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Despite the slowdown in the growth of the farm sector for the second
quarter, economic growth for the period likely hit 5.2% to 6% because of
the good showing of the industry and services sectors, the National
Economic and Development Authority (NEDA) yesterday said. For the first
quarter, the country's gross domestic product (GDP) grew by 6.4% largely
due to the good performance of the farm sector, which registered a
growth of 7.7%. NEDA assistant director Scholastica D. Cororaton said
the latest figures culled by her agency indicated that the industry
sector could have grown by 5% to 6.3% in April-June, while the services
sector could have grown by 5.5% to 6.4%. "We're looking at a growth
lower than the 6.4%, around 5.2% to 6%. This already takes into account
the slower growth of the agriculture sector," Ms. Cororaton said.
Figures released by the Bureau of Agricultural Statistics (BAS)
showed that the farm sector registered a growth of 4.7% year-on-year in
the second quarter -- down from 7.7% in January-March. Despite this,
NEDA said there were indications that the industry and services sectors
had performed better than in the first quarter. "While it's a bit
difficult to forecast industry and services, our indicators show that
the two sectors did strenghthen in the second quarter," Ms. Cororaton
said. She, however, admitted that the unabated increases in oil prices
could pose a threat to economic growth for the last half of the year,
especially if inflation rates would go up. Despite saying that inflation
for 2004 can breach the high-end target of 5%, the government remains
confident that the target of 4.9%-5.8% for the year will still be
achieved, given the strong showing of the economy for the first and
second quarters. -- Jennifer A. Ng
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By FELIPE F. SALVOSA II, Reporter
The Arroyo administration has finally found a way to curb the rampant
importation of used cars, which has been a bane to the local automotive
industry. Malacañang is crafting an executive order that will in effect
raise the cost of acquiring used vehicles imported from abroad, tax- and
duty-free, through freeport zones such as Subic Bay and then sold
through public auctions. A well-placed source said the order would
extract used vehicles from the current tariff heading for imported
vehicles -- which does not distinguish between brand new and used
vehicles. Used vehicles will then have a new tariff heading. Once they
are brought out of the freeport, a surcharge in the form of a specific
duty will be imposed, the source said. This is on top of the existing ad
valorem tax charged on used vehicles upon entry into the Philippine
customs area, the source added. The ad valorem scheme has been blamed
for the extremely low prices of used vehicles since the tax rate is
based on the importer's acquisition cost, which is often undervalued. A
specific duty, which is to be patterned after that of Australia, will be
more effective since it will be based on transaction value, or the
purchase price agreed upon by the end-user and the auctioneer of the
used vehicle, the source said. "The specific duty is still being
determined," the source said, adding that public hearings would be
conducted by the Tariff Commission. Malacanang will justify the move by
highlighting the negative impact of used cars on the environment, the
source said.
Government officials earlier tried to ban used cars, citing the
dangers of converting right-hand drive vehicles to left-hand drive, but
were stopped by an injunction issued by an Olongapo court at the request
of vehicle importers. The source noted that the same strategy was
successfully used on sugar. The President signed Executive Order No. 295
last March, reclassifying sugar-based pre-mixes to plug tariff loopholes
that enabled imported pre-mixes to come into the country duty-free. The
Tariff and Customs Code of 1978 or Presidential Decree No. 1464 as
amended, empowers the President to "increase, reduce and remove existing
rates of import duty, as well as to modify the form of duty and the
tariff nomenclature." The Chamber of Automotive Manufacturers of the
Philippines, Inc. or CAMPI earlier stated that used car imports have
resulted in "substantial market erosion" and has hampered the growth of
the local automotive sector. Around 200,000 new vehicles were registered
with the Land Transportation Office last year, while automotive industry
sales totaled only a little over 92,000 units. CAMPI noted that
neighboring countries in the Association of Southeast Asian Nations have
returned to their sales levels prior to the 1997 Asian financial crisis,
while the Philippines was "still finding difficulties in achieving a
sustainable growth." Currently, Thailand and Malaysia are hitting
600,000 units and 350,000 units, respectively. Philippine automotive
sales, meanwhile, grew by 8% to 92,336 units last year, but this still
is a far cry from the 162,095 units sold by the industry at its peak in
1996.
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Investors of Universal Leisure Corp. (ULC), the leisure company
ordered closed by the Securities and Exchange Commission (SEC), are
threatening to go after the assets of DM Consunji Holdings Inc. (DMCI).
This was after SEC ordered the return of their investments in ULC.
Investors have claimed that DMCI had defrauded them of some
PhP2 billion through its sale of shares in Universal Leisure Club
Inc. and other properties developed by ULC. In a press conference,
lawyer Maricel Lopez said DMCI must be made to return the money it took
from her clients, ULC's minority stakeholders. The minority had asked
SEC to investigate the allegedly massive fraud perpetuated by ULC and
its parent company, publicly listed Universal Rightfield Holdings Inc.,
which allegedly failed to deliver on their promises to investors. The
minority also asked SEC to order Universal Leisure Club, Inc. to return
their investments in the club. It accused DMCI of being the brains
behind the alleged fraud because ULC's mother company, Universal
Rightfield, was founded by DMCI. DMCI, however, said that it did not
have a stake in ULC, and no longer had a significant stake in Universal
Rightfield.
Currently, it has only a two percent stake in Universal Rightfield.
"Mr. [Isidro] Consunji, who is the chairman of the board of ULC and the
president of DMCI, is bound to return the amount to the investing
public...The SEC order [for refund] was for any person or property with
the money. It doesn't matter if [DMCI] has a minimal stake, if they have
our money, we'll go after them," Ms. Lopez said. But DMCI Holdings Chief
Finance Officer Herbert M. Consunji told BusinessWorld the ULC
minority "could insist" on collecting from his company, but they would
first have to prove that DMCI had something to do with the fraud. "I
don't think they could do this, because we don't own ULC or Universal
Rightfield. They can insist that we do, but before they can go after our
assets, let them prove that [we got their investments]," he said. He
also said the minority already had gone to court to sue DMCI and its
officials, but the court had dismissed the case. "I don't know what
would be their hold. We just have to wait and see how they would do it.
But as far as we are concerned, we have no stake in both companies," he
said.
Last month, SEC ordered Universal Leisure Club. Inc. to refund its
investors. It also revoked the company's permit to sell securities.
Under Rule 13 of the Securities Regulations Code, if the SEC revokes a
registration statement, or suspends registration of a company, the
issuer of the securities or any person acting on its behalf "has the
duty" to refund all payments made by purchasers of the securities. Ms.
Lopez said minority would not be limited to raising money from the
properties of the club. The group has already secured from the
Mandaluyong Regional Trial Court a writ of attachment on properties sold
to the club. This meant that the assets were frozen, Ms. Lopez said. She
also said that many club properties -- the Club Highlands in Batulao,
the Brixton Property, Universal Sports Club, the Exchange Business Club,
the PSE Center, the Tanay Mountain Spa and Resort, and the Palm Bay
Beach Club in Puerto Galera -- have already been mortgaged. "But this
does not mean that we're locked in with these assets," she added. Ms.
Lopez claimed that DMCI was guilty of "syndicated estafa." She claimed
DMCI sold the deed of assignment of rights to Batulao to Universal
Leisure Club for
PhP160 million, when it got the rights for nothing. Investors
were also made to pay
PhP289 million for the land, and
PhP77 million in development costs. "DMCI's disclosure to SEC
shows that the title was clean. But the real title shows the property
was mortgaged for
PhP400 million eight months before the public offering. They
covered it up," she claimed.
For the Brixton Property, Ms. Lopez said that while ULC paid for the
property and the deed of assignment, it was placed under the name of
Universal Rightfield. Later on, Universal Rightfield mortgaged the
property to Philippine Bank of Communications for
PhP150 million, she said. Meanwhile, the Exchange Business Club
could not be developed because the property was attached by a court, Ms.
Lopez said. She added that the PSE Center property was already mortgaged
to Metropolitan Bank even before it was sold to Universal Leisure Club.
Ms. Lopez also said that the 60-hectare Tanay property, which was
titled, was bought by DMCI for
PhP50 to
PhP100 per square meter, but was sold to Universal Leisure Club
for
PhP344 per square meter. "They sold for
PhP289 million the land, which cost only
PhP112 million," she said, and the club spent another
PhP192 million for development costs. The Puerto Galera property
costs
PhP65 million, against an original price of
PhP35 million, she added. She also said the contract that DMCI
presented to the SEC was "unsigned, so that they couldn't run after
them." All in all, DMCI made
PhP618 million in secret profits, Ms. Lopez claimed. "Wastage"
for property acqisitions totaled
PhP869 million, she added. She also said Universal Leisure Club
incurred losses of
PhP446 million for developments that were not made, while
dissipation, including underwriting commissions and "missing"
investments, totaled
PhP2.1 billion. "This is interesting because it is the Consunji
group of companies that did this. You want the big fish, this is the big
fish," Ms. Lopez said. She also said the ULC minority would file a
criminal case of syndicated estafa and violation of tax laws against
DMCI. "We will look at all violations, and we're still deciding where
the case will be filed," she said. --
Jennee Grace U. Rubrico
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By BERNARDETTE S. STO. DOMINGO,
Reporter
Following oil price increases by major companies earlier this month,
small players are also raising their prices for gasoline and diesel by
35 centavos per liter and 50 centavos per liter for kerosene. Seaoil
announced that its new prices would take effect between 12:01 p.m. of
Aug. 16 and 12:01 a.m. of Aug. 18, while Flying V implemented the
increase at midnight yesterday. Unioil Philippines and Eastern Petroleum
Corp. adjusted their prices at 6 a.m. and 12 noon, respectively,
yesterday. Fernando L. Martinez, chairman of the Independent Philippine
Petroleum Companies Association, said oil prices were likely to remain
high. "All analysis is pointing to sustained increase up to winter. It
may have to stay that way," he told reporters. World oil prices hit a
new record high Friday with Dubai crude peaking to $38.90 per barrel in
Aug. 13, posting an average of $37.88 for this month from $34.65 a month
ago, up by $3.23.
