More incentives for stand-alone trust corporations

In an effort to encourage more banks to spin off their trust operations, thereby allowing Bangko Sentral ng Pilipinas (BSP) to better supervise the activities of trust entities, the Monetary Board issued BSP Circular No. 884 on July 22 concerning the guidelines on the establishment and operation of trust corporations. The new circular aims to increase the competition in the asset management business by introducing provisions authorizing foreign entities to purchase, own or acquire voting stocks of trust corporations.

Trust corporations essentially performs the same functions as the trust departments of banks by engaging in trust, other fiduciary business and investment management activities, as trustee. These are stock corporations authorized to administer any trust or hold property in trust or on deposit for the use and benefit of others, and/or act as a financial consultant, investment adviser or portfolio manager.

While as early as 2011, the BSP allowed the establishment of stand-alone trust corporations by banks and non-bank entities through BSP Circular No. 710, the July 22 BSP report on entities with trust authority shows that banks continue to manage trust operations through their trust departments. Based on the report, the BSP has granted authority to engage in trust business to 40 banks compared to just seven non-bank financial intermediaries.

The new circular does not prohibit banks to continue conducting its trust operations through its departments, but it provides incentives and relaxed some rules in a bid to address the reservations of banks and non-bank entities in establishing stand-alone trust corporations.

For instance, under the new circular, the Monetary Board may now authorize foreign banks and regulated non-bank foreign entities engaged in finance, asset management and other similar activities acceptable to the BSP to purchase, own or invest in up to 100% of the voting stock of stand-alone trust corporations. However, only qualified foreign banks and regulated non-bank entities may acquire more than 40% of the voting stock of trust corporations. Further, only widely-owned and publicly listed foreign banks and regulated non-bank foreign entities may acquire controlling interest in trust corporations.

Meanwhile, individuals and non-regulated corporations are allowed to invest in up to 40% of the voting stock of a trust corporation. But in case of foreign individuals and non-regulated foreign corporations, their investments are subject to an aggregate ceiling of 40% of the trust corporation’s total outstanding voting stock.

BSP Circular No. 884 likewise relaxed the rules on minimum capital requirements of trust corporations. They are now allowed to have an initial paid-in capital of only P100 million at the time of incorporation compared to the P300 million required capital under the old circular. They are given a five-year transition period to increase their capital to P300 million which is expected to give trust corporations enough time to expand its operations and afford the higher capital requirement.

Another incentive under the new circular is the reduction of the basic security deposit requirement to not less than P500,000 or 0.03% to 0.2% of the book value of the assets under management, whichever is higher, depending on the trust rating of the trust corporation. Prior to the issuance of this circular, trust corporations are required to deposit with the BSP eligible government securities for the faithful performance of its activities equivalent to the required capital of the trust corporation or at least P300 million, significantly reducing the resources it could use in the trust operations.

The BSP circular also introduced a new provision which permits trust corporations to establish branches and marketing offices upon prior approval of the Monetary Board. Although these entities are only allowed to carry out its trust and other fiduciary operations in its principal place of business as specified in its articles of incorporation, the branches and marketing offices may promote and present the trust corporation’s products to a wider customer base.

Based on the new guidelines, trust corporations would not be subject to reserve requirements and other credit-related prudential controls applicable to bank operations such as the single borrowers’ limit and limit on loan accommodations to directors, officers, stockholders and their related interests.

Based on the foregoing, the new rules and regulations provided significant incentives and benefits to existing and potential market players. The question is whether these would be enough for BSP to achieve its objectives of attracting more market players, increasing the competition in the trust business and inducing development of new trust products and services for the benefit of the investing public.

Shiree Amor P. Roma is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).

sproma@accralaw.com

source:  Businessworld

WB-WSP, PPP Center set guidelines on water supply, sanitation contracts

PUBLIC-PRIVATE Partnership (PPP) Center Executive Director Cosette V. Canilao underscored the need for a standardized set of guidelines in order to consistently establish criteria when water districts and local government units (LGUs) select private partners for infrastructure projects.

Such guidelines, she said, will “facilitate consistency in establishing the technical, financial and operational criteria” for water PPP deals.

Hence, the PPP Center and the World Bank’s Water and Sanitation Program (WSP) jointly initiated a memorandum of understanding (MOU) among government agencies to harmonize interventions by various PPP institutions and to reconcile processes and requirements for PPP initiatives in the water sector.

Among those who were covered by the MOU are the Local Water Utilities Administration; National Water Resources Board; Philippine Associate of Water Districts; the Department of the Interior and Local Government; and the PPP Center.

Under the MOU, a PPP Technical Working Group composed of said agencies will work together for a focused set of training, technical assistance, as well as policy process guidance to water districts and LGUs pursuing PPPs in the water and sanitation sector.

