AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 2003
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
REGISTRATION STATEMENT
UNDER SCHEDULE B
OF
THE SECURITIES ACT OF 1933
---------------------
REPUBLIC OF THE PHILIPPINES
(Name of Registrant)
Name and Address of Authorized Representative in the United States:
HON. LINGLINGAY LACANLALE
CONSUL GENERAL
PHILIPPINE CONSULATE GENERAL
556 FIFTH AVENUE
NEW YORK, NEW YORK 10036-5095
It is requested that copies of notices and communications from the
Securities and Exchange Commission be sent to:
<Table>
DAVID JOHNSON, ESQ. SEBASTIAN R. SPERBER, ESQ.
ALLEN & OVERY CLEARY, GOTTLIEB, STEEN & HAMILTON
9TH FLOOR, THREE EXCHANGE SQUARE BANK OF CHINA TOWER
CENTRAL ONE GARDEN ROAD
HONG KONG SAR HONG KONG SAR
</Table>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
The securities being registered herein are to be offered on a delayed or
continuous basis pursuant to Release Nos. 33-6240 and 33-6424 under the
Securities Act of 1933.
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1)(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Debt Securities and Warrants......... $1,062,700,000 100% $1,062,700,000 $45,522.43(3)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Estimated for purpose of determining the registration fee.
(2) Exclusive of accrued interest, if any.
(3) Pursuant to Rule 457(p) under the Securities Act of 1933, the amount of
registration fee has been offset by US$40,450, which is the registration fee
paid by the Registrant, National Power Corporation and Power Sector Assets
and Liabilities Management Corporation under Registration Statement No.
333-105868 under Schedule B, originally filed with the Commission on June 5,
2003 and withdrawn on August 28, 2003.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
CONTAINED HEREIN ALSO RELATES TO DEBT SECURITIES AND/OR WARRANTS HAVING AN
AGGREGATE PRINCIPAL AMOUNT OF $437,300,000 REGISTERED UNDER THE REGISTRANT'S
REGISTRATION STATEMENT NO. 333-91176 UNDER SCHEDULE B AND NOT PREVIOUSLY SOLD IN
THE UNITED STATES FOR WHICH THE REGISTRANT PAID A REGISTRATION FEE OF $40,231.
THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION STATEMENT, ALSO
CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO.
333-91176 AND SUCH POST-EFFECTIVE AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE
CONCURRENTLY WITH THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT AND IN
ACCORDANCE WITH SECTION 8(c) OF THE SECURITIES ACT OF 1933.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT ISSUE THE SECURITIES OFFERED IN THIS PROSPECTUS UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO EXCHANGE THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
EXCHANGE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED AUGUST 28, 2003
PROSPECTUS
(REPUBLIC OF THE PHILIPPINES LOGO)
REPUBLIC OF THE PHILIPPINES
$1,500,000,000
DEBT SECURITIES AND/OR
WARRANTS
The Republic will provide specific terms of these securities in supplements
to this prospectus. You should read this prospectus and any supplement carefully
before you invest. This prospectus may not be used to offer or sell securities
unless accompanied by a supplement. The Republic may sell the securities
directly, through agents designated from time to time or through underwriters.
The names of any agents or underwriters will be provided in the applicable
prospectus supplement.
You should read this prospectus and any supplements carefully. You should
not assume that the information in this prospectus, any prospectus supplement or
any document incorporated by reference in them is accurate as of any date other
than the date on the front of these documents.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated August -- , 2003.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Certain Defined Terms and Conventions....................... 2
Forward Looking Statements.................................. 2
Data Dissemination.......................................... 3
Use of Proceeds............................................. 3
Prospectus Summary.......................................... 4
Republic of the Philippines................................. 9
History, Land and People.................................. 9
Government and Politics................................... 9
Recent Developments....................................... 13
Philippine Economy........................................ 17
GDP and Major Financial Indicators........................ 25
Principal Sectors of the Economy.......................... 30
Prices, Employment and Wages.............................. 35
Balance of Payments....................................... 38
Monetary System........................................... 61
The Philippine Financial System........................... 68
The Philippine Securities Markets......................... 74
Public Finance............................................ 76
The Government Budget..................................... 81
Debt...................................................... 82
Description of the Securities............................... 94
Description of the Debt Securities........................ 94
Description of the Warrants............................... 103
Limitations on Issuance of Bearer Debt Securities......... 103
Taxation.................................................... 105
Philippine Taxation....................................... 105
United States Tax Considerations.......................... 106
Plan of Distribution........................................ 113
Validity of the Securities.................................. 114
Authorized Representative in the United States.............. 114
Experts; Official Statements and Documents.................. 114
Further Information......................................... 114
Index to Debt Tables of the Republic of the Philippines..... T-1
</Table>
1
CERTAIN DEFINED TERMS AND CONVENTIONS
Statistical information included in this prospectus is the latest official
data publicly available at the date of this prospectus. Financial data provided
in this prospectus may be subsequently revised in accordance with the Republic's
ongoing maintenance of its economic data, and that revised data will not be
distributed by the Republic to any holder of the Republic's securities.
All references in this prospectus to (a) the "Republic" or the
"Philippines" are to the Republic of the Philippines, (b) the "Government" are
to the national government of the Philippines, (c) the "administration" are to
the current administration of President Gloria Macapagal-Arroyo and (d) "Bangko
Sentral" are to Bangko Sentral ng Pilipinas, the central bank of the
Philippines.
Government owned corporations are corporations at least 51% of the capital
stock of which is owned by the Government directly or indirectly through its
instrumentalities.
The fiscal year of the Government commences on January 1 of each year and
ends on December 31 of such year.
Unless otherwise indicated, all references in this prospectus to
"Philippine Pesos", "pesos" or "P" are to the lawful national currency of the
Philippines, those to "dollars", "US dollars" or "$" are to the lawful currency
of the United States of America and those to "SDR" are to Special Drawing Rights
of the International Monetary Fund.
This prospectus contains conversions of some peso amounts into US dollars
for the convenience of the reader. Unless otherwise specified, the conversions
were made at the exchange rate as stated by the Bangko Sentral Reference
Exchange Rate Bulletin published by the Treasury Department of Bangko Sentral on
the relevant date. No representation is made that the peso amounts actually
represent the US dollar amounts or could have been converted into US dollars at
the rates indicated, at any particular rate, or at all.
Any discrepancies in the tables included herein between the amounts listed
and the totals thereof are due to rounding.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus under "Republic of the
Philippines" are forward-looking. They include statements concerning, among
others,
- the Republic's economic, business and political conditions and prospects;
- the Republic's financial stability;
- the depreciation or appreciation of the peso;
- changes in interest rates;
- governmental, statutory, regulatory or administrative initiatives; and
- adverse changes in economic conditions in the Republic.
Actual results may differ materially from those suggested by the
forward-looking statements due to various factors. These factors include, but
are not limited to:
- Adverse external factors, such as high international interest rates and
recession or low growth in the Republic's trading partners. High
international interest rates could increase the Republic's current
account deficit and budgetary expenditures. Recession or low growth in
the Republic's trading partners could lead to fewer exports from the
Republic and, indirectly, lower growth in the Republic.
2
- Adverse domestic factors, such as a decline in foreign direct and
portfolio investment, increases in domestic inflation, high domestic
interest rates and exchange rate volatility. Each of these factors could
lead to lower growth or lower international reserves.
- Other adverse factors, such as climatic or seismic events and political
uncertainty.
DATA DISSEMINATION
The Republic is a subscriber to the International Monetary Fund's Special
Data Dissemination Standard ("SDDS"), which is designed to improve the
timeliness and quality of information of subscribing member countries. The SDDS
requires subscribing member countries to provide schedules indicating, in
advance, the date on which data will be released or the so-called "Advance
Release Calendar". For the Philippines, precise dates or "no-later-than-dates"
for the release of data under the SDDS are disseminated three months in advance
through the Advance Release Calendar, which is published on the Internet under
the International Monetary Fund's Dissemination Standards Bulletin Board.
Summary methodologies of all metadata to enhance transparency of statistical
compilation are also provided on the Internet under the Dissemination Standards
Bulletin Board. The Internet website for the Philippines' "Advance Release
Calendar" and metadata is located at
"http://dsbb.imf.org/Applications/web/sddscountrycategorylist/?strcode=PHL".
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, the net
proceeds from sales of securities will be used for the general purposes of the
Republic, including for budget support and to repay a portion of the
Government's borrowings.
3
PROSPECTUS SUMMARY
REPUBLIC OF THE PHILIPPINES
GENERAL
The Philippine archipelago has over 7,000 islands with a total land area of
approximately 300,000 square kilometers. The islands are grouped into three
geographic regions: Luzon, the largest island, in the north covering an area of
141,395 square kilometers, Visayas in the central region, covering an area of
55,606 square kilometers, and Mindanao in the south, covering an area of 101,999
square kilometers. Manila is the Republic's capital. As of December 31, 2002,
the population of the Republic was approximately 82 million.
GOVERNMENT AND POLITICS
Since 1935, the Republic has had three constitutions, the most recent of
which was adopted by a plebiscite held in February 1987. The ratification of the
new Constitution in 1987 restored a presidential form of government consisting
of three branches: executive, legislative and judiciary. Executive power is
exercised by the President who is elected by direct popular vote and who may
serve one single term of six years. Legislative authority is vested in the
Congress of the Philippines, which consists of the Senate and the House of
Representatives. Judicial power is vested in the Supreme Court and in such lower
courts as may be established by law from time to time. In January 2001, Gloria
Macapagal-Arroyo assumed the office of the Presidency after the impeachment and
resignation of former President Joseph Estrada. Criminal charges for perjury,
illegal use of an alias, and plunder have been filed against Mr. Estrada with
the Sandiganbayan, a special court with jurisdiction over criminal and civil
cases involving graft and corruption. Hearings on these charges are ongoing.
On December 30, 2002, President Gloria Macapagal-Arroyo announced that she
would not seek another term as president. The next presidential election is
scheduled to take place in May 2004. In her announcement, President Arroyo
explained that she wanted to be unburdened by politics and further concentrate
her efforts on her administration's economic reform plans.
Over the past three decades, groups of communist rebels and disaffected
Muslims in the Republic have periodically fought with Government forces. Armed
conflict has continued between the Government and various rebel groups, mainly
communist rebels and Muslim separatists. The United States government has sent
troops to the Philippines and pledged monetary aid to help the Republic in its
campaign against these rebel groups and against terrorism generally.
ECONOMY
The Philippines has a mixed economy in which the Government is directly
engaged in certain economic activities through government owned and controlled
corporations ("GOCCs") and Government Financial Institutions ("GFIs"). The
Government actively encourages domestic and foreign private investment, and has
sought to establish a broader and more balanced base for economic development.
Beginning in 1991, further liberalization of trade and investment in the
Philippines has been undertaken in tandem with the deregulation of the financial
system, foreign exchange liberalization, tax reforms, acceleration of
privatization, enhancement of competition in the provision and operation of
public utilities, and deregulation of the oil and power industries. The
Government has indicated that these steps are taken in conjunction with
conservative fiscal and monetary policies in an effort to accelerate economic
growth, contain inflation, create fiscal and external payment surpluses, and
increase foreign investor confidence.
In an attempt to promote macroeconomic stability and sustained growth of
income and employment, the Arroyo Administration proposed its Medium-Term
Philippine Development Plan for 2001-2004. The plan
4
aims to expand and equalize access to economic and social opportunities,
inculcate receptivity to change and promote personal responsibility through its
primary policy objectives:
- comprehensive human development and protecting the vulnerable;
- good governance and rule of law;
- agricultural and fisheries modernization; and
- macroeconomic stability and equitable growth based on free enterprise.
The principal sectors of the Philippine economy are services, industry and
agriculture (including fishery and forestry). At constant market prices, the
services sector accounted for 45.8% of Gross Domestic Product ("GDP") in 2002,
led by trade (16.3% of GDP) transportation, communications and storage (7.7% of
GDP) and private services (7.5% of GDP). The industry sector accounted for 34.5%
of GDP at constant market prices in 2002, of which 24.1% of GDP at constant
market prices came from manufacturing. The agriculture sector accounted for
19.7% of GDP at constant market prices in 2002.
In 2002, gross national product ("GNP") grew 4.5% and GDP grew 4.4%,
compared with GNP growth of 3.5% and GDP growth of 3.0% for 2001. The increased
growth rates are, in part, a result of lower interest and inflation rates, and
in the administration's view, reflect the success of its macroeconomic strategy
implemented in 2001. The 2002 economic performance is the strongest recorded by
the Philippines since the 1997 Asian financial crisis. The first half of 2003
saw continued economic growth, as GNP grew 4.8% and GDP grew 3.9%, compared with
GNP growth of 3.3% and GDP growth of 4.0% in the first half of 2002.
Foreign trade plays a significant role in the Philippine economy. In 2002,
exports of goods and services accounted for approximately 45.9% of the country's
GNP and imports accounted for approximately 46.4% of GNP. The country's trade
strategy emphasizes export promotion. The expansion of export-oriented, labor-
intensive manufacturing operations, such as electronics, drove total exports of
goods to $34.4 billion in 2002 and produced an average annual export growth rate
of 3.9% from 1998 to 2002. Manufactured goods comprise the most important
category of the Republic's exports, accounting for 90% of the Republic's exports
in 2002. Electronics, machinery and transport equipment and garments have
historically been the Republic's leading manufactured exports. Exports of goods
in 2002 were $34.4 billion, representing an increase of 10.1% from 2001, largely
due to higher export shipments of machinery and transport equipment, clothing
and apparel, and electronics.
The Republic disclosed in early 2003 that the reported current account
surplus for 2000, 2001 and 2002 had been overstated due to monitoring problems
giving rise to underreported imports. Reflecting the updated import data, the
current account for 2000 has been revised to a surplus of $6.3 billion from a
previously reported surplus of $8.5 billion, and the current account for 2001
has been revised to a surplus of $1.3 billion from a previously reported surplus
of $4.6 billion. At these revised levels, the current account surplus stood at
7.9% and 1.7% of gross national product for 2000 and 2001, respectively.
However, the capital and financial account for 2000 has been revised to a net
outflow of $4.1 billion from a previously reported net outflow of $6.5 billion,
and the capital and financial account for 2001 has been revised to a net outflow
of $1.1 billion from a previously reported net outflow of $3.7 billion. As
revised, the Republic's balance of payments recorded a surplus of $660 million
for 2002, compared to a $192 million deficit for 2001. The year-on-year
turnaround was mainly attributed to higher remittances from overseas workers and
growth in exports.
In the first four months of 2003, the Republic's balance of payments
recorded a deficit of $519 million, compared to a surplus of $1.9 billion for
the first four months of 2002. The reversal was due both to a decrease in the
current account surplus, from $1.5 billion in the first four months of 2002 to
$342 million in the first four months of 2003, and to a reversal in the capital
and financial account, from a surplus of $1.7 billion in the first four months
of 2002 to an outflow of $612 million in the first four months of 2003. The
current account for the first four months of 2003 declined from the same period
in 2002 mainly because of increased imports in preparation for a war in Iraq and
a decline in tourism due to the SARS epidemic. The capital and financial account
for the first four months of 2003 declined from the first four months of 2002
mainly because of global investor uncertainty and withdrawals of foreign
currency by non-residents from Philippine banks.
5
The Republic's external debt approved by and registered with Bangko Sentral
(which includes banking system debt, public sector debt whether or not
guaranteed by the Government and private sector debt) amounted to $55.8 billion
as of March 31, 2003, a 3.6% increase from the $53.9 billion as of December 31,
2002. The increase in the first quarter of 2003 resulted mostly from net inflows
of foreign exchange to finance the Government's budgetary requirements. In 2002,
Bangko Sentral-approved external debt increased 2.9% from the $52.4 billion
recorded as of December 31, 2001. The increase in debt in 2002 was due to
additional borrowing to settle maturing obligations and finance the Government's
budget deficit, as well as upward foreign exchange revaluation adjustments on
third-country currency denominated debt resulting from the continued
depreciation of the US dollar against third-country currencies. As of December
31, 2002, 73% of the Republic's outstanding direct external debt, which amounted
to $25.3 billion, carried fixed rates, while 23% had variable rates. The
remaining 4% was non-interest bearing. As of June 30, 2002, the average cost of
fixed rate credits was about 6%. For liabilities with floating interest rates,
the margin over the applicable base rate ranged from 3.5% to 4.4%. The average
interest rates for 91-day Treasury bills decreased from an average of 9.86% in
2001 to 5.43% in 2002, following the decline in global interest rates. As of
December 31, 2002, approximately 58% of the Republic's outstanding direct
external debt was denominated in US dollars while 33% was denominated in
Japanese yen. As of December 31, 2002, multi-currency loans from the World Bank,
the International Monetary Fund and the Asian Development Bank accounted for
15.3% of the Republic's external debt.
On June 12, 2003, Fitch Ratings downgraded the Republic's long-term foreign
currency rating from BB+ to BB on the grounds that current and prospective
fiscal trends amount to a material deterioration in sovereign creditworthiness,
notwithstanding the recent upturn in tax receipts. Fitch also lowered the
long-term local currency rating from BBB- to BB+ and changed the outlook on both
ratings from negative to stable. Fitch mentioned that the change in outlook
reflected Fitch's judgement that broader macro-economic trends remained
reasonable with respect to growth, inflation and the current account balance. On
April 24, 2003, Standard & Poor's Ratings Service downgraded the Republic's
long-term foreign currency rating from BB+ to BB, downgraded the Republic's
local currency rating from BBB+ to BBB and revised the long-term ratings outlook
from negative to stable. Standard & Poor's emphasized the Government's high
fiscal deficit, increased interest payments due to its high debt burden, and
heavy reliance on external capital for economic growth. On January 8, 2003,
Moody's Investors Service revised its outlook on the Republic's local-currency
rating for government bonds from stable to negative, while affirming each of the
Republic's foreign currency ratings. Moody's recognized that revenue collections
had improved in recent months, but noted that poor revenue collection in prior
periods had weakened long-term fiscal prospects.
6
SUMMARY ECONOMIC INFORMATION OF THE REPUBLIC OF THE PHILIPPINES
<Table>
<Caption>
1998 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- ------
(IN BILLIONS, EXCEPT AS INDICATED)(1)
GDP (at current market prices)(2)............. P 2,665 P 2,977 P 3,355 P 3,674 P 4,023 P2,037(3)
GDP (at constant 1985 prices)(2).............. 888 918 973 1,002 1,046 518(3)
GDP per capita (in US dollars at current
market prices)(2)........................... $ 864 $ 992 $ 989 $ 917 $ 970 $ 465(3)
GDP (growth rate at constant 1985
prices)(2).................................. (0.6)% 3.4% 4.4% 3.0% 4.4% 3.9%(3)
GNP (growth rate at constant 1985
prices)(2).................................. 0.4% 3.7% 4.8% 3.5% 4.5% 4.8%(3)
Annual increase in consumer price index (1994
= 100)...................................... 9.7% 6.7% 4.4% 6.1% 3.1% 3.3%(4)
Unemployment rate............................. 10.1% 9.8% 11.2% 11.1% 11.4% 12.2%(5)
Total government revenues..................... P 463 P 479 P 515 P 564 P 567 P 358(6)
Total government expenditures................. 513 590 649 711 778 454(6)
Surplus (deficit) of government............... (50.0) (111.7) (134.2) (147.0) (211) (95)(6)
Public sector borrowing requirement(7)........ (111.3) (138.0) (174.6) (189.8) (268.3) N/A(8)
Consolidated public sector financial
position(9)................................. (83.2) (100.5) (151.7) (147.6) (231.3) N/A(8)
</Table>
<Table>
<Caption>
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- -------
(IN MILLIONS, EXCEPT AS INDICATED)
Goods trade -- exports............ $ 29,496 $ 34,211 $ 37,295 $ 31,243 $ 34,383 $17,068(10)
Goods trade -- imports(11)........ (29,524) (29,252) (33,481)(12) (31,986)(12) (33,975)(12) 18,571(10)
Services trade -- exports......... 13,917 4,803 3,972 3,148 3,056(13) 954(13)
Services trade -- imports......... (12,778) (7,515) (6,402) (5,198) (4,320) (1,514)(13)
Current transfer (net)............ 435 512 437 447 503 210(13)
Current account (deficit)......... 1,546 7,219 6,258(11) 1,323(11) 4,197 342(13)
As a percentage of GNP............ 2.3% 9.0% 7.9% 1.7% 5.0% N/A(8)
Total capital and financial
account......................... $ 478 $ (2,333) $ (4,119) $ (1,080) $ (2,104) $ (612)(13)
Overall balance of payments
position........................ 1,359 3,586 (513) (192) 660 (519)(13)
As a percentage of GNP............ 2.0% 4.5% (0.6)% (0.2)% 0.8% N/A(8)
Gross international
reserves(14).................... $ 10,806 $ 15,107 $ 15,024 $ 15,658 $ 16,180 $16,139(15)
</Table>
<Table>
<Caption>
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- ----
(IN BILLIONS, END OF PERIOD)(16)
Direct domestic debt of the
Republic(17)............................ P 850.9 P 978.4 P1,068.2 P1,247.7 P1,471.2 N/A(8)
Direct external debt of the
Republic(17)............................ $ 16.5 $ 19.8 $ 22.0 $ 22.1 $ 25.3 N/A(8)
Public sector domestic debt(18)........... P1,396.2 P2,196.6 P2,542.0 P2,288.3 N/A(8) N/A(8)
Public sector external debt(19)........... $ 26.9 $ 31.8 $ 31.5 $ 25.1 $ 28.0 $29.7(20)
</Table>
- ---------------
Sources: National Statistics Office; National Statistical Co-ordination Board;
Bureau of the Treasury; Department of Finance, Bangko Sentral.
(1) Amounts in pesos have been converted to US dollars using the average Bangko
Sentral reference exchange rates for the applicable year.
(2) GDP and GNP figures for 2001 and 2002 have recently been revised. See "GDP
and Major Financial Indicators -- Periodic Revisions to Philippine National
Accounts."
(3) First half of 2003.
(4) Year on year as of July 2003.
(5) As of April 30, 2003.
(6) First seven months of 2003.
(7) Represents the aggregate deficit of the Government, the Central Bank-Board
of Liquidators (the "CB-BOL"), the Oil Price Stabilisation Fund and the 14
GOCCs whose debt comprises virtually all the debt incurred by GOCCs (the
"14 monitored GOCCs").
(8) N/A means "not available."
7
(9) Comprises the aggregate deficit or surplus of the Government, the CB-BOL's
accounts, the 14 monitored GOCCs, the Social Security System (the "SSS"),
the Government Service Insurance System (the "GSIS"), Bangko Sentral, the
Government financial institutions ("GFIs") and the local government units.
(10) First six months of 2003.
(11) National Statistics Office data was adjusted to: (a) exclude aircraft
procured under operating lease arrangements amounting to $542 million for
1996, $45 million 1997 and $136 million for 1998 and (b) include an
additional $466 million worth of aircraft imported under capital lease
arrangements for 1997.
(12) Represents the final revised numbers released by the Inter-agency Task
Force on the Balance of Payments.
(13) First four months of 2003.
(14) Comprises the holdings by Bangko Sentral of gold reserves, foreign
investments, foreign exchange and SDRs, including Bangko Sentral's reserve
position in IMF at period end.
(15) As of July 31, 2003.
(16) Amounts in original currencies were converted to US dollars or pesos, as
applicable, using the Bangko Sentral reference exchange rates at the end of
each period.
(17) Represents debt of the Government only, and does not include other public
sector debt. Includes direct debt obligations of the Government, the
proceeds of which are on-lent to GOCCs and other public sector entities,
but excludes debt guaranteed by the Government and debt originally
guaranteed by other public sector entities for which the guarantee has been
assumed by the Government.
(18) Represents debt of the Government, the 14 monitored GOCCs, the CB-BOL,
Bangko Sentral and the GFIs.
(19) Includes public sector debt whether or not guaranteed by the Government.
(20) As of March 31, 2003.
8
REPUBLIC OF THE PHILIPPINES
HISTORY, LAND AND PEOPLE
HISTORY. Spain governed the Philippines as a colony from 1521 until 1898.
On June 12, 1898, during the Spanish-American War, the Filipinos declared their
independence. The United States claimed sovereignty over the Philippines under
the 1898 Treaty of Paris, which ended the Spanish-American War, and governed the
Philippines as a colony until 1935 when the Philippines became a self-governing
commonwealth. On July 4, 1946, the Philippines became an independent republic.
GEOGRAPHY AND GENERAL INFORMATION. The Philippine archipelago, located in
Southeast Asia, comprises over 7,000 islands and a total land area of
approximately 300,000 square kilometers. The Republic groups the islands into
three geographic regions: Luzon in the north, covering an area of 141,395 square
kilometers, Visayas in the center, covering an area of 55,606 square kilometers,
and Mindanao in the south, covering an area of 101,999 square kilometers. The
Republic is also divided into 15 administrative regions.
Forests cover approximately 50% of the Philippines and 47% of the country
is under agricultural cultivation. In 2002, agriculture, forestry and fishery
employed 37.0% of the labor force and provided 4.3% of the Republic's export
earnings (including exports of agriculture-based products). The Republic is
generally self-sufficient in staple cereals and is a major exporter of certain
agricultural products. Manufactured goods comprise the most important category
of the Republic's exports, accounting for approximately 90% of the Republic's
exports in 2002. Electronics, machinery and transport equipment and garments
have historically been the Republic's leading manufactured exports.
The Republic's population is currently approximately 82 million. The
Republic's capital, Manila, located in Luzon, has an estimated population of 1.7
million. The cities of Manila, Pasay, Kalookan, Quezon City, Mandaluyong, Las
Pinas, Muntinlupa, Marikina, Pasig and Makati, together with seven surrounding
municipalities, make up the National Capital Region or Metro Manila. Metro
Manila, the most populous of the administrative regions, has an estimated
population of 9.9 million people.
The majority of Filipinos have Malay ethnic origins. Filipino culture also
includes strong Spanish, Chinese and American influences. Filipino is the
national language, but English is the primary language used in business,
government and education. The population speaks over 80 other dialects and
languages, including Chinese and Spanish. Based on a 2000 survey, the Republic's
literacy rate is 95%, ranking among the highest in Asia.
Christianity, primarily Roman Catholicism, is the predominant religion in
the Philippines. A significant Muslim minority lives in Mindanao.
GOVERNMENT AND POLITICS
GOVERNMENTAL STRUCTURE. Since 1935, the Republic has had three
Constitutions. The country adopted the current Constitution by plebiscite in
February 1987 after the ousting a year earlier of Ferdinand Marcos, who had
ruled for 20 years, in favor of Corazon Aquino after a people's uprising. The
new Constitution restored a presidential form of government comprised of three
branches: executive, legislative and judicial.
The principal features of each branch are as follows:
- Executive -- A President, directly elected for a single, six-year term,
exercises executive power. If the President dies, becomes permanently
disabled or is removed from office or resigns, the Vice President acts as
President for the remainder of the term. If the Vice President cannot
serve, the President of the Senate or, if he cannot serve, the Speaker of
the House of Representatives, acts as President until the election and
qualification of a new President or Vice President. The person acting as
President for any remaining term may, if elected, serve a six-year term
as President.
In May 1998, the country elected Joseph Estrada as President and Gloria
Macapagal-Arroyo as Vice President. In January 2001, after a people's
uprising, there was a transition of power to President Arroyo.
9
- Legislative -- The Congress, comprised of the Senate and the House of
Representatives, exercises the country's legislative authority. The
Constitution mandates a Senate of 24 members and a House of
Representatives of not more than 250 members, all elected by popular
vote. Senators serve for a term of six years and members of the House of
Representatives for a term of three years. The country held elections for
13 Senators and all members of the House of Representatives in May 2001.
The other 11 Senators were elected in May 1998.
- Judicial -- The Supreme Court and any lower courts established by law
exercise the country's judicial authority. The country's court system is
a multi-tiered system of courts of general jurisdiction that includes the
Supreme Court and the Court of Appeals. Below these, the Regional Trial
Courts, Metropolitan Trial Courts, the Municipal Trial Courts and the
Municipal Circuit Trial Courts constitute courts of original
jurisdiction.
Special or administrative tribunals and quasi-courts also exercise judicial
functions. Included in this category are constitutional commissions, the
Sandiganbayan (the court that handles Government graft and corruption
cases) the Court of Tax Appeals, the Shari'ah courts (which handle matters
governed by Islamic law) and administrative agencies that handle
specialized areas such as labor relations and securities regulation.
A Chief Justice and 14 Associate Justices constitute the Supreme Court,
which supervises all lower courts and related personnel. The Supreme Court
and the Court of Appeals may review decisions and rulings of lower courts
and quasi-judicial tribunals. The President appoints each Supreme Court or
Court of Appeals justice and lower court judge from at least three
candidates nominated by the Judicial and Bar Council.
POLITICAL PARTIES. The Republic's multi-party system currently has several
registered political parties. For the May 2001 elections, President Arroyo was
supported by the People Power Coalition, which was comprised of the
Lakas-NUCD-UMDP, the Liberal Party, Reporma, Promdi, Aksyon Demokratiko and
other pro-Arroyo administration parties. In turn, parties identified with former
President Estrada formed the Puwersa ng Masa ("Force of the Masses") coalition,
which was comprised of the Nationalist People's Coalition, the Laban ng
Demokratikong Pilipino, Partido ng Masang Pilipino, the People's Reform Party
and the Kilusang Bagong Lipunan (the party organized by the late President
Ferdinand Marcos and his political allies).
ADMINISTRATIVE ORGANIZATION. As of December 31, 2002, the Republic had 17
regions and 43,645 local Government units. Local Government units included 79
provinces, 115 cities, 1,495 municipalities (subdivisions of provinces) and
41,956 barangays (villages, which are the basic units of the political system).
Highly urbanized cities function independently of any province, while other
cities are subject to the administrative supervision of their home provinces.
10
The Government is mainly organized around the 20 departments and
department-equivalent agencies of the executive branch, which implement the
various programs and projects of the Government. The departments and
department-equivalent agencies are in turn organized into sectors.
<Table>
<Caption>
SECTOR MAJOR DEPARTMENTS
- ------ -----------------
Social services........................... Health; Education, Culture and Sports; Labor and
Employment; Social Welfare and Development
Economic services......................... Agriculture; Agrarian Reform; Energy; Environment and
Natural Resources; Tourism, Trade and Industry; Public
Works and Highways; Transportation and Communications;
Science and Technology
Defense................................... National Defense
General public services................... Foreign Affairs; Finance; Budget and Management;
Interior and Local Government; Justice; National
Economic and Development Authority; Office of the Press
Secretary
Constitutional offices.................... Elections; Audit; Civil Service; Office of the
Ombudsman; Human Rights
Autonomous Region of Muslim Mindanao...... Not applicable
Cordillera Administrative Region.......... Not applicable
</Table>
Agencies attached to the various departments perform regulatory, policy
formulation and coordination functions.
The projects and programs in the Autonomous Region of Muslim Mindanao and
Cordillera Administrative Region are implemented by various departments from
different sectors. The total budget allocated for projects in the Autonomous
Region of Muslim Mindanao was P12.1 billion for 2003. The total budget allocated
for projects in the Cordillera Administrative Region is P12.0 billion for 2003.
GOVERNMENT CORPORATIONS. The Government owns or controls a number of
corporations that provide essential goods and services and work with the private
sector to encourage economic growth and development. Traditionally restricted to
basic public services and national monopolies, the number of Government
corporations grew from 13 in the 1930s to 301 by 1984. In 1988, the Government
launched a reform program to reduce the number of Government corporations,
establishing the legal and policy framework for the country's privatization
program. See "Privatization -- General."
Currently, there are approximately 100 Government corporations, including
subsidiaries. Each of these corporations is attached to a department for policy
and program coordination.
11
The Government closely monitors 14 major non-financial Government
corporations engaged in various major business activities by recording their
individual contribution to the public sector deficit or surplus position and
other financial indicators. These 14 corporations and their areas of activity
are as follows:
<Table>
<Caption>
GOVERNMENT CORPORATION BUSINESS ACTIVITY
- ---------------------- -----------------
National Power Corporation.................................. power generation and
transmission
Philippine National Oil Company............................. holding company, power
National Electrification Administration..................... electric utilities
Metropolitan Waterworks and Sewerage System................. water utilities
Local Water Utilities Administration........................ water utilities
Philippine Export Zone Authority............................ area development
National Food Authority..................................... agriculture
National Irrigation Administration.......................... agriculture
Philippine National Railways................................ transportation
Light Rail Transit Authority................................ transportation
Philippine Ports Authority.................................. transportation
National Development Company................................ holding company
National Housing Authority.................................. housing
Home Guaranty Corporation................................... housing insurance
</Table>
As of December 31, 2001, these 14 corporations had aggregate domestic and
external debt of P1,140 billion, which comprised virtually all the debt incurred
by Government corporations.
To facilitate the implementation of better business practices, the
Government intends to expand its monitoring of Government corporations,
including to the National Home Financing Corporation, which provides mortgage
financing for low-income housing.
The Government currently records the contribution to the public sector
deficit or surplus, and other financial indicators, of three Governmental
financial institutions that provide credit to enterprises in support of public
policies including two specialized Government banks -- the Development Bank of
the Philippines and the Land Bank of the Philippines. For a description of the
Development Bank and the Land Bank, see "-- The Philippine Financial
System -- Structure of the Financial System." The third institution, the Trade
and Investment Development Corporation of the Philippines (formerly Philippine
Export and Foreign Loan Guarantee Corporation), guarantees foreign currency
loans to exporters and contractors. As of December 31, 2001, the monitored
Governmental financial institutions had aggregate domestic and external debt of
P301.4 billion.
INTERNATIONAL RELATIONS. The Philippines places a high priority on
expanding global trade through a multilateral framework of principles and rules
that respect individual countries' policy objectives and levels of economic
development. The country's participation in various international organizations,
such as the World Trade Organization, the International Monetary Fund ("IMF"),
the International Bank for Reconstruction and Development (also known as the
World Bank) and the Asian Development Bank, allows it to encourage liberalized
trade and investment and to discuss global issues that will affect the
Republic's economy.
12
The following table shows the Republic's capital participation in, and
loans obtained from, major international financial organizations.
MEMBERSHIP IN INTERNATIONAL FINANCIAL ORGANIZATIONS
<Table>
<Caption>
CAPITAL CAPITAL LOANS
NAME OF ORGANIZATION DATE OF ADMISSION SUBSCRIBED SHARE PAID IN OUTSTANDING
- -------------------- ----------------- ---------- ------- --------- -----------
(IN MILLIONS, EXCEPT FOR PERCENTAGES)
International Monetary Fund(1).... December 1945 SDR 879.9 -- SDR 879.9 SDR 1,052.7
International Bank for
Reconstruction and
Development(2).................. December 1945 $ 6,844.0 0.4% $ 48.9 $ 3,353.0
Asian Development Bank(3)......... December 1966 $ 1,142.0 2.4% $ 80.0 $ 2,551.5
</Table>
- ---------------
(1) As of May 31, 2003; Source: IMF.
(2) As of June 30, 2002; Source: World Bank Annual Report.
(3) As of December 31, 2002; Source: Asian Development Bank Annual Report.
The Philippines also promotes its economic interests through membership in
the following regional organizations:
- the Association of Southeast Asian Nations ("ASEAN");
- ASEAN Free Trade Area;
- South East Asia, New Zealand and Australia Central Banks;
- South East Asian Central Banks;
- Asia-Pacific Economic Cooperation; and
- Executives Meeting of East Asia and Pacific Central Banks.
RELATIONSHIP WITH THE IMF. The IMF currently maintains a close dialogue
with the Government, within the framework of a post-program monitoring
arrangement ("PPM"). The PPM involves program assessments that are based on a
regular review of economic developments and policies rather than the attainment
of specific quantitative targets. This arrangement does not involve a financing
component.
In December 2002, the IMF completed a 10-day review of the Philippine
economy as part of the PPM. The IMF emphasized the need for the reduction of the
fiscal deficit through increased revenues. In particular, the IMF recommended
additional taxes on telecommunications, "sin" products and automobiles, and
measures to improve the efficiency of tax collection. The IMF also recommended
improvements in energy regulation, including a stronger and more independent
Energy Regulatory Commission ("ERC") and the expedited privatization of the
National Power Corporation ("NPC"). See "Philippine Economy -- Restructuring of
the Electric Power Industry and the Privatization of National Power
Corporation".
In August 2003, the IMF completed its most recent 10-day review of the
Philippine economy as part of the PPM. The IMF continued to emphasize the need
for measures to reduce the Government fiscal deficit, including structural
reforms in the banking sector, improvements in tax collection, improvements in
the efficiency of NPC and an increase in basic power rates.
The next IMF review of the Philippine economy pursuant to the PPM will take
place in November 2003, at which time the Government will determine whether it
intends to continue the PPM. The Republic will continue to be subject to the
IMF's annual Article 4 review, which is standard for all IMF members.
RECENT DEVELOPMENTS
MILITARY INCIDENT IN MANILA
On Sunday, July 27, 2003, approximately 300 members of the Armed Forces of
the Philippines occupied a luxury apartment complex in Manila's main financial
district and threatened to detonate explosives they had
13
planted in the area. The soldiers, who accused the military of corruption and
collusion with rebel forces, demanded the resignations of President Arroyo and
Defense Secretary Angelo Reyes. The 20-hour standoff ended peacefully when
Government negotiators persuaded the soldiers to return to barracks. The next
Monday, the Philippine financial markets continued normal operations. However,
in the week following the incident, the Philippine Stock Exchange composite
index declined by 3.8% to close at 1235.30 on August 1, 2003. As of August 21,
2003, the Philippine Stock Exchange composite index had partially recovered to
1245.34. It is unclear whether or not the incident will have a long-term effect
on foreign investment or on the Philippine financial system as a whole.
SUSPENSION OF BANGKO SENTRAL GOVERNOR
On August 14, 2003, the Philippine Court of Appeals issued an order
suspending Bangko Sentral Governor Rafael Buenaventura and four other central
bank officials for one year. The court, reversing an earlier finding of the
Office of the Ombudsman (the office mandated under the Constitution of the
Republic to investigate and prosecute all complaints of corruption against
public officials and government employees), found Mr. Buenaventura
"administratively liable of gross neglect of duty" for not performing an
adequate investigation in connection with the closure of a commercial bank in
2000. Mr. Buenaventura and the other suspended officials will file motions for
reconsideration with the Court of Appeals. The suspensions have not yet taken
effect. The Government does not expect the suspensions to affect the operations
of Bangko Sentral.
STATE OF THE NATION ADDRESS
President Arroyo delivered her latest State of the Nation address on July
28, 2003, one day after the aborted military uprising in Manila. President
Arroyo urged Congress to approve pending economic reforms, such as the Transco
franchise, legislation to allow farmland to be used as loan collateral, an
excise tax on automobiles, and restructuring of the Bureau of Internal Revenue
("BIR").
FUNDS RELEASED FROM MARCOS ACCOUNTS
The Supreme Court ruled, on July 15, 2003, that the Government may claim
approximately $683 million from frozen Swiss bank accounts of former President
Ferdinand Marcos and his family. In its decision, the Supreme Court found that
Marcos had illegally acquired the money from the Republic during his 20 years as
President. Following the verdict, Swiss authorities have approved the transfer
of all but $10 million of the funds to the Government. The Marcos family has
filed a motion for reconsideration of the Supreme Court decision, which may
delay actual release of the funds. The Arroyo administration has proposed to use
the funds to compensate human rights victims of the Marcos administration, fund
agrarian land reform, reduce the fiscal deficit and reduce the Republic's debt.
