Why is Subic Bay successful?

When the United States military bases at Subic Bay and in Pampanga were brought back to the Philippines, it was—or should have been—a golden opportunity. But disaster, both natural and human, intervened to turn gold into lead.

The problem with the Philippines is not that everything is terrible, as so many would like us and the world to believe, but that there are so many inconstancies that favor negative assessments. Most social programs fail to achieve the desired results, and then we have the Pantawid Pamilyang Pilipino Program, which is a success. So many politicians are a disgrace to the country, and then we also have the like of the late Sen. Joker Arroyo and people like Blas Ople and Raul Roco as role models.

It is the inconstancies of accomplishment that is keeping us down in some areas and killing us in others. The Philippines is unpredictable. Foreign direct investment has been a bad joke for decades and yet, for example, the call-center business is a stunning and enviable success.

However, we are not the only nation with this problem. Thailand has been trying for 50 years to achieve political stability under its constitutional monarchy but cannot seem to get it together, needing regular political intervention by the military. Maybe it is simply a matter of geography being next to the US, but Mexico is a narco-state whether they like that description or not.

The Subic Bay Freeport Zone (SBFZ) should have been an economic and investment jewel in the crown from the first day. The reason it was not was because there was little vision, too much political power infighting, and no thought-out long-term plan. Was it to be a tourist zone, a shipping-transit harbor, or a manufacturing free port? Like a child wanting to eat the cake, ice cream and candy all at the same time, the government was not able to focus and develop a single goal.

Instead, the country saw a failure in all three areas.

Nevertheless, over time, the SBFZ has finally found its legs, and is moving forward. Once again, Subic has been counted among the world’s best by being crowned winner of the Asia region, as well as picking up the award for best zone in South Asia and Southeast Asia. This award is given by fDi Intelligence, a division of the Financial Times Ltd.

The SBFZ was commended also for its infrastructure and its ability to attract reinvestment. In our opinion, all the credit should go to the Subic Bay Metropolitan Authority. We offer our congratulations to its chairman, Roberto V. Garcia, and his team.

We will not second-guess why the SBFZ is doing so well in its appointed task. But we will note that the SBFZ is 110 kilometers north of Metro Manila. Maybe the key to success is to get as far away from the seat of the national government as possible. Perhaps, we should ask Gov. Joey S. Salceda of Albay or Mayor Rodrigo R. Duterte of Davao City about that.

source:  Business Mirror

Purisima Wants Public Float Increased to 30%

Finance secretary Cesar Purisima wants the average public float of listed companies to increase to 30 percent to deepen the domestic capital markets.

Purisima said on the sidelines of the SEC (Securities and Exchange Commission)-PSE (Philippine Stock Exchange) Corporate Governance Forum yesterday the average public ownership rule must be raised from the current average of 20 to 25 percent.

“Here in the Philippines, the float is still not deep enough. We need to further expand that,” Purisima said.

“The market needs to be deep enough so that there is true price discovery,” he added.

The PSE requires publicly listed companies to maintain a minimum 10 percent public float.

The PSE implemented the minimum public float rule to increase market liquidity and for the efficient price discovery in the stock market.

When the minimum public ownership was set at 10 percent in 2011, several listed companies decided to voluntarily delist themselves from the market.

Many foreign investors have complained that the number of shares traded in the country is limited.

The compulsory 10 percent float had long been considered as too small. 

The shallow float also makes price manipulation easier. 

Meanwhile, in the same event, Purisima said the Department Order (DO) issued by the Department of Finance in April which prescribes the “fit and proper rule” for directors of insurance and public companies is his recommendation.

“The DO is not an order in the real sense because it is very clear that it is a recommendation, it is not compulsory to adopt it. I just felt that I needed to share my thoughts on it,” Purisima said.

DO No. 054-2015 prescribes that covered entities have directors who are fit and proper to hold such positions in the interest of building a strong and stable financial system by virtue of upholding the highest standards in corporate governance.

“Good governance extends to corporate governance. We want our insurance and public companies to reflect the highest corporate standards of integrity and excellence. For company directors in the country to be ‘fit and proper’ is a given; this rule merely enforces good practice,” he earlier said.

The DO sets forth minimum qualifications of directors and independent directors. 

For directors, s/he must ideally be at least 25 years old and a college graduate or an individual with at least five years experience in the business. Ideally, s/he must also have attended a special seminar on corporate governance for board of directors conducted or accredited by SEC or the Insurance Commission (IC) as may be applicable. 

