Philippine Weekly Update - for the week ending 8 July 2011
In-Focus - July 11, 2011

Political

The Ombudsman orders the probe of the fertilizer fund mess involving P728 million. The probe will include former president Macapagal-Arroyo. The Ombudsman also ordered the dismissal and perpetual disqualification from public office of LWUA Chair Prospero Pichay over the agency’s unauthorized investment in a rural bank two years ago.

The Supreme Court upheld the revocation of a 1989 stock distribution plan for Hacienda Luisita’s more than 6,000 farmers and called for the holding of a referendum to determine whether they would opt for land or shares of stocks.

 
Economic

To cushion the impact of the universal charge on consumers, PSALM will push for the sale of major assets of Napocor, including the Unified Leyte geothermal power plants.

The IFC has implemented a new transparency process prior to investing in projects, making it the first development assistance institution to require a systematic corporate-governance analysis of every investment transaction as part of its due diligence process.

COA has recommended that Congress be allowed to appropriate the government’s share from the Malampaya natural gas project so the funds could be included in the national budget or be used to pay the country’s debts. COA made the proposal after finding that P77.2 billion of the Malampaya funds had been lying idle for eight years.

The SEC said that companies violating the ownership cap cannot be penalized for past violations using a new law. They will, however, have to comply with the new interpretation how the 40% foreign ownership cap will be determined.

The Justice Department expects to soon begin tackling competition issues with guidelines implementing E.O. 45 likely out next week. The rules will govern the planned Office for Competition. It will be staffed by current state lawyers but would also engage the services of technical consultants and advisers from the private sector.

The NTC aims to decide on the country’s digital television standard within two weeks.

Government infrastructure investments continued to lag despite government’s claim that it had accelerated spending. Latest fiscal data show that the government only spent P42.2 billion as of May on infrastructure, significantly down from last year’s P106.1 billion during the period.

Inflation rose to its highest in 26 months in June, reaching 4.6%, from 4.5% in May. This brought the average inflation for the first half of the year to 4.3% from 4.2% in the same period of last year. These figures are based on 2000 prices. A new series based on 2006 prices, released by the NSO for the first time, shows annual inflation at 5.2% in June and 4.7% in the first half of this year.

Tax exemptions granted to excess employee social security contributions have been revoked by the BIR. In Revenue Memorandum Circular 27-2011 dated July 1, the BIR said that only the mandatory monthly contributions to government (SSS, GSIS, Pag-ibig, PhilHealth) are exempted from income and withholding tax.

The IFC will hold off fresh funding for renewable energy projects until the government approves the pricing for this sector.

Customs has tightened the rules on the entry of imported motor vehicles as part of efforts to curb smuggling. A new office has been created which would approve the release of imported vehicles, after a ‘Clearance of No Derogatory Information’ has been issued.

The exposure of the local banking industry to the real estate sector expanded by 11% to P444.9 billion in the first three months of the year. The ratio to the total loan portfolio stands at 14.7%.

The Philippines will appeal the WTO panel ruling which agreed that the government discriminates against foreign brands of alcoholic beverages by imposing unreasonably higher taxes.

Gross international reserves of the country stood at US$ 69 billion at the end of June 2011, compared to US$ 48.7 billion a year ago.

The DOE will come up with a new set of standards for energy efficiency before the end of the year.

Regulators are looking to require firms to disclose more details of their corporate structures in order to better track their foreign ownership, following the Supreme Court ruling that changed the formula of computing companies’ foreign ownership.

Vehicle sales in the first half of the year dropped 1.6% to 70,000 units compared to the same period of last year, due to supply limitations after the Japan earthquake / tsunami.


Business

PLDT moved to comply with a Supreme Court ruling redefining foreign ownership limits, announcing a plan to issue up to 150 million preferred shares with voting rights.

The ERC has provisionally approved the application of Northwind Power Development Corp. for the adoption of the feed-in-tariff of P9.50 per kwh.


Investments

Suzuki Motor Corp. will build a motorcycle factory in the Philippines and will more than double its production capacity. It will invest US$ 26 million; the plant will have a capacity of 200,000 units per annum.


Infrastructure

A consortium led by FDC Utilities, Inc., a subsidiary of Filinvest Development Corp., is planning to construct a US$ 450 million, 300-MW power plant inside the PHIVIDEC Industrial Estate in Misamis Oriental.


CongressWatch

The House Committee on ways and means has endorsed for plenary approval the proposed Customs Modernization and Tariff Act of 2011 that seeks to modernize customs administration.