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The Department of Finance (DoF) wants Congress to limit exemptions to
the value-added tax (VAT) to widen the tax base and raise more money for
the government. Finance Secretary Juanita D. Amatong told a Senate
hearing yesterday that her office was drafting a bill listing the
exemptions to be removed. But she declined to detail them, telling
senators Finance was still "studying" them.
The Tax Reform Act of 1997 exempts several transactions from VAT:
- sale of non-food agricultural products, cotton, copra, and
marine and forest products;
- sale or importation of agricultural marine food products in
their original state, livestock, breeding stock and genetic
materials;
- sale or importation of fertilizers, seeds, seedlings, fish,
prawn, livestock and poultry feeds;
- sale or importation of coal and natural gas, petroleum products
subject to excise tax;
- importation of passenger or cargo vessels of more than 5,000
tons;
- importation of professional instruments, wearing apparel, and
domestic animals;
- services from persons subject to percentage tax: agricultural
contract growers, those engaged in medical, dental, hospital,
veterinary and educational services;
- sale by the artist of his art, literary works musical
compositions.
- recently, a new law exempted doctors and lawyers from VAT; and
- services rendered by the regional or area headquarters of
multinational corporations in the country which act as supervisory,
communications and coordinating centers for their branches in the
Asia-Pacific Region and do not earn income from the Philippines.
Ms. Amatong said too many exemptions prevented the government from
collecting more VAT. Revocation of these exemptions will result in
higher VAT collections, she added, although she did not say by how much.
VAT accounts for as much as 20% of BIR's annual tax collection. It was
adopted locally in 1988, replacing 12 different kinds of indirect taxes
such as annual fixed taxes and sales tax from manufacturers. It
initially covered only the sale and importation of goods, but in 1996 it
was expanded to include most types of services. Finance is also
proposing to Congress a two-step increase in the VAT rate:
- to 12% in 2006 if VAT collection does not reach 3.6% of the
value of total economic output in 2005; and
- to 14% in 2007 if VAT collection does not reach 4.1% of gross
domestic product in 2006.
The International Monetary Fund reportedly wants the government to
raise the VAT rate to 15%, so VAT collection can go up by an estimated
PhP10 billion annually. -- Karen L.
Lema
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Combined debts of the national government and the public sector
reached
PhP5.9 trillion as of end-2003, the Department of Finance reported
yesterday. Budget undersecretary Laura Pascua said debt continued to
pile up because the deficit remained unabated. She said the government
was forced to borrow to brigde the fiscal gap and bail out debt-rideen
government-owned and -controlled corporations like National Power
Corporation. Freedom from Debt Coalition figures show the Arroyo
government borrowed
PhP958.1 billion between 2001 and 2003. Programmed borrowings for
this year alone amount to
PhP411.9 billion -- to total to
PhP1.328 trillion in borrowings from 2001 to 2004.
In comparison, the Aquino government (1986 to 1992) borrowed
PhP383.3 billion; the Ramos government (1992 to 1998)
PhP401 billion; and the Estrada government,
PhP725.1 billion. Senate committee on finance chairman Manuel B.
Villar, Jr. has pushed for a legislative inquiry on the consolidated
public sector debt and government debt servicing. This aims to ensure
that the cash-strapped government exercises prudent spending. "The
Philippines needs to come to grips with the fiscal deficit and the debt
problem. The deficit remains unmanageable while the public debt is now
calculated to be 80% of the gross national product," Mr. Villar said in
a resolution. The government aims to trim the consolidated public sector
deficit to 3% of gross domestic product by 2009, from the current 6.7%.
-- Karen L. Lema
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Dollar remittances from about eight million overseas Filipino workers
(OFWs) rose by 5% or $228 million to $4.7 billion in seven months to
July, from about $4.5 billion in the same period a year ago. Bangko
Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) reported
yesterday that in July alone, dollar remittances jumped by 14.5% year on
year to $734 million from $641 million. BSP attributed the rise to an
increase in the number of Filipino workers abroad. BSP said more
Filipinos have left to work abroad because of the lack of gainful
opportunities in the country.
Data from the Philippine Overseas Employment Administration showed
that the total number of deployed workers as of July rose by 9.2% to
569,877 workers from 521,818 as of end-June. Nevertheless, this growth
rate is below the 6% increase that will allow the government to reach
its full-year OFW remittance goal of $8 billion, from $7.6 billion last
year. BSP is optimistic that remittances will improve as OFWs adjust to
stricter transfer requirements by their host countries. "Robust demand
for Filipino workers is expected to continue because of their skills and
professionalism," BSP officer-in-charge Alberto V. Reyes said yesterday.
Filipinos abroad comprise of engineers, caregivers, doctors, nurses,
performing artists, managers, and office personnel, among others. BSP
said there was an increase in the number of production workers,
caregivers, professionals, and service workers in July. Aside from an
increase in deployment of workers, BSP said many Filipinos have already
adjusted to stricter fund transfer requirements of some countries.
Saudi Arabia in particular, stepped up its anti-money laundering
efforts and imposed tougher rules for financial transactions with the
Philippines, which remains on an international roster of dirty money
havens. "The continuing efforts by domestic commercial banks to expand
access to banks by Filipino workers abroad also improved remittances,"
Mr. Reyes said. Dollar remittances can also pick up in the fourth
quarter as offshore workers send money to their families for their
Christmas spending, BSP said.
The government counts a lot on dollar remittances from OFWs to help
keep the economy afloat. Dollar inflow contribute to economic growth
through consumer spending by OFW beneficiaries in the country. OFWs also
invest their money in small and medium businesses and real estate.
Dollar remittances also form part of the country's current account, a
big component of the balance-of-payments, which reflect movements in
trade. Actual dollar inflows to the country is estimated to be higher.
Central bank estimates that more than $5 billion in remittance pass
through informal channels like couriers and moneychangers. Sources of
dollar remittances in July include Hong Kong, Singapore, Italy, United
States, United Kingdom, Saudi Arabia, and the United States.
-- Iris Cecilia C. Gonzales
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By CECILLE S. VISTO, Sub-Editor
The Department of Finance (DoF) has ordered Public Estates Authority
(PEA) to come up with a five-year development plan for the Manila Bay
Reclamation area. PEA general manager and chief executive officer
Teodorico C. Taguinod said his office was already drafting the
development map for Bay City, which would be submitted to Finance
Secretary Juanita D. Amatong. The directive to put together a master
plan for the 1,500-hectare Roxas Boulevard reclamation area was the
first official order that the Finance department handed down since it
took over PEA. President Gloria Macapagal-Arroyo issued Executive Order
No. 329 on July 19, 2004 transferring control over PEA to the Finance
department, from the Department of Public Works and Highways. "It will
be a blueprint covering 2005 to 2010. It will detail how we envision how
the Bay City should be," Mr. Taguinod told BusinessWorld. PEA is
the government agency responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the
government. Bay City is its main project. Although the development plan
is not yet complete, Mr. Taguinod said, the area will be divided into
various zones: residential, commercial and office, and even
entertainment.
Within the next five years, state-run Philippine Amusement and Gaming
Corp. -- another government corporation recently transferred under DoF
supervision -- is expected to build an entertainment city that will be
the biggest in Asia. The SM Group is also set to wrap up construction
next year of its 50-hectare Mall of Asia, which will be one of the
biggest shopping and leisure complexes in the region. Mr. Taguinod said
the SM mall would also have a coliseum that would be bigger and more
modern than the Araneta Coliseum in Cubao, Quezon City. The Mall of Asia
is SM Prime's biggest project to date. It is envisioned to become a
premier shopping destination and tourist attraction at the Manila Bay-Roxas
Boulevard area, which was once a popular tourist and leisure hub. PEA is
also planning to put up its own baywalk, similar to the Roxas Boulevard
project of Manila Mayor Joselito Atienza. It will located at the
Promenade area at the back of the SM property. A seven-kilometer
restaurant row will also be put up. Spaces will be leased out to
concessionaires, with PEA directly supervising baywalk operations.
Bay City property owners such as SM, the Metrobank Group, Asiaworld
Properties, and Manila Bay Development Corporation will also have a hand
in overseeing the development of Promenade. "It will be bigger and
better than the existing baywalk in Manila. We are putting this up to
encourage more traffic into the area," Mr. Taguinod said. Ms. Arroyo had
invoked her power under the Administrative Code of 1987 when she
transferred PEA under the DoF two months ago. The move was consistent
with the government's bid to raise additional income for the government.
The Finance department now exercises supervisory powers over the
finances of PEA. Under the law, 50% of the net income of
government-owned and controlled corporations should be remitted to the
national government as dividends. PEA, a government corporation that
enjoys fiscal autonomy and does not receive funding from the national
government, hopes to make around
PhP1.4 billion to
PhP2.5 billion from the sale of a five-hectare, 11-lot block at the
Manila Bay reclamation area this month. PEA will also sell eight lots,
totaling 11 hectares, sometime next year after these will have been duly
valued by accredited appraisal companies.
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By KAREN L. LEMA, Reporter
Philippine Charity Sweepstakes Office (PSCO) and Philippine National
Oil Company-Energy Development Corp. (PNOC-EDC) officials are among the
highest paid in government service based on a Commission on Audit (CoA)
report. The heads of the Development Bank of the Philippines (DBP), the
Securities and Exchange Commission (SEC) and the Landbank of the
Philippines have also the fatest paychecks among government-owned
and-controlled corporation (GOCC) officials. Budget Secretary Emilia T.
Boncodin made this disclosure yesterday during a Senate hearing based on
a 2001 and 2002 COA report. Ms. Boncodin and Finance Secretary Juanita
D. Amatong said that they were surprised to learn that salaries of some
GOCC and government financial institutions (GFI) heads exceed even those
of private sector counterparts not only in the country but also in the
region. "They were approved because they were exempted from the salary
standardization law," Ms. Boncodin was quoted earlier as saying. While
it is "not illegal," Ms. Boncodin said it is "unconscionable to get
PhP600,000 a month" when the country is having "financial
difficulties."
In 2001, PCSO chairman Maria Livia Singson, sister of former Ilocos
Sur Governor Luis "Chavit" Singson was the highest paid GOCC official at
that time getting PhP9.8 million in annual salaries. The amount, Ms.
Boncodin said is inclusive of allowances. Second on the list is the PCSO
general manager Virgilio Angelo, with PhP6.5 million. He is followed by
DBP President Remedios Makalincag who got PhP5.3 million in salaries in
2001. With PhP5.2 million in annual salaries, then SEC chair Lilia
Bautista was number four on the list followed by PCSO general manager
Ricardo Golpeo with PhP4.1 million. In 2002, PNOC-EDC chairman and
president Sergio Apostol ranked first with PhP92 million. From number
seven in 2001, DBP Chief Operating Officer Edgardo Garcia became the
second highest paid GOCC official in 2002 getting PhP7.5 million, up
from his 2001's pay of only PhP3.8 million.
Third on the list is PNOC-Exploration Corp. President and Chief
Executive Officer (CEO) Rufino Bomasang with PhP6.1 million. He is
followed by the DBP President and CEO Victor Villar with PhP6.6 million.
