FDI: Vietnam can; why can’t PHL?

A photograph in Wednesday’s edition of the BusinessMirror makes clear the economic realities of the 21st century.

The picture shows the Swiss Foreign Minister meeting with the Vietnamese Deputy Prime Minister in Hanoi to discuss bilateral relations, trade and investment. The irony is that this meeting is taking place under a prominent picture of Ho Chi Minh.

“Uncle Ho” may have been the leader of Vietnam’s long struggle for independence, but, economically, he was a hard-line communist, who modeled his nation’s policies after those of Joseph Stalin’s.

The story under the photograph might be causing Ho to spin in his grave as Vietnam is about to open the country further to foreign investment.

Vietnam’s transition to a more open and free economic state began in 1986, almost 20 years after, Ho died. It began with ‘Doi Moi’. This policy maintained strict central government economic planning, but allowed for small businesses to open and grow. In 1996 Vietnam implemented what, at that time, was one of the most progressive and open foreign investment laws in the region, if not the world.

Export zones were set up, profits were allowed to be repatriated, and build-operate-transfer schemes were implemented. Virtually every sector of the economy, from agriculture to infrastructure, became available to foreign investment. Foreigners were allowed 100-percent ownership of their companies.  But, as good as that all sounds, there were some restrictions on foreign direct investment (FDI). Vietnam is now moving ahead to open its economy even more.

In 2014 Vietnam attracted net $9 billion in FDI; the Philippines brought in $6 billion. But pledged FDI in Vietnam fell 22 percent in the five months of the year. The Philippines saw a drop of 40 percent in the first quarter.

Vietnam’s Planning and Investment Minister Bui Quang Vinh said his country intends to bring in $12 billion in 2015 by significant changes in Vietnam’s foreign investment regulations.

On July 1 the government will reduce to six from 51 the number of areas in which foreign firms are prohibited from operating. It will also loosen regulations in more than 100 other areas in what will be the biggest overhaul of foreign business rules in the economy, since private firms were allowed in Vietnam in 1990.

Vinh said the revised laws on investment and enterprises “will make huge changes to significantly improve our business environment and create strong momentum for growth.” Vinh expects FDI pledges of $23 billion in 2015.

But, in the Philippines, we get this kind of comment from a prominent leader: “What do we, as a nation, stand to gain from relaxing the [foreign investment] provisions now deemed restrictive?”

The following facts might answer that question. The annual economic growth rate in Vietnam averaged 6.48 percent from 2000. The Philippines’s average was 5.08 percent. In the first quarter of 2015, Philippine growth was 5.2 percent; in Vietnam, it was 6.03 percent.

FDi is not a “magic bullet” for the economy. But it is a critical factor, and that factor is missing in our country.

source:  Business  Mirror

Teddy Locsin: How Jojo should have said it

JOJO Binay’S speech was met with brickbats. Here’s how Binay should have said it. “I have resigned from the Aquino Cabinet with a one-line resignation letter. I do not mince words or waste them. I am grateful for the privilege of serving in the Cabinet of a man of unquestioned sincerity. But I cannot go on working alongside colleagues of indisputable insincerity who work against me—sadly, with no electoral advantage to themselves.

“I resigned because it is approaching that time when those of us in the Cabinet who intend to run in next year’s election must tell the electorate why we are running—on a level playing field and along a straight and narrow track by not taking advantage of Cabinet positions and the funding that goes with them.

“I do not want what I will say in the coming campaign to be taken as criticism of an Aquino administration; in the first of which I served proudly as OIC mayor, in the second of which as a Cabinet member.

“But the platform on which I will run might be taken as criticism of the President I served, even as I served his mother in a lesser capacity. I do not want that. His mother put him in my care when she was president.