RENEWED CLOSE TIES BETWEEN THE REPUBLIC AND THE UNITED STATES. In May
2003, President Arroyo visited the United States and received pledges of aid to
finance anti-terrorism measures and economic development in Mindanao. During the
visit, US President George W. Bush, in recognition of the Republic's support of
the US-led war on terrorism, designated the Republic a "major non-NATO ally,"
which would allow the Republic increased access to US military research and
supplies. Commitments made by the Bush administration during President Arroyo's
visit include:
- $30 million in counter-terrorism equipment and training;
- $30 million in development assistance for Mindanao;
- $25 million to train and equip an anti-terrorism combat engineering unit;
- US military support for Philippine military operations against the Abu
Sayyaf guerrilla group;
- initiatives to help reduce transaction fees on remittances from overseas
Filipinos; and
- trade preferences on certain Philippine agricultural products.
14
INTERNAL CONFLICT WITH REBEL GROUPS. Over the past three decades, groups
of communist rebels and disaffected Muslims in the Republic have periodically
fought with Government forces. Armed conflict has continued between the
Government and various rebel groups, mainly communist rebels and Muslim
separatists.
Since March 2003, a series of bombings and raids in the southern region of
Mindanao have killed almost 100 civilians. In response the AFP launched
sustained military offensives against the Moro Islamic Liberation Front ("MILF")
and the Abu Sayyaf guerrilla group, both of which the Government holds
responsible for the recent attacks. Leaders of the MILF, the largest Muslim
separatist group in the Philippines, condemned the recent attacks and denied
that they target civilians.
As part of the Government's response to recent terrorist attacks, a number
of anti-terrorism bills have been proposed in Congress. President Arroyo has
urged the Congress to pass these bills quickly to give the military and the
police increased power in fighting terrorism. The draft bills include, among
other items, measures that would improve the state's ability to intercept
communications, conduct surveillance, freeze bank accounts, make warrantless
arrests and extend detentions.
As part of the recent heightened cooperation between the Republic and the
United States in the campaign against terrorism, the United States has sent
troops and military advisers to help the AFP defeat the Abu Sayyaf. In July
2002, the United States and the Republic entered into a sustained military
cooperation agreement. Pursuant to the agreement, more than 1,000 US troops have
arrived in the Philippines since October 2002 to participate in joint military
exercises and to train the AFP in counter-terrorism strategy and tactics.
According to the AFP, 5,000 Government soldiers are currently in pursuit of the
Abu Sayyaf, and heavy fighting between the AFP and the Abu Sayyaf has continued
in Mindanao. According to military officials, fewer than 500 Abu Sayyaf
guerrillas remain in Mindanao.
Philippine and US defense officials are currently negotiating the terms of
reference to govern the deployment of additional US troops in Sulu, Mindanao, in
an operation known as "Balikatan 03-1." The Government has indicated that US
involvement in Sulu will be limited to joint training exercises under the
supervision of the Philippine military; however, some Philippine legislators and
local Mindanao officials have expressed concern about the possibility of US
participation in direct combat against Abu Sayyaf guerrillas.
In early 2003, fierce fighting resumed between the MILF and the AFP.
Clashes, concentrated near a MILF stronghold in southern Mindanao known as the
Buliok complex, forced an estimated 40,000 to 80,000 civilians to evacuate their
homes. The Philippine National Police believe that the MILF has ties to the
Indonesian group Jemaah Islamiah, which is widely believed to be responsible for
the terrorist bomb attack in Bali, Indonesia in October 2002 and the hotel
bombing in Jakarta, Indonesia in August 2003 (see -- "Terrorist Attacks in the
United States and Related Events") and also to be linked to the al-Qaeda
terrorist organization. MILF leaders have denied that the group is responsible
for the recent terrorist bombings in the Philippines and have denied any link to
Jemaah Islamiah or al-Qaeda.
Formal peace negotiations between the Government and the MILF have been
suspended since 2001. However, on July 17, 2003, the Government and the MILF
declared an indefinite bilateral cease-fire. To facilitate the peace process,
the Government also suspended arrest warrants on several MILF leaders suspected
of involvement in recent terrorist attacks in Mindanao. Peace talks between the
Government and the MILF, mediated by the Malaysian government, are scheduled to
resume in August 2003 in Kuala Lumpur, Malaysia. However, MILF leaders have
insisted that Government troops must pull out of the Buliok complex in Mindanao
before peace talks can resume. The United States has pledged diplomatic and
financial support for the peace negotiations.
In 2002, the United States and the European Union placed the Communist
Party of the Philippines (the "CPP") and the CPP's armed affiliate, the New
People's Army (the "NPA"), on their lists of "foreign terrorist organizations."
As a result, the United States and European governments have frozen financial
accounts linked to these groups and restricted travel of CPP and NPA members in
the United States and the European Union. In response to several recent bombings
and kidnappings attributed to the CPP, the AFP has initiated a military
offensive to end the insurgency. However, the Government continues to be open to
peace
15
negotiations with the National Democratic Front ("NDF"), a political
organization closely aligned with the CPP and NPA. Since September 2002, formal
peace talks between the Arroyo administration and the NDF have been suspended by
order of the President. The NDF has announced that it will not participate in
peace talks until the United States and the European Union remove the CPP and
the NPA from their lists of "foreign terrorist organizations." Despite this
development, the Government has begun informal exploratory talks with CPP and
NDF leaders in Amsterdam, with the aim of reviving the peace process. The
resumption of formal peace negotiations has been deferred, however, amid resumed
fighting between the AFP and the NPA, as well as allegations that the NDF and
CPP are using the illegal drug trade to finance their operations.
UNCERTAINTY IN IRAQ AND NORTH KOREA. In April 2003, an international
coalition led by the United States defeated the regime of former Iraqi President
Saddam Hussein. The victory of the coalition forces in Iraq, followed by the
passage of a United Nations resolution to lift economic sanctions on Iraq, has
eased much of the previous uncertainty over the stability of international
markets and the supply of oil from the Middle East. However, coalition military
forces continue to occupy Iraq and a new national government has yet to be
formed. The US and coalition governments have not officially stated when they
expect to restore political and economic stability to Iraq.
North Korea's recent announcement that it would reactivate its nuclear
weapons program has drawn harsh criticism and further economic sanctions from
the United States. It is unclear how any potential military action by or against
North Korea or embargoes or sanctions against North Korea will affect the
international financial markets or the Philippine economy.
SEVERE ACUTE RESPIRATORY SYNDROME. In early 2003, the outbreak of Severe
Acute Respiratory Syndrome ("SARS") seriously disrupted several Asian economies
and impeded global travel and trade. Since February 2003, the disease has spread
from China to more than 25 countries around the world; at least 8,400 people
have been infected and more than 900 of them have died. Hong Kong, China,
Taiwan, and Singapore have been especially hard hit by the disease.
On May 21, 2003, the World Health Organization ("WHO") lifted its advisory
against travel to the Philippines. The WHO noted that there had been no new
locally transmitted SARS cases in the Philippines in 20 days, twice the maximum
incubation period of the disease. In total, there have been 14 cases of SARS
reported in the Philippines, two of them fatal.
The effect of SARS on the Republic's economic growth was minimal in the
first quarter of 2003; however, SARS adversely affected the Republic's GDP and
GNP growth in the second quarter of 2003 because of decreased tourism,
transportation, and food manufactures caused by fears of the spread of the SARS
virus. In April 2003, President Arroyo announced the creation of a P1.5 billion
contingency fund to stem a potentially more serious outbreak of SARS in the
Philippines. President Arroyo also formed a crisis management team including
labor, health, immigration, and military officials. The contingency fund and the
crisis management team remain in place. Although the spread of SARS appears to
be on the decline, it is impossible to predict the long-term effect of SARS on
Philippine public health or on the Philippine economy.
CHANGES IN THE ARROYO ADMINISTRATION. On December 30, 2002, President
Gloria Macapagal-Arroyo announced that she would not seek another term as
president. The next presidential election is scheduled to take place in May
2004. In her announcement, President Arroyo explained that she wanted to be
unburdened by politics and further concentrate her efforts on her
administration's economic reform plans.
The Secretary for Justice, Hernando Perez, resigned on January 2, 2003,
amid allegations that he had extorted money from a Manila congressman. On
December 19, 2002, the Presidential Anti-Graft Commission charged Mr. Perez with
obstruction of justice for prohibiting the Bureau of Immigration from divulging
the travel records of high-ranking government officials, including himself. On
January 16, 2003, Simeon Datumanong, former Secretary for Public Works and
Highways, officially replaced Mr. Perez as Secretary for Justice.
In December 2002, President Arroyo announced several changes in her
cabinet. In particular, the President replaced Secretary of Socio-Economic
Planning Dante P. Canlas with Romulo Neri, former director-general of the
Congressional Planning and Budget Office. President Arroyo also announced the
16
replacement of the Secretary of Agriculture, Leandro Montemayor, with Luis
Lorenzo, Jr., a former businessman and presidential advisor on job creation, and
the replacement of the Secretary of Environment and Natural Resources, Heherson
Alvarez, with Elizea Gozun, an environmental consultant.
The President also re-arranged some of her cabinet members in early 2003.
In January 2003, Ignacio Bunye, the President's Press Secretary, was appointed
as the President's spokesperson in place of Rigoberto Tiglao, who was named as
the President's Chief of Staff. Also in January 2003, Hernani Braganza,
Secretary of Agrarian Reform, was appointed as the new Press Secretary. Roberto
Pagdanganan, chairman of the Board of Administrators of the Cooperative
Development Authority, has been appointed to replace Mr. Braganza as Secretary
of Agrarian Reform.
Although the effect of these recent developments is unclear, the Government
does not believe that President Arroyo's decision not to seek re-election or the
changes in leadership positions will materially affect the stability or
effectiveness of the Arroyo administration.
TERRORIST ATTACKS IN THE UNITED STATES AND RELATED EVENTS. The evolving
response of the United States and other nations to the terrorist attacks of
September 11, 2001 in New York City and Washington, D.C. has resulted in
continuing political and economic uncertainty and in increased volatility in the
world's financial markets. The US-led military action in Afghanistan, which
began in October 2001, successfully defeated the Taliban government and weakened
the al-Qaeda forces blamed for the September 11 attacks. However, the US
government has indicated that al-Qaeda continues to operate in countries around
the world and continues to threaten and plan additional terrorist attacks.
In May 2003, bombings in Casablanca, Morocco and Riyadh, Saudi Arabia
killed dozens of civilians and renewed concern over international terrorism by
al-Qaeda and affiliated groups. On August 5, 2003, a terrorist bombing of a
hotel in Jakarta, Indonesia, killed 12 people and injured 150 others. Also, in
October 2002, a terrorist bombing in Bali, Indonesia killed at least 190 people,
including many foreign tourists. It is not known whether those responsible for
the Bali and Jakarta attacks were connected to al-Qaeda or to previous attacks
in the Philippines. In response to the recent attacks, the United States and the
United Kingdom have issued advisories against travel to Mindanao, where rebel
groups are most active. It is unclear how the Philippine economy or the
international financial markets will be affected in the future by
terrorism-related events either inside or outside the Philippines.
POSSIBLE CONSTITUTIONAL CHANGE. In July 2003, the Senate committee on
constitutional amendments and revision of laws passed a resolution calling for a
constitutional convention after 2004 that could result in various changes to the
Philippine Constitution of 1987, including converting the Government to a
parliamentary system and changing to a unicameral legislature. However, a
majority in the House of Representatives prefers to convene a constituent
assembly as the means of effecting constitutional change. In March 2003, the
House of Representatives passed a resolution proposing such an assembly.
However, the Government does not expect constitutional change to take place in
the near term, given the different processes favored by the two legislative
bodies.
CRIMINAL CHARGES AGAINST ESTRADA. Criminal charges for perjury, illegal
use of an alias, and plunder filed against former President Joseph Estrada in
2001 by the Ombudsman continue to be tried in the Sandiganbayan, a special court
with jurisdiction over criminal and civil cases involving graft and corruption.
On May 19, 2003, Mr. Estrada filed a motion to dismiss the charges against
him, arguing that he is still the legitimate president of the Philippines and
immune from prosecution, despite a ruling by the Philippine Supreme Court that
Mr. Estrada had effectively resigned from the presidency. On July 29, 2003, the
Sandiganbayan rejected with finality Mr. Estrada's motion to dismiss the charge
of plunder and related charges against him. The defense is expected to begin
presenting its evidence in August 2003.
PHILIPPINE ECONOMY
OVERVIEW. Like many developing countries after World War II, the
Philippines protected local industry from foreign competition through measures
such as import tariffs and quotas, hoping to replace imported finished goods
with domestically produced goods over time. Successive Governments also
intervened in the
17
country's economic affairs by imposing quantitative trade barriers, price
controls and subsidies. Initially, the economy grew rapidly, with real GNP
growing at an average rate of 5.8% per annum from 1970 to 1980, largely due to
increased exports and Government investments. Infrastructure spending increased,
and state ownership of commercial enterprises became prevalent. By the early
1980s, however, the country faced ballooning budget deficits, growing levels of
foreign and domestic borrowing, rising inflation, climbing interest rates, a
depreciating peso, declining investment capital, and slowing economic growth or,
at times, a contraction in GDP. The country's unstable political situation
during that period, highlighted by the assassination of opposition leader
Benigno Aquino in 1983, exacerbated its economic problems.
The general optimism brought about by the peaceful removal of the unpopular
Marcos administration in 1986 helped economic recovery. Real GNP grew by 3.6% in
1986, increasing to 7.2% in 1988 before decelerating to 0.5% in 1991. The
deceleration was caused principally by underlying macroeconomic imbalances,
compounded by supply bottlenecks, natural disasters, political instability, the
global recession and the Persian Gulf crisis.
The Government of President Corazon Aquino, who came to power in 1986,
embarked on a stabilization program aimed at preventing an upsurge in inflation,
controlling the fiscal deficit and improving the external current account
position. The economy responded favorably to these measures, posting increases
in real GNP, investments, private consumption and imports in 1992. The Aquino
administration also recognized that the country's economic difficulties in large
part resulted from its protectionist policies. The Aquino administration,
therefore, initiated reforms to open the economy to market forces and reduce the
size and role of the Government in the Philippine economy. The Government of
President Fidel Ramos, who assumed office in 1992, accelerated the reform
efforts initiated by the Aquino administration.
Following a review of a number of the policies and programs initiated by
previous administrations, the Estrada administration continued many of the
financial policies and market-oriented reforms of the Aquino and Ramos
administrations.
After the onset of the Asian economic crisis in mid-1997, the Philippines
experienced economic turmoil characterized by currency depreciation, a decline
in the performance of the banking sector, interest rate volatility, a
significant decline in share prices on the local stock market and a reduction of
foreign currency reserves. These factors led to a slowdown in the Philippine
economy in 1997 and 1998 with real GDP contracting by 0.6% in 1998. The
Philippines' economic performance in 1998 was also adversely affected by the
decline in agricultural production caused mainly by the effects of the drought
related to the El Nino phenomenon and later the typhoons related to the La Nina
phenomenon. In response, the Government adopted a number of policies to address
the effects of the Asian economic crisis by strengthening the country's economic
fundamentals. In 1999 and 2000, a number of the Philippines' economic indicators
showed more favorable results. In 1999, real GNP growth improved to 3.7% while
real GDP expanded by 3.4%. The trend continued in 2000 with real GNP growing by
4.8% and GDP growing by 4.4%. In 2001, the real GNP grew by 3.4% and the real
GDP grew by 3.2%. The slower pace of economic growth in 2001 was primarily due
to the manufacturing sector suffering from weak demand, although the weakness
was partially set off by strong agricultural output, a strong services sector
and rapid growth in the telecommunications industry.
The Arroyo administration has prepared a medium-term development plan for
2001 to 2004 to fight poverty and unemployment through more effective governance
and improvements in public finances.
RECENT ECONOMIC DEVELOPMENTS. Economic growth was sustained in 2002 and
the first quarter of 2003, although growth momentum slowed due to a series of
adverse developments including:
- the rapid increase in the Government's budget deficit, which was P212.0
billion for the full year 2002 (higher than the original full-year
forecast for 2002 of P130 billion, although lower than the fourth quarter
revised deficit target of P223 billion), caused by higher than expected
expenditures and lower than expected revenue collections from the Bureau
of Internal Revenue ("BIR");
- the ongoing conflict with rebel groups in Mindanao, the conflict with
communist rebels, the bombings and bomb threats in the Republic, the
terrorist bombing in Bali, Indonesia, uncertainty over effects of
18
the war in Iraq and the response to terrorism by the Government, the
United States and other countries; and
- Fitch Ratings' downgrade of the Republic's long-term foreign currency
rating from BB+ to BB and their downgrade of the Republic's long-term
local currency rating from BBB- to BB+; Standard & Poor's Rating
Service's downgrade of the Republic's long-term foreign currency rating
from BB+ to BB, and their downgrade of the Republic's local currency
rating from BBB+ to BBB; and Moody's Investors Service's revised outlook
on the Republic's long-term foreign currency sovereign credit rating from
stable to negative.
Despite these challenges and the generally weak global conditions, in the
first quarter of 2003, yearly GNP growth was 5.6%, compared to 4.3% for the
first quarter of 2002, and yearly GDP growth was 4.5%, compared to 3.8% for the
first quarter of 2002. The increased growth rates are, in part, a result of
lower interest and inflation rates, and in the Government's view reflect the
success of the administration's macroeconomic strategy.
RECENT ECONOMIC INDICATORS. The following table sets out the performance
of certain of the Republic's principal economic indicators for the specified
periods. Growth in GDP, GNP, inflation, exports, imports and domestic credit
growth is indicated on an annualized basis.
<Table>
<Caption>
2001 2002 2003
---- ---- ----
Real GDP growth (%)......................................... 3.0(1) 4.4(1) 3.9(2)
Real GNP growth (%)......................................... 3.5(1) 4.5(1) 4.8(2)
Inflation rate (%).......................................... 6.1(3) 3.1(3) 3.3(4)
Unemployment rate (%)....................................... 11.1(5) 11.4(5) 12.2(6)
91-day T-bill rate (%)...................................... 9.86(3) 5.43(3) 6.37(7)
External position
Balance of payments ($ million)........................... (192) 660 (519)(8)
Trade-in-goods balance/GNP (%)............................ (0.6) 0.5 (2.8)(2)
Export growth (%)...................................... 17.3 10.1 3.4(8)
Import growth (%)...................................... (4.5) 6.2 14.5(8)
External debt ($ billion)(9).............................. 52.4 53.9 55.8(2)
International reserves
Gross ($ billion)...................................... 15.7 16.2 16.1(10)
Net ($ billion)........................................ 11.4 12.8 12.8(10)
Months of retained imports(11)......................... 5.0 4.7 4.5(10)
Domestic credit growth (%).................................. 0.9 4.8 7.8(12)
</Table>
- ---------------
(1) GDP and GNP growth figures for 2001 and 2002 have recently been revised.
See "GDP and Major Financial Indicators -- Periodic Revisions to Philippine
National Accounts".
(2) First half of 2003.
(3) Full year average.
(4) Year on year as of July 2003.
(5) Average of the January, April, July and October applicable statistics based
on the January, April, July and October labor force surveys for the
relevant year.
(6) As of April 30, 2003.
(7) Average over the first five months of 2003.
(8) First four months of 2003.
(9) Debt approved by and registered with Bangko Sentral, which includes banking
system debt and public sector debt, whether or not guaranteed by the
Government, and private sector debt.
(10) As of July 31, 2003.
19
(11) Number of months of average imports of merchandise goods and payments of
services and income that can be financed by gross reserves.
(12) Growth from June 2002 to June 2003.
RECENT ARROYO ADMINISTRATION ECONOMIC POLICY. After announcing that she
would not run for re-election, in January 2003, President Arroyo announced that
her administration would focus on the provisions of the Medium-Term Philippine
Development Plan, originally set out in the National Socio-Economic Summit of
2001. See "-- National Socio-Economic Summit of 2001." In particular, President
Arroyo urged Congress to quickly approve the remaining financial and fiscal
reforms recommended in the National Socio-Economic Summit of 2001, as well as
the absentee voting bill, which would allow overseas Filipinos to vote in
national elections, and the dual citizenship bill, which would grant dual
citizenship to Filipinos abroad to encourage them to invest in the Philippines.
In addition, in December 2002, President Arroyo announced the following
measures to enhance productivity:
- increasing government credit for small- and medium-scale enterprises to
P10 billion in 2003;
- forming a new anti-smuggling task force; and
- improving the oversight system for government procurements.
NATIONAL SOCIO-ECONOMIC SUMMIT OF 2001. On December 10, 2001, President
Arroyo convened the National Socio-Economic Summit of 2001, which included more
than 1,000 leaders of Government, business, labor organizations and civil
society. President Arroyo called the summit in recognition of new uncertainties
arising from the September 11 terrorist attacks on the United States. The
Government recognized the immediate need to safeguard jobs and social services,
enhance competitiveness and productivity of the economy and strengthen investor
confidence by improving peace, order and governance, and remove inefficiencies
in agriculture, industry and services. In a speech before Congress on January
14, 2003, President Arroyo called for Congress to speed up passage of a number
of these measures.
The policy initiatives of the summit are summarized in the following table.
PEACE, ORDER AND SECURITY - Integrate and coordinate intelligence
activities and resources of law enforcement
and security agencies; more quickly identify,
locate and neutralize kidnap for ransom
groups, drug syndicates, terrorists,
smugglers, and coup plotters; and improve the
reward system for information on these
groups; and
- Mobilize the peace and order councils more
actively and organize self-defense units
under the supervision of the Department of
Interior and Local Government and the
Philippine National Police.
FINANCIAL AND FISCAL REFORMS - Increase tax collection through industry
benchmarking, review of large contract items
in the budget, monitoring of local government
unit remittances, improved collection of
value-added tax and the 2% minimum corporate
income tax and indexation of the excise tax;
- Combat smuggling by strictly implementing
seizure orders and stopping issuances by
Government agencies of documents legitimizing
smuggling and other measures to combat
smuggling;
- Facilitate the recovery of the financial
sector and enhance access to credit through
the Special Purpose Vehicle Act, the
Securitization Act, new legislation removing
documentary stamp taxes on secondary trading
transactions, amendments to the Bangko
Sentral and Philippine Deposit Insurance
Corporation charters,
20
the Corporate Recovery Act and the Personal
Equity Retirement Act; and
- Enhance private sector access to official
development assistance for
Build-Operate-Transfer projects, railway and
other infrastructure projects and education
institutions.
AGRICULTURE - Use hybrid and certified seeds in rice and
corn production and facilitate marketing
contracts between agricultural producers and
business corporations;
- Ensure adequate financing of the Government
fund set up to increase agricultural
competitiveness;
- Reform lending procedures at the Land Bank of
the Philippines to increase the number of
agricultural loans; and
- Maintain budgeted funding for programs on
agriculture, fisheries, indigenous peoples,
agrarian reform, community-based forest
management and watershed protection and
management.
TRADE AND INDUSTRY - Rationalize the country's investment
incentives scheme to match those of other
Asian nations and ensure that appropriate
incentives will be granted to information
technology services;
- Support small and medium enterprises by
streamlining business documentation
requirements, strengthening the guarantee
fund system and developing on-line credit
application;
- Promote micro-finance banks; and
- Modernize the cargo transport system by
reviewing existing legislation and passing
new legislation on air cargo liberalization.
TOURISM-RELATED INDUSTRIES - Rechannel 40% of travel tax collections to
tourism-related projects and programs;
- Liberalize visa requirements and fees for
Chinese tourists;
- Allow for an automatic increase in frequency
of flights once a carrier's current flights
achieve a 70% load factor; and
- Promote domestic and international tourism.
TELECOMMUNICATIONS AND
INFORMATION
TECHNOLOGY - Expand broadband services and other
telecommunications facilities in industrial
parks and regional centers to develop and
encourage e-commerce and e-business;
- Implement an e-development program for small,
micro and medium enterprises; and
- Modify the implementing rules and regulations
of the Build-Operate-Transfer Law to address
specific requirements of information
technology projects.
LABOR AND EMPLOYMENT - Provide employment facilitation services such
as job matching and referrals, guidance
counseling and livelihood and
entrepreneurship development;
- Implement a job corps program by January 2002
to promote, among other things,
entrepreneurship among workers and generate
local jobs and facilitate overseas
employment; and
21
- Conduct skills training, retraining and
upgrading to equip workers with new
technology skills.
INFRASTRUCTURE - Identify solid waste disposal projects in
Metro Manila and other cities;
- Reduce traffic congestion in Metro Manila and
other cities; and
- Generate employment through labor-based
construction methods, especially for small
rural infrastructure projects.
HOUSING - Streamline the issuance of housing permits
and clearances and monitor compliance with
the reformed processes;
- Promote rent-to-own and similar schemes; and
- Index "sin" taxes and earmark P5 billion of
the Government's share of those taxes to
subsidize a targeted socialized housing
program.
HEALTH AND OTHER SOCIAL
SERVICES - Expand the National Health Insurance Program
and accelerate the rollout of the indigent
health program;
- Reduce by one half the prices as of July 2002
of medicine commonly used by the poor by
increasing the number and type of
distribution points; and
- Pass legislation on domestic violence and
anti-trafficking of women.
A monitoring body composed of presidential advisers and assistants provides
quarterly status reports on the above action items to the Legislative-Executive
Development Advisory Council.
PRIVATIZATION. The Government has privatized a number of Government
corporations. The country's privatization program has broadened the ownership
base of Government assets and developed the domestic capital markets.
Before 2001, the Committee on Privatization, an executive office under the
office of the President chaired by the Secretary of Finance, oversaw the
Government's privatization program. The Committee was responsible for
formulating privatization policies and guidelines, identifying disposable
assets, monitoring progress and approving the price for and the buyers of the
assets. The marketing of assets was handled by disposition entities, including
the Asset Privatization Trust, the Presidential Commission on Good Government
and the National Development Company. The division of responsibilities between
the Committee on Privatization and the disposition entities served as a check
and balance mechanism and enhanced transparency.
The terms of the Committee on Privatization and the Asset Privatization
Trust expired on December 31, 2000. Since January 1, 2001, the Privatization
Council has been responsible for the privatization of the remaining Government
corporations scheduled to be privatized. The Privatization Council, a
policy-making body, is chaired by the Secretary of Finance and includes
representatives from the Department of Tourism, The Department of Trade and
Industry, the Department of Budget and Management, the Department of Justice,
the National Economic and Development Authority, the National Treasury and the
Presidential Commission on Good Government. Along with the Privatization
Council, there are two new disposition entities, the Land Bank of the
Philippines, which is responsible for the disposition of the financial assets
previously held by the Asset Privatization Trust, and the Privatization and
Management Office, which is responsible for the disposition of physical assets.
All disposition entities must submit their privatization plans to the
Privatization Council for its review and approval and file a report containing
the results of each privatization transaction.
22
The following table summarizes the Government's principal privatizations to
date:
<Table>
<Caption>
GOVERNMENT GROSS
OWNERSHIP PRIVATIZATION
YEAR OF SALE AFTER SALE PROCEEDS(1)
----------------- ---------- -------------
(IN BILLIONS)
International Corporate Bank........................ 1987; 1993 0.0% P 2.2
Union Bank of the Philippines....................... 1988; 1991; 1992 13.0 1.3
Philippine National Bank............................ 1989; 1992; 1995;
1996; 2000 16.0(2) 6.5
Philippine Plaza Holdings........................... 1991 0.0 1.5
Manila Electric Company............................. 1991; 1994; 1997 30.0(3) 16.3
Philippine Airlines................................. 1992 1.0(2) 10.7
Petron Corporation.................................. 1993; 1994 40.0 25.0
National Steel Corporation.......................... 1994; 1997 12.5 17.1
Paper Industries Corporation of the Philippines..... 1994 8.0 2.4
Philippine Shipyard and Engineering Corporation..... 1994 9.0 2.1
Fort Bonifacio Development Corporation.............. 1995 45.0 39.2
Metropolitan Waterworks and Sewerage System......... 1997 --(4) --(4)
Philippine Associated Smelting and Refining Corp.... 1999 4.3 3.3
Philippine Phosphate Fertilizer Corporation......... 2000 0.0 3.1
</Table>
- ---------------
Source: Privatization Council.
(1) Net remittances to the Government upon the privatization of its assets are,
in certain circumstances, less than the gross proceeds from the sale of such
assets, based on agreements between the Government and the privatized
entities.
(2) Government's ownership was diluted in 2001 by a pre-emptive rights offering.
(3) Government ownership includes ownership by agencies and Government financial
institutions.
(4) The privatization of Metropolitan Waterworks and Sewerage System involved
awarding two 25-year concessions to rehabilitate, expand and operate the
system. Over the term of the concessions, the concessionaires are required
to make improvements in water services, sewerage services, and
interconnection facilities, and to pay concession fees to the Metropolitan
Waterworks and Sewerage System. The estimated cost of the required
improvements is $7.0 billion, which is expected to be incurred over the
25-year concession period.
As of May 31, 2002, 26 Government corporations, 144 assets handled by the
Privatization and Management Office and certain personal property assets held by
the Presidential Commission on Good Government were scheduled for privatization.
With the initial privatization phase approximately 80% complete, during 2003 the
Government plans to focus on selling its remaining shares in Manila Electric
Company ("Meralco"), fully privatizing the Philippine National Bank, privatizing
the Philippine National Construction Corporation, disposing of certain assets
held by the Presidential Commission on Good Government and selling the
International School of Manila property. The current economic slowdown, however,
may, in the near term, affect investors' propensity to invest, or the prices
that they are willing to pay for the Government's assets, which would thereby
reduce the proceeds received from any privatized assets. In the medium term, the
Government plans to privatize the National Power Corporation, PNOC Energy
Development Corporation, the International Broadcasting Corporation, Food
Terminal Inc. and the Philippine Postal Corp. In the long term, the Government
intends to establish public-private partnerships to provide social services,
especially in the health, education and pension sectors, and also intends to
prioritize selected Government corporations. The Government has also encouraged
"build-operate-transfer" arrangements and other initiatives to enable the
private sector to meet more of the infrastructure needs, especially in the
power, water, transportation and telecommunications sectors.
In 2002, remittances to the National Treasury from privatizations amounted
to P1.5 billion, significantly lower than the original privatization proceeds
target for 2002 of P5 billion, because of significant delays in the
privatization of National Power Corporation and the reduction of value of
Meralco.
23
Restructuring of the Electric Power Industry and the Privatization of
National Power Corporation. On June 8, 2001, the Electric Power Industry Reform
Act of 2001 (the "EPIRA" or the "Act") was signed into law by President Gloria
Macapagal-Arroyo. The Act became effective on June 26, 2001. The EPIRA provides
a legal framework for the restructuring of the electric power industry and for
the privatization of NPC. On February 27, 2002, pursuant to the EPIRA, the Joint
Congressional Power Commission (the "JCPC") approved the implementing rules and
regulations (the "IRRs") which now govern the restructuring of the electric
power industry and the privatization of NPC. The privatization of NPC will occur
following (i) the restructuring of the electric power industry's various
sectors, (ii) the creation of a new regulatory framework for the electric power
industry, (iii) the establishment of certain transition mechanisms to minimize
economic dislocation, and (iv) the establishment of various open market devices
to promote free and fair competition.
The EPIRA mandates that the power industry be restructured to comprise four
sectors -- generation, transmission, distribution and supply. Under the EPIRA,
the Energy Regulatory Commission ("ERC") is the primary governmental agency
responsible for overseeing the power industry, and the Department of Energy
("DOE") and JCPC perform supervisory roles. To allow the industry to adjust to a
market-oriented setting, and to help mitigate adverse economic consequences of
the restructuring, the EPIRA contains transition mechanisms dealing with, among
other issues, supply contracts, independent power producer ("IPP") contracts,
and "stranded costs" that NPC will not be able to dispose of in the
privatization.
To reorganize NPC's assets and liabilities, the EPIRA provides for the
creation of two disposition entities:
- the Power Sector Assets and Liabilities Management Corporation ("PSALM"),
which will take ownership of all of NPC's existing generation assets,
liabilities, real estate, and other disposable assets, as well as certain
IPP contracts; and
- the National Transmission Corporation ("Transco"), an entity wholly owned
by PSALM, which will assume NPC's electricity transmission assets.
NPC's generation assets will be privatized by PSALM through an open and
transparent public bidding process. PSALM will also coordinate the privatization
of NPC's transmission assets through concession contracts, while NPC's
sub-transmission assets will be operated and maintained by Transco until their
sale to qualified distribution utilities. NPC will continue to operate the
generation assets after they are transferred to PSALM, pursuant to an operations
and maintenance agreement, until they are sold. NPC is still negotiating the
operations and maintenance agreement with PSALM.
Issues Relating to the Purchased Power Adjustment and the Universal
Charge. The Purchased Power Adjustment ("PPA"), an automatic cost adjustment
mechanism, historically allowed NPC to pass on increased costs associated with
its US dollar obligations under its contracts with IPPs. President Arroyo, by
presidential directive, reduced the current average PPA charge from P1.25 per
kWh to P0.40 per kWh, effective May 8, 2002. The ERC, through an order issued on
September 6, 2002, affirmed the presidential directive. Since late September
2002, NPC has deferred recovery of the PPA charge, in connection with the
unbundling of its transmission and generation rates. In addition, the PPA has
been replaced by the Generation Rate Adjustment Mechanism ("GRAM"). In May 2003,
the ERC set revised generation rates under the GRAM which were, overall, lower
than the rates NPC had requested. NPC expects that the current rates under the
GRAM, if not subsequently revised by the ERC, will significantly impair NPC's
future operating revenues.
Under the EPIRA, a "Universal Change" is to replace the existing rate
adjustments. The Universal Change, which will not be limited to NPC's customers,
is intended to pay for NPC's remaining debt and contract obligations that will
not be liquidated by proceeds from NPC's privatization. While the Arroyo
administration has announced that the Universal Charge needs to be implemented
as a matter of policy, various members of Congress and of the public continue to
oppose the imposition of any Universal Charge. If the Universal Charge is
significantly lower than the expected P0.40 per kWh, or if it is eliminated,
NPC's
24
financial condition will continue to deteriorate and NPC will need to obtain
additional financing to continue operations.
Other Rate Reductions Affecting NPC's Revenues. In addition to the
reduction of the PPA from P1.25 per kWh to P0.40 per kWh mandated by the
President in May 2002 and affirmed by the ERC in September 2002, the following
reductions in NPC's basic electricity rates have been imposed:
- The EPIRA. The EPIRA mandated an overall rate decrease of P0.30 per kWh
in June 2001.
- ERC Orders. In June 2002, the ERC, in connection with NPC's unbundling
rate petition, denied NPC's request to revise NPC's rates upward by P0.17
per kWh, and instead ordered NPC to reduce NPC's rates by P0.07 per kWh
before September 26, 2002. On September 6, 2002, the ERC ordered NPC to
disregard its June 2002 ruling and to reduce generation rates by P1.10
per kWh in Visayas, P0.27 in Luzon and P0.40 in Mindanao. NPC filed a
motion for reconsideration and clarification of this order. The ERC has
ordered that NPC implement the revised generation rate for the Visayas
grid pending resolution of NPC's motion for reconsideration. NPC could
face fines of up to P50 million if it does not comply with this order. In
late September 2002, NPC's transmission and generation rates were
unbundled. In connection with this unbundling, the ERC further lowered
NPC's generation rates in September 2002. In April 2003, NPC filed an
application with the ERC to recover fuel and purchased power costs under
the GRAM. However, the generation rates the ERC set in May 2003, in
response to NPC's application, are significantly lower than the rates NPC
had requested, and NPC has filed for a motion for reconsideration of the
revised rates with the ERC. In addition, if the rates approved by the ERC
under the GRAM do not allow NPC to pass on the costs associated with the
generation of electricity, NPC's future operating revenues could be
adversely affected. On May 29, 2003, the ERC promulgated new rules on
transmission rates. While NPC cannot predict its transmission rates under
the new rates, NPC expects the revised rates, which incorporate a
performance-based rate setting methodology, will not be materially
different from NPC's current transmission rates.
For the year ended December 31, 2002, NPC received approximately P3.9
billion from the Government to finance its debt service requirements. NPC has
not yet repaid this amount to the Government. In addition, NPC anticipates that
it will need $1.9 billion in financing to cover its total cashflow deficit for
2003. In 2003, NPC has so far received $650 million in funds either guaranteed
or lent directly by the Government. There is no assurance that NPC will be able
to raise the funds needed to meet all of its obligations. To the extent that NPC
cannot raise such funds, it will be necessary for the Republic to provide NPC
with the sufficient capital to meet its obligations. The Republic will have to
borrow such capital or use its international reserves for these purposes.
GDP AND MAJOR FINANCIAL INDICATORS
GROSS DOMESTIC PRODUCT. Gross domestic product, or GDP, measures the
market value of all final goods and services produced within a country during a
given period and is indicative of whether the country's productive output rises
or falls over time. By comparison, gross national product, or GNP, measures the
market value of all final goods and services produced by a country's citizens
during a given period, whether or not the production occurred within the
country.
Economists show GDP and GNP in both current and constant market prices. GDP
and GNP at current market prices values a country's output using the actual
prices of each year, whereas GDP and GNP at constant market prices (also
referred to as "real" GDP and GNP) values output using the prices from a base
year, thereby eliminating the distorting effects of inflation. Growth figures
for GDP and GNP in this prospectus are year-on-year comparisons of real GDP and
real GNP, respectively.
RECENT RESULTS. In the first half of 2003, GNP grew by 4.8% (compared to
growth of 3.3% in the first half of 2002), and GDP grew by 3.9% (compared to
growth of 4.0% in the first half of 2002).
In the first quarter of 2003, GNP grew by 5.1% and GDP grew by 4.5%,
compared to GNP growth of 4.3% and GDP growth of 3.8% in the first quarter of
2002. The service sector led the first quarter 2003
25
expansion, growing by 5.5%. Growth in the service sector was due mainly to
significant growth in consumer banking, insurance, communications and
information technology services. Trade growth arising from modest inflation also
spurred growth in the services sector. The industry sector grew by 4.1%, with
continued growth in the mining and quarrying and manufacturing subsectors,
offset by a decline in construction due to cutbacks in government projects. The
agriculture, fishery and forestry sector posted growth of 2.9% compared to 4.8%
growth for the first quarter of 2002. The relative slowdown in agriculture,
fishery and forestry was due mainly to declines in palay production and fishing
caused by the El Nino weather phenomenon.
In the second quarter of 2003, GDP grew by 3.2% (compared to growth of 4.1%
in the second quarter of 2002) and GNP grew by 4.5% (compared to growth of 2.3%
in the second quarter of 2002). All three sectors of the economy had lower
growth in the second quarter of 2003 than in the second quarter of 2002. The
service sector grew by 5.0%, the industry sector grew by 1.7% and the
agriculture, fishery and forestry sector grew by 1.6% in the second quarter of
2002. Growth in the service sector was mainly due to sustained growth in
wireless communications, land transport, financial services and health services,
which offset a slowdown in the growth of air transport, tourism, trade and
government services. In the industry sector, sustained growth in mining and
quarrying was offset by further contraction in construction (mainly due to
reductions in government spending) and a slowdown in growth in manufacturing
(particularly manufactures of electrical machinery, transport equipment, and
metal). In the agriculture, fishery and forestry sector, the El Nino weather
phenomenon and two typhoons reduced growth from the previous year. In
particular, sustained growth in sugarcane production and the fishery subsector
offset significant declines in rice and corn production.
