total
company production is expected to come from the Philippines, the company
said. More than the cost advantage, Ms. Batungbacal said the ICT Group
chose to invest in the country because of the highly skilled work force.
"The Philippine accent is more acceptable to the North American client
base," she said. Mr. Brennan said the Philippines is $10 cheaper per
hour than the US, and $20 cheaper per hour than the United Kingdom.
A call center operation in India is 50 cents cheaper per hour than
the Philippines, but India's edge is fast disappearing because of the
rupee's appreciation versus the dollar, he said. "Clearly, among our
many clients, the Philippines has been a preferred destination for voice
support services. We have found the Filipino work force to be extremely
conscientious, capable, and talented in their provisioning of customer
management services, as well as being career-driven, responsible, and
professional," the ICT Group chief said.
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The Energy Regulatory Commission (ERC) penalized four electric
distribution utilities, including the Manila Electric Co. (Meralco), for
breaking various regulatory rules. Meralco was charged for its failure
to obtain the ERC's approval to sell properties. The commission fined
Ibaan Electric Engineering Corp. in Ibaan, Batangas, for its failure to
provide adequate safeguards and comply with safety standards as required
by its certificate of public convenience and necessity clearance and a
resolution, which could have averted an accident during a typhoon in
2003. Mactan Electric Co. in Cebu and Bauan Electric and Light System,
owned by the local government of Bauan, Batangas, were penalized for the
late submission of required annual reports, which serve as statistical
basis for ERC in formulating regulatory policies.
A total of PhP263,750.00 is expected to be paid by the four
distribution firms to the national treasury through the ERC. Compliance
with pertinent laws, orders, rules and regulations promulgated by the
ERC is continuously monitored by the commission's investigation and
enforcement division of its regulatory sperations service, ERC Chairman
Rodolfo B. Albano, Jr. said. Non-compliance will mean penalty in the
amount prescribed corresponding to the violation and in some instances,
revocation of the distribution utility's certificate of public
convenience and necessity or both. Awaiting final resolution of cases
for various regulatory infractions are 15 other distributors. If found
guilty they would be required to pay some
PhP2 million in fines. -- Bernardette S. Sto.
Domingo
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By IRIS CECILIA C. GONZALES,
Reporter
The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or
BSP) will sign a crucial document necessary to close the sale of
National Steel Corp. to an Indian-owned company if all parties finally
execute the transaction, an official yesterday said. The firm's creditor
banks and its winning bidder Global Infrastructure Holdings Ltd. have
failed to seal the
PhP13.25-billion transaction as two pre-closing documents have
yet to be signed. One of the supposed pre-closing documents is a
certificate of eligibility from the BSP that the deal has complied with
the Special Purpose Vehicle Law. The other is an agreement between
secured creditors and state-owned National Power Corp. on how
outstanding liabilities to the power firm would be paid.
BSP Assistant Governor Nestor A. Espenilla, Jr., however, said the
central bank is not the reason for the apparent impasse in the
transaction as it is ready to sign the deal so long as concerned parties
meet the requirements. He said the BSP is only waiting until the
concerned parties move and execute the sale. "They have to execute the
transaction," he said yesterday. The BSP official said the Bangko
Sentral has already given its prior approval to the deal. "The
transaction is considered an eligible sale under the law. It is just up
to all parties to execute the transaction," he said yesterday. He said
once the transaction is ready and the sale is finalized, BSP would then
sign the crucial document, that would make the sale eligible for
incentives under the SPV law that include hefty tax discounts.
Aside from the "pre-closing" agreements, concerned parties also have
to sign two final documents. These are 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
creditor banks. Another BSP official said in a separate interview the
large amount of money involved in the transaction has delayed the sale
as some creditor banks want to ensure they will recover the debts owed
to them by the steel firm. National Steel's biggest creditor is
Philippine National Bank, with
PhP5.639 billion. The second biggest creditor is Credit Agricole
Indosuez with
PhP1.687 billion.