Lastly, s/he must be fit and proper for the position of a director of the covered entity, taking into account several factors including integrity or probity, competence, relevant education/training (e.g., financial literacy), physical and mental fitness, diligence, and knowledge or experience.

Meanwhile, the DO prescribes that an independent director is ideally an individual not more than 80 years old, unless otherwise found fit to continue serving as such by SEC or IC. 

Ideally, s/he must also not be (or has been) a member of the executive committee of the board of directors, or an officer or employee, of the covered entity, its subsidiaries, affiliates or related companies during the three years immediately preceding the date of his election.

An independent director must not be a “substantial shareholder,” i.e., does not own/hold shares of stock sufficient to elect one seat in the board of directors of either the covered entity, its subsidiaries, affiliates or any related companies of its majority corporate shareholders.

The DO prescribes the ideal minimum number of independent directors as at least 20 percent but not less than two members of the board of directors. 

For publicly-listed corporations, the DO holds that the number of independent directors shall be proportionate to the percentage of shares held by the public.

Further, the DO describes an ideal tenure as five consecutive years, after which re-election is possible after a “cooling period” of two years.

source:  Malaya

GSIS Family Bank stake sale fails again

PENSION FUND Government Service Insurance System (GSIS) has once again failed to dispose its majority stake in GSIS Family Bank after interested buyers were unable to comply with the agency’s bid requirements.

GSIS’ Investment Bids and Awards Committee (IBAC) declared the failure of the new round of negotiated sale for its thrift banking arm in Advisory No. 03-2015 dated Oct. 12 posted on its Web site.

“The Committee declared the failure of negotiated sale of all GSIS shares in GSIS Family Bank since no party fully complied with the requirements, as published on September 11, 2015,” the statement signed by GSIS’ IBAC Chairperson Severina L. Resurrection said.

This is the third time this year that the GSIS put its 99.5% stake in its thrift banking arm for sale and failed to clinch a deal.

GSIS had set the deadline for the submission of documentary requirements and financial offers for the latest round of negotiated sale last Oct. 5.

In its invitation to interested parties last September, GSIS sought more detailed plans on bids for its banking unit.

Interested bidders were required to submit a “detailed action plan with timelines to rehabilitate the bank,” GSIS said.

They also had to hand over projected monthly financial statements for the first 12 months of operations, together with assumptions. 
The floor price for the stake on sale remained unchanged at P501 million.

The negotiated sale was also subject to the condition that the remaining 0.5% of GSIS Family Bank belonging to private stockholders, represented by the heirs of former Cavite Rep. Renato P. Dragon (2nd district), will also be sold to the same buyer through a separate transaction.

In July, after the first round of its negotiated sale for GSIS Family Bank failed and during the second bidding process, GSIS President and General Manager Robert G. Vergara said the agency may have to consult its advisers should the its new attempt fall through. Still, it again put up the thrift bank for sale last month after the second round of bidding failed as well.

In the first round declared a failure in June, private equity company Altus Capital Partners Inc. submitted a P501-million offer for the government’s majority shares in the bank. During the second sale round deemed a failure last month, GSIS accepted the P502-million offer of Phindep Development Corp., a real estate firm based in Kawit, Cavite, the lone offeror to secure the consent from the Dragon family.

GSIS Family Bank was put back on the auction block in April after the pension fund cleared a legal stumbling block from a Makati Regional Trial Court.

The Makati court placed a restraining order against the bank’s sale based on a complaint by Mr. Dragon who claimed GSIS failed to rehabilitate the thrift bank. 

Mr. Dragon has a stake in the bank through Royal Savings Bank which he had owned. GSIS Family Bank was the result of several mergers, including that of Royal Savings Bank and ComSavings Bank. -- Imee Charlee C. Delavin

source:  Businessworld

Berjaya eyes more investments in PHL

MALAYSIAN conglomerate Berjaya Corp. Berhad is keen on expanding its businesses in the Philippines, as it sees the economy enjoying robust growth on the back of strong consumer spending, its founder said on Tuesday.

In an interview, Berjaya Founder and Advisor Vincent Tan said the Philippines is a “great” country to invest in, particularly for its core businesses.

“You have a great population which is great in our consumer business.

We think that outside Malaysia, the Philippines is a great place to invest,” Mr. Tan said.

He said Berjaya is looking at developing a sanitary landfill in the country, but admits securing government support may be difficult. 

“We hope we are able to build one by next year. What you need is sanitary landfill. We’re still talking but getting support from the government is a big challenge,” Mr. Tan said.