Mean of Platts Singapore or MoPS unleaded gasoline jumped to $52.25
per barrel spot price. Month to date average is now $51.09 per barrel
from $46.52 in July. Diesel, on the other hand, increased to $46.25 from
$50.58, up by $4.33. The Energy department attributed the continued
increase to worries of fresh sabotage in Iraq and possible supply
disruptions in Venezuela, where President Hugo Chavez won a referendum
on his leadership yesterday. It added the Organization of Petroleum
Exporting Countries or OPEC, which controls half of the world's oil
exports, had also been unable to arrest rising prices despite increasing
its production.
For his part, Energy Secretary Vincent S. Perez, Jr., called on oil
companies to temper the adjustments in pump prices. "We note the oil
companies' continued cooperation and sensitivity in the midst of soaring
global oil prices the past months. But we are still making an appeal to
them to reduce the level of price adjustment they have implemented, from
35 centavos per liter to only 30 centavos, to soften its impact to the
public," the Energy chief said. Mr. Perez last week warned the
Philippines would face rougher roads ahead given the continuing increase
of prices in the world market. The Energy department earlier moved for
frequent but smaller adjustments to help cushion the impact to
consumers.
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By ANNA BARBARA L. LORENZO,
Reporter
The Philippine Air Terminals Co. Inc. (Piatco) said it has no dummies
within its firm since the company that built the stagnating Terminal III
of the Ninoy Aquino International Airport (NAIA) has already publicly
disclosed its stakeholders. Piatco vice-president for public affairs
Moises S. Tolentino, Jr. also said the alleged violation of the
anti-dummy law was already a "dead issue" since it has been raised in
previous hearings, and the topic has been dismissed. "It is legally
untenable. Even the Supreme Court ignored it. A dummy is a concealed
foreign owner. In Piatco, it's all public. It's on record with the SEC
(Securities and Exchange Commission)," Mr. Tolentino said. Aside from
the Supreme Court, he said even both houses of the Congress came out
with a resolution stating that there is no violation in the anti-dummy
law due to the liberalization of the Investment Act. "They understood
the way the new investment act operates. 'Corporate layering' is totally
allowable in the liberalized investment act so we can have more foreign
investors coming in," Mr. Tolentino said.
Piatco is 60% owned by the Cheng family, while 30% of the stake is
held by Fraport and the rest is held by a Japanese stakeholder. The 60%
Cheng stake is in turn held by four companies under the Cheng group,
three of which are also partly owned by Fraport. Meanwhile, Mr.
Tolentino said the government has already lost the potential of earning
PhP1.62 billion in the past two years after the Supreme Court
nullified the contract which would allow Piatco to operate NAIA Terminal
III. Under its contract, Piatco should pay the government PhP300 million
annually during the two-year construction period, and PhP510 million per
year for the first five years of operation. Mr. Tolentino said Piatco
has already paid the government PhP600 million to cover the construction
period, and is currently seeking a refund since its contract has been
declared null and void. Aside from the annual fee, the government is
also entitled to 36% of the collected terminal fees and the 5% tax from
the operation's gross revenues. Piatco has already filed a request for
arbitration before the International Chamber of Commerce's International
Court of Arbitration. Deadline for the submission of position papers on
the case is on Aug. 20. Mr. Tolentino said position papers would mostly
be on preliminary procedural issues, and hearing for the case would
likely be determined after the submission. Fraport has likewise filed
for arbitration before the World Bank's International Center for
Settlement of Investment Disputes. Fraport is seeking the refund of its
$425 million investment.
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Level playing field or
return to regulated environment
By BENNET S. STO. DOMINGO,
Reporter
Independent oil companies yesterday moved for the privatization of
the government's 40% stake in Petron Corp., to reflect a level playing
field among big and small players. If Petron is not privatized, the
government might as well go back to a regulated industry, Independent
Philippine Petroleum Companies Association (IPPCA) chairman Ferdinand L.
Martinez yesterday said. "There's no level playing field. Petron, being
partly owned by the government, is pursuing a different pricing agenda
other than [one that is] purely market driven. At a time when they
should increase, they are the last to implement [a price hike]. They are
not recovering what ought to be recovered," he said. Mr. Martinez said
proceeds from the sale of the government stake in Petron could be used
for exploration projects. Privatization, he added, will perk up the
capital market. "Right now, pricing is not that free, always tempered by
action of Petron in the market. If government continues to use Petron as
leverage to control price, there is no deregulation," he said.
An earlier proposition to nationalize the ownership of Petron, he
said, is "ill-advised" as there is no guarantee that 100% government
ownership will temper the prices of oil. Mr. Martinez said full
privatization will generate at least PhP10-12 billion compared to PhP90
million if shares are bought back by the government. The government,
through the Philippine National Oil Co. (PNOC), owns 40% of Petron.
Saudi Aramco holds the other 40% while the remaining 20% is owned by
individual shareholders. "What will be generated from the privatization
of Petron should be used for exploration. It's saddening, we [the
Philippines] were the ones who spearheaded exploration and now we have
been left behind by our neighbors," Mr. Martinez said. He claimed
Petron's minority shareholders have lost 70% of their investment since
the firms share prices dropped to PhP2.70 from PhP10 during its initial
public offering in 1996. "The deregulation in the last six years did not
turn out as we expected. Now we are not subjected to recovery formula,
and other sectors, apart from the government, dictate how much or how
less we can sell," he added.
The IPPCA also scored the Consumer and Oil Price Watch (COPW) over
allegations that
oil companies are overpricing. "We could no longer hold down the
prices of refined petroleum products, particularly diesel fuel and
gasoline. The need for survival demands that we have to adjust our
prices to reflect world prices," IPPCA President Ramon Villavicencio
said. The group also appealed to COPW chairman Raul T. Concepcion to be
more prudent in his pronouncements to avoid confusing the public and
raising false expectations. The COPW last week said oil companies owe
the public another rollback for gasoline products, claiming
over-recoveries.
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Inflation in August may hit 6.1-6.3% owing largely to higher
oil prices, the National Economic Development Authority (NEDA)
yesterday said. The surge in oil prices also mean this year' 4.0-5.0%
inflation target may be breached, NEDA assistant director of National
Policy and Planning Staff Scholastica D. Cororaton said. "Food prices
for August remain stable. Inflationary pressures are basically coming
from higher oil prices and transport fares," Ms. Cororaton told a
briefing. Inflation in July came in at 6%. Year-to-date inflation is at
4.3%. Ms. Cororaton said there is the possibility that the government
may breach the 2004 inflation goal. "The main reason for this is the oil
price increases. We never really expected the price of oil to move up to
more than $40 per barrel," she said. "The assessment then was that after
the Iraq crisis last year, the situation would normalize. But they have
not really normalized and that has added pressure [on oil prices]." She
said an impact analysis by the NEDA showed oil prices in January to
August this year were up by 22.4% compared to the same period last year.
"Also, the peso-dollar rate has depreciated by 4.2% and transport fares
are up by 37.5%. Wages are also up," Ms. Cororaton said. She said the
government expects inflationary pressures from oil prices to ease in
2006 due to projections that supply will start normalizing as the peace
and order situation in the Middle East stabilizes and Russia starts
supplying oil. "Beginning 2006, inflation is targeted to fall 3% to 4%
as you will have no more inflationary pressure coming from oil prices,"
Ms. Cororaton said. -- Jennifer A. Ng
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Eight foreign companies have expressed interest in the Front End
Engineering Design (FEED) of the $100-million Batangas-Manila gas
pipeline project. These firms are Pacific Consultants International
Inc./JGC Philippines; Worley Pty. Ltd./Maunsell; Mott MacDonald; Gulf
Interstate Engineering; CB & I John Brown; Engineers India Ltd.; JP
Kenny Pty. Ltd.; and the consortium of LG International/Hyundai/KOGAS.
Philippine National Oil Co.-Exploration Corp. (PNOC-EC), which is
implementing the project, said it will conduct "quality cost-based
evaluation" of all submitted tenders. "This would involve the evaluation
first of the technical proposal prior to considering the financial bid.
