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The City of Manila plans to double the assessment values of real
properties within its area of jurisdiction to help raise more revenues
for the city government. At present, under the eight-year-old City
Ordinance No. 7905, the assessment values of residential, commercial,
and industrial lands in Manila stand at 10%, 25%, and 25%, respectively,
of their fair market value. A new ordinance being discussed by the City
Council will raise the assessment values of residential lands to 20% of
fair market value, and and that of commercial lands and industrial lands
to 50%. Residential buildings worth
PhP175,000-PhP300,000
will also have a new assessment rate of 10%, from 5%. Residential
buildings worth
PhP10 million and up will be assessed at 60%, from 30% previously.
Meanwhile, commercial and industrial buildings valued at
PhP300,000 and below will have an assessment rate of 30%, from the
previous 15%. The assessment level of commercial and industrial
buildings valued at
PhP10 million and up, will double to 80% from the previous 40%.
Machineries will also be subject to an increase in assessment levels.
From 25%, the assessment level of residential machineries will be raised
to 50%. The assessment level of commercial and industrial machineries
will be at 80%, from 40% previously. The assessment rate of cultural and
scientific institutions, as well as hospitals, local water districts
will also be raised to 15% from 7.5%. Government-controlled suppliers
and distributors of water and electric power will be assessed at 10%
from 5%. Mercedes D. Catiil, chief of Manila's assessment division, said
that amending City Ordinance No. 7905 to raise the assessed value of
Manila's real estate has been long delayed. "Real estate should be the
primary source of Manila's revenues," she said, but current real estate
assessment levels were insufficient to generate more revenues for the
city's needs.
Manila, Ms. Catiil said, receives
PhP1.4 billion a year from real estate taxes, "way behind" other
cities such as Quezon City and Makati City. Makati City's real estate
taxes reaches
PhP2.8 billion annually, she said. The ordinance setting the new
assessment rates, set for second reading approval, was endorsed by the
majority bloc of the city council. It is also supported by Manila Mayor
Jose Atienza Jr. If approved, the ordinance is expected to help generate
around
PhP2.5 billion-PhP2.6
billion a year for Manila. It will take effect on January 1, 2005.
Ms. Catiil said revenues would go to Mr. Atienza's urban renewal
projects under the "Buhayin ang Maynila" program.
-- Kristine L. Alave
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Foreign direct investments (FDIs) approved by the government has been
declining annually by an average of 34.1% in the last six years, said
private research firm Institute for Development and Econometric Analysis
Inc. (IDEA). In a report, IDEA said the country had been losing FDIs
since 1997 mainly because of the financial crisis that hit the country
that year, which was worsened by the unstable political system, the high
cost of doing business, poor infrastructure, and security concerns.
"Unless the government is able to bring down the cost of doing business
in the country, the Philippines will continue to lose much-needed FDIs,"
IDEA warned. FDI pledges reached a record high of
PhP262.1 billion in 1997. IDEA said this contracted progressively to
hit
PhP34 billion last year, the lowest recorded level so far. IDEA also
said that while the government approved some
PhP115.6 billion in FDIs in the first quarter, this increase in
investments does not necessarily indicate an improvement in the
country's investment climate. "The increase in the total FDI approvals
was due to the high base effect of the 'one-time, big-ticket project' of
GNPower Ltd. Co. Inc., which amounted to
PhP96.5 billion," IDEA said.
A recent survey by the Japan External Trade Organization showed that
many Japanese executives viewed as too high the cost of doing business
in the country, relative to other Asian economies. Investment-related
costs considered too steep were the minimum wage rate, telephone and
mobile phone rates, electricity rates, as well as corporate income and
value-added taxes. -- J. A. Ng
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Debt-saddled water utility firm Maynilad Water Services Inc. will
submit in court next month a revised rehabilitation program that assumes
a payment of $120 million to state-run Metropolitan Waterworks and
Sewerage System (MWSS) to cover unpaid concession fees. Following last
Friday's hearing at the Quezon City Regional Trial Court, Maynilad legal
counsel Helena Calo told reporters that the Lopez-led water firm would
have to revise the rehabilitation program submitted to the court in
2003, as well as the amendment to it submitted earlier this year. This
is given Socioeconomic Planning Secretary Romulo L. Neri's advise for
MWSS to scrap its compromise agreement with Maynilad and its creditors
and for MWSS to fully draw Maynilad's performance bond of $120 million.
"We have to take the initiative, if there's going to be a drawing [of
the bond] without a covering agreement, then we have to adjust the 2003
rehabilitation plan to accommodate the drawing of the $120 million
bond," she said. She also said Maynilad believed that its financial
rehabilitation could continue even if MWSS were to draw the bond in
full.
The Supreme Court has allowed MWSS to draw the entire $120 million
after noting that this issue was separate from the company's corporate
recovery petition pending before the Quezon City Court. "We trust the
Supreme Court's opinion that this will still work," Ms. Calo said. The
performance bond was required under the 1997 concession agreement
between Maynilad and MWSS, to guarantee Maynilad's payment of concession
fees. Financial problems had forced Maynilad to stop payments to MWSS.
Its unpaid concession fees to the government has ballooned to
PhP8 billion, prompting MWSS to collect on the performance bond. Ms.
Calo said that although Maynilad was still weighing its options, it
would not totally abandon the debt to equity swap proposed in previous
rehabilitation plans. "Yes, the drawing [of the bond by MWSS] can be
consistent with equity conversion. That's what we're working on," she
said. She added that Maynilad would continue to pursue its proposed
debt-to-equity arrangement with government and its creditors, despite
MWSS' withdrawal from the deal. "While we are still pursuing our
argument and position regarding the enforceability of Amendment No.2
[the second rehabilitation plan], we are also looking at another
possibility or angle with MWSS where we can adjust and come up with a
new plan. But we are not giving up on Amendment on No. 2," she said.
Under the proposed debt-to-equity swap in Amendment No. 2, Maynilad
agreed to let MWSS draw $50 million of the bond, while the rest of
Maynilad's debts to MWSS would be converted into a 62% equity in
Maynilad. This will pave the way for the exit of the Lopez business
group from Maynilad. The government, however, backed out of this
compromise and decided to instead draw the entire $120 million. The
banks that guaranteed the payment of the bond included Citibank N.A.,
the Manila Offshore Branch of Credit Lyonnais, the Singapore Branch of
Credit Industriel et Commerciel, Fortis Bank, Chinatrust Philippines
Commercial Bank Corp. and Rizal Commercial Banking Corp. MWSS had said
it would initially draw 25% of the $120-million performance bond so it
could finance its capital expenditures. Government corporate counsel
Elpidio J. Vega also told the court that the government would support
MWSS' move to withdraw from the debt-to-equity swap scheme. Mr. Vega
said MWSS had the right to rescind the deal following the Supreme Court
decision that allowed it to draw the entire performance bond, as well as
the concurring opinion of the National and Economic Development
Authority. But despite pulling out from the compromise agreement, Mr.
Vega said MWSS would continue to consult Maynilad and would support a
rehabilitation plan that would be acceptable to all parties.
-- Leilani M. Gallardo
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Think-tank says local
valuation too politicized
By JUDY T. GULANE, Reporter
The House of Representatives think-tank has recommended transferring
the power to approve the schedules of fair market values of real
properties to the Department of Finance (DoF) from local governments in
order to de-politicize the process and ensure uniformity in tax
treatment. The Congressional Planning and Budget Department (CPBD) noted
that the Sanggunian Panlalawigans or Panglungsods (local councils) fail
to update their schedules of fair market values and impose the highest
assessments and tax rates because of likely political pressure. The
Sanggunians, under the Local Government Code (LGC) of 1991, have been
given the power to approve the schedule of values prepared by local
assessors. Placing the task of approving the schedules with the DoF will
entail the establishment of a regional technical committee that shall be
composed of provincial and city assessors and representatives of the
Bureau of Local Government Finance, Bureau of Internal Revenue and the
private sector. This committee shall review and recommend the schedule
of values for approval of the Finance Secretary.
The CPBD made this recommendation in a policy prescription for the
13th Congress. It noted that the national government continues to spend
for functions that have already been devolved to local governments as
provided in the Local Government Code. The LGC provides local
governments a share in internal revenue taxes as well as the power to
raise revenues, mainly through property and business taxes and licenses.
Yet even with the power to impose taxes and fees on their constituents,
most local governments would rather rely on their internal revenue
allotments (IRA), resulting in the increase in IRA allocation to 40% to
20% of internal revenue collection. The CPBD said local governments
should improve revenue generating activities through their biggest local
revenue source, real property taxes. The additional revenue will be free
up funds that the national government can spend on services that are
nationwide in scope, and for the local governments to spend on
maintenance and other operating expenses and capital outlay, it said.
The CPBD noted that the collection of real property taxes by local
governments is low given the "political nature" of the Sanggunians.
"Differences in valuation approaches and timing in the revision of
schedules can distort the property market, that is, two similar assets
located in two different but adjacent jurisdictions may bear different
real property tax burdens," the CPBD said.
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Two bills filed in the House of Representatives seek to reimpose a
franchise tax on telecommunication firms in lieu of the valued-added tax
(VAT) which is reportedly a big factor in tax leakages. Quezon Rep.
Danilo E. Suarez and Ilocos Sur Rep. Eric D. Singson, in House Bills
1560 and 1469, respectively, said telecommunication firms normally claim
large amounts of input tax credits for capital purchases which are then
deducted from output VAT. Often, they claim excessive input tax and pay
minimal output tax. Input tax refers to the VAT due on imports and
purchase of goods and services. Output tax, on the other hand, refers to
the VAT due on the sale or lease of taxable goods, services or
properties. The two legislators also noted that telecommunication
companies offer diverse products that are subject to different tax
treatments. "Under the present system, services rendered locally by
telecom companies are subjected to the VAT and classified as either
'exempt,' 'zero-rated,' or 'taxable at 10% of gross receipts.' Overseas
dispatches, messages and communications transmitted by telecom companies
are, however, charged with an overseas telecommunication tax at a rate
of 10% on the amount paid for such services," Mr. Suarez said in his
bill's explanatory note. "This setup creates an opportunity for tax
evasion as receipts from higher taxed products or services can be
shifted to the lower taxed group, thereby reducing the tax liability of
the company," he said.