“I shall promise a swift resumption of light-rail operations by any means that work; and I shall implement a profound overhaul of the entire system so that breakdowns are not repeated to the detriment of ordinary Filipinos—compounding the long hard work they do with the long hard walk they must take to and from work in the dark before dawn and in the darkness of midnight. Wherever urban centers have reached a point of irremediable congestion, I shall implement the same efficient transport system.

“I promise justice, security and peace for our Muslim brothers and sisters, and for their Christian brothers and sisters. I promise ironclad security for their families and communities against armed elements seeking to take complete control of their lives by executive action rather than by democratic election, and to put peaceful communities at their mercy without the protection of our Constitution and the laws. All this in one indivisible republic, dedicated to freedom and justice for all regardless of religion.

“I believe it is possible, nay, it is mandatory, to deliver good government without taking shortcuts that violate the rule of law. That is the challenge of a democratic presidency and the oath that presidents take to uphold the Constitution and the laws.

“If government cannot govern well without bending the law, it may still achieve short-term reforms but the ultimate result is the long-term deformation of our democracy—against which Ninoy Aquino fought and for which his life was taken.

“In foreign affairs where there are no permanent friends, I shall make no permanent enemies for our country. I will pick no fight that is not directly in defense of homeland security.

“If at all possible, I will incur no deep enmity with a powerful neighbor and adhere to a course of peaceful dialogue but without the smallest infringement of our sovereignty or the tiniest loss of national territory—neither to a foreign power nor to domestic terrorists.

“Other than what I have promised, I will promise nothing more in my campaign that I have not performed. I will attempt nothing I have not already achieved; so the work of government shall entail no waste and invite no disappointment. But this much I promise you, my government will not begin and end with a massacre.

“I will not berate the Holy Father if he comes again to visit.

“I will make mistakes; I am only human; but I will say sorry for them. Not to apologize is tantamount to threatening more of the same.

“From first day to last, my administration will be marked by the continuing and increasingly inclusive progress that was started by this administration; by the unbroken peace that this government threatens to lose through a unilateral and uninformed initiative prompted by foreign governments.

“And always, ever  and foremost, my administration will be marked by unrelenting devotion to the best interests of all our people, poor and rich, and the growing numbers in the middle for which we must credit this admin.

“You have heard much against me. Please take the trouble to see what I have done for one city.

“Look at what is there before you: every child in school, including the children of Taguig; every elderly person given attention and respect because people retire only from work and not from life itself—and we all…we all get old.

“See for yourselves, rather than hear from my enemies, what I have done—and what I aim to do if, God willing, the people let me.

“At a certain point in our lives we are confronted with the choice: their way or the highway. Well I’m on the road. I hope to see more of you there. It will be hard but who wants easy? It will be a fight but what else is worth doing? I will take questions now.”

I am not saying that this and just this, word for word, is what Jojo should have said; but he should have been more reflective, taken the trouble to sound more thoughtful—and less baduy by peddling the opposition hook, line and sinker.

source:  Business Mirror

European Commission lifts ban on all PH airlines

MANILA, Philippines (UPDATED) – All local airlines can now enter the European airspace, joining national flag carrier Philippine Airlines (PAL) and budget carrier Cebu Pacific. (READ: PH carriers to know by July if they can fly to Europe)

The European Commission (EC) announced on Thursday, June 25, that all airlines certified in the Philippines have been taken out from the European Union Air Safety List due the tight oversight being conducted by the Civil Aviation Authority of the Philippines (CAAP).

Removed from the list were PAL Express (formerly Air Philippines Corporation), Cebu Pacific’s Cebgo (formerly Tiger Airways Philippines and Southeast Asian Airlines); Air Asia Incorporated; Air Asia Zest; Island Aviation Incorporated; Magnum Air Incorporated (Skyjet); and South East Asian Airlines International Incorporated (Seair-I).

“After 5 years of hard work, we are finally able to release the airlines certified in the Philippines from the European Air Safety List. The Philippines is an important country with a sizeable and rapidly growing aviation sector,” said Violeta Bulc, European Union commissioner for transport.