In 2002, GNP grew 4.5% and GDP grew 4.4%, compared with GNP growth of 3.5%
and GDP growth of 3.0% for 2001. The increased growth rates are, in part, a
result of lower interest and inflation rates, and, in the administration's view,
reflect the success of the administration's macroeconomic strategy implemented
in 2001.
All production sectors showed better than expected growth in 2002: the
service sector grew by 5.5%, the industry sector grew by 3.7% and the
agriculture, fishery and forestry sector grew by 3.3%. All subsectors of the
service sector showed growth in 2002, particularly the transportation,
communications and storage sector, which grew 8.9% primarily because of
increased computerized operations for Government services, and trade, which grew
5.8% primarily because of increased regional operations by the large domestic
retailers. Growth in the private services (5.5%), finance (3.4%) and ownership
of dwellings and real estate (1.7%) subsectors also contributed to the upbeat
performance of the service sector (though finance and real estate have yet to
regain their pre-1997 performance levels).
26
The following tables present the GDP of the Philippines by major sector at
both current and constant market prices.
GROSS DOMESTIC PRODUCT BY MAJOR SECTORS
(AT CURRENT MARKET PRICES)
<Table>
<Caption>
FIRST PERCENTAGE
SIX OF GDP
MONTHS -------------
1998 1999 2000(1) 2001(1) 2002(1) 2003 1998 2002
-------- -------- -------- -------- -------- -------- ----- -----
(IN BILLIONS, EXCEPT AS INDICATED)
Agriculture, fishery
and forestry....... P 451.6 P 510.5 P 528.9 P 548.7 P 592.1 P 279.9 16.9% 14.7%
-------- -------- -------- -------- -------- -------- ----- -----
Industry sector
Mining and
quarrying........ 20.1 18.0 21.8 21.7 33.5 20.0 0.8 0.8
Manufacturing...... 582.9 644.0 745.9 831.6 915.2 463.1 21.9 22.8
Construction....... 157.4 162.9 217.2 222.1 235.4 105.5 5.9 5.9
Electricity, gas
and water........ 78.0 86.1 92.5 116.3 124.1 71.5 2.9 3.1
-------- -------- -------- -------- -------- -------- ----- -----
Total............ 838.4 911.1 1,082.4 1,191.7 1,308.2 660.1 31.5 32.5
Service sector
Transportation,
communications
and storage...... 139.7 159.3 199.0 247.6 276.9 150.3 5.2 6.9
Trade.............. 361.2 419.3 473.0 517.6 556.3 274.8 13.6 13.8
Finance............ 130.3 141.6 149.1 160.1 170.5 91.9 4.9 4.2
Ownership of
dwellings and
real estate...... 189.3 208.9 220.9 236.7 252.9 133.4 7.1 6.3
Private services... 280.6 335.4 381.6 433.7 484.9 256.7 10.5 12.1
Government
services......... 274.1 290.8 319.8 337.7 380.9 189.4 10.3 9.5
-------- -------- -------- -------- -------- -------- ----- -----
Total............ 1,375.0 1,555.3 1,743.4 1,933.2 2,122.3 1,096.6 51.6 52.8
-------- -------- -------- -------- -------- -------- ----- -----
Total GDP............ P2,665.1 P2,976.9 P3,354.8 P3,673.7 P4,022.7 2,036.7 100.0% 100.0%
======== ======== ======== ======== ======== ======== ===== =====
Total GNP............ P2,802.1 P3,136.2 P3,566.1 P3,918.7 P4,290.2
Total GDP (in
billions of US
dollars)(2)........ $ 65.2 $ 76.2 $ 76.0 $ 72.0 $ 78.0 $ 38.1
GDP per capita (in US
dollars)(2)........ $ 864.0 $ 992.0 $ 988.7 $ 916.8 $ 969.5 $ 465.2
</Table>
- ---------------
Source: National Statistical Coordination Board.
(1) The GDP figures for 2000, 2001 and 2002 have recently been revised. See
"-- Periodic Revisions to Philippine National Accounts".
(2) Calculated using the average exchange rate for the period indicated. See
"-- Monetary System -- Foreign Exchange System."
27
GROSS DOMESTIC PRODUCT BY MAJOR SECTORS
(AT CONSTANT MARKET PRICES(1))
<Table>
<Caption>
PERCENTAGE
FIRST SIX OF GDP
MONTHS -------------
1998 1999 2000(2) 2001(2) 2002(2) 2003 1998 2002
-------- -------- -------- -------- -------- --------- ----- -----
(IN BILLIONS, EXCEPT AS INDICATED)
Agriculture, fishery and
forestry................. P 173.2 P 184.5 P 192.5 P 199.6 P 206.2 P 101.0 19.5% 19.7%
-------- -------- -------- -------- -------- -------- ----- -----
Industry sector
Mining and quarrying..... 10.6 9.7 10.7 10.1 15.3 8.9 1.2 1.5
Manufacturing............ 221.2 224.7 237.3 244.1 252.6 123.4 24.9 24.1
Construction............. 51.8 51.0 64.4 61.2 59.2 25.1 5.8 5.7
Electricity, gas and
water.................. 30.3 31.3 32.6 32.8 34.2 17.5 3.4 3.3
-------- -------- -------- -------- -------- -------- ----- -----
Total.................. 313.9 316.7 345.0 348.2 361.2 174.9 35.4 34.5
Service sector
Transportation,
communications and
storage................ 58.6 61.7 68.2 74.2 80.8 42.4 6.6 7.7
Trade.................... 138.6 145.4 152.9 161.5 170.8 82.7 15.6 16.3
Finance.................. 45.4 46.3 46.7 47.3 48.9 25.8 5.1 4.7
Ownership of dwellings
and real estate........ 48.1 48.4 48.3 48.1 48.9 25.3 5.4 4.7
Private services......... 63.9 67.6 70.9 74.0 78.0 39.6 7.2 7.5
Government services...... 46.2 47.7 48.5 48.9 51.2 26.1 5.2 4.9
-------- -------- -------- -------- -------- -------- ----- -----
Total.................. 400.9 417.0 435.5 454.0 478.7 241.9 45.2 45.8
-------- -------- -------- -------- -------- -------- ----- -----
Total GDP.................. P 888.0 P 918.2 P 973.0 P1,001.7 P1,046.1 P 517.8 100.0% 100.0%
======== ======== ======== ======== ======== ======== ===== =====
Total GNP.................. P 934.5 P 969.3 P1,036.4 P1,073.1 P1,121.0 P 559.2
Yearly growth in GDP....... (0.6)% 3.4% 4.4% 3.0% 4.4% 3.9%
Yearly growth in GNP....... 0.4% 3.7% 4.8% 3.5% 4.5% 4.8%
</Table>
- ---------------
Source: Economic and Social Statistics Office; National Statistical Coordination
Board.
(1) Based on constant 1985 prices.
(2) The GDP figures for 2000, 2001 and 2002 have recently been revised. See
"-- Periodic Revisions to Philippine National Accounts".
28
The following table shows the percentage distribution of the country's GDP
at constant 1985 prices.
DISTRIBUTION OF GROSS DOMESTIC PRODUCT BY EXPENDITURE
(AT CONSTANT MARKET PRICES(1))
<Table>
<Caption>
1998 1999 2000 2001 2002
----- ----- ----- ----- -----
Personal consumption................................... 79.7% 79.1% 77.3% 77.8% 77.5%
Government consumption................................. 7.9 8.2 8.2 7.5 7.4
Capital formation
Fixed capital........................................ 23.1 21.8 22.2 23.1 22.6
Changes in stocks.................................... (0.9) (0.8) (0.1) 1.3 (0.1)
----- ----- ----- ----- -----
Total capital formation........................... 22.2 21.0 22.1 24.4 22.5
Exports of goods and services.......................... 41.4 41.5 45.8 43.0 42.6
Imports of goods and services.......................... (54.5) (51.3) (50.4) (50.7) (50.9)
Statistical discrepancy................................ 3.3 1.5 (2.9) (1.9) 0.9
----- ----- ----- ----- -----
Total.................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</Table>
- ---------------
Source: Economic and Social Statistics Office; National Statistical Coordination
Board.
(1) Based on constant 1985 prices.
Periodic Revisions to Philippine National Accounts. The National
Statistical Coordination Board ("NSCB") releases quarterly data on the
Republic's national accounts, which include GDP and GNP. Under NSCB policy, GDP
and GNP data for a particular quarter are revised the following quarter, and
thereafter in May of each year. Quarterly GDP and GNP estimates are considered
"final" after three years. However, NSCB may still revise the "final" estimates
whenever NSCB undertakes an overall revision of the national accounts. The most
recent overall revision was completed in 1990, and the next overall revision is
scheduled for 2004.
Revisions in the Republic's national accounts are normally due to the
availability of new or more complete data, receipt of revised data from original
sources, and inclusion or exclusion of emerging or closed industries. During the
years 1997-2002, the averages of the revisions to the NSCB's quarterly growth
rates for GDP and GNP have been -0.03% and -0.18%, respectively. The NSCB has
traditionally followed the 1968 United Nations System of National Accounts
("UNSNA"), and it is currently in the process of incorporating certain
recommendations of the 1993 UNSNA.
In May 2003, the NSCB revised GDP and GNP figures for 2000, 2001, and 2002.
The May 2003 revisions reflected the ongoing implementation of the 1993 UNSNA,
as well as revisions in the following source data:
- balance of payments and merchandise imports;
- forestry production;
- agricultural production;
- mineral production;
- construction; and
- deployment of overseas foreign workers.
The May 2003 revisions resulted in a slight decrease in the growth rates
previously reported for the years 2001 and 2002. However, because the Republic's
national accounts for the year 1999 and earlier have not been recently revised,
the growth rates for 2000 were not revised in May 2003. The growth rates for
2000 may not, therefore, be comparable in all respects to those for 2001 and
2002.
29
To ensure the accuracy of the GDP and GNP growth rates for 2000 and
earlier, the NSCB plans to recalculate the national accounts for years prior to
2000 in a manner consistent with the May 2003 revisions to the national accounts
of 2000, 2001, and 2002. The process of revising the data for earlier years will
begin in September 2003, and will continue in conjunction with the overall
revision in the national accounts scheduled for 2004. Therefore, GDP and GNP
estimates that are currently considered "final" may be subject to further
material change.
PRINCIPAL SECTORS OF THE ECONOMY
AGRICULTURE, FISHERY AND FORESTRY
Agriculture. The country's principal agricultural products include
cereals, such as rice and corn, both of which are cultivated primarily for
domestic use, and crops, such as coconuts, sugar cane and bananas, produced for
both the domestic market and export. The Philippines' diverse agricultural
system contains many coconut plantations farmed by agricultural tenants and
workers, sugar haciendas farmed either under labor administration or by tenants,
and large "agro-business" plantations devoted mainly to non-traditional export
crops such as bananas and pineapples. Rice, corn and coconuts each account for
approximately one-quarter of the country's cultivated area. The country
occasionally needs to import rice and corn.
Fishery. The Philippines' fishing industry contributes significantly to
the country's foreign exchange earnings. Pollution of coastal waters as a result
of population growth, mining activities and wasteful fishing methods have
damaged the marine and inland resources in some areas in recent years, leading
to decreases in production.
Forestry. The country's forests, one of the Philippines' main natural
resources, contain a large quantity of hardwood trees. Over the years population
growth, shifting cultivation, illegal logging and inadequate reforestation
depleted the forests, leading to a Government-imposed total ban on logging
activity in virgin forests and the subsequent continuing decline of the forestry
subsector.
Recent Results. The agriculture, fishery and forestry sector grew by 3.3%
in 2002 compared to growth of 3.7% in 2001 at constant market prices, due to the
positive performance of both the agriculture and fishery subsectors, offsetting
the decrease in the forestry subsector. The agriculture and fishery industry
subsectors grew by 3.7% in 2002 compared to growth of 4.9% in 2001. In addition
to favorable weather conditions, the Government's revitalized support for
agriculture through various means, including the distribution of certified
seeds, rehabilitation of irrigation facilities and the use of modern equipment,
especially in the fishery subsector, contributed to the growth in the
agriculture and fishery subsectors. The forestry subsector contracted by 66.4%
in 2002, following a 27.3% contraction in 2001. For 2002, the agriculture,
fishery and forestry sector contributed 19.7% to the total GDP growth rate of
4.4%.
INDUSTRY SECTOR
The sector comprises, in order of importance, manufacturing, construction,
electricity, gas and water and mining and quarrying. The sector contributed
approximately 35.4% of GDP in 1998 and 34.5% in 2002, at constant market prices.
The sector grew by 3.7% in 2002 compared to 0.9% in 2001, with the slower growth
mainly due to the global economic slowdown. In 2002, the industry sector grew by
3.7%. The growth in 2002 was driven by improvements in all subsectors.
Manufacturing. The country's manufacturing subsector comprises three major
industry groups:
- consumer goods, including the food, footwear and garment industries;
- intermediate goods, including the petroleum, chemical and chemical
product industries; and
- capital goods, including the electrical machinery and electronics
industries.
30
The following table presents, at constant market prices, the gross value
added, which equals the value of sales minus the cost of raw material and
service inputs, for the manufacturing sector by industry or industry group.
GROSS VALUE ADDED IN MANUFACTURING BY INDUSTRY GROUP
(AT CONSTANT MARKET PRICES(1))
<Table>
<Caption>
INDUSTRY/INDUSTRY GROUP 1998 1999 2000 2001 2002
- ----------------------- -------- -------- -------- -------- --------
(IN MILLIONS)
Food manufactures...................... P 78,744 P 83,049 P 84,590 P 88,227 P 95,010
Beverage industries.................... 9,003 8,896 9,175 8,820 8,907
Tobacco manufactures................... 5,538 5,681 5,886 6,133 6,535
Textile manufactures................... 5,085 4,660 4,128 3,778 4,067
Footwear/wearing apparel............... 12,699 10,801 12,327 12,801 13,822
Wood and cork products................. 2,769 2,451 2,220 2,060 2,063
Furniture and fixtures................. 2,881 2,852 3,172 3,232 3,065
Paper and paper products............... 2,132 2,033 2,627 2,258 2,032
Publishing and printing................ 3,093 3,055 2,964 2,967 3,173
Leather and leather products........... 224 222 229 254 293
Rubber products........................ 1,849 2,065 2,115 1,743 1,705
Chemical and chemical products......... 14,169 13,868 13,523 14,648 13,961
Petroleum and coal products............ 37,472 37,137 39,896 38,929 34,361
Non-metallic mineral products.......... 6,614 5,834 5,625 5,215 5,708
Basic metal industries................. 4,745 4,206 3,600 3,851 3,625
Metal industries....................... 4,231 4,272 4,645 5,257 5,977
Machinery (except electrical).......... 3,540 3,555 4,219 5,326 4,200
Electrical machinery................... 19,284 22,277 27,678 29,009 34,192
Transport equipment.................... 1,810 1,984 2,125 2,325 2,379
Miscellaneous manufactures............. 5,269 5,769 6,527 7,249 7,061
-------- -------- -------- -------- --------
Gross value added in manufacturing..... P221,151 P224,667 P237,271 P244,082 P252,136
======== ======== ======== ======== ========
</Table>
- ---------------
Source: Economic and Social Statistics Office; National Statistical Coordination
Board.
(1) Based on constant 1985 prices.
From 1998 through the first quarter of 1999, weak demand and high operating
costs forced a number of businesses to close or cut back operations.
Import-dependent industries, including transport equipment and rubber, chemical,
petroleum and coal products, experienced declining output. Export-related
industries, however, including furniture and fixtures, electrical machinery and
leather products, grew, as did food manufactures.
In 1999, the manufacturing subsector reversed its 1.1% contraction in 1998
to a growth of 1.6%. The sector recorded positive growth for the last three
quarters of 1999. The major gainers for the sector included electrical
machinery, which registered a growth of 15.5%, and transport equipment, which
registered a growth of 9.6%. The decliners in the subsector were led by
footwear/ wearing apparel, which recorded a 14.9% contraction.
The manufacturing subsector grew by only 2.9% in 2001, compared to 5.6%
growth in 2000. This reduction was caused primarily by lower growth in the
manufacture of apparel, furniture and electrical machinery and by contraction in
the manufacture of beverages, paper products, rubber products, petroleum and
coal products, and non-metallic mineral products. Gains in growth in the
manufacture of food, tobacco, leather products, nonelectrical machinery,
chemical products and basic metal products contributed positively
31
to the manufacturing subsector, although they were unable to fully offset the
declines in the subsector as a whole.
In 2002, the annual growth rate of the manufacturing subsector was 3.5%, up
from 2.9% for 2001. The growth in manufacturing was due mainly to growth in the
manufacture of electrical machinery, leather products and footwear and apparel.
Food processing, leather products, footwear and apparel, metal industries and
electrical machinery showed improved results while output remained negative in
chemical products, paper products, rubber products, petroleum and coal products
and non-electrical machinery products.
Construction. The construction subsector's contribution to GDP, at
constant market prices, decreased slightly from 5.8% in 1998 to 5.7% in 2002.
The construction subsector decreased by 5.0% in 2001 after an increase of 26.3%
in 2000. In 2002, the construction subsector contracted by 3.3% from the
previous year, primarily due to a decrease in public construction.
Electricity, Gas and Water. The electricity, gas and water subsector grew
by 0.7% in 2001, compared to 4.2% in 2000. The slower growth was attributable
primarily to reduced electricity demand and decreased water sales resulting from
the rehabilitation of water mains and pipes. The subsector grew 4.3% in 2002.
With limited natural resources available for energy development, the
Philippines satisfies most of its energy needs with imports of coal and oil,
which it then converts into electric power. In 1998, the Government enacted a
new oil industry deregulation act, which allowed oil prices to fluctuate and
eased the entry of new players into the industry. The 1998 oil industry
deregulation act has increased investment activity and attracted new players
into the downstream oil industry, with approximately P4 billion of new
investments in LPG refilling, bulk storage and retail outlets since deregulation
of the industry. Prices of petroleum products have fluctuated in response to
market prices and competition has increased. Retail petrol prices declined by a
total of P0.50-0.65 per liter between October 1998 and January 1999 in response
to increased competition; however, prices have since increased due to the
increase in world crude oil prices. Increases in world crude oil prices led the
country to increase coal imports and decrease oil imports.
The following table sets out the country's energy consumption by source.
ENERGY CONSUMPTION BY SOURCE
<Table>
<Caption>
ENERGY SOURCE 1998 1999 2000 2001
- ------------- ----- ----- ----- -----
(% OF TOTAL CONSUMPTION)
Domestic sources
Oil....................................................... 0.1% 0.1% 0.0% 0.1%
Coal...................................................... 2.0 1.6 1.6 1.9
Hydro..................................................... 3.6 5.5 5.0 5.1
Geothermal................................................ 6.4 7.5 7.8 7.2
Other(1).................................................. 28.6 28.8 27.8 30.7
----- ----- ----- -----
Total domestic sources................................. 40.7 43.5 42.2 45.0
----- ----- ----- -----
Imported sources
Oil....................................................... 53.7 50.2 45.5 46.0
Coal...................................................... 5.5 6.3 12.3 10.1
----- ----- ----- -----
Total imported sources................................. 59.2 56.5 57.8 56.1
----- ----- ----- -----
Total................................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</Table>
- ---------------
Source: Department of Energy.
(1) Other includes gas, fuelwood and biomass fuel.
32
NPC is the principal entity engaged in the development, generation and
transmission of electric power on a nationwide basis. It establishes and
maintains transmission line grids, generating facilities and inter-island
connections throughout the Republic.
The EPIRA, which provides a legal framework for the restructuring of the
electric power industry and the privatization of the assets and liabilities of
the National Power Corporation, was enacted on June 8, 2001. See "Electric Power
Industry Restructuring and Privatization."
Mining and Quarrying. The mining and quarrying subsector contracted by
5.4% in 2001, compared to growth of 10.0% during 2000. This considerable decline
was caused primarily by the decline in growth of gold production and contraction
in the production of stone quarrying, clay and sandpits and other non-metallic
mining. Increases in the growth of chromium and other metallic mining did not
have a significant impact on the growth of the subsector as a whole. However, in
2002 the mining and quarrying subsector rebounded from the previous declines,
with growth of 51.0%. Most of the growth in the mining and quarrying subsector
was attributable to production from the Camago-Malampaya Gas Project.
SERVICE SECTOR
The sector comprises, in order of importance, trade, finance, housing and
real estate, private services, transportation, communications and storage and
Government services. The services sector remains the largest contributor to GDP,
having contributed approximately 46.0% of GDP at constant market prices in the
first quarter of 2003, 45.8% of GDP in 2002 and 45.3% in 2001. In 2002, the
services sector as a whole grew by 5.5%.
Trade. The trade subsector, which consists of wholesale and retail
activities, accounted for 16.3% of GDP at constant market prices in 2002. The
trade subsector grew by 5.6% in 2001 at constant market prices, compared to 5.2%
growth in 2000. This increase was caused by a notable growth in wholesale trade,
which accounts for one-fourth of trade output. The trade subsector grew by 5.8%
in 2002.
Finance. The finance subsector's contribution to GDP at constant market
prices decreased slightly from 5.1% in 1998 to 4.7% in 2002.
The finance subsector grew by 3.4% in 2002 after growing by 1.2% in 2001
and 0.9% in 2000. For a discussion of the country's financial system, see
"-- The Philippine Financial System."
Housing and Real Estate. The housing and real estate subsector grew by
1.6% in 2002 at constant market prices after contracting by 0.5% in 2001 and
registering zero growth in 2000, at constant market prices.
Private Services. The private services subsector includes educational,
medical and health, recreational and hotel and restaurant services. The
subsector contributed approximately 7.5% to GDP in 2002. Except for business
services and personal services, which experienced higher rates of growth, all
private services experienced lower, although positive, growth. The private
services subsector grew by 5.5% in 2002 at constant market prices, compared to
growth of 4.4% in 2001.
Transportation, Communications and Storage. The geographically diverse
nature of the Philippines makes it important to have well developed road, air
and sea transportation systems. The Government has encouraged the private sector
to provide basic transportation services and strengthen inter-regional and urban
links. Important ongoing projects involving the private sector include the Metro
Rail Transit Project, Metro Manila Skyway Project, the Manila-Cavite Expressway
Project and the South Luzon Expressway Extension.
The country's road network is the most important transportation system,
carrying about 65% of freight and 90% of passenger traffic. The road network
covers more than 200,000 kilometers. About 1.8 million vehicles use the road
network, including 236,000 vehicles for public use, principally in Metro Manila.
Traffic remains congested in the capital region, despite traffic management and
various engineering measures. To ease traffic congestion the Government has
built and continues to promote alternative road networks and mass rapid urban
transit rail.
33
Usage of the country's rail facilities has declined largely because of the
outdated facilities of the Philippine National Railways. The Government has
constructed a two-line light-rail transit system in Metro Manila, financed by a
build, lease and transfer arrangement, and has started work on a third line of
the light-rail transit system, which is expected to be operational by year 2004
and will be able to carry 500,000 passengers per day.
Four international airports, in Manila, Cebu, Clark and Subic, and 83 other
facilities throughout the country help meet the country's air transport needs.
The Government plans to upgrade several major airports to international
standards and generally to modernize air navigation and communications
operations in the country. A new Manila International Airport terminal, expected
to accommodate 10 million international passengers per year, is currently in the
planning stage. The Government has formulated a plan for the transition from
land-based to satellite-based technology in civil aviation. It approved the
implementation of the new communications, navigation surveillance and air
traffic management systems project, which will implement satellite-based
technology designed to control and manage the air traffic within the respective
flight information region. Once financing is obtained and implementation is
completed, the system will increase air travel safety, shorten flight duration
for air passengers and improve aircraft operating efficiency due to more
flexible flight paths and increased airspace capacity.
Philippine Airlines, Inc., the primary national air carrier, several
smaller domestic airlines and airlines from various countries provide air
service to, from and within the country. Philippine Airlines retains a leading
position in domestic routes, but since the beginning of 1998, Philippine
Airlines has had increasing financial difficulties and labor problems. The
airline's finances, however, began to improve in its fiscal year 1999 (ending on
March 31, 2000). After registering six consecutive years of losses, Philippine
Airlines reported a net profit of P45.8 million in fiscal year 1999. In the
fiscal year 2000 (ending on March 31, 2001), the airline realized an 815% rise
in profits, registering a net profit of P419 million.
The Republic also requires an effective water transport system to ferry
cargo and passengers among islands. Currently, the water transport system
handles about 40% of total freight traffic and 10% of total passenger traffic in
the Philippines. The regulatory policy during the past decade has been to open
the industry to competition, ensuring lower cargo passage rates and improving
the quality of service. The Government plans to construct or improve 96 national
ports, approximately 300 municipal, feeder and fishing ports and river landings
and special handling facilities for grains and bulk cargo in other selected
ports.
Faced with historical shortages of telephone lines and long waits for basic
telephone service, especially outside Metro Manila, the Government opened the
telecommunications industry in 1993 to intensify competition and to increase
substantially the number of telephone lines and interconnections. The Government
has continued to implement programs designed to provide telephone lines,
exchanges and transmission facilities to underserved regions of the country. As
of December 31, 2001, more than 6.9 million lines have been installed, which
translates to a telephone density of 8.9 main telephone lines per 100
inhabitants.
The country has 11 international long distance providers and five cellular
mobile telephone operators, as well as a number of competitors in the local
telephone market. The privately-owned Philippine Long Distance Telephone Company
owns and operates the public switch telecommunications network, to which other
companies are connected.
The transport, communications and storage subsector's contribution to GDP,
at constant market prices, grew from 6.6% in 1998 to 7.7% in 2002. At constant
market prices the subsector grew by 8.8% in 2001, compared to growth of 10.5% in
2000. This reduced growth was caused primarily by decreases in the growth rate
of most facets of transportation and storage, most notably a contraction in
water transport and a significant decrease in growth of air transport. In 2002,
the subsector grew by 8.9%, compared to 8.8% in 2001.
Government Services. The Government services subsector grew by 4.7% in
2002.
34
PRICES, EMPLOYMENT AND WAGES
INFLATION
The Philippines reports inflation as the annual percentage change in the
consumer price index, which measures the average price of a standard "basket" of
goods and services used by a typical consumer. In June 1998, the Government
began employing a 1994-based CPI basket of goods and services, which since 1999
has been the sole official measurement. For Metro Manila, the 1994 CPI basket
consists of 705 commodities. In addition, the 1994 CPI basket for areas outside
Metro Manila focuses on provinces or cities.
The following table sets out the principal components of the 1994 CPI
basket.
PRINCIPAL COMPONENTS OF 1994 CPI BASKET
<Table>
<Caption>
CATEGORY BASKET
- -------- ------
Food items (including beverages and tobacco), total......... 55.1%
Rice...................................................... 11.8
Non-food items, total....................................... 44.9
Housing and repairs....................................... 14.7
Services.................................................. 12.3
Fuel, light and water..................................... 5.7
Clothing.................................................. 3.7
Miscellaneous............................................. 8.5
</Table>
The following table sets out the consumer price index and the manufacturing
sector's equivalent, the producer price index, as well as the annual percentage
changes in each index based on the 1994 CPI basket.
CHANGES IN CONSUMER AND PRODUCER PRICE INDEX
<Table>
<Caption>
1998 1999 2000 2001 2002 2003
----- ----- ----- ----- ----- -----
Consumer Price Index......................... 136.8 145.9 152.3 161.6 166.6 172.2(1)
Increase over previous year.................. 9.7% 6.6% 4.4% 6.1% 3.1% 3.3%(1)
Producer Price Index for manufacturing(2).... 131.7 137.9 141.5 165.6 170.4 181.8(3)
Increase/(decrease) over previous year(2).... (11.0)% 4.7% 2.6% 17.0% 2.9% 7.9%(3)
</Table>
- ---------------
Source: National Statistics Office.
(1) As of July 2003.
(2) Measured by the 1994 PPI benchmark.
(3) As of May 2003.
In 1998 the 9.7% inflation rate was caused by the peso depreciation and
lower agricultural output caused principally by the drought related to the El
Nino phenomenon and a number of typhoons related to the La Nina phenomenon. In
1999, inflation declined to 6.6%. The decline was due primarily to a sharp fall
and subsequent stability in food prices resulting from strong performance in the
agriculture sector leading to increased food supply, which partially offset the
effects of increases in world crude oil prices.
Inflation remained in single digits at 4.4% for 2000, compared with the
6.6% recorded in 1999. Moderate inflation was achieved notwithstanding an
increase in economic activity, inflationary pressures arising from wage
adjustments and increases in oil prices and transport fares.
Inflation was kept low in 2001, at an average of 6.1%, which was within the
Government's target of 6-7%. Favorable food and oil prices, stable exchange
rates and moderate growth in demand all contributed to low inflation.
The national inflation rate averaged 3.1% for 2002. Inflation continued to
be benign despite the recent adjustments in domestic oil prices, which increased
by 11.2% at December 31, 2002 as compared with
35
December 31, 2001 (in part because the adjustments were treated as transport
charges), and despite an increase in food prices due to weather-related
reductions in supplies of rice, fruits, and vegetables. Reductions in Bangko
Sentral's policy interest rates and efforts to maintain fiscal discipline, which
led to lower market lending rates and lower costs of capital for businesses,
also had a favorable impact on inflation. Equally important, inflationary
pressures caused by more demand than supply continued to be subdued due in part
to current levels of unemployment and spare capacity. The reduction in the PPA
of NPC, effective May 8, 2002, and the decision of the Manila Waterworks and
Sewerage System to delay petitions for water rate increases also helped to keep
inflation rates relatively low.
The national year-on-year inflation rate was 3.3% in July 2003, slightly
lower than the 3.4% year-on-year inflation rate for June 2003 yet still higher
than the 2.6% rate for July 2002.
EMPLOYMENT AND WAGES
The following table presents selected employment information for various
sectors of the economy.
SELECTED EMPLOYMENT INFORMATION(1)
<Table>
<Caption>
1998 1999(3) 2000(3) 2001(3) 2002(3)
------ ------- ------- ------- -------
Labor force (in thousands)(2)..................... 29,674 30,759 30,911 32,809 33,936
Unemployment rate................................. 10.3% 9.8% 11.2% 11.1% 11.4%
Employment share by sector:
Agriculture, fishery and forestry................. 37.9% 38.8% 32.9% 37.2% 37.0%
Industry sector
Mining and quarrying............................ 0.4 0.4 0.4 0.4 0.4
Manufacturing................................... 10.2 9.9 10.0 10.0 9.5
Construction.................................... 5.9 5.5 5.4 5.4 5.3
Electricity, gas and water...................... 0.5 0.5 0.4 0.4 0.4
------ ------ ------ ------ ------
Total industry sector........................ 17.1% 16.3% 16.2% 16.2% 15.6%
Service sector
Transportation, communication and storage....... 6.8 6.9 7.2 7.3 7.2
Trade........................................... 15.6 15.7 16.3 18.0 18.7
Finance and housing............................. 2.5 2.6 2.6 2.8 2.8
Services........................................ 20.1 19.7 20.5 18.6 18.7
------ ------ ------ ------ ------
Total services sector........................ 45.0% 44.9% 46.6% 46.7% 47.4%
------ ------ ------ ------ ------
Total employed............................. 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</Table>
- ---------------
Source: Bureau of Labor and Employment Statistics -- Current Labor Statistics;
National Statistics Office -- Labor Force Survey.
(1) Figures for 1998 to 2002 are the average of the applicable statistic for
each quarter in the relevant period.
(2) Does not include overseas Filipino workers.
(3) Figures generated using 1995 census-based population projections.
At the end of 2002, the Filipino labor force, not including overseas
workers, totalled 33.9 million people. The Filipino labor force is relatively
young. Filipino workers are employed primarily in service industries, such as
nursing and education, and in manufacturing export industries, such as
electronics and garments. Approximately 892,000 Filipino workers were working
overseas from January to December 2002, an increase of approximately 2.9% from
the same period in 2001.
Regional tripartite bodies consisting of representatives of Government,
businesses and workers establish minimum wage requirements, which vary based on
region and industry. Under the law, minimum wage requirements may only be
increased once in any twelve month period. The minimum wages for workers in
36
Metro Manila and the surrounding areas are the highest in the country. Across
the regions, daily minimum wages range from a low of P114.0 to a high of P280.0.
The economic difficulties that began in the second half of 1997, including
the slower growth of the country's industrial production, drove the average
unemployment rate to 10.3% in 1998, before it declined to 9.8% in 1999. The
unemployment rate then increased to 11.2% in 2000 due to the effects of the El
Nino weather phenomenon on agriculture and labor cutbacks in industry. Labor and
employment conditions improved in 2001 as the economy grew stronger than
expected during the year. The substantially reduced number of strikes, increased
rates of deployment of workers overseas and improved legislated wage indicators
reflect broadly improved labor, employment and wage conditions during the year.
In 2002, the average national unemployment rate rose slightly to 11.4% from
11.1% in 2001. On January 25, 2002, pursuant to policies adopted at the National
Socio-Economic Summit of 2001, the Government implemented a job corps program
promoting volunteerism, civic consciousness among the country's youth, community
development and employment projects.
In April 2003, the unemployment rate was 12.2%, compared to 13.9% in April
2002. The number of unemployed persons was 4.2 million in April 2003, a 13%
decline from April 2002. The largest number of unemployed persons was located in
Metro Manila, which posted a 17.0% unemployment rate as of April 2003.
In Metro Manila, where 13.8% of the country's labor force is located,
unemployment ranged from 13.8% to 16.4% from 1997 to 1999 and from 17.9% to
17.7% from 2000 to 2002.
SOCIAL SECURITY SYSTEM AND GOVERNMENT SERVICE INSURANCE SYSTEM
The Philippines does not pay any unemployment compensation or make any
general welfare payments other than through the Social Security System and the
Government Service Insurance System. The Social Security System provides private
sector employees, including self-employed persons and their families, with
protection against disability, sickness, old age and death. Monthly
contributions by covered employees and their employers, and investment income of
the Social Security System, fund the system. The Social Security System invests
its funds in Government securities and in domestic equity securities.
The Government Service Insurance System administers social security
benefits for Government employees, including retirement benefits, life
insurance, medical care and sickness and disability benefits. The system also
administers the self-insurance program for Government properties, such as
buildings and equipment. The Government Service Insurance System also oversees
loan programs, including housing loans for Government employees. Monthly
contributions by covered employees and their employers fund the system.
Government agencies must include in their annual appropriations the amounts
needed to cover their share of the contributions and any additional premium
required based on the hazardous nature of the work. The Government Service
Insurance System invests its funds in a manner similar to the Social Security
System.
SAVINGS
The following table sets out the ratio of gross national savings, total
investment and the savings-investment gap as a percentage of GDP.
NATIONAL SAVINGS AND INVESTMENTS
<Table>
<Caption>
1998 1999 2000 2001 2002
----- ----- ----- ----- -----
Gross national savings............................... 22.7% 27.5% 26.2% 22.5% 24.7%
Gross investments.................................... 20.3% 18.8% 18.4% 20.7% 19.3%
Savings-investment gap............................... 2.4% 8.8% 7.8% 1.8% 5.4%
</Table>
- ---------------
Source: National Accounts, NSCB.
37
Government steps to stimulate the savings rate in the Philippines include:
- launching a nationwide savings consciousness campaign to inform savers
about different types of financial assets;
- shifting by the Philippine Stock Exchange from merit-based regulation to
self-regulation;
- tightening disclosure and insider trading rules;
- removing double taxation of mutual funds;
- allowing increased foreign equity participation in investment and
financing companies;
- rationalizing financial taxes (e.g., gross receipts tax, documentary
stamp tax, initial public offerings tax);
- broadening of the scope and coverage of small denominated Treasury-bills;
- establishing a Small and Medium Enterprises Board at the Philippine Stock
Exchange; and
- lengthening of the yield curve of government securities.
BALANCE OF PAYMENTS
BALANCE OF PAYMENTS PERFORMANCE
Balance of payments figures measure the relative flow of goods, services
and capital into and out of the country as represented in the current account
and the capital and financial accounts. The current account tracks a country's
trade in goods, services, income and current transfer transactions. The capital
and financial account includes the capital account, which covers all
transactions involving capital transfers and acquisition or disposition of
non-produced, non-financial assets, and the financial account, which covers all
transactions associated with changes of ownership in the foreign financial
assets and liabilities of an economy. A balance of payments surplus indicates a
net inflow of foreign currencies, thereby increasing demand for and
strengthening the local currency. A balance of payments deficit indicates a net
outflow of foreign currencies, thereby decreasing demand for and weakening the
local currency.
Beginning in January 2000, Bangko Sentral has reported the balance of
payments under a new framework based on the fifth edition of the Balance of
Payments Manual, or BPM5, of the IMF. As compared to the previously used balance
of payments framework, the new framework introduced certain changes in
classification, format and coverage. With respect to classification and format,
the new framework (among other things) reports an income account that reflects
new earnings from land, labor, and finance; groups financial transactions into
direct investment, portfolio investment, and other investment; and separates
transfers between the current and capital accounts. Also, with respect to trade,
the new framework excludes shipped goods that do not change ownership (thus
deviating from the statistics on foreign goods trade currently published by the
National Statistics Office). Finally, in the financial account, the new
framework only reports actual financial transactions. In particular, the
financial account under the new framework excludes previously reported
revaluations of assets and liabilities, and excludes changes in the value of
gold in Bangko Sentral reserves.
38
The following table sets out the consolidated financial position on a cash
basis for the Republic for the years 1999-2002.