PREPAID
Meanwhile, the sale of prepaid cards, Mr. Singson said, continues to
be unmonitored by the Bureau of Internal Revenue (BIR). The National Tax
Research Center has estimated that at least
PhP127 billion was lost every year between 1998 to 2002. The amount
includes evaded taxes from businessmen, professionals and corporations
and leakage in VAT. It further estimates that the average tax leakage
from VAT is
PhP41.6 billion or about 30% of potential tax due. Messrs. Suarez
and Singson said the reimposition of a franchise tax on
telecommunications firms will simplify tax treatment as well as address
the inadequacies of the BIR in its monitoring and collection. Mr. Suarez
is calling for a 3.5% franchise tax on gross receipts of these firms on
the first year of the law's effectivity, to be increased to 7% on the
second year. Mr. Singson, for his part, seeks a 5% franchise tax on
gross receipts. The reimposition of a franchise tax on telecommunication
firms has been suggested by the government's economic managers and is
part of a tax reform package that is estimated to yield
PhP80 billion.
Before telecommunications companies were covered by VAT, they used to
pay a 5% franchise tax equivalent to 5% of gross revenues. This was
replaced by a 10% VAT on gross sales in 1994 when Congress passed
Republic Act 7716 which expanded the coverage of the 1988 VAT law. Albay
Rep Jose Clemente S. Salceda, a member of the economic managers group
that acts as an informal clearinghouse for the government's tax
measures, said the franchise tax is more acceptable than a tax on text.
Mr. Salceda said it will also yield more revenues for the government
since it will be easier to collect than VAT. -- J. T.
Gulane
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The Bangko Sentral ng Pilipinas has decided to keep a high rating
standard as one of the requirements in accrediting banks and financial
institutions as third-party custodians. The central bank is in the
process of accrediting third-party custodians that would safekeep
securities bought and traded in the Philippine financial system. Banks
have been asking regulators to lower the standards, particularly the
CAMELs rating -- a rating scale used by the Federal Reserve System, for
them to qualify as independent custodians. CAMELs stands for capital
adequacy, asset quality, management, earnings, liquidity and sensitivity
to market risk. The Bangko Sentral said qualified banks must have a
CAMELs rating of at least "4" but banks want a lower grade of between 3
and 3.5. Alberto V. Reyes, the central bank deputy governor for bank
supervision and examination, said regulators decided to keep the
required rating at 4. Mr. Reyes said there is no need to revise it since
the target number of third-party custodians will most likely be met. "We
are not going to change the CAMELS rule any more," he said.
The central bank's move to have independent securities custodians
aims to avoid double or multiple sales as what happened in the 1994
Bancap scandal -- where a single set of Treasury bills were illegally
sold three or four times to separate clients. The job of the custodian
bank is to ensure that all transactions are backed-up by government
securities and there is no double sale. An independent custodian should
have no subsidiary or affiliate relationship with the issuer, owner
and/or seller of securities. Armando L. Suratos, the central bank
officer-in-charge, said the policy-making Monetary Board accredited last
week Germany-based Deutsche Bank, bringing to three the number of
third-party custodians accredited by the board. Two weeks ago, monetary
authorities also gave the green light to London-based Hong Kong and
Shanghai Banking Corp. and United States-based Citibank N.A. Mr. Suratos
said the central bank is still reviewing other applications. Mr. Reyes
said it plans to accredit a total of five custodians. To qualify for the
job, a bank or institution must comply with the minimum capital and must
have a risk-based capital adequacy ratio of not lower than 12%. The
applicant must have a comprehensive risk management system approved by
its board, and adequate technical expertise to ensure the protection,
safety, and integrity of client assets. Central bank Governor Rafael B.
Buenaventura has said having independent custodians will help strengthen
the capital market. -- Iris Cecilia C. Gonzales
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The money market this week will remain on alert for fresh leads that
could drive the Philippine peso stronger or keep interest rates steady,
traders said. Targetting range-bound trading near PhP55.70, a trader
said he expects the peso's near support at PhP55.65 per greenback. The
bias of the market is for the peso to further appreciate in the next few
days, the trader added. On Friday, the local unit closed at PhP55.715
against the US dollar. "Higher inflation means higher interest rate for
the peso. While it is high, there's a lot of reason to buy peso right
now. Sellers are outnumbering the buyers," a trader said. The jump in
inflation to 6% in July from 5.1% in June was fuelled by a rise in the
price of basic goods and the pressure on the central bank to tighten its
monetary policy. "Oil companies already bought [dollars] last week.
We'll have to see if they will come in at this point," another trader
said. Global financial markets last week calmed, following moves to ease
oil price increases which jumped to as high as $44.50 a barrel. Most
Asian countries, including the Philippines, import their oil products.
Meanwhile, central bank officials said last week that they would work
with key government agencies to ease inflationary pressures before
moving to tighten monetary policies. News on Thursday that the Bangko
Sentral ng Pilipinas was expecting to raise interest rates in the coming
months to match the US Federal Reserve's move, alarmed the bond market
and pushed interest rates higher. "Interest rates have stabilized by
Friday. The market's reaction was sentiment-driven. We were unsure what
the [central bank] will really do. In the meantime, while the inflation
report posed a double-whammy, 'yung iba nag-profit-taking muna
[the others took profits]," a bond trader said. "There is really no
clear direction. Let's wait [some] more," the trader added.
-- I. P. Pedrasa
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The country's thrift banks reported a slight improvement in their bad
loans ratio in the first four months of the year, latest data from the
Bangko Sentral ng Pilipinas showed. Data showed that the proportion of
the industry's nonperforming loans (NPL) to its total loans improved to
12.35% as of end-April compared to 12.80% in the same period last year.
The bad loan ratio, however, went up by 0.07 percentage point to 12.35%
from 12.28% for the month of March. The industry's NPL grew by 0.9% or
PhP16 million, surpassing the growth in total loan portfolio by
0.3%.
Overall, banks are still having a difficult time disposing of their
bad loans given the difficult economic tide and the lack of incentives
for buyers of bad loans and assets. Central bank data showed that total
loan portfolio went up by PhP156.1 billion as of end-April, higher by
PhP10.2 billion compared with PhP145.9 billion a year ago.
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By LEILANI M. GALLARDO, Senior
Reporter
Foreign creditors of debt-saddled Bayan Telecommunications, Inc. (BayanTel)
are asking for a $1.25-million refund to cover the litigation and
incidental expenses they incurred in legal proceedings that led to the
court approval of the telco's financial rehabilitation. In a motion
filed before the Pasig regional trial court last month, BayanTel
creditors Bank of New York, Avenue Asia Investments L.P., Avenue Asia
International Ltd., Avenue Asia Special Situations Fund II L.P., Avenue
Asia Capital Partners L.P., and Van Eck Global Opportunity Masterfund
Ltd. demanded that they be reimbursed for expenditures they incurred
when they filed for BayanTel's court-mandated rehabilitation.
The banks said they have a right to file for a reimbursement of legal
fees and incidental expenses since this is stipulated by a clause in the
bond contract they signed with BayanTel in July 1999. "In making its
objection to the claim, the BayanTel Group completely disregards the
express provision of the indenture which allows the trustee [Bank of New
York] to collect and or file proofs of claim in the event of default or
in any judicial proceedinmgs in relation to BayanTel," the banks said.
The banks said the claim covers "reasonable compensation, expenses,
disbursements, and advances of the trustee, its agents and counsel,
accountants and experts." The creditor banks also said their right to
collect or file proofs of claim is clearly established in the contract
and is not limited as to when the expenses are incurred or whether these
expenses are incurred prior to or during any judicial proceeding.
"Accordingly, as a matter of contract law, BayanTel is obliged to
reimburse the expenses incurred by the petitioner in the enforcement of
the claims of the beneficiaries of the notes pursuant to indenture," the
banks said. The creditors also said professional fees covered by the
refund were required "due to the complex nature of the cross-border
transactions among the parties as evidenced by the indenture as well as
the relevant agreements."
Among the professionals that were hired by the creditors to support
their case calling for BayanTel's rehabilitation were audit firm
PriceWaterhouseCoopers, local law firm Belo Gozon Elma Parel Asuncion
and Lucila and international law firm Clifford Chance LLP. The banks
also said BayanTel is bound by the local Civil Code to reimburse
expenses incurred during its legal proceedings. "BayanTel, in turn,
being the party which caused such event of default is bound by the Civil
Code to reimburse expenses," the banks said.
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By BERNARDETTE S. Sto. DOMINGO
Five firms have signified interest to operate the National
Transmission Corp. (Transco), the spin-off firm mandated by law to take
over the transmission functions of state-owned National Power Corp. (Napocor).
Energy Secretary Vincent S. Perez, Jr., yesterday announced five
investor groups submitted Friday expressions of interest and nonbinding
term sheets for a concession agreement to operate Transco. The
submissions "exceeded expectations, and based on the quality of queries
by these parties, we should be looking at very competitive offers come
negotiation time," Mr. Perez said in a statement. He declined to
identify, however, the interested parties saying these will be disclosed
in due time. Officials earlier said three firms have expressed interest
in Transco. The first, Singapore Power, was the only one to bid for the
concession in two bidding rounds, both later declared as failure.
Government rules on the disposition of its assets allow negotiations
after a failed bidding. Mr. Perez said he had instructed the Power
Sector Assets and Liabilities Management Corp. (PSALM) to prepare for
negotiations that will ensure an optimal price for Transco, keeping in
mind the government is not holding a fire sale of the assets. Under the
Electric Power Industry Reform Act, the government, through PSALM -- the
holding company of Napocor -- is mandated to privatize Transco. After
the national elections, PSALM invited interested firms to submit
nonbinding term sheets to take advantage of increased interest in the
country's transmission assets.
PSALM President Raphael P.M. Lotilla said authorities "will negotiate
for terms that will bring maximum value to the government." PSALM is set
to begin negotiations in August. Mr. Perez earlier announced that
American firm AES and Australian company Transgrid have expressed
interest on Transco. The government expects to raise $2 billion from the
privatization of Transco. The amount will be used to pay part of
Napocor's debts. On Friday, the government said it aims to convert four
idle power plants, including a never-used nuclear plant, into gas-fired
plants next year as part of a plan to avert a looming power shortage.