Trailing him are Thelmo Cunanan, then President and CEO of PNOC with
PhP6-million, DBP executive vice-president Pancer Tumangan with
PhP5.9-million, DBP senior vice president Elizabeth Ong with
P5.9-million, Government Service Insurance System President and General
Manager Winston Garcia with P5.6 million, DBP executive vice-president
Rolando Geronimo, with P5.5 million, and Vivencio Macapagal, also an
Executive Vice-President of DBP with PhP5.3 million. Ms. Boncodin said
such high paychecks should no longer be allowed now given the
government's fiscal problems. "We just would like to call attention to
the fact that we are all in this together and hindi pwedeng may anak
ng Diyos (there can't be no exemptions)," she added. With the
release of the CoA report, Ms. Boncodin hopes that those named would
voluntarily have their fat paychecks cut.
Ms. Boncodin earlier told reporters the government is studying the
possibility of capping the salaries of officials and employees of GFIs
and GOCCs if only to reduce state expenses as well as the budget
deficit. She said that the exemption from salary standardization was
also under review because it was being "abused." The National Power
Corp., DBP, GSIS are some of the institutions that are exempt from the
law's coverage. After reading the CoA report, Senate finance committee
chairman Manuel B. Villar, Jr. proposed the rationalization of the
salaries and benefits of top GOCC officials. "Poor management should not
be rewarded with fat salaries. If these officials were in the private
sector, they would have been fired," Mr. Villar said. "The heads of
GOCCs must be held accountable for the state firms' financial troubles.
There is a need to look into the fiscal prudence of our public debts.
The government should determine the weakness in its fiscal management
and address them immediately," he added.
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The national government's deficit reduction schedule may have to be
extended in case the government absorbs
PhP500 billion in National Power Corporation (Napocor) debt and none
of the Palace-proposed revenues are passed by Congress. As long as all
eight revenue measures are passed, the government will be able to wipe
out its budget deficit by 2009 even if it absorbs all of Napocor's
debts, a Finance department executive told reporters yesterday.
Malacaņang has said these new taxes will help earn the government
PhP80 billion in annual revenues. "The government could pay off the
debts of Napocor by raising the deficit and pay it through borrowings or
raising enough funds through new taxes to cover the additional
obligations," Budget undersecretary Laura Pascua said in a chance
interview.
Senator Sergio Osmeņa III yesterday said during a Senate hearing that
the absorbing the cash-strapped utility's debts would mean an additional
PhP36.7 billion interest expense next year,
PhP45.5 billion in 2006,
PhP48.8 billion in 2007,
PhP53.2 billion in 2008,
PhP61.2 billion in 2009 and
PhP66.3 billion in 2010. The government's proposed
PhP907.6-billion budget for 2005 already covers
PhP301.69 billion in interest payments, excluding those of Napocor.
Budget Secretary Emilia T. Boncodin said it is crucial that Congress
enacts the new taxes to help the government earn additional income. If
Congress fails to do so, she said the government might be "delayed" in
meeting its target of balancing the budget by 2009. Finance Secretary
Juanita D. Amatong admitted that she is unsure of convincing Congress to
pass the new tax laws. This is the reason why the Department of Finance
this early is looking at alternative measures by which it could raise
additional income, like taxing overseas Filipino workers.
QUESTIONS
During the Senate hearing, Senate President Franklin M. Drilon
expressed concern over the policy direction outlined by Socioeconomic
Planning Secretary Romulo L. Neri. "That the government will assume
PhP500 billion in Napocor debts is already a policy? Is that the
decision of the economic managers or you are just talking at the top of
your head?," Mr. Drilon asked Mr. Neri. Mr. Neri said the policy for
achieving energy independence already includes the absorption of the
state-run utility's debts. This was confirmed by Finance Secretary
Juanita Amatong. Mr. Osmeņa scored the government economic managers for
giving a "false picture" on the Executive department's plan to Napocor's
financial burden.
The opposition lawmaker also expressed doubts on Mr. Neri's
projection that the private sector will invest in the power sector
starting next year until 2006, a point echoed by Mr. Drilon. "The
Department of Energy said we need more than $5 billion in capital for
the power sector. We need this next year so by 2008 the new generating
plants will be in place," Mr. Drilon told reporters after the briefing.
But with the projection that investments will start pouring only by next
year, the new power plants will be completed by 2009 since the plants
require a four-year gestation period. "I would suggest that a review
should be made on this macroeconomic forecast," Mr. Drilon said.
-- K. L. Lema and C. I. Roncesvalles
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Revenue collection targets were surpassed in August, the Bureau of
Internal Revenue (BIR) said in a statement yesterday. The BIR said
collections for the month hit
PhP43.128 billion, slightly over the
PhP43.114-billion target and
PhP4.693 billion above collections in July last year. Total
collections for eight-month period reached
PhP311.211 billion, exceeding by
PhP29.803 billion collections for the January to August period in
2003. The tax bureau said it is optimistic that it will meet its
PhP477-billion year-end target despite poor tax collections in the
first semester. The BIR, which accounts for over 80% of government's
revenues, is under pressure meet its revenue goals to allow the
government to keep the 2004 budget deficit below a programmed
PhP197.8-billion cap.
The tax bureau attributed its positive performance to its continuing
Tax Compliance Verification Drive and special operations geared to
enhancing taxpayer compliance . The Bureau's Large Taxpayer Service,
which surpassed its
PhP24 billion target by
PhP927-million, likewise contributed to the bureau's successful
collection performance in August. It has recently stepped up it campaign
against tax evaders and filed series of tax evasion cases against more
than 20 business establishments who have allegedly cheated the
government of hundreds of millions of pesos by underdeclaring value
added tax payments. The BIR has admitted the huge amount of money lost
to tax evasion has contributed to the deficit problem. Several lawmakers
have claimed that the government can do without new tax measures. They
said that improving tax efficiency should be more than enough to solve
the country's fiscal woes. -- Karen L. Lema
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By IRA P. PEDRASA
The government yesterday rejected most of the bids for its reissued
three-year Treasury bonds, saying it was maximizing all fund sources and
that its borrowing plan was still on track. At yesterday's auction, the
T-bonds fetched a yield-to-maturity rate of 11.594% or up by 59.4 basis
points when it was last auctioned on March 9. "We are still on program.
We are maximizing all sources such as revenue collections,
over-the-counter placements, and the auction. We will borrow when we
need it. We don't want a negative carry; that's basic for a treasurer,"
Deputy Treasurer Eduardo S. Mendiola said after the auction.
Indicating strong market appetite, total tenders reached
PhP11.224 billion against a public offering of PhP4.5 billion.
The auction committee accepted only PhP2.2 billion worth of bids. "We
capped the rate at 11.625%. Comparing it at the secondary market at
[11.7733%] and the best bid at 11.625%. We still got cheaper; the
average is much lower," Mr. Mendiola said. A trader said, "It's
obviously higher, but the rates are already here." "The market took the
cue from the two-year bonds which was awarded at 10.75%. We are looking
for further developments. The Federal Reserve is expected to raise
interest rates again, and the inflation is still there," a trader added.
The United States Federal Reserve is expected to raise US benchmark
rates by another 25 basis points next week to fend off inflationary
pressures. The market is also awaiting leads from the next Philippine
inflation report. The trader said even if the Fed keeps rates steady,
the Philippine market will still be on the losing end as it will be
facing higher inflation. Another trader added that the yield curve of
government securities was already steep. "Until when will the central
bank sustain its overnight rates? This is really the trend now. We are
looking at a negative real interest rate," the trader added, referring
to rates adjusted for inflation.
Meanwhile, some traders also said the resignation of National
Treasurer Mina C. Figueroa put additional pressure on the market. "You
can't take away the negative connotation over her resignation at a time
when we have the fiscal burden to overcome. You can't help but
speculate," another trader said. Citing a "personal deficit" and her
intention to move back to the private sector, Ms. Figueroa gave her
letter of resignation dated September 10. Her resignation takes effect
on October 15. She denied rumors of policy disagreements over the
government's borrowings. Her decision also caused as a knee-jerk
reaction from the peso the other day. Yesterday, however, the Philippine
unit strengthened by almost five centavos against the US dollar,
following the rally from regional currencies. The Thailand bath emerged
as the big winner at 41.30 coming from 41.50. The peso was previously
compared to the Thai currency. The Japanese yen, at last count, was at
109.70 from below 110.30. "The market can't seem to break the PhP56.25
resistance [level]. The dollar was already long over-bought," a currency
trader said. At the Philippine Dealing System, the country's local
currencies exchange, the peso averaged weaker by almost three centavos
to PhP56.196 from PhP56.169. The local unit posted its intraday low at
its opening value of PhP56.24. It finally settled at its intraday high
of PhP56.165.
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HONG KONG -- Philippine sovereign dollar bonds traded firmer
yesterday, a day after these were sold off on Treasurer Mina Figueroa's
resignation, while the regional market held mostly steady ahead of a
flurry of new issues. Ms. Figueroa said on Monday she had resigned and
would leave her post next month, adding to market concerns about the
government's ability to manage a gaping $3.5-billion annual budget
deficit. Philippine sovereign dollar bonds eased, following the news of
her resignation.
On Tuesday, Philippine sovereign dollar bonds due in 2014 rose 0.5
point to 97.50/98.00 in price terms, while Philippine '25s also gained
0.5 point to 107/50/108.00. "With Philippine sovereigns still cheap
versus the broader emerging market debts and with the repo market
indicating still substantial short positions in most Philippine
sovereign bonds, we maintain our recommendation for overweight portfolio
positions and also recommend buying the RoP 2015, 2025 sovereigns,"
Barclays Capital said in a client note on Tuesday. Five-year Philippine
credit default swaps -- a form of insurance contract for bondholders
against debt default by the issuer -- were unchanged at 435/445 basis
points (bps). Asian borrowers are expected to sell US$1.6 billion worth
of fresh debt this week, following nearly US$2.2 billion of new issues
being priced in the past week. The main focus of the primary market is a
US$1 billion sovereign bond issue by South Korea. The South Korean
government is expected to price the 10-year sovereign issue on
Wednesday. The deal, lead managed by Barclays Capital, Citigroup,
Deutsche Bank and JP Morgan, has so far attracted US$400 million of
orders, a market source said.
South Korea began investor roadshows in Singapore on Monday and will
continue in London on Tuesday and in New York on Wednesday. Spreads on
South Korean sovereign dollar bonds due in 2013 were steady at 70/67 bps
over US Treasuries. "In near term, the upside potential of Asian
benchmark credits could be limited due to the supply risks concern,
despite the continuous strong demand on Asian credit derivatives," BNP
Paribas said in a report. Meanwhile, Malaysian casino and power group
Genting Bhd. is expected to price a US$300 million, 10-year bond later
on Tuesday at a spread of 132 to 134 bps above comparable US Treasuries.
Genting tightened the price guidance from an initial 137 bps over
after the offering was six times oversubscribed, another market source
said. HSBC and Citigroup are the joint bookrunners. The deal comes a day
after Telekom Malaysia Bhd. sold US$500 million of 10-year bonds. The
issue was heavily oversubscribed, attracting orders worth US$5 billion.
The Telekom bonds due in 2014 were quoted at 109/106 bps over comparable
Treasuries, tighter than the launch price of 112 bps over, as investors
chased the issue in the secondary market. Malaysian issuers have raised
nearly US$2.5 billion worth of dollar-denominated debt this
year.Ports-to-telecoms conglomerate Hutchison Whampoa Ltd.'s bonds due
in 2014 were stable at 165/163 bps over comparable Treasuries, while
PCCW Ltd.'s bonds due in 2013 were steady at 130/120 bps over.