We expect the bids evaluation to be completed in a month's time," PNOC-EC
external relations officer Rudolph Dimen said in a statement.
PNOC-EC had extended the deadline for the submission of bids to
August 12 from July 12. The 100-kilometer pipeline will transmit natural
gas from Malampaya in Palawan to Manila and industrial areas in nearby
Cavite. It is also expected to transport natural gas for the Sucat Power
Plant. The FEED is where the technical details will be drawn up together
with the acquisition of relevant field data such as geotechnical and
route alignment information. The firm said it will come out with the
Engineering, Procurement and Construction tender package by the third
quarter of 2005.
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The government aims to reduce poverty to 17-20%, achieve 7% economic
growth and create 10 million jobs by 2010, the National Economic
Development Authority (NEDA) yesterday said. The NEDA yesterday
presented targets which will form part of the Medium-Term Philippine
Development Plan (MTPDP) and the Medium-Term Public Investment Program (MTPIP)
for 2005-2010. NEDA assistant director Scholastica D. Cororaton said the
government is also aiming to increase the percentage of investments to
gross domestic product (GDP) to 25-28% and increase exports to $50
billion within two years. "The policies required to achieve these
targets include macroeconomic policies that would enhance macroeconomic
stability and these policies [would] focus on strengthening the fiscal
sector," Ms. Cororaton said.
To reduce poverty from the current 34% to 17-20% by 2010, the economy
will have to grow by at least 7%. "Achieving a 7% to 8.5% growth will
hinge largely on strong growth in the manufacturing sector, agriculture
and industry and services sector." For the agriculture sector, she said
it would have to remain resilient and grow by at least 4.0-5.0% until
2010. "We also need to shift to a growth path where industry and
services will play a strong (role)," she said. On the demand side, Ms.
Cororaton said the economy has to shift from private consumption-led
growth to one that is investment- and export-led. "Investments would
have to grow double-digit rates from 2006 onwards to 2010. Same thing
with exports, they would have to grow by more than 10%." Ms. Cororaton
emphasized that the growth targets will be boosted largely by the right
policy mix. The NEDA is currently in the process of finalizing the
strategic planning matrix of the MTPDP. It expects to complete the MTPDP
and MTPIP by October 25.
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By IRA P. PEDRASA
Debt yields rose slightly yesterday as the market reacted, albeit
belatedly, to the government's inflation report which showed consumer
prices rising at a faster pace in July. "It was very much a long-delayed
reaction, what was more surprising was the increase in rates at the
secondary market last week, now [debt rates] were only up by a few basis
points, it was not a surprise anymore," a trader said. "Technically,
what happened was only a correction," another trader added. Inflation,
or the rise in the prices of basic goods, went up last month to 6%, its
highest level in almost three years. Interest rates rose slightly across
all three tenors yesterday even as banks continued to bid for short-term
debt papers. Indicating strong market appetite, tenders were
oversubscribed for all three short-term instruments but the Bureau of
the Treasury accepted only some bids. The 91-day Treasury bill rate rose
by 5.8 basis points to 7.183% from 7.125% two weeks ago. Tenders reached
PhP5.33 billion against a PhP4.5-billion public offering. The
Treasury partially awarded PhP3.76 billion worth of bids.
Meanwhile, the 182-day debt paper rate increased by only 2.2 basis
points to 8.208% from 8.186% with the auction committee accepting only
PhP3.36 billion tenders out of the total PhP4.69 billion. The rate of
the one-year instrument was up by 10.5 basis points to 9.281% from
9.176% for the PhP2.89-billion bids against the total of PhP3.76
billion. "The way we're looking at it, we should not be accepting higher
rates yet. The market is still liquid," National Treasurer Mina C.
Figueroa said. One trader said, however, that even if cash flow is still
healthy, banks still have the final word on whether they will risk their
money. "At this point, we are looking at how inflation numbers will fare
from the July report," another trader said. Another trader said any rate
between 7% and 7.5% is still acceptable. "There were only small
adjustments despite risks on hand, more or less we have already
anticipated the [inflation] report," he said.
PESO CLOSES WEAKER
At the currency market, the Philippine peso ended weaker by five
centavos against the US dollar to PhP55.73 from last Friday as the yen
dragged most regional currencies. "The United States economic figures
including its trade deficit, however, put on hold a somewhat bullish
dollar," a currency trader said. At the Philippine Dealing System, the
country's electronic currencies exchange, the peso averaged stronger by
more than six centavos to PhP55.662 from PhP55.726 previously. Hovering
within a 12-centavo range, the peso slipped to as low as PhP55.73 and
strengthened to PhP55.61 against the greenback. Opening at PhP55.63, the
peso closed 10 centavos weaker in the afternoon at PhP55.73. Total
volume of transacted dollars increased to $147 million from $144.5
million previously.
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HONG KONG -- Philippine dollar bond prices were outperforming
yesterday morning, tracking higher US Treasury prices, while most other
benchmark Asian bonds were broadly unchanged. Philippine sovereign
dollar bonds were trading slightly higher in price, with the ROP '14s at
98.625/99.125, up about an eighth of a point, while the ROP '25s rose
about a quarter of a point to 110.5 on the bid side. "There's been
buying in the Philippines for the last week or so and we continue to see
that trend," said a trader at a European bank in Hong Kong. "The
Philippines moved up in cash price terms after the Treasury move on
Friday in New York, so in cash price it's doing better but in spread
terms it's probably in line." Traders in Manila said that investors were
looking to Philippine debt for yield. "We still see bids have been
supported as we still have end money accounts looking to play the carry
trade. With the US Treasury stability they would rather be in the ROP or
Philly corporates to give them higher yields," said one trader in
Manila.
US Treasury prices rallied on Friday as the release of trade and
consumer data raised fresh doubts about the strength of the world's
largest economy. With oil prices hitting fresh highs of more than US$46
a barrel, US stocks hovering around 2004 lows and the June US trade
deficit widening more than expected to a record US$55.8 billion, the
combined effect was to encourage investors to buy safe-haven Treasuries.
"More and more people are questioning [Federal Reserve Chairman Alan]
Greenspan's view that the economy will pick up and grow strongly in the
second half of this year. Especially after last Friday's trade balance
figure," said the head of credit trading at a European bank in Hong
Kong. "The trade figure also showed us that the Japanese and also the
European economies are slowing down. I think with stock markets getting
weaker, people's view on the economy has been changing and spreads may
be under a bit of pressure." But for the time being, most benchmark
spreads were trading steady. Hutchison Whampoa Ltd. bonds due in 2014
were trading at 200/197 bps over Treasuries, in line with Friday's
closing levels, while PCCW '13s were quoted at 151/145 bps over.
-- Reuters
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Chinatrust (Philippines) Commercial Bank Corp. earnings slipped 22%
to
PhP260.59 million in the first six months from PhP334.36 million
in 2003, the bank reported to the Securities and Exchange Commission.
Though its first-semester net income is lower, Chinatrust said its
niche-focused business strategy appears to be on track as its
performance was better than industry "in terms of profitability,
portfolio quality, and capital adequacy," the bank said. "The first-half
performance was boosted by the vast improvement in interest spreads
brought about by the hefty growth in consumer loans and low-cost
deposits. "In addition, substantial recoveries from delinquent loans and
foreclosed assets, reversals of loan loss provisions due to the overall
improvement of the portfolio, and sustained profits from foreign
exchange trading helped neutralize the substantial drop in trading
gains. During the first half of the year, the bank took a conservative
and defensive trading strategy in the light of rising interest rates and
declining bond prices," the bank added. Chinatrust managed to keep its
net interest income up, as it climbed 28.29% to PhP419.48 million from
PhP326.98 million, by pushing the growth of its high-yielding consumer
finance portfolio, improving its recovery from delinquent loans, and
improving the overall yield on both its peso and foreign currency loan
portfolios. -- Ruby Anne M. Rubio
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By JENNEE GRACE U. RUBRICO, Senior
Reporter
Lopez holding company Benpres Holdings Corp. posted a net loss in the
first half due to a decline in revenues and lower sales, particularly of
water concessionaire Maynilad Water Service, Inc. Benpres, in its
financial report to the Securities and Exchange Commission, said it
posted
PhP191 million in losses for the first six months against a net
profit of
PhP43 million for the same period last year. For the second
quarter, however, the firm's losses were trimmed at
PhP49 million, from a net loss of
PhP90 million in the same period last year. Unaudited revenues
stood at
PhP3.792 billion for the period against
PhP4.153 billion in the same period in 2003. Net sales and
services fell 8% to
PhP2.551 billion, reflecting the drop in Maynilad revenues due to
lower billed volume. "Maynilad's financial performance remains
consolidated under Benpres on account of [its] 59% ownership in the
water utility," the company said. The firm said last year's net income
was better as it still included PhP188 million in revenues and PhP181
million in expenses of Customer Contact Center, Inc., which was sold
last year. Benpres said cost of sales and services increased by 4% to
PhP2.157 billion, while general and administrative expenses fell
37% to
PhP829 million because of a reclassification of concession fees.