BALANCE OF PAYMENTS(1)(2)
<Table>
<Caption>
FIRST
FOUR
YEARS ENDED DECEMBER 31, MONTHS
----------------------------------------- -------
1999 2000 2001 2002 2003
-------- -------- -------- -------- -------
(IN MILLIONS)
CURRENT ACCOUNT:(2)........................... $ 7,219 $ 6,258 $ 1,323 $ 4,197 $ 342
-------- -------- -------- -------- -------
Goods and services:........................... 2,247 1,384 (2,793) (856) (1,581)
Exports(3).................................. 39,014 41,267 34,391 37,439 11,895
Imports(3).................................. 36,767 39,883 37,184 38,295 13,476
Goods....................................... 4,959 3,814 (743) 408 (1,021)
Credit: Exports(3)....................... 34,211 37,295 31,243 34,383 10,941
Debit: Imports(3)........................ 29,252 33,481 31,986 33,975 11,962
Services.................................... (2,712) (2,430) (2,050) (1,264) (560)
Credit: Exports.......................... 4,803 3,972 3,148 3,056 954
Debit: Imports........................... 7,515 6,402 5,198 4,320 1,514
Income:....................................... 4,460 4,437 3,669 4,550 1,713
Credit: Receipts......................... 8,082 7,804 7,152 7,931 2,786
Debit: Disbursements..................... 3,622 3,367 3,483 3,381 1,073
Current transfers:............................ 512 437 447 503 210
Credit: Receipts......................... 607 552 517 594 232
Debit: Disbursements..................... 95 115 70 91 22
CAPITAL AND FINANCIAL ACCOUNT:(2)............. (2,333) (4,119) (1,080) (2,104) (612)
Capital account:............................ (8) 38 (12) (19) (8)
Credit: Receipts......................... 44 74 12 2 2
Debit: Disbursements..................... 52 36 24 21 10
Financial account:.......................... (2,325) (4,157) (1,068) (2,085) (604)
Direct investment........................ 1,754 1,453 1,142 1,026 (39)
Debit: Assets, residents' investments
abroad.............................. (29) (108) (160) 85 23
Credit: Liabilities, non-residents'
investments in the Philippines...... 1,725 1,345 982 1,111 (16)
Portfolio Investment:.................... 6,874 207 1,050 1,921 638
Debit: Assets, residents' investments
abroad.............................. 807 812 399 369 550
Credit: Liabilities, non-residents'
investments in the Philippines...... 7,681 1,019 1,449 2,281 1,188
Other Investment:........................ (10,953) (5,817) (3,260) (5,023) (1,203)
Debit.................................. 18,639 15,313 13,898 13,214 3,615
Credit................................. 7,686 9,496 10,638 8,191 2,412
NET UNCLASSIFIED ITEMS:....................... (1,300) (2,652) (435) (1,433) (249)
-------- -------- -------- -------- -------
OVERALL BOP POSITION:(4)...................... $ 3,586 $ (513) $ (192) $ 660 (519)
======== ======== ======== ======== =======
</Table>
- ---------------
Source: Bangko Sentral.
(1) Beginning January 2000, the Republic adopted the BPM5. For the purpose of
assessing comparative performance, the 1999 balance of payments was
reconstructed to conform with the conceptual coverage of the BPM5.
(2) The Republic has disclosed that the reported current account surplus for
2000 and 2001 had previously been overstated due to monitoring problems
giving rise to underreported imports. See the discussion in the main text
following this table.
(3) Data on exports and imports from the National Statistics Office were
adjusted to exclude temporary exports and imports and returned goods.
(4) The overall BOP position results from the change in net international
reserves excluding the effects of revaluation of reserve assets and selected
reserve liabilities, gold monetization and Special Drawing Rights
allocation.
39
Recent Revisions. In January 2003, the Republic disclosed that the
previously reported current account surplus had been overstated due to
monitoring problems giving rise to underreported imports. An inter-agency task
force on the balance of payments considered the effects of this problem on the
Republic's consolidated financial position, specifically the Republic's current
account and capital and financial account. The inter-agency task force has
revised the Republic's balance of payments data for the years 2000 and 2001, but
will not review prior years due to incomplete information. The inter-agency task
force worked within the guidelines of the IMF's reporting system and included
representatives of the Bangko Sentral, the National Statistics Office, the
National Economic and Development Authority, the National Statistics
Coordination Board, the Bureau of Customs and the Philippine Export Zone
Authority.
Reflecting the updated import data, the current account for 2000 has been
revised to a surplus of $6.3 billion from the previously reported surplus of
$8.5 billion, and the current account for 2001 has been revised to a surplus of
$1.3 billion from the previously reported surplus of $4.6 billion. At these
revised levels, the current account surplus stood at 8.4% and 1.8% of gross
national product for 2000 and 2001, respectively. Accordingly, the capital and
financial account for 2000 has been revised downward to a net outflow of $4.1
billion from a previously reported net outflow of $6.5 billion, and the capital
and financial account for 2001 has been revised downward to a net outflow of
$1.1 billion from a previously reported net outflow of $3.7 billion.
In 1999, under the BPM5 framework, the balance of payments recorded an
overall surplus of $3.6 billion. This resulted from a surplus of $7.2 billion in
the current account due to an improvement in the goods trade balance and net
inflows from the income account. The capital and financial account recorded a
deficit of $2.3 billion in 1999, although there were sustained inflows of direct
investment and portfolio investment by nonresidents.
In 2000, the balance of payments position recorded a deficit of $513
million, following the weaker capital and financial account even as the current
account continued to perform favorably. The current account posted a surplus of
$6.3 billion for 2000, or 13.3% lower than the level registered in 1999. The net
outflow in the capital and financial account totalled $4.1 billion following the
weakening in the financial account. Inflows of both direct and portfolio
investments offset some of the outflows in the other investments account.
However, portfolio investments were down considerably in 2000 to a net inflow of
$207 million from a net inflow of $6.1 billion in 1999.
In 2001, the overall balance of payments showed a deficit of $192 million,
compared to a deficit of $513 million in 2000. This positive development was
caused by lower net outflows of $1.1 billion in the capital and financial
account in 2001, as compared to $4.1 billion in 2000, which overshadowed a
substantial decline in the current account surplus of $1.3 billion in 2001, as
compared to $6.2 billion in 2000. Exports of goods contracted by 16.2% and
inflows in the services trade account decreased by 20.7% due to lower travel
receipts arising from perceived security concerns and the travel scare that
followed the terrorist attacks in the United States. Imports of goods declined
by 4.5%, and outflows in the services trade account declined by 18.8%. Foreign
direct investments posted a net inflow of $982 million, compared to a $1.3
billion net inflow in 2000. From a net inflow of $207 million in 2000, portfolio
investments increased, to a net inflow of $1.1 billion in 2001.
In 2002, the balance of payments registered a surplus of $660 million,
compared to a deficit of $192 million in 2001. This improvement can mainly be
attributed to the strong performance of the current account, which offset the
weak performance of the capital and financial account. The current account
surplus more than tripled to $4.2 billion for 2002 from $1.3 billion in 2001.
This positive development was mainly caused by higher net inflows in the income
accounts, the reversal of the trade-in-goods balance to a surplus from a deficit
and lower net outflows in services. Higher net inflows from current transfers
also helped strengthen the current account's performance for the year. The
trade-in-goods balance for 2002 posted a surplus of $408 million, as compared to
a deficit of $743 million for 2001 as growth of exports outpaced that of
imports. The strong export performance was supported by increasing
intra-regional trade in Asia, absorbing the reduction in demand from the US and
Japan, the Republic's traditional trading partners, and by a new export plan
focusing on aggressive marketing and developing small and medium enterprises.
The trade-in-
40
services account for 2002 recorded a net outflow of $1.3 billion, 38.3% lower
than to the level in 2001, mainly because of the lower net payments for
transportation services, construction services and miscellaneous business,
professional and technical services. Net inflows in the income account for 2002
grew by 24.0% to $4.6 billion. The higher surplus was due mainly to an increase
in the number of deployed overseas foreign workers who continued to send
remittances from abroad. The current transfers account for 2002 amounted to $503
million, 12.5% higher than the level registered in 2001. The improvement was due
to higher transfers from migrant workers, as well as receipts in the form of
gifts, grants and donations from individuals and non-governmental institutions.
However, the capital and financial account for 2002 posted a higher net outflow
of $2.1 billion, compared with a net outflow of $1.1 billion in 2001. The weaker
performance of this account was attributed to the decline in net inflow of
direct investments, which fell to $1.0 billion, or 10.2% below the level posted
in 2001, as well as the higher net outflow in other investments which rose to
$5.0 billion in 2002 from $3.3 billion in 2001. These changes offset the
positive impact of higher net inflow of portfolio investments, which rose to a
net inflow of $1.9 billion, an increase of 82.1% from the net inflow of $1.1
billion in 2001 due mainly to the substantially higher non-residents'
investments in resident-issued foreign-denominated debt securities.
In the first four months of 2003, the Republic's balance of payments
recorded a deficit of $519 million, compared to a surplus of $1.9 billion for
the first four months of 2002. The reversal was due both to a decrease in the
current account surplus, from $1.5 billion in the first four months of 2002 to
$342 million in the first four months of 2003, and to a reversal in the capital
and financial account, from a surplus of $1.7 billion in the first four months
of 2002 to an outflow of $612 million in the first four months of 2003. The
current account for the first four months of 2003 declined from the same period
in 2002, mainly because of increased imports (during the first three months of
2003) in preparation for a war in Iraq and a decline in tourism due to the SARS
epidemic. The capital and financial account for the first four months of 2003
declined from the first four months of 2002, mainly because of global investor
uncertainty and withdrawals of foreign currency by non-residents from Philippine
banks.
The following discussion of the 2000 and 2001 balance of payments does not
reflect recent revisions to the Republic's balance of payments. However, the
discussion of the 2002 and 2003 balance of payments reflects all such revisions.
Current Account
RECENT RESULTS. After having been revised to reflect updated import data,
the current account recorded a surplus of $4.2 billion in 2002, more than three
times the $1.3 billion surplus for 2001. The higher surplus in the
trade-in-goods account and the higher net inflow in the income account
contributed significantly to this development. The trade-in-goods account posted
a surplus of $408 million in 2002. The increase in the net income account
surplus to $4.6 billion in 2002 also helped strengthen the current account
balance. In the first four months of 2003, the current account posted a surplus
of $342 million, a 76.5% decrease from the same period in 2002.
Goods Trade. Trading in goods significantly affects the Philippine
economy. From 1998 to 2002, exports accounted for an average of approximately
44% of the country's GNP and imports accounted for an average of approximately
40% of GNP. The country's trade strategy emphasizes export promotion. The rapid
expansion of export-oriented, labor-intensive manufacturing operations, such as
electronics and textiles, drove total exports to $35.0 billion in 2002 and
produced an average annual export growth rate of 4.4% from 1998 to 2002.
A significant proportion of exports, estimated at approximately 40% in
2002, depends on imported raw materials or other inputs, rendering the country's
exports vulnerable to any import decline resulting from a peso depreciation. The
Government aims to reduce the importance of imports for producing the country's
exports by implementing a number of different policies, including infrastructure
development and tariff reform.
41
Exports of Goods. The following table sets out the country's exports of
manufactures by major commodity group.
MERCHANDISE EXPORTS BY SECTOR
<Table>
<Caption>
PERCENTAGE OF
FIRST SIX TOTAL EXPORTS
MONTHS -------------
1998 1999 2000 2001 2002 2003 1998 2002
------- ------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
Manufactures
Electronics and electrical
equipment/parts........ $17,388 $21,558 $22,517 $16,894 $18,746 $11,605 58.9% 53.5%
Garments.................. 2,356 2,267 2,562 2,403 2,392 1,122 8.0 6.8
Textile yarns/fabrics..... 243 221 249 226 249 124 0.8 0.7
Footwear.................. 147 86 76 73 48 28 0.5 0.1
Travel goods and
handbags............... 183 154 177 174 83 35 0.6 0.2
Wood manufactures......... 118 128 210 119 112 67 0.4 0.3
Furniture & fixtures...... 323 353 383 298 316 143 1.1 0.9
Chemicals................. 340 295 328 318 361 180 1.2 1.0
Non-metallic mineral
manufactures........... 106 111 134 123 113 59 0.4 0.3
Machinery and transport
equipment.............. 3,329 4,971 5,930 6,198 7,118 617 11.3 20.5
Processed food and
beverages.............. 306 264 280 345 388 246 0.1 1.1
Iron and steel............ 28 18 25 14 17 10 0.1 0.0
Baby carriages, toys,
games and sporting
goods.................. 169 158 165 145 140 60 0.6 0.4
Basketwork, wickerwork and
other articles of
plaiting materials..... 85 84 95 83 74 41 0.3 0.2
Miscellaneous manufactured
articles, not elsewhere
specified.............. 207 214 231 230 243 138 0.7 0.7
Others.................... 786 852 1,002 984 1,015 558 2.7 2.9
------- ------- ------- ------- ------- ------- ----- -----
Total manufactures..... 26,114 31,734 34,364 28,627 31,415 15,032 88.5 89.6
Agro-based products
Coconut products.......... 832 458 569 525 478 300 2.8 1.4
Sugar and sugar
products............... 100 71 57 32 46 58 0.4 0.1
Fruits and vegetables..... 447 456 535 552 541 293 1.5 1.5
Other agro-based
products............... 466 476 495 428 455 219 1.6 1.3
------- ------- ------- ------- ------- ------- ----- -----
Total agro-based
products............. 1,845 1,461 1,656 1,537 1,520 870 6.3 4.3
Mineral products............ 591 645 649 536 512 314 2.0 1.5
Petroleum products.......... 129 216 436 242 353 272 4.4 1.0
Forest products............. 24 20 42 21 24 10 0.1 0.1
Others...................... 794 956 932 1,186 1,237 570 2.7 3.5
------- ------- ------- ------- ------- ------- ----- -----
Total.................. $29,497 $35,032 $38,079 $32,149 $35,061 $17,068 100.0% 100.0%
======= ======= ======= ======= ======= ======= ===== =====
</Table>
- ---------------
Source: National Statistics Office.
42
Exports of manufactured goods grew at an average rate of 4.4% per year from
1998 to 2002. However in 2001 a decline of 18.7% was recorded. As a percentage
of total exports, manufactured goods increased from 88.5% in 1998 to 89.6% in
2002. Exports of electronics, electrical equipment and parts, and
telecommunications equipment declined as a proportion of total exports from
58.9% in 1998 to 53.5% in 2002. During the same period, exports of garments as a
proportion of total exports decreased from 8.0% in 1998 to 6.8% in 2002 because
of increased international competition and a general decline in world-wide
demand. Exports of agro-based products, including coconut products, sugar
products, fruits and vegetables, also declined considerably as a proportion of
total exports from 6.3% in 1998 to 4.3% in 2002. On the other hand, increased
production helped exports of machinery and transport equipment grow at an
average annual rate of 20.9% from 1998 to 2002. As a percentage of total exports
machinery and transport grew from 11.3% in 1998 to 20.5% in 2002.
In 1998, total exports increased by 16.9% from 1997 to $29.5 billion. The
start-up of a number of new semiconductor and microprocessor factories boosted
exports of semiconductors, the top export earner. The depreciation of the peso
helped exports and offset the adverse effects of the Asian financial crisis on a
number of the Republic's trading partners.
In 1999, total exports grew by 18.8% to $35.0 billion, compared with 16.9%
over 1998. Electronics, machinery and transport equipment and garments were the
leading export earners. Higher shipments of mineral products, fruits and
vegetables and furniture and fixtures also contributed to the expansion of
exports in 1999.
In 2000, exports totalled $38.1 billion and accounted for 43.9% of the GNP.
Merchandise exports in 2000 grew by 8.7%. Among the merchandise exports,
electronics maintained its position as the top earner and continued growing, but
at a decelerated rate of 4.5% in 2000 compared to 24.0% in 1999. Garments, the
third top earner, had a 13.0% increase in 2000 after a 3.9% contraction in 1999.
Machinery and transport, the second top earner in 2000, experienced decelerated
growth, from 49.3% in 1999 to only 19.3% in 2000. Merchandise exports during
2000 amounted to $38 billion translating to an 8.7% growth, a deceleration from
the 18.8% growth registered in 1999.
In 2001, exports declined by 15.5% to $32.1 billion. The decline reflected
the slump in demand by the country's leading trading partners, namely the US and
Japan, as well as the downtrend in demand in the information technology sector.
Exports of semiconductor components experienced declines in both volume and
price. All major commodity groups posted declines except fruits and vegetables,
which registered a 3.2% modest growth. Electronics, machinery and transport
equipment and garments remained the top three export commodities.
Total exports of goods for 2002 were $35.0 billion, or 9.0% higher than
exports of goods in 2001. Higher demand for Philippine goods from Taiwan, Hong
Kong, South Korea, Malaysia and China made up for a decrease in exports to the
US and Japan, which together account for approximately 40% of the country's
export market (25% for the US and 15% for Japan in 2002). The following table
sets out the destinations of the country's exports.
43
EXPORTS BY DESTINATION
<Table>
<Caption>
FIRST SIX PERCENTAGE OF
MONTHS TOTAL EXPORTS
--------- -------------
1998 1999 2000 2001 2002 2003 1998 2002
------- ------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
United States............... $10,098 $10,446 $11,365 $ 8,980 $ 8,653 $ 3,579 34.2% 24.7%
Japan....................... 4,234 4,664 5,609 5,057 5,278 2,626 14.4 15.1
ASEAN countries(1).......... 3,723 4,917 5,895 4,914 5,276 3,203(2) 12.6 15.0
United Kingdom.............. 1,757 1,766 1,506 997 2,341 N/A 5.6 2.6
Hong Kong SAR............... 1,326 1,947 1,907 1,580 927 1,458 4.5 6.7
The Netherlands............. 2,319 2,865 2,982 2,976 2,777 1,121 7.9 7.9
Germany..................... 1,035 1,229 1,329 1,323 1,386 640 3.5 4.0
Taiwan...................... 1,757 2,993 2,861 2,127 2,484 832 6.0 7.1
South Korea................. 509 1,032 1,173 1,044 1,340 N/A 1.7 3.8
People's Republic of
China(3).................. 344 575 663 793 1,352 1,050 1.2 3.9
Others...................... 2,394 2,608 2,788 2,359 3,252 3,099(4) 8.1 9.3
------- ------- ------- ------- ------- ------- ----- -----
Total..................... $29,496 $35,042 $38,078 $32,150 $35,066 $17,068 100.0% 100.0%
======= ======= ======= ======= ======= ======= ===== =====
</Table>
- ---------------
Source: Foreign Trade Statistics, National Statistics Office.
(1) Includes (for 1998 to 2002) only Brunei, Indonesia, Malaysia, Singapore and
Thailand.
(2) Includes only Malaysia, Singapore and Thailand.
(3) Excludes Hong Kong SAR.
(4) Includes United Kingdom and South Korea.
The United States absorbed, on average, 29.3% of total exports from 1998 to
2002. Japan accounted for, on average, 14.8% of Philippine exports from 1998 to
2002. Recognizing the danger of over-reliance on so few export markets, the
country has attempted to increase its exports to other countries, particularly
ASEAN countries. The Republic is a party to the ASEAN Free Trade Agreement that
provides for the implementation of the common effective preferential tariff that
will reduce tariffs among ASEAN nations by 2008 to between 0% and 5% for all
manufactured goods and non-sensitive agricultural and processed agricultural
products. Additional activities to support the free trade area include plans for
intra-regional investments, industrial linkages and banking and financial
integration.
Imports of Goods. The import data for 2000, 2001 and 2002 have been
revised. See "Balance of Payments -- Recent Revisions".
For 2002, the value of total imports as reported by the National Statistics
Office has been adjusted from $33.5 billion to $38.3 billion. For 2001, the
value of total imports has been adjusted from $29.6 billion to $37.2 billion.
For 2000, the value of total imports has been adjusted from $31.4 billion to
$36.5 billion.
Since a more detailed breakdown of these revised numbers is not yet
available, the following charts and accompanying discussion reflect previously
reported import data.
44
IMPORTS BY COMMODITY GROUP
<Table>
<Caption>
PERCENTAGE OF
FIRST SIX TOTAL IMPORTS
MONTHS -------------
1998 1999 2000 2001 2002 2003 1998 2002
------- ------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
Raw materials and intermediate goods
Unprocessed raw materials(1)...... $ 1,170 $ 1,517 $ 1,337 $ 1,368 $ 1,371 $ 707 3.9% 4.1%
Semi-processed raw materials(2)... 10,415 11,078 10,724 10,078 11,791 6,688 35.1 35.2
------- ------- ------- ------- ------- ------- ----- -----
Total raw materials and
intermediate goods.............. $11,585 $12,595 $12,061 $11,446 $13,162 7,396 39.1% 39.3%
Capital goods....................... 12,185 11,829 12,161 11,437 13,432 7,195 41.1 40.1
Consumer goods
Durable........................... 902 1,091 1,072 949 984 574 3.1 2.9
Non-durable....................... 1,721 1,553 1,452 1,534 1,595 785 5.8 4.8
------- ------- ------- ------- ------- ------- ----- -----
Total consumer goods.............. $ 2,623 $ 2,644 $ 2,524 $ 2,483 $ 2,579 $ 1,359 8.8% 7.7%
Mineral fuels and lubricants........ 2,020 2,420 3,877 3,372 3,234 2,006 6.8 9.7
Other............................... 1,246 1,238 765 812 1,066 615 4.2 3.2
------- ------- ------- ------- ------- ------- ----- -----
Total............................. $29,659(3) $30,776 $31,388 $29,550 $33,471 $18,571 100.0% 100.0%
======= ======= ======= ======= ======= ======= ===== =====
</Table>
- ---------------
Source: National Statistics Office.
(1) Includes wheat, corn, unmilled cereals excluding rice and corn, inedible
crude materials and unmanufactured tobacco.
(2) Includes chemicals and chemical compounds, manufactured goods that are not
capital or consumer goods, materials for the manufacture of electrical and
electronic equipment and parts and embroideries.
(3) Excludes the value of aircraft amounting to $136 million procured under
operating lease arrangements.
In 1998, weakening demand because of the economic slowdown and the
depreciation of the peso forced imports down 21.2% to $29.7 billion, compared
with $35.9 billion for 1997. Lower imports of machinery transport equipment,
partly due to Philippine Airlines' financial difficulties and temporary closure,
fertilizers and artificial resins led the decline. A number of exporters
decreased their imports and elected instead to draw down their inventories to
alleviate the impact of the weak peso, also hurting overall imports.
In 1999, imports totalled $30.8 billion. This represented an increase of
3.8% from imports for 1998. The increase was due mainly to an increase in
imports of electronics and components, minerals, fuel and lubricants. Imports in
December 1999 increased by 28.7% compared to December 1998, the highest monthly
growth in imports in three and a half years.
In 2000, imports increased by 2.1% to $31.4 billion, compared to a 4.1%
increase in 1999. The growth was due to higher imports of capital goods, which
rose by 2.8%, as well as the increase in imports of mineral fuel and lubricants
which grew by 59.3% following the hike in the average price of petroleum crude
in 2000 to $27.89 per barrel, compared to $16.31 per barrel in 1999.
In 2001, imports fell by 5.9% to $29.5 billion, a reversal of the 3.8%
increase registered in 2000. This decline resulted primarily from the reduction
in imports of raw materials and intermediate goods and capital goods used for
exports and domestic production, as well as the reduced appetite for
foreign-made goods as a result of the weak peso. Except for the months of April
to June, imports were down, with November posting the largest year-on-year
contraction at 23.6%.
In 2002, imports of goods increased by 13.3% to reach $33.5 billion. All
major categories of goods imports except for mineral fuels and lubricants
increased from 2001 to 2002. Of the total $33.5 billion in imports of goods,
capital goods accounted for $13.4 billion, or 40.1%, raw materials and
intermediate goods accounted for $13.2 billion, or 39.3%, mineral fuels and
lubricants accounted for $3.2 billion, or 9.7%, and consumer goods accounted for
$2.6 billion, or 7.7%.
45
The following table sets out the sources of the Philippines' imports by
country, without reflecting import data revisions. See "Balance of
Payments -- Recent Revisions".
IMPORTS BY SOURCE
<Table>
<Caption>
PERCENTAGE OF
FIRST SIX TOTAL IMPORTS
MONTHS -------------
1998(1) 1999 2000 2001 2002 2003 1998 2002
------- ------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
Japan....................... $ 6,029 $ 6,136 $ 6,027 $ 6,098 $ 6,957 $ 3,657 20.3% 20.8%
US.......................... 6,560 6,365 5,323 4,989 6,381 3,796 22.1 19.1
ASEAN countries(2).......... 4,050 4,248 4,796 4,379 4,457(3) 2,554(3) 13.7 13.3(3)
Hong Kong SAR............... 1,300 1,226 1,217 1,259 1,570 797 4.4 4.7
Saudi Arabia................ 606 810 1,048 887 998 634 2.0 3.0
Taiwan...................... 1,415 1,614 1,948 1,607 1,636 874 4.8 4.9
South Korea................. 2,189 2,723 2,350 1,950 2,579 1,261 7.4 7.7
Australia................... 683 757 816 645 N/A N/A 2.3 N/A
Germany..................... 822 800 734 734 N/A N/A 2.8 N/A
People's Republic of
China(4).................. 1,198 1,040 768 953 1,231 788 4.0 3.7
Others...................... 4,808 5,023 6,360 6,050 7,662(5) 4,210(5) 16.2 22.9(5)
------- ------- ------- ------- ------- ------- ----- -----
Total..................... $29,660 $30,742 $31,387 $29,548 $33,471 $18,571 100.0% 100.0%
======= ======= ======= ======= ======= ======= ===== =====
</Table>
- ---------------
Source: Foreign Trade Statistics, National Statistics Office. Economic Indices
and Indicators Division, Industry and Trade Statistics Department, Republic of
the Philippines.
(1) Foreign trade statistics were adjusted to exclude aircraft procured under
operational lease arrangements to conform with the new balance of payments
framework.
(2) Includes only Indonesia (from 1998 to 2001), Malaysia, Singapore and
Thailand.
(3) Malaysia, Singapore and Thailand only.
(4) Excludes Hong Kong SAR.
(5) Includes Australia, Germany, Brunei and Indonesia.
46
Services Trade. The following table sets out the country's services trade
by sector compiled in accordance with the BPM5 framework for the periods
indicated.
SERVICES TRADE
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Total services trade......................... $(2,712) $(2,112) $(2,050) $(1,264) (560)
Exports.................................... 4,803 3,972 3,148 3,056 954
Imports.................................... 7,515 6,084 5,198 4,320 1,514
Transportation............................... (1,369) (1,785) (1,758) (1,605) (574)
Exports.................................... 575 891 659 631 214
Imports.................................... 1,944 2,676 2,417 2,236 788
of which: Passenger........................ (117) (73) (237) (302) (95)
Exports................................. 15 243 99 87 34
Imports................................. 132 316 336 389 129
of which: Freight.......................... (1,167) (1,638) (1,452) (1,225) (440)
Exports................................. 428 481 380 445 155
Imports................................. 1,595 2,119 1,832 1,670 595
of which: Other............................ (85) (74) (69) (78) (39)
Exports................................. 132 167 180 99 25
Imports................................. 217 241 249 177 64
Travel....................................... 1,246 1,129 494 869 208
Exports.................................... 2,554 2,134 1,723 1,740 511
Imports.................................... 1,308 1,005 1,229 871 303
Communication services....................... (307) (79) 113 224 51
Exports.................................... 424 182 328 310 86
Imports.................................... 731 261 215 86 35
Construction services........................ (108) (27) (235) (95) (5)
Exports.................................... 58 97 64 28 11
Imports.................................... 166 124 299 123 16
Insurance services........................... (30) (90) (75) (259) (54)
Exports.................................... 51 66 48 35 32
Imports.................................... 81 156 123 294 86
Financial services........................... (250) (389) (42) (13) (5)
Exports.................................... 67 80 33 32 12
Imports.................................... 317 469 75 45 17
Computer and information services............ (38) (18) (61) (25) (4)
Exports.................................... 57 76 22 21 8
Imports.................................... 95 94 83 46 12
Royalties and license fees................... (104) (190) (158) (229) (92)
Exports.................................... 6 7 1 1 0
Imports.................................... 110 197 159 230 92
</Table>
47
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Other business services...................... (1,672) (595) (320) (139) (83)
Exports.................................... 929 359 219 224 70
Imports.................................... 2,601 954 539 363 153
Merchanting and other trade-related
services.............................. (230) (200) 16 29 0
Exports............................... 186 59 24 35 4
Imports............................... 416 259 8 6 4
Operational leasing services............ (47) (58) (61) (16) (4)
Exports............................... 15 23 10 7 7
Imports............................... 62 81 71 23 11
Misc. business, professional and
technical services.................... (1,395) (337) (275) (152) (79)
Exports............................... 728 277 185 182 59
Imports............................... 2,123 614 460 334 138
Personal, cultural and recreational..... (81) (87) (42) (10) (2)
Exports............................... 58 43 15 7 3
Imports............................... 139 130 57 17 5
Audio-visual and related................ (3) (9) (10) (10) (2)
Exports............................... 14 15 6 6 3
Imports............................... 17 24 16 16 5
Other personal, cultural and
recreational services................. (78) (78) (32) 0 0
Exports............................... 44 28 9 1 0
Imports............................... 122 106 41 1 0
Government services.......................... 1 19 34 18 0
Exports.................................... 24 37 36 27 7
Imports.................................... 23 18 2 9 7
</Table>
- ---------------
Source: Bangko Sentral.
In 1999, under the BPM5 framework, the services account recorded a net
outflow of $2.71 billion following higher service payments. Net outflows were
noted in transportation, communication, construction, insurance, financial,
computer and information, royalties and license fees, and other personal,
cultural and recreational services with the exception of travel services, which
recorded a net inflow of $1.2 billion.
In 2000, the services account recorded a net outflow of $2.11 billion,
22.1% lower than the net outflow of $2.71 billion in 1999. This development was
due to lower net outflows in communication, construction, miscellaneous
business, professional and technical services, computer and information and
other trade-related services.
In 2001, the services trade account posted a deficit of $2.05 billion, 2.9%
lower than the $2.11 billion deficit recorded in 2000. The deficit in 2001 was
brought about by decreased inflows from passenger and travel services. However,
the reduction in the deficit from 2001 was due mainly to the lower net outflows
in freight following the decline in good imports, royalties and fees, financial
services and other business services. The reversal in communication services
account to a net inflow from a net outflow also contributed to the narrower
deficit.
The trade-in-services account posted a net outflow of $1.3 billion in 2002,
38.3% lower than the level in the comparable period in 2001. The narrowing of
the deficit was triggered by lower net payments for
48
transportation services, construction services and miscellaneous business,
professional and technical services. Meanwhile, increased net receipts from
travel services, which rose by 75.9% to $869 million, helped trim the net
outflow in the services account. This was due to the higher rate of decline in
travel payments relative to that of travel receipts. The lower travel payments
reflected in part the weaker peso and the Government program to promote local
tourism.
In the first four months of 2003, the trade-in-services account posted a
net outflow of $560 million, an increase of 60.9% over a net outflow of $348
million in the same period in 2002. The higher outflow was due to a significant
decrease in travel receipts, reflecting the slowdown in the global economy,
tension in the Middle East, the outbreak of SARS in the Asian region and
domestic security concerns, as well as a rise in freight payments.
Income. The following table sets out the Republic's income compiled in
accordance with the BPM5 framework for the periods indicated. Prior to the
adoption of the BPM5 framework, income was included in services trade. Entries
with "zero" balances indicate either that there are no relevant transactions
during the period or that the Republic has not yet begun to track and record the
relevant entry.
INCOME
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Total income................................. $ 4,604 $ 3,216 $ 3,669 $ 4,550 1,713
Receipts................................... 8,082 7,804 7,152 7,931 2,786
Disbursements.............................. 3,478 4,588 3,483 3,381 1,073
Compensation of employees, incl. border,
seasonal and other workers................. 6,794 6,050 6,031 7,171 2,538
Receipts................................... 6,794 6,050 6,031 7,171 2,538
Disbursements.............................. 0 0 0 0 0
Investment income............................ (2,190) (2,834) (2,362) (2,621) (825)
Receipts................................... 1,288 1,754 1,121 760 248
Disbursements.............................. 3,478 4,588 3,483 3,381 1,073
Direct investment income................... (772) (802) (608) (792) (197)
Receipts................................ 63 163 10 18 3
Disbursements........................... 835 965 618 810 200
Income on equity........................ (718) (819) (527) (770) (187)
Receipts.............................. 35 57 10 18 3
Disbursements......................... 753 876 537 788 190
Dividends and distributed branch
profits............................ (184) (240) (654) (650) (187)
Receipts........................... 35 57 10 18 3
Disbursements...................... 219 297 664 668 190
Reinvested earnings and undistributed
branch profits..................... (534) (579) (127) (120) 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 534 579 (127) 120 0
Income on debt (interest)............... (54) 17 (81) (22) (10)
Receipts.............................. 28 106 0 0 0
Disbursements......................... 82 89 81 22 10
</Table>
49
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Portfolio investment income................ (607) (445) (545) (746) (256)
Receipts................................ 451 645 634 425 154
Disbursements........................... 1,058 1,090 1,179 1,171 410
Income on equity (dividends)............ (22) (8) (23) (16) (13)
Receipts.............................. 16 8 6 0 0
Disbursements......................... 38 16 29 16 13
Monetary authorities.................. 0 0 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 0 0 0 0 0
General government.................... 0 0 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 0 0 0 0 0
Banks................................. 0 0 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 0 0 0 0 0
Other sectors......................... (22) (8) (23) (16) (13)
Receipts........................... 16 8 6 0 0
Disbursements...................... 38 16 29 16 13
Income on debt (interest)............... (585) (437) (522) (730) (243)
Receipts.............................. 435 637 628 425 154
Disbursements......................... 1,020 1,074 1,150 1,155 397
Bonds and notes....................... (525) (429) (554) (739) (244)
Receipts........................... 430 621 584 413 153
Disbursements...................... 955 1,050 1,138 1,152 397
Monetary authorities.................. 180 305 304 141 110
Receipts........................... 266 443 417 297 128
Disbursements...................... 86 138 113 155 18
General government.................... (501) (469) (642) (701) (303)
Receipts........................... 0 0 0 0 0
Disbursements...................... 501 469 642 701 303
Banks................................. 35 0 0 0 0
Receipts........................... 35 0 0 0 0
Disbursements...................... 0 0 0 0 0
Other sectors......................... (239) (265) (216) (179) (51)
Receipts........................... 129 178 167 116 25
Disbursements...................... 368 443 383 295 76
Money market instruments................ (60) (8) 32 91 1
Receipts.............................. 5 16 44 12 1
Disbursements......................... 65 24 12 3 0
Monetary authorities.................. (6) (5) 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 6 5 0 0 0
</Table>
50
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
General government.................... 0 0 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 0 0 0 0 0
Banks................................. 0 0 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 0 0 0 0 0
Other sectors......................... (54) (3) 32 9 1
Receipts........................... 5 16 44 12 1
Disbursements...................... 59 19 12 3 0
Other investment income................. (811) (1,587) (1,209) (1,083) (372)
Receipts.............................. 774 946 477 317 91
Disbursements......................... 1,585 2,533 1,686 1,400 463
Monetary authorities.................. 135 184 (31) (45) (16)
Receipts........................... 313 472 232 116 33
Disbursements...................... 178 288 263 161 49
General government.................... (795) (1,462) (724) (621) (215)
Receipts........................... 0 0 0 0 0
Disbursements...................... 795 1,462 724 621 215
Banks................................. 187 161 (102) (120) (39)
Receipts........................... 382 397 206 144 48
Disbursements...................... 195 236 308 264 87
Other sectors......................... (338) (470) (352) (297) (102)
Receipts........................... 79 77 39 57 10
Disbursements...................... 417 547 391 354 112
</Table>
In 2001, the income account continued to record a surplus ($3.7 billion)
which was 14.1% higher than the 2000 surplus of $3.2 billion. The net outflow in
the investment income account declined by 16.7% to $2.4 billion as falling
global interest rates had a greater impact on investment income (particularly
interest income on placements in portfolio and other investments) than on
interest repayments. Disbursements mainly consisted of dividend repatriation and
interest payments on loans.
In 2002, the surplus in the income account increased by 24.0% from its $3.7
billion mark for 2001 to reach $4.5 billion. In 2002, the investment income
account yielded a net outflow of $2.6 billion, which represented an increase of
11.0% from the net outflow recorded in 2001, as interest payments on portfolio
and other investments fell with the continued drop in global interest rates.
Remittances from overseas Filipino workers amounted to $7.2 billion in
2002, an increase of 18.9% from 2001. The income account's recorded surplus of
$4.5 billion was propelled by the 2.6% rise in the number of overseas Filipino
workers, especially in the Middle East, Europe, and Asia. As the global economic
slowdown affects some of the countries where Filipinos are working, the
Government has intensified its marketing efforts to increase hiring of Filipinos
abroad.
In the first four months of 2003, the income account posted a net inflow of
$1.7 billion, a 13.1% increase from the same period in 2002.
51
Capital and Financial Account
The following discussion of the balance of payments for 2000 and 2001 does
not reflect recent revision to the Republic's balance of payments. In
particular, the discussion of balance of payments for 2001 compares only
previously reported 2001 and 2000 data. However, the discussion of the 2002 and
2003 balance of payments reflects all recent revisions.
Foreign Investments. The Philippines monitors investment flows into and
out of the country, keeping track of direct and portfolio investments by
non-residents in the Philippines and by Filipino residents abroad. Direct
investments are the category of international investment in which a resident
entity in one economy obtains a lasting interest in an enterprise resident in
another economy. A direct investment is established when a resident in one
economy owns 10% or more of the ordinary shares or voting power of an
incorporated enterprise or the equivalent of an unincorporated enterprise in
another economy. Portfolio investments include investments in equity and debt
securities, that is, bonds, notes and money market instruments, and financial
derivatives. The essential characteristic of instruments classified as portfolio
investments is that they can be traded.
The following table sets out the foreign investment flows into and out of
the Philippines by type for the periods indicated. Entries with "zero" balances
indicate either that there are no relevant transactions during the period or
that the Republic has not yet begun to track and record the relevant entry.
FOREIGN INVESTMENTS
<Table>
<Caption>
1999 2000 2001
-------- ------- -------
(IN MILLIONS)
Non-resident investments in the Philippines
Direct investments
Placements
New foreign investments in the Philippines........... $ 1,241 $ 1,207 $ 697
Reinvested earnings.................................. 534 579 488
Technical fees and others converted to equity........ 26 2 0
Bond conversions..................................... 0 0 0
Imports converted into investments................... 0 0 0
Others............................................... 0 0 0
Withdrawals(1)......................................... (122) (185) (69)
-------- ------- -------
Total direct investments.................................. $ 1,679 $ 1,603 $ 1,116
======== ======= =======
Portfolio investments
Placements............................................. 15,490 3,704 1,486
Withdrawals............................................ (14,080) (3,887) (1,103)
-------- ------- -------
Total portfolio investments............................... $ 1,410 $ (183) $ 383
======== ======= =======
Total non-resident investments in the Philippines(2)...... $ 3,089 $ 1,420 $ 1,499
======== ======= =======
</Table>
52
<Table>
<Caption>
1999 2000 2001
-------- ------- -------
(IN MILLIONS)
Less resident investments abroad
Direct investments
Placements
Residents' investments abroad........................ 63 46 33
Withdrawals.......................................... (108) (141) (195)
-------- ------- -------
Total direct investments.................................. $ (45) $ (95) $ (162)
======== ======= =======
Portfolio investments
Placements............................................. 788 1,866 4,080
Withdrawals............................................ (300) (1,417) (4,022)
-------- ------- -------
Total portfolio investments............................... $ 488 $ 449 $ 58
======== ======= =======
Other investments(3)...................................... 1,317 177 589
-------- ------- -------
Total resident investments abroad......................... 1,760 531 485
-------- ------- -------
Net foreign investment...................................... $ 1,329 $ 889 $ 771
======== ======= =======
</Table>
- ---------------
Source: Bangko Sentral.
(1) Non-resident withdrawals of direct investments include capital recovery
under the build-operate-transfer scheme.
(2) Excludes net flows arising from the trading of Philippine debt papers in the
secondary market abroad.
(3) Includes residents' deposits in banks abroad.
53
After the implementation of the BPM5 framework, the Financial Account is
now divided into three categories: direct investments, portfolio investments and
other investments. The following table sets out the Republic's direct
investments compiled in accordance with the BPM5 framework for the periods
indicated. Entries with "zero" balances indicate either that there are no
relevant transactions during the period or that the Republic has not yet begun
to track and record the relevant entry.