-- Reuters
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By CECILLE S. VISTO, Sub-Editor
and ROMMER M. BALABA, Reporter
Listed LMG Chemicals Corp. said it will lose at least
PhP1 million daily as a result of the temporary closure of its
plant in Pasig City. The plant will remain indefinitely closed until a
multipartite monitoring team tasked to study the case deemed it safe to
allow the resumption of its operations. In an interview, LMG Chairman
and Chief Executive Antonio M. Garcia said the firm's 400 to 500
employees will be retrenched if the Pasig City government makes good its
threat that it will no longer allow the plant to operate.
Moreover, some of the company's major clients -- including water
utility Manila Water Co., which buys its water purification chemical
from LMG and a number of food firms -- will also be adversely affected
by government's refusal to lift the cease and desist order. LMG, an
affiliate of Chemical Industries of the Philippines, Inc. (Chemphil),
supplies clients with chemicals crucial to their products and services.
"We ask the Pasig government and its mayor, Vicente Eusebio, to be
rational. We create jobs and pay our taxes. We've been here since the
1960s and a small accident like this should not be used as basis to shut
down the plant. Besides, there were neither injuries nor fatalities,"
Mr. Garcia told BusinessWorld. He estimated that it will take
some two weeks before Pasig City government and the Department of
Environment and Natural Resources could decide whether the plant should
resume operations.
In the meantime, he said the company will abide by the government's
order to hold all plant activities until further notice. However, the
Environmental Management Bureau yesterday said it is "indefinitely"
suspending operations of the sulfur plant. To recall, Mr. Eusebio
ordered the facility closed on Monday after finding it "an imminent
threat to life, health and property." Residents and pupils of nearby
elementary schools complained last Friday of dizziness, nausea,
difficulty in breathing and vomiting due to persistent sulfur acid-like
odor coming from the plant. It was later discovered that at the time of
the accident, LMG was replacing its acid circulating pump and that there
was a leak in its heat exchanger.
In a cease and desist order, Mr. Eusebio said it will not allow LMG
to reopen the plant until it installs additional control devices and
review the possible sources of leaks. Environment and LMG officials met
yesterday to discuss the company's alleged violations. Mr. Garcia said
it will take at least two years for LMG to build another plant in case
the Pasig City government makes good its threat that it will no longer
allow the company to operate within its jurisdiction. "They [LMG] could
not resume operations unless they have complied with the requirements,"
Environmental Management Bureau director Julian D. Amador told
BusinessWorld yesterday. Mr. Amador however said the Pasig
government had already issued an earlier cease-and-desist instruction
and the bureau's closure order was just a reiteration to prevent further
environmental and health effects until the company has remedied the
situation. "We issued the order since they purportedly violated some
provisions of Presidential Decree No. 1586. They have 10 days to file a
motion for reconsideration, but they would remain closed," said Sixto E.
Tolentino, Jr., the bureau's National Capital Region director, in
another interview.
Presidential Decree No. 1586 provides for the establishment of
environmental management-related measures. "We still have not imposed
any penalties, just the closure order, as the monitoring team continues
to study the area. The company nonetheless has admitted there was
technical problem that resulted in the release of fumes in the area,"
Mr. Tolentino explained. LMG is involved in manufacturing, trading and
chemical bulk storage. It is the largest sulfuric acid producer in the
country, and the only domestic producer of detergent alkylate. The firm
manufactures alkyl benzene, sulfuric acid, detergent sulfur and other
industrial chemicals. A similar incident happened at the LMG factory
about three years ago due to malfunction on its sulfur feed, emitting
toxic fumes.
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By BERNARDETTE S. STO. DOMINGO,
Reporter
State-owned National Transmission Corp. (Transco) is shutting down
the 230-kilovolt Biņan-Dasmariņas line to upgrade transmission capacity
by 900 megawatts and address transmission line congestion in Luzon's
generation hub. Alan T. Ortiz, president and chief executive, said in a
statement the line will remain closed until yearend. Once upgraded, the
capacity will be enough to meet the requirement of the Philippine Grid
Code and transport the power generated by power plants in Southern
Luzon, the Transco chief said.
Southern Luzon is host to the country's biggest power plants, from
the baseload coal plant in Calaca and the Mak-Ban geothermal plant to
the facilities running on natural gas harnessed from Palawan, Transco
said. The concentration of mega power plants in the area, however, has
put considerable strain in the capacity of the transmission network to
transport power to major load centers in Luzon, it added. "Once the line
upgrade is finished, the Ilijan gas-fired facility in Batangas can be
dispatched up to 1,200 megawatts which is a significant increase
compared to its current dispatch of 600 megawatts. By providing enough
transport capacity to the power generated by the country's gas-fired
plants, we are making significant progress in our effort to minimize our
dependence on oil," Mr. Ortiz said. He added Transco will allow the
Visayas region to reclaim about 400 megawatts of capacity which is
exported to Luzon. This 400 megawatts will be enough to secure
electricity supply to the entire Visayas. The line should have been
upgraded five years ago but plans were not drawn up until Transco
started operating independently in 2003, Mr. Ortiz said. "Ultimately,
unclogging this bottleneck will optimize the use of Malampaya gas by
allowing the gas-fired plants of Sta. Rita, San Lorenzo and Ilijan to be
dispatched at their minimum energy quantity," he said.
Meanwhile, a congressional action is not needed in order to sell
Transco, Justice Secretary Raul M. Gonzalez yesterday said. In a press
briefing at the Department of Justice, Mr. Gonzalez said "unless you
sell Transco, you will never be able to sell the assets. It's like
selling farm in the mountains without any roads." Earlier reports said
the government expects to raise up to $5 billion by end-2005 from the
sale of the power plants and grids owned by the debt-strapped National
Power Corp. -- with Ma. Elisa P. Osorio
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The Northwind Power Development Corp. (NorthWind) is looking at
upgrading the proposed 25-megawatt wind power plant in Bangui, Ilocos
Norte to a 40-megawatt facility to improve power supply in the Luzon
grid, the Energy department yesterday said. Energy Sec. Vincent S.
Perez, Jr. yesterday said the firm made the decision following the
recent ruling of the Energy Regulatory Commission granting National
Power Corp., an average of 97 centavos per kilowatt hour increase in
generation rates. Mr. Perez said the rate adjustment had encouraged
investors to infuse money for capital-intensive projects. "The 40
megawatts committed by NorthWind will certainly beef up the generating
capacity in the province to meet its growing electricity demand," he
said in a statement. He said the construction of the plant will make the
Philippines the first and largest wind power producer in Southeast Asia.
The plant is seen to provide additional capacity to Ilocos Norte
Electric Cooperative and improve the reliability and stability of supply
in the region, he added. It is expected to become operational by early
next year. Mr. Perez said the firm recently inked an agreement with
international bank ABN-Amro, to finance the project, while Philippine
Export and Import Bank guaranteed the loan.
Recently, the Energy department has released the Philippine Wind
Power Investment Kit, which outlined the country's wind energy program
as well as prospects and opportunities for the development, utilization
and commercialization of wind power. It also unveiled some 16 wind power
project areas in the country which have a total wind power capacity of
345 megawatts of electricity. Mr. Perez said investors are entitled to
incentives such as waiver of production bonus on the first project and
payment of production bonus to the government only after the project has
fully recovered pre-operating expenses as stated under Executive Order
462, the law encouraging private sector participation in the exploration
and development of ocean, solar, and wind energy resources.
Other incentives include income tax holiday, reduced duty rates for
imported capital equipments, and other Board of Investments mandated
incentives. Investors may also avail of financial assistance from the
Development Bank of the Philippines, the United Nations Development
Programme-Global Environment Facility and PhilEximBank.
-- Bernardette S. Sto. Domingo
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By JENNEE GRACE U. RUBRICO, Senior
Reporter
Food and beverage giant San Miguel Corp. said that it will save $300
million annually once it starts sourcing its raw material requirements
from local farmers. In a statement, the company said that it spends
"millions of dollars every year" from importing raw materials from the
US, Argentina, and India. San Miguel imports raw materials for its
feeds, liquor, and soft drinks businesses. It heavily imports cassava,
corn, soybeans and sorghum. San Miguel Chairman Eduardo M. Cojuangco,
Jr. said San Miguel's new raw material sourcing program -- which will
source raw materials from local farmers -- will help farmers in the
countryside as well as the government in terms of dollar savings. "We
hope to develop these high-value crop growing sectors into a base for
self-sufficiency, at least for San Miguel," he said. The company also
said the program is expected to generate one million jobs over a
five-year period.
Mr. Cojuangco said other companies should follow the lead of San
Miguel and source their raw materials from local farmers. "In doing so
they help themselves, they help the government and most important, they
help alleviate poverty in rural Philippines. With three out of four poor
Filipinos living in rural areas, we need to do our part in countryside
development." The program, San Miguel said, provides farmers with a
steady and assured long-term market for their produce. There are three
components to the program: training and technology transfer, financing,
and the provision of a steady, assured market characterized by stable
pricing. The program has been introduced in Bukidnon, Zamboanga del Sur,
South Cotabato, the CARAGA region, Negros, Panay in the Visayas, Central
Luzon, Cagayan Valley and Ilocos.
The company said it imports 50% of its cassava, 40% of its corn and
100% of its soybean and soybean meal requirements. Once the program is
in full swing, San Miguel anticipates acquiring 100% of its raw
materials from local sources. The company is hoping to fully implement
the program in three to five years. The raw material sourcing program is
one of several components of San Miguel's Integrated Agro-Industrial
Zone growth model. It clusters in one area several operations starting
from raw material sourcing to processing. San Miguel hopes to put up
several agro-industrial zones in Central Luzon, Northern Mindanao,
Southern Tagalog, Northern Luzon and Visayas.
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By ROULEE JANE F. CALAYAG
The Philippine Association of Stock Transfer and Registry Agencies (PASTRA)
is ready to launch its electronic direct registration system in October.
If the plan goes through, it will be ahead by a few months than the
clearing and settlement system of the Securities and Clearing Corp. of
the Philippines (SCCP) which will be launched in January. PASTRA
officials said though there will be no "turf war" between their group
and the SCCP which is a subsidiary of the Philippine Stock Exchange.
"Ours is a transfer and registry system and not a clearing and
settlement system," PASTRA Chairman Jenny Serafica told BusinessWorld.
"It will be central, serving as a network that will link all transfer
agents. We will only be one entity that will offer the best [services],"
she added. "The transfer agencies will not compete with each other. The
competition will only be in terms of the service."
The new system will bypass the Philippine Central Depository, thereby
doing away with a layer in the stock registration process.
Internet-based, the system could be accessed only by legitimate stock
owners. The system "is cheap and offers added value. It is the first
one-stop shop [of its kind] in the country," she added. "Users only need
to log in to the website and they will be linked to the issuers and the
SCCP." PASTRA expects to generate added income from the site through the
issuers who may want to put out some ads in the web site. Ms. Serafica
said that even SCCP Chairman William Ang had shrugged off speculations
of a possible competition. Although the launch was delayed for a few
months, PASTRA officials said they are at the final stage and are
ironing out the minor glitches to ensure the system will run smoothly.