BAYANTEL
Benpres said it made provision for losses from the payment of
interest on guarantees, as the company paid interest on Bayan
Telecommunications, Inc.'s (BayanTel) convertible preferred shares and
continued to accrue such payments at contractual rates. On June 28, a
Pasig regional trial court approved a rehabilitation plan for BayanTel,
almost a year after unsecured creditors led by Asian Avenue Ltd. filed
for court receivership of BayanTel. The approved plan allows BayanTel to
pay $375 million out of principal obligations of $477 million over 19
years. The remainder, along with interest and other BayanTel
obligations, will be converted to an appropriate instrument that will
not burden the business operations of BayanTel. Any conversion of debt
to equity will be limited to 40% ownership in BayanTel. The decision
also includes equal treatment of all creditors-secured and unsecured.
Benpres said that ABS-CBN Broadcasting Corp. and First Philippine
Holdings Corp. performed "as well as was expected for the period," with
gross revenues from the media giant growing 10% to
PhP6.614 billion, and net income also increasing 10%
PhP560 million. "However, EBITDA [earnings before interests,
taxes, depreciation and amortization] slipped 3% year on year to
PhP2.132 billion as cash expenses overtook revenue growth in the
first half of 2004," Benpres said. It said First Holdings booked profits
of
PhP1.976 billion for the first semester, 2% higher than in the
previous year. Benpres said the net income of First Holdings includes a
PhP228.7-million gain from the sale of 1.1 million preferred
shares in SIRF Technology Holdings, Inc., a San Jose, California-based
supplier of GPS semiconductor and software solutions.
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By CECILLE S. VISTO, Sub-Editor
Wireless operator Smart Communications, Inc. expects to earn at least
PhP1 billion to
PhP3 billion in the next three years from its international cash
remittance service via text messaging. President and Chief Executive
Napoleon L. Nazareno said the projected profit for Smart Padala is
"small" or less than 10% of the
PhP16.1-billion windfall the telco registered last year. However,
Mr. Nazareno said the new remittance service will be maintained as it is
seen to control the so-called subscriber churn or the percentage of
total subscribers that discontinue service divided into the total
population. "It will be a churn buster. They must continue to subscribe
to Smart to be able to avail of the service," said Mr. Nazareno at a
recent forum sponsored by the Ateneo de Manila University. Smart Padala
was launched on Aug. 1 but only after one week, some
PhP8 million worth of remittance has gone through the system.
Smart Padala is a system that allows an overseas Filipino worker (OFWs)
to send money to recipients in the Philippines through a Smart
remittance company partner. An OFW has to visit any of the following
remittance partners: CBN Grupo (United Kingdom, Spain, Greece, Hong Kong
and Japan), Travelex/Asian FX (worldwide), Forex International (Hong
Kong), New York Bay (New York and New Jersey), DAX Remittance (Los
Angeles), and Banco de Oro Partner (Hong Kong). The remittance company
then sends the peso equivalent through a Smart Money account it
establishes for the beneficiaries in the Philippines, who will receive
the text notification of money loaded to his account on his Smart
cellular phone. The recipient can then go to any accredited Smart Padala
center or selected outlets of McDonald's, 7-Eleven, and Tambunting
Pawnshop for instant encashment.
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By ROULEE JANE F. CALAYAG
The Philippine Stock Exchange (PSE) is looking at new reforms to
bolster the bourse's performance. In separate interviews with
BusinessWorld, PSE Chairman Alicia Rita M. Arroyo and independent
director and concurrent officer-in-charge Peter Favila laid out the
blueprint for the proposed reforms. These include moving to amend the
implementing rules of the securities law, clearer parameters on the
bourse's self-regulatory organization status, and ensuring the
independence of the stock exchange's compliance and surveillance group.
Ms. Arroyo said they are focusing on four areas of improvement. Foremost
is a review of the compliance and surveillance rules. "We need to review
the compliance and surveillance rules to come up with rules that are
clearer to follow and less ambiguous." She said that at present,
violations of trading participants immediately mean penalties, causing
problems for the exchange. The work on the compliance and surveillance
rules took two months. "From June to August, the board rooms of the two
exchanges were filled during discussions. The changes will be up to
where the participants agree or disagree. Brokers concerned were there,
especially as we discussed the broker-dealer rule," she said.
Another area is the Securities Regulation Code (SRC). "With the SRC,
we have swung from one side of the pendulum to another -- from not too
strict [stance] to not too tight," Ms. Arroyo said. She said they would
need to sit down with the Securities and Exchange Commission (SEC) and
other groups to refine the changes that will be considered and the
definition of the exchange's self-regulatory organization (SRO) status.
Last week, PSE officials met with SEC officials to discuss some of these
issues. "We need to define up to when will it be SEC's and when is PSE
authorized to investigate if there are cases toward listed companies and
trading participants," Ms. Arroyo said. In line with this initiative,
the PSE will move to amend the implementing rules and regulations of the
securities law. "Some rules are hampering trading activities. These
include some definitions and rules in trading that are not so clear that
it cannot be followed strictly," Ms. Arroyo said. "We need to go beyond
that and see what the actual practice is."
The last item in PSE's agenda is how to make the compliance and
surveillance group independent and not necessarily a spin-off. "We are
looking at a revised structure that would be acceptable to the SEC to
make [the surveillance group] independent," Ms. Arroyo said. Mr. Favila,
who is in charge of the exchange's operations until Sept. 6, said they
are actively pursuing reforms for the market. "We are doing as much as
we can to improve the market because nothing is constant here," he said.
"Rules may have to be adjusted. We will be introducing amendments which
we can defend to the SEC," he said. But Mr. Favila stressed that all
parties, including brokers and dealers, should exercise patience to
achieve their objective. "The objective is to simplify matters without
compromising the integrity of the issue and the market," said Mr. Favila,
adding the PSE, as a market maker, had to exercise a degree of
conservativeness.
As for the review of the securities' law, he said the PSE recognizes
the importance of having a strong relationship with the SEC. "We will
raise issues that we feel we need to do to strengthen our relationship
and make it healthier. Communication is crucial." Overall, he said, the
reforms are designed to refocus on the business side of the PSE.
"Reforms must be in place in line with the international convention to
start building confidence in the market. The PSE, as a market mover,
must be dynamic," he added, stressing that constructive criticisms are
welcomed. "We are advocates of transparency and good governance. We have
to introduce a mindset that will stay and not pretend to know all," said
Mr. Favila. Depending on the change, the PSE leadership expects trading
volumes to grow eventually.
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Gonglomerate JG Summit Holdings. Inc. yesterday said its first-half
profit fell 20%, dragged down by losses in its telecom asset Digitel as
it expanded into mobile phone services. JG Summit, which is controlled
by the wealthy Gokongwei family, controls phone firm Digital
Telecommunications, Inc. (Digitel), property firm Robinsons Land Corp.,
food and beverage firm Universal Robina Corp., and airline firm Cebu
Air, Inc. The conglomerate said its first-half profit fell to
PhP1.38 billion from
PhP1.72 billion last year. Taking out its first-quarter profits
of
PhP474.26 million, the conglomerate's quarterly earnings were
about
PhP906 million, up 13% from
PhP801.61 million last year. Consolidated revenues for the first
half totalled
PhP29.85 billion, 13.2% higher from last year's
PhP26.38 billion. The conglomerate said losses at Digitel offset
strong earnings at its property and airline units. "The company's bottom
line was greatly affected by the losses incurred in the
telecommunications business, particularly in its wireless business," JG
Summit said.
First half losses at Digitel, the country's third-largest
telecommunications group, reached PhP693.4 million. The phone firm,
which launched the mobile phone service Sun Cellular in March last year,
has said it expects losses until 2006 as it spends to compete against
dominant Philippine Long Distance Telephone Co. and second-ranked Globe
Telecom, Inc. Robinsons Land, which develops condominium, residential
villages, and shopping malls, had a profit of
PhP577.6 million from January to June, up 40% from the previous
year, due to strong rental income from its commercial centers. Unlisted
Cebu Air, the country's second-largest airline, returned to profit in
the first-half with earnings of PhP480 million versus a net loss of
PhP24 million last year. JG Summit shares closed flat at PhP1.68
before the results announcement, as the main index gained 0.26%. Digitel
jumped PhP1.54 to 66 centavos, while Robinsons Land was not traded on
Monday. Robinsons Land closed at PhP1.92 when it was last traded on Aug.
12. -- Reuters
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By ROULEE JANE F. CALAYAG
A slew of positive economic indicators and interest in selected blue
chip stocks held back the market from further consolidating amid
investor worries over rising oil prices. Reaching its highest in two
weeks, the Philippine Stock Exchange composite index (Phisix) rose 4.20
points or 0.26% at 1,594.83. Over 1 billion shares were traded in 2,298
transactions for
PhP451.9 million. Losers outranked gainers, 46-29, while 40
issues were unchanged. Rommel Macapagal, chairman of Westlink Global
Equities, Inc., said the Phisix tried to break the 1,600 level on the
strength of the gains of the American Depositary Receipts (ADRs) of
Philippine Long Distance Telephone Co. (PLDT) in New York. "As the
market tried to hit the resistance level which it could not break for
weeks, profit-taking and some selling sank in," said Mr. Macapagal.