DIRECT INVESTMENTS
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Total direct investments..................... $ 608 $ 1,348 $ 1,142 $ 1,026 $ (39)
======= ======= ======= ======= =====
Assets: Residents' investments abroad........ (30) (107) (160) 86 23
Equity capital............................. (45) (95) (162) 77 23
Claims on affiliated enterprises........ (45) (95) (162) 77 23
Placements............................ 63 46 33 85 32
Withdrawals........................... 108 141 195 8 9
Liabilities to affiliated enterprises... 0 0 0 0 0
Reinvested earnings........................ 0 0 0 0 0
Other capital.............................. 15 (12) 2 8 0
Liabilities: Non-residents' investments in
the Philippines............................ 578 1,241 982 1,111 (16)
Equity capital............................. 1,145 1,024 628 945 33
Liabilities to direct investors......... 1,145 1,024 628 945 33
Placements............................ 1,267 1,209 697 995 74
Withdrawals........................... 122 185 69 50 41
Reinvested earnings........................ 534 579 (127) 120 0
Other capital........................... (1,101) (362) 481 46 (49)
Claims on direct investors.............. 0 0 0 0 0
Liabilities to direct investors............ (1,101) (362) 481 46 (49)
</Table>
- ---------------
Source: Bangko Sentral.
54
The following table sets out the Republic's portfolio investments compiled
in accordance with the BPM5 framework for the periods indicated. Entries with
"zero" balances indicate either that there are no relevant transactions during
the period or that the Republic has not yet begun to track and record the
relevant entry.
PORTFOLIO INVESTMENTS
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Total portfolio investments.................. $ 6,064 $ (113) $ 1,060 $ 1,912 $ 638
======= ======= ======= ======= =======
Assets: Residents' investments abroad........ 586 806 399 369 550
Equity securities.......................... 55 42 4 21 1
Placements.............................. 75 219 4 23 1
Withdrawals............................. 20 177 0 2 0
Debt securities............................ 531 764 395 348 549
Banks................................... 98 357 341 341 472
Other sectors........................... 433 407 54 7 77
Placements............................ 713 1,647 4,076 3,829 1,454
Withdrawals........................... 280 1,240 4,022 3,872 1,377
Money-market instruments................ 0 0 0 0 0
Liabilities: Non-residents' investments in
the Philippines............................ 6,650 693 1,449 2,281 1,188
Equity securities............................ 1,410 (183) 383 410 46
Placements................................. 15,490 3,704 1,486 1,381 219
Withdrawals................................ 14,080 3,887 1,103 971 173
Debt securities.............................. 5,240 876 1,066 1,071 1,142
Monetary authorities....................... 1,158 88 11 55 99
General Government......................... 2,912 2,223 950 999 848
Banks...................................... 0 0 239 368 (2)
Other sectors.............................. 1,170 (1,435) (134) 449 197
Money-market instruments..................... 0 0 0 0 0
Financial derivatives........................ 0 0 0 0 0
</Table>
- ---------------
Source: Bangko Sentral.
55
The following table sets out the country's other investments compiled in
accordance with the BPM5 framework for the periods indicated. Entries with
"zero" balances indicate either that there are no relevant transactions during
the period or that the Republic has not yet begun to track and record the
relevant entry.
OTHER INVESTMENTS
<Table>
<Caption>
FIRST FOUR
MONTHS
1999 2000 2001 2002 2003
------- ------- ------- ------- ----------
(IN MILLIONS)
Total other investments...................... $(8,467) $(7,742) $(3,260) $(5,023) (1,203)
======= ======= ======= ======= =======
Assets: Residents' investments abroad........ 18,647 15,311 13,898 13,214 3,615
Trade credits(1)........................... 16,381 17,401 13,774 12,880 3,758
Loans(2)................................... 262 (1,309) 830 346 (617)
Currency and deposits...................... 2,278 (757) (509) 218 322
Banks................................... 961 (934) (1,098) (490) (138)
Other sectors........................... 1,317 177 589 708 460
Other assets(3)............................ (274) (24) (197) (230) 152
Liabilities: Non-residents' investments in
the Philippines............................ 10,180 7,569 10,638 8,191 2,412
Trade credits(1)........................... 9,958 7,157 10,981 9,958 2,680
Loans...................................... 575 354 178 (225) (223)
Monetary authorities.................... 0 51 177 (40) 2
Drawings(4)........................... 0 105 117 118 133
Repayments(4)......................... 0 54 50 158 131
General Government...................... 340 (125) 16 (131) (22)
Drawings(4)........................... 1,465 933 931 870 320
Repayments(4)......................... 1,125 1,058 915 1,001 342
Banks(5)................................ 626 (250) (647) 920 (361)
Other sectors........................... (391) 678 692 (974) 158
Long-term............................. (494) 952 916 (780) (160)
Drawings........................... 2,610 2,428 3,142 1,030 614
Repayments......................... 3,104 1,476 2,226 1,810 774
Short-term............................ 103 (274) (224) (194) 318
Currency and deposits(6)................... (466) (120) 401 (1,637) (226)
Other Liabilities(7)....................... 113 178 (922) 95 181
</Table>
- ---------------
Source: Bangko Sentral.
(1) All trade credits are short-term credits in non-governmental sectors.
(2) All loans are short-term bank loans.
(3) All other assets are bank assets.
(4) Long-term loans.
(5) Short-term loans.
(6) All bank currency and deposits.
(7) All short-term bank liabilities.
56
The following discussion does not take into account the 2000, 2001 and 2002
revisions to the Balance of Payments.
Domestic macroeconomic policies and structural reforms have significantly
affected the flow of foreign investment into the Philippines. The Foreign
Investment Act of 1991, as amended, introduced a more favorable investment
environment to the Philippines. The act permits foreigners to own 100% of
Philippine enterprises, except in certain specified areas included in a
"negative list" with respect to which the Constitution or applicable statute
limits foreign ownership, generally to a maximum of 40% of the entreprise's
equity capital. The Constitution also prohibits foreign ownership in certain
sectors, such as the media.
In 1999, net investment inflows declined by 20.5% to $1.3 billion compared
to $1.6 billion in 1998. New foreign direct investments declined by 23.9% to
$1.2 billion, compared with $1.6 billion for 1998. In 1999, under the BPM5
framework, a net outflow of $1.8 billion was registered in the capital and
financial account due to the net outflow of $9.5 billion in the other investment
accounts. The continued inflows of direct and portfolio investments, on the
other hand, cushioned the impact of these outflows.
In 2000, under the BPM5 framework the net outflow in the financial account
reached $6.5 billion, an increase of 262.5% from the net outflow of $1.8 billion
recorded in 1999. However, sustained net inflows of both direct and portfolio
investments mitigated the contraction in the financial account. This developed
due to the net outflows posted in the portfolio and other investment accounts.
In 2001, the financial account registered a net outflow of $1.1 billion, a
83.6% decline from the net outflow of $6.5 million recorded in 2000. The direct
investment account posted a sustained net inflow, while the portfolio investment
account gained strength as it made a turnaround to a net inflow of $1.1 billion
in 2001. Meanwhile, the cumulative net outflow in the other investment account
of $3.3 billion was 57.9% lower than the $7.7 billion in 2001.
In 2002, the net outflow in the capital and financial account almost
doubled to $2.1 billion (including a net outflow of $19 million from the capital
account). The expansion of the net inflow in the portfolio investment account to
$1.9 billion from a net inflow of $1.1 billion in 2001 (due to success in the
capital markets of the government and GOCCs) dampened the negative impact of the
higher net outflow of other investment and the lower net inflow of direct
investments.
Non-residents' investments in the Philippines increased by 39.5% to $3.4
billion in 2002 due mainly to the investment of $544 million worth of shares by
a Japanese firm in the San Miguel Corporation, a domestic brewery company, in
March 2002. The remaining investment was directed to other manufacturing
companies, financial institutions, mining corporations and construction
companies.
Non-residents' direct investments in equity capital increased by 50.5% to
$945 million during 2002. The bulk of non-residents' equity investments came
from Japan, including the investment of $544 million in a local brewery company
in March 2002. Additional investments were directed to other manufacturing
companies, financial institutions, mining corporations and construction
companies. The major sources of direct investments were the US, the United
Kingdom, Singapore and Taiwan. Total direct investments for the first half of
2002 registered a net inflow of $726 million. The 46.7% drop from the same
period in 2001 was due mainly to repayments on intercompany loans, particularly
in June, and residents' placements of equity capital abroad.
In 2002, the portfolio investments account yielded a net inflow of $1.9
billion compared to the net inflow of $1.1 billion in 2001, due mainly to the
higher non-residents' investments in resident issued foreign-denominated debt
securities, particularly government-issued medium-term bonds. Meanwhile, net
inflows of non-residents' investments in equity securities rose slightly by 7.0%
to $410 million in 2002.
The net outflow in other investments increased by 54.1% to $5.0 billion in
2002. This developed mainly because of withdrawals by non-residents of their
maturing foreign currency deposits, as well as increased deposits abroad by
resident non-banks -- most of which were corporations involved in
build-operate-transfer schemes -- to fund their debt service and import
payments.
In the first four months of 2003, the net outflow in the capital and
financial account was $612 million, compared to a net inflow of $1.7 billion net
inflow in the first four months of 2002. This reversal was due to net
57
outflow of direct investment, increased net outflow of other investments and
decreased net inflow of portfolio investments, reflecting a weakened global
economy and the higher net repayment of loans.
Portfolio investments in the first four months of 2003 recorded a net
inflow of $638 million, representing a 66.8% decrease from the net inflow of
$1.9 billion in the same period in 2002. Non-residents' investments in both
equity and debt securities contracted during this period, due to investors'
concerns over geopolitical uncertainties.
The direct investment account posted a net outflow of $39 million in the
first four months of 2003, a reversal from the net inflow of $843 million in the
first four months of 2002. This substantial reversal was the result of a severe
drop in non-resident's investment in equity capital and a steep decline in new
capital during the first four months of 2003.
In the first four months of 2003 the other investment account posted a $1.2
billion net outflow, a 17.6% increase compared to the $1.0 billion outflow for
the same period in 2002. The larger net outflow resulted from the higher net
repayment of loans, particularly maturing borrowings and interbank placements,
as well as the withdrawal of foreign currency deposits from local banks.
Over the past few years, the Government has undertaken a number of programs
to encourage capital investment, including introducing build-operate-transfer
programs, reforming the legal regimes governing foreign investment and the
foreign exchange payment system and restructuring the tariff regime. In August
1995, the Government implemented a schedule of tariff reductions to correct
distortions caused by past policies. Rates will be reduced to 3% for raw
materials and to 10% for finished goods by 2003, and tariffs will be further
adjusted to a range from 0% to 5% by 2004. The Philippines also lifted
quantitative restrictions on all regulated agricultural products, except rice,
and replaced them with tariffs permitted under the Uruguay Round agreements.
The Philippines is also a member of the ASEAN Free Trade Area, which
provides for the gradual reduction to 5% or less or elimination of tariffs in
2003 on the trade of goods among ASEAN countries pursuant to a Common Effective
Preferential Tariff scheme. [update-has ROP opted out?] Currently, the
Philippines restricts imports of certain products only for reasons of health,
security, safety and environmental protection.
The Republic's Board of Investments coordinates with national agencies and
local Governments on investment policies and procedures and establishes and
administers annual investment priority plans to promote certain sectors of the
economy by providing special investment incentives to specific industries. The
Government's 2001 Investments Priorities Plan is working to alleviate poverty,
promote economic health, and improve business competitiveness in e-commerce.
In March 2000, the Retail Trade Liberalization Act was enacted. The law
aims to promote efficiency and competition among domestic industries and foreign
competitors and better service and lower prices for consumers. Prior to its
enactment, only citizens of the Philippines and corporations wholly-owned by
Filipino citizens could own a retail business in the Philippines. Under the law,
a foreigner is allowed to own 100% of a retail business in the Philippines
provided it makes an investment of at least $7.5 million in the Philippines. If
a foreigner makes an investment of between $2.5 million to $7.5 million, the
foreigner is allowed to own up to 60% of the retail business in the Philippines
for the first two years.
58
The following table sets out foreign investment in the Philippines
registered with Bangko Sentral by sector.
FOREIGN EQUITY INVESTMENTS REGISTERED
WITH BANGKO SENTRAL BY SECTOR
<Table>
<Caption>
FIRST FIVE
MONTHS
1998 1999 2000 2001 2002 2003
------ -------- -------- ------ -------- ----------
(IN MILLIONS)
Banks and other financial
institutions...................... $193.1 $ 258.3 $ 483.9 $476.4 $ 153.0 $ 64.6
Manufacturing....................... 245.5 1,049.1 171.7 262.9 943.1 105.1
Mining.............................. 161.2 27.3 239.5 66.2 114.6 0.0
Commerce and real estate............ 161.9 166.3 62.3 23.2 26.6 48.0
Services............................ 12.1 16.7 5.2 8.4 21.5 7.6
Public utilities.................... 67.9 552.5 423.5 20.6 131.8 0.3
Others(1)........................... 43.0 36.5 12.2 0.2 40.9 8.1
------ -------- -------- ------ -------- ------
Total investments................... $884.7 $2,106.7 $1,398.2 $857.8 $1,431.5 $233.7
====== ======== ======== ====== ======== ======
</Table>
- ---------------
Source: International Operations Department, Bangko Sentral.
(1) Includes construction and agriculture, fishery and forestry.
INTERNATIONAL RESERVES
The following table sets out the gross international reserves of Bangko
Sentral, compiled in a manner consistent with the revised balance of payments
framework and the treatment of IMF accounts in the monetary survey published in
the IMF's International Financial Statistics.
GROSS INTERNATIONAL RESERVES OF BANGKO SENTRAL
<Table>
<Caption>
AS OF DECEMBER 31,
-----------------------------------------------
1998(1) 1999(1) 2000(2) 2001 2002
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT MONTHS AND PERCENTAGES)
Gold(3)...................................... $ 1,569 $ 1,782 $ 1,973 $ 2,216 $ 3,036
SDRs......................................... 1 19 2 14 10
Foreign investments(4)....................... 8,738 12,881 12,371 12,786 13,570
Foreign exchange............................. 376 222 565 533 445
Reserve position in the IMF(5)............... 122 120 113 109 118
------- ------- ------- ------- -------
Total........................................ $10,806 $15,024 $15,024 $15,658 $16,180
======= ======= ======= ======= =======
Total as number of months of imports of goods
and services............................... 3.1 4.4 4.4 5.0 4.8
Total as a % of short-term debt
Original maturity.......................... 150.4% 261.5% 252.6% 258.9% 275.6%
Residual maturity.......................... 98.2 168.4 141.8 130.7 134.9
</Table>
- ---------------
Source: International Operations Department, Bangko Sentral.
(1) Represents official figures from Bangko Sentral's Treasury Department under
the old system, which did not treat monetary gold (that is, gold available
to monetary authorities for use in foreign exchange and other financial
transactions) under the swap arrangements as part of gross international
reserves.
(2) Beginning January 2000, a new system was adopted, revising the treatment of
monetary gold under swap arrangements, including it as part of gross
international reserves. For purposes of comparison with 2000 data, the
revised treatment of monetary gold (that is,
59
gold available to monetary authorities for use in foreign exchange and other
financial transactions) under the swap arrangements would have resulted in
an upward adjustment of the gross international reserves level as of
December 31, 1999 to $15,107 million.
(3) Of these amounts, 75.3% in 1998 and 83.3% in 1999 served as collateral for
gold-backed loans. Under the new accounting system adopted in 2000, 82.6% of
the amount as of December 31, 2000, 85.7% as of December 31, 2001, and 62.6%
as of December 31, 2002 served as collateral for gold-backed loans and gold
swap arrangements.
(4) Consists of time deposits, investments in securities issued or guaranteed by
government or international organizations and repurchase agreements.
(5) The reserve position in the IMF is an off-balance sheet item and is recorded
by Bangko Sentral's Treasury Department as a contingent asset with a
matching contingent liability.
The gross international reserves controlled by Bangko Sentral constitute
substantially all of the Philippines' official international reserves.
Bangko Sentral occasionally enters into options with respect to gold,
foreign exchange and foreign securities for purposes of managing yield or market
risk. It also enters into financial swap contracts to optimize yield on its gold
reserves.
In 1998, the Government took a number of steps to boost reserves, including
obtaining a $610 million one-year loan from a syndicate of mainly domestic banks
in September 1998 and drawing upon the $1.4 billion standby facility provided by
the IMF. The IMF disbursed $278 million under the stand-by facility in November
1998 and $133 million in December 1998. In 1998, the reserve level was also
increased by $500 million of foreign currency deposits with Bangko Sentral from
foreign banks, $492 million in net proceeds from the Republic's global bond
offering in April 1998, a $750 million club loan from a consortium of foreign
banks, $210 million in net foreign exchange purchases by Bangko Sentral and
increased investment inflows resulting from improvements in the currency
markets. However, foreign exchange outlays of $1.9 billion by the Government and
$532 million by Bangko Sentral used to service maturing foreign obligations
reduced reserve levels.
In 1999, gross international reserves increased significantly to reach
$15.0 billion as of the end of 1999, equivalent to 4.4 months of imports of
goods and payment of services and income. The increase in reserve level was due
to higher public sector borrowing, renewed private capital flows and stronger
external trade performance. Among other reasons, the reserve level was increased
by the Republic's $1.2 billion global bond offerings in January and February
1999, $350 million eurobond offering in March 1999, $292 million global bond
offering in October 1999 and $400 million re-opening of its 2019 bonds in
December 1999. Further, the IMF disbursed $130 million under the stand-by
facility in March 1999 and $214 million in July 1999. In June 1999, the Republic
refinanced the $610 million syndicated loan facility it obtained in 1998 with
three-year fixed and floating rate notes and, in December 1999, the Republic
completed a $260 million eurobond offering to partially refinance the $610
million one-year loan.
In January 2000, Bangko Sentral revised its method of accounting for
international reserves at the recommendation of the IMF. Under the previous
accounting system, a gold swap transaction was treated as a sale of gold which
reduced the amount of gold holdings. Under the revised system, a gold swap
transaction is treated as a loan transaction collateralized by gold that remains
a part of the international reserves. In addition, under the revised system, the
accrued interest payable on Bangko Sentral's short-term liabilities is netted
out of gross international reserves when calculating net international reserves,
reducing the level of net international reserves.
As of December 31, 2000, gross international reserves stood at $15.0
billion, equivalent to 4.4 months of imports of goods and payment of services
and income. Major sources of foreign exchange inflows in 2000 were the
Republic's $1.6 billion Yankee bond offering in March, a $500 million Bangko
Sentral syndicated loan in April, a Y35 billion Samurai bond offering and a $400
million syndicated loan in October, a $200 million private placement of
Yen-denominated eurobonds in November and a $200 million private placement of
eurobonds in December. These inflows were partially offset by a decline in
portfolio investments by non-residents from their 1999 levels. As of December
31, 2000, net international reserves totalled $11.3 billion, compared to $11.8
billion as of December 31, 1999 (after adjustment for the BPM5 framework).
60
As of December 31, 2001, gross international reserves rose to $15.7
billion. The increase in gross international reserves during the year 2001 was
attributed mainly to foreign exchange inflows arising from various foreign loans
and bond flotations. The various loans and bond flotations include, among
others, the Republic's $199 million Floating Rate Notes due 2004; the Republic's
$100 million Facility Loan Agreement; the Republic's $220 million cross currency
swap; the Republic's $119 million Treasury Bills to pre-fund the Government's
2002 requirements; the Asian Development Bank ("ADB") Non-Bank Financial Program
Loan of $75 million; the ADB Power Sector Loan of $100 million; the Republic's
$444 million Fixed Rate Bonds due 2006; the Republic's Shibosai $365 million
Fixed Rate Guaranteed Bonds due 2011; Bangko Sentral's $740 million 3-year Term
Loan Facility; Bangko Sentral's $200 million Floating Rate Notes due 2003;
Bangko Sentral's $550 million 9% Notes due 2005 and Bangko Sentral's $700
million loan from other foreign financial institutions. The impact of these
inflows was partly mitigated by the servicing of foreign exchange requirements
of the Government and Bangko Sentral. Net international reserves totaled $11.4
billion as of December 31, 2001.
The Bangko Sentral's gross international reserves rose to $16.2 billion as
of December 31, 2002. This was a 3.3% increase as compared to the level at the
end of December 2001 of $15.7 billion. The increase in gross international
reserves during the period was due mainly to foreign exchange inflows in the
form of net deposits by the Treasury. However, these were partly offset by
outflows to meet the foreign exchange requirements of Bangko Sentral and the
Republic. At December 31, 2002, Bangko Sentral's gross international reserves
were adequate to cover 4.7 months' worth of imports of goods and payment of
services and income. The level of reserves was 2.9 times the amount of the
country's short-term external debt based on original maturity or, alternatively,
1.4 times the amount of short-term external debt based on residual maturity. In
2002, the majority of reserves consisted of foreign investments (77.7%), while
the balance consisted of gold (18.8%), foreign exchange (2.8%), and combined
SDRs and reserve position in the IMF (0.7%). Reserves (other than gold) were
held in the following foreign currencies: US dollars (92.0%), Japanese yen
(3.7%), pounds sterling (1.7%) and the balance (2.6%) in other foreign
currencies.
Bangko Sentral's gross international reserves were $16.1 billion at the end
of July 2003, slightly less than $16.2 billion as of December 31, 2002. The
end-July level is equivalent to 4.5 months of imports of goods and payments of
services and income and was 1.3 times the amount of short-term external
obligations of the Republic, based on residual maturity or 2.6 times the amount
of short-term external debt of the Republic based on original maturity.
Net international reserves, as defined by Bangko Sentral, excludes from
gross international reserves both short-term foreign exchange liabilities and
IMF credits. Bangko Sentral's net international reserves stood at $12.8 billion
as of July 31, 2003, the same level as of December 31, 2002.
The preceding figures were not affected by the revised import data reported
by the inter-agency task force on the balance of payments. See "Balance of
Payments -- Recent Revisions".
MONETARY SYSTEM
MONETARY POLICY. In 1993, the Government established Bangko Sentral, the
Republic's central bank, pursuant to the New Central Bank Act. Bangko Sentral
replaced the old Central Bank of the Philippines, which had incurred substantial
deficits in connection with:
- quasi-fiscal activities, including entering into foreign exchange forward
cover contracts and swaps with certain banks and Government corporations
and assuming the foreign exchange liabilities of certain Government and
private corporations during the Philippines' foreign exchange crisis in
the early 1980s;
- development banking and financing; and
- open market operations financed by the issuance of domestic securities at
high interest rates.
Bangko Sentral functions as an independent central monetary authority
responsible for policies in the areas of money, banking and credit, as
authorized under the New Central Bank Act. The New Central Bank
61
Act prohibits Bangko Sentral from engaging in quasi-fiscal activities,
commercial banking or development banking or financing. Additionally, Bangko
Sentral does not engage in any commercial banking activities.
Bangko Sentral's primary objectives are to maintain price stability,
monetary stability and the convertibility of the peso. To achieve its price
stability objective, Bangko Sentral undertakes monetary management mainly
through adjustments to policy rates and the conduct of open market operations,
including the purchase and sale of Government securities, rediscounting
transactions and adjustments in reserve requirements.
Bangko Sentral's functions include:
- conducting monetary policy;
- issuing the national currency;
- managing foreign currency reserves;
- acting as depository for the Government, its political subdivisions and
instrumentalities and Government owned corporations; and
- regulating banks and quasi-banks in the Philippines.
The Government owns all of the capital stock of Bangko Sentral. A seven
member Monetary Board, comprised of Bangko Sentral's Governor, a member of the
Cabinet designated by the President and five full-time private sector
representatives, governs Bangko Sentral. The President appoints each of the
seven Monetary Board members, except the Cabinet representative, to six-year
terms.
Philippine law requires Bangko Sentral to maintain a net positive foreign
asset position. As of 2002, Bangko Sentral had total assets of P1,231 billion,
of which international reserves accounted for P855.3 billion. Bangko Sentral's
remaining assets consist mainly of foreign exchange receivables, loans and
advances and Government securities, and its liabilities consist mainly of
deposits of financial institutions, the Government and Government-owned
corporations and foreign liabilities in the form of loans and bonds payable.
MONEY SUPPLY. The following table presents certain information regarding
the Philippines' money supply:
MONEY SUPPLY
<Table>
<Caption>
AS OF DECEMBER 31,
----------------------------------------------------
1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
(IN BILLIONS OF PESOS, EXCEPT FOR PERCENTAGES)
M1(2)
Currency in circulation.................... P146.1 P218.5 P192.3 P194.7 P220.0
Current account deposits................... 135.4 175.6 194.7 193.3 250.0
-------- -------- -------- -------- --------
Total...................................... 281.5 394.1 387.0 388.0 470.1
percentage increase...................... 9.0% 40% (1.8)% 0.3% 21.2%
M2(3)...................................... P1,138.4 P1,357.9 P1,423.2 P1,521.1 P1,666.3
percentage increase...................... 8.0% 19.3% 4.8% 6.9% 9.5%
M3(4)...................................... P1,144.6 P1,365.1 P1,427.0 P1,525.0 P1,669.7
percentage increase...................... 7.4% 19.3% 4.6% 6.8% 9.5%
</Table>
- ---------------
Source: Bangko Sentral, Department of Economic Research.
(1) Preliminary.
(2) Consists of currency in circulation and demand deposits.
(3) Consists of M1, savings deposits and time deposits.
(4) Consists of M2 and deposit substitutes.
62
The Republic's money supply, as measured by domestic liquidity, was P1.7
trillion as of June 30, 2003, a 6.2% increase from June 30, 2002. This rate of
growth in money supply was lower than the 9.5% growth from December 31, 2001 to
December 31, 2002. The decrease in growth through June 2003 was attributed to
the continuing effects of the increase in the liquidity reserve requirement for
banks, the removal of the tiering scheme on banks' placements under the Bangko
Sentral's Reverse Repurchase Facility, and a shift in deposits from peso
accounts to foreign currency accounts.
The following table presents information regarding domestic interest and
deposit rates.
DOMESTIC INTEREST AND DEPOSIT RATES
<Table>
<Caption>
FIRST SIX
MONTHS
1998 1999 2000 2001 2002 2003
----- ----- ----- ----- ----- ----------
(WEIGHTED AVERAGES IN PERCENTAGES PER PERIOD)
91-day Treasury bill rates......................... 15.3 10.2 9.9 9.9 5.4 6.1
90-day Manila Reference rate(1).................... 13.8 10.1 8.8 10.1 6.4 7.3
Bank average lending rates(2)...................... 18.4 11.8 10.9 12.4 8.9 9.4
</Table>
- ---------------
Source: Bangko Sentral, Department of Economic Research.
(1) Based on promissory notes and time deposit transactions of sample commercial
banks.
(2) Starting in January 2002, monthly rates reflect the annual percentage
equivalent of all commercial banks' actual monthly interest income on
peso-denominated loans to the total outstanding levels of their
peso-denominated demand/time loans, bills discounted, mortgage contract
receivables and restructured loans.
In 1998, Bangko Sentral sought to mitigate the effects of the 1997 Asian
financial crisis and avoid potential corporate bankruptcies by encouraging
reductions in bank lending rates. Bangko Sentral approved certain policies to
ease liquidity in 1998, including the opening of a 30-day lending window, the
opening of a swap window for banks without Government securities holdings, a
reduction in the statutory reserve requirement from 13% to 10% and the purchase
of Government securities at market prices. Even with these measures in place,
the average 91-day Treasury bill rate in 1998 was 15.3%, compared to 13.1% in
1997, and the average bank lending rate in 1998 was 18.4%, compared to 16.2% in
1997.
In 1999, as Asian economies recovered more fully from the 1997 financial
crisis, Bangko Sentral adopted measures to reduce inflation and lower interest
rates. In particular, Bangko Sentral decreased the liquidity reserve requirement
from 5% to 4% in April 1999 in order to lower bank intermediation costs and
thereby reduce the banks' domestic lending rates. As the inflation rate eased
from 11.5% in January 1999 to 6.7% for the full-year 1999, Bangko Sentral
gradually reduced its overnight borrowing rate from 13.375% at the start of the
year to 8.75% at the end of the year, and reduced its overnight lending rate
from 15.375% at the start of the year to 12.0% at the end of the year. This was
followed by a reduction in bank lending rates, from an average of 18.4% in 1998
to an average of 11.8% in 1999. Also, with the slowdown in inflation and the
decline in interest rates, demand for government securities increased
significantly. The 91-day Treasury bill rate declined steadily from 13.2% in
January to 8.4% in August, before rising again to 8.9% in December amid
uncertainty over potential Y2K disruption.
In 2000, Bangko Sentral sought to encourage price stability in the face of
threats to the Philippine economy, including a growing fiscal deficit, political
uncertainty related to the impeachment trial of former president Estrada,
renewed fighting with rebel groups and instability in oil prices. The average
inflation rate in 2000 declined to 4.4% from the 1999 average rate of 6.7%;
however, inflation rose in the second half of 2000 to reach 6.7% in December
2000, largely because of a sharp decline in the value of the peso and the
tightened monetary policy of the US Federal Reserve. To help contain inflation,
Bangko Sentral reduced the overnight borrowing rate and the overnight lending
rate (the "policy rates") by a total of 635 basis points from May to October
2000. In October 2000, Bangko Sentral also increased banks' liquidity reserve
requirements by 4 percentage points to curb speculation in the foreign exchange
market. As a result of these tightening moves, the average 91-day Treasury bill
rate rose from 8.9% in January to 15.8% in November. The temporary
63
tightening measures also helped to slow the growth in the inflation rate and
stabilize the foreign exchange market. In December 2000, Bangko Sentral began a
gradual easing of the monetary policy stance by reducing the overnight rates by
a total of 150 basis points. This induced a decline in interest rates, with the
91-day Treasury bill rate falling to 13.6% in December 2000.
In the first part of 2001, Bangko Sentral policy generally accommodated the
gradual slowdown in inflation while also seeking to ensure adequate liquidity.
From January to May 2001, Bangko Sentral reduced policy rates by a total of 450
basis points. These rates remained unchanged from May 18 to October 4, 2001. In
July and August 2001, Bangko Sentral raised banks' liquidity reserve requirement
from 7% to 11%, and also reduced, from $10,000 to $5,000, the amount of US
currency an individual could buy over-the-counter from banks without
documentation. The measures were intended to siphon excess liquidity in the
economy that could lead to higher inflation or be used to speculate on the peso.
In another measure to help ease pressure on the peso, the tiering system on
banks' overnight placements with Bangko Sentral (initially adopted in June 2000)
was temporarily removed in August 2001.
In the months following the terrorist attacks of September 11, 2001, the
Bangko Sentral made no major changes to monetary policy, but continued to
encourage bank lending and economic growth. In November 2001, the tiering
structure for banks' overnight placements with Bangko Sentral was put back into
place, and in December 2001, the rates under the tiering structure were modified
to 7.75% for placements of up to P5 billion, 5.75% for the next P5 billion, and
3.75% for placements in excess of P10 billion. Bangko Sentral further reduced
policy rates in the fourth quarter of 2001, resulting in a cumulative reduction
of 575 basis points from December 2000. The reduction in policy rates in
December was accompanied by a two percentage point reduction in banks' liquidity
reserve requirements intended to encourage a further reduction in market
interest rates. At the end of 2001, the overnight borrowing rates and lending
rates stood at 7.75% and 10.0%, respectively. Also, by December 2001, the 91-day
Treasury bill rate had declined to a monthly average of 8.9% from a monthly
average of 13.6% in December 2000.
During the first three months of 2002, Bangko Sentral reduced policy rates
a total of 75 basis points to 7.0% and 9.25% for the overnight borrowing and
lending rates, respectively. These were the lowest levels in Bangko Sentral's
policy rates in 10 years. In January 2002, Bangko Sentral also reduced the
liquidity reserve requirement by 2 percentage points to 7.0%, a move which
restored liquidity reserves to their pre-July 2001 level. In March 2002, the
tiered rates for banks' overnight placements with Bangko Sentral were lowered to
7.0% for placements of up to P5 billion, 4.0% for the next P5 billion, and 1.0%
for placements in excess of P10 billion. To induce banks to channel the
additional liquidity into lending for productive activities, the tiering scheme
was also modified to cover placements in special deposit accounts.
During the last nine months of 2002, Bangko Sentral kept policy rates
unchanged. Although the inflation rate declined to its lowest level since 1987,
monetary authorities recognized inflationary risks stemming from the
Government's increased fiscal deficit and instability in the Middle East. At the
end of 2002, the overnight borrowing and lending rates remained unchanged from
March 2002 at 7.0% and 9.25%, respectively. By December 2002, the 91-day
Treasury bill rate had declined further to an average of 5.2% from an average of
8.9% in December 2001.
In 2003, Bangko Sentral has pursued a monetary policy based on inflation
rather than on foreign exchange rates. Inflation rates in 2003 have so far
remained well below the Government's target of 4.5-5.5%. On March 17, 2003, in a
measure intended to increase liquidity in the credit markets, Bangko Sentral
approved guidelines that would allow local banks to issue US-dollar denominated
unsecured subordinated debt, in addition to such debt denominated in pesos. On
July 2, 2003, Bangko Sentral lowered its policy rates by 25 basis points to
their lowest levels since 1992. At the same time, the tiered rates for banks'
overnight placements with Bangko Sentral were lowered to 6.75% for placements of
up to P5 billion, 3.75% for the next P5 billion, and 0.75% for placements in
excess of P10 billion. The overnight borrowing and lending rates currently stand
at 6.75% and 9.0%, respectively.
With the resolution of major military action in Iraq and a
lower-than-expected Government fiscal deficit, the Monetary Board expects
inflation to remain stable for the rest of 2003. Despite recent instability in
the financial markets caused by the military incident on July 27, 2003, the
Monetary Board expects that the
64
incident will have a minimal effect on output and inflation. See "Recent
Political Developments -- Military Incident in Manila".
Overall, the benchmark 91-day Treasury bill rate declined from an average
of 15.3% in 1998 to 10.2% in 1999, 9.9% in 2000, 9.9% in 2001, and 5.4% in 2002.
As of August 18, 2003, the 91-day Treasury bill rate had further declined to
5.2%.
Commercial bank lending rates also eased steadily over the past four years,
from an average range of 18.1-21.5% in 1998, to 12.6-16.0% in 1999, 12.9-15.6%
in 2000, 13.7-15.3% in 2001, and 8.7-10.4% in 2002. In June 2003, commercial
bank lending rates ranged from 9.0% to 10.8%.
FOREIGN EXCHANGE SYSTEM. The Republic maintains a floating exchange rate
system under which market forces determine the exchange rate for the peso.
Bangko Sentral may, however, intervene in the market to maintain orderly market
conditions and limit sharp fluctuations in the exchange rate.
The following table sets out exchange rate information between the Peso and
the US dollar.
EXCHANGE RATES OF PESO PER US DOLLAR
<Table>
<Caption>
PERIOD PERIOD
YEAR END AVERAGE(1)
- ---- ------ ----------
1998........................................................ 39.059 40.893
1999........................................................ 40.313 39.089
2000........................................................ 49.998 44.194
2001........................................................ 51.789 50.993
2002........................................................ 53.096 51.604
</Table>
- ---------------
Source: Reference Exchange Rate Bulletin, Treasury Department, Bangko Sentral.
(1) The average of the monthly average exchange rates for each month of the
applicable period.
Foreign exchange may be freely sold and purchased outside the banking
system and deposited in foreign currency accounts. Both residents and
non-residents may maintain foreign currency deposit accounts with authorized
banks in the Philippines, and residents may maintain deposits abroad without
restriction.
Payments related to foreign loans registered with Bangko Sentral and
foreign investments approved by or registered with Bangko Sentral may be
serviced with foreign exchange purchased from authorized agent banks. Bangko
Sentral must approve and register all outgoing investments by residents
exceeding $6 million per investor per year if the funds will be sourced from the
banking system. For a discussion of Bangko Sentral's loan approval regime, see
"-- The Philippine Financial System -- Foreign Currency Loans."
While the Government imposes no currency requirements for outgoing
payments, all exchange proceeds from exports, services and investments must be
obtained in any of 22 prescribed currencies. Authorized agent banks may convert
the acceptable currencies to pesos.
Individual or corporate non-residents may open peso bank accounts without
Bangko Sentral's approval. The export or electronic transfer out of the
Philippines of peso amounts exceeding P10,000 requires prior authorization from
Bangko Sentral.
The value of the peso relative to the US dollar and other foreign
currencies declined substantially in 1997 and early 1998. Bangko Sentral
initially responded to the peso depreciation in July 1997 by increasing its
sales of US dollars and raising interest rates. When sales of pesos remained
stronger than expected, Bangko Sentral allowed the peso to float on July 11,
1997. The value of the peso then declined over time, reaching a low of P45.42
per US dollar on January 8, 1998. As the Government implemented various monetary
and fiscal policies to curb speculation and restore confidence in the economy,
the peso began to strengthen. On December 31, 1998, Bangko Sentral's reference
exchange rate was P39.06 per US dollar and on December 31, 1999, the exchange
rate was P40.31 per US dollar.
65
In 2000, the peso's value declined significantly. For the first four months
of 2000, the peso-dollar rate was relatively stable, averaging P40.78 per US
dollar. However, the exchange rate began to exhibit volatility starting in
mid-May and exceeded P45.00 per US dollar on July 27, 2000. It reached a record
average low of P51.68 per US dollar in November 2000. The peso recovered briefly
in November, bringing the rate up to P49.39 per US dollar on November 29, 2000.
This trend, however, was not sustained as the peso depreciated to an average of
P49.99 per US dollar by the end of 2000. The weakness of the peso in 2000 was
attributed mainly to the rise in US interest rates, concerns over the rising
fiscal deficit, the conflict in Mindanao, and the ensuing political
uncertainties surrounding the impeachment trial of former President Estrada.
The peso depreciated further in 2001. From P50.00 per US dollar at
end-2000, transitory shocks caused the peso to reach a low of P55.01 per US
dollar on January 19, 2001. The peso strengthened thereafter and was relatively
stable for most of February and March. From early April, however, the peso
traded in the P50-P51 per US dollar range. The pressure on the peso again
intensified starting late June until the first week of August, but the peso
subsequently appreciated to an average of P51.25 per US dollar in September,
from an average of P53.22 per US dollar in July. The peso weakened again
starting the second week of October before appreciating towards the latter part
of December as market conditions stabilized. Overall, during 2001 the peso
depreciated by 13.8% compared to the average peso-dollar exchange rate for 2000.
The fluctuations in the peso-dollar rate during 2001 were caused by the
political crisis involving the impeachment proceedings of the former President
the economic slowdown in the US and in Japan and heightened uncertainty after
the September 11 terrorist attacks in the United States.
Since reaching P49.48 per US dollar on May 20, 2002, the peso has steadily
depreciated. The peso declined in value from a monthly average of P53.52 per US
dollar in December 2002 to a monthly average of P53.40 per US dollar in June
2003, then depreciated further to an intraday low of P55.47 per US dollar on
August 25, 2003. The intraday low of August 25, 2003 was the lowest the peso had
fallen relative to the US dollar since January 17, 2001, when it reached its
all-time intraday low of P55.75 per US dollar. The decline in the peso has
accelerated since the end of July 2003 due to several recent political
developments in the Philippines. These political events include the July 27
military incident in Manila, the Court of Appeals' order to suspend Bangko
Sentral Governor Rafael Buenaventura and other central bank officials for one
year, and money laundering accusations by a senator against Jose Miguel Arroyo,
the husband of president Arroyo. See "Recent Developments". These events,
combined with high seasonal US dollar demand and the general strength of the US
dollar in the currency markets, have pushed the peso to historical lows.