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Australian miner Medusa Mining Ltd. has entered into a joint venture
with Canada's BachTech Mining Corp. to look for mining projects in the
Philippines. In a letter to publicly listed Dizon Copper-Silver Mines,
Inc., Medusa said the joint venture, wherein Medusa and BachTech will
own a 50% stake each, is for an initial period of three years and will
start with test work on tailings from Dizon's drillings. Under the deal,
BachTech will provide its technology on an exclusive basis to the joint
venture for the treatment of gold-copper ores.
BachTech has a patented technology in treating refractory ores and
concentrate to enhance the recovery of gold, silver, and base metals.
The company has a 55% stake in Tonkin Springs LLC, the owner of the
Tonkin Springs gold project in Nevada. The company has also entered into
agreements for participating in the Chinese gold industry through equity
and project participation. Medusa said the joint-venture firms will
investigate gold, silver, and copper sulphide mineralization projects
that would be suitable for application of BachTech's "bioleaching
technology." -- Jennee Grace U. Rubrico
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By ROULEE JANE F. CALAYAG
Share prices ended lower yesterday due to a much needed technical
correction. But despite the market's sharp drop, analysts were not
worried. They said it was long awaited given the market's strong
nine-day rally that saw the Philippine Stock Exchange composite index
close at a 53-month high. Rommel Macapagal, chairman of Westlink Global
Equities, Inc., said a continuous rally could not go on because the
market needs a breather. "It was a much needed correction. The pulls of
exhaustion finally caught up with the bulls," he said. Profit-taking was
heavy as investors cashed in gains in the past nine days. The correction
was expected, said some analysts. One of them said it was even
surprising that the correction came only yesterday when it was projected
to come on Monday.
TREASURER'S RESIGNATION
The sudden resignation of National Treasurer Mina C. Figueroa also
triggered the correction. "The resignation could also have accelerated
the decline," said Mr. Macapagal. Ms. Figueroa reportedly quit her post
due to differences over policies on the borrowing tack of the Department
of Finance. What reportedly made up the national treasurer's mind to
resign was the $1-billion global bond issued last week. The offering
signified the government's boldness to face the international market
only two weeks after admitting its weak fiscal situation. Ms. Figueroa
allegedly felt that the Arroyo administration was shelling out more
money than it was supposed to under its borrowing program. The other
issue that allegedly ticked off the national treasurer was the
350-million-euro bond offering in July. She took over the post of Sergio
Edeza in February after serving as deputy treasurer since August 2001.
Some months earlier, she had signified her desire to go back to the
private sector. She served as vice-president of Security Bank Corp.
before joining the National Treasury three years ago.
An analyst said the resignation of the national treasurer dampened
sentiment especially with the threat of a fiscal crisis. But some
observers said the resignation was only used as an excuse by some groups
to pocket gains from the market because the correction had already been
projected since last week. "We will know the extent of the correction
[today] and see where the market stops. There may even be an early
rebound," said Mr. Macapagal.
PHISIX
The Phisix plummeted 41.71, closing at 1,717.45. Transaction volume
was thin at 1.1 billion shares worth
PhP712.1 million. "It was good that there was not enough volume
when the market corrected," he added. The market, said Mr. Macapagal,
will be building base at the moment. He plots the support level at 1,680
to 1,700 and the next resistance at 1,760. The all shares index went up
by 4.37 to 1,071.1. Mining stood strong, rising by 6.06 to 1,830.13.
Commercial-industrial went down 72.04 to 2,742.70. Banking and financial
services was down 4.66 to 489.36. Oil continued its decline, dropping by
0.02 to 1.64. The property index bled 13.74 at 572.28. Trades dropped to
2,978 from over 4,000 on Monday. Advancers numbered only a third of the
decliners at 19-63. Issues that were unchanged totalled 32. The
correction resulted in foreign net selling of
PhP7.4 million.
TELECOMS
After drawing investors for most of the nine-day rally, telecom
stocks failed to hold their sway over the market. Although
telecommunications heavyweight Globe Telecom, Inc. still dominated the
market, its price declined by PhP45 at PhP1,045. The industry's giant,
Philippine Long Distance Telephone Co. was also weak as it slipped by
PhP60 to PhP1,385.
OPTIMISTIC
Just when everyone was beginning to think that the Philippine stock
market was invincible, defying all forces expected to plunge it to new
lows this month, it reversed its direction. Although some dealers were
disappointed by the significant drop in the Phisix yesterday, most
remained optimistic. They believe that profit-taking will only last for
a day or two during the trading week. After that, the market will again
be ready to attack like a bull and perform better than expected. With
ongoing reforms both at the Philippine Stock Exchange and the
government, dealers see no reason why the market would slump. But as
uncertainty is the only certain thing in the market, which is driven by
developments on the corporate and economic scenes, investors may dwell
on the sidelines while thinking of their options.
At the moment, their eyes will be trained on the new stock exchange
president Francis Lim -- whether he will deliver the reforms he promised
and how these will translate to better trading volumes. Mr. Lim will be
taking over his post tomorrow after deferring for more than two months.
With his professional obligations fully dispensed with, Mr. Lim could
focus on the immediate tasks of drawing in more investors.
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By JENNEE GRACE U. RUBRICO, Senior Reporter
The National Tax Research Center, a unit of the Department of
Finance, is proposing the formation of a National Appraisal Authority
that will set standards to minimize "political interference" in property
and asset valuation. In a draft bill for the proposed Real Property Appraisal and
Assessment Reform Act, the center noted the lack of uniformity in
property appraisal. It noted there was no single agency that could
ensure that valuations and appraisals were done according to
internationally accepted standards. Its proposal seeks to rationalize, develop, improve and regulate the
appraisal and assessment of real property, as well as establish a
single, realistic value for specific real properties being appraised.
The draft bill proposes the establishment of a specialized agency
that will provide uniform standards for the valuation of real property
and separate the function of valuing real properties from the
administration of taxes from these properties. "There being no adequate technical supervision on valuation matters,
local assessors generally operate independently, thereby spawning a lack
of uniformity and equity in real property appraisal among different
provinces and cities," the draft bill stated. "The multiplicity of systems and methods of property appraisal has
created confusion in the public mind and a lack of confidence in the
system, especially when different values are attributed to the same
property," it added.
The bill noted that at least 23 national government agencies did real
property appraisal, and that each used its own system and methodology.
It also noted that appraisal practices of local government units also
varied greatly. The bill also noted political interference in the appraisal practices
of local governments, with officials allowing only minor increases in
property values over previous value levels. It added that there was "selective and subjective increases on
valuations," and frequent deferment of the general revision of property
assessments, contrary to the Local Government Code's provision on
assessing properties once every three years. "The main objective of a general revision of real property
assessments is to update real property values for taxation purposes as
these change over time. Because of the frequent deferment of the general
revisions, valuations used by [local governments] are out of date and do
not reflect the changes occurring within the market from time to time,"
the bill stated. The use of a single valuation base, it noted, "will remove confusion
and provide a sound reliable basis" for the assessment of real property
taxes as well as "reduce costs of duplications." Under the draft bill, the proposed National Appraisal Authority will
be attached to the Department of Finance. It will be the primary agency
of the government on matters concerning the appraisal of real
properties.
The proposed authority will set and maintain valuation standards that
are consistent with internationally accepted standards, regulations, and
specifications for real property appraisal, for tax purposes.
The draft bill also stated that the proposed appraisal authority
would:
- review and approve the "schedule of market values" prepared by
provincial, city, and municipal assessors;
- coordinate or conduct the appraisal of special purpose
properties;
- provide technical assistance on real property appraisal matters
to government agencies;
- provide "leadership and direction" to local government units,
national government agencies, private sector institutions, and
individuals on matters pertaining to appraisal;
- recommend the appointment of qualified persons for local
government assessors;
- develop and maintain a database of real property transactions
and prices of materials for buildings and other structures and
machineries; as well as
- determine, fix, and collect reasonable amounts to be charged as
administration fees, fines, and penalties relative to the
implementation of the provisions of the draft bill.
A board composed of representatives from the government and the
private sector will also be formed to advice the National Appraisal
Authority in the preparation, review and approval of the schedule of
market values, and in the setting, maintenance, and compliance
monitoring of the valuation standards. The draft bill also provides for the development and maintenance of a
real property database on the sale, exchange, lease, mortgage, donation
and all real property transactions in the country, and on the prices of
materials for the construction or renovation of buildings and other
structures, and on prices of machinery. The amount needed to finance the initial implementation of the
proposal will be charged against the appropriations of the Bureau of
Local Government Finance's Real Property Assessment Division and Local
Assessments Operations, and other divisions of the agency, the draft
bill states. "Thereafter, such funds as may be necessary for the continued
implementation of this Act shall be included in the annual General
Appropriations Act," the draft bill added.
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By FELIPE F. SALVOSA II, Reporter
and CECILLE S. VISTO, Sub-Editor
A crucial document finalizing the sale of National Steel Corporation
(NSC) to an Indian-owned company was signed last Friday as scheduled,
but two more conditions need to be met to close the
PhP13.25-billion deal, the steel firm's biggest creditor clarified
yesterday. John Deveras, Philippine National Bank (PNB) senior vice-president,
confirmed that the group of creditor banks and the winning bidder,
Global Infrastructure Holdings, Ltd., have sealed an asset purchase
agreement, but this was only one of three documents that needed to be
signed. "The transaction did not close last Friday. Certain conditions have
to be met," Mr. Deveras stressed.
The two "pre-closing" conditions are:
- a certificate of eligibility from the Bangko Sentral ng
Pilipinas (Central Bank of the Philippines, or BSP) on the deal's
compliance with the
Special Purpose Vehicle (SPV) Law; and
- an agreement among secured creditors and the National Power
Corporation (Napocor) on how outstanding liabilities would be paid.
When these conditions will have been met, the parties will sign the
last two documents:
- an omnibus agreement that will secure all payments to be made by
Global; and
- a sharing agreement that will outline how proceeds of the sale
will be apportioned among the creditors banks.
Before the proceeds are distributed, NSC's obligations will first be
deducted, Mr. Deveras said. NSC owes
PhP171.2 million in real estate taxes to Iligan City in Central
Mindanao, and
PhP270 million to Napocor. Global will be required to pay the previously agreed
PhP1 billion downpayment only when all three documents will have
been signed. So far, Global has deposited, in escrow, $6.5 million. In dollar
terms, the downpayment amounts to $17.857 million, the PNB official
said. As part of "security arrangements," Global also executed a
PhP250-million standby letter of credit, which the creditors will
withdraw if the Indian firm reneges on payments. Global will not be allowed to offset from the
PhP1-billion downpayment the expenses it incurred in rehabilitating
NSC's plant. Global, whose mother company Ispat Industries, Ltd. owns one of
India's biggest private steel operations, won the bid for NSC at
PhP13.25 billion payable in eight years. "If the deal does not close, that's their risk," Mr. Deveras said.