Although the market remains in consolidation mode, Mr. Macapagal said it
was good that it managed to close higher yesterday. "We are still
holding up and hoping to challenge the 1,600 resistance level," he said,
adding that the market should be able to break this in a matter of days.
But he warned that investors continue to be cautious due to the lower
value turnover in the exchange. Shares traded yesterday amounted to only
PhP400 million after hovering between PhP600 million to PhP900 million
last week. Mr. Macapagal said this may discourage investors from
actively participating in the stock exchange.
INDICES
The indices fared well with the all shares up 3.5 points to 1,002.09.
Banks and financial services also rose 0.08 to 457.28. The
commercial-industrial kept its momentum, moving up 13.41 to 2,545.93.
Mining failed to keep in step with the trend. It slipped 22.82 to
1,965.95. Oil also dropped 0.03 to 1.59. Some dealers said gains in
telecom stocks and some blue chips supported the market. Economic data
released earlier also kept the market afloat.
ECONOMIC INDICATORS
According to the Bangko Sentral ng Pilipinas, overseas Filipino
workers (OFWs) remitted $4 billion, up 2.6%, during the first semester.
Investors also drew inspiration from a report by the Bureau of Internal
Revenue (BIR) that said its PhP38.39 billion tax collection in July
exceeded the PhP38.02-billion target. Market watchers are keeping an
optimistic view, noting that if the BIR manages to consistently exceed
its collection goal, the government may be able to curb its budget
deficit. The agriculture sector also brought some good news to the
market. The sector, which accounts for a fifth of the country's economic
output, recorded a 6.61% year-on-year growth during the first semester.
Agriculture officials said the growth resulted from an increased
production in unhusked rice, corn, sugarcane and aquaculture subsectors.
ACTIVE STOCKS
Meanwhile, PLDT topped the list of most actively traded stocks,
advancing PhP30 to PhP1,300 on 108,730 shares valued at PhP140.8 million
as its ADRs in New York rose $0.27. Its total market share was 31%.
Globe Telecom, the country's second largest mobile phone operator, was
up PhP10 to PhP915. Its ex-cash date is today. Mobile phone firm
Pilipino Telephone Corp. (Piltel) rose PhP0.10 at PhP2.65 after the
central bank approved Smart Communications, Inc.'s plan to issue $100
million to $300 million worth of new securities to cover Piltel's debts.
SM Prime Holdings, Inc., a leading mall developer and operator, slid
PhP0.10 to PhP5.80. The company last week reported strong earnings for
the first half. The "B" shares of Manila Electric Co. (Meralco), which
are available to foreign investors, rose PhP0.50 to PhP23.75. Meralco A
shares were unchanged at PhP15. Ayala Corp. slipped PhP0.10 to P5.40
while its unit Ayala Land, Inc. stuck to its previous price of PhP5.40.
Ayala traded 3.2 million shares worth PhP17.4 million, with a market
share of 3.86%. Property developer Belle Corp. was down PhP0.04 to
PhP0.70 while DMCI Holdings slid PhP0.10 to PhP1.38 as investors took
profits. Both A and B shares of San Miguel Corp., Southeast Asia's
largest food and beverage conglomerate, were unchanged at PhP57.50 and
PhP70.50, respectively.
STOCK NEWS
Meanwhile, Trans-Asia Oil and Energy Development Corp. will list
today an additional 500,000 common shares. The Gokongwei's JG Summit
Holdings, Inc. closed unchanged at PhP1.68. It earlier declared a cash
dividend of PhP0.03 per share to shareholders on record as of Aug 20.
The payment is on Sept. 15. San Miguel Corp.'s liquor unit Ginebra San
Miguel Inc. closed higher by 50 centavos at P30.50. It earlier declared
a cash dividend of P0.375 per share to be given to shareholders on
record as of Aug. 20. The payment date is on Sept. 13. Despite a
controlled optimism in the market, the reports of listed firms such as
Jollibee Foods Corp., MegaWorld Property Holdings, Inc., Metro Alliance
Holdings, Inc. and Asian Terminals, Inc., which were generally positive,
should give an added incentive for investors. Revenues of fastfood giant
Jollibee rose 30% to PhP6.9 billion for the second quarter on robust
system-wide sales. In a statement, Jollibee informed the stock exchange
that its system-wide sales, or the direct sales to consumers from both
company-owned and franchised stores, were up 28.7% during the period.
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By LIEZL EILLEN C. ANTONIO,
Researcher
Business confidence made a comeback in late July to early August, as
President Gloria Macapagal-Arroyo started to unveil her economic plans
in her new term in office, giving businessmen a glimpse of where the
economy could be headed over the next six years. With uncertainties
brought by the national elections finally over, businessmen became more
upbeat on current business conditions, as well as on the economic
outlook in the next few months. Based on the latest perceptions survey
conducted for BusinessWorld by NOP World Asia Pacific (formerly
RoperASW Asia Pacific) from July 28 to August 3, the
business confidence index (BCI) moved up by 7.7 points to 92.0 from
84.3 the previous month. The confidence level was the highest in almost
two years or since September 2002. The jump in the index, meanwhile, was
the biggest recovery since March, when it grew by 12.5 points to 89.6
from 77.1 the previous month. BCI is a monthly composite measure of how
businessmen perceive the current economic and political environment and
how they assess the economy's prospects six months into the future. The
poll covers 300 randomly selected respondents who work for the country's
Top 700 corporations. "[The increase in business confidence] came in
within expectations right after the elections in May as well as the
final tally that was finished in June. Overall, businessmen are
optimistic that recovery is underway for the second semester this year,"
said Grace Crisostomo-Cerdenia, chief operating officer of online
brokerage 2Tradeasia.com. The present situation index bounced back last
month as it rose by 18.2 points to 99.5 from 81.3 previously.
When asked on their perception of current business conditions, almost
26 out of 100 businessmen or 25.7% said it was good, up from 15.3% a
month ago. Pessimists also dropped to 29.3% from 58%. Still, the bulk or
45% of respondents said the situation was neither good nor bad. "I think
a lot of companies, now that the political atmosphere has somewhat
cooled, has [sic] taken better focus in terms of rolling out their
expansion plans according to the macroeconomic plans of the
administration," Ms. Cerdenia said. Businessmen likewise remained
neutral on government performance. When asked how the government was
faring, the almost 44 out of 100 or 43.7% of businessmen said it was
doing neither better nor worse. But the positive perception slightly
increased to 38% from 35%, and the negative perception climbed as well
to 18.3% from 15.7% previously.
In her inaugural address, Ms. Arroyo announced her 10-point agenda
for the next six years. Among others, the program intends to focus on
employment, education and utilities. It also plans to address the budget
deficit, to improve the country's infrastructure, to develop Clark and
Subic economic zones in Central Luzon, to improve commerce and housing
in areas outside Metro Manila and to continue the peace process.
In
her first State of the Nation Address (SONA) as the 14th
president of the Philippines last July 26, Ms. Arroyo also outlined
five key reform packages in her administration:
- job creation through economic growth;
- anti-corruption through good government;
- social justice and basic needs;
- education and youth opportunity; as well as
- energy independence and savings.
During the speech, the president reiterated her call for eight new
tax measures aimed at curbing the budget deficit. The proposal, which
has taken flak from both the public and the private sector, is designed
to increase national revenues by
PhP80 billion.
The proposed eight tax measures involve:
- an increase in the value added tax rate to 12% from 10%;
- reimposition of a 3% franchise tax on telecommunication
companies;
- use of gross income taxation for corporations and self-employed
individuals;
- rationalization of fiscal incentives;
- indexation to inflation of the excise taxes on tobacco and
alcoholic drinks;
- grant of general tax amnesty;
- use of a performance-related attrition system in government, and
- adjustment in the excise tax and tariff on petroleum products.
When asked if Ms. Arroyo's
SONA addressed their personal or business concerns, almost 28 out of
100 businessmen or 27.8% replied, "only a little." While 26.1% answered
"some of them," another 20.4% responded "not at all." Only 9.7% said her
speech "very much" tackled their concerns, while 16.1% said they were
uncertain. Ms. Cerdenia said the
SONA tackled mainly the general framework or direction of the
economy, and not each sector's concerns. "You have the chief executive
outlining the general macroeconomic policies for the economy," she said.
When asked on Ms. Arroyo's ability to improve the economy, those who
believed in her increased to 37% from 30%. But pessimists also climbed
to 22.3% from 19.7%. Still, the bulk or 40.7% of business executives
surveyed said they were uncertain. "No one can predict specifically what
will happen [to the economy], but I agree that she's competent enough to
fulfill the job in terms of adequately addressing the budget deficit
problem, the backlog in the labor front as regards demand and supply and
the containment of prices of crucial commodities that are sensitive to
lower-income consumer category," Ms. Cerdenia said.