“Today’s result can serve as an example for other countries which have difficulty to match their safety oversight capabilities with the growth of their industry,” she said.

Opportunities

The lifting of the ban would allow and encourage Europeans to tap the services of the Philippine carriers when travelling to the Philippines or to other countries, said CAAP spokesperson Eric Apolonio.

The decision comes after a 5-man EU safety assessment team gave a positive review of the airlines following a series of inspections in April.

This led to the suspension of the operations of Skyjet and Seair last May 15 due to safety issues.

The suspension of Skyjet and Seair was lifted last June 7.

While the 7 carriers largely service only domestic and Asian routes, Apolonio said the EU decision will still benefit them.

Previously, European insurance companies would not cover people who flew on airlines on the EU Air Safety List, he said.

"European tourists will be encouraged to use low-cost carriers in the Philippines now," boosting the number of visitors who will want to fly around the archipelago, Apolonio told Agence France-Presse.

PAL now flies to London and is planning to add more European destinations, whileCebu Pacific is applying to fly to Italy.

Lubomir Frebort, EU chargè d’ affaires, congratulated CAAP for overseeing the operations of airlines operating in the Philippines.

“Within this period of time, the Philippines was able to get full lifting from the ban due to CAAP’s openness to improve its oversight functions, complemented by readiness of Philippine air carriers to enhance their own safety and operation standards,” Frebort said. – Rappler.com, with a report from Agence France-Presse

UNMASKING THE SALIM EMPIRE: Closet billionaires . . . or corporate dummies?

Third of a Series

The Salim conglomerate in the Philippines, aka the “MVP” group, has five executives who are the Indonesian billionaire Anthoni Salim’s Filipino partners, their identities heretofore kept hidden from the public eye.

With the enormous income and share prices of the conglomerate’s subsidiaries, mainly Philippine Long Distance Telephone Co. (PLDT), the mammoth holding firm, Metro Pacific Investments Corp. and Meralco, these five executives could be the country’s closet billionaires.

Or they could be merely corporate dummies who help portray the fiction that the conglomerate is a Filipino entity, which, therefore, can go into public utility firms.

You decide what they are.

Except for the high-profile Manuel V. Pangilinan, 68 — who has been portrayed as controlling, or even owning the conglomerate that is known by his name’s initials – you mostly probably haven’t heard of them. Until now.

Surprisingly, these four executives are just third-tier executives in the hierarchy of the Salim empire in the country:

• Alfredo Panlilio, 52, senior vice president for Customer Retail Services and Corporate Communications of Manila Electric Co.
• Victorico Vargas, 62, president of Maynilad Water Services;
• Rene Bañez, 59, senior vice president, Supply Chain, Asset Protection and Management Group of PLDT;
• Lourdes Rausa-Chan, 61, PLDT senior vice president for Corporate Affairs and Legal Services, chief governance officer, and corporate secretary.

Indonesian tycoon Salim’s Filipino partners, and the market value of their indirectly held shares in PLDT and Metro Pacific Investments Corp. – if they are really the owners of the key firms, that is.

Together with Pangilinan, they are the stockholders of a firm named Pacific Enterprise Management Corp. (PEMH). Their respective percentage shares in the firm are shown in Table 1.

This firm is the sole Filipino partner of Salim, through subsidiaries of First Pacific Co. Ltd., which he controls, in a shell company named Pilipinas Pacific Enterprise Holdings. This company is at the apex of corporate layers that represent the investors in the Indonesian billionaire’s Philippine empire.

The Pangilinan-Panlilio-Vargas Group?

The company chairman is Pangilinan, who also chairs and is the sole representative of all five intermediate firms that are the corporate layers for Salim’s control of PLDT and MPIC. He is the biggest stockholder of the firm with a 29 percent stake.