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The Philippine Stock Exchange (PSE) will suspend today the trading of
shares of House of Investments, Inc. pending the approval of its capital
restructuring. The stock exchange said in a disclosure the suspension
will be lifted after two trading days from the release of a circular
informing the trading participants of the approval of the Securities and
Exchange Commission (SEC) to cut its authorized capital stock. Maria
Isabel T. Garcia, head of the PSE listings department, said in the
statement that there will only be a change in the par value House of
Investments' common shares to PhP1.50 from PhP2. She said there will be
no changes in the number of outstanding and listed shares upon the
lifting of the trading suspension.
After several years of losses, House of Investments is pooling its
resources to focus on its core investments. The holdings company made a
turnaround in 2003, posting
PhP21.76 million in net income from
PhP71.01 million in losses the previous year as most of its
investments turned profitable. The turnaround was also attributed to the
robust income growth from car dealership operations. Perry Y. Uy,
executive vice-president, said during the company's annual stockholders'
meeting in July, the firm will evaluate opportunities that come along.
-- Roulee Jane F. Calayag
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Opposition Senator Sergio R. Osmeņa III yesterday called for a Senate
inquiry on a provision in the bidding guidelines for the Masinloc power
plant, allowing local firms to match the best bid offered by foreign
bidders. During a Senate hearing on energy yesterday, Mr. Osmeņa lashed
out at the Power Sector Assets and Liabilities Management Corp.,
(PSALM), saying the right-to-match policy will scare investors away.
"Why did you put something in the terms of reference that the law never
intended to happen? If you will push through with this, no one will
invest in Masinloc," he told PSALM President Raphael P. M. Lotilla. Mr.
Osmeņa also requested for copies of the terms of reference and bidding
documents for the sale of Masinloc. He said the Senate should
investigate the matter. Mr. Lotilla said the issue remains a "gray area"
that may be reviewed or modified.
Masinloc is the first major power plant to be auctioned off by the
government as part of its privatization efforts. It will be bidded out
on Oct. 27. It is among the 28 power plants of state-owned National
Power Corp. (Napocor) to be auctioned from October to April 2006 in a
bid to solve the budget deficit and avert a looming power crisis. PSALM
was tasked to oversee the sale of Napocor's assets. Foreign firms who
participated in a pre-bidding conference for Masinloc early this month,
had warned the right-to-match provision could derail efforts to sell
power assets. Among the 18 firms who attended the pre-bidding were
Mirant Philippines, Inc., Korean Electric Power Co. Philippines,
Japanese firm Marubeni Corp., Trans-Asia Power Corp., First Gas Power
Corp., and Aboitiz Power Corp. "Some foreign companies questioned the
right-to-match provision. This might derail the privatization efforts of
the government. We need to have a level playing field," an industry
source earlier said. Under the assailed provision, if a foreign company
presents the best bid and a local firm matches its bid, the contract
would be awarded to the local firm. -- Bernardette S.
Sto. Domingo
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By ROULEE JANE F. CALAYAG
Profit-taking continued to weigh down on local share prices
yesterday. Coming from a spectacular nine-day rally, the stock market
went on a consolidation mode since Tuesday. Dealers said the technical
correction will prevail until tomorrow to allow the market to stabilize
above the 1,700 level. "We see the correction continuing through Friday.
There will still be profit-taking," said Dianne Sy, research associate
at Unicapital Securities, Inc.
FOREIGN INVESTORS
Unless investors see incentives that will spur aggressive buying, the
market is expected to linger in negative territory. The government's
belt-tightening measures may prod foreign fund managers to continue
upgrading their portfolio of Philippine stocks, some traders said.