President Gloria Macapagal Arroyo said the revival of the plants would
also reduce the country's dependence on imported oil. "Inactive power
plants such as Sucat, Limay, Malaya and the Bataan nuclear plant should
also be converted into gas-fired plants in 2005 to ensure that
additional capacity will be in place in Luzon by 2008."
-- with Reuters
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By CECILLE S. VISTO, Sub-Editor
Fastfood giant Jollibee Foods Corp. is mulling the creation of two
boards of directors to take care of the two major aspects of the
business. In a business forum of the Ateneo de Manila University last
Friday, Jollibee Chairman and Chief Executive Tony Tan Caktiong said
this early, the firm is already looking at sustaining the success of the
business. While he admitted that no succession strategies have been
firmed up thus far, the possible constitution of two sets of board
directors is a recommendation the company is considering. "We are
looking at this suggestion but we don't know if this could be
implemented," said Mr. Tan Caktiong, recently awarded as the World
Entrepreneur of the Year by Ernst and Young.
Jollibee, now on its 25th year and has the distinction of beating
McDonald's in the Philippines, is still controlled by the Tan Caktiong
family even as its ownership base widened after its initial public
offering in the 1990s. "It's our internal topic now in terms of
succession to the second generation. There's no clear solution yet but
some suggestions being made are in line with the possible creation of
two boards. We're a publicly listed company but at the same time, there
are some family issues [we have to resolve]," Mr. Tan Caktiong said. The
first set of directors, he said will take care of the "business side,"
while the second set will concentrate on the "family side." The second
set of officials will decide on matters such as who can work in the
company, the type of performance evaluation that should be adopted, what
businesses can the family members get into on their own and whether
these businesses compete with the restaurant chain. "The family board
will set the criteria [for these things] It is a challenge how to extend
this [success of Jollibee] to the next generation," Mr. Tan Caktiong
said.
The election of two sets of directors is not a practice in the
corporate world. Many firms though have implemented a two-tier corporate
hierarchy. On the first tier is the board of governors or directors,
whose members are elected by the shareholders of the corporation. On the
second tier is the upper management or individuals hired by the board of
governors. The first group is tasked to monitor the company on behalf of
the shareholders while the second group is responsible for the
day-to-day operations and profitability of the corporation. If Jollibee
pushes through with its plan to change the corporate structure, it will
need the approval of both the Philippine Stock Exchange and the
Securities and Exchange Commission.
Meanwhile, Mr. Tan Caktiong said the food firm has no plans of
following the lead of competitors like Burger King in introducing a
vegetarian menu. He said it suffices that his restaurant chain's
servings are "just right" and its fare cooked the healthy way. "Our
portion sizes are just right but if you're suggesting that we introduce
vegetarian dishes, then that's another issue," said Mr. Tan Caktiong
when asked during the forum whether Jollibee plans to make its meals
"healthier."
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The National Power Corp. (Napocor) on Saturday opened a
PhP56-million wind/diesel hybrid power plant in Batanes, which is
seen to generate yearly savings of
PhP2.5 million in fuel costs for the state-owned firm. The
landmark power plant is expected to generate 180 kilowatts of
electricity for the provincial capital of Basco and for the entire
island of Batan, the power firm said. Napocor said with the operation of
the power plant, Batan Island will be provided uninterrupted, 24-hour
power supply for the first time. The hybrid project will use three wind
turbine generators with a capacity of 60 kilowatts each, and two diesel
generators with a capacity of 500 kilowatts each. The wind turbines were
built on top of Mt. Sumhao, while the diesel generators were put up
beside Napocor's existing 1.25-megawatt diesel power plant in Basco. The
project is a joint initiative of Napocor and the Departments of Energy
and Science and Technology, and the provincial government of Batanes,
which secured part of the project funding. Napocor provided counterpart
funds amounting to
PhP8.48 million.
Following the commissioning of the power plant, Napocor, through its
Small Power Utilities Group, will take over operations and maintenance,
and provide fuel supply and other technical support to the plant. The
government has been pursuing the development of new and renewable energy
sources like wind, solar, and biomass to boost the country's energy
self-sufficiency and protect the environment from the effects of
traditional fossil fuels such as oil and coal. -- B.
S. Sto. Domingo
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By ROULEE JANE F. CALAYAG
Trading is expected to be slow and cautious as rising oil prices
haunt financial markets all over the world. Dealers said over the
weekend that the uptrend in oil prices could overshadow earlier gains
made in the Philippine bourse. Jose Vistan, Jr., research director of AB
Capital Securities, Inc., said the "overriding economics of oil dwarfed
individual company results."
CORPORATE EARNINGS
Dominant telecommunications firm Philippine Long Distance Telephone
Co. (PLDT) last week surprised the market with its first-half net
profit, which rose over five times to
PhP12 billion, driven by sustained gains in its wireless
business. PLDT is confident that it could replicate this performance
throughout 2004. It expects earnings to hit PhP22 billion by the end of
the year. Globe Telecom, the country's second top telecom carrier,
reported a 58% hike in net profit to PhP6.9 billion as of June due
largely to a strong growth in subscriber base and improved operating
efficiency. Southeast Asia's largest food and beverage conglomerate, San
Miguel Corp., also stood strong during the period. The company's
consolidated net income for the first six months rose 31% to PhP4
billion. These reports, however, failed to solidify gains as worries
over rising world oil prices stole the thunder from the market and
triggered some selling.
OIL SUPPLY FEARS
Limited oil supply in the face of burgeoning demand due to global
expansion and a host of terror threats caused oil prices to reach record
highs. The Organization of Petroleum Exporting Countries, whose members
have been producing the largest amount of oil in the past three decades,
is unable to keep prices from spiralling because of its inability to
meet growing global demand. "Oil prices have risen by more than
one-third since the end of 2003 on worries that accelerating global
demand has left supplies tightly stretched with little leeway for
disruption," said Mr. Vistan. The recent decision of the Russian
government to bar major world oil producer Yukos from accessing its bank
accounts added pressure to an already stymied industry. The decision
weakened the ability of Yukos, which pumps 1.7 million barrels of oil
every day, to export oil and ease the tight global demand.
As if this was not enough, the world economy reeled anew from an
increase in crude oil prices at the New York Mercantile Exchange. Crude
oil for September delivery leaped to $44.50 a barrel, considered the
highest in 21 years. "Persistently high oil prices could feed inflation
and cut into corporate profits, consumer spending and the pace of
economic recovery," added AB Capital's Mr. Vistan. But he is optimistic
that the uptrend will not continue. "Crude prices may stabilize in the
coming weeks as Saudi Arabia, the world's largest oil producer, started
production at two new fields," he added. The Arab country is also
reportedly planning to defer the shutdown of its older wells. However,
this may not be enough to address the problem of rising prices with
crude oil estimated to stay at over $40 a barrel until the situation
improves.
TRADE WITH CAUTION
There is little to expect during this "ghost month" of August, said
Mr. Vistan, as he advised investors to avoid an aggressive buying spree.
"With the high price of oil and the prevailing terror alert, there is a
lot of pressure on the market on a short-term basis," he said. While
some companies have yet to report their earnings for the first half, Mr.
Vistan stressed that expectations in some companies "have been a little
too optimistic to exceed." This scenario merits some cautious moves from
investors as uncertainties over oil prices will leave the market
vulnerable. "Any time we get some bad news in the price of oil, we are
going to see negative stock reaction," Mr. Vistan said. But he added
that most of the market's concerns are temporary. "Stocks and the
earnings underneath them are still fundamentally solid," he said. These
may be uncertain times but traders may be able to find "opportunities to
pick some battered issues that are already oversold."
INFLATION
The Philippine Stock Exchange composite index, or Phisix, dropped
7.85 points or 0.50% to 1,576.85 week on week. The series of oil price
increases had led to higher transport fares and food prices, resulting
in an inflation rate of 4.3% in July. According to the National
Statistics Office, the consumer price index in July rose 6% from 5.1% in
June. Although the July inflation rate was still within the government
target of 4% to 5%, investors were worried this might be an indication
of the government's inability to keep to its goal. Other analysts had
stressed that the surge in oil prices is a global concern that needs
immediate attention.
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Inflation rose sharply at the fastest pace in nearly three years in
the year through July, or 33 months to be exact, fuelled by faster rises
in prices of services and raising pressure on the central bank to
tighten monetary policy. The jump in inflation to 6.0% from 5.1% in June
prompted the government yesterday to say it could breach its average
inflation target for the year, although the central bank said it was
still certain of hitting the 4%-5% range. "The trend in oil prices is
not very encouraging," Socioeconomic Planning Secretary Romulo Neri told
Reuters, referring to the rise in crude prices to record highs near $45
per barrel. "We may breach the 5% target if oil price hikes continue."
The Philippines imports nearly all its crude requirements and the
surge in world prices has already fed through to fuel and transport
price increases this year. Bangko Sentral ng Pilipinas (Central Bank of
the Philippines, or BSP) Deputy Governor Amando Tetangco said there was
still room to keep overnight interest rates steady, and that the average
inflation target of 4%-5% in 2004 would be met. "For 2004, we will still
be within the target range of 4%-5%, even with the 6% for July," he told
Reuters. July's inflation rate, the highest since September 2001,
brought the average increase in prices this year to 4.3%. Inflation has
risen steadily this year, partly spurred by sharp oil price rises, from
3.4% in January. Mr. Tetangco said the 2005 inflation target, which is
also 4% to 5%, could be breached due to rising oil prices, higher
transport fares and wages. Song Seng Wun, economist at G.K. Goh
Securities in Singapore, said he expected inflation to stay above 6% for
the rest of the year due to high oil prices, adding that a breach of the
target was likely. "In all probability, it will exceed the 5% [average
in 2004]," he said.
RISING INTEREST RATES
Analysts said the sharp rise in inflation had raised the chances of
an interest rate increase in the coming months. "This certainly
heightens the risk of a BSP rate hike, particularly since the US Fed is
expected to hike rates on the 10th of August," said Danny Suwanapruti,
an analyst at Forecast in Singapore. The central bank has not touched
its benchmark rates since a cut of 25 basis points in July 2003 that
matched a similar move by the US Federal Reserve. The bank's overnight
borrowing rate is 6.75% and its lending rate is 9%. The statistics
office blamed the sharp increase in inflation largely on a 10.8% rise in
prices of services like transport and communications. It was the highest
since the services index rose 11.3% in September 2001. Prices of food,
beverages and tobacco leapt 6.1% in the year through July, the highest
since April 1999. Fuel, light and water prices jumped 6.9% on the year.