Surprisingly, though – considering that Pangilinan has been the conglomerate’s public face, and that many thought he was its controlling stockholder so that it was called the “MVP Group” – the amount of shares of the next biggest stockholders, Panlilio and Vargas, aren’t too far from his: 24 percent each. (Bañez and Rausa-Chan have 11 percent each.)

Also unexpected is that the PEMH president is a relatively young Panlilio, the youngest of the group, but who is, in effect, Pangilinan’s right-hand man. Vargas is vice president, while Bañez is treasurer. So if the group just had to have a Filipino name, instead of “Salim Group,” perhaps more appropriate would have been “PPV Group,” after the initials of the three biggest individual stockholders of the conglomerate, next to Salim.

However, Rausa-Chan isn’t the shell firm’s corporate secretary, the post she has occupied in Salim’s flagship PLDT since the Indonesian tycoon acquired it in 1998. That post is held by lawyer Alex Erlito Fider, a partner of the Picazo Buyco Tan Fider & Santos law firm. Fider is also corporate secretary of five other firms belonging to the Salim conglomerate.

It is PEMH that allows Salim to skirt the constitutional ban on foreign controlled public-utility enterprises.

That is undertaken by having this shell company own 60-percent of Pilipinas Pacific Enterprise Holdings (PPEH), with the remaining 40 percent held by a subsidiary of First Pacific Enterprise Holdings B.V., a Netherlands-based subsidiary of Salim’s Hong Kong-based First Pacific Co., Ltd.

Since it is 60 percent owned by PEMH, whose stockholders are the five Filipinos, PPEH is classified as a “Philippine corporation.”

The chain of corporate layers below PPEH – Enterprise Investment Holdings (EIH), Metro Pacific Holdings, Inc., Metro Pacific Resources, Inc., and Metro Pacific Asset Holdings – are all classified as Philippine firms, which, therefore, can own public utility firms. (See accompanying chart.)

The reason why Salim had to have several corporate layers to invest in PLDT and MPIC, even if PPEH is already masked as a Philippine corporation and, therefore, technically allowed to control public utilities, is that each layer further dilutes the Filipino stockholders’ shares, and inversely increases his holding for near-absolute control.

Thus, while PPEH is 60 percent controlled by the five executives, its share is reduced to 36 percent in EIH, 21.6 percent in Metro Pacific Holdings (the corporate investor in Metro Pacific), 13 percent in Metro Pacific Resources (one of the two investors in PLDT), and 8 percent in Metro Pacific Asset Holdings (the second investor in PLDT through Philippine Telecommunications Investment Corp.)

On the other hand, Salim’s holdings inversely grow from 78 percent, 87 percent, to 92 percent, respectively, in the three firms for his uncontested control of these firms, even as they are classified as “Philippine corporations,” thanks to PEMH’s role in the layers.

The all-Filipino firm PEMH’s economic interest in PLDT is reduced to 2.2 percent, and that in MPIC to 12.1 percent. That of the Indonesian tycoon is 23.4 percent in PLDT and 43.7 percent in MPIC – if the Filipinos in PEMH actually own the shares registered to them, that is.

Salim, with these shares, has an uncontested control of the two firms, since the remaining shares are dispersed among thousands of investors in the stock market, though none of them owns more than 1 percent.

And our stupid lawmakers, and even such purportedly professional organization of economists such as the Foundation for Economic Freedom, are pushing for the lifting of the country’s purported restrictions on foreign investments! What naiveté.

Biggest individual stockholders

The stockholders of PEMH make them the biggest individual stockholders of both PLDT and Metro Pacific, because of their indirect holdings, as shown in Table 1.

TABLE 1: PEMH SHARE DISTRIBUTION AND INDIRECT SHARES IN PLDT AND MPIC, THROUGH PEMH
(% OF TOTAL)

Source: The firms’ reports to US and Philippine SECs. (Percentages rounded off)

Their shares are much larger, for instance, than the second biggest individual stockholder (after Pangilinan) in PLDT’s reports, Albert and Gretchen del Rosario, who together have only 0.1 percent, according to the PLDT’s figures submitted to the US and Philippine SECs.

