Philippines Wins FinanceAsia Best Borrowers Award

Philippines Wins FinanceAsia Best Borrowers Award

Award earned for first ever transaction as an investment grade sovereign


The Republic of the Philippines was awarded as the “Region’s Best Borrower” by FinanceAsia’s Fixed Income Research Poll 2014. The award cited the country’s innovative execution of the Accelerated 1-Day Switch Tender Offer and the concurrent US$ 1.5 billion new 10-year bond issue completed in January 2014. FinanceAsia hosted the awards dinner to congratulate all the winners of this year’s Fixed Income Research Poll last 29 October 2014, coinciding with the 3rd Annual Borrowers & Investors Forum- Southeast Asia in Singapore.

The Philippines targeted 11 series of bonds with a notional value of US$9.6 billion, where tendering investors could choose between switching into the new bond or tendering for cash. The bonds were tendered through dealer managers, saving time and reducing market risk exposure for the Philippines. Global investor response to the new 10-year bond issue was 9-times oversubscribed, with an orderbook of approximately US$ 13.5 billion from 500 investors reflecting strong demand.Deutsche Bank Securities, Inc., Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank acted as joint lead global coordinators for the Philippines on this transaction.

The Accelerated ‘Switch’ Tender Offer was the first of its kind conducted in Asia, proving the Philippines’ sophistication as a sovereign issuer. This also marked the first international USD offering from the Philippines since January 2012 and its first as an investment grade sovereign.

Robust investor demand allowed the Philippines to aggressively price the securities and realize cost savings while extending the maturity of outstanding debt. The transaction also enabled the country to retire outstanding high coupon bonds, further bolstering fiscal strength through prudent and proactive liability management. The above transaction was followed by a domestic bond exchange in August as part of the strategy to rebalance the domestic portfolio and term out maturities.

FinanceAsia also highlighted the Government’s efforts to boost the development of the local capital market in promoting liquidity in the GS market and consolidating its debt portfolio. This was achieved by increasing the volume at auction and the re-issuance of outstanding benchmark securities. The success of this strategy is evidenced by the year-on-year decline in the number of outstanding securities and the secondary market activity of re-issued securities.

Treasurer of the Philippines Rosalia de Leon welcomed the news saying, “We are thankful for the recognition given by the international investors’ community in response to our efforts in proactive liability management. This reflects well on the development of the Philippine debt market and emboldens us to pursue more innovative strategies to managing sovereign debt.”

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Philippines Signs World Bank Cebu Bus Rapid Transit (BRT) Project

Philippines Signs World Bank Cebu Bus Rapid Transit (BRT) Project
Purisima: Investing on BRT system supports rapid and sustainable growth 

Finance Secretary Cesar V. Purisima signed the loan agreement for the World Bank’s Cebu Bus Rapid Transit (BRT) Project on behalf of the Government of the Republic of the Philippines last 14 October 2014. The project is set to improve the overall performance of the urban passenger transport system in the Project Corridor in Cebu City, with an emphasis on the quality and level of service, safety, and environmental efficiency.

The Cebu BRT Project includes the development of segregated BRT bus-ways from Bulacao to Ayala, with a link to Cebu’s South Road Property, a feeder service between Ayala and Talamban with signal priority, 33 stations expected to service 330, 000 people per day in 2015, 176 buses, an area stop light control for the whole city of Cebu, and a central transport control room. The World Bank will provide funding of USD 116 million from the International Bank for Reconstruction and Development (IBRD) and USD 25 million from its Clean Technology Fund (CTF).

The project, once complete, is expected to service an average of 433, 000 individual trips per day. The Cebu BRT is projected to save 25 minutes of travel time and P7.50 in fares. In signing the agreement, Secretary Purisima said, “Our improved public finances have enabled us to spend more confidently on public investments supporting our rapid growth. As Cebu City is fast becoming one of our prime urban centers, investing in sound infrastructure lays solid groundwork for a more sustainable growth trajectory.”

The Philippine government and the World Bank chose to undertake the development of a bus rapid transit system because of its low cost (5% to 10% of rail), quick construction (around 2 years), and its higher quality of service despite having the same capacity as rail. Cebu City was also a prime location for the BRT system, as it is governed by a single local government unit supportive of the project and has high Public Utility Jeep (PUJ) dominance with no significant bus presence.