The statistics office said inflation in the year through July using the
2000 base year stands at 6.6%, also higher than the 5.4% in the year
through June. The central bank uses the 1994 base year inflation figure
when setting monetary policy.
Inflation is the year-on-year change in the consumer price index
(CPI), which consists of the basket of goods and services bought by the
average Filipino household. BSP had projected a lower July inflation
rate of 5.3%-5.9% -- already its highest monthly forecast for this year.
Inflation in June was a 32-month high of 5.1%. In September 2001,
inflation was 6.2%.
PRESSURES
"For so many months, we've been having 3% to 4% inflation, so this 6%
is rather high. Compared to two to three years ago, this is really
high," said Think Tank Inc. economist Bienvenido Oplas. "Even though
there is a possibility that inflation will ease slightly from its
current 6%, there are pressures that are just waiting in the wings which
can bring inflation back up or even higher again," added ING Barings
economist Joey Cuyegkeng. "You got pending petitions on wage increases
still, petitions on power rates, and it's likely that crude oil prices
will remain higher than expected. So those things will continue to
provide price pressures." Last August 2, oil companies raised the prices
of gasoline, diesel, and kerosene by 50 centavos per liter. They also
warned of price adjustments later this month, citing the surge in
petroleum prices in the world market. Global oil prices soared to a
21-year high last July 29, with Dubai crude hitting $35.96 per barrel.
Regional prices of unleaded gasoline also rose to $46.52 per barrel
end-July from $45.18 in June, while diesel soared to $46.24 from $42.84.
"I think it's relatively psychological. Businesses think they should
keep up with the same standard of living, so they pass on to the
consumers whatever increases there are in fuel prices, power rates,
etc.," Mr. Oplas said.
In a report, the National Statistics Office said the
higher-than-expected July inflation rate was propped up mainly by the
10.8% increase in the inflation of services, also a 33-month high, from
only 8.1% in the previous month. The third heaviest weighted commodity
group in the CPI, the services commodity group, captures movements in
transport fares and fuel pump prices, among others. Food, beverages and
tobacco also recorded faster price increases last month, to 6.1% from 5%
in June. Upward adjustments in prices of agricultural commodities like
rice, fish and vegetables were noted last month as the country
officially entered the rainy season. Typhoon Igme that hit many areas
during the middle of July also disrupted the supply of commodities.
Higher inflation rates were also registered in fuel, light and water, to
6.9% in July from 6.0% in June, and miscellaneous items to 2.2% from 2%.
Clothing and housing costs, meanwhile, decelerated to 2% and 3.2%,
respectively.
WATCHING
Despite the rising price trend, economists believe inflation will
still settle within the 4%-5% target set by the government for this
year. "The key is whether this inflation is one-off or not. Apparently,
if present conditions remain the same, then inflation would continue to
be high; though I think it's likely that we're going to see the
full-year average rate closer to the higher end [of 5%], rather than
previously at the middle," Mr. Cuyegkeng said. The analyst also does not
expect BSP to raise interest rates, noting that inflationary pressures
are mostly supply-driven. "I think that BSP has made it relatively clear
as to the source of inflation and their response to the sources. As long
as the sources are supply-driven, BSP has made it clear that monetary
responses will have an insignificant effect on cooling down inflation,"
he added. On a monthly basis, inflation slowed down to 1.1% in July from
1.5% growth in June, given the 2.1% deceleration in services inflation.
In addition, slower hikes were observed in the prices of clothing and
housing items. Core inflation, which strips out food and energy items,
advanced by 6.0% after rising by 5.4% in June.
STRATEGY
BSP officials said they would work with key government agencies to
help arrest inflation before resorting to monetary tightening, which
could raise the costs of borrowing in the country and affect economic
growth. BSP Assistant Governor Diwa C. Guinigundo said BSP would
coordinate with the departments of Agriculture, and Trade and Industry
for possible government intervention to stabilize prices. One option is
to import goods and raw materials such as meat, chicken feed, and
processed goods to stabilize the supply and prices. BSP
officer-in-charge Armando L. Suratos said non-monetary intervention
would be more effective because inflation pressures were supply-side and
were likely to be temporary. Still, he said monetary authorities would
keep a close watch on inflation. "BSP will continue to closely monitor
the developments in price conditions and inflation expectations as they
affect the forecast for inflation over the next two years, and if
appropriate, formulate a measured response that may emerge over the near
term," Mr. Suratos said. Some analysts expect BSP to adjust policy rates
to head off rising inflation if prices increases are sustained. "A
sustained increase in prices may force the hand of the BSP to pursue
monetary tightening in the near future," said Stephen Huang, an
economist at the University of Asia and the Pacific. Another economist
at a foreign bank said BSP may have to adjust interest rates if the US
Federal Reserve System raises key interest rates by up to 75 basis
points by yearend.
MAJOR CONCERN
Meanwhile, Socioeconomic Planning Secretary Neri said "the sustained
high level of oil and other commodities in the global market is expected
to put pressure on inflation in the coming months with the probability
of breaching the 5% mark, the high-end of the inflation target for 2004
and 2005." He also said he could not make a projection on the inflation
rate for 2005 because of the volatility and unpredictability of oil
prices, given the tension in the Middle East. The Department of Energy
earlier warned that consumers may be in for more fuel price increases,
with world oil prices likely to remain high due to terrorist threats in
the United States and the further tightening of globaly supply. Energy
Secretary Vincent S. Perez, Jr. had said Dubai crude reached a 13-year
high on Tuesday at $37.50 per barrel. "This is one of the highest as far
as we know since 1990. This is a major concern for us ," he said.
Mr. Neri also said the increase in the prices of food items such as
rice, corn, fruits, fish, and vegetables in July were due to typhoon
Igme, and have contributed to inflation. "[The July inflation] was
compounded by food inflation pegged at 6.4%. This was driven by [an
increase] in the price of corn and meat," he said. Corn prices in July
went up by 11.2% while meat prices increased by 15.3%. Mr. Neri also
said the high prices of alternative ingredients such as soybean meal,
used for feeds for livestock and poultry, likewise contributed to food
inflation last month. "Food inflation is due to factors beyond our
control. From last year, we had Typhoon Harurot. Then the price of
soybean [meal] tripled," he said. Typhoon Harurot hit the country in
July last year and ravaged corn-growing regions in Northern Luzon. The
government authorized the importation of 350,000 metric tons of corn
early this year following the clamor of the livestock and poultry
industry for cheaper feeds. This was after corn prices shot up by as
much as
PhP12 per kilogram.
CATCH 22
University of the Philippines economist Felipe M. Medalla said the
July inflation rate was expected due to unabated increases in the price
of fuel. "The July inflation rate is to be expected because of the
increases in oil prices. I think there is a possibility that the
inflation target for 2004 may be breached because it appears there will
be no letup in oil price hikes [for the rest of the year]," he said in
an interview. In controlling inflation, Mr. Medalla said the government
would be put in a "catch 22 situation," since alternatives available to
contain inflation could backfire. "Given the current scenario, the
government has two choices -- either they let inflation go up or the
central bank could raise interest rates to control inflation," he said.
Either way, both will have adverse impact on the economy's growth. "The
last thing you want is to create an 'inflationary psychology', so the
government may resort to increasing interest rates. But doing this may
consequently slow down demand and affect our economic growth," Mr.
Medalla said.
-- Ernesto B. Calucag, Iris Cecilia C. Gonzales
and Jennifer A. Ng
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San Miguel Corporation, Southeast Asia's biggest food and beverage
firm, stepped up its regional expansion yesterday by taking a 50% stake
in Australia's biggest juice maker, Berri Ltd. The deal, which places an
enterprise value on Berri of A$335 million (US$235 million), will help
unlisted Berri expand into Asian markets like Thailand, Vietnam,
Indonesia and China. Berri's brands, Just Juice, Daily Juice and Berri
already have half of Australia's A$1.2 billion juice market. Analysts
said the tie-up would give San Miguel a strong brand to complement its
stable of drinks and food products. "It is just prudent for San Miguel
to acquire this company to strengthen its foothold in the region," said
Astro del Castillo, managing director at First Grade Holdings Inc.
A San Miguel company source told Reuters the acquisition cost would
be half the equity value of Berri's business, estimated at A$245
million. The deal includes a clause allowing San Miguel to increase its
stake if the partnership goes well in the first few years. The source
said earlier San Miguel had bought slightly over 50% in Berri to give it
a majority stake, but later said the share was only 50% because plans to
take a higher stake had not proved feasible for now. San Miguel has said
it would only buy into any company if it gains management control. Berri
said in a statement released in Melbourne that its major shareholder and
former chairman Doug Shears "will remain an equal partner in the
business."
In a joint statement with Berri released in Manila, San Miguel
chairman Eduardo Cojuangco Jr. said the deal was an important plank in
the firm's regional expansion plans. "It is a terrific complement to our
existing portfolio and our buy-in is consistent with San Miguel's
strategy to acquire businesses with strategic fit with its core
categories. With Berri, we are better positioned to build on the many
opportunities we see for convenient beverages throughout the
Asia-Pacific. We hope to be able to accelerate the regional distribution
and growth of Berri products," he said. He also said that San Miguel was
"committed to providing Berri with the resources and opportunities they
need to grow, while sustaining and enhancing their leadership in their
home market." San Miguel plans to increase its overseas business to
30%-40% of group revenues in the future compared to less than 15% now
after dominating its home market in beer, liquor, soft drinks, and
processed food.
