RP hotel decree may scare investors

RP hotel decree may scare investors

By Mynardo Macaraig

MANILA (AFP): The Philippines has delivered a series of blows to foreign investor confidence, culminating in a court ruling this week against the sale of a historic hotel to a Malaysian company, analysts say.

The Philippine Supreme Court Monday declared void the sale of a 51 percent stake in the Manila Hotel to Malaysia's Renong Overseas Corp. Sdn. Bhd.

The court's 15 justices decided 11-to-four in favor of ordering the government to hand the property instead to the losing bidder -- on the grounds that historical sites must remain under Filipino control.

"This court cannot extract rhyme or reason from the determined efforts of respondents to sell the historical landmark -- this grand old dame of hotels in Asia -- to a total stranger," it said Leopoldo Teehankee, vice-president of investment house Urbancorp Investments Inc., warned the court decision was "sending the wrong signals to exactly the people who are keenly looking at this."

It showed that "in the granting of economic rights, privileges and concessions, when a choice has been made between a qualified foreigner and a qualified Filipino, the latter shall be chosen over the former."

The court decision was the latest in a series of upsets to major Philippine contracts awarded to foreigners.

The award of a multi-billion-dollar Philippine waterworks contracts lurched into uncertainty last Friday as authorities gave their stamp of approval, despite a court issuing a restraining order.

The two 25-year contracts to upgrade and run Manila's waterworks were awarded Jan. 23 to consortiums involving British, U.S. and French companies.

The Philippines' Committee on Privatization gave its approval to the controversial contracts last Friday.

But officials said the Court of Appeals issued a temporary restraining order last Thursday, barring the state-run Metropolitan Waterworks and Sewerage System management from taking further action on the contracts.

Also last month, President Fidel Ramos ordered re-bidding for a port handling contract originally granted to a subsidiary of Hutchison Whampoa Ltd. of Hong Kong.

Last May, a 133-million-dollar Philippine civil and military radar contract with British firm GEC-Marconi Ltd. was canceled after a senator charged it was overpriced.

Helen Alvarez, research director of All-Asia Capital and Trust Corp., warned "the public might take (the hotel decision) as a precedent" on how the port-handling and waterworks issues would be handled by the courts.

Johnny Ravalo, chief economist of the Bankers Association of the Philippines, said the fragility of such contracts "may be perceived as an additional form of uncertainty. It might fall under the category of legal risk."

"It's very unclear to foreigners whether the rules of the game will be changed in mid-stride or not," Ravalo said.

Teehankee warned investors would be looking at the other cases, particularly the Manila waterworks contract, as a "bellwether" of how business is done in the Philippines.

Foreign investors "will certainly take a wait-and-see attitude. If further developments prove them correct, that there is something wrong with our system ... then they could stay away," Teehankee added.

The analyst said foreign investment was still coming into the country, pushing the stock market to new highs in the past three trading days, but warned Ramos himself may have to exercise political will to prevent more broken contracts.