The Department of Transportation and Communications will serve as the implementing agency. The project is expected to run from 2013-2018, and will be operation from 2018 to 2030 and beyond.

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Intercontinental Grains in hot water for illegal rice imports

Intercontinental Grains in hot water for illegal rice imports


Importing rice without the prerequisite import permit from the National Food Authority (NFA) prompted the Bureau of Customs (BOC) to file smuggling-related cases against representatives of Intercontinental Grains International Trading, Inc at the Department of Justice. The charges stem from the firm’s illegal importation of over 5,400 Metric Tons (more than 5.4-Million kilograms) of rice from September to October 2013. The rice has a total dutiable value of P76.9-Million and an estimated market value of P217-Million.

Two separate complaints were filed by BOC Acting District Collectors Mario Mendoza of the Port of Manila and Elmir Dela Cruz of the Manila International Container Port against Edgar Salvador, Proprietor of Intercontinental Grains International Trading; Reginald Sihiyon, the company’s President and Chairman; Ruperto Guilaran, Corporate Secretary and Director; Zarian Lanzar, Treasurer and Director; Board Members Emma Dequilla and Apolonio Magno; as well as the firm’s customs brokers Baltazar Ramirez and Ailene Rejuso. The eight face multiple counts of violating Section 3601 of the Tariff and Customs Code of the Philippines (TCCP) and Section 29 of Presidential Decree (PD) Number 4, as amended by P.D. No. 1485. The latter states that only the NFA can import rice and private entities who wish to do the same must secure a permit from the agency; while the former prohibits any importation that does not comply the necessary regulations.

Each count of violating Section 3601 of the TCCP carries a maximum punishment of ten years imprisonment and a fine of P50,000; while violation of P.D. No. 4 is levied a maximum penalty of four years imprisonment and a fine of P8,000.00 per count.

Intercontinental Grains International Trading imported 4,750 Metric Tons of rice through the Manila International Container Port and another 675 Metric Tons via the Port of Manila. Both shipments came from Thailand. However, based on records from the NFA, the firm was allotted a total import quota of only 1,565 Metric Tons in 2013. The NFA also confirmed that none of the shipments of Intercontinental Grains International Trading were covered by any import permit nor were any documents filed before the agency.

“The fact that Intercontinental Grains did not bother to file a permit with the NFA and ignored the quota it was allotted signifies bad faith and a gross disregard for our laws. These import volumes are regulated to ensure fair trade and an even playing field for our local rice industry, which firms like Intercontinental Grains ignored to the detriment of our farmers,” says Customs Commissioner John P. Sevilla.

Data from the BOC showed that Intercontinental Grains International Trading was one of 2013’s biggest rice importers. The firm, along with Bold Bidder Marketing, Silent Royalty Marketing, Starcraft International Trading Corporation and Medaglia De Oro Trading, cornered a combined 75% of the 200,000 Metric Tons of rice that entered various ports in the country without the required import from NFA in 2013.

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Philippines Signs Development Policy Loan with the World Bank

Philippines Signs Development Policy Loan with the World Bank
Agreement will boost Philippine inclusive growth agenda
A development policy loan agreement to boost fiscal sustainability and governance transparency amounting to USD 300 million has been signed between the Government of the Republic of the Philippines and The World Bank. Finance Secretary Cesar V. Purisima signed The World Bank’s Third Development Policy Loan (DPL 3) last 14 October 2014 on behalf of the Philippine government.

The loan program aims to spur sustained and inclusive growth and job creation through increasing physical and human capital investment, as well as tackling regulatory barriers in land, labor, and capital markets. 

Under DPL 3, the Philippines will receive support in strengthening priority public investment implementation, reducing the cost of doing business for jobs creation and poverty reduction, developing the human capital of the poor, promoting fiscal transparency and good governance, as well as consolidating fiscal sustainability through revenue mobilization and risk management.