The 114-year old Philippine firm is building a factory in Thailand
and has signed a lease for a drinks plant in Vietnam. It also wants to
expand in Indonesia, Taiwan, China and Malaysia. Coca-Cola Amatil wanted
to buy Berri for about A$300 million last year to shore up slowing
growth in its traditional soft drinks, but competition authorities
banned the sale. Mr. Shears, who owns about 56% of Berri, had put a
price tag of about A$400 million on the firm. "For Berri, the new
partnership will spur market presence into key Asian markets such as
Thailand, Vietnam, Indonesia and China," Berri CEO Alison Watkins said
in the statement. Ms. Watkins told Reuters in Sydney that Berri was more
concerned about expanding its overall market presence than just widening
its market share. The firm has been exporting its Berri brand juice in
Indonesia, Malaysia and Singapore for eight to 10 years. "We've really
been competing with quite a narrow focus in those countries and it's
been entirely export-driven, so this has been a chance for us to step up
to another level," she said. Ms. Watkins will remain CEO, Brian Gray
chairman, and Colin Kop chief financial officer of Berri. They will be
half of the new board, with three directors to be appointed by San
Miguel. Berri's earnings before interest and tax rose by about 14% in
fiscal 2003 to A$35 million.
San Miguel earlier reported a 32% jump in quarterly profit on brisk
beer sales during the run-up to May national elections. Berri corners an
estimated 65% of the country's fast growing fresh juice segment. Its
brands sold locally include Berri, Daily Juice, Fruitful Australian
Fresh, Just Juice, Mildura Sunrise, and Mr. Juicy. Berri also produces
bottled water under its Kyneton Mineral Water and Summit water brands.
San Miguel said Berri's brands provide a strong complement to its stable
of alcoholic beverages, including flagship beer and hard liquor brands
San Miguel Pale Pilsen and Ginebra San Miguel. San Miguel's acquisition
of a 50% stake in Berri expands its presence in Australia. In April
2000, it acquired leading Australian premium beer manufacturer J. Boag &
Son.
San Miguel is the country's largest publicly listed food, beverage,
and packaging firm. In the last three months, it has acquired assets in
Thailand, Indonesia, and Vietnam. The Thailand facility includes a fully
equipped brewery on a 21.75 hectare site in Pathum Thani, and a 2.4
hectare property at the Bang Po area of Metro Bangkok, which has a port
facility with access to the Cho Phraya River. The brewery, San Miguel
had said, could produce one million hectoliters of beer yearly. The
Indonesia facility is a multi-product beverage facility that will allow
San Miguel to start manufacturing and distributing soft drinks. The
facility -- located 25 kilometers from Jakarta in Bekasi province, West
Java -- will complement San Miguel's processed meats, beer and packaging
businesses in Indonesia. The Vietnam facility -- called the San Miguel
Vietnam Company Ltd. -- will manufacture high quality beverages,
including bottled water and fruit-based drinks using local raw
materials. "The company will utilize its strengths in the domestic
business and international orientation as it aggressively builds up its
businesses in the region," San Miguel said.
-- Jennee Grace U. Rubrico and Reuters
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By CECILLE S. VISTO, Sub-Editor
The government decision to get $30 million from Maynilad Water
Services Inc.'s $120-million performance bond is expected to raise the
price of the utility's water. Maynilad sources said the company was
still computing the actual increase, but estimates placed it at over
PhP7 per cubic meter. This will raise Maynilad's water tariff to
almost
PhP26 per cubic meter from the current basic rate of
PhP19.92 per cubic meter. Maynilad expects its banks, the guarantors
of the bond, to bill the company immediately after state-run
Metropolitan Waterworks and Sewerage System (MWSS) takes the $30
million. The performance bond answers for concession fees that Maynilad
owes MWSS.
Under a standby letter of credit, a consortium of banks led by Hong
Kong-based Citicorp. International Ltd. can run after Maynilad
shareholders for payment of the drawn amount. Maynilad parent Benpres
Holdings Corp. has guaranteed payment of 60% of the amount to be
withdrawn, while its French partner, Ondeo Services Phils., Inc., has
committed to shoulder the rest. But since Benpres is still restructuring
nearly $500 million in debts, banks that guaranteed its performance bond
may have to wait for its cash flow to improve. Ondeo, more liquid than
Benpres, has the capacity to pay the $12 million, or 40% of the $30
million. Maynilad sources said Ondeo would pass on this cost to
customers. But any rate increase must be duly approved by the MWSS
Regulatory Office.
The issue of the bond and the decision of the MWSS to withdraw from
its compromise deal with Maynilad and its creditors will all be taken up
in a hearing today at a Quezon City Regional Trial Court. Judge Reynaldo
B. Daway has required Acting Government Corporate Counsel Elpidio Vega,
Jr. to appear today and discuss the implications of the government's
rescission of the compromise deal. The deal would have paved the way for
a government takeover of Maynilad and the exit of the Lopez family from
the utility. BusinessWorld yesterday reported that MWSS wanted to
draw 25% of the $120-million performance bond that guaranteed its
collection of water concession fees from Maynilad. MWSS will use the
money to finance its capital expenditures.
Finance Secretary Juanita Amatong had said her department was still
studying the request. Banks that guranteed the Maynilad bond earlier
threatened to sue the government if it drew more than $50 million -- the
amount set in the compromise agreement that MWSS and Maynilad signed
last March. The government is no longer in a hurry to draw the entire
$120 million after Maynilad guarantors decided last month to renew it
for another year. MWSS had abandoned its earlier commitment to limit its
draw to $50 million after obtaining a Supreme Court ruling authorizing
it to get its hands on the entire $120 million. Implementation of the
compromise would have resulted in an increase in Maynilad's water tariff
to
PhP26.34 per cubic meter starting last June. In previous interviews,
Maynilad officials said its dispute with MWSS over unpaid concession
fees would burden consumers as rate increases previously granted
remained unimplemented. Uncollected tariff adjustments, they warned,
would mean bigger prices increases in the future.
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Big local and foreign banks that have lent money to debt-ridden Bayan
Telecommunications, Inc. (BayanTel) are contesting the recent Pasig
court approval of its financial rehabilitation. In a notice dated July
23, the banks told the trial court they would appeal its decision "for
being contrary to law and evidence on record." They claimed it was
illegal for the Pasig court to put all BayanTel creditors, with or
without collateral, on equal footing even in terms of getting payments.
The notice of appeal was filed by "secured" creditors Asian Finance and
Investment Corp., Bayerische Landes-bank (Singapore Branch), Clearwater
Capital Partners Singapore Pte. Ltd., Deutsche Bank AG, Express
Investments III Private Ltd., Export Development Canada, J.P. Morgan
Chase Bank, P.T. Bank Negara Indonesia (Hong Kong Branch), Standard
Chartered Bank, and local banks Metropolitan Bank and Trust Co. and
Rizal Commercial Banking Corp. A separate notice of appeal was filed in
court by local banks China Banking Corp. and Philippine National Bank.
Secured creditors or those holding loan collaterals disagree with the
Pasig court's move to treat all BayanTel's creditors equally, even in
terms of payments and of past due interest. Secured creditors account
for 52.6% of BayanTel's total debts, unsecured creditors account for the
rest. Last June 28, Pasig Judge Rodolfo R. Bonifacio ordered the equal
treatment of all creditors as well as allowed the restructuring of
BayanTel's $325-million debt, spreading out payments over 19 years. The
court also appointed Remigio A. Noval as company receiver. Despite
putting creditors on equal footing, the court still allowed secured
creditors to hold on to their collateral, which they could foreclose on
if rehabilitation would fail and they would resort to liquidation. But
the trial court also stressed that if BayanTel's debts were converted
into equity, Filipinos should continue to hold 60% of the firm, in line
with constitutional provisions limiting foreign ownership of a
telecommunication firm to 40%. --
Leilani M. Gallardo
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The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or
BSP) is looking at several reforms, including reorganizing itself, so it
can improve its supervision of the banking industry. BSP Deputy Governor
Armando L. Suratos said these reforms would enhance BSP's efficiency as
a regulator that could strengthen the banking and financial system.
"These changes involve more of reengineering our system to make it more
efficient," he said. Changes are also necessary for BSP to implement key
accords, particularly Basel II, he said. The Basel II accord, adopted by
central banks worldwide during a meeting in Basel, Switzerland last
June, requires banks to maintain enough capital to cover their risks.
New capital adequacy ratios detailed by the accord must be adopted by
banks by 2007. The accord also seeks to strengthen market discipline by
enhancing transparency in banks' financial reporting. As such, Mr.
Suratos said BSP has started a bank-wide reorganization that would last
until yearend.
The reorganization will include the creation of a BSP unit that will
focus on strengthening micro-enterprises, consistent with the thrust to
help enhance small businesses' access to credit. Mr. Suratos said BSP
officials have yet to finalize the details of the reorganization. BSP
will also retrain its employees, including examiners and regulators, to
enhance their efficiency in regulating banks, particularly risk-based
supervision. BSP has adopted a risk-based approach to bank supervision
in an effort to ensure that financial institutions understand and
control the types and levels of risks they assume. Mr. Suratos said
risk-based supervision was a process where the risks of a financial
institution were assessed, and the appropriate supervisory activity was
designed and executed in an effective manner.
-- Iris Cecilia C. Gonzales
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By KARL LESTER M. YAP, Reporter
The police and military have tightened security in the Makati City
business area, the country's premier financial district, and other
"soft" targets, amidst speculaions of possible terror attacks. Armed
Forces of the Philippines (AFP) National Capital Region Command (NCRCom)
chief Lt. Gen. Alberto F. Braganza and Philippine National Police (PNP)
National Capital Region Police Office (NCRPO) chief Director Ricardo F.
de Leon yesterday made an ocular inspection of the security measures
implemented in the Makati business district and to check on the
readiness of their troops. "We have inspected the Makati business
district, particularly the Makati Stock Exchange, and visited our troops
there," said Mr. Braganza, although he hastened to add this was a
routine inspection. "We have to remind our troops to institute stricter
measures in light of persistent reports of terror attacks not only here,
but abroad," he added.
Meanwhile, Metro Manila police chief Mr. de Leon announced that the
police stand ready to combat terrorist threats in Metro Manila.
Intelligence operatives have monitored terror threats against the
country although they deemed these not serious enough to raise alert
levels. The AFP and PNP said alert levels remained normal as of
yesterday, despite the raising of alert level to Code Orange in the
United States, the second highest alert level, due to warnings that the
al Qaeda terror group was again planning massive attacks in financial
centers in New York and Washington sometime before the US presidential
elections in November. Local authorities, however, said they were not
taking chances, justifying the deployment of patrols in Makati and
Ortigas district in Pasig City as well as other strategic areas as
necessary to prevent any possible attacks from happening in said areas.