The PNB official also said compliance with the SPV Law, which allows
banks to unload nonperforming assets from their books, was needed as it
offered a number of incentives. For instance, losses over the
transaction are recognized and may be amortized for a period of 10
years. Mr. Deveras said he was optimistic the pre-closing conditions would
be met. On the reported last-ditch effort of NSC's second-biggest
creditor, Calyon (formerly Credit Agricole Indosuez) to block the sale,
Mr. Deveras said the matter was for the Securities and Exchange
Commission (SEC) to decide. "From day one [it has] been opposing [the
deal]," he noted. So far, SEC has not issued a restraining order. A hearing has been
set on September 16 to decide on the petition filed by Calyon, which is
contesting SEC's jurisdiction. The conclusion of the asset purchase agreement was delayed twice
because of backtaxes due to Iligan City. Before settling for
PhP171.2 million, the city government demanded
PhP928.055 million consisting of the principal amount and penalties.
Pengurusan Danaharta Nasional Berhad, Malaysia's national asset
management company, withdrew opposition to the sale after being assured
of a "fair share" of the proceeds. Danaharta used to own more than 80%
of the steel firm after taking over from Hottick Investments, Ltd.,
which failed to support NSC's debts.
NSC owes:
-
PhP5.639 billion to PNB;
- Credit Agricole Indosuez,
PhP1.687 billion;
- Land Bank of the Philippines,
PhP1.17 billion (with
PhP160 million in the form of long-term commercial papers);
- China Banking Corp.,
PhP846.9 million;
- Rizal Commercial Banking Corp.,
PhP687.6 million;
- Metropolitan Bank and Trust Company,
PhP686.2 million (originally borrowed from Asian Bank Corp.);
- United Coconut Planters Bank,
PhP403.46 million;
- Export Industry Bank,
PhP397.09 million (originally from Urban Bank);
- Equitable PCI Bank,
PhP481.46 million;
- Bank of Commerce,
PhP151.14 million (when combined with Traders Royal Bank's
PhP91.57 million);
- Wise Capital Investment and Trust,
PhP143.51 million;
- United Overseas Bank,
PhP63.97 million; and
- Allied Banking Corp.,
PhP13.65 million.
NO CHOICE
Meanwhile, SEC may have no choice but to dismiss Calyon's opposition
to NSC's sale. In lieu of a restraining order, the SEC will have to rule on the
legality of annulling all its orders on the liquidation of NSC, as
sought by Calyon Corporate and Investment Bank. "What has been done cannot be undone. But Calyon can still seek the
annulment of all previous orders of the corporate watchdog on the SEC
liquidation, which is a long shot," a source from one of the
creditor-banks told BusinessWorld. But another executive from a bank that has considerable exposure in
NSC said Calyon's request for an injunction was still a "pending
incident." "It is still a pending incident because the core issue is
whether SEC had the jurisdiction to issue orders relating to the
liquidation of NSC in the first place ... It is still on the table, but
it will be difficult to take back what has transpired," the bank
executive said. Both bank officials also said Calyon must wait for other NSC
creditors to comments on its injunction petition as well as for the
decision of SEC general counsel Vernette Umali-Paco on the case. The controversy can be elevated to the Court of Appeals if SEC rules
against Calyon and maintains that it legally liquidated NSC.
Calyon, with a
PhP1.69-billion exposure in Asia's oldest steel company, is its
second biggest creditor after Philippine National Bank. It tried in vain to block the closure of the
PhP13.25-billion sale last Friday, claiming SEC has "no
jurisdiction" over the liquidation of NSC. Calyon, in asking SEC for an injunction, said the commission could
not preside over the liquidation of NSC. It noted that while the
commission has the power to issue orders to facilitate liquidation, it
was not authorized under Presidential Decree 902-A to preside over the
process of folding a company. PD 902-A is the law that empowers SEC to
oversee corporate disputes. NSC's liquidation receiver Danilo Concepcion had said Calyon had lost
its right to question the liquidation plan for corporation, having
joined the lengthy negotiations for the sale of its assets. With SEC refusing to issue a restraining order, the NSC deal was
finally closed last September 10.
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President Gloria Macapagal Arroyo yesterday defended the government's
"pain package" of new taxes, saying her administration needed more money
to beat a fiscal crisis as well as to grow the economy. "Our strategy is to avert a larger financial crisis down the road,
sustain economic growth and protect the welfare of the most marginal
sectors," the President said in a statement. "This is a moment of sacrifice as it is a moment of truth, when we
have to come to terms with the past and present and decide to win back
national stability and survival over the long term," she added. The President made the statement following the presentation by Albay
(southern Luzon) Rep. Jose Clemente S. Salceda of his proposed "pain
package" that was expected to raise
PhP215 billion for the government in the next three years.
In his 31-page analysis of the country's fiscal situation, Mr.
Salceda said the country needed to embrace "painful" measures, including
more taxes, higher costs of public utilities and consumer goods, and
bigger spending cuts to get the country out of the debt hole. The President yesterday urged leaders in the public and private
sectors to "set the example" of helping the government deal with its
fiscal problem. "I ask our leaders in government and the private sector to find in
themselves the moral resources to set the example and take this fight to
the finish," Ms. Arroyo said. "The world has taken attention of our efforts and we must wield the
political will and determination to push through with our plans," she
added.
Press Secretary Ignacio R. Bunye also said the Chief Executive has
ordered the review of the performance of all government-owned and
controlled corporations to determine which ones would be abolished to
stem the bleeding of much-needed state funds.At the same time, Mr. Bunye said the Palace would match Congress
sacrifice by giving up its "discretionary funds," the same way members
of the House of Representatives have decided to abolish their Priority
Development Assistance Funds, derisively referred to by the public as
"pork barrel." -- J. O. Valisno
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The Securities and Exchange Commission (SEC) insists that the Bangko
Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) circular
that limits to several local and foreign banks the registration and
safekeeping of all securities does not usurp its powers. SEC chairman Fe Barin said in a press release yesterday that while
the central bank's Circular No. 428 on third-party custodians covered
securities transactions as defined by the Securities Regulation Code (SRC),
it would actually involve only transactions by banks and non-bank
financial institutions (NBFIs) that were part of their securities
custodianship and securities registry operations. "The circular does not encroach on the SEC's powers because the
circular is only for third-party custodianship. The circular is just to
make sure that the securities you're dealing with, if there is no
physical delivery, it will be in the hands of a third party. This is for
the protection of the public," said Ms. Barin, who used to be part of
the central bank's policy-making Monetary Board. She also said that SEC "must have been consulted" before the Bangko
Sentral passed the circular. "I'm very sure that if there is even the
smallest doubt that it [circular] encroaches someone else's authority,
there would have been appropriate consultations. They must have
consulted the SEC," she said.
Circular No. 428 allows banks and non-bank financial institutions to
act as securities custodian and registry after getting prior Monetary
Board approval. Among others, a securities custodian functions as the safekeeper of
the securities of a client; holds title to the securities in a nominee
capacity; represent clients in corporate actions in accordance with the
direction provided by the securities owner; and acts as a collecting and
paying agent. A securities registry, meanwhile, maintains an electronic registry
book; delivers confirmation of transactions and other documents within
agreed trading periods; issues registry confirmations for transfers of
ownership as it occurs; prepares regular statement of securities
balances as frequently as may be required by the owner of the securities
but not less frequent than every quarter; and follows appropriate legal
documentation to govern its relationship with the Issuer.
Section 2 of the circular states that the rules cover all the
securities custodians' and registry operators' transactions in
securities as defined by Section 3 of the SRC, where at least one of the
parties is a bank or an NBFI. Section 3 of the SRC defines securities as shares, participation or
interests in a corporation or in a commercial enterprise or
profit-making venture and evidenced by a certificate, contract,
instrument, whether written or electronic in character. It includes shares of stock, bonds, debentures, notes, evidences of
indebtedness, asset-backed securities; investment contracts,
certificates of interest or participation in a profit sharing agreement,
certificates of deposit for a future subscription; fractional undivided
interests in oil, gas or other mineral rights; derivatives like option
and warrants; certificates of assignments, certificates of
participation, trust certificates, voting trust certificates or similar
instruments; and proprietary or non proprietary membership certificates
in corporations. NBFIs are reportedly concerned by the perceived usurpation of SEC
powers by the central bank.
NBFIs earlier also expressed concern that Ms. Barin, who was with the
Monetary Board for a long time, might "think like a bank regulator" and
stifle capital markets. NBFI officials noted that the banking industry was heavily regulated,
while the capital markets were given enough leeway to be "creative" with
their products. If SEC started regulating the capital markets the way the central
bank regulated banks, it "might stifle the creativity and dynamism" of
the industry, as it has a higher risk appetite than the banking sector,
NBFIs officials said. But Ms. Barin said she has "a tendency to think where I sit." "I do what I'm supposed to do. When you accept a responsibility, you
make sure you understand what those responsibilities are. And you
understand the reason behind the laws and regulations. If 'creativity'
is what is called for, as long as it is within the laws [it's alright],"
she said. -- Jennee Grace U. Rubrico
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Clark International Airport in Pampanga, Central Luzon will spend
about
PhP2 billion starting this year to convert itself into a world-class
facility by 2006. And to finance its expansion,
PhP1 billion will come from the airport itself, while another
PhP1 billion will come from the Manila International Airport
Authority (MIAA). "We will try to avoid borrowing as much as possible, as ordered by
Malacaņang. The construction will take two years and it will start
immediately," MIAA general manager Alfonso Cusi said yesterday. The expanded Clark airport aims to attract low-cost airline companies
that will fly tourists and businessmen to the Central Luzon area. It
will also target airlines that fly routes to the Middle East carrying
overseas Filipino workers.
MIAA, under Executive Order No. 341 signed by President Gloria
Macapagal-Arroyo last month, was granted full authority to supervise all
international airports in the country. These include Clark airport,
which is in the President's home-province. MIAA previously handled only the operations of the Ninoy Aquino
International Airport. The executive order effectively puts Mr. Cusi, former chief of the
Philippine Ports Authority, in charge of international airports in
Clark, Laoag, Subic, Mactan-Cebu, Davao, General Santos, and Zamboanga. In a statement, MIAA said the Clark airport's expansion was in line
with Ms. Arroyo's plan to decongest Metro Manila and to spur economic
activity in the provinces. Mr. Cusi has discussed the expansion project with Clark International
Airport general manager Adelberto Yap. The two officials will lead the
capsule-laying ceremony for the expansion in Clark on September 28.
-- A. B. L. Lorenzo
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Eight nongovernment organizations (NGOs) are vying for the coveted
title of "Asia Pacific NGO of the Year" in the 2004 Asia Pacific NGO
Awards, the first-ever region-wide search for the best NGOs to be held
in Manila this Thursday, September 16. The awards will recognize and reward the professionalism and
excellence in the non-profit sector. The search is open to NGOs from
eight countries, namely: Hong Kong, Indonesia, Malaysia, the
Philippines, Singapore, South Korea, Taiwan, and Thailand.
To qualify, NGOs must have demonstrated good management,
transparency, accountability, and a strategic approach to resource
mobilization. Organizations with political and/or religious purpose were
excluded.
Out of a total of 76 entries, the following NGOs have been chosen as
finalists (one per country):
- Hong Kong Society for the Aged (Hong Kong);
- Institut Dayakologi (Indonesia);
- Shelter Home for Children (Malaysia);
- Philippine Business for Social Progress (Philippines);
- Singapore Children's Society (Singapore);
- Corporation Leftovers Love Sharing Community (South Korea);
- Garden of Hope Foundation (Taiwan); and
- The Foundation for Child Development (Thailand).