On March 13, 2003, in a measure intended to reduce currency speculation,
Bangko Sentral reduced the amount of US dollars that banks are allowed to buy in
the currency spot market. In particular, Bangko Sentral lowered the amount of US
dollars that a bank could purchase above clients' requirements to $5 million or
2.5% of the bank's unimpaired capital, whichever is lower. This
"overbought-limit" had previously been set at the lesser of $10 million or 5% of
the bank's unimpaired capital. In March 2003, Bangko Sentral also limited to six
months the duration of forward contracts to cover long-term currency
requirements; however, Bangko Sentral continues to encourage the use of forward
currency contracts as insurance against currency fluctuations and as an
alternative to the direct purchase of foreign currency in the market.
Since the measures taken in March 2003, Bangko Sentral has not intervened
in the currency markets to support the peso against the US dollar. Although
Bangko Sentral closely monitors the currency markets, its current policy is to
let the market determine the peso/US dollar exchange rate, absent market
movements related to speculation. However, if there is a sharp fluctuation in
exchange rates, Bangko Sentral reserves the right to take measures to stabilize
the value of the peso.
STABILIZATION OF THE PESO. Since it allowed the peso to move within a
wider range on July 11, 1997, Bangko Sentral has intervened minimally in the
foreign exchange market. It has, however, adopted measures
66
related to foreign exchange trading aimed to reduce currency speculation and
combat money laundering. These measures include:
- requiring prior approval of Bangko Sentral to sell non-deliverable
forward contracts to non-residents (Bangko Sentral believes that
speculators used non-deliverable forward contracts to increase
artificially the demand for foreign currency);
- reducing banks' permitted long or overbought foreign exchange position to
the lower of $5 million or 2.5% of unimpaired capital (the accompanying
20% limit on banks' short or oversold foreign exchange position has been
lifted, subject to periodic review by Bangko Sentral, to increase the
foreign exchange available in the market);
- limiting the types of forward contracts that can be used as deductions
when valuing a bank's overbought foreign exchange position;
- requiring banks to consolidate their foreign exchange accounts with those
of their subsidiaries when calculating net open foreign exchange
positions;
- decreasing the maximum amount of foreign exchange that banks can sell
over-the-counter on an undocumented basis to $5,000 from $10,000;
- prohibiting banks from extending peso loans to non-residents; and
- requiring banks to periodically report significant foreign exchange
purchases and sales. See "-- The Philippine Financial System -- Structure
of the Financial System."
In addition, in 1997, Bangko Sentral introduced the currency risk
protection program, which is a hedging facility provided by Bangko Sentral
through commercial banks and universal banks under which eligible borrowers may
borrow to hedge their unmatured foreign exchange liabilities. On the maturity of
a forward contract, the difference between the contract rate and the market rate
is settled and paid in pesos. This reduces banks' foreign exchange exposure and
generally reduces demand for foreign currency in the spot market. In early 1998,
as a part of the program, Bangko Sentral expanded oil companies' access to
commercial bank funds by permitting them to borrow foreign currencies, in
addition to obtaining loans and advances, to pay for their non-crude and
non-refined imports and to meet their short-term working capital requirements.
In January 2000, Bangko Sentral imposed a 90-day minimum holding period for
foreign investments placed in peso time deposits with Philippine banks to
tighten its monitoring of the foreign exchange market and discourage the inflow
of short-term speculative funds. The holding period applies only to peso time
deposits and not to other investments such as equities, government securities or
commercial paper. Peso time deposits that are terminated within the 90-day
period will not be converted by Philippine banks to foreign currency, but may be
transferred to other peso-denominated investments.
In October 2000, Bangko Sentral introduced guidelines on the foreign
exchange trading activities for foreign exchange corporations or corporations
that are subsidiaries or affiliates of banks, quasi-banks or non-bank
intermediaries. Under the guidelines, foreign exchange corporations must
document aggregate sales of foreign exchange of more than $10,000 to Philippine
residents. Bangko Sentral also increased the minimum paid-in capital for foreign
exchange corporations to P50 million. In October 2000, Bangko Sentral also
expressly prohibited banks from engaging in engineered swap transactions because
Bangko Sentral believes these transactions contributed to the volatility of the
peso-US dollar exchange rate during 2000.
In 2001 and 2002, Bangko Sentral implemented the following measures to
address dollar speculation and exchange rate volatility:
- in August 2001, it expanded the eligibility rules of the currency risk
protection program to include registered foreign currency-denominated
bonds and foreign currency deposit loans with remaining tenors up to five
years or with original maturities up to one year; US dollar trust
receipts; foreign currency import bills and customers' liabilities under
acceptances; and trade transactions of clients other than oil companies.
The coverage of the currency risk protection program was further expanded
67
in September 2001 to include registered short-term trade-related
borrowings of oil companies from offshore banking units and offshore
banks;
- it reduced the ceiling on undocumented over-the-counter sales of foreign
exchange to $5,000 to prevent abuse through the splitting of foreign
exchange sales;
- it increased fines and imposed non-monetary sanctions for violations of
foreign exchange rules; and
- it required effective from January 1, 2002, any person who brings into or
out of the Philippines foreign currency valued at more than $10,000 to
document the source and purpose of the transport of such currency.
THE PHILIPPINE FINANCIAL SYSTEM
COMPOSITION. The following table sets out the total assets of the
Philippine financial system by category of financial institution.
TOTAL ASSETS OF THE FINANCIAL SYSTEM(1)
<Table>
<Caption>
AS OF
AS OF DECEMBER 31, MAY 31,
---------------------------------------------------- --------
1998 1999 2000 2001 2002(2) 2003(2)
-------- -------- -------- -------- -------- --------
(IN BILLIONS)
Banks
Commercial banks............... P2,512.2 P2,722.3 P3,013.6 P3,070.5 P3,250.2 P3,255.6
Thrift banks................... 216.4 223.5 245.8 259.0 261.9 261.2
Rural banks.................... 60.0 61.9 67.4 73.8 83.5 85.5
-------- -------- -------- -------- -------- --------
Total banks................. 2,788.6 3,007.7 3,326.8 3,403.3 3,595.6 3,602.3
-------- -------- -------- -------- -------- --------
Non-bank financial
institutions................ 656.2 733.6 773.8 691.3 730.2 729.7
-------- -------- -------- -------- -------- --------
Total assets................ P3,444.8 P3,741.3 P4,100.6 P4,094.6 P4,325.8 P4,322.0
======== ======== ======== ======== ======== ========
</Table>
- ---------------
Source: Bangko Sentral
(1) Excludes assets of Bangko Sentral.
(2) Provisional.
The Philippine financial system consists of banks and non-bank financial
institutions. Banks include all financial institutions that lend funds obtained
from the public primarily through the receipt of deposits. Non-banks include
financial institutions other than banks which lend, invest or place funds, or at
which evidences of indebtedness or equity are deposited with or acquired by
them, either for their own account or for the account of others. Non-bank
financial institutions may have quasi-banking functions. Quasi-banking functions
include borrowing money to relend or purchase receivables and other obligations
by issuing, endorsing or accepting debt or other instruments or by entering into
repurchase agreements with 20 or more lenders at any one time.
The Supervision and Examination Sector of Bangko Sentral supervises all
banks and non-banks with quasi-banking functions, including their subsidiaries
and affiliates engaged in related activities, with Bangko Sentral's Monetary
Board having ultimate supervisory authority.
STRUCTURE OF THE FINANCIAL SYSTEM. The Philippine financial system is
comprised of commercial banks, thrift banks, rural banks, specialized Government
banks and non-bank financial institutions. Each type of bank participates in
distinct business activities and geographic markets.
Commercial banks:
- accept drafts;
- issue letters of credit, promissory notes, drafts, bills of exchange and
other evidences of indebtedness;
68
- receive deposits;
- buy and sell foreign exchange and gold and silver bullion; and
- lend money on a secured or unsecured basis.
Expanded commercial banks, otherwise known as universal banks, in addition
to regular commercial banking activities, may also engage in investment banking
activities, invest in non-bank businesses and own allied financial undertakings
other than commercial banks. As of December 31, 2002, the country had 42
commercial banks, with 4,223 branch offices.
The following table sets out the outstanding loans of commercial banks
classified by sector.
COMMERCIAL BANKS' OUTSTANDING LOANS BY SECTOR
<Table>
<Caption>
AS OF DECEMBER 31,
-------------------------------------------------------------------------
1998 1999 2000 2001
------------------ ------------------ ------------------ ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
Agriculture, fishery and
forestry....................... P62,930 4.7% P58,859 4.3% P62,101 4.3% P56,823
Mining and quarrying............ 20,048 1.5 16,466 1.2 21,166 1.5 19,890
Manufacturing................... 357,455 26.5 382,267 28.2 404,224 27.8 372,906
Electricity, gas and water...... 47,284 3.5 53,274 3.9 75,398 5.2 70,359
Construction.................... 54,972 4.1 53,384 4.0 46,949 3.2 42,151
Wholesale and retail............ 210,191 15.6 203,177 15.0 201,233 13.9 210,306
Transportation, storage and
communication.................. 98,636 7.3 91,024 6.7 99,653 6.9 83,068
Financial institutions, real
estate and business services... 347,339 25.7 342,673 25.3 386,797 26.6 359,199
Community, social and personal
services....................... 149,336 11.1 153,104 11.3 153,983 10.6 184,534
---------- ----- ---------- ----- ---------- ----- ----------
Total.......................... P1,348,191 100.0% P1,354,228 100.0% P1,451,504 100.0% P1,399,236
========== ===== ========== ===== ========== ===== ==========
<Caption>
AS OF
AS OF DECEMBER 31, JUNE 30,
-------------------------- ------------------
2001 2002 2003
----- ------------------ ------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
Agriculture, fishery and
forestry....................... 4.1% P72,428 5.1% P77,548 5.4%
Mining and quarrying............ 1.4 14,448 1.0 14,760 1.0
Manufacturing................... 26.7 379,404 26.5 375,041 26.0
Electricity, gas and water...... 5.0 71,372 5.0 69,194 4.8
Construction.................... 3.0 35,390 2.5 34,944 2.4
Wholesale and retail............ 15.0 206,215 14.4 201,924 14.0
Transportation, storage and
communication.................. 5.9 71,947 5.0 73,835 5.1
Financial institutions, real
estate and business services... 25.7 380,739 26.6 386,813 26.8
Community, social and personal
services....................... 13.2 200,719 14.0 209,459 14.5
----- ---------- ----- ---------- -----
Total.......................... 100.0% P1,432,663 100.0% P1,443,518 100.0%
===== ========== ===== ========== =====
</Table>
- ---------------
Source: Bangko Sentral.
Thrift banks invest their capital and the savings of depositors in:
- financings for homebuilding and home development;
- marketable debt securities;
- commercial paper and accounts receivable, drafts, bills of exchange,
acceptances or notes arising out of commercial transactions; or
- short-term working capital and medium and long-term loans to small and
medium-sized businesses and individuals engaged in agriculture, services,
industry, housing and other financial and allied services in its market.
As of December 31, 2002, the country had 94 thrift banks, with 1,184 branch
offices. Aggregate assets of the banking system increased by 25.2% from the end
of 1997 to the end of 2002.
Rural banks extend credit in the rural areas on reasonable terms to meet
the normal credit needs of farmers, fishermen, cooperatives and merchants and,
in general, the people in the rural communities. As of December 31, 2002, the
country had 776 rural banks, with 1,135 branch offices.
The specialized Government banks are the Development Bank of the
Philippines, the Land Bank of the Philippines and the Al-Amanah Islamic
Investment Bank of the Philippines. The Development Bank generally provides
banking services to meet the medium and long-term needs of small and
medium-sized agricultural and industrial enterprises, particularly in rural
areas. The Land Bank primarily provides financial
69
support for agriculture and all phases of the Republic's agrarian reform
program. The Development Bank and the Land Bank may also operate as universal
banks. The Al-Amanah Islamic Investment Bank promotes the development of the
Autonomous Region of Muslim Mindanao by offering banking, financing and
investment services based on Islamic banking principles and rulings.
Non-bank financial institutions are primarily long-term financing
institutions though they also to a minor extent, facilitate short-term
placements in other financial institutions. As of March 31, 2003, Bangko Sentral
regulated or supervised 28 investment houses, 32 finance companies, 18 security
dealers/brokers, 5,241 pawnshops, 10 investment companies, six lending
investors, 85 non-stock savings and loan associations, seven venture capital
corporations, two Government non-bank financial institutions and eight credit
companies.
The minimum bank capitalization requirements as of the end of 2002 is P4.95
billion for universal banks, P2.4 billion for commercial banks and P325 million
for thrift banks based in Metro Manila (P52 million for thrift banks based
outside of Metro Manila).
The economic downturn affected banks in the Philippines primarily in two
ways. First, slow growth in bank deposits limited the ability of banks to extend
new loans. Second, the depreciation of the peso, declining equity prices and
higher domestic interest rates weakened the assets of Philippine banks. This
caused many relatively small financial institutions to fail and created concerns
about the stability of the Philippine financial system.
70
The following table provides information regarding non-performing loans for
the banking system for the periods indicated.
TOTAL LOANS (GROSS) AND NON-PERFORMING LOANS BY TYPE
OF COMMERCIAL BANKS
<Table>
<Caption>
AS OF
AS OF DECEMBER 31, MAY 31,
---------------------------------------------------- --------
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
(IN BILLIONS, EXCEPT PERCENTAGES)
Expanded commercial banks(1)
Total loans......................... P1,080.1 P1,086.1 P1,025.0 P 992.2 P1,041.9 P1,063.8
Total non-performing loans.......... 112.4 141.6 172.4 192.6 188.0 190.8
Ratio of non-performing loans to
total loans...................... 10.4% 13.0% 16.8% 19.4% 17.3% 17.9%
Non-expanded commercial banks(2)
Total loans......................... 120.8 139.7 184.3 182.7 155.8 160.8
Total non-performing loans.......... 16.5 23.0 32.4 41.7 26.9 28.9
Ratio of non-performing loans to
total loans...................... 13.6% 16.4% 17.6% 22.8% 17.2% 18.0%
Government banks(3)
Total loans......................... 185.9 201.0 222.4 200.3 192.6 228.0
Total non-performing loans.......... 18.8 25.4 33.5 35.7 30.3 30.3
Ratio of non-performing loans to
total loans...................... 10.1% 12.6% 15.1% 17.8% 15.7% 13.3%
Foreign banks(4)
Total loans......................... 155.7 156.2 196.5 249.9 249.0 215.4
Total non-performing loans.......... 12.2 5.4 7.5 11.9 7.9 7.0
Ratio of non-performing loans to
total loans...................... 7.9% 3.5% 3.8% 4.8% 3.2% 3.3%
Total loans........................... P1,542.5 P1,582.9 P1,628.2 P1,625.1 P1,639.4 P1,667.9
Total non-performing loans............ 160.0 195.4 245.8 281.9 245.1 257.0
Ratio of non-performing loans to total
loans............................... 10.4% 12.3% 15.1% 17.4% 15.0% 15.4%
</Table>
- ---------------
Source: Bangko Sentral, Department of Economic Research/Supervisory Reports and
Studies Office.
(1) Includes ING Bank (foreign bank) and excludes Land Bank of the Philippines
and Development Bank of the Philippines. In May 2001, three expanded
commercial banks (Standard Chartered Bank, HSBC and ING Bank) were
reclassified as foreign banks.
(2) Excludes Orient Bank.
(3) Consists of Land Bank, Development Bank and Al-Amanah Islamic Investment
Bank.
(4) Consists of 13 foreign banks; excludes three foreign bank subsidiaries.
The rise in NPLs weighed down on the asset quality of banks in 2001. The
commercial banking system's NPLs as a percent of total loans rose from 15.1% in
December 2000 to 17.4% in December 2001. This weakening resulted from the
depreciation of the peso, which contributed to a rise in loan defaults, and the
slowdown in business activity that saw a drop in credit demand. Also, in late
2000 and early 2001, Bangko Sentral extended P30 billion in emergency loans to
Equitable PCI and P25 billion in emergency loans to Philippine National Bank to
help the banks alleviate short-term liquidity problems attributed to heavy
withdrawals during the Estrada impeachment trial.
As of December 31, 2002, the ratio of non-performing loans to total loans
in the commercial banking system stood at 15.0%, lower than the 17.4% as of
December 31, 2001. The improvement in the NPL ratio
71
from the previous year was due in part to a redefinition of "non-performing
loan" which took effect September 19, 2002 (the redefinition allows banks to
exclude from "non-performing loans" uncollectable or worthless loans that have
been fully covered by allowance for probable losses); however, even under the
previous definition of "non-performing loan," the NPL ratio at the end of
December 2002 would have decreased during the year to 15.8%. The yearly decrease
in the NPL ratio was also attributed to increased foreclosure, restructuring
proceedings, and generally improving performance of the commercial banking
sector.
As of May 31, 2003, the ratio of non-performing loans to total loans in the
commercial banking system stood at 15.4%, higher than the 15.0% ratio as of
December 31, 2002 but still an improvement over the 18.4% ratio recorded at the
end of May 2002. The recent increase in the NPL ratio was attributed to a rise
in uncollectable loans combined with a contraction in commercial banks' total
loan portfolio. The improvement in the NPL ratio since the end of May 2002 was
due in part to the redefinition of "non-performing loan" which took effect
September 19, 2002. The decrease in the non-performing loan ratio was also
attributed to increased foreclosure, restructuring proceedings, and generally
improving performance of the commercial banking sector. The non-performing loans
coverage ratio (loan reserves to non-performing loans) decreased to 50.3% at the
end of May 2003 from 50.6% at the end of April 2003 but declined from 44.4% at
the end of May 2002.
In December 2002, Congress approved the Special Purpose Vehicle ("SPV") Act
of 2002. The SPV Act provides the legal framework for the creation of private
asset management companies that are expected to relieve a major portion of the
banking system's non-perfoming assets and thereby promote bank lending to
support economic growth. President Arroyo signed the bill into law on January
10, 2003. The SPV Act's implementing rules and regulations took effect on April
12, 2003. On June 26, 2003, the Monetary Board of Bangko Sentral approved
accounting guidelines allowing the staggered booking of losses from the
discounted sales of non-performing assets to SPVs to spread their losses over a
maximum period of seven years, provided that the banks fully disclose any
deviations from generally accepted accounting practices in connections with such
sales.
The recent passage of the Special Purpose Vehicle Act is expected to
further reduce the NPL ratio.
After the Asian economic crisis, Bangko Sentral adopted new measures to
protect the soundness of the country's banks. Generally, these reforms aimed to
reduce risks in the financial system, strengthen regulatory oversight, and bring
domestic banking standards closer to international best practices. The major
reforms, and subsequent modifications through 1999, are described below.
- Limits on a bank's transactional capacity. Bangko Sentral generally
limited a bank's real estate loans to no more than 20% of a bank's loan
portfolio, increased required collateral for individual real estate loans
and increased required liquidity cover on foreign exchange liabilities.
- Increased minimum capital requirements. Bangko Sentral gradually raised
minimum capital requirements for universal banks, commercial banks and
thrift banks, and increased penalties for non-compliance.
- Stricter treatment of delinquent and restructured loans. After the Asian
financial crisis, Bangko Sentral reduced the period that a loan had to be
overdue to qualify as non-performing. In 1999, to align its regulations
with international standards, Bangko Sentral redefined non-performing
loans (with respect to those payable as a lump sum or in quarterly,
semi-annual or annual installments) as loans for which principal or
interest is 30 days past due. Moreover, Bangko Sentral tightened the
criteria for reclassifying restructured loans as performing.
- Increased provisions for potential loan losses. In 1997, Bangko Sentral
mandated provisions for loan losses based generally on a bank's gross
loan portfolio in addition to provisions for probable losses linked to
loans classified as sub-standard. In 1999, however, to encourage greater
bank lending, Bangko Sentral relaxed the general loan loss provisioning
requirement so that it would not apply to newly granted loans. The
specific loan loss provisioning requirements remain in effect.
72
- Improved corporate governance. To increase transparency, Bangko Sentral
expanded required bank disclosures regarding interest rates, capital
adequacy, non-performing loans and provisions for probable losses, and
also mandated mark-to-market accounting on banks' transaction portfolios.
Additional regulations aimed to improve bank management by expanding the
duties of boards of directors, appointing compliance officers for each
bank, and requiring external auditors of banks to report materially
adverse information to Bangko Sentral.
- Improved bank restructuring. To avoid bank closures, Bangko Sentral
adopted strategies to encourage rehabilitation of troubled bank assets as
well as mergers or consolidations with healthy financial institutions.
- Limits on the establishment of new banks. In response to the Asian
financial crisis, Bangko Sentral issued new regulations that required new
banks to maintain suitable stockholders, adequate financial strength, an
appropriate legal structure and qualified management. In 1999, to further
encourage a stronger financial sector, Bangko Sentral put in place a
general moratorium on the establishment of new banks. The Monetary Board
has indicated that the moratorium (with certain exceptions including
consolidations and acquisitions) is to remain in place through 2003.
The General Banking Law of 2000, which amended the General Banking Act,
enhanced Bangko Sentral's supervisory and enforcement powers and liberalized
foreign ownership of banks. In particular, the General Banking Law reforms
included the formal adoption of Basel risk-based capital requirements, a legal
basis for consolidated supervision, stronger safeguards against insider loans,
enhanced disclosure requirements and increases in monetary penalties. The
General Banking Law of 2000, however, repealed the Philippine Deposit Insurance
Corporation's independent right to conduct on-site supervision and require
information from banks.
In December 2001, to encourage bank lending, Bangko Sentral lowered
required loan loss provisions from 2% to 1% of the outstanding balance of
unclassified loans other than restructured loans (less loans considered
"non-risk" under existing regulations); however, the bank also imposed a 5%
reserve on the outstanding balance of unclassified restructured loans (less
loans considered "non-risk" under existing regulations).
As part of the global fight against money laundering, Bangko Sentral has,
since July 2000, required banks to report unusually large transactions and all
unusual patterns of transactions which have no apparent lawful purpose. In July
2001, Bangko Sentral also reduced the ceiling on undocumented over-the-counter
sales of foreign exchange from $10,000 to $5,000. Additionally, pursuant to the
Anti-Money Laundering Act of 2001 (the "AMLA"), Bangko Sentral has issued
several administrative measures that require banks to document or report details
of large or suspicious foreign exchange transactions, including the parties
involved and the sources of transferred funds. These measures were intended to
bring the Republic's money laundering regulations closer to international
standards.
On March 7, 2003, President Arroyo signed into law amendments to the
Anti-Money Laundering Act of 2001 ("AMLA") that are intended to comply with the
demands of the Financial Action Task Force ("FATF"). The FATF, established by
the Organisation for Economic Cooperation and Development to combat money
laundering, is backed by most of the world's industrialized nations.
The amendments lowered the threshold amount for bank transactions
automatically subject to reporting requirements from P4 million to P500,000. The
amendments also expanded the definition of "suspicious transactions" that are,
regardless of amount, subject to the scrutiny of the Anti-Money Laundering
Council ("AMLC"), the agency charged with enforcing the law. However, under the
amended law, a court order will be required for the AMLC to examine suspicious
transactions or freeze bank accounts other than those suspected to be related to
terrorism, kidnapping, hijacking, and drug trafficking. The new law remains
silent on whether it will apply retroactively, leaving the courts to decide
whether regulators may scrutinize suspicious transactions made before the
original act's passage in 2001. The implementing rules and regulations of the
AMLA were approved by a bicameral Congressional committee in August 2003.
The Government believes that the money-laundering law, as amended, conforms
to FATF requirements. However, the FATF must still review the amended law,
evaluate its implementing rules and regulations, and
73
monitor its enforcement against international standards before it removes the
Philippines from its "noncooperative" list and rules out the possibility of
sanctions. The Government has indicated that this approval process could take
one to two years.
Foreign Currency Loans
Bangko Sentral imposes a combination of prior approval, registration and
reporting requirements on all non-peso denominated loans. The regime is as
follows:
<Table>
<Caption>
TYPE OF LOAN REGULATORY REQUIREMENT
- ------------ ----------------------
Private sector loans: Prior approval, subsequent registration and
- guaranteed by a public sector entity or a reporting requirements.
local commercial bank;
- granted by foreign currency deposit units that
are specifically or directly funded from, or
collateralized by, offshore loans or deposits;
- obtained by banks and financial institutions with
a term exceeding one year which will be relent to
public and private enterprises; or
- serviced using foreign exchange purchased from
the banking system, unless specifically exempted
from the approval requirement.
Private sector loans which are specifically exempted Subsequent registration and reporting
and which will be serviced with foreign exchange requirements.
purchased in the banking system.
All private sector loans to be serviced with foreign Reporting requirements.
exchange not purchased from the banking system.
Public sector offshore loans except: Prior approval and reporting requirements.
- short-term foreign currency deposit loans for
trade financing; and
- short-term interbank borrowings
</Table>
THE PHILIPPINE SECURITIES MARKETS
HISTORY AND DEVELOPMENT. The securities industry in the Philippines began
with the opening of the Manila Stock Exchange in 1927. In 1936, the Government
established the Securities and Exchange Commission (the "SEC") to oversee the
industry and protect investors. Subsequently, the Makati Stock Exchange opened
in 1963 and merged with the Manila Stock Exchange to form the Philippine Stock
Exchange in 1994.
On June 29, 1998, the SEC granted the Philippine Stock Exchange
self-regulatory organization status, empowering it to supervise and discipline
its members, including by examining a member's books of account and conducting
audits.
To broaden the range of securities eligible for listing, the Philippine
Stock Exchange established a board for small- and medium-sized enterprises with
an authorized capital of P20 million to P99.9 million of which at least 85% must
be subscribed and fully paid. The Philippine Stock Exchange intends to
eventually list debt securities and equity derivatives as well.
On July 19, 2000, the Securities Regulation Code of 1999 was signed into
law. The code:
- shifted the focus of securities regulation from a merit-based system to a
disclosure-based system;
- strengthened the anti-fraud provisions of the securities laws;
- utilized self-regulatory organizations to protect investors;
74
- updated securities regulations to be more consistent with international
practices; and
- strengthened the SEC's rule-making and corporate reorganization powers.
As of June 10, 2002, the Philippine Stock Exchange had 151 local and 33
foreign members and 236 listed companies.
Due to the effects of the 1997 Asian financial crisis, in 1998 the
Philippine Stock Exchange Composite Index was quite volatile and continued to
fall, reaching an historic low of 1,082.2 on September 11, 1998.
The stock market rebounded in late 1999, as the Philippine Stock Exchange
Composite Index reached 2,143.0 at the end of December 1999, a 8.9% increase
from its level at the end of December 1998. The recovery, however, was
short-lived as the Philippine Stock Exchange Composite Index contracted for
three consecutive quarters in 2000, declining 31.1% for the first nine months
due to political turmoil, weakening economic fundamentals and a stock market
manipulation scandal involving BW Resources Corporation, a publicly traded
company, and Mr. Dante Tan, its largest shareholder. The stock market's overall
capitalization grew 33% in 2000. As of December 31, 2000, overall capitalization
was approximately P2.5 trillion, compared to P1.9 trillion as of December 31,
1999 and P1.4 trillion as of December 31, 1998. As a percentage of GNP, market
capitalization declined from 86.4% in 1999 to 77.6% by the end of 2000. The
Philippine Stock Exchange Composite Index closed at 1,494.5 on December 31,
2000.
On June 20, 2001, the Philippine Stock Exchange announced that the SEC had
approved its proposal for its demutualization, or conversion from a mutual or
membership organization into a publicly-held stock corporation. Under the
demutualization, the Exchange created a new corporation which assumed
approximately 80% of the Exchange's total assets. Exchange member broker-dealers
surrendered membership rights to the Exchange and, in return, received shares of
the new corporation, shares of the Exchange and trading rights. On July 20,
2001, the Philippine Stock Exchange approved the plan to demutualize the stock
exchange. On August 8, 2001, the Philippine Stock Exchange completed its
conversion to a stock corporation that is publicly held. As its first
shareholders, each of the 184 member-brokers subscribed and fully paid for
50,000 shares. The second part of the demutualization, the public offering and
listing of its shares on the Exchange, is still under planning.
The Philippine Stock Exchange Composite Index reached 1,168.08 at the end
of December 2001, a 21.8% decrease from its level at the end of December 2000.
The yearly decline was caused in large part by the September 11 terrorist
attacks on the United States, the US-led military operations in Afghanistan,
uncertainties about the prospects of the global economy due to the subsequent
threat of war and recession and apprehensions over the Philippine economic and
political environment.
In 2002, the composite index rose to a high of 1,452.51 on February 20, but
then decreased to 1,018.4 at the end of December 2002. The higher budget
deficit, concerns of a global economic slowdown, increased crime and
kidnappings, the accounting scandals that affected certain large corporations in
the US and the proposed partial sale by First Pacific Company Limited of its
24.4% controlling stake in the Philippine Long Distance Telephone Company to the
Gokongwei Group contributed to a decline in the composite index in 2002.
From its close of 1,018.4 at the end of December 2002, the Philippine Stock
Exchange composite index had risen to 1,283.80 on July 25, 2003. The resolution
of the war in Iraq, higher than expected growth of the Philippine economy in the
first quarter of 2003 and improved revenue collection by the Government
contributed to the recent rise in the composite index in the first half of 2003.
However, in the week following the military incident in Manila on July 27, 2003,
the Philippine Stock Exchange composite index declined by 3.8% to close at
1235.30 on August 1, 2003. As of August 21, 2003, the Philippine Stock Exchange
composite index had partially recovered to 1245.34. It is unclear whether or not
the incident will have a long-term effect on the Philippine stock markets.
GOVERNMENT SECURITIES MARKET. The Government securities market is
dominated by short-term Treasury bills with maturities not exceeding one year.
Responding to investor preferences and to create a yield curve for long-term
domestic securities, the Government issued securities with longer maturities,
including
75
five-year fixed rate treasury bonds in June 1995 and seven and ten-year fixed
rate treasury bonds in 1996. The restructuring of the Republic's domestic debt
in favor of longer-term securities kept the issuance of Treasury bills of P17.9
billion below budget in 1996, while the issuance of fixed rate Treasury bonds
exceeded expectations by P13.5 billion. In 1997, the Government sold, for the
first time, 20-year Treasury bonds in the amount of P2 billion. The Government's
outstanding direct domestic debt totalled P1,471.2 billion as of December 31,
2002, an increase of 72.9% from P850.9 billion as of December 31, 1998.
INTERNATIONAL BOND MARKET. In February 1997, Bangko Sentral approved
guidelines governing the issuance of peso-denominated bonds in the international
capital markets. Bangko Sentral will require the receipt of foreign currency by
the Philippines and its exchange into pesos in the local banking system.
PUBLIC FINANCE
THE CONSOLIDATED FINANCIAL POSITION. The consolidated public sector
financial position measures the overall financial standing of the Republic's
public sector. It is comprised of the public sector borrowing requirement and
the aggregate deficit or surplus of the Social Security System and the
Government Service Insurance System, Bangko Sentral, the Government financial
institutions and the local Government units. The public sector borrowing
requirement reflects the aggregate deficit or surplus of the Government, the
Central Bank-Board of Liquidator's accounts, the Oil Price Stabilization Fund
and the 14 monitored Government owned corporations.
The following table sets out the consolidated financial position on a cash
basis for the periods indicated.
CONSOLIDATED PUBLIC SECTOR FINANCIAL POSITION OF THE REPUBLIC
<Table>
<Caption>
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
(IN BILLIONS, EXCEPT PERCENTAGES)
Public sector borrowing requirement:
National Government........................ P (50.0) P(111.7) P(134.2) P(147.0) P(210.7)
Central Bank-Board of Liquidation.......... (26.4) (20.5) (19.1) (23.5) (15.1)
Oil Price Stabilization Fund(1)............ 0.7 1.9 0.3 0.8 0.0
Monitored Government owned corporations.... (38.0) (4.6) (19.2) (24.5) (46.4)
Government transfers to Government owned
corporations............................ 0.9 3.0 4.2 4.5 3.9
Other adjustments.......................... 1.5 (6.1) (6.6) 0.0 0.0
------- ------- ------- ------- -------
Total public sector borrowing
requirement........................... P(111.3) P(138.0) P(174.6) P(187.0) P(268.3)
------- ------- ------- ------- -------
As a percentage of GNP....................... (4.0)% (4.4)% (5.0)% (5.1)% (4.8)%
Other public sector:
Social Security System and Government
Service Insurance System................ P 17.8 P 36.4 P 15.5 P 9.3 P 25.6
Bangko Sentral(2).......................... 3.2 (4.0) 0.2 (0.1) 4.2
Government financial institutions.......... 5.4 3.3 2.8 3.9 5.4
Local Government units..................... 2.0 3.2 3.8 4.2 3.4
Timing adjustment of interest payments to
Bangko Sentral.......................... (0.3) (2.3) 0.5 (0.2) (1.6)
Other adjustments.......................... 0.0 0.8 0.1 0.1 0.0
------- ------- ------- ------- -------
Total other public sector............... 28.1 37.5 22.9 17.2 37.0
------- ------- ------- ------- -------
Consolidated public sector financial
position.............................. P (83.2) P(100.5) P(151.7) P(147.6) P(231.3)
======= ======= ======= ======= =======
As a percentage of GNP....................... (3.0)% (3.2)% (4.3)% (4.5)% (4.3)%
</Table>
76
- ---------------
Source: Fiscal Policy and Planning Office, Department of Finance.
(1) The Oil Price Stabilization Fund was created by the Government to stabilize
the domestic price of oil products. Prior to deregulation in 1997, if
exchange rates and international crude oil prices exceeded certain levels,
oil companies received money from the fund, but if exchange rates and crude
oil prices fell below those levels, oil companies contributed to the fund.
The fund was technically abolished with the full deregulation of the oil
industry in February 1998.
(2) Amounts are net of interest rebates, dividends and other amounts remitted to
the Government and the Central Bank-Board of Liquidation.
For 1998, the consolidated financial position recorded a deficit of P83.2
billion, or 3.0% of GNP at current prices, because of the increased public
sector borrowing requirement to finance higher deficits incurred by the
Government and the Government owned corporations. Costs relating to the
restructuring of the old Central Bank contributed P26.4 billion to the deficit.
For 1999, the consolidated financial position recorded a deficit of P100.5
billion, or 3.2% of GNP at current market prices, compared to a deficit of P83.2
billion in 1998. The Government's position was P15.2 billion off its target of
P85.3 billion for the year. The Government accounted for P111.7 billion of the
total deficit for the period, in line with its objective of stimulating the
economy. Restructuring costs for the old Central Bank also contributed P20.5
billion to the total public sector borrowing requirement.
Led by the Government deficit, the consolidated financial position deficit
increased to P151.7 billion in 2000 or 4.3% of GNP at current market prices,
compared with the previous year's deficit of P100.5 billion. The consolidated
public sector deficit was largely due to a public sector borrowing requirement
of P174.6 billion, which included P19.1 billion for costs relating to the
restructuring of the old Central Bank and the P19.2 billion deficit of the 14
monitored non-financial Government corporations. The Government owned
corporations' budget gap deteriorated from the single-digit deficit posted in
1999 as both current and capital expenditures increased. The greatest
contributors to the deficit were the Philippine National Oil Company, the
National Power Corporation, the Light Rail Transit Authority, the National
Development Corporation and the National Food Authority. The other public sector
entities had a combined surplus of P22.9 billion in 2000, largely due to the
substantial surpluses of the local government units and the social security
institutions such as the Government Services and Insurance System and Social
Security System.
For 2001, the consolidated financial position recorded a deficit of P147.6
billion or 4.5% of GDP at current market prices. The Government accounted for
P147.0 billion of the deficit, the Central Bank restructuring accounted for
P23.5 billion and the monitored Government-owned corporations accounted for
P24.5 billion. The other public sector entities had a combined surplus of P17.2
billion during 2001, of which P9.3 billion was attributable to the social
security institutions.
For 2002, the consolidated financial position of the Republic recorded a
deficit of P231.3 billion. The Government recorded a P210.7 billion deficit, the
Central Bank restructuring accounted for an additional P15.1 billion deficit,
and the monitored Government-owned corporations accounted for a P46.4 billion
deficit. The total public sector borrowing requirement of P268.3 billion was
offset in part by a combined surplus of P37.0 billion for the other public
sector entities during 2002. Of the surplus, P25.6 billion was attributable to
the social security institutions.
77
GOVERNMENT REVENUES AND EXPENDITURES. The following table sets out
Government revenues and expenditures for the periods indicated.
GOVERNMENT REVENUES AND EXPENDITURES
<Table>
<Caption>
ACTUAL BUDGET
---------------------------------------------- -----------------
1998 1999 2000 2001 2002 2001(1) 2002
------ ------- ------- ------- ------- ------- -------
(IN BILLIONS, EXCEPT PERCENTAGES)
REVENUES
Tax revenues
Bureau of Internal Revenue...................... P337.2 P 341.3 P 360.8 P 388.7 P 394.5 P 388.1 P 447.6
Bureau of Customs............................... 76.0 86.5 95.0 96.2 96.3 105.1 115.1
Others(2)....................................... 3.4 3.9 4.2 4.9 5.6 5.7 8.6
------ ------- ------- ------- ------- ------- -------
Total tax revenues............................ 416.6 431.7 460.0 489.8 496.4 498.9 571.3
As a percentage of GNP...................... 14.9% 13.9% 13.2% 13.3% 12.3 13.0% 13.7%
Non-tax revenues
Bureau of the Treasury income(3)................ P 22.5 P 26.2 P 30.8 P 46.4 P 47.2 P 24.9 P 22.2
Fees and other charges(4)....................... 21.0 16.0 17.9 24.3 21.9 23.2 25.6
Privatizations(5)............................... 1.7 4.2 4.6 1.2 0.6 10.0 5.0
Comprehensive Agrarian Reform Program (land
acquisition and credit)....................... 0.0 0.2 0.1 0.0 0.0 0.0 0.0
Foreign grants.................................... 0.4 0.3 1.4 2.0 1.1 1.2 0.3
------ ------- ------- ------- ------- ------- -------
Total non-tax revenues........................ 45.5 46.5 53.4 71.9 70.8 59.3 53.0
------ ------- ------- ------- ------- ------- -------
Total revenues.............................. 462.5 478.5 514.8 563.7 576.1 558.2 624.3
------ ------- ------- ------- ------- ------- -------
As a percentage of GNP.................... 16.6% 15.2% 14.7% 15.3% 14.3% 14.5% 15.0%
EXPENDITURES
Personnel......................................... P172.9 P 167.0 P 182.7 P 190.9 N/A(6) N/A(6) P 251.3
Maintenance and operating expense................. 118.3 141.6 149.3 155.6 N/A(6) N/A(6) 80.8
Other current operating expense................... 0.2 5.5 3.6 0 N/A(6) N/A(6) N/A(6)
Interest payments
Foreign......................................... 26.3 31.3 47.3 62.2 65.9 63.2 64.0
Domestic........................................ 73.5 75.0 93.6 112.6 120.0 116.2 140.3
------ ------- ------- ------- ------- ------- -------
Total interest payments....................... 99.8 106.3 140.9 174.8 185.9 179.4 204.3
Subsidies to Government corporation............... 4.7 6.8 9.1 9.4 7.6 N/A(6) 5.0
Allotment to local government units............... 72.0 96.4 100.0 118.2 140.5(7) N/A(6) 103.9
Transfers to the Oil Price Stabilization Fund..... 0.0 0.7 0.0 0.0 N/A(6) N/A(6) 28.6
Comprehensive Agrarian Reform Program (land
acquisition and credit)......................... 0.5 0.0 2.3 0.0 N/A(6) N/A(6) 5.6
Infrastructure and other capital outlays.......... 43.5 61.2 60.4 57.4 N/A(6) 101.0 67.8
Equity and net lending............................ 1.1 4.7 3.2 4.4 5.4 4.1 7.1
------ ------- ------- ------- ------- ------- -------
Total expenditures.............................. 512.5 590.2 649.0 710.8 777.9 703.2 754.3
------ ------- ------- ------- ------- ------- -------
As a percentage of GNP........................ 18.4% 18.8% 18.5% 18.6% 18.4% 18.3% 18.0%
Surplus/(Deficit)................................. P(50.0) P(111.7) P(134.2) P(147.0) P(210.7) P(145.0) P(130.0)
FINANCING
Domestic financing.............................. P 37.6 P 28.9 P 55.5 P 124.1 P 101.6 P 118.7 P 79.0
Net domestic borrowings....................... 76.5 98.8 119.5 152.3 155.0 165.2 63.3
Non-budgetary accounts........................ (56.0) 32.6 (57.6) (50.4) (55.1) (24.3) 15.1
Use of cash balances.......................... 17.1 37.4 (6.5) 22.2 (1.7) 22.2 N/A(6)
Foreign financing............................... 12.3 82.8 78.8 22.9 109.1 26.3 0.7
------ ------- ------- ------- ------- ------- -------
Total financing............................. P 50.0 P 111.7 P 134.2 P 147.0 P 214.9 P 145.0 P 130.0
====== ======= ======= ======= ======= ======= =======
</Table>
- ---------------
Source: Department of Finance; Department of Budget and Management.