Eleven "chokepoints" in the metropolis are being maintained and troops
are deployed in bus stations, ports, and malls, said Mr. Braganza. Both
military and police chiefs assured the public that authorities were on
top of the situation and that the security situation in the country
remained stable.
Last Monday, US officials raised alert levels in Washington and New
York after receiving reports that extremists linked to al Qaeda leader
Osama bin Laden were targeting key US cities and infrastructures.
Specific buildings and areas include the New York Stock Exchange in New
York, and the International Monetary Fund and World Bank buildings in
Washington. The US government threat level for financial institutions in
the mentioned areas would be raised to orange, or high alert, but would
remain at yellow, or elevated elsewhere. On Sept. 11, 2001, al Qaeda
masterminded the attacks on the World Trade Center in New York and the
Pentagon in Washington by using hijacked commercial planes. More than
3,000 people died in the attacks.
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The government is seeking to implement a number of measures to combat
corruption, among which involve strengthening anti-corruption laws and
expanding lifestyle checks, to minimize the loss of government funds and
help the government achieve its 10-point agenda. President Gloria
Macapagal-Arroyo presented the proposals during a recent meeting of the
Legislative-Executive Development Advisory Council (LEDAC). Fighting
corruption was one of the measures discussed during the LEDAC to help
the country to achieve a robust economic growth by 2010. Socioeconomic
Planning secretary Romulo L. Neri, who also chairs the LEDAC Executive
Committee, said the President will focus on three key areas of reform
related to enforcement of laws, improvement of systems and "values
formation." Mr. Neri said the government was looking at amending
Republic Act 1379 or the Unexplained Wealth Act, which could be
patterned after the RICO (Racketeer Influenced and Corrupt
Organizations) Law of the United States by integrating attachment
proceedings with the filing of lifestyle check cases. "The President
will also urge the Bureau of Customs and the Bureau of Internal Revenue
to be more efficient in their tax collection and to minimize losses due
to corruption and red tape," he said. Mr. Neri said Mrs. Arroyo is also
eyeing to amend Republic Act 6770 and allow the Office of the Ombudsman
to hire private prosecutors to litigate before the Sandiganbayan. The
government is also planning to introduce improvements in "frontline
services", launch the automation of elections, fully implement the
procurement law, pursue judicial reforms and re-engineer the
bureaucracy. Mr. Neri said the President has asked the Cabinet to work
closely with the Bishops and Businessmen's Conference to craft
"enforceable" anti-corruption programs along four areas of concern,
namely:
- To address the need for specially-trained prosecutors and
investigators to act on all cases of graft and corruption;
- To involve all sectors at all levels to scrutinize projects that
are willfully made transparent, so that the people, especially the
poor, can actually see the benefits accruing to them from
governance;
- To make clear and available for public scrutiny, without
exception unless national security is involved, the terms of bidding
of government-funded projects, and all other contracts or agreements
of government with the private sector; and
- To ensure transparency, accountability, participation and
communication as a vehicle for good governance.
Ms. Arroyo also reportedly sought the legislative body's support to a
law that will downsize the current bureaucracy, as well as discussions
on Charter change. Mr. Neri said the setup of a Commission on Values is
being eyed by the government to address graft and corruption in the
country. The commission, which will be an ad-hoc body, will pursue
values education in schools and value seminars in institutions.
Anti-corruption through good government is one of the key reform
packages that Ms. Arroyo promised in her
State of the Nation Address last month. Quoting a report released by
the United Nations Development Program, the Office of the Ombudsman said
the government lost some $48 billion to graft and corruption over the
past 20 years.
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By LEILANI M. GALLARDO, Senior
Reporter
Philippine Ratings Services Corp. (Philratings) yesterday gave its
highest rating to Ayala Corp.'s planned issuance of fixed-rate five-year
bonds totalling
PhP5 billion. Philratings, an affiliate of Standard and Poor's,
said it gave Ayala Corp.'s debt papers a "PRS Aaa" rating which means
the notes have the smallest degree of investment risk and that interest
payments are protected by a large or exceptionally stable margin while
its principal is fully secured. In assigning the ratings, Philratings
said it considered Ayala Corp.'s diversified portfolio of businessess in
well-established markets as "well as its strong financial flexibility
which is anchored mainly on its investments or holdings in publicly
listed companies." The ratings agency also noted Ayala Corp.'s committed
shareholders and capable management team. Despite the company's total
debt level of PhP60 billion as of end-2003, Philratings expressed
optimism the firm can sucessfully manage its liabilities. "Although
Ayala Corp.'s present level of debt can be seen as moderately aggressive
Philratings views positively the company's plans to replace a portion of
its dollar borrowings maturing in 2005 with the proposed peso issue," it
said. It said the debt papers are intended to pay maturing debts, thus
will not bloat the company's total liabilities.
The ratings firm said the move to shift to peso-denominated debt
reduces the company's exposure to foreign exchange fluctuations and
partly addresses its short-term and medium-term refinancing needs. Ayala
Corp. said it is awaiting for the Securities and Exchange Commission's
approval of the bond issuance but stressed that it will only issue the
debt papers at a time when it feels the local capital market is most
receptive and favorable for a peso issuance of such magnitude. With
almost PhP6 billion in cash at the parent level and $140 million in
undrawn, committed credit facilities established with various financial
institutions, Ayala Corp. said it can adequately cover its maturing
obligations up to next year.
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The Philippine Stock Exchange (PSE) has cleared First Resources
Management and Securities Corp. of any improper sales practices when it
bought Manila Electric Co. (Meralco) shares on behalf of the Government
Service Insurance System (GSIS). In a July 20 memo, the PSE's market
surveillance division said it "reviewed the alerts gathered during the
period and we found no compelling incidence to incite an investigation."
The brokerage house is owned by PSE director and former chairman Vivian
Yuchengco. The market surveillance division did the investigation on the
trading activities of Meralco between October 2003 and June 2004 based
on the instruction of the stock exchange following reports that First
Resources bought Meralco shares for GSIS during these months. The
division's action was separate from the inquiry now being conducted by
the Securities and Exchange Commission (SEC) against First Resources on
the same GSIS transactions.
First Resources' lawyers Teodoro Cruz, Jr. and Perpetuo Lucero, Jr.
asked the SEC for the basis of its investigation on the stock brokerage
firm. "The manner by which the investigation is being conducted and the
fact that it is directed only against our client necessitates that the
basis for the investigation be made clear," they said. They said First
Resources is not the only broker which transacted Meralco B shares from
October 2003 to January 2004 "and yet it is the only one being
investigated." -- Roulee Jane F. Calayag
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GENERAL LUNA, Surigao de Norte -- A
PhP1.75-million pilot project for a village-level solar powered
seaweed processing plant in Tawi-Tawi is expected to be put up in
September, a regional official of the Bureau of Fisheries and Aquatic
Resources yesterday said. "We are just finalizing the scopes of
responsibilities of participating agencies before the final memorandum
of agreement is signed," fisheries assistant regional director Janice
Jumali of the Autonomous Region in Muslim Mindanao told BusinessWorld.
Ms. Umali said the processing plant had to be built to boost seaweed
farmers' income given that processed seaweed fetches a higher price than
unprocessed seaweed. Raw seaweed costs around
PhP35 per kilo while the processed, or those that have been
packed into chips, fetch as much as
PhP150 per kilo in Zamboanga where Tawi-Tawi farmers sell their
produce. The processing plant, to be jointly funded by the BFAR with a
PhP1 million contribution and the Alliance for Mindanao Off-grid
Renewable Energy (AMORE) with a
PhP750,000 share, is capable of processing up to two metric tons
of raw seaweed daily.
AMORE is a United States Agency for International Development-funded
project in Muslim Mindanao. Ms. Umali said the Bureau of Post-harvest
and Research Extension is studying the final design of the fabricating
machines to be used. The machines would be used in 10 other processing
plants in Tawi-Tawi. Also in her assessment of Mindanao's seaweed
industry during the ninth cluster meeting of the Department of
Agriculture's Southern Mindanao group, Ms. Umali noted limited
achievements to support the business. For example, production support
service in terms of the establishment of seaweeds nurseries and the
development of demonstration farms and grow out farms have been below
target. "Our main problems really are the difficulties in fresh water
and power supplies, which are needed for the operation of seaweed farms
and their subsequent processing," she said.
Meanwhile, five research and development projects for Mindanao's
seaweed industry remain unfunded by the government despite being in the
pipeline for some time now. The PhP125,000 study on the feasibility of
tunnel solar dryer for seaweed dryers still has to push through
considering its limited funding requirements. --
Rommer M. Balaba
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Aboitiz One, Inc., the freight unit of Aboitiz Equity Ventures, Inc.,
yesterday signed a
PhP1.5-billion service deal with pharmaceutical and health care
products distributor Diethelm (Philippines), Inc. Under the five-year
deal, Diethelm will use Aboitiz One's Distribute and Save Service for
the delivery of its pharmaceutical and consumer products. "So far, we've
had nothing but good rapport with Aboitiz One. With its nationwide
network, technology and passion for delivery, Aboitiz One offers quality
service -- delivering our goods where, when and how we want it," Larry
Williams, Diethelm Philippines vice-president for operations, said in a
statement. Aboitiz One has seven aircraft, 20 sea vessels, and 1,000
prime movers, trailer trucks, multicabs and motorcycles. Aside from its
on-time delivery, Aboitiz One also boasts of its online tracking and
monitoring system that allows clients to check their shipment status via
mobile phone and the internet. "Our partnership with Aboitiz One further
boosts our local operations, engaging the best possible means of
delivering goods using the flexibility that Aboitiz One has honed
through its years of operations," Mr. Williams said.
Diethelm Philippines is a joint venture between United Laboratories,
the largest pharmaceutical company in Southeast Asia, and Diethelm
Keller Siber Hegner, a Swiss-based global marketing company. Last year,
it invested PhP950 million for its distribution center in the 44-hectare
Unilab Pharma Campus in Biņan, Laguna. Last April, Diethelm Philippines
expanded its distribution contract with Aboitiz One by tapping the
logistics provider to distribute its two new clients, Mead Johnson and
Masterfoods Philippines. Diethelm's other pharmaceutical clients include
Novartis, AM Europharma, Boston Scientific, Issho-Genki, and 3M Dental.