Activities in focus under DPL 3 include infrastructure development and the streamlining of business registration processes for MSMEs. DPL 3 will also support the Philippines in policy and institutional development on developing human capital, transparency, enhancing the tax effort, and the advancement of an integrated fiscal risk management strategy.

In signing the agreement, Finance Secretary Cesar V. Purisima said, “DPL 3′s strong focus on fiscal sustainability, infrastructure, human capital, and good governance enables the Philippines to boost our inclusive growth agenda as we reach the tail-end of this administration. This is consistent with the Philippines’ partnership with The World Bank in ensuring our economic turnaround story translates into real and sustainable gains for the Filipino people.”

While the Department of Finance serves as the main liaison with the World Bank on budget support operations, responsibilities for policy dialogue as well as monitoring and evaluation are shared with DBM, DPWH, DOT, DA, Climate Change Commission, DTI, DSWD, DepEd, and DOH.

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On the September NG Fiscal Performance

Statement of Finance Secretary Cesar V. Purisima

on the September NG Fiscal Performance


“I am pleased to report that the National Government has registered a budget deficit of P5.2 billion in September 2014, narrower than year-ago deficit, as a result of fast-paced year-on-year growth of revenue collections. For the period of January to September, the budget balance was at a deficit of P31.1 billion, well-within the program.

“The primary balance for the month was at a surplus of P23.6 billion, wider than the year-ago figure of P10.6 billion. As of end September 2014, the primary balance was also recorded at a surplus of P226.3 billion and wider than comparable figures last year.

Revenue, BIR, and BOC collections grow above 20 percent

“Total revenues amounted to P154.7 billion in September, higher than last year’s comparable figures by 21.4% and exceeding the program by 1.8%. Year-to-date, total revenues reached P1.425 trillion, a growth of 12.5% year-on-year.

“The Bureau of Internal Revenue (BIR) raked in P105.7 billion for the month, also exceeding its target. The Bureau posted a growth of 22.9% over the same period in 2013, registering the highest year-on-year growth rate for 2014. For the first three quarters of the year, the BIR collected P996.4 billion, also posting a double-digit year-on-year increase of 11.0%.

“The Bureau of Customs (BOC) continued its streak of double-digit growth rates, increasing its collections by 27.7% to reach a record high of P32.9 billion for September. Year-to-date, the BOC’s collections totaled P265.8 billion, an improvement of 18.3% from the same period last year.

“For the period of January to September, the collections of the Bureau of Treasury (BTr) have totaled P81.3 billion, up 19.3% year-on-year. As of end-September, the BTr has exceeded its target collections for the period by 82.3%.

“News of record highs in the collections of the Bureau of Customs and the Bureau of Internal Revenue comes on the heel of our second non-deal roadshow this month, which happened in four major cities in the United States. Whereas the Philippine officials in the Tokyo roadshow covered several sectors, the Philippine delegation in the US met with key executives in banking to drum up even greater interest in the industry, which was recently liberalized to foreign companies.

Interest payments generate savings of P19.0 billion

“National Government disbursements for the month totaled P159.8 billion, higher than year-ago figures by 9.5%. For the first three quarters of the year, expenditures amounted to P1.456 trillion, expanding 6.5% year-on-year.

“Year-to-date interest payments came in at P257.4 billion, lower than programmed and thus generating savings of P19.0 billion. Interest payments as a share of the National Government’s disbursements continued its downward trend – as of the third quarter of this year, the percentage has dropped to 17.7% from 18.9% in the same period a year ago.


Holistic, revenue-neutral, and equitable reforms to the tax system


“Our fiscal performance through the past four years has shown that through efficient tax administration alone, we have come a long way in augmenting revenues. However, in the light of efforts to accelerate ASEAN integration and boost the Philippines’ competitiveness, the Department of Finance expresses openness to a change in the tax system, particularly in the review of our income tax structure.

“Lowering income tax rates will attract even more foreign investors into the country but will be detrimental to our fiscal health if they are not offset by revenue-generating measures. Hence, we remain resolute in our stand that anytax reformpursued must be holistic, revenue-neutral, and equitable so all Filipinosmay continue to benefit from a robust fiscal position. This is the mindset that we possess as we engage in discussions with legislators concerning tax reform.”

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