(1) Revised as of July 17, 2001.
(2) Represents tax revenues of the Department of Environment and Natural
Resources, Bureau of Immigration and Deportation, Land Transportation Office
and other Government entities.
78
(3) Represents interest on deposits, interest on advances to Government owned
corporations, interest on securities, dividends from Government owned
corporations, earnings received from the Philippine Amusement and Gaming
Corporation, earnings and terminal fees received from Ninoy Aquino
International Airport, guarantee fees and others.
(4) Represents receipts from the Land Transportation Office, Department of
Foreign Affairs and other Government agencies.
(5) Represents remittances to the National Government from the sale of interests
in Government owned corporations, Government financial institutions and
other Government-owned assets and from the sale of assets by the
Presidential Commission on Good Government and the Asset Privatization
Trust.
(6) N/A means "not available."
(7) Includes capital transfers to local government units.
RECENT RESULTS
In the first seven months of 2003, Government revenues were P358.2 billion
and expenditures were P453.6 billion, resulting in a deficit of P95.4 billion.
The seven-month deficit was 27.6% lower than the P131.8 billion deficit reported
for the first seven months of 2002. Of the P358.2 billion in revenues for the
first seven months of 2003, P243.0 billion came from the Bureau of Internal
Revenue, P62.2 billion from the Bureau of Customs, P30.4 billion from the Bureau
of the Treasury, and P22.6 billion from other agencies. The P453.6 billion in
expenditures in the first seven months of 2003 included P157.3 billion for
personnel, P129.7 billion for interest payments, and P59.3 billion for capital
outlays.
REVENUES
Sources. The Government derives its revenues from both tax and non-tax
sources. The main sources of revenue include income tax, value added tax and
customs duties. The main sources of non-tax revenue consist of interest on
deposits, amounts earned from Government owned corporations and privatization
receipts.
In 1995 the Ramos Government submitted the Comprehensive Tax Reform Package
for Congressional action. The objective of the proposal was to establish a
simple, broad-based and efficient tax system, with minimal scope for discretion
on the part of Government officials, that would provide a self-sustaining
revenue base that would keep pace with the budgetary needs of a growing economy.
The comprehensive tax reform package was enacted in 1997 and provides a
three-tiered excise tax on cigarettes and converts beer taxation from ad valorem
to specific excise taxes. The comprehensive tax reform package also restructured
and simplified the tax rates for business and professional income, reduced the
corporate income tax rate, and reformed certain elements of tax administration.
The Government expanded the coverage of the value-added tax system in 1996
and 1997 to include Government contracts and suppliers, telecommunication
services, road freight and other transportation, real property, restaurants and
caterers, hotels and motels, and broadcasting. The expansions in coverage raised
P6.7 billion out of total value-added tax revenues of P40.9 billion in 1996,
P6.4 billion out of total value-added tax revenues of P47.3 billion in 1997 and
P0.2 billion out of total value-added tax revenues of P47.5 billion in 1998.
Total value-added tax revenues amounted to P55.2 billion for 1999 and P55.3
billion for 2000.
Since 2001, the Bureau of Internal Revenue has implemented the following
tax administration improvements:
- resolution of delinquent accounts or disputed assessments which are
either being litigated in the courts or being challenged by taxpayers;
- use of electronic documentary stamp metering machines to accurately
assess and monitor documentary stamp taxes;
- broadening the tax base to increase the number of registered taxpayers;
- issuance of revenue regulations regarding automobiles which are subject
to excise tax; and
- implementing a ceiling on deductible representation expenses as mandated
by the Tax Code of 1997.
Beginning January 1, 2003, the 10% value-added tax ("VAT") on services
rendered by banks, non-bank financial intermediaries and finance companies is
being implemented by the BIR in lieu of the 5% tax on gross
79
receipts to which these entities were previously subject. The VAT is due on
financial intermediation services, financial leasing, net foreign exchange
gains, net trading gains, certain real estate sales and sales of other
properties acquired through foreclosure, sales of goods and properties and all
other income derived by banks and non-bank financial intermediaries.
However, the DOF has asked President Arroyo to certify as "urgent" a bill
seeking to replace the VAT with the gross receipts tax scheme, contending that
it would be difficult to impose VAT on banks.
Results. In 1998, Government revenues decreased to P462.5 billion compared
with P471.8 billion for 1997 due, in part, to the general contraction of the
economy and lower imports. Revenues collected by the Bureau of Internal Revenue
increased to P337.2 billion from P314.7 billion, but were P17.9 billion short of
target estimates. Revenues from customs duties fell to P76 billion from P94.8
billion, just below the target for the year.
In 1999, Government revenues amounted to P478.5 billion, a 3.5% increase
compared with 1998. The 1999 figure was, however, P12.2 billion less than the
revised target. Non-tax revenues reflected a P5.6 billion dividend payment from
Bangko Sentral and P3.3 billion in proceeds from the sale of Philippine
Associated Smelting and Refining Corp. Revenues collected by the Bureau of
Internal Revenue were P12.2 billion less than the revised target. The shortfall
was primarily attributable to the slow recovery of the industry sector. Revenues
collected by the Bureau of Customs were P2.9 billion more than the revised
target.
In 2000, Government revenues amounted to P514.8 billion, a 7.6% increase
over 1999 revenues. The 2000 amount was P47.6 billion short of the April 2000
IMF revenue target. Revenues collected by the Bureau of Internal Revenue
increased to P360.8 billion but were P37.0 billion short of target estimates.
The shortfall was attributable primarily to lower Bureau of Internal Revenue
collections of items such as documentary stamp tax and capital gains tax. The
slowdown in the financial and real estate sectors also adversely affected
collections in 2000. Bureau of Customs revenue increased to P95.0 billion, P3.1
billion more than targeted. Intensified customs collection and anti-smuggling
operations accounted for the Bureau of Custom's better-than-targeted
performance. Even with the marked slowdown in its collections from 1999 levels,
the Bureau of the Treasury continued to surpass its target. The Treasury
collected P30.8 billion in non-tax revenue from dividends on its shares of
stocks and income from investments. Privatization efforts generated only P4.6
billion in remittances, compared to a target of P22.9 billion, as unfavorable
market prices prevented the government from disposing of its assets.
Privatization remittances consisted of proceeds from the sale of the Philippine
National Bank, Philippine Phosphate Fertilizer Corporation, and a package of
International Broadcasting Corporation's radio stations.
Government revenues in 2001 were P563.7 billion, of which P489.8 billion
were tax revenues and P71.9 billion were non-tax revenues. Revenue collections
for 2001 were P5.5 billion higher than the budgeted amount of P558.2 billion and
9.5% higher than revenue collections for 2000. The increase was mainly
attributable to the Bureau of the Treasury which collected P21.5 billion more
than its target of P24.9 billion, offsetting a P8.9 billion shortfall from the
targeted amount of cash collections by the Bureau of Customs. The Bureau of
Internal Revenue surpassed its target by P621 million for the period, collecting
P388.7 billion. Privatization revenues for 2001 were P1.2 billion, compared to
the budgeted amount of P10 billion, as unfavorable market conditions prevented
the disposition of Government assets targeted for privatization.
Government revenues in 2002 totaled P567.1 billion, of which P496.4 billion
were from tax revenues and P70.8 billion were from non-tax revenues. Total
revenues for 2002 increased 0.6% from total revenues for 2001. Of total tax
revenues during 2002, the BIR accounted for P394.5 billion and the Bureau of
Customs accounted for P96.3 billion. Bureau of Treasury collections accounted
for P47.2 billion in revenue in 2002, and taxes from other government offices
and non-tax revenues accounted for the remaining P29.0 billion.
The BIR's collection of P394.5 billion in 2002 was 1.5% more than the
P388.7 million collected in 2001. The lower than expected amounts collected for
2002 have been mainly attributed to the BIR's continued difficulty in generally
enforcing the Republic's tax laws as well as the relatively low interest rate
environment. Under the recently appointed BIR Commissioner, Guillermo Parayno,
the BIR has implemented a program to identify, report, and prosecute taxpayers
and companies that under-declare their VAT. A BIR program for
80
voluntary assessment and collection of unpaid VAT and other income taxes has
been put in place to collect unpaid taxes that were discovered by the BIR. This
investigation concluded that underreporting of income from businesses has
resulted in P10 billion in uncollected tax revenue. The BIR is making a
concerted effort to recover as much of this revenue as possible through the
continued implementation of reform measures aimed at strengthening tax loans and
customs procedures and increasing revenue recovery. In the first six months of
2003, the BIR increased collection of VAT by 18.0% over the first six months of
2002. In addition, in order to encourage better tax compliance, the BIR under
the new Commissioner has simplified the filing process and the payment of taxes.
In the first six months of 2003, the BIR had total tax collections on net income
and profit of P124.2 billion, 13.9% higher than for the same period in 2002 and
0.6% above its six-month goal.
EXPENDITURES
Expenditures in 1998 increased to P512.5 billion, compared to P470.3
billion in 1997. These expenditures compared together with revenues of P462.5
billion resulted in a deficit of P50.0 billion in the Government's fiscal
position for 1998, compared to a fiscal surplus of P1.6 billion in 1997.
Expenditures in 1999 increased to P590.4 billion compared to P512.5 billion
in 1998. The total expenditures were P14.1 billion more than the revised target.
The increase in expenditures in 1999 was due in large part to economic stimulus
efforts by the Government and in part to the repayment of certain accounts
payable that were outstanding from previous Government administrations. Revenues
of P478.5 billion resulted in an overall deficit of P111.7 billion in 1999.
Expenditures in 2000 increased to P649.0 billion compared to P590.4 billion
in 1999. The total expenditures were P19.5 billion more than the Government's
target. The increase in expenditures was due primarily to higher interest
payments which increased by P16 billion as a result of high interest rates for
Treasury bills and fixed rate Treasury bonds. Other contributing factors
included the depreciation of the peso, compared to the US dollar, an increase in
LIBOR and the unprogrammed interest payment for the Metro Rail Transit
obligation. Revenues of P514.8 resulted in an actual Government deficit of
P134.2 in 2000.
Government expenditures for 2001 were P710.8 billion, P7.5 billion more
than the budgeted amount of P703.2 billion and 9.5% higher than expenditures for
2000. The actual Government deficit for 2001 was P147.0 billion compared to the
budgeted deficit of P145.0 billion.
Government expenditures in 2002 were P777.9 billion, compared to P710.8
billion in 2001. The increase in expenditures from 2001 to 2002 was due in part
to higher expenditures for infrastructure, personal services, education,
veterans' pensions, and allotments to local government units for anti-poverty
programs and security measures.
DEFICIT
The deficit in 2002 was P210.7 billion, which exceeded the Government's
original target of P130 billion deficit 2002 but was lower than the revised 2002
budget deficit forecast of P223 billion. This rapid increase in the budget
deficit has been caused by lower than expected revenue collections from the BIR,
and higher than expected expenditures.
THE GOVERNMENT BUDGET
THE BUDGET PROCESS. The Administrative Code of 1987 requires the
Government to formulate and implement a national budget. Various planning and
fiscal agencies coordinate to determine expected revenue, expenditure and debt
based on growth, employment and inflation targets. The budget also reflects
national objectives regarding domestic and foreign debt, domestic credit and
balance of payments.
The President submits the budget to Congress within 30 days of the opening
of each regular session of Congress, which occurs on the fourth Monday of each
July. The House of Representatives reviews the budget and transforms it into a
general appropriations bill. The Senate then reviews the budget. A conference
committee composed of members of both houses of Congress then formulates a
common version of the bill. Once both houses approve the budget, the bill goes
to the President for signing as a general appropriations act.
81
On March 11, 2003, a bicameral Congressional committee approved a P804.0
national government budget for 2003. The budget approved by the bicameral
committee reflected a P200 million reduction from the P804.2 billion budget
originally proposed by President Arroyo. The 2003 budget includes appropriations
of P804.0 billion, a 3.0% increase from the P780.8 billion budgeted for 2002.
The 2003 budget includes an automatic appropriation of P223 billion to service
the Government's foreign and domestic debts. The 2003 budget forecasts P602
billion in revenue collections against the P804 million in budgeted
expenditures, which would result in a deficit of P202 billion for the year 2003.
On August 5, 2003, the Arroyo administration submitted its proposed 2004
budget to Congress. The budget calls for appropriations of P864.8 billion in
2004, and forecasts a fiscal deficit of P197.8 billion. Under the proposed
P864.8 billion budget, P271.5 billion would be allocated for debt interest
payments, P43.2 billion would be allocated for national defense and P53.6
billion would be allocated for police.
DEBT
EXTERNAL DEBT. The following table sets out the total outstanding Bangko
Sentral-approved and registered external debt.
BANGKO SENTRAL APPROVED EXTERNAL DEBT(1)
<Table>
<Caption>
AS OF
AS OF DECEMBER 31, MARCH 31,
----------------------------------------------- ---------
1998 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- ---------
(IN MILLIONS, EXCEPT PERCENTAGES)
By Maturity:
Short-term(2).................... $ 7,185 $ 5,745 $ 5,948 $ 6,049 $ 5,558 $ 6,423
Medium and long-term............. 40,632 46,466 46,112 46,306 48,315 49,383
------- ------- ------- ------- ------- -------
Total......................... $47,817 $52,210 $52,060 $52,355 $53,874 $55,806
======= ======= ======= ======= ======= =======
By Debtor:(3)
Banking system................... $12,777 $11,726 $11,462 $11,537 $10,880 $11,218
Public sector(4)................. 26,873 31,795 31,498 25,149 28,017 29,717
Private sector................... 17,507 17,410 17,648 15,669 14,977 14,871
------- ------- ------- ------- ------- -------
Total......................... $47,817 $52,210 $52,060 $52,355 $53,874 $55,806
======= ======= ======= ======= ======= =======
By Creditor Type:
Multilateral..................... $10,058 $10,245 $ 9,665 $ 9,553 $ 8,970 $ 9,268
Bilateral........................ 14,926 16,429 15,336 14,531 15,621 15,895
Banks and financial
institutions.................. 9,672 10,340 11,176 12,003 12,015 11,827
Bondholders/noteholders.......... 11,209 12,951 13,447 13,678 14,785 16,024
Others........................... 1,952 2,245 2,436 2,590 2,482 2,792
------- ------- ------- ------- ------- -------
Total......................... $47,817 $52,210 $52,060 $52,355 $53,874 $55,806
======= ======= ======= ======= ======= =======
Ratios:
Debt service burden to exports of
goods and services(5)......... 11.7% 14.1% 12.5% 16.0% 16.6% 15.3%
Debt service burden to GNP....... 7.4% 8.3% 7.7% 8.8% 9.2% 9.3%(6)
External debt to GNP............. 69.8% 65.1% 65.8% 69.3% 65.7% 73.5%(7)
</Table>
- ---------------
Source: Bangko Sentral.
(1) Excludes a $75 million loan to be made by the Asian Development Bank
pursuant to an agreement between the Asian Development Bank and the Republic
in October 2001.
(2) Debt with original maturity of one year or less.
82
(3) Classification by debtor is based on the primary obligor under the relevant
loan or rescheduling documentation.
(4) Includes public sector debt whether or not guaranteed by the Government.
(5) This ratio is based on the debt service burden for the relevant period
relative to the total exports of goods and receipts from services and income
during such period based on the BPM5 framework.
(6) For comparability with annual figures, ratio is based on GNP for the first
quarter of 2003.
(7) For comparability with annual figures, ratio is based on GNP for the four
quarters ending March 31, 2003.
The Republic's external debt approved by and registered with Bangko Sentral
(which includes banking system debt, public sector debt whether or not
guaranteed by the Government and private sector debt) amounted to $55.8 billion
as of March 31, 2003, a 3.6% increase from the $53.9 billion as of December 31,
2002. The increase in the first quarter of 2003 resulted mostly from net inflows
of foreign exchange to finance the Government's budgetary requirements.
The Republic's external debt approved by Bangko Sentral amounted to $53.9
billion as of December 31, 2002, a 2.9% increase from the $52.4 billion recorded
as of December 31, 2001. The increase in Bangko Sentral-approved external debt
in 2002 was due mainly to new Government borrowings to pay for financial and
economic reforms, power and energy development projects, and manufacturing,
transportation and communications infrastructure. These new borrowings were
offset by purchases by Filipinos of Government dollar-denominated bonds,
currency revaluation adjustments and direct repayment of debt.
As of December 31, 2002, 73% of the Republic's outstanding direct external
debt, which amounted to $25.3 billion carried fixed rates while 23% had variable
rates. The remaining 4% were noninterest bearing. As of June 30, 2002, the
average cost of fixed rate credits was about 6%. For liabilities with floating
interest rates, the margin over the applicable base rate ranged from 3.5% to
4.4%. The average interest rates for 91-day Treasury bills decreased from an
average of 9.86% in 2001 to 5.43% in 2002, following the decline in global
interest rates. As of December 31, 2002, approximately 58% of the Republic's
outstanding direct external debt was denominated in US dollars while 33% was
denominated in Japanese yen. As of December 31, 2002, multicurrency loans from
the World Bank, the International Monetary Fund and the Asian Development Bank
accounted for 15.3% of the Republic's external debt.
The public sector remained the biggest borrower, accounting for $28.0
billion of foreign financing as of December 31, 2002 compared to $25.1 billion
as of December 31, 2001. Meanwhile, private sector external debt as of December
31, 2002 decreased to $15.0 billion from $15.7 billion as of December 31, 2001.
Since December 31, 2002, the Government has borrowed a total of $1.625
billion and E300 million in the international capital markets. In response to
recent increases in the Government's external debt, some members of the Senate
have proposed legislation that would place certain limits on Government
borrowings. One Senate bill would set a limit on total debt and tie this limit
to the Republic's GDP, while another would set a cap only on future borrowings.
Hearings on these bills are ongoing. Some members of Congress have also called
for the repeal of the law which currently mandates automatic appropriation for
debt service in the annual budget. It is unclear whether either of these
proposed measures will be implemented or if implemented what impact these
measures would have on the Republic.
GOVERNMENT FINANCING INITIATIVES. The Government has obtained funds under
the so-called "Miyazawa initiative" to help finance projects contemplated by the
country's spending program. The Miyazawa initiative was launched by the Japanese
government in October 1998 with an assistance package totalling the equivalent
of $30 billion. The package consists of support measures to assist five Asian
countries, including the Philippines, overcome their economic difficulties.
Under the Miyazawa initiative, the Government requested co-financing from Japan
of approximately $900 million of program loans from the Asian Development Bank
and the World Bank, $300 million each for the banking sector reform program with
the World Bank, the power sector restructuring program with the Asian
Development Bank and the Metro Manila air quality enhancement program with the
Asian Development Bank.
In July 2000, the Republic entered into a grain sector development program
loan agreement with the Asian Development Bank. The Asian Development Bank
disbursed $300 million under this program in 2000; however, the undisbursed
balance of $70 million was cancelled in April 2003. Also in July 2000, the
Republic
83
signed a $100 million program loan agreement with the Asian Development Bank to
support the Pasig River Environment Management and Rehabilitation Program. As of
December 31, 2002, $40 million had been disbursed under this program.
In November 2001, the Republic entered into a $75 million program loan
agreement with Asian Development Bank to support the Non-Bank Financial
Governance Program. This loan was fully disbursed in the same year. In July
2003, the Republic concluded negotiations with the Asian Development Bank for a
$150 million loan to support the Second Non-Bank Financial Governance Program.
As of December 31, 2001, the Republic had received $100 million from each of the
World Bank and the Japan Bank for International Cooperation ("JBIC") under their
respective banking sector loan programs. However, World Bank and JBIC have
canceled the remaining combined undisbursed commitment of $40 million.
As of December 31, 2002, the Republic had received a total of $600 million
in loans from the Asian Development Bank and JBIC to support power sector
reforms. Also as of December 31, 2002, the Republic had received $300 million in
loans to support air quality improvement programs.
From 1998 to 2002, the Republic received a total of $1.3 billion in
financing from Japan under the Special Yen Loan Package, also known as the
"Obuchi Fund".
CREDIT RATINGS. On June 12, 2003, Fitch Ratings downgraded the Republic's
long-term foreign currency rating from BB+ to BB on the grounds that current and
prospective fiscal trends amount to a material deterioration in sovereign
creditworthiness, notwithstanding the recent upturn in tax receipts. Fitch also
lowered the long-term local currency rating from BBB- to BB+ and changed the
outlook on both ratings from negative to stable. Fitch mentioned that the change
in outlook reflects Fitch's judgement that broader macro-economic trends remain
reasonable with respect to growth, inflation and the external current account
balance.
On April 24, 2003, Standard & Poor's Ratings Service downgraded the
Republic's long-term foreign currency rating from BB+ to BB, downgraded the
Republic's local currency rating from BBB+ to BBB and revised the long-term
ratings outlook from negative to stable. Standard & Poor's emphasized the
Government's high fiscal deficit, increased interest payments due to its high
debt burden, and heavy reliance on external capital for economic growth. On
January 8, 2003, Moody's Investors Service changed its rating outlook on the
Republic's local-currency rating for government bonds from stable to negative,
while affirming each of the Republic's foreign-currency ratings. Moody's
recognized that revenue collections had improved in recent months, but noted
that poor revenue collection in prior periods had weakened long-term fiscal
prospects.
The following table sets out the changes in credit ratings or rating
outlooks for the Republic for the three years preceding the date of this
prospectus.
<Table>
<Caption>
DATE RATING AGENCY INSTRUMENT CREDIT RATING OR RATING OUTLOOK
- ---------------------------- ----------------- ---------------------------- -------------------------------
October 19, 2000............ Standard & Poor's Republic's long-term local Downgraded outlook from
and foreign currency ratings "stable" to "negative"(1)
October 27, 2000............ Moody's Republic's bonds and notes Raised to Ba1
Downgraded outlook from
"stable" to "negative"(2)
March 15, 2001.............. Fitch-IBCA Long-term local currency Downgraded outlook from
obligations "positive" to "stable"(3)
February 4, 2002............ Moody's Republic's long-term foreign Upgraded outlook from
currency rating "negative" to "stable"(4)
April 4, 2002............... Standard & Poor's Republic's long-term foreign Upgraded outlook from
currency rating "negative" to"positive"(5)
October 29, 2002............ Standard & Poor's Republic's long-term foreign Downgraded outlook from
currency rating "stable" to "negative"(6)
November 25, 2002........... Fitch-IBCA Republic's long-term foreign Downgraded outlook from
currency "stable" to "negative"(7)
</Table>
84
<Table>
<Caption>
DATE RATING AGENCY INSTRUMENT CREDIT RATING OR RATING OUTLOOK
- ---------------------------- ----------------- ---------------------------- -------------------------------
January 8, 2003............. Moody's Republic's local currency Downgraded outlook from
rating "stable" to "negative"(8)
April 24, 2003.............. Standard & Poor's Republic's long-term foreign Downgraded from BB+ to BB(9)
currency rating
Republic's local currency Downgraded from BBB+ to BBB(9)
rating
June 12, 2003............... Fitch Ratings Republic's long-term foreign Upgraded outlook from
currency rating "negative" to "stable"
Downgraded from BB+ to BB(10)
Republic's long-term local Downgraded from BBB- to BB+(10)
currency rating Upgraded outlook from
"negative" to "stable"
</Table>
- ---------------
(1) Standard & Poor's noted the political uncertainty relating to
then-president Estrada's alleged corrupt practices, the rising budget
deficit and growing concerns about the Government's ability to undertake
effective economic management during a period of political uncertainty.
(2) Moody's noted that unfolding political developments associated with
then-president Estrada could impair policy-making and hamper the
Government's ability to defend its external payments position.
(3) Fitch noted the continuing deterioration of public finances and its impact
on public indebtedness.
(4) Moody's noted that the upgrade reflected the Republic's success in meeting
its fiscal targets and a stronger economic outlook.
(5) Standard & Poor's noted that the upgrade reflected the Government's
improved economic management under the Arroyo administration and the
Republic's adequate external liquidity.
(6) Standard & Poor's noted that the downgrade reflected diminishing prospects
for the fiscal consolidation necessary to stabilize and reduce the
Government's debt burden and sustain investor confidence.
(7) Fitch noted that further evidence of falling tax revenues had undermined
the Government's fiscal credibility and raised concerns about rising public
indebtedness.
(8) Moody's recognized that revenue collections had improved in recent months,
but noted that poor revenue collection in prior periods had weakened
long-term fiscal prospects.
(9) Standard & Poor's noted the Government's high fiscal deficit, increased
interest payments due to its high debt burden, and heavy reliance on
external capital for economic growth.
(10) Fitch noted that existing and prospective fiscal trends amounted to a
material deterioration in sovereign creditworthiness.
PUBLIC SECTOR DEBT. The following table describes the country's
outstanding public sector debt.
OUTSTANDING PUBLIC SECTOR DEBT(1)
<Table>
<Caption>
AS OF DECEMBER 31,
-----------------------------------------
1998 1999 2000 2001
-------- -------- -------- --------
(IN BILLIONS, EXCEPT PERCENTAGES)
Government(2)
Domestic............................................... P 850.9 P 986.7 P1,068.2 P1,247.7
External............................................... 645.3 797.0 1,098.5 1,137.2
-------- -------- -------- --------
Total................................................ P1,421.1 P2,142.2 P2,648.9 P3,079.5
======== ======== ======== ========
Monitored GOCCs(3)
Domestic............................................... 143.5 644.8 810.6 744.9
External............................................... 548.0 286.1 308.1 395.0
-------- -------- -------- --------
Total................................................ P 691.5 P 930.9 P1,118.7 P1,139.9
======== ======== ======== ========
</Table>
85
<Table>
<Caption>
AS OF DECEMBER 31,
-----------------------------------------
1998 1999 2000 2001
-------- -------- -------- --------
(IN BILLIONS, EXCEPT PERCENTAGES)
CB-BOL(4)
Domestic............................................... 0.0 0.0 0.0 0.0
External............................................... 102.2 74.9 81.8 73.9
-------- -------- -------- --------
Total................................................ P 102.2 P 74.9 P 81.8 P 73.9
======== ======== ======== ========
Bangko Sentral(4)
Domestic............................................... 197.3 193.5 202.6 118.3
External............................................... 190.3 299.3 385.2 475.5
-------- -------- -------- --------
Total................................................ P 387.6 P 492.8 P 587.8 P 593.8
======== ======== ======== ========
GFIs(3)
Domestic............................................... 204.5 379.9 460.6 175.3
External............................................... 68.9 95.3 74.3 126.1
-------- -------- -------- --------
Total................................................ P 273.4 P 475.2 P 534.9 P 301.4
======== ======== ======== ========
Less loans on-lent or guaranteed by the Government
Domestic............................................... 8.7 8.3 12.5 23.2
External............................................... 370.6 441.4 562.3 555.2
-------- -------- -------- --------
Total................................................ P 379.3 P 449.7 P 574.8 P 578.4
======== ======== ======== ========
Total public sector(5)
Domestic............................................... 1,396.2 2,196.6 2,542.0 2,288.3
External............................................... 1,479.6 1,469.7 1,855.2 2,125.1
-------- -------- -------- --------
Total................................................ P2,875.8 P3,666.3 P4,397.2 P4,413.4
======== ======== ======== ========
As a percentage of GNP (at current prices)
Public sector debt(5).................................... 102.9% 116.9% 125.7% 114.5%
Public sector domestic debt(5)........................... 50.0% 70.0% 72.7% 59.3%
Public sector external debt(5)........................... 53.0% 46.9% 53.1% 55.1%
National Government debt(2).............................. 37.3% 54.0% 59.3% 59.7%
National Government domestic debt(2)..................... 30.5% 31.5% 30.9% 33.0%
National Government external debt(2)..................... 20.4% 36.8% 44.8% 41.8%
</Table>
- ---------------
Source: Fiscal Policy and Planning Office, Department of Finance.
(1) Amounts in original currencies were converted to pesos using the applicable
Bangko Sentral reference exchange rates at the end of each period.
(2) Includes debt that is on-lent to Government owned corporations and other
public sector entities and debt that has been assumed by the Government and
contingent liabilities.
(3) Includes net lending from the Government, and borrowings on-lent or
guaranteed by the Government.
(4) Liabilities, including deposits, less currency issue and inter-government
accounts.
(5) Includes the Government, the monitored Government owned corporations, the
Central Bank -- Board of Liquidation, Bangko Sentral and Government
financial institutions. Does not include other public sector debt that is
not guaranteed by the Government.
The outstanding public sector debt, comprised of the debt of the
Government, the monitored Government corporations, the Central Bank-Board of
Liquidation, Bangko Sentral and the Government financial institutions, amounted
to P4,413.4 billion as of December 31, 2001 and P4,397.2 billion as of December
31, 2000. As of December 31, 2001, the Government accounted for P3,079.5
billion, or 69.8%, of outstanding public sector debt. Public sector debt as a
proportion of GNP decreased from 125.7% as of December 31, 2000 to 114.5% as of
December 31, 2001.
86
GOVERNMENT DEBT. The following table summarizes the outstanding direct
debt of the Republic as of the dates indicated.
SUMMARY OF OUTSTANDING DIRECT DEBT OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
------------------------------------------------------------------------
1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- --------------------
(IN MILLIONS)
Medium/long-term debt(3)
Domestic............... P 408,809 P 513,667 P 600,925 P 822,269 P1,065,976 $20,094
External............... $ 16,525 $ 19,800 $ 21,992 $ 22,082 $ 25,340(4) $25,340(4)
Short-term debt(5)
Domestic............... P 442,121 P 464,737 P 467,275 P 425,414 P 405,226 $ 7,639
---------- ---------- ---------- ---------- ---------- -------
Total debt............. P1,496,221 P1,775,356 P2,166,700 P2,384,917 P2,815,468 $53,072
========== ========== ========== ========== ========== =======
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) Includes Government debt that is on-lent to Government owned corporations
and other public sector entities. Excludes debt guaranteed by the Government
and debt originally guaranteed by other public sector entities for which the
guarantee has been assumed by the Government. The table reflects debt of the
Government only and does not include any other public sector debt.
(2) Amounts in original currencies were converted to US dollars or pesos, as
applicable, using Bangko Sentral's reference exchange rates at the end of
each period.
(3) Debt with original maturities of one year or longer.
(4) The Government has incurred an aggregate of $1.625 billion and E300 million
of external debt since December 31, 2002.
(5) Debt with original maturities of less than one year.
DOMESTIC DEBT OF THE REPUBLIC. The following table summarizes the
outstanding direct domestic debt of the Republic as of the dates indicated.
SUMMARY OF OUTSTANDING DIRECT DOMESTIC DEBT OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
--------------------------------------------------------------------
1998 1999 2000 2001 2002
-------- -------- ---------- ---------- --------------------
(IN MILLIONS)
Loans
Direct.................. P 38,789 P 39,743 P 15,541 P 15,317 P 15,609 $ 294
Assumed................. 24,355 20,369 19,117 13,858 8,251 156
-------- -------- ---------- ---------- ---------- -------
Total loans.......... 63,144 60,112 34,658 29,175 23,860 450
Securities
Treasury bills.......... 442,121 464,737 467,275 425,414 405,226 7,639
Treasury notes/bonds.... 345,665 453,555 566,267 793,094 1,042,115 19,644
-------- -------- ---------- ---------- ---------- -------
Total securities..... 787,786 918,292 1,033,542 1,218,508 1,447,342 27,283
-------- -------- ---------- ---------- ---------- -------
Total debt........... P850,930 P978,404 P1,068,200 P1,247,683 P1,471,202 $27,732
======== ======== ========== ========== ========== =======
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) Includes Government debt that is on-lent to Government owned corporations
and other public sector entities. Excludes debt guaranteed by the Government
and debt originally guaranteed by other public sector entities for which the
guarantee has been assumed by the Government. The table reflects debt of the
Government only, and does not include any other public sector debt.
(2) Amounts in original currencies were converted to US dollars or pesos, as
applicable, using Bangko Sentral's reference exchange rates at the end of
each period.
87
The following table sets forth the direct domestic debt service
requirements of the Republic for the years indicated.
DIRECT DOMESTIC DEBT SERVICE REQUIREMENTS OF THE REPUBLIC(1)
<Table>
<Caption>
PRINCIPAL INTEREST
YEAR REPAYMENTS PAYMENTS TOTAL TOTAL(2)
- ---- ---------- -------- -------- --------
(IN MILLIONS)
1998............................................... P 28,761 P 73,525 P102,286 $2,619
1999............................................... 61,552 74,980 136,532 3,392
2000............................................... 45,429 93,575 139,004 2,783
2001............................................... 54,039 112,592 166,631 3,268
2002............................................... 72,749 127,723 200,472 3,919
2003(3)............................................ 101,583 149,304 250,887 4,905
2004(3)............................................ 104,137 169,879 274,016 5,357
2005(3)............................................ 117,504 180,295 297,799 5,822
2006(3)............................................ 109,451 183,754 293,205 5,732
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) Excludes debt service in respect of Government debt that is on-lent to
Government owned corporations and other public sector entities guaranteed by
the Government and debt originally guaranteed by other public sector
entities for which the guarantee has been assumed by the Government. The
table reflects debt of the Government only, and does not include any other
public sector debt.
(2) Amounts in pesos were converted to US dollars using the applicable Bangko
Sentral reference exchange rates at the end of each period. For 2003 through
2006, amounts in pesos were converted to US dollars using the applicable
Bangko Sentral reference exchange rates as of December 27, 2002.
(3) Projected, based on debt outstanding as of December 31, 2002.
The Government's outstanding direct domestic debt increased 17.9% to
P1,471.2 billion as of December 31, 2002, from P1,247.7 billion as of December
31, 2001 due to the increased issuance of Treasury bills.
88
EXTERNAL DEBT OF THE REPUBLIC. The following table summarizes the
outstanding external direct debt of the Republic as of the dates indicated.
SUMMARY OF OUTSTANDING DIRECT EXTERNAL DEBT OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
-----------------------------------------------
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
(IN MILLIONS)
Loans
Multilateral............................... $ 4,665 $ 4,468 $ 4,388 $ 4,323 $ 4,390
Bilateral.................................. 7,944 9,055 8,193 7,236 8,167
Commercial................................. 208 256 651 841 925
------- ------- ------- ------- -------
Total loans............................. 12,817 13,779 13,232 12,400 13,482
Securities
Eurobonds.................................. -- 352 514 915 1,062
Brady Bonds................................ 2,173 1,482 1,385 1,287 1,190
Yen Bonds.................................. 345 391 655 949 959
Notes...................................... -- -- 810 1,010 400
Global Bonds............................... 1,190 3,796 5,396 5,396 8,246
T-Bills.................................... -- -- -- 125 --
------- ------- ------- ------- -------
Total securities........................ 3,708 6,021 8,760 9,682 11,857
------- ------- ------- ------- -------
Total................................... $16,525 $19,800 $21,992 $22,082 $25,340(3)
======= ======= ======= ======= =======
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance
(1) Includes Government debt that is on-lent to Government owned corporations
and other public sector entities. Excludes debt guaranteed by the Government
and debt originally guaranteed by other public sector entities for which the
guarantee has been assumed by the Government. The table reflects debt of the
Government only, and does not include any other public sector debt.
(2) Amounts in original currencies were converted to US dollars using the
applicable Bangko Sentral reference exchange rates at the end of each
period.
(3) The Government has incurred an aggregate of $1.625 billion and E300 million
of external debt since December 31, 2002.
Outstanding direct external debt increased 0.4% to $22.1 billion as of
December 31, 2001, from $22.0 billion as of December 31, 2000. The Government
borrowed to finance power and energy development projects, financial and
economic reforms and manufacturing, transportation and communication and other
infrastructure undertakings. The currency depreciation during 1997 significantly
increased the amount of external debt in Peso terms. As of December 31, 2001,
the Government owed 32.8% of outstanding direct external debt to bilateral
creditors, mainly the United States and Japan, 47.6% to banks and other
commercial creditors and 19.6% to multilateral creditors.
As of December 31, 2002, approximately 58% of the Republic's external
obligations were denominated in US dollars while approximately 33% were
denominated in Japanese yen.
89
The following table sets forth, by designated currency and the equivalent
amount in US dollars, the outstanding direct external debt of the Republic as of
December 31, 2002.
SUMMARY OF OUTSTANDING DIRECT EXTERNAL
DEBT BY THE REPUBLIC BY CURRENCY(1)
(AS OF DECEMBER 31, 2002)
<Table>
<Caption>
AMOUNT IN EQUIVALENT
ORIGINAL AMOUNT IN % OF
CURRENCY US DOLLARS(2) TOTAL
--------- ------------- ------
(IN MILLIONS, EXCEPT PERCENTAGES)
US Dollar................................................... 14,725 $14,725 58.11%
Japanese Yen................................................ 998,443 8,326 32.86
European Currency Unit...................................... 913 948 3.74
Special Drawing Right....................................... 701 947 3.74
French Franc................................................ 826 131 0.52
Austrian Schilling.......................................... 1,301 98 0.39
Deutsche Mark............................................... 121 64 0.25
Pound Sterling.............................................. 14 22 0.09
Swiss Franc................................................. 46 33 0.13
Belgian Franc............................................... 718 18 0.07
Danish Krone................................................ 57 8 0.03
Kuwait Dinar................................................ 2 7 0.03
Korean Won.................................................. 4,223 4 0.01
Italian Lire................................................ 8,718 5 0.02
Swedish Krona............................................... 18 2 0.01
Canadian Dollar............................................. 2 1 0.01
------- ------
Total..................................................... $25,340(3) 100.00%
======= ======
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) Includes Government debt that is on-lent to Government owned corporations
and other public sector entities. Excludes debt guaranteed by the Government
and debt originally guaranteed by other public sector entities for which the
guarantee has been assumed by the Government. The table reflects debt of the
Government only, and does not include any other public sector debt.