"Trading volumes in the past days were huge, driven mostly by foreign
traders. We will see results in a few days if they, the major movers [of
the stock market], will keep the momentum," said Ms. Sy. Foreign net
buying was consistently high in the past nine trading sessions until it
reverted to foreign net selling on Tuesday. Although there were talks of
a fiscal crisis that time, foreign investors stuck to the Philippine
market, shoring up their investments significantly. Expectations for the
market remain relatively the same, said Ms. Sy. "The market will be
consolidating," she said, noting initial resistance at 1,740 and the
next at 1,760. She sees first support at 1,680 and the next at 1,650.
DOWNTREND
The Philippine Stock Exchange composite index (Phisix) closed lower.
It dipped 11.37 or 0.66% to 1,706.08. The rest of the indices, except
for the all shares and property, moved in the same direction as the
Phisix. Commercial-industrial dipped 18.61 to 2,724.09. Banks and
financial services dropped 3.96 to 485.4. Mining also slid, down 3.66 to
1,826.47. Oil dropped 0.03 to 1.61. However, property rose 0.86 to
573.14. The all shares index remained strong, taking in 1.59 at
1,072.69. Trades further weakened at 2,639. Even the trading volume was
not spared, as it dropped to to 908.8 million shares valued at
PhP528.5 million. But number of advancers and decliners were
equal at 33 each. Issues that were unchanged were greater at 44.
AYALA STOCKS
The market's favor continued to rest on Ayala stocks. Although Globe
Telecom, Inc., Ayala's telecommunications arm, slid to the seventh slot
after being the most traded stock in recent days, its replacement in the
lead position was a sister company. Ayala Land, Inc. dominated trading
although it was unchanged at PhP6.10. It cornered 4.24% of the market
for PhP22.4 million. Telecommunications giant Philippine Telephone Long
Distance Co. (PLDT) was not eased out as the second most actively traded
stock although its price was down to PhP1,370. It clung to the spot with
13,000 shares traded for PhP19.2 million. PLDT's sister company Metro
Pacific Corp. advanced to the third position, up at PhP0.53. Other top
traded stocks were Union Cement Corp., "B" shares of Manila Electric Co.
(Meralco), Ayala's banking subsidiary Bank of the Philippine Islands,
DMCI Holdings, Inc., Ayala Corp. and Jollibee Foods Corp.
LEADS
As technical correction rules the market, investors are keenly
sifting developments in the government and business circles. A plan by
the Department of Finance to push for limited exemptions to the
value-added tax (VAT) may gain some support from investors although this
may not sit well with the rest. In line with measures aimed at raising
additional revenues for the government, Finance Secretary Juanita D.
Amatong said the government is drafting a bill that will enumerate
exemptions that will be dropped. The Finance chief said the government
could not collect more VAT because of those exemptions. The approval of
this proposal would help government reduce the country's ballooning
debts and manage its resources efficiently. As of end-2003, the combined
debts of the national government and the public sector totalled
PhP5.9 trillion.
SAN MIGUEL CORP
San Miguel Corp. did not make it to the list of the top 20 most
actively traded stocks. The food and beverage giant said in a statement
on Tuesday that it expects to save $300 million annually once it starts
sourcing its raw material requirements from local farmers. Importing raw
materials from the United States, Argentina and India for its feeds,
liquor, and soft drinks businesses costs San Miguel Corp. "millions of
dollars every year." In what could be seen as a boost to the
government's campaign to control spending, San Miguel Chairman Eduardo
Cojuangco, Jr. said the new sourcing program will help farmers and the
government in terms of dollar savings. Mr. Cojuangco enjoined other
companies to follow its lead to support the government in its drive to
rein in the fiscal deficit.
HOUSING PROJECT
Listed holding firm Alliance Global Group Inc., meanwhile, will be
concentrating on its McKinley Hill residential project in Fort Bonifacio.
The firm owned by Filipino-Chinese George T. Yang expects to turn in
revenues from the project by the second half of the year. The company
rolled out the first phase of its project, the McKinley Hill Village, a
high-end residential subdivision last May. While it concentrates on this
venture, Mr. Yang said the firm will strive at becoming a key player in
industries with dynamic growth curves while maintaining its other
business interests.
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