The best five NGOs will be announced on September 16 during awarding
ceremonies to be held at the SGV Conference Hall at the Asian Institute
of Management Corporate Center in Makati City. The first-prize winner, adjudged "Asia Pacific NGO of the Year," will
receive a cash prize of $10,000 (around
PhP550,000), and will be sent on an all-expense paid trip to the
International Workshop on Resource Mobilization in Bangkok, Thailand in
May 2005. The second-prize winner will get $5,000, and the three
runner-ups will have $1,000 each. The 2004 Asia Pacific NGO Awards is sponsored by Citigroup, the
pre-eminent global financial services company; and organized by Resource
Alliance, a United Kingdom-based organization with expertise in resource
mobilization. Citigroup believes the competition will help promote best practices
and provide training to NGOs.
Seeing tremendous opportunities in partnering with non-profits to
serve communities more effectively, the global bank is giving out more
than $5 million this year to the non-profit sector in Asia and the
Pacific. "Nongovernmental organizations are growing in importance in the
Asia-Pacific region, and are increasingly inserting themselves, both
into the workings of our communities and into the policy making
process," a press release quoted one of the judges, Kenneth Fagan,
general counsel for the Asia Pacific Region, Citibank N.A., as saying.
-- R. M. Balaba
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CARINA L. RONCESVALLES and JUDY T. GULANE, Reporters
Senators are skeptical over the plan of the House of Representatives
to remove pork barrel funds from the proposed 2005 budget and shift to
line-item budgeting. Administration and opposition senators noted that
the plan still has to prove its worth. Senate President Franklin M. Drilon said the Upper Chamber will make
its judgment on the positive news announced by House Speaker Jose de
Venecia, Jr. when the Lower Chamber submits the proposed
PhP907.6-billion General Appropriations Act (GAA) for 2005. The
House panel is scheduled to start with budget hearings on September 20. "Let us see whether or not the amount allocated for the pork barrel
is removed from the budget because that will reduce our budget deficit
to the extent of the pork barrel being totally deleted as proposed," Mr.
Drilon said in an interview. Congressmen over the weekend promised to scrap pork barrel funds from
the proposed 2005 budget to reduce government expenditures and ease
pressure on its ballooning deficit. In exchange, the Lower House wants
to adopt the line-item approach. This will mean that every single
government project and its corresponding cost will be identified to the
last peso and centavo in the national budget.
The current budget uses the lump sum system, where chunks of funds
for specific purposes are appropriated without detailing all the
activities that will be funded. This year, Senators got an annual pork barrel fund of PhP200 million
while Congressmen got PhP70 million. But under the 2005 budget submitted
by the Department of Budget and Management, pork barrel funds have been
reduced to PhP120 million and PhP40 million for Senators and
Congressmen, respectively. Administration Sen. Joker P. Arroyo noted that the plan to forego the
Priority Development Assistance Fund or pork barrel funds and adopt the
line budgeting system will be an "interesting game of power play." "This will be a very good game about scrapping the pork barrel and
line item budgeting. Watch this interesting game of positioning between
the Executive department and Congress," Mr. Arroyo said in a separate
interview.
Senate Minority Leader Aquilino Q. Pimentel, Jr. backed the decision
of the Lower House to use line-item budgeting even as he challenged Mr.
de Venecia to stand firm on his plan. "It remains to be seen whether they will be fulfilled by JDV [Mr. de
Venecia]. To see is to believe," Mr. Pimentel said. He also clarified that the proposed system will not give too much
power to legislators. "If we do line-item budgeting, every Congressman
and Senator who will propose a particular project for funding in the GAA
will have to justify it in open debates. There will be no insertions of
new items," Mr. Pimentel said. He also urged President Gloria Macapagal-Arroyo to give up her
PhP5-billion pork barrel funds to manifest her sincerity in implementing
austerity measures. These funds, he said, include the PhP2 billion
calamity fund, PhP1 billion contingency fund, PhP1 billion social fund,
PhP500 million intelligence fund and other confidential discretionary
funds.
Administration Sen. Miriam Defensor Santiago also cautioned the
possible window-dressing of the pork barrel funds if only to convince
the public that the belt-tightening measures have Congressional support. "There is much to be investigated on the terms agreed upon. The pork
barrel may assume another name," Ms. Santiago said, noting that the
annual budget remains hounded by technicalities that only experts can
understand. Members of the Lower House also yesterday pushed for line-item
budgeting for debt servicing, noting that the government's debt payments
will take up the largest allocation in the proposed 2005 national
budget. Makati Rep. Teodoro L. Locsin, Jr. said the national budget must
"detail each and every indebtedness" while Bayan Muna party-list
Representative Teodoro Casiņo, Jr. in a statement said line-item
budgeting for interest payments in the national budget is in line with
the clamor for "greater transparency and integrity in the budget
process."
Debt service payments comprise a total of PhP301.7 billion or 33.24%
in the proposed 2005 national budget. It will be the first time in the
Philippines' fiscal history that debt service payments overtake personal
services as biggest budgetary priority. Line-item budgeting for debt service payments, Mr. Casiņo said, will
require an itemized list of debt expenditures, as well as annexes
showing the purpose for which the loans were contracted and how these
loans were actually utilized. "Should the executive department fail to justify the grounds for
repaying certain unutilized or questionable loans, then this ground can
be used by Congress to deny or reduce specific allocations under the
debt servicing budget," he added. How viable line-item budgeting for debt service payments will be
remains to be seen, with Mr. Locsin warning as early as now that "big
businesses will say there will be no time for this... because they're
the ones who stole the money." Elaborating, he said, these business were the ones that contracted
commercial loans during the Marcos time -- loans that were eventually
assumed and are continued to be paid by the government.
Under the 2005 proposed national budget, debt service payments are
not itemized but are allocated a lump sum of PhP301.7 billion. Republic Act 6670, which provides a "modified performance budgeting,"
only asks line-item budgeting for personnel services. But even this
particular provision is limited to line item budgeting up to division
chiefs and second lieutenants only. Salary for casual or temporary
employees is expressed in a lump sum. Meanwhile, the Senate Committee on Finance will start today the
deliberations on the proposed 2005 national budget. Committee chairman
Sen. Manuel B. Villar noted that the national allocation submitted by
the Department of Budget and Management (DBM) to Congress is 5% higher
than the PhP861.6-billion budget this year. Mr. Villar added that the 2005 General Apropriations Act (GAA)
consists of PhP446 billion in new general appropriations and PhP496
billion in automatic appropriations. The budget deliberations will be attended by Budget Secretary Emilia
Boncodin, Finance Secretary Juanita Amatong, Socioeconomic Planning
Secretary Romulo Neri, Customs Commissioner George Jereos, Internal
Revenue Commissioner Guillermo Parayno and National Treasurer Mina
Figueroa.
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There will be moderate increases, or even a rollback, in local pump
prices next month following August's peak world oil price levels,
businessman Raul T. Concepcion said in a press release yesterday. Oil companies, he said, are expected to stagger increases on a weekly
basis in October, as requested by President Gloria Macapagal Arroyo, the
Energy department, and the Consumer and Oil Price Watch (COPW) which Mr.
Concepcion heads. "While it is still early, COPW is optimistic that we have reached the
peak levels of oil prices in August and the increase in October will be
moderate or even a rollback," he said.
Energy Secretary Vincent S. Perez Jr., meanwhile, urged oil companies
to hold pump prices at current levels to reflect world market trends.
"We don't see any increase in pump prices for the rest of this
month," he said in a separate statement, noting that global oil prices
have shed more than $3 per barrel in recent weeks due to an oversupply.
"Computations show that there are still unrecovered costs on the part
of the oil companies after world oil prices skyrocketed last few months.
We expect the oil companies to keep their prices at steady level," he
said. Mr. Concepcion also said that with the decision of oil refiner Petron
Corporation not to raise prices for the rest of the month if
international prices continue to ease, new oil players will likely hike
prices for diesel and not gasoline. Any increase will be calibrated to
reflect the drop in oil prices, he added.
Dubai crude, the benchmark used by oil companies in setting pump
prices, has fallen 12 times in the last 14 trading days after hitting a
record high of $41.26 a barrel on August 20. The Department of Energy (DoE) said the average price of Dubai crude
from September 1 to 9 dropped to $35.22 a barrel from $38.54 on
oversupply reports. DoE data also showed unleaded gasoline based on the Mean of Platts
Singapore (MOPS) benchmark dropped to an average of $47.99 a barrel from
$51.49 in August. MOPS-based diesel, meanwhile, remained volatile, averaging $51.86 a
barrel from $51.66 last month. The COPW last week announced that oil refiners Petron and Pilipinas
Shell Petroleum Corp. will increase diesel prices by 91 centavos a liter
and roll back prices for gasoline by 63 centavos this month.
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The Senate trade and commerce and economic affairs committees
yesterday pushed for the reconstitution of the National Anti-Smuggling
Task Force (NASTF) as smuggling continues to imperil local business
activities. During a joint Senate inquiry, committee chairman Manuel A. Roxas II
scored the Bureau of Customs (BoC) for its alleged inefficiency to curb
the illegal entry of goods, which he said hit a volume of
PhP525 billion last year. "The committee is disturbed with the passive approach of the BoC. At
the same time, we are impressed with the achievements of the NASTF and
recommend to the President the reconstitution of NASTF until it becomes
evident that the BoC can perform the work of NASTF," Mr. Roxas told a
news conference after the hearing.
Agriculture and food committee chairman Sen. Ramon B. Magsaysay Jr.
also called for the reconstitution of the NASTF to ease the rampant
smuggling of farm products. "The 40 containers of smuggled onions at the Bureau of Customs which
I inspected recently are merely tip of the iceberg. How many more of
these illegally shipped containers are released day by day to the
market, killing our local industry and pushing us to the brink of
economic difficulty?," Mr. Magsaysay asked in a statement.
Opposition Sen. Juan Ponce Enrile urged President Gloria Macapagal
Arroyo to lead efforts to strengthen the antismuggling campaign. "I am
requesting the President, through her people in the Senate and the
members of the bureaucracy to think about the solutions proposed by the
NASTF ... I hope she will consider this request, otherwise this will
affect our decision to approve the new taxes since revenues were lost
due to smuggling," Mr. Enrile told reporters in a separate news
conference. Former presidential antismuggling adviser and Interior and Local
Government Secretary Angelo Reyes said the NASTF worked for the
collection of
PhP48.2 million in additional revenues, filing of 62 cases and
release of the inward forward manifest to track down the illegal entry
of goods during its five-month term.
He said that when the NASTF was abolished last month, it gave several
recommendations such as:
- the enactment of a law to make smuggling a heinous crime;
- extensive gathering of information on imports of raw materials
for exports which are duty-free;
- reduction of the number of custom-bonded warehouses;
- identification of existing custom-bonded warehouses and their
subsidiaries;
- computerization of the operations of the BoC;
- immediate auction of seized smuggled goods; and
- random inspection at 15 ports nationwide.
Mr. Roxas asked the BoC to name the top smugglers in the country in a
bid to boost the government's campaign. Customs Commissioner George
Jereos replied that the agency has a watch list of 20 smugglers which
cannot be revealed yet since he still has to consult the BoC legal
department.
