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.