“We are definitely keen to invest in sanitary landfills in the Philippines if we can get the support of the authorities.”

Also, Mr. Tan said he sees good opportunities in the hotel industry.

“I think there is a good opportunity in Philippines’ resorts. You have beautiful waters,” he said.

Berjaya Philippines, Inc.’s business include gaming, distribution of motor vehicles, hotels and restaurants. 

Perdana Hotel Philippines, Inc. currently manages a 4-star hotel in Makati City, while Philippine Gaming Management Corporation leases online lottery equipment to the Philippine Charity Sweepstakes Office. 

Berjaya Philippines also acquired United Kingdom-based luxury car dealer HR Owen in 2013.

Its associate companies include Berjaya Pizza Philippines, Inc., which holds the Papa John’s Pizza franchise in the Philippines, and Berjaya Auto Philippines, Inc., which distributes Mazda vehicles. 

In Malaysia, Berjaya’s interests are diversified into several core businesses: consumer marketing, direct selling and retail, financial services, hotels, resorts, investment and development, gaming and lottery management, environmental services and clean technology investment, motor trading and distribution, food and beverage, and investment holding, among others. -- M.F.E. Flores

source:  Businessworld

JICA, MILF identify economic and logistics corridors in Midanao

CONOMIC and logistics corridors in Mindanao have been identified by the development arm of the Moro Islamic Liberation Front (MILF) and the Japan International Cooperation Agency (JICA), highlighting the channels which can be industrialized further to bring development in the conflict-affected areas in the region.

In a statement released by JICA on Friday, the development agency, together with the Bangsamoro Development Authority (BDA), identified these channels as the: Northern corridor: Cotabato City-Marawi City-Iligan (Lanao del Norte); Central corridor: Cotabato City-Midsayap-Pikit-Digos (Davao del Sur); and Southern corridor: Cotabato City-Shariff Aguak-General Santos (South Cotabato).

The three channels which were identified are pegged for development by upgrading arterial roads and improving ports and airports as planned under the Bangsamoro Development Plan (BDP), the plans for which were presented to different stakeholders this week.

The BDP is a six-year development plan (2014 to 2019) which provides a blueprint for development in conflict areas in Mindanao as mandated by the peace agreement between the Philippine government and the MILF.

According to JICA, 24 key development projects have been identified under the BDP and are set to be implemented starting mid-2016 to 2022, out of 60 projects in 15 programs under the comprehensive plan.

Aside from the upgrading of road networks, airports and seaports, projects such as communal irrigation support, goat-based integrated farming, and mixed field crops farming are also part of the upcoming development measures.

Talks between the Philippine and the Japanese government in the past have touched on improving peace and development in Mindanao, a region which has the highest poverty incidence in the country at 56% of its populace.

Japan has been extending assistance to the Philippines to achieve inclusive development in Mindanao as early as 2006, at a time when it launched the Japan-Bangsamoro Initiatives for Reconstruction and Development program. Japan has also given the Philippines P7.55 billion in funding assistance for Mindanao development through its Official Development Assistance (ODA) fund. -- Alden M. Monzon

source:  Businessworld

Productive Time Lost to High Cost of Doing Business in Ph

The high cost of starting and maintaining a business in the Philippines has resulted to lost productive time, which translates to an annual opportunity cost of more than P100 billion in the form of foregone income, taxes, and spending, the World Bank said.

In a Special Focus section in the World Bank’s Philippine Economic Update, the multilateral bank agency said that business regulations have long been a cumbersome process in the Philippines, posing obstacles to the development of micro, small, and medium enterprises (MSMEs) and job creation.

The World Bank said that one particular concern is the high cost imposed on MSMEs in starting and maintaining a business.  

“They not only have to pay for legitimate fees equivalent to 17 to 36 percent of per capita income (P21,000 to P45,000), they also spend a considerable amount of time moving from one agency to another and waiting in line to process their documents, often resulting in significant loss of productive time and income,” the report said.

“In some instances, businesses report that they need to pay bribes or give gifts to obtain various permits and government services,” it added.

The agency said that aside from the more than P100 billion estimated total opportunity cost from productive days lost annually, opportunity cost  of around P40 billion can also arise from discouraged Filipinos who could have started a business if only the cost was reasonable.  

The World Bank said that this translates to foregone employment of 62,179, or about five percent of new labor force entrants annually.

The multilateral bank agency said that simplifying and streamlining the business registration process in the Philippines would not only support job generation, but also improve transparency and accountability in the government.  

source:  Malaya Insights

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