ERADICATE SMUGGLING FIRST
A big group of employers yesterday called on the Arroyo
administration to conduct a "full consultation" on new tax proposals,
warning of a number of "repercussions" on Filipino industries. In a statement, the Employers Confederation of the Philippines (ECoP)
said the government should first run after smugglers and delay the
reduction of tariffs under various free trade arrangements. "It is not correct to impose arbitrary tax measures just to solve the
fiscal crisis," ECoP president Rene Y. Soriano said. He noted that previous tax measures, such as the overhauled excise
tax scheme for motor vehicles, "achieved the opposite" as additional
taxes tend to shrink the market. Mr. Soriano said Filipino industries must be "strengthened" by making
the taxable sector "grow and expand." "To be able to collect more taxes, we need to have more and stronger
industries able to compete nationally, regionally and globally. Taxation
can lead to the weakening of competitiveness," he stressed. Mr. Soriano pointed to smuggling as a leading source of revenue
losses. Low valuations, he noted, lead to low value-added tax
collections. "This is unfair to the locals and this is a major contributor to the
collapse of many domestic industries," he said.
Moreover, lower tariffs, under the ASEAN Free Trade Area for example,
"do not make sense," he argued. Former Finance Secretary Jose Isidro Camacho noted that substantial
revenues have been lost because of the government's decision to reduce
tariffs at a rate even faster that neighboring countries in Southeast
Asia, Mr. Soriano said. In effect, lower tariffs are tantamount to a government subsidy on
imports considering that customs handling, inspections, and other
administrative functions cost money, Mr. Camacho added.
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The Asian Development Bank (ADB) may extend more technical and
financial support to the government in the latter's effort to
restructure the power sector and improve its fiscal position. The power reform agenda being pursued by the government, ADB
director-general for Southeast Asia Shamshad Akhtar said in a statement,
is "appropriate." "[The reform agenda] is an ambitious and complex task, given the
prevailing economic environment. It requires close coordination, spread
over a relatively long period of time, on the legislative, regulatory
and policy measures," Ms. Akhtar said. "The agenda addresses issues of ownership, industry structure,
competition, pricing and regulation and we are seeing progress in each
of these areas. "ADB is keen to work closely with the government and other
development partners to facilitate the process which is essential if the
country is to meet its broader development objectives," she stressed. Ms. Akhtar issued the statement following a dialogue with the Energy
department on issues faced by the power sector.
During the meeting, Energy Secretary Vincent S. Perez Jr. confirmed
the government's commitment to pursuing reforms in the power sector, as
mandated by the Electric Power Industry Reform Act. Mr. Perez emphasized the need to immediately undertake reforms in the
power sector given the growing burden that the National Power Corp.'s
losses place on the national budget. The Philippines is considered as among the first of ADB's developing
member countries to implement the privatization of power generation
assets, concessionaire agreements for the operation of transmission
assets and the introduction of a wholesale electricity spot market. As the lead financing agency in the country's power sector, the ADB
said it will continue to hold consultations and dialogues with the
government and review the power sector reforms and privatization
process. It underscored the need to restore the financial viability of the
power sector and hasten this industry's restructuring and privatization.
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By NORMAN P. AQUINO, Senior Reporter
National Treasurer Mina Figueroa yesterday quit her post following
"policy differences" with the Finance department's borrowing tack. Specifically, the national treasurer felt the government was paying
more than it should under its borrowing program, a highly placed source
told BusinessWorld. Ms. Figueroa reportedly disagreed with Finance Undersecretary Eric
Recto on the cost of the $1-billion global bond that the government
issued last week, which she felt was higher than prevailing market
rates. "She also felt the government paid higher fees for its 350-million
euro bond offering last July," the official pointed out. BusinessWorld tried to contact Ms. Figueroa but she would not
answer calls. Finance Secretary Juanita Amatong, who was attending a
hearing at the House of Representatives, claimed she was not aware of
the resignation. BusinessWorld also tried to get in touch with Mr. Recto, who
likewise denied he knew that Ms. Figueroa had quit her post.
The Philippines issued 350 million euros worth of bonds in July to
refinance maturing debts this month. It also raised $1 billion in
overseas debt last Wednesday through the sale of additional 2015 and
2025 global bonds to bridge a financing gap at beleaguered National
Power Corp. The Philippines sold $300 million worth of bonds due in 2015 at
8.875%, and $700 million worth of bonds maturing in 2025 at 10.625%. Mr. Recto said the government had set a price guidance of 98 for the
2015 bonds and 106 for the 2025 series. The successful sale of the bond, he added, was a proof that "we are
still able to access the international market." Deutsche Bank, JP Morgan
and Credit Suisse First Boston were the lead managers for the sovereign
debt issue. Napocor needs $1.5 billion to fund its operations and settle maturing
debts this year. The government has been borrowing on behalf of Napocor
because the power firm's mounting losses make it too costly for it to
raise money on its own in the global debt market. The global bond offering came after comments late last month by
President Gloria Macapagal Arroyo that the country is in a fiscal
crisis. The funding exercise completed the government's stated goal of $1.5
billion for the year for Napocor and helped prefund the government's
borrowing requirement to fill a projected budget deficit of
184.5 billion pesos next year.
Early last week, the government said it planned to raise about 22% of
its 2005 financing need from overseas sources including multilateral
lenders and 78% from the domestic market. It said an equivalent of about
PhP84 billion will be raised via offshore bonds. Mr. Recto said the government decided to go ahead with its quick
offer to avoid competing with the issues that will be launched by other
sovereign and corporate borrowers. The Philippines will use a portion of its newly sold $1 billion
global bond to help fill the government's funding gap for 2005, Mr.
Recto earlier said. He also said the bulk of the bond proceeds would be used for the
financing requirements of state-owned Napocor for this year, but about
$200 million will be used for the government's need for 2005.
Last month, think tank Congressional Planning and Budget Department
said the government is putting its fiscal position in greater risk by
increasing its foreign borrowings in the first half of this year. In its analysis of the government's cash operations, the department
noted that the government's gross borrowings for the first semester
totaled PhP228.1 billion, of which 37% or PhP83.3 billion were loans
from foreign sources. This was inconsistent with the programmed borrowing mix of 16-84 in
favor of domestic borrowing. It further noted that 80% of the total foreign borrowings were
long-term commercial loans that are subject to higher interest rates.
Program or project loans, in comparison, are subject to concessional
rates.
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The government still allowed interest rates to move up but warned
banks to sell the debt papers to clients or else be delisted as an
eligible dealer. "I wouldn't believe the secondary market anymore. When you talk to
institutional clients, there are no done deals at those levels,"
National Treasurer Mina C. Figueroa said. During yesterday's auction, the Treasury partially awarded the 91-day
and 364-day paper but fully rejected the 182-day paper as total bids of
PhP3.26 billion fell short of the PhP3.5-billion public offering.
The three-month paper was up by 28 basis points to 7.718% while the
one-year instrument moved up by 20.4 basis points to 9.975%. For both papers, tenders reached as high as PhP12.945 billion against
a combined offering of PhP7.5 billion. The Bureau of the Treasury accepted only PhP6.385 billion. "We set the cap for the 91-day at 7.75% and the 364 at only 10%. The
six-month was only a throwaway as it was really undersubscribed," Ms
Figueroa added.
If the auction committee had accepted bids, the 182-day paper would
have been at 8.954% or up by 49.9 basis points from the last auction.
"We will look at the last one-and-a-half-year performance of the
GSEDs [government securities eligible dealers]... We plan to categorize
them into primary dealers and ordinary GSEDs. Those primary dealers
would be able to ask for rates while ordinary GSEDs can only bid at
noncompetitive levels. Hopefully, we can put it out at the end of the
year," Ms. Figueroa said. "I talked to the [Money Market Association of the Philippines]
officials over this already. I promised that I would still discuss with
them first," she added.
-- Ira P. Pedrasa
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The Philippine National Bank asked for a
PhP17.5-million refund from the Commissioner of Internal Revenue
for taxes which it said were wrongfully imposed on interest income. In a September 8 filing before the Supreme Court, the bank said "the
20% final withholding tax on interest income should not form part of a
bank's taxable gross receipts for Gross Receipts Tax (GRT) purposes." "Such amended quarterly percentage tax returns of petitioner thus
reflected a reduced amount of taxable gross receipts and GRT liabilities
resulting in an overpayment by petitioner of GRT when compared with
previous returns," the 12-page motion read.
From June 30, 1994 to March 31, 1996, the bank paid PhP981.42 million
in taxes when it should have paid only PhP963.92 million, it said. On May 12, 2003, the Court of Appeals reversed a Court of Tax Appeals
decision partially granting the bank's claim for refund and awarded the
bank PhP13.79 million, representing overpaid gross receipts tax. "No error could be attributed to the findings of the [Court of Tax
Appeals], and thus, should not be disturbed," it said, adding that that
"being a court of special jurisdiction," the Court of Tax Appeals'
findings and conclusions should be accorded great weight. The bank said since such court is a special court primarily created
to review tax cases, the Supreme Court should only reverse a decision
when there is an abuse of authority.
To support its case, it cited a court decision on the Collector of
Internal Revenue versus Manila Jockey Club. In the said case, the Court of Appeals ruled that the commission
never became the club's property because it was earmarked by law for the
Board on Races. As such, it did not form part of the club's gross
receipts and thus not subject to the 20% amusement tax. In this case, the bank said "the earmarking in favor of the
government of 20% final withholding tax on the bank's interest income
was required both by the National Internal Revenue Code and the Revenue
Regulations." As such, the 20% "should not form part of the bank's taxable gross
income as it never formed part of the bank's income as it is already
earmarked at the outset in favor of the government," it said.
-- Ma. Elisa P. Osorio
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Largest local lender Metropolitan Bank and Trust Co. will likely
spend PhP320 million for capital expenditures on technology this year.
In a report filed with the Securities and Exchange Commission, the
bank said the outlay -- to be sourced from its working capital -- will
include upgrades of personal computers, central processing units,
automated teller machine tandem hosts, corporate local area network,
servers, and on-line back-up recovery centers as required by the Bangko
Sentral ng Pilipinas (central bank). "Given that product and delivery channel homogeneity is already
highly pronounced, the bank shall continue to drive for higher standards
of customer satisfaction with critical support from technology
upgrades," it said.
Aiming to strengthen its hold on established markets, the bank will
continue embarking on the development of its several electronic banking
initiatives such as pursuing ATM interconnections for its 670 electronic
tellers similar to earlier arrangements with international ATM giants
Cirrus-Maestro and VISA Plus, so as to provide customers with access to
ATMs worldwide. "It intends to continue supplementing its phone-banking,
mobile-banking, and Internet-banking facilities to allow customers to
perform real-time bank transactions over a distinct array of electronic
channels," the bank said. Sustaining its focus on expanding its consumer base, the bank is
harnessing a comprehensive database of target clients for its current
and future offerings. "It also offers a wide range of retail banking products to the
employees of its corporate customers and to owners of small- and
medium-sized businesses which are customers of its various branches," it
said. The bank saw a 10.9% increase in net income to PhP1.73 billion during
the first semester from PhP1.56 billion in the same period in 2003.