These percentage ownership figures certainly aren’t just of academic interest.

The billions of pesos of profits from PLDT and MPIC (especially from its very profitable monopoly Meralco) are distributed to the ultimate owners, based on their direct and indirectly owned shares, while the shares themselves are worth billions in the stock market.

Based on data reported by First Pacific in its annual reports from 2000-2014, that its share of profits from PLDT totaled $2.2 billion, and from MMPIC, $378 million, the current stock market prices of PLDT and MPIC, and indirect shares of the five Filipino executives, I computed their income and market of value of shares they hold as shown in Table 2.

TABLE 2: ESTIMATED INCOME RECEIVED AND MARKET VALUE OF SHARES INDIRECTLY OWNED BY THE FIVE EXECUTIVES

(Percentages rounded off)

The figures are gargantuan, making them the country’s closet billionaires – if they are really the stockholders, that is.

I doubt very much, though, if they really received these shares of profits, or else they would have appeared since 2000 in the Bureau of Internal Revenue’s top taxpayers’ list. I’m also astonished why they would still be working eight to 10 hours at Salim’s conglomerate, when they could just rely on their share of even just PLDT and Meralco’s profits.

On Wednesday I will discuss who on earth are Panlilio, Vargas, Bañez, and Chan to Salim that they became his partners. I will also discuss the obvious question: Are they really billionaires with their indirect holdings in one of the country’s largest conglomerates, or are they just dummies, their purported shares in reality held by Salim?

NOTE

I had sent emails, as far back as several weeks ago, to all the Salim group officials mentioned in this article, requesting their comment on the points raised in this piece. I wasn’t even given the courtesy of any form of reply. I had also informed certain people close to Pangilinan and Panlilio that I had sent them such emails.

I am grateful to my colleague, columnist Emeterio Perez, for sharing with me crucial information for this article.

tiglao.manilatimes@gmail.com
FB: Bobi Tiglao

CALAX : Cavite-Laguna Expressway deal awarded today

A UNIT of Metro Pacific Investments Corp. (MPIC) will be awarded today the 35-year contract to build, operate, and maintain the planned Cavite-Laguna Expressway (CALAX) that is expected to ease traffic congestion south of the capital, the Department of Public Works and Highways (DPWH) said yesterday.

“The NoA (notice of award) is set for release tomorrow,” Ariel C. Angeles, officer-in-charge and director of DPWH’s Public-Private Partnership Service, said in a mobile phone reply, as Public Works Secretary Rogelio L. Singson confirmed separately via text: “Yes, we will award tomorrow.”

Asked if MPIC-backed MPACALA Holdings, Inc. -- which submitted a higher premium over rival San Miguel Corp. -- passed the financial evaluation, Mr. Angeles replied: “They passed. Resolution [is] already approved.”

MPCALA offered a premium of P27.3 billion on top of P35.42-billion project cost, nearly 23% more than the P22.2-billion bid of San Miguel Corp. subsidiary Optimal Infrastructure Development, Inc. DPWH had set a P20.1-billion floor premium for this tender -- Optimal’s bid in the first auction on June 2 last year.

The NoA for the CALAX project was originally scheduled on June 4. Asked why award was slightly delayed, Mr. Angeles explained: “The NoA was routed to all SBAC (special bids and awards committee) members. And the schedule is still ahead of the original timetable and still within the time frame allowed under the BOT (Build-Operate-Transfer) law.”

In a separate interview, MPIC Chairman Manuel V. Pangilinan said his group will defer negotiations for partnerships until the group formally receives the NoA. “Ayaw namin makipagusap kasi wala pa ‘yung notice of award. (We don’t want to talk to prospective partners because the notice of award has yet to be issued). Of course we’re the highest bidder based on the bid, but I think until we receive the notice of award, we are not officially the winner,” he told reporters on the sidelines of IdeaSpace Finals Night in Ortigas district on Friday night. “When we get that, maybe we can start talking to potential partners. But until we receive that notice, it’s inappropriate for the group to be talking.”