Among its clients in the consumer goods sector are Kraft Foods, Dyson
Laboratories, and ABS-Gen. "They have helped us reach 7,000 customers on
time, all the time. They have helped us through their reliability,
through their advanced systems, and their customer service perspective,"
Mr. Williams earlier said. -- A. B. L. Lorenzo
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By ROBERT LEONORAS, Correspondent
BACOLOD CITY in Western Visayas -- Separate warrants of arrest were
issued against top executives of the Mateo International Management
Group Holdings Co. and the Tibayan Group and Investment Corp. for
syndicated estafa. The warrant against Tibayan officials was issued last
Monday, while the warrant against Mateo officials was issued Wednesday.
Judge Roberto Chiongson of the Bacolod Regional Trial Court Branch 50
issued the warrant of arrest against the 10 local and national
executives of Mateo for syndicated estafa charges. No bail was allowed.
Named as repondents were: local head Stephen Balazuela, for 64 counts of
syndicated estafa; Jessica Castro, six counts; Carmelita Galvez,
executive director for finance, six counts; and Felizardo Buaron Jr.,
six counts. Mr. Chiongson also ordered the arrest of the firm's national
officials who are facing 64 counts of syndicated estafa charges. They
are Ervin Mateo and his wife, Evelyn, chairman and director of finance,
respectively; Galileo Saporsantos, director for accounts and his wife,
Nenita; Romeo Esteban, director for engineering; and Joselito Zapanta,
vice-president for capitalization. The charges were based on the
complaint of 57 investors who claimed to have lost
PhP29.9 million to the company. The National Bureau of
Investigation (NBI) filed the case in April last year.
TIBAYAN
Meanwhile, NBI special investigator Arnel Sigue said there is a
manhunt for 15 local and national officials of the Tibayan Group for 148
counts of syndicated estafa charges. "An arrest warrant was also issued
against the Tibayan officials. We're ready to serve the warrant," he
said. The warrant was also issued by Mr. Chiongson. No bail was
recommended. Respondents included the firm's local manager Reynaldo
Cenzon and other officers, namely, Danilo Cartagena, Eric Laserna,
Valentino Castillo, Judy Nograles, Elias Uytiepo and Felino Reyes.
President Jesus Tibayan and his wife, Palmy as well as Ezekiel Martinez,
Liborio Elacio, Jimmy Catigan, Nelda Baran and Rico Puerto were also
ordered arrested. The charges were based on the complaints of 78
residents of Negros Occidental, including Bacolod City, who claimed to
have invested and lost at least
PhP42.6 million. The NBI filed the charges in March last year.
The Bacolod City Prosecutor's office filed the charges before the trial
court only last June 30.
Last year, the Senate trade and commerce committee said firms engaged
in alleged "pyramid" scams have amassed an estimated PhP120 billion from
millions of unwitting victims. Mateo Management started its operation in
Iloilo City in June 1998 when Jesus Tibayan and the Mateo couple formed
the Tibayan Mateo Compact Group to solicit and accept investments from
investors. After Messrs. Tibayan and Mateo had a falling out in 1999,
the group's name was changed to Mateo Management Group. Then Mateo
Management continued to solicit and receive investments in Iloilo City
and province and other provinces of Panay Island. Thereafter, the Mateo
couple created several shell corporations such as MMG International
Management Group, Inc. and Mateo Management Group Holdings Co. with
interests in music recording and real estate development, among others.
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San Miguel Corp., Southeast Asia's largest food and beverage
conglomerate, recorded strong growth in the first semester with
consolidated net income up 31% to PhP4 billion. This was fuelled by a 6%
growth in San Miguel's corporate volume and and a 13% increase in
consolidated sales revenues to PhP81.3 billion. Higher beer volumes, the
fixed cost containment of the Coca-Cola Beverage Group, significant
improvements in the food group and the recovery of beer operations in
the international market brought the company's consolidated operating
income for the first semester to PhP8.11 billion, up 32% over last
year's. Operating income for domestic beer climbed 25% to PhP4 billion,
while revenues rose 22% to PhP18.3 billion on a beer volume growth of
19%. The volume of San Miguel's international beer sales advanced 17%
for the first six months with sales revenue of $120.1 million. San
Miguel also said its second-quarter profit jumped 32% on brisk beer
sales in the run-up to the May national elections.
San Miguel, the Philippines' largest company with a market value of
$3.6 billion, was a big winner from election-related spending, analysts
said. Beer and hard liquor account for about a third of group revenues.
The firm's earnings are expected to rise further in the second half,
analysts said, but possibly at a slower pace as record high crude prices
jack up costs and dampen the outlook. "The company confirms that it
posted a 32% rise in second-quarter net income," San Miguel, 15% owned
by Japan's Kirin Brewery Co. Ltd., said in a statement to the stock
exchange. Three company sources told Reuters on Wednesday that the
company's net profit was PhP4 billion ($71.7 million) in the first half.
That means the company earned PhP2.26 billion in the second quarter
against PhP1.71 billion a year earlier. It had a net profit of PhP1.74
billion in the first quarter. The result was in line with market
estimates of PhP2 billion to PhP2.6 billion for the three months to
June.
Analysts polled by Reuters Estimates believe San Miguel, which sells
nine of every 10 bottles of beers consumed locally, will see full-year
profits rise 17% to PhP8.66 billion. The company, founded 114 years ago,
recorded group revenues of about PhP81 billion in the first half, up 13%
from a year ago, one of the sources said. San Miguel's domestic beer
volumes rose 20% in the first half, one source said, suggesting that a
near 8% price hike in most beer products in March had little dampening
effect on demand. That compared to an 11% gain in the first half of 2003
to 73.5 million cases of 24 320-ml bottles. But analysts warned beer
sales could slow if Congress passes a bill that would index beer and
tobacco prices to inflation, a move likely to increase prices.
San Miguel wants to set up new manufacturing plants in seven Asian
countries to support future growth after dominating its home market for
beer, liquor, food and soft drinks. It had said its overseas business
should account for 30%-40% of group revenues in the future compared to
the current contribution of less than 15%. San Miguel is building a
factory in Thailand and had signed a lease for a drinks plant in
Vietnam. It said it also wants to expand in Australia, Indonesia,
Taiwan, China and Malaysia. Analysts have expressed concern that San
Miguel's regional expansion may raise its financing costs, as the
company said it would invest at least $100 million in each of the seven
nations. There are also worries that the regional expansion would not
generate enough returns for the company due to stiff competition and
marketing restrictions in its target countries. Still, San Miguel's
initiatives to expand in the region had gained headway with the
successive groundbreaking activities for new facilities in Thailand,
Indonesia, and Vietnam. The company said this reflects its confidence
that it has the products and brands that appeal to a variety of regional
tastes. -- Roulee Jane F. Calayag and Reuters
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Implementation not
likely in near term
By JEFFREY O. VALISNO and BERNARDETTE
S. STO DOMINGO, Reporters
A planned 2% tariff hike on imported petroleum products has been
shelved by Malacaņang in a bid to cushion the impact of escalating world
oil prices. Executive Order 336, which increased the import duties to 5%
from 3%, was supposed to take effect shortly after the President signed
the order on July 23, Energy Secretary Vincent S. Perez, Jr. yesterday
said. However, the Palace decided to indefinitely postpone the EO
implementation while world oil prices are at an all-time high, Mr. Perez
told a briefing in Malacaņang. "The reason why we have not implemented
this yet is because President Gloria Macapagal-Arroyo wanted to ensure
that any increase in tariff will not be felt by the consumers, and we
will only do so when the oil prices start declining," Mr. Perez said.
The President decided to increase the tariff as part of revenue measures
aimed at addressing the budget deficit. The current 3% tariff, Mr. Perez
said, is one of the lowest rates among oil-importing countries in Asia.
He added that imported oil products by the Philippines are one of the
least taxed in the region.
With world oil prices hitting fresh highs this week -- brought about
by external factors like the rising oil demand of China, political
tensions in the Middle East, refinery capacity cutbacks in South Korea,
and the recent terrorist warnings in the US -- the government deemed
that the EO's imposition would be untimely. The EO may stay shelved for
a considerable period, as Mr. Perez said "All these of these world
developments suggest that prices in the Philippines will remain high,
and we are concerned that as the winter season in the North Hemisphere
nears ... the prices will remain high..." Aside from delaying the
implementation of higher import tariffs on oil products, Mr. Perez
assured the public that the government is taking other steps to soften
the blow of the latest round of oil price hikes. The Energy department
has warned oil companies and other individuals and groups in the
downstream oil business not to take advantage of the prevailing oil
prices by indiscriminately adjusting prices of their products. "The
Energy department will run after individuals and companies that will
resort to unscrupulous practices, particularly unfair pricing, at this
very crucial time in the industry," Mr. Perez said. He also called for
cooperation and vigilance among the consumers to help report abuses.
PETRON
Mr. Perez called on other sectors to refrain from further clouding
the oil issue by sending wrong information to the public about rising
fuel prices, including blaming the privatization of Petron Corp. as the
reason for the government's helplessness amidst rising pump prices. "I
feel at this point the issue of oil prices is really unrelated to our
ownership of Petron," he said. "This (privatization of Petron) doesn't
do anything to the oil prices. We are already pleased that Petron has
been partly privatized. We only own 40%. The government is comfortable
with that level. We do not intend to increase it nor do we intend to
sell it. We believe this is just enough participation for us to have an
influence in the oil market," he added. Senate Franklin M. Drilon has
proposed that the government buy back Petron from Saudi Aramco, who owns
40% of the oil firm, as a solution to higher oil costs and charges that
big oil companies are conspiring for higher profit. Mr. Perez said
Petron did not follow the 50-centavo price hike implemented over the
weekend by oil companies. This, he said, is a clear manifestation of the
government's influence in the oil market. Mr. Perez also said it is up
to oil companies to justify rate hikes since the government has no
business doing so under the deregulated environment. "It's really very
hard to have a benchmark because it's a deregulated industry. Companies
may wish to move or not move and therefore it's difficult for the Energy
department to justify an increase," Mr. Perez said.
Dubai crude oil has been hitting all-time highs in the past few days.
Yesterday, Dubai crude further jumped to $37.70 per barrel from $37.50.
MOPS-based unleaded gasoline, meanwhile, has soared to $50.82 per barrel
and diesel to $50.37 per barrel. Mr. Perez said he met with independent
oil firms and businessman Raul T. Concepcion last Monday where he asked
oil companies to explain the recent adjustment. "We agreed that we need
to have informal consultations more often to avoid differences that end
up being publicized. There was also a common sentiment expressed that
perhaps price adjustments more frequent but smaller may be better than
infrequent and large adjustments, I support that sentiment," Mr. Perez
said. The Department of Energy (DoE) warned on Wednesday that world oil
prices will likely remain high due to terrorist threats in the United
States and further tightening of global supply. "These developments
continue to state that prices will remain high and as the winter season
nears, the DoE is concerned that prices may remain at these levels," he
said. Mr. Perez also said the Philippines has sufficient petroleum
inventory of 56 days with an additional 9,000 barrels to be loaded this
month, all of which will extend inventory until October.
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By KAREN L. LEMA, Reporter
A tax amnesty bill filed in Congress needs to be amended, the
Department of Finance (DoF) said. For one, Finance officials want the
amnesty tax rate to differ depending on the type of taxpayer availing of
the reprieve. It also wants to limit the scope of criminal immunity
granted to erring taxpayers. A Finance official said the DoF has decided
to adopt previous amendments it proposed to a tax amnesty bill filed in
the 12th Congress by Antique Rep. Exequiel Javier. With the 13th
Congress now in session, House ways and means committee chairman Rep.
Danilo E. Suarez (Quezon), has filed a bill with the same provisions but
this time covering unpaid taxes from 2003 backwards. The official said
the DoF will soon submit its position paper to Congress recommending
that a distinction be made between "taxpayers who may have been filing
balance sheets or similar statements together with their tax returns"
and "taxpayers who have not filed any such balance sheet, etc. with the
BIR (Bureau of Internal Revenue)..." when computing the amnesty tax
rate. The DoF wants those who have been filing statements of assets,
liabilities and net worth (SALNs) and want to include undeclared assets
charged 10% of the increase in net worth over that declared/reported in
their SALNs. For first-time SALN filers, the DoF wants a 3% rate. To
base the amnesty tax on net worth will effectively subject taxpayers who
have been filing SALNs together with their income tax returns once again
to taxes on prior years' incomes as these are necessarily part of net
worth, Finance Undersecretary Grace P. Tan has said.
Net worth is defined as the sum of all inflows of wealth, diminished
by liabilities, over the years. Under Messrs. Javier and Suarez'
proposals, resident citizens will pay a tax of 3% or
PhP20,000, whichever is higher, while nonresident citizens will be
required to pay 2% or
PhP15,000, whichever is higher. Large corporations, or those with a
subscribed capital above
PhP50 million, will be required to pay a tax of 3% or
PhP500,000, whichever is higher, while medium-scale firms with a
subscribed capital above
PhP20 million but below
PhP50 million will be required to pay 3% or
PhP250,000, whichever is higher. Small-scale firms, meanwhile, will
have a rate of 3% or PhP100,000, whichever is higher. "We theorize the
rate of amnesty tax should approximate the tax that government failed to
collect, or what is owed to government by the erring taxpayer. In this
manner, the offer of a tax amnesty would be put in proper perspective
and not be misinterpreted as favoring or rewarding the tax cheats," the
DoF last year said.
The DoF will also recommend the scrapping of a provision on
third-party information which will allow tax authorities to confirm the
authenticity of the tax declared by any applicant through any "third
party." This, the DoF said, has become a tool for harassment. The
government has implemented 10 tax amnesties since 1972, which helped it
collect more than
PhP1.5 billion. Tax amnesties have become a popular revenue tool
since it can raise taxes without the difficulty, cost and time consumed
by identifying, verifying and prosecuting tax evaders. Done often,
however, they can be counterproductive and interpreted as a sign of poor
tax law enforcement. Mr. Suarez' House Bill 552 aims to enable the
collection of unpaid taxes from 2003 backwards. If enacted into law,
"every person, natural and juridical, deriving income or owning
properties with an acquisition cost of at least PhP100,000 within the
taxing jurisdiction of the Philippines," will be required to file SALNs
as of Dec. 31, 2003. Those who wish to apply for amnesty must file in
triplicate form a notice and return with a copy of the SALN as of Dec.
31, 2003. The bill is one of eight tax proposals that President Gloria
Macapagal Arroyo has asked Congress to pass into law.
OTHER MEASURES
The other measures are a shift to gross from net income taxation for
corporations and self-employed individuals, two-step increase in the
value-added tax rate, increase in taxes on tobacco and alcohol products
as well as petroleum products, limiting fiscal incentives, tax amnesty,
creation of a performance-driven system for government agencies and the
reimposition of franchise tax on telecommunication companies. Ms. Tan
said the tax amnesty bill will also provide the government a potent
means to build and widen the tax base because it mandates the filing of
SALN by all taxpayers. The Finance department will also ask Congress to
disqualify from the tax amnesty program those with pending cases before
Presidential Commission on Good Government (PCGG) and Sandiganbayan;
those with pending case violating the Anti-Money Laundering Law; those
proven to have committed fraud, illegal exaction and malversation of
public funds; and those with tax cases that have final court judgment.
The criminal liability of those with cases involving the Anti-Graft and
Corrupt Practices Act, the DoF said, should likewise not be lifted with
the availment of the tax reprieve. "We recommend that there should be no
immunity from the Anti-Graft and Corrupt Practices Act. The graft
practice is not, in essence, the nonpayment of tax; it is the
procurement of economic value or personal gain using the influence or
power of public office. Of course, the offender must pay the tax
thereon, but he/she should not escape the penalties for graft," the DoF
has said.
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Philippine Savings Bank (PSBank), the country's second largest thrift
bank, posted an 11% growth in its first-half net income to PhP197.2
million due to higher loan and deposits volumes and higher average
rates. Total resources as of end-June increased by 29.6% to PhP38.97
billion, it said in a disclosure to the Philippine Stock Exchange. The
bank sustained momentum in the consumer banking business as retail loans
grew 23% to PhP22.16 billion from PhP18.07 billion. Continuing to
improve service delivery and distribution network, PSBank opened 11 new
branches in April. This brings its branch network to 121. Its bad loans
remained at 8.3% as of end-June.
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By ROULEE JANE F. CALAYAG
The stock market continued to move forward yesterday, buoyed by
enthusiasm over the strong earnings reports of major telecommunication
companies. While some profit-taking capped gains on share prices, the
Philippine Stock Exchange composite index (Phisix) sustained its
momentum as it closed 4.89 points or 0.31% higher at 1,577.80 on 2.49
billion shares traded for
PhP687.5 million. The Phisix meandered on a narrow range of
1,570.91 and 1,578.10. Elena Ponceca, research head of Unicapital
Securities, Inc., said the rise in the Phisix may have been due to a
correction that the market had been expecting. "I am not too sure if the
correction expected in the short term had already started but we are
expecting some corrections in the Phisix within the week to Wednesday
due to the corporate earnings reports of big issues," said Ms. Ponceca.
Major telecommunication companies such as Philippine Long Distance
Telephone Co. (PLDT) and Globe Telecom had made impressive earnings
reports over the past days, inspiring investors to step out from the
sidelines. Other companies will be reporting about their performance
during the first half in the next few days, probably until Wednesday.
She said the earnings reports may trigger "increased pressure to sell on
news." The market reacted fairly strong on Wednesday, after telecom
giant PLDT reported a net profit of PhP12 billion, exceeding by almost
five times its income a year ago. Value turnover went up to PhP869.61
million that day, an improvement from sluggish trading for the past
three consecutive sessions. However, yesterday's value turnover failed
to replicate the previous level as it slipped by PhP182.11 million. "The
thin value was due to a bit of foreign selling and bearish expectations
resulting from rising crude oil prices," said Ms. Ponceca. Higher oil
prices could influence price of consumer goods.
INFLATION
Earlier, the National Statistics Office reported that the consumer
price index (CPI) rose 6% in July because of higher transport fares and
food prices. The inflation rate, which tracks CPI changes, was at 5.1%
in June. The average rate from January to July was 4.3%, still within
the government's target of 4%-5%. The Bangko Sentral ng Pilipinas said
the other day that the inflation rate may rise but the increase is seen
to remain within the government's target of between 4% and 5%. Amando
Tetangco, Jr., the central bank deputy governor, had said inflation
might "exceed" next year's target. This had triggered a negative
reaction from financial markets, which were reportedly considering some
rate adjustments. However, Mr. Tetangco allayed their fears, saying the
adjustment would be temporary. "By 2006, it should be back to the 4%-5%
range," he said.
INDICES
At the stock market, the indices were all stable. The all shares
index was up 2.86 to 1,007.76. Banks and financial services rose 3.5 to
456. Commercial-industrial advanced 0.57 to 2,492.99. Mining clinched
strong gains of 85.74 at 1,812.32. Oil was unchanged at 1.54. Property
climbed 6.56 at 541.37. Almost 3.5 billion shares amounting to PhP687.5
million were traded. There were 3,522 transactions. There was a thin
line between gainers and losers at 37-38. A total of 43 issues were
unchanged.
ACTIVE STOCKS
PLDT remained the most actively traded stock although it slipped five
pesos at PhP1,280 on 192,640 shares worth PhP246.59 million. Pilipino
Telephone Corp. (Piltel) was the second top traded stock with 38.89
million shares amounting to PhP91.22 million. It was up PhP0.20 to
PhP2.40. Piltel said it hopes to turn around from its net loss of
PhP3.35 billion in 2003 by posting profits of over PhP1 billion this
year. Globe rose five pesos to PhP900 on 65,020 shares worth PhP58
million. Meralco B, available to foreign investors, was down PhP0.50 at
PhP21.75. It traded 2.18 million shares worth PhP48.36 million. Meralco
A also weakened -- by PhP0.50 at PhP14.75. San Miguel Corp. B, available
to foreigners, was unchanged at PhP68.50 and San Miguel A at PhP57.
Southeast Asia's food and beverage conglomerate reported yesterday a
consolidated net income of PhP4 billion during the first semester. This
is up 31% from last year's. The company also said it took a 50% stake in
Australia's biggest juice maker, Berri Ltd. The alliance is seen to give
the conglomerate a brand that will complement its current line of drinks
and food products.
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