“This will ensure a level playing field for prospective private partners,” Canilao said.

She added that the agencies covered by the MOU acknowledged that they needed help in  navigating through viable and legally appropriate PPP options for the water and sanitation sector, and how the pact will serve as the appropriate platform for their shared objective of having water districts and LGUs pursue properly structured and competitively procured PPP projects.

The memorandum is part of the PPP Center’s mandate to initiate PPP policy and process reforms, as well as the provision of technical assistance and capacity building to implementing agencies.

It is currently assisting a few local water projects, such as the Baggao Water Supply PPP Project, which is now in the procurement stage for a private partner.

At the national level, its pipeline includes the Bulacan Bulk Water Supply Project and the New Centennial Water Source (Kaliwa Dam) Project, both also under procurement stages.

The government has awarded 10 contracts since it launched the PPP Program in late 2010, namely:

• The P2.2-billion Daang Hari-South Luzon Expressway project bagged by Ayala Corp. in 2011;
• The P16.42-billion first phase of the PPP School Infrastructure Program (PSIP), which went in 2012 to the consortium formed by Megawide Construction Corp. and Citicore Holdings Investment Inc., as well as the BF Corp.-Riverbanks Development Corp. Consortium;
• The P15.68-billion Ninoy Aquino International Airport expressway, given to San Miguel Corp. unit Vertex Tollways Development Inc. in 2013; and
• The P3.86-billion PSIP Phase II contract, partially awarded in 2013 to Megawide and the BSP & Co., Inc.-Vicente T. Lao Construction consortium;
• The P5.69-billion Modernization of the Philippine Orthopedic Center project that went to the Megawide-World Citi Inc. consortium also in 2013.
• The P1.72-billion Automatic Fare Collection System contract awarded to the AF Consortium of Ayala and Metro Pacific Investments Corp. (MPIC) in 2014;
• The P17.5-billion Mactan Cebu International Airport New Passenger Terminal project bagged in 2014 by Megawide Construction Corp. and GMR Infrastructures Ltd.;
• The P64.9-billion Light Rail Transit Line 1 Cavite Extension deal, awarded in 2014 to Light Rail Manila Consortium of Ayala and MPIC;
• The P2.5-billion Integrated Transport System Southwest Terminal, won by Megawide and partner Walter Mart Property Management Inc. of billionaire and retail magnate Henry Sy in January; and
• The P35.42-billion Cavite-Laguna Expressway bagged by MPCALA Holdings Inc. of MPIC in June.

It intends to plug the gap in the country’s transportation facility in the next decade by rolling out massive infrastructure projects that are seen to spur economic growth.

source:  Business Mirror

Aquino: Social services, infrastructure projects benefit more Filipinos

President Benigno Aquino 3rd said his administration has been delivering substantial vital social and basic services and infrastructure projects that benefit more Filipinos without raising taxes. 

“We didn’t raise taxes except for sin tax. We improve what they call the tax collection—or tax administration, the collection efficiencies from 12 (percent) to 13.6 (percent),” he said in an interview on ANC aired on Tuesday night. 

President Aquino bared his administration aims to increase the enrollment coverage of the Philippine Health Insurance Corp. (PhilHealth) and build more classrooms during the remaining months of its term. 

“We started out with 66,000 as a backlog. I think we will finish something like 180,000 classrooms to take care of the old, (those) damaged by all of the disasters, the K-12 (Basic Education Program) requirements and so on and so forth,” he said. 

The Chief Executive noted that family-beneficiaries of the government’s anti-poverty initiative, the conditional cash transfer (CCT) program, have already reached 4.4 million. 

“CCT… (from) 780,000 households to 4.4 million households then expanding it to high school. We had the first batch graduate last year. Over 300,000 (graduates) and over 13,000 ‘yung honor students,” he said. 

Further, President Aquino cited the country’s irrigation infrastructures which were also funded without raising taxes. 

“For repair and maintenance, they (National Irrigation Administration) would do it 200 percent of target. Actually, more than 200 percent,” he added. PNA

source:  Manila Times

Mactan-Cebu International Airport takes off due to PPP deal with GMR

LAPU-LAPU CITY—Some P35 billion have been infused for the modernization of the Mactan-Cebu International Airport (MCIA) here.

The amount shows a stark contrast to the P15.35 billion that President Aquino approved for the Clark International Airport’s (CIA) new terminal to be finished in 2022.

Andrew Acquaah-Harrison, chief executive advisor of GMR Megawide, said MCIA is presently handling 7.1 million passengers annually, but in the fourth year of its modernization, MCIA will be handling 11 million passengers and will have a terminal capacity for 12.5 million.

The CIA is presently handling close to 1 million passengers in its terminal which has a capacity of 4 million and with the completion of the first phase of the new terminal in 2017 will add another 3 million.