Despite doubts on her leadership in relation to the Middle East
crisis, the president's popularity remained steady with 46.7% of
businessmen saying she was "doing a good job," up from 42.7% previously.
Those who believed in her sincerity also rose to 44.7% from 31.7% a
month ago. The abduction of truck driver Angelo dela Cruz and the
government's decision to pull out its 51-man humanitarian contingent
from Iraq to ensure his safety has raised doubts, both in the local and
the international scene, on the president's ability to make decisions.
Other countries aside from the United States, such as Australia and
Poland, have expressed disappointment over the government move.
OUTLOOK STILL CAUTIOUS
Businessmen's outlook in the next six months, meanwhile, remained
lukewarm, with most of them still watching out for further developments
in the programs of the administration. The rise in business cost as a
result of the sustained oil price hike, on top of the threat of increase
in interest rates, continued to weigh down business prospects. "A lot of
businessmen would want to know what other short- to medium-term risks
there would be on both the fiscal and monetary fronts, so they could cap
further increases in consumer prices because of fluctuating crude
prices," Mr. Cerdenia said. Although political uncertainties have been
reduced, she added, "most businessmen do not expect changes to happen
overnight. It would take time for the economy to adjust, for the labor
market to improve." When asked on their perceived direction for the
economy in the near term, majority or 58.3% of respondents believed it
would neither improve nor worsen. The number was higher than the 37% who
said the same thing a month ago. Those who expected it to improve
totaled 23.7%, while 17.7% said otherwise.
Businessmen also expect hiring levels to remain unchanged in the next
six months, with 78.3% saying so, a jump from 63.3%. Around 12% of the
respondents believed their companies would hire fewer workers, while
9.7% said otherwise. Respondents also remained neutral on investment
prospects. Majority -- 84.3% of the respondents -- said the level of
investments would stay the same in coming months. The figure jumped from
63.3% a month ago. Optimists reached 9%, while pessimists hit 6.7%. As a
result, the future expectations index inched up by 1.3 points to 87.4
from 86.1 a month ago. Meanwhile, perception of the stock market faced
another setback last month as respondents who expected it to improve
dropped further to 12.7% from 23.3% a month ago. Similarly, the number
of pessimists decreased to 29% from 42%. Those who expected it to stay
at current levels registered the biggest number at 58.3%. Outlook on the
peso remained negative, as 45.3% expected it to depreciate further.
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By CECIL MORELLA, AFP
Vicente S. Aquino patrols an obscure front of the war on terror in
the Philippines, fighting alongside a platoon of accountants. Working in
a secluded wing of the Bangko Sentral ng Pilipinas complex, Mr. Aquino
and his Anti-Money Laundering Council sleuths pore over reams of wire
transfers trying to isolate the drug dealers, kidnappers and
pyramid-scheme scammers from legitimate businesses. They are also
"looking into" the accounts of entities suspected as conduits of
terrorist funds. Mr. Aquino declines to discuss specific cases. "Our job
entails a lot of risks, grave risks," he told AFP in an interview. "We
are up against money launderers, organized crime groups and even
financiers of terrorists." The 45-member staff receives daily death
threats by telephone, he said.
Formed after the Philippines passed a landmark anti-money laundering
law in October 2001, the council is the government's financial
intelligence agency. Mr. Aquino, a former university lecturer who began
his law enforcement career as a tough-as-nails state prosecutor in
Manila, became the council secretariat's first executive director after
a stint as head of the central bank's special operations section. He
completed a financial investigators' course at the US Federal Bureau of
Investigation (FBI) academy in Virginia in 2002. "We'd rather do our job
quietly and discreetly, without fanfare. We are more comfortable with
that," he said. "We still have some vacant positions to be filled up and
we are in the process of recruiting qualified people."
The agency monitors millions of transaction reports from banks,
securities dealers and brokers, insurance companies and other financial
institutions -- all mandated to report transactions that exceed the
PhP500,000 daily threshold. Number-crunching computers and
certified public accountants and information technology experts analyze
patterns "in the hope that we will find something suspicious, which will
trigger an investigation and possible prosecution," Mr. Aquino said. The
agency has frozen accounts worth a billion pesos, and recently helped
British police track down and repatriate $750,000 in pyramid scam
accounts. Its lawyers have filed criminal cases in court against 25
suspected money launderers and civil forfeiture cases against 23 other
accounts. The council has yet to lose a case. Mr. Aquino, a beefy
52-year-old, likens himself to a fisherman, trawling in a large body of
water that is the global financial system. "No system is perfect, but we
and the covered institutions are doing our best to make sure all our
nets do not have any holes and do not allow the fish to escape," he
said.
Congress has yet to pass an anti-terrorism law, but Mr. Aquino said
his agency is providing intelligence to counterpart agencies abroad
under a special authority from President Gloria Macapagal-Arroyo. Mr.
Aquino also regularly sends out staff abroad to study at FBI-run
training courses on international law enforcement. The southern
Philippines, home to a decades-old Muslim separatist rebellion, is
considered a training ground of Southeast Asian militants allied to the
al Qaeda network. Over the past year, the military and police there have
arrested three suspected terrorist financiers who laundered about
$75,000 through banks and at least one money-changer shop. Despite the
council's efforts, the Financial Action Task Force (FATF), an anti-money
laundering initiative of the Organization for Economic Cooperation and
Development, still lists the Philippines as a money laundering haven
alongside the likes of Myanmar and Nigeria. "We don't deserve to be in
that list anymore because we have actually addressed all the concerns of
the FATF," Mr. Aquino said.
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SINGAPORE -- Other Singaporean-owned telecommunication firms are
being urged to look at the Philippines as a potential area of expansion
following the successful alliance of Globe Telecommunications and
Singapore Telecom International (SingTel). Lee Boon Yang, Minister for
Information, Communication and the Arts, told visiting Filipino
journalists that the island state's mobile penetration rate is already
around 86%. Telcos such as Mobile One and Starhub, he said, have no
choice but to explore the international market for a bigger clientele
base. "The Philippines is a good place for them to look at. SingTel is
already in partnership with Globe. We are encouraging our telecom
companies to look beyond Singapore. I think it is critical that they do
so because Singapore is close to saturation. Growth domestically will be
very limited," Mr. Lee said. Singapore has a population of only four
million. Mobile phone users are mainly subscribers and not prepaid users
as those in the Philippines. The other major mobile service provider in
the Philippines, Smart Communications, already considers Mobile One and
Starhub as its Singapore partners. However, the subsidiary of the Hong
Kong-listed First Pacific Co. Limited has not taken in other major
foreign partners.
Asia Cellular Satellite (ACeS) International, a unit of Philippine
Long Distance Telephone Co. (PLDT), has expanded its services to 10
countries in the Asia Pacific including Singapore. The Philippine
constitution limits foreign ownership of telcos to 40%, thus foreign
players have to ally with local firms before they can offer mobile and
landline services. "We support the telecom operators but their business
plans are their initiative. As to specifics, as to opportunities, they
have to look for these themselves. It is their money they are investing
so we don't chart the directions for them," Mr. Lee said. He said the
experience of listed SingTel is a good model for other players to adopt.
SingTel used to derive practically all of its revenues from the
Singaporean market. After securing a foothold in the international
market, its income mix has drastically changed. Its international
operations now account for about 70% of its earnings with the domestic
market accounting for only 30%. SingTel owns 40% of the Ayala-controlled
Globe. It also has a strong presence in Australia, Japan, Hong Kong,
Korea, Taiwan and Europe. "But of course, telecommunications is a
particularly difficult area for our companies to venture into outside
Singapore as not all countries have liberalized their industries the way
we did four years ago," Mr. Lee said.
Singapore fully liberalized its telecom industry in 2000. Foreign
players have been allowed to secure licenses to provide either services
or facilities to customers. Mr. Lee said the opening up of the market
resulted not only in the attraction of more foreign players to Singapore
but also in the considerable slash in service rates. For instance,
international calls are now as much as 75% cheaper. This did not result
in a lower top line for companies as heavier usage of the services made
up for the slash in the rates. Meanwhile, Singapore will launch its
third generation cellular phone services by yearend. SingTel, Mobile One
and Starhub have secured their 3G licenses and have signed
infrastructure agreements with suppliers as early as last year. The 3G
service, Mr. Lee said, will roll out in December but trials are already
ongoing. -- Cecille S. Visto
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British American Tobacco is questioning the implementation of higher
excise taxes on new cigarette brands. In a seven-page opposition,
British American Tobacco asked the Supreme Court to immediately render a
decision on the increase, to
PhP13.44 per pack from
PhP8.96 previously, as it may seriously impair its finances. In
addition, the importer asked that a restraining order and/or a writ of
preliminary injunction be issued against a Makati Regional Trial Court
decision which upheld the constitutionality of the National Internal
Revenue Code, Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue
Memorandum Order No. 6-2003 which paved the way for separate taxes on
existing and new brands of cigarettes. "The disparity in tax treatment
... effectively bars existing brands and new brands of cigarettes from
competing in an impartial and non-discriminatory arena," the motion
said. The firm added it is "in complete contravention of the
constitutionally enshrined precepts of equal protection and uniformity
in taxation and in utter disregard of the country's commitment under the
GATT-WTO (General Agreement on Tariffs and Trade-World Trade
Organization)." As the nature of the business requires the firm to
import 500,000 packs of Lucky Strike cigarettes per month on a regular
basis, it is prejudiced by approximately
PhP2.24 million per month, it said. ." -- M.