(2) Amounts in original currencies were converted to US dollars using the
applicable Bangko Sentral reference exchange rates as of December 27, 2002.
(3) The Government has incurred an aggregate of $1.625 billion and E300 million
of external debt since December 31, 2002.
90
The following table sets forth the direct external debt service
requirements of the Republic for the years indicated.
DIRECT EXTERNAL DEBT SERVICE REQUIREMENTS OF THE REPUBLIC(1)(2)
<Table>
<Caption>
PRINCIPAL INTEREST
YEAR REPAYMENTS PAYMENTS TOTAL
- ---- ---------- -------- ------
(IN MILLIONS)
1998........................................................ $ 907 $ 584 $1,491
1999........................................................ 933 778 1,711
2000........................................................ 831 947 1,778
2001........................................................ 887 1,209 2,095
2002........................................................ 1,718 1,243 2,961
2003(3)..................................................... 1,698 1,501 3,199
2004(3)..................................................... 1,788 1,583 3,371
2005(3)..................................................... 1,811 1,646 3,457
2006(3)..................................................... 1,671 1,658 3,329
2007(3)..................................................... 1,345 1,660 3,005
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) Excludes debt service in respect of Government debt that is on-lent to
Government owned corporations and other public sector entities or guaranteed
by the Government, other than debt originally guaranteed by other public
sector entities for which the guarantee has been assumed by the Government.
The table reflects debt of the Government only, and does not include any
other public sector debt.
(2) For 1997 through 2002, amounts in original currencies were converted to US
dollars using the applicable Bangko Sentral reference exchange rates
prevailing on the date of payment. For 2003 through 2007, amounts in
original currencies were converted to US dollars using the applicable Bangko
Sentral reference exchange rates as of February 19, 2003.
(3) Projected, based on debt outstanding as of December 31, 2002.
GOVERNMENT GUARANTEED DEBT. The following table sets forth all Republic
guarantees of indebtedness, including guarantees assumed by the Government, as
of the dates indicated.
SUMMARY OF OUTSTANDING GUARANTEES OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
-------------------------------------------------------
1998 1999 2000 2001 2002(3)
------ ------ ------- ------- -----------------
(IN MILLIONS)
Domestic.............................. P8,677 P8,320 P12,451 P23,167 P19,070 $ 359
External.............................. $7,568 $8,908 $ 9,402 $ 9,177 $10,757 $10,757
------ ------ ------- ------- ------- -------
Total............................... $11,117
=======
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) Includes debt originally guaranteed by the Government and debt guaranteed by
other public sector entities for which the guarantee has been assumed by the
Government.
(2) Amounts in original currencies were converted to US dollars or pesos, as
applicable, using Bangko Sentral's reference exchange rates at the end of
each period.
(3) The Republic has guaranteed $ -- in external debt and P -- in
domestic debt since December 31, 2002.
PAYMENT HISTORY OF FOREIGN DEBT. In early 1985 and in 1987, the Government
rescheduled principal maturities of most medium- and long-term liabilities owed
to commercial bank creditors falling due between October 1983 and December 1992.
The Philippines normalized its relationship with foreign bank creditors in 1992
after issuing Brady Bonds in exchange for its commercial bank debt.
91
The Philippines rescheduled portions of its obligations to official
creditors, such as foreign Governments and their export credit agencies, five
times between 1984 and 1994 as follows.
<Table>
<Caption>
NEW MATURITY
(FROM DATE OF
RESCHEDULED RESCHEDULING
DATE OF RESCHEDULING AGREEMENT AMOUNT AGREEMENT) GRACE PERIOD
- ------------------------------ ------------ ------------- ------------
December 1984......................................... $896 million 10 years 5 years
January 1987.......................................... $1.1 billion 10 years 5.5 years
May 1989.............................................. $1.8 billion 8.5 years 5 years
June 1991............................................. $1.5 billion 15-20 years 6.5 years
July 1994*............................................ $498 million 15-20 years 8-10 years
</Table>
- ---------------
* Not implemented. See discussion in following paragraph.
In December 1994, the Government decided not to avail itself of the July
1994 rescheduling agreement to accelerate the country's graduation from
rescheduling country status. As of June 30, 1999, the Republic's rescheduled
obligations with its bilateral creditors amounted to $2.2 billion, with Japan at
$1.2 billion and the United States at $506 million having the largest exposures.
In addition to debt restructuring, the Republic has engaged in debt
buyback, debt-to-equity, debt-for-debt, debt-for-nature and other debt reduction
arrangements to reduce its debt by at least $6 billion. The Republic intends to
maintain various efforts to manage its debt portfolio to improve yield and
maturity profiles. The Republic may utilize proceeds from debt issues for the
purpose of repurchasing outstanding debt through a variety of methods, including
public auctions and repurchases of debt securities in the open markets.
While there have been a number of reschedulings of the Republic's debt to
its bilateral creditors in the past few years, the Republic has not defaulted
on, and has not attempted to restructure, the payment of principal or interest
on any of its external securities in the last 20 years.
Brady Bonds. In 1992, the Philippines issued approximately $3.3 billion of
Brady Bonds, maturing between 2007 and 2018, in exchange for commercial bank
debt, and secured, as to repayment of principal at stated maturity, $1.9 billion
of the bonds with zero-coupon bonds purchased by the Republic in the open
market. As of year-end 1997, cash and short-term investment grade securities
deposited with the Federal Reserve Bank of New York, as collateral agent,
secured the payment of approximately 12 to 14 months of interest on $1.6 billion
of the Brady Bonds.
In October 1996, the Government exchanged $6.5 million of Series A
Principal Collateralized Interest Reduction Bonds due 2018 and approximately
$628 million of Series B Principal Collateralized Interest Reduction Bonds due
2017 for $551 million of its $690 million 8.75% Bonds due 2016. After the
exchange, approximately $2.3 billion of the Brady Bonds remained outstanding.
The exchange generated significant savings in debt service and the release of
the US Treasury securities held as collateral with respect to the exchanged
bonds and established a liquid and long-term sovereign benchmark extending the
maturity of the Philippine debt profile. The exchange resulted in the
redemption, at a discount, of approximately $635 million of Brady Bonds. In
addition, the Brady Bond exchange freed more than $124 million in cash from the
collateral released in the retirement of the Brady Bonds.
In October 1999, the Government exchanged approximately $401 million of its
Principal Collateralized Interest Reduction Bonds, $165 million of its Interest
Reduction Bonds and $54 million of its Floating Rate Debt Conversion Bonds for
approximately $544 million of 9.50% Global Bonds due 2024. After the exchange,
approximately $1.5 billion of the Brady Bonds remained outstanding. Similar to
the October 1996 exchange, this exchange generated significant savings in debt
service and the release of the US Treasury securities held as collateral with
respect to the exchanged bonds and established a sovereign benchmark extending
the maturity of the Philippine debt profile. The exchange freed approximately
$149 million in cash from the collateral released in the retirement of the Brady
Bonds.
92
The following table sets out the foreign currency bonds issued by the
Republic.
FOREIGN CURRENCY BONDS ISSUED BY THE REPUBLIC
<Table>
<Caption>
OUTSTANDING OUTSTANDING
BALANCE AS OF BALANCE AS OF
ISSUE DATE DECEMBER 31, 2002
------------- -----------------
(IN MILLIONS)
Brady Bonds(1)
Interest Reduction Bonds.................................. $ 757 $ 250
Principal Collateralized Interest Reduction Bonds......... 1,894 583
Debt Conversion Bonds..................................... 697 357
------- -------
Total.................................................. $ 3,348 $ 1,190
Japanese Yen Bonds(2)
Sixth Series.............................................. 250 250
Seventh Series............................................ 292 292
Shibosai Series A......................................... 417 417
------- -------
Total....................................................... $ 959 $ 959
Notes....................................................... 1,010 400
Global bonds................................................ 8,246 8,246
Eurobonds(2)................................................ 1,062 1,062
T-Bills..................................................... 125 --
------- -------
Total foreign bonds.................................... $14,751 $11,857(3)
======= =======
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
(1) The difference between the amount of the Brady Bonds originally issued and
the amount currently outstanding represents repurchases of such Bonds by the
Republic in the secondary market (or their acquisition in connection with
debt for equity and similar transactions), the 1998 Brady Bond exchange, the
cancellation of such acquired Bonds and principal repayments.
(2) Yen and Euro denominated bonds were converted to US dollars using Bangko
Sentral's reference exchange rate as of December 27, 2002.
(3) The Government has incurred an aggregate of $1.625 billion and E300 million
of external debt since December 31, 2002.
93
DESCRIPTION OF THE SECURITIES
DESCRIPTION OF THE DEBT SECURITIES
The Philippines may issue debt securities in separate series at various
times. The description below summarizes the material provisions of the debt
securities that are common to all series and the Fiscal Agency Agreement. Each
series of the debt securities will be issued pursuant to a fiscal agency
agreement (each, as applicable to a series of debt securities, the "Fiscal
Agency Agreement"). Since it is only a summary, the description may not contain
all of the information that is important to you as a potential investor in the
debt securities. Therefore, the Philippines urges you to read the form of the
Fiscal Agency Agreement and the form of global bond before deciding whether to
invest in the debt securities. The Philippines has filed a copy of these
documents with the Securities and Exchange Commission as exhibits to the
registration statement of which this prospectus is a part. You should refer to
such exhibits for more complete information.
The financial terms and other specific terms of your debt securities are
described in the prospectus supplement relating to your debt securities. The
description in the prospectus supplement will supplement this description or, to
the extent inconsistent with this description, replace it.
You can find the definitions of certain capitalized terms in the subsection
titled "Glossary of Certain Defined Terms" located at the end of this section.
General Terms of the Bonds
The prospectus supplement that relates to your debt securities will specify
the following terms:
- The aggregate principal amount and the designation;
- The currency or currencies or composite currencies of denomination and
payment;
- Any limitation on principal amount and authorized denominations;
- The percentage of their principal amount at which the debt securities
will be issued;
- The maturity date or dates;
- The interest rate or rates, if any, for the debt securities and, if
variable, the method by which the interest rate or rates will be
calculated;
- Whether any amount payable in respect of the debt securities will be
determined based on an index or formula, and how any such amount will be
determined;
- The dates from which interest, if any, will accrue for payment of
interest and the record dates for any such interest payments;
- Where and how the Philippines will pay principal and interest;
- Whether and in what circumstances the debt securities may be redeemed
before maturity;
- Any sinking fund or similar provision;
- Whether any part or all of the debt securities will be in the form of a
global security and the circumstances in which a global security is
exchangeable for certificated securities;
- If issued in certificated form, whether the debt securities will be in
bearer form with interest coupons, if any, or in registered form without
interest coupons, or both forms, and any restrictions on exchanges from
one form to the other; and
If the Philippines issues debt securities at an original issue discount, in
bearer form or payable in a currency other than the US dollar, the prospectus
supplement relating to the debt securities will also describe applicable US
federal income tax and other considerations additional to the disclosure in this
prospectus.
94
Payments of Principal, Premium and Interest
On every payment date specified in the relevant prospectus supplement, the
Philippines will pay the principal, premium and/or interest due on that date to
the registered holder of the relevant debt security at the close of business on
the related record date. The record date will be specified in the applicable
prospectus supplement. The Philippines will make all payments at the place and
in the currency set out in the prospectus supplement. Unless otherwise specified
in the relevant prospectus supplement or the debt securities, the Philippines
will make payments in US dollars at the New York office of the fiscal agent or,
outside the United States, at the office of any paying agent. Unless otherwise
specified in the applicable prospectus supplement, the Philippines will pay
interest by check, payable to the registered holder.
If the relevant debt security has joint holders, the check will be payable
to all of them or to the person designated by the joint holders at least three
business days before payment. The Philippines will mail the check to the address
of the registered holder in the bond register and, in the case of joint holders,
to the address of the joint holder named first in the bond register.
The Philippines will make any payment on debt securities in bearer form at
the designated offices or agencies of the fiscal agent, or any other paying
agent, outside of the United States. At the option of the holder of debt
securities, the Philippines will pay by check or by transfer to an account
maintained by the payee with a bank located outside of the United States. The
Philippines will not make payments on bearer securities at the corporate trust
office of the fiscal agent in the United States or at any other paying agency in
the United States. In addition, the Philippines will not make any payment by
mail to an address in the United States or by transfer to an account with a bank
in the United States, Nevertheless, the Philippines will make payments on a
bearer security denominated and payable in US dollars at an office or agency in
the United States if:
- payment outside the United States is illegal or effectively precluded by
exchange controls or other similar restrictions; and
- the payment is then permitted under United States law, without material
adverse consequences to the Philippines.
If the Philippines issues bearer securities, it will designate the offices of at
least one paying agent outside the United States as the location for payment.
Repayment of Funds; Prescription
If no one claims money paid by the Philippines to the fiscal agent for the
payment of principal or interest for two years after the payment was due and
payable, the fiscal agent or paying agent will repay the money to the
Philippines. After such repayment, the fiscal agent or paying agent will not be
liable with respect to the amounts so repaid. However, the Philippines'
obligations to pay the principal of, and interest on, the debt securities as
they become due will not be affected by such repayment.
You will not be permitted to submit a claim to the Philippines for payment
of principal or interest on any series of debt securities unless made within ten
years, in the case of principal, and five years, in the case of interest, from
the date on which payment was due.
Global Securities
The prospectus supplement relating to a series of debt securities will
indicate whether any of that series of debt securities will be represented by a
global security. The prospectus supplement will also describe any unique
specific terms of the depositary arrangement with respect to that series. Unless
otherwise specified in the prospectus supplement, the Philippines anticipates
that the following provisions will apply to depositary arrangements.
REGISTERED OWNERSHIP OF THE GLOBAL SECURITY. The global security will be
registered in the name of a depositary identified in the prospectus supplement,
or its nominee, and will be deposited with the depositary, its nominee or a
custodian. The depositary, or its nominee, will therefore be considered the sole
owner or
95
holder of debt securities represented by the global security for all purposes
under the Fiscal Agency Agreement. Except as specified below or in the
applicable prospectus supplement, beneficial owners:
- will not be entitled to have any of the debt securities represented by
the global security registered in their names;
- will not receive physical delivery of any debt securities in definitive
form;
- will not be considered the owners or holders of the debt securities;
- must rely on the procedures of the depositary and, if applicable, any
participants (institutions that have accounts with the depositary or a
nominee of the depositary, such as securities brokers and dealers) to
exercise any rights of a holder of the debt securities; and
- will receive payments of principal and interest from the depositary or
its participants rather than directly from the Philippines.
The Philippines understands that, under existing industry practice, the
depositary and participants will allow beneficial owners to take all actions
required of, and exercise all rights granted to, the registered holders of the
debt securities.
The Philippines will issue certificated securities and register debt
securities in the name of a person other than the depositary or its nominee only
if:
- the depositary for a series of debt securities is unwilling or unable to
continue as depositary or ceases to be a clearing agency registered under
the Securities Exchange Act of 1934 and the Philippines does not appoint
a successor depositary within 90 days;
- the Philippines determines, in its sole discretion, not to have a series
of debt securities represented by a global security; or
- a default occurs that entitles the holders of the debt securities to
accelerate the maturity date and such default has not been cured.
In these circumstances, an owner of a beneficial interest in a global
security will be entitled to registration of a principal amount of debt
securities equal to its beneficial interest in its name and to physical delivery
of the debt securities in definitive form. Definitive debt securities in bearer
form will not be issued in respect of a global security in registered form.
BENEFICIAL INTERESTS IN AND PAYMENTS ON A GLOBAL SECURITY. Only
participants, and persons that may hold beneficial interests through
participants, can own a beneficial interest in the global security. The
depositary keeps records of the ownership and transfer of beneficial interests
in the global security by its participants. In turn, participants keep records
of the ownership and transfer of beneficial interests in the global security by
other persons (such as their customers). No other records of the ownership and
transfer of beneficial interests in the global security will be kept.
All payments on a global security will be made to the depositary or its
nominee. When the depositary receives payment of principal or interest on the
global security, the Philippines expects the depositary to credit its
participants' accounts with amounts that correspond to their respective
beneficial interests in the global security. The Philippines also expects that,
after the participants' accounts are credited, the participants will credit the
accounts of the owners of beneficial interests in the global security with
amounts that correspond to the owners' respective beneficial interests in the
global security.
The depositary and its participants establish policies and procedures
governing payments, transfers, exchanges and other important matters that affect
owners of beneficial interests in a global security. The depositary and its
participants may change these policies and procedures from time to time. The
Philippines has no responsibility or liability for the records of ownership of
beneficial interests in the global security, or for payments made or not made to
owners of such beneficial interests. The Philippines also has no responsibility
or liability for any aspect of the relationship between the depositary and its
participants or for any aspect of the relationship between participants and
owners of beneficial interests in the global security.
96
BEARER SECURITIES. The Philippines may issue debt securities of a series
in the form of one or more bearer global debt securities deposited with a common
depositary for the Euroclear System and Clearstream Banking, societe anonyme, or
with a nominee identified in the applicable Prospectus Supplement. The specific
terms and procedures, including the specific terms of the depositary
arrangement, with respect to any portion of a series of debt securities to be
represented by a bearer global security will be described in the applicable
Prospectus Supplement.
Additional Amounts
The Philippines will make all payments on the debt securities without
withholding or deducting any present or future taxes imposed by the Philippines
or any of its political subdivisions, unless required by law. If Philippine law
requires the Philippines to deduct or withhold taxes, it will pay the holders of
the debt securities such additional amounts as are necessary to ensure that they
receive the same amount as they would have received without such withholding or
deduction.
The Philippines will not pay, however, any additional amounts if the holder
of the debt securities is liable for Philippine tax because:
- the holder of the debt securities is connected with the Philippines other
than by merely owning the debt security or receiving income or payments
on the bond; or
- the holder of the debt securities failed to comply with any reasonable
certification, identification or other reporting requirement concerning
the holder's nationality, residence, identity or connection with the
Philippines, if compliance with such requirement is required by any
statute or regulation of the Philippines as a precondition to exemption
from withholding or deduction of taxes; or
- the holder of the debt securities failed to present its debt security for
payment within 30 days of when the payment is due or when the Philippines
makes available to the holder of the debt securities or the relevant
fiscal or paying agent a payment of principal or interest, whichever is
later. Nevertheless, the Philippines will pay additional amounts to the
extent the holder would have been entitled to such amounts had it
presented its debt security for payment on the last day of the 30 day
period.
Status of Bonds
While outstanding, the debt securities will:
- constitute direct, unconditional and unsecured obligations of the
Philippines;
- rank at least equally in right of payment with all of the Philippines'
other unsecured and unsubordinated External Indebtedness, except as
described below; and
- continue to be backed by the full faith and credit of the Philippines.
Under Philippine law, unsecured debt (including guarantees of debt) of a
borrower in insolvency or liquidation that is documented by a public instrument,
as provided in Article 2244(14) of the Civil Code of the Philippines, ranks
ahead of unsecured debt that is not so documented. Debt is treated as documented
by a public instrument if it is acknowledged before a notary or any person
authorized to administer oaths in the Philippines. The Government maintains that
debt of the Philippines is not subject to the preferences granted under Article
2244(14) or cannot be documented by a public instrument without acknowledgment
of the Philippines as debtor. The Philippine courts have never addressed this
matter, however, and it is uncertain whether a document evidencing the
Philippines' Peso or non-Peso denominated debt (including External
Indebtedness), notarized without the Philippines' participation, would be
considered documented by a public instrument. If such debt were considered
documented by a public instrument, it would rank ahead of the debt securities if
the Philippines could not meet its debt obligations.
The Philippines has represented that it has not prepared, executed or filed
any public instrument, as provided in Article 2244(14) of the Civil Code of the
Philippines, relating to any External Indebtedness. It also has not consented or
assisted in the preparation or filing of any such public instrument. The
Philippines
97
also agreed that it will not create any preference or priority in respect of any
External Public Indebtedness pursuant to Article 2244(14) of the Civil Code of
the Philippines unless its grants equal and ratable preference or priority to
amounts payable under the debt securities.
Negative Pledge Covenant
If any debt securities are outstanding, the Philippines will not create or
permit any Liens on its assets or revenues as security for any of its External
Public Indebtedness, unless the Lien also secures the Philippines' obligations
under the debt securities. In addition, the Philippines will not create any
preference or priority for any of its External Public Indebtedness pursuant to
Article 2244(14) of the Civil Code of the Philippines, or any successor law,
unless it grants equal and ratable preference or priority to amounts due under
the debt securities.
The Philippines may create or permit a Lien:
- on any property or asset (or any interest in such property or asset)
incurred when the property or asset was purchased, improved, constructed,
developed or redeveloped to secure payment of the cost of the activity;
- securing Refinanced External Public Indebtedness;
- arising out of the extension, renewal or replacement of any External
Public Indebtedness that is permitted to be subject to a lien pursuant to
either of the previous two bullet points, as long as the principal amount
of the External Public Indebtedness so secured is not increased;
- arising in the ordinary course of banking transactions to secure External
Public Indebtedness with a maturity not exceeding one year;
- existing on any property or asset at the time it was purchased, or
arising after the acquisition under a contract entered into before and
not in contemplation of the acquisition, and any extension and renewal of
that Lien which is limited to the original property or asset and secures
any extension or renewal of the original secured financing;
- that:
(A) arises pursuant to any legal process in connection with court
proceedings so long as the enforcement of the lien is stayed and the
Philippines is contesting the claims secured in good faith; or
(B) secures the reimbursement obligation under any surety given in
connection with the release of any lien referred to in (A) above;
if it is released or discharged within one year of imposition; or
- arising by operation of law, provided that any such Lien is not created
or permitted to be created by the Philippines for the purpose of securing
any External Public Indebtedness
The international reserves of Bangko Sentral represent substantially all of
the official gross international reserves of the Philippines. Because Bangko
Sentral is an independent entity, the Philippines and Bangko Sentral believe
that the debt securities' negative pledge covenant does not apply to Bangko
Sentral's international reserves. Bangko Sentral could therefore incur External
Indebtedness secured by international reserves without securing amounts payable
under the debt securities.
Events of Default
Each of the following constitutes an event of default with respect to any
series of debt securities:
1. NON-PAYMENT: the Philippines does not pay principal or interest on
any debt securities of such series when due and such failure continues for
30 days;
2. BREACH OF OTHER OBLIGATIONS: the Philippines fails to observe or
perform any of the covenants in the series of debt securities (other than
non-payment) for 60 days after written notice of the default is
98
delivered by any holder of debt securities to the Philippines at the
corporate trust office of the fiscal agent in New York City;
3. CROSS DEFAULT AND CROSS ACCELERATION:
(a) the Philippines fails to make a payment of principal, premium,
prepayment charge or interest when due on any External Public
Indebtedness with a principal amount equal to or greater than
$25,000,000 or its equivalent, and this failure continues beyond the
applicable grace period; or
(b) any External Public Indebtedness of the Philippines or the central
monetary authority in principal amount equal to or greater than
$25,000,000 is accelerated, other than by optional or mandatory
prepayment or redemption;
For purposes of this event of default, the US dollar equivalent for non-US
dollar debt will be computed using the middle spot rate for the relevant
currency against the US dollar as quoted by The Chase Manhattan Bank on the date
of determination.
4. MORATORIUM: the Philippines declares a general moratorium on the
payment of its or the central monetary authority's External Indebtedness;
5. VALIDITY:
(a) the Philippines, or any governmental body with the legal power and
authority to declare such series of debt securities and the related
Fiscal Agency Agreement invalid or unenforceable, challenges the
validity of such series of debt securities or the related Fiscal
Agency Agreement;
(b) the Philippines denies any of its obligations under such series of
debt securities or the related Fiscal Agency Agreement; or
(c) any legislative executive, or constitutional measure or final
judicial decision renders any material provision of such series of
debt securities or the related Fiscal Agency Agreement invalid or
unenforceable or prevents or delays the performance of the
Philippines' obligations under such series of debt securities or the
related Fiscal Agency Agreement;
6. FAILURE OF AUTHORIZATIONS: any legislative, executive or
constitutional authorization necessary for the Philippines to perform its
material obligations under the series of debt securities or the related
Fiscal Agency Agreement ceases to be in full force and effect or is
modified in a manner materially prejudicial to the holders of the debt
securities;
7. CONTROL OF ASSETS: The Philippines or the central monetary
authority does not at all times exercise full control over the Philippines'
International Monetary Assets; or
8. IMF MEMBERSHIP: The Philippines ceases to be a member of the IMF
or losses its eligibility to use the general resources of the IMF.
The events described in paragraphs 2, 4, 5 and 6 will be events of default
only if they materially prejudice the interests of holders of the debt
securities.
If any of the above events of default occurs and is continuing, holders of
the debt securities representing at least 25% in principal amount of the debt
securities of that series then outstanding may declare all of the debt
securities of the series to be due and payable immediately by written notice to
the Philippines and the fiscal agent. In the case of an event of default
described in paragraphs 1 or 4 above, any holder of the debt securities may
declare the principal amount of debt securities that it holds to be immediately
due and payable by written notice to the Philippines and the fiscal agent.
Investors should note that:
- despite the procedure described above, no debt securities may be declared
due and payable if the Philippines cures the applicable event of default
before it receives the written notice from the holder of the debt
securities;
99
- the Philippines is not required to provide periodic evidence of the
absence of defaults; and
- the Fiscal Agency Agreement does not require the Philippines to notify
holders of the debt securities of an event of default or grant any holder
of the debt securities a right to examine the bond register.
Modifications and Amendments; Bondholders' Meetings
Each holder of a series of debt securities must consent to any amendment or
modification of the terms of that series of debt securities or the Fiscal Agency
Agreement that would:
- change the stated maturity of the principal of the debt securities or any
installment of interest;
- reduce the principal amount of such series of debt securities or the
portion of the principal amount payable upon acceleration of such debt
securities;
- change the debt securities' interest rate;
- change the currency of payment of principal or interest;
- change the obligation of the Philippines to pay additional amounts on
account of withholding taxes or deductions; or
- reduce the percentage of the outstanding principal amount needed to
modify or amend the related Fiscal Agency Agreement or the terms of such
series of debt securities.
With respect to other types of amendment or modification, the Philippines
may, with the consent of the holders of at least a majority in principal amount
of the debt securities of a series that are outstanding, modify and amend that
series of debt securities or, to the extent the modification or amendment
affects that series of debt securities, the Fiscal Agency Agreement.
The Philippines may at any time call a meeting of the holders of a series
of debt securities to seek the holders' approval of the modification, or
amendment, or obtain a waiver, of any provision of that series of debt
securities. The meeting will be held at the time and place in the Borough of
Manhattan in New York City as determined by the Philippines. The notice calling
the meeting must be given at least 30 days and not more than 60 days prior to
the meeting.
While an event of default with respect to a series of debt securities is
continuing, holders of at least 10% of the aggregate principal amount of that
series of debt securities may compel the fiscal agent to call a meeting of all
holders of debt securities of that series.
The Persons entitled to vote a majority in principal amount of the debt
securities of the series that are outstanding at the time will constitute a
quorum at a meeting of the holders of the debt securities. To vote at a meeting,
a person must either hold outstanding debt securities of the relevant series or
be duly appointed as a proxy for a holder of the debt securities. The fiscal
agent will make all rules governing the conduct of any meeting.
The Fiscal Agency Agreement and a series of debt securities may be modified
or amended, without the consent of the holders of the debt securities, to:
- add covenants of the Philippines that benefit holders of the debt
securities;
- surrender any right or power given to the Philippines;
- secure the debt securities;
- cure any ambiguity or correct or supplement any defective provision in
the Fiscal Agency Agreement or the debt securities, without materially and
adversely affecting the interests of the holders of the debt securities.
100
Replacement of Debt Securities
If a debt security becomes mutilated, defaced, destroyed, lost or stolen,
the Philippines may issue, and the fiscal agent will authenticate and deliver, a
substitute debt security. The Philippines and the fiscal agent will require
proof of any claim that a debt security was destroyed, lost or stolen.
The applicant for a substitute debt security must indemnify the
Philippines, the fiscal agent and any other agent for any losses they may suffer
relating to the debt security that was destroyed, lost or stolen. The applicant
will be required to pay all expenses and reasonable charges associated with the
replacement of the mutilated, defaced, destroyed, lost or stolen debt security.
Fiscal Agent
The Philippines will appoint a fiscal agent or agents in connection each
series of the debt securities whose duties would be governed by the related
Fiscal Agency Agreement. Different fiscal agents may be appointed for different
series of debt securities. The Philippines may maintain bank accounts and a
banking relationship with each fiscal agent. Each fiscal agent is the agent of
the Philippines and does not act as a trustee for the holders of the debt
securities.
Notices
All notices will be mailed to the registered holders of a series of debt
securities. If a depositary is the registered holder of global securities, each
beneficial holder must rely on the procedures of the depositary and its
participants to receive notices, subject to any statutory or regulatory
requirements.
If the Philippines lists a series of debt securities on the Luxembourg
Stock Exchange, and the rules of that exchange so require, all notices to
holders of that series of debt securities will be published in a daily newspaper
of general circulation in Luxembourg. The Philippines expects that the
Luxemburger Wort will be the newspaper. If notice cannot be published in an
appropriate newspaper, notice will be considered validly given if made pursuant
to the rules of the Luxembourg Stock Exchange.
Governing Law
The Fiscal Agency Agreement and the debt securities will be governed by the
laws of the State of New York without regard to any principles of New York law
requiring the application of the laws of another jurisdiction. Nevertheless, all
matters governing the authorization, execution and delivery of the debt
securities and the Fiscal Agency Agreement by the Philippines will be governed
by the laws of the Philippines.
Further Issues of Debt Securities
The Philippines may, without the consent of the holders of the debt
securities, create and issue additional debt securities with the same terms and
conditions as any series of bonds (or that are the same in all respects except
for the amount of the first interest payment and for the interest paid on the
series of debt securities prior to the issuance of the additional debt
securities). The Philippines may consolidate such additional debt securities
with the outstanding debt securities to form a single series. Any further Debt
Securities forming a single series with the outstanding Debt Securities of any
series constituted by a Fiscal Agency Agreement shall be constituted by an
agreement supplemental to such relevant Fiscal Agency Agreement.
Jurisdiction and Enforceability
The Philippines is a foreign sovereign government and your ability to
collect on judgments of US courts against the Philippines may be limited.
The Philippines will irrevocably appoint the Philippine Counsel General in
New York, New York as its authorized agent to receive service of process in any
suit based on any series of debt securities which any holder of the debt
securities may bring in any state or federal court in New York City. The
Philippines submits to the jurisdiction of any state or federal court in New
York City or any competent court in the Philippines in
101
such action. The Philippines waives, to the extent permitted by law, any
objection to proceedings in such courts. The Philippines also waives irrevocably
any immunity from jurisdiction to which it might otherwise be entitled in any
suit based on any series of debt securities.
Because of its waiver of immunity, the Philippines would be subject to suit
in competent courts in the Philippines. Judgments against the Philippines in
state or federal court in New York City would be recognized and enforced by the
courts of the Philippines in any enforcement action without re-examining the
issues if:
- such judgment were not obtained by collusion or fraud;
- the foreign court rendering such judgment had jurisdiction over the case;
- the Philippines had proper notice of the proceedings before the foreign
court; and
- such judgment were not based upon a clear mistake of law or fact.
Notwithstanding any of the above, the Philippine Counsel General is not the
agent for receipt of service for suits under the US federal or state securities
laws, and the Philippines' waiver of immunity does not extend to those actions.
In addition, the Philippines does not waive immunity relating to its:
- properties and assets used by a diplomatic or consular mission;
- properties and assets under the control of its military authority or
defense agency; and
- properties and assets located in the Philippines and dedicated to a
public or Governmental use.
If you bring a suit against the Philippines under federal or state
securities laws, unless the Philippines waives immunity, you would be able to
obtain a United States judgment against the Philippines only if a court
determined that the Philippines is not entitled to sovereign immunity under the
United States Foreign Sovereign Immunities Act. Even if you obtained a United
States judgment in any such suit, you may not be able to enforce the judgment in
the Philippines. Moreover, you may not be able to enforce a judgment obtained
under the Foreign Sovereign Immunities Act against the Philippines' property
located in the United States except under the limited circumstances specified in
the act.
Glossary of Certain Defined Terms
Certain definitions used in the Fiscal Agency Agreement are set forth
below. For a full explanation of all of these terms or any capitalized terms
used in this section you should refer to the Fiscal Agency Agreement.
"External Indebtedness" means Indebtedness denominated or payable by its
terms, or at the option of the holder, in a currency or currencies other than
that of the Philippines.
"External Public Indebtedness" means any External Indebtedness in the form
of bonds, debentures, notes or other similar instruments or other securities
which is, or is eligible to be, quoted, listed or ordinarily purchased and sold
on any stock exchange, automated trading system or over-the-counter or other
securities market.
"Indebtedness" means any indebtedness for money borrowed or any guarantee
of indebtedness for money borrowed.
"International Monetary Assets" means all (i) gold, (ii) Special Drawing
Rights, (iii) Reserve Positions in the Fund and (iv) Foreign Exchange.
"Lien" means any mortgage, deed of trust, charge, pledge, lien or other
encumbrance or preferential arrangement which has the practical effect of
constituting a security interest.
"Refinanced External Public Indebtedness" means the US$130,760,000 Series A
Interest Reduction Bonds due 2007 issued by the Republic on December 1, 1992,
the US$626,616,000 Series B Interest Reduction Bonds due 2008 issued by the
Republic on December 1, 1992, the US$153,490,000 Series A Principal
Collateralized Interest Reduction Bonds due 2018 issued by the Republic on
December 1, 1992 and
102
the US$1,740,600,000 Series B Collateralized Interest Reduction Bonds due 2017
issued by the Republic on December 1, 1992.
"Special Drawing Rights," "Reserve Positions in the Fund" and "Foreign
Exchange", have, as to the type of assets included, the meanings given to them
in the IMF's publication entitled "International Financial Statistics" or any
other meaning formally adopted by the IMF from time to time.
DESCRIPTION OF THE WARRANTS
The description below summarizes some of the provisions of warrants for the
purchase of bonds that the Republic may issue from time to time and of the
Warrant Agreement. Copies of the forms of warrants and the Warrant Agreement are
or will be filed as exhibits to the registration statement of which this
prospectus is a part. Since it is only a summary, the description may not
contain all of the information that is important to you as a potential investor
in the warrants.
The description of the warrants that will be contained in the prospectus
supplement will supplement this description and, to the extent inconsistent with
this description, replace it.
General Terms of the Warrants
Each series of warrants will be issued under a warrant agreement to be
entered into between the Republic and a bank or trust company, as warrant agent.
The prospectus supplement relating to the series of warrants will set forth:
- The terms of the bonds purchasable upon exercise of the warrants, as
described above under "Description of Bonds -- General Terms of the
Bonds";
- The principal amount of bonds purchasable upon exercise of one warrant
and the exercise price;
- The procedures and conditions for the exercise of the warrants;
- The dates on which the right to exercise the warrants begins and expires;
- Whether and under what conditions the warrants and any bonds issued with
the warrants will be separately transferable;
- Whether the warrants will be issued in certificated or global form and,
if in global form, information with respect to applicable depositary
arrangements;
- If issued in certificated form, whether the warrants will be issued in
registered or bearer form, whether they will be exchangeable between such
forms, and, if issued in registered form, where they may be transferred
and registered; and
- Other specific provisions.
The warrants will be subject to the provisions set forth under "Description
of the Securities -- Description of the Debt Securities," "-- Governing Law" and
"-- Jurisdiction and Enforceability".
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
Bearer securities will not be offered, sold or delivered in the United
States or its possessions or to a United States person, except in certain
circumstances permitted by United States tax regulations. Bearer securities will
initially be represented by temporary global securities (without interest
coupons) deposited with a common depositary in London for the Euroclear System
and Cedel for credit to designated accounts. Unless otherwise indicated in the
applicable Prospectus Supplement:
- each temporary global security will be exchangeable for definitive bearer
securities on or after the date that is 40 days after issuance only upon
receipt of certification of non-United States beneficial ownership of the
temporary global security as provided in United States tax regulations,
provided that
103
no bearer security will be mailed or otherwise delivered to any location
in the United States in connection with the exchange; and
- any interest payable on any portion of a temporary global security with
respect to any interest payment date occurring prior to the issuance of
definitive bearer securities will be paid only upon receipt of
certification of non-United States beneficial ownership of the temporary
global security as provided in United States tax regulations.
Bearer securities (other than temporary global debt securities) and any
related coupons will bear the following legend: "Any United States person who
holds this obligation will be subject to limitations under the United States
federal income tax laws, including the limitations provided in Sections 165(j)
and 1287(a) of the Internal Revenue Code." The sections referred to in the
legend provide that, with certain exceptions, a United States person who holds a
bearer security, or coupon will not be allowed to deduct any loss realized on
the disposition of the bearer security, and any gain (which might otherwise be
characterized as capital gain) recognized on the disposition will be treated as
ordinary income.
For purposes of this section, "United States person" means:
- an individual citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust if a United States court is able to exercise primary supervision
over the trust's administration and one or more United States persons
have the authority to control all of the trust's substantial decisions.
For purposes of this section, "United States" means United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction.
104
TAXATION
The following discussion summarizes certain Philippine and US federal
income tax considerations that may be relevant to you if you invest in debt
securities. This summary is based on laws, regulations, rulings and decisions
now in effect, all of which may change. Any change could apply retroactively and
could affect the continued validity of this summary.
This summary does not describe all of the tax considerations that may be
relevant to you or your situation, particularly if you are subject to special
tax rules. You should consult your tax advisor about the tax consequences of
holding debt securities, including the relevance to your particular situation of
the considerations discussed below, as well as of state, local or other tax
laws.
PHILIPPINE TAXATION
The following is a summary of certain Philippine tax consequences that may
be relevant to non-Philippine holders of the global bonds in connection with the
holding and disposition of the global bonds. The Republic uses the term
"non-Philippine holders" to refer to (i) non-residents of the Philippines who
are neither citizens of the Philippines nor are engaged in trade or business
within the Philippines or (ii) non-Philippine corporations not engaged in trade
or business in the Philippines.
This summary is based on Philippine laws, rules, and regulations now in
effect, all of which are subject to change. It is not intended to constitute a
complete analysis of the tax consequences under Philippine law of the receipt,
ownership, or disposition of the global bonds, in each case by non-Philippine
holders, nor to describe any of the tax consequences that may be applicable to
residents of the Republic.
Effect of Holding Global Bonds. Payments by the Republic of principal of
and interest on the global bonds to a non-Philippine holder will not subject
such non-Philippine holder to taxation in the Philippines by reason solely of
the holding of the global bonds or the receipt of principal or interest in
respect thereof.
Taxation of Interest on the Global