Harrison said GMR has taken over the MCIA operation and upgrade after winning the bid and signing a public-private partnership (PPP) agreement with the government in November 2014.

The CIA’s new terminal is fully funded by the national government in the General Appropriations Act  in contrast to the MCIA’s PPP.

Harrison said that at present, MCIA is handling 260 flights per day and 12 to 13 movements per hour, which is an improvement after only less than a year of their operations.

Harrison said Hyderabad International Airport, also known as Rajiv Gandhi International Airport was the first airport developed by GMR in India.

Harrison said PPP is an advocacy.

“I’m not saying that everybody should believe in it, but what we want to demonstrate is PPP is a successful route to economic growth and development and you will see that our story is a testimony to that success,” he said.

“Let’s not forget that the airport hub is a business and in this business, 66.67 percent of our income comes from aeronautical, anything to do with aircraft airline passenger charges. Nonaeronautical is retail that’s around 29.99 percent and around 3 1/2 percent comes from innovation, like advertising and other creative ideas,” he added.

“And in order to remember that, we have to focus on the needs of the airlines,” he stressed. Often people mistake an airport customer to be the passengers. It is not, he pointed out.

“Airports’ primary customers are the airlines because without the airlines there are no passengers,” he said. “People will not show up at the airport and say we’re gonna travel to Mactan because the staff there are really nice but they travel because they have a particular airline they fly with,” he explained.

“Concessionaires and businesses, they are important stakeholders in the airport community and they have to feel that they are part of the airport, and of course, passengers,” he said.

All of that translate into an airport product which is user experience,” he added.

“Our view is we must focus on this user experience, and if we focus on that, we will be successful and we will be profitable, but if we focus just on profitability and ignore this user experience we won’t succeed.

“We see ourselves as part of the tourism ecosystem working with local governments, resorts, hotels, tour operators, the Department of Tourism to market Cebu more aggressively,” he said.

“So for example, we are planning a road show in China to visit six cities where we can demonstrate the beauty of the Philippines, how close it is to get to the Philippines and the affordability of the Philippines.”

Harrison said, “We will try to put the Philippines on the map in the way perhaps very different on how it was done so far, but that’s not to undermine the efforts that were put in before.” He said if these efforts will not be made, “the capacity of the airport can never be realized.”

source:  Business Mirror

5 groups vie for P108-B airports PPP

THE DEPARTMENT of Transportation and Communications (DOTC) has cleared five out of six groups seeking to participate in its next big-ticket public-private partnership (PPP) project, the auction of airport contracts for the Bacolod-Silay, Iloilo, Davao, Laguindingan and New Bohol air gateways.

In a bid bulletin issued Friday, the department said it prequalified consortiums led by Filipino conglomerates and their international partners vying for the contracts valued together at about P108 billion.

Those that made the cut were San Miguel Corp. and South Korea’s Incheon International Airport (SMHC-IIAC Airport Consortium); Metro Pacific Investments Corp. with a unit of Aéroports de Paris and TAV Havalimanlari Holdings A.S. (Philippine Airports Consortium); Aboitiz Equity Ventures with VINCI Airports (Maya Consortium); Megawide Construction Corp. and India’s GMR Infrastructure (GMR Infrastructure and Megawide Consortium), and Filinvest Land Inc., Japan Airport Terminal Corp. and Sojitz Corp. (Filinvest-Jatco-Sojitz Consortium), the DOTC said.

A sixth group, Union Equities-Acsa Consortium, was disqualified by the DOTC.

The prequalification documents were submitted last Aug. 17. This exercise is meant to determine which groups are qualified to submit technical and financial proposals for the project. Those bids are expected to be opened by January 2016 and the DOTC expects to award the project by February 2016.

The DOTC said the operations and maintenance (O&M) of the regional airports, selected partly for their tourism potential, would be bid out in two bundles.

The first bundle consists of the P20.26-billion Bacolod-Silay and the P30.40-billion Iloilo airport projects. The second bundle will include the P40.57-billion Davao, the P14.62-billion Laguindingan and the P2.34-billion Bohol airport projects.

The winning concessionaires for each bundle will handle the O&M of the airports for 30 years and will undertake the expansion of the facilities as most of the airports are operating beyond their design capacity. These improvements are needed to enhance passenger safety and convenience as well as to ensure more efficient airport operations.

This is the second airport PPP deal after the P17.5-billion Mactan Cebu International Airport was rolled out and eventually awarded in 2014 to the Megawide-GMR consortium.

Apart from this project, the DOTC had said it was studying the possible O&M auction of Manila’s Ninoy Aquino International Airport, the country’s busiest air gateway. This comes amid the broader goal to replace Naia, which suffers from heavy congestion, with a new international gateway.

source:  Inquirer