Contract signing is targeted on July 28, when the winning bidder has to pay 20% of the premium. The balance will be paid over 10 years.

Detailed engineering design will be prepared from July 2015 to 2016, construction will be undertaken from July 2016 to July 2020, while operation and maintenance period will be from July 2020 to July 2050.

The CALAX project involves a 35-year contract to finance, build and operate a 47-kilometer four-lane toll road between Cavite Expressway in Kawit, Cavite and the South Luzon Expressway-Mamplasan Interchange in Biñan, Laguna.

President Benigno S. C. Aquino III last year ordered a fresh auction after San Miguel, whose subsidiary was disqualified on technical grounds concerning its bid security, appealed to Malacañang. Neither the Team Orion consortium of Ayala-owned AC Infrastructure Holdings Corp., Aboitiz Land, Inc. and Macquarie Infrastructure Holdings (Philippines) Pte. Ltd. -- the highest compliant bidder in the first tender -- nor MTD Philippines, Inc. joined the new auction.

AIRPORT PARTNER
On another public-private partnership project that MPIC wants to bid for -- the P108.19 billion worth of contracts to develop, operate and maintain (O&M) five regional airports -- Mr. Pangilinan said the group will likely team up with a major airport operator from Europe.

Asked if MPIC was also in talks with potential Japanese partners, he replied: “We have spoken to some Japanese partners, but I think we have decided on a particular partner. This is a big airport operator in the world.”

Pressed for the firm’s identity, Mr. Pangilinan replied: “It’s probably European. Maybe we’ll announce it when we decide to bid. We’re just waiting for the terms of bid from the government.”

The Department of Transportation and Communications (DoTC) was supposed to release last week the final bidding terms for the regional airport project auction, PPP Center Executive Director Cosette V. Canilao had said on May 30. Sought for updates, DoTC Undersecretary Jose Perpetuo M. Lotilla, who also heads the department’s Pre-Qualification, Bids and Awards Committee, yesterday said via text that “revised terms will still have to be released this week.”

Qualification documents will have to be submitted within 40 days from release of final Instructions to Prospective Bidders, the department had said. The government has set a two-stage bidding process for the regional airport auction, which means qualification documents are submitted separately from financial and technical proposals, according to an invitation to pre-qualify and bid published in newspapers last December. In that invitation, the government asked interested parties to submit offers to finance, design, build, operate and maintain the facilities for 30 years.

The five regional airports up for auction are grouped into two bundles: the first being Bacolod-Silay Airport (P20.26 billion) and Iloilo Airport (P30.40 billion); and the second package consisting of the New Bohol (Panglao) Airport (P2.34 billion), Laguindingan Airport (P14.62 billion), and Davao Airport (P40.57 billion).

The department had excluded the P5.81-billion Puerto Princesa O&M and Development Project because of the tourism potential in the area, and said it will likely be bundled with a “tourism airport-centric strategy” for Palawan.

The consortium of MPIC and JG Summit Holdings, Inc. is one of five groups that bought bid documents for the regional airport project auction. The four others were San Miguel Corp.; Aboitiz Equity Ventures, Inc.; air cargo warehousing firm Philippine Skylanders, Inc.; and the group of Megawide Construction Corp. and Bangalore-based GMR Infrastructure Ltd.

Nine PPP deals cumulatively worth some P136.5 billion have been awarded since the flagship infrastructure program was launched in the third quarter of 2010.

MPIC is one of three Philippine subsidiaries of Hong Kong-based First Pacific Company Ltd., the others being Philippine Long Distance Telephone Co. (PLDT) and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld.

sourcE:  Businessworld