-- Ruby Anne M. Rubio
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Second largest lender Bank of the Philippine Islands (BPI) is
teaching potential and new clients on how to use the bank's alternative
banking channels. Yesterday, the bank launched a tutorial center called Express
Learning Center, which is very accessible to both office workers and
students alike since it is situated in a mall. The first center is right
beside the convenience banking center in Park Square I at the Ayala
Center in Makati City. The bank has emabarked on different innovations ranging from
electronic to on-line banking services offered to Filipinos here and
abroad. It introduced electronic banking in the country through
asynchronous transfer mode technology through BPI Express Teller. "BPI continues its tradition of leadership as it introduces new
offerings to serve its clientele. These channels offer customers the
convenience of 'anytime, anywhere' banking, and allows them to do a wide
array of banking transactions from their home or office," the bank said
in a statement.
The Ayala-led bank added that clients who go to the center can learn
online banking in one easy session. "They can also be tutored in phonebanking, which has an extensive
menu for self-service transactions, whether you are a deposit client, a
credit card holder, or have loans or remittances with BPI," it said. The learning center also offers a special module on financial advise
that can be given to overseas Filipino workers and their families or
beneficiaries. Backed by higher revenues, the bank's net earnings rose by over 30%
to PhP3.5 billion during the first six months of 2004 from P2.6 billion
a year ago. -- Ruby Anne M. Rubio
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By CECILLE S. VISTO, Sub-Editor
Customers of the debt-saddled Maynilad Water Services, Inc. should
brace for higher water rates starting next month if a Quezon City court
approves the company's rehabilitation plan which calls for the hike. Although the government had said it will not allow the debt-saddled
company to implement new water rate hikes, it stressed it will not
prevent Maynilad from finally implementing increases previously approved
by the state-run Metropolitan Waterworks and Sewerage System Regulatory
Office (MWSS-RO). But while it is inclined to allow the Lopez-led firm to increase the
average tariff or the per cubic-meter charge for its customers starting
next month, the actual amount of additional charges is still to be
determined. Maynilad wants to increase rates to PhP26.98 per cubic meter from
only PhP19.92.
Former Government Corporate Counsel and Justice Undersecretary Manuel
A. J. Teehankee said one of the conditions that MWSS had set before
approving the revised rehabilitation plan for Maynilad is that there
should be "no special rate increases" for west zone consumers. The
regulatory authority, he added, also required that water services should
not be interrupted. "This rehabilitation plan does not contemplate special rate increases
except for the rate rebasing of every five years as provided under the
concession agreement. It is hinged on the fact that there will be no new
rate applications for Maynilad customers in the meantime," Mr. Teehankee
said. Maynilad, based on its 1997 concession contract, was entitled to a
rate rebasing starting January 2003. A rebasing scheme is allowed every
five years.
The MWSS-RO approved in January 2003 a PhP6.84 increase spread over
five years. Of the amount, only PhP4.40 was supposed to be charged in
2003, with the remainder to be charged in the next four years. Maynilad postponed the implementation of the rate hike as its early
concession termination dispute with MWSS was then pending arbitration. Maynilad, in its proposed corporate recovery blueprint submitted last
week, indicated that it will finally implement the rebased rates. It
added: "recovery of all approved tariffs is indispensable" to get
Maynilad back to financial profitability. "Since the recovery of all approved tariffs is indispensable to the
revised rehabilitation plan, Maynilad and MWSS are discussing the terms
by which the approved 2003-2007 tariffs will be implemented, with
Maynilad undertaking not to file applications for additional tariff
increases," it said. Notably, the tariff projections of Maynilad and MWSS were different.
Even as Mr. Teehankee said only the previously approved rebased rates
will be allowed, Maynilad's projections also included the implementation
of a so-called special transitory mechanism and higher environmental
charge. The mechanism was designed to allow the concessionaire to collect
foreign exchange losses and missed revenue arising from the late
implementation of the rate rebasing adjustment. MWSS deferred the
implementation until next year.
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State-owned Philippine National Oil Co. (PNOC) recently acquired a
PhP20.5-million funding from the Japan External Trade
Organization (Jetro) for the conduct of a feasibility study on the
proposed 19-megawatt Sicopong hydropower project in Sta. Catalina,
Negros Oriental. The project is part of key strategies earlier unveiled by President
Gloria Macapagal Arroyo to develop renewable energy sources to achieve
energy independence. "We have enough water resources and we want to harness their full
potential so we are aggressively developing them into hydropower
projects, and Negros Oriental is one significant area to tap," PNOC
President Eduardo V. Maņalac said. The state-owned firm inked a memorandum of agreement with West Japan
Engineering Consultants, Inc., the company tasked to evaluate the
technical, social, financial and environmental viability of the project.
Hydropower experts from West Japan Engineering have done field visits
and preliminary surveys in Sicopong, which was found to have good
potential, PNOC said. It said provincial leaders have been pushing for the conduct of the
feasibility studies to look at the site's viability, noting their
optimism the output would ease the power supply problem of the province.
Mr. Maņalac said that Negros is now becoming the renewable energy
center of the country as it is home to PNOC's 112.5-megawatt Palinpinon
I and the 80-megawatt Palinpinon II geothermal fields, and its tie-up
with British firm Bronzeoak for a 30-megawatt bagasse-powered
cogeneration project in Talisay. West Japan Engineering has also completed the feasibility studies for
PNOC for the 23.5-megawatt Timbaban Hydropower project in Panay and the
18-megawatt Catuiran Hydro project in Mindoro. The results are now being evaluated for eventual implementation, the
PNOC said. -- Bennet S. Sto. Domingo
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Mondragon International Philippines, Inc. yesterday postponed for
another six months the holding of its stockholders' meeting to give time
for prospective investors to finish their due diligence on the firm's
assets. "The investors wanted more time to complete their due diligence.
Until such time that they are finished with their studies, we cannot
hold a meeting. But we hope that they can finish their studies soon, or
within six months," Jose Antonio U. Gonzalez, chairman and chief
executive, told BusinessWorld. "While we have been holding
negotiations with the investors, they have asked for more time in view
of what they call political uncertainty and country risk."
In a disclosure, Mr. Gonzalez said that "the meeting was rescheduled
to allow the company enough time to pursue negotiations with concerned
entities as well as with investors who will provide additional funds."
These funds, he said, would be used to settle the company's
obligations to the government and "normalize operations within Mimosa,"
its leisure estate in Clark. He said the company postponed its stockholders' meeting to March 14,
2005, "exactly six months" from now. The company last convened its stockholders' meeting three years ago.
"I want this to be settled for the benefit of stockholders. The
company only wants to protect their interest," he said. He declined to name the investors but claimed many are interested.
"They want to remain confidential," he said.
Wholly owned unit Mondragon Leisure and Resorts Corp. used to manage
the 235-hectare Mimosa leisure estate inside the former Clark air base
in Pampanga. While there are reportedly investors looking at Mimosa, most of them
were apparently turned off with the present setup since state-owned
Clark Development Corp. runs the estate. "They want to deal with a private entity," said Mr. Gonzalez,
referring to the investors who are looking at the estate.
-- Roulee Jane F. Calayag
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By ROULEE JANE F. CALAYAG
A host of factors converged to further strengthen the performance of
the Philippine stock market which started the week in positive
territory. Contrary to expectations of a possible decline in the Philippine
Stock Exchange composite index (Phisix) due to some stocks reaching
overbought levels, the benchmark index continued to soar, closing 7.02
higher at 1.758.62. "The [expected technical] correction was overshadowed by the
higher-than-expected global bond float and the drop in world crude oil
prices over the weekend," said Mylene Crucena Mercado, investment
analyst at 2tradeasia.com. A fortnight after President Gloria Macapagal Arroyo declared that the
country was facing a fiscal crisis, the government said it was again
ready for the international capital market with at least $750 million in
bond offering. This was later raised to $1 billion, following a healthy
demand for the sovereign bonds.
OIL PRICES
The decrease in the world crude oil prices also boosted the stock
market and prevented an early bout of technical correction. The market marched on with its gains also through the pullback in oil
prices to $42.81 per barrel from $43.99 inspired local investors. "The Phisix moved seven points up at 1,758.62, following crude oil
futures' biggest decline in three months at $42.81, down by 4%, as well
as Petron Corp.'s decision to keep product prices unchanged, despite
smaller firms' rate increase. Government's higher-than-expected $1
billion funds from its global bond offering also aided sentiment,"
explained Ms. Mercado. The Oil Petroleum Exporting Countries will be meeting this week in
Vienna to look into oil output and prices. An uneventful observance of the third anniversary of the Sept. 11
terror attacks likewise helped the market sustain its forward move. And last but not least, the follow-through buying in select stocks
expected to record strong gains in the financial front also buoyed
sentiment and increased investors' appetite.
INDICES
At the stock market, the number of losers was twice the gainers,
56-28 while 32 issues clung to their previous prices. Four counters were down and only two sustained their gains. "Among sectors, only commercial-industrial ended in green, up 0.79%
day-on-day, led by telcos. Erstwhile high-performing property was down
30% and financials, down 1.4%, finished weaker owed to much-needed
technical breathers," added Ms. Crucena. Commercial-industrial gained 22.05 or 0.79% at 2,814.74. The banks
and financial services sector dipped 7.18 or 1.43% to 494.02. Mining
recorded the biggest decline of 35.58 at 1,824.07. Property slid 1.75 to
586.02. Oil lost 0.09 or 5.14% at 1.66. The all shares index was up 2.67 or 0.25% at 1,066.73.
Value turnover declined to slightly over
PhP1 billion from a spectacular level of almost PhP2 billion
last week. There were 4,188 trades for 2.89 billion shares that exchanged hands
in yesterday's session.
AYALA STOCKS
Globe Telecom, Inc. was still the top traded stock, closing at
PhP1,090 with 214,000 shares valued at PhP232.9 million. The market continued to focus on other Ayala stocks such as Bank of
the Philippines Islands (BPI), Ayala Corp., and Ayala Land, Inc. BPI, the banking arm of the Ayala group, was the third most actively
traded stock although its price dipped to PhP46. The stock price of
conglomerate, Ayala Corp., also dropped but it still managed to rank as
the fourth top traded stock. It closed at PhP6.30. Philippine Long Distance Telephone Co. remained the closest
challenger to Globe in the second spot. It closed higher at PhP1,445,
cornering 21.57% of the market with 157,000 shares worth PhP227.8
million.
FOREIGN BUYING
With the improving economic climate, spruced up by government's
widespread efforts to stamp out its fiscal deficit, foreign fund
managers kept their hard-earned investments in the local equities
market. Foreign net buying amounted to PhP125.6 million yesterday. As the market enters into its tenth trading day this month, investors
remain upbeat about the prospects at the bourse. They expressed hope
that the upward trend will be sustained until the end of the year. Although it is still a long way to go before the year draws to a
close, some investors have already began to plot a fruitful rally for
the next three months. They said there was no stopping the bull from
reigning as the domestic stock market defied all expectations early on.
The stock market staged spectacular gains, with value climbing to
less than PhP2 billion in one session last week. It also closed to a
record 53-month high. The drive to conquer the bearish mood that has been weighing the
market for years rages on and investors are heartened by this seeming
single-minded commitment to reverse the fate of the local bourse. Dealers expect sideways trading to prevail today, with some technical
corrections. But while the market readies for these corrections, investors will
also be monitoring other developments which could offer pockets of
opportunity for them. Generally, traders said the market will be moving smoothly except for
a few dips in some stocks.
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