E. P. Osorio
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By Ma. ELISA P. OSORIO, Reporter
First Metro Investment Corp. asked the Supreme Court to compel BPI
Family Savings Bank, Inc. to pay the investment house
PhP387.24 million in unpaid principal obligation and interest
computed from August 29, 1989 to July 31, 2004. The amount sought by
First Metro represents the principal of PhP65.33 million, the interest
on principal of PhP165.72 million and the interest on interest of
PhP156.19 million. The computation on the interest on interest was
arrived at by charging the savings bank unit of the country's second
largest lender, Bank of the Philippine Islands, a 12% interest on the
17% interest on the principal for each year it failed to pay. In an
August 12 filing of a comment by First Metro, it said the 12% interest
on the 17% interest remain unpaid for each year up to the point when it
should have been fully paid. Therefore, it should earn interest during
those years, it said. "The 12% interest on the 17% interest shall be
computed on a yearly basis, and then the interest, with the total of
these yearly 12% interests being multiplied by the number of years that
the total accumulated interest remains unpaid," the comment said.
In the May 21, 2004 decision of the court, First Metro -- a unit of
the country's largest lender Metropolitan Bank and Trust Co. -- said the
base amount for the computation of interest is "from October 4, 1989
until fully paid." However, BPI Family Bank, in its motion for
reconsideration, said tat the 17% interest shall only earn the legal
interest of 12% from the time of the extrajudicial demand until the date
of the judicial demand. In this case, it would be from August 29, 1989
to October 4 of the same year. This translates in a mere 36-day 12%
interest on the 17%. First Metro disagreed, saying in its comment that
"all that a debtor would do is avoid or delay paying an obligation." The
comment further alleged that in the letter of BPI Family Bank to First
Metro dated June 16, 2004 or a day before the bank filed a motion for
reconsideration, it admitted liability for the 17% interest per annum up
to the date of payment and was merely proposing an alternative formula
for computing the interest on interest. If the computation of the bank
were to be followed, it would pay only PhP231.67 million. In its letter,
the bank said the interest amounted to PhP164.41 million and the
interest on interest PhP1.93 million.
Likewise, the First Metro comment stated that the bank's allegation
that the principal amount should earn the 17% interest for a limited
time only is without merit. In the letter-guaranty given by BPI Family
Bank to the investment house on August 15, 1989, it said a 17% interest
per annum would be given to the amount deposited. "Petitioner [BPI
Family Bank] has delayed payment for 15 long years and now would like to
ask this Court to reward the delay by decreeing a lower rate of 12% p.a.
instead of the clear stipulation of 17% p.a.," the comment said.
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The Bangko Sentral ng Pilipinas is optimistic that mid-size
commercial bank Philippine Bank of Communications (PBCom) will be able
to attract enough buyers for its
PhP12.5 billion worth of bad assets. Alberto V. Reyes, the
central bank deputy governor for bank supervision and examination, said
at least 12 investors have expressed interest in participating in the
bank's scheduled auction in the third week of August. "Many have
expressed interest. There are around 12," he told reporters over the
weekend. PBCom has set an August 24 date for the public bidding of its
bad assets. The sale, managed by KPMG Laya Mananghaya, is in line with
the bank's nonperforming assets disposal program. Mr. Reyes said
investors are interested because the process is transparent and that the
bad assets have been subdivided in tranches.
The bank said companies and banks that have expressed interest in
participating in the auction include Bank of America Corp., Deutsche
Bank AG, Ayala Corp. and Robinsons Land Corp. The bank said it expects
the sale to result in the formation of a special purpose vehicle, or SPV,
otherwise known as an asset management company. PBCom president Isidro
C. Alcantara, Jr. said half of the bad assets to be put on the auction
block will be composed of nonperforming loans, and the rest will be
foreclosed properties. -- Iris Cecilia C. Gonzales
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By JENNEE GRACE U. RUBRICO, Senior
Reporter
Media giant ABS-CBN Broadcasting Corp. plans to conduct initial
public offering for units ABS-CBN Global Ltd. and Beyond Cable in two
years. ABS-CBN Head for Finance Randolph T. Estrellado said the listing
of the international and cable units is the company's "dream." Beyond
Cable is a joint venture between the Lopez Group's Sky Cable and the
Philippine Long Distance Telephone Co.'s Home Cable. ABS-CBN owns a 10%
stake in Sky, while parent Benpres Holdings Corp. has a 60% stake in the
firm, which it intends to sell to a third party. ABS-CBN extended a
$30-million loan to Beyond Cable, in the form of a convertible debt
instrument, but it said it is yet to find out by how much the loan would
increase its stake in the joint venture. "It's been a dream to take Sky
Cable public, and now, Beyond Cable. There is a good chance of this
happening now," Mr. Estrellado said. He said a 20%-30% stake may be
offered to the public, but he is not yet sure how much this would earn
for the company. But he said plans are not yet definite as ABS-CBN was
still looking at ways to make the cable business more profitable. "It
has not been making money because of the rampant problem of piracy," he
said.
One measure that Beyond Cable is looking at, he said, is encrypting
the signal so that it could only come from a cable box. He said the
company will build Beyond Cable's subscriber base by tiering the service
so that those with fewer programs will pay lower than those with more
programs. "Part of the plan is for Beyond Cable to subsidize [service].
So the first box will be free. But if you have second or third
television set, you will have to pay for a cable box. Today, the game
plan is to meet subscription rate. When it is tiered, we can offer lower
prices depending on the number of programs," he said. For the global
unit, Mr. Estrellado said ABS-CBN is pushing through with plans to list
the unit at the Singapore stock exchange in two years. He said with ABS-CBN
Global's "significant" growth rate, it would likely continue posting
positive results in two years. Mr. Estrellado said the size of the stake
that would be offered to the public is still "a question mark." "But we
will still keep control. Probably we will hold more than 50%. If it's
more than 50%, we consolidate revenue growth," he said. ABS-CBN Global
operates in North America, Middle East, Europe and Australia.
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By FELIPE F. SALVOSA II, Reporter
The country's nascent auto export program is facing a major setback.
Thailand has decided to impose higher excise taxes on Ford Escape
compact sport utility vehicles (SUV) manufactured in the Philippines,
with new rates of as much as 40% set to take effect next month. Thai
Cabinet ministers overhauled their automobile excise tax scheme in July
to favor fuel-efficient vehicles and encourage the use of alternative
fuels such as natural gas. As a result, the category "off-road purpose
vehicle" or OPV, under which SUVs are classified, has been abolished. In
Thailand, OPVs enjoy lower taxes at 29% as against passenger cars which
are taxed 35%-48% depending on engine size. This scheme will be replaced
by a single four-tiered system that will tax all vehicles regardless of
type, also on the basis of engine size or displacement, with small cars
enjoying the lowest rate of 30%. Escape's 2.3-liter version falls on the
second tier, for vehicles with 2,100cc to 2,500cc engines, which will be
taxed 35%. The 3-liter version falls on the third tier, for vehicles
with 2,500cc to 3,000cc engines, which has a corresponding rate of 40%.
An industry source said Thailand would implement the new excise taxes
on imported SUVs in September -- months ahead of domestically produced
vehicles which would not be covered by the new rates until Jan. 1, 2005.
SUVs produced in Thailand would thus enjoy, albeit briefly, a price
advantage over imported completely built-up units or CBUs. "A few months
can make an enormous difference," the source argued. The source added
that as much as 7,000 units of Ford Escape would be affected by the new
excise tax rate, citing preliminary estimates. Ford Philippines exported
4,300 vehicles to Thailand from January to July out of its year-to-date
volume of 5,500 units, with Escape accounting for some 70%. Ford Escape
is currently the best-selling small SUV in the Thai market, recording
the most sales for two months in a row early this year. The "unfair"
treatment has raised speculation that Thailand was on a campaign to
snatch Ford's Philippine operations, the source said. Thailand
already edged out the Philippines last year when Ford Motor Co.
announced a $500-million investment to increase the capacity of its
existing joint venture, AutoAlliance Thailand. At the same time, Ford
said it would expand its Philippine operations but was pouring in only
$50 million.
Ford is the Philippines' sole CBU exporter, shipping so far a total
of 21,000 units valued at around $300 million to Thailand, Indonesia,
and Singapore since 2002. Last week, Ford Philippines began exporting
the Escape to Malaysia, its fourth market in the Association of
Southeast Asian Nations or ASEAN. Ford exports its Escape, Lynx, and
Tierra models as well as Mazda's Tribute and Protégé within ASEAN at low
tariffs under the ASEAN Free Trade Area. Aside from preferential
tariffs, Ford enjoys tax credits of $400 per unit for an annual export
volume of at least 5,000 units under the Arroyo administration's
Automotive Export Program. The company expects total exports to reach
100,000 units within a five-year period.
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By ANNA BARBARA L. LORENZO,
Reporter
Logistics firm Diethelm Philippines, Inc. is set to invest another
PhP504 million in the next two to three years for the expansion
of its distribution hub in Mamplasan, Laguna. The expansion would make
the Diethelm facility in Laguna the biggest distribution center in the
Philippines with an estimated area of 45,000 square meters, said
Vice-President for operations Larry Williams. "We plan to invest another
$9 million in the next two to three years. This would increase our
capacity by 50%," Mr. Williams told BusinessWorld in a recent
interview. On top of this, he said Diethelm Philippines would invest $2
million to $3 million in the next four to five years for technological
improvements. Diethelm Philippines has a 31,000-square kilometer hub at
the United Laboratories (Unilab) Pharma Campus which can accommodate a
maximum of 25,000 pallet caps. The distribution firm was formed last
year through a
PhP950-million joint venture between Unilab and Swiss-based
global marketing firm Diethelm Keller Siber Hegner. Mr. Williams said
the expansion is part of the global group's plan to double revenues in
the Philippines. "We are growing fairly well in Asia and we see a large
potential in the Philippines. We want to double that in the next two to
three years," he said. He added that about 60% of Diethelm's global
revenue comes from Asia. The Philippines contributes only 5% in revenue
at the moment.
Diethelm's distribution centers in Asia include Hong Kong, Thailand,
Japan, and Vietnam. To boost Philippine operations, Mr. Williams said
Diethelm would also be more aggressive in attracting business. "The
expansion would be triggered by new businesses and taking business away
from the competition," he said. Diethelm's pharmaceutical principals
include Multicare, Alcon, Solvay Pharma, ABS Gen, and Dyson
Laboratories. On the consumer side, clients include Nestl&ecute;,
Novartis, MeadJohnson, Kraft and Masterfoods Philippines, Inc., and
German cosmetic firm, Eucasan. "We are very optimistic for the
Philippines and the business sector and we have complete confidence in
the new government. That should be evident in our investments," Mr.
Williams said.
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The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or
BSP) has given its final approval to the debt swap deal between Smart
Communications, Inc. and the creditor banks of smaller affiliate
Pilipino Telephone Corp. (Piltel). BSP's policy-making Monetary Board
approved in its meeting last Thursday the debt swap agreement, which
would pave the way for unlisted Smart, the country's largest mobile
phone firm, to take over debt-saddled Piltel. Alberto V. Reyes, BSP
deputy governor for bank supervision and examination said that under the
arrangement approved by the board, Smart will take over Piltel loans
amounting to $280 million owed to 12 local banks and three foreign
banks. "This will reduce the bad loan ratio of the industry," Mr. Reyes
said late Friday. The debt swap, originally scheduled for July, would
pave the way for Smart, the country's largest mobile phone firm, to take
over Piltel and help the telco recover its losses.
Third-ranked Piltel defaulted on its debt payments in 1999 and
declared a moratorium on PhP41.1 billion worth of obligations. After an
overhaul in 2001, it was left with unrestructured debt of
PhP20.5 billion. Smart's parent Philippine Long Distance
Telephone Co. (PLDT) had said it was pursuing the Piltel bail-out
because it would allow Smart to take advantage of tax breaks due to
losses built up by Piltel. In March, PLDT Chairman Manuel V. Pangilinan
said Smart could save up to
PhP14 billion in taxes, including about PhP10 billion in 2004, if
it took over its weaker sister firm. Smart had said it expects to
acquire PLDT's 45.3% holding in Piltel after the debt swap is completed.
That, along with a plan to acquire 59 million convertible preferred
shares, would eventually give Smart 90% ownership in Piltel. Smart and
Piltel together hold 58% of the lucrative telecommunication market with
a combined 16 million subscribers. The debt swap had been delayed after
Smart initially failed to get the creditors' thumbs up for the required
75% of Piltel's debt. Smart had proposed to pay 40 cents for every $1 of
Piltel debt and had set aside $20 million for the swap. Piltel
creditors include Japanese firm Marubeni Corp., Metropolitan Bank and
Trust Co., Bank of the Philippine Islands and Land Bank of the
Philippines. -- Iris Cecilia C. Gonzales
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By ROULEE JANE F. CALAYAG
A series of consolidation is expected to ensue this week as the stock
market remains under the shadow of oil price increases. In spite of the
improved first-half performance reports of most listed companies, the
rise in oil prices continue to dampen market sentiment. Last week, the
price of oil in the world market soared to a new high at over $45 per
barrel. It is feared that higher oil prices may set off an economic
chain reaction, crimping consumption and eventually pulling down
profits.
CHINESE GHOST MONTH
Also, the market's value turnover may likely drop this week with the
observance of the Chinese ghost month, which starts today. The ghost
month is the seventh month in the Chinese lunar calendar where months
are counted based on the moon's movement around the earth. The moon
takes only 29.5 days to circle the earth at one time. In accordance with
Chinese tradition, most people stay at home to avoid an unlucky
encounter with a ghost out enjoying the festival. This is observed on
the first day of the festival, believed to be the day when the gates of
Hades open to allow ghosts and spirits into the world of the living for
a month of bacchanal of food and wine. Analysts expects the Chinese, who
comprise majority of investors in the Philippine market, to stay out of
the stock market in line with this tradition, resulting in weak value
turnover. "Expect lighter trading [this week] because of the [observance
of the] ghost month," said Richie C. Oleta, research chief of A. T. De
Castro Securities, Corp..
BARGAIN HUNTING
Share prices performed well last week, with the Philippine Stock
Exchange composite index (Phisix) up 13.78 points or 0.87% on bargain
hunting. Investors strengthened their positions by grabbing select
stocks that had hit low prices. Bargain hunting was significant in Lopez
stocks such as Manila Electric Company (Meralco), First Philippine
Holdings, Inc., ABS-CBN Broadcasting Corp. and Benpres Holdings Corp.
Market players also snapped up shares of Ayala Corp., Globe Telecom and
"B" shares of San Miguel Corp.
LEADS
Stocks portal 2tradeasia.com foresees a sideways trading session this
week as portfolio managers wait for new catalysts that could toss the
Phisix above the 1,600 level. Most fund managers will look out for key
fiscal and monetary measures that could offer respite from the heavy
burden of oil price increases. The market would welcome any measure that
could cushion the impact of rising consumer prices. 2tradeasia.com said
aside from stocks that have enough cash hoard to support expansion
plans, investors would also be looking at the main beneficiaries of such
funds as well as joint venture schemes. Market players would also be
scouting for stocks that have plotted additional income sources to
sustain expected bottomline growth. The stocks portal advised investors
to buy selectively.
CONSOLIDATION
Based on the technical analysis of BPI Securities, the market will
remain in consolidation after it failed to breach the 1,600 level. "It
is likely to consolidate within the 1,580 to 1,600 range," noted BPI
Securities in an online report. A bullish session may occur, said the
securities firm, if the market breaks through the 1,600 to 1,620
resistance range. But it cautioned of further consolidation if the
Phisix fails to hold support at 1,580. "The market is still short-term
bullish. The immediate up trendline remains intact with support at
1,580," BPI Securities noted in its report. Dealers said a fresh wave of
developments is needed to cut short the period of consolidation expected
in the market. The earnings data of some companies submitted late Friday
afternoon may also lead to a renewed trading in some stocks today.
EARNINGS DATA
Robust sales in the first semester helped RFM Corp. reduce its losses
to
PhP15 million from PhP98 million last year. The listed firm
recorded an 11.3% increase in sales at PhP2.7 billion in the first half.
Its operating income stood at PhP79 million during the period. For the
second quarter, RFM posted a net income of PhP15 million, a turnaround
from losses of PhP65 million during the same period last year. Sales
amounted to PhP1.4 billion, up 8.8% from last year's. The company's
operating income for the period was PhP73 million, again a turnaround
from a loss of PhP32 million for the same quarter in 2003. Poultry and
animals feed producer Vitarich Corp. narrowed down its expenses for the
second quarter, recording a net loss of PhP30.14 million, a significant
improvement form a loss of PhP119.37 million for the same period last
year. Vitarich said it also trimmed its operating loss to PhP6.74
million from PhP168.7 million during the first half.
In the meantime, China Banking Corp. will list an additional 6.09
million common shares tomorrow. The bank told the stock exchange that
the shares will cover the 20% stock dividend declaration to stockholders
on record as of July 22. This, however, is not the case for SPI
Technologies, Inc. Trading of its shares has been suspended temporarily
on Friday following a report that the Securities and Exchange Commission
approved its merger with SPI Acquisition Co., Inc. SPI Technologies is
expected to issue a statement to clarify the veracity of the report. It
earlier disclosed that SPI Acquisition, the local unit of US-based THLPV
Acquisition LP, had acquired 311.15 million of its common shares. The
total common shares represents 99.7% of the fully diluted share capital
of SPI Technologies, the largest provider of business process
outsourcing (BPO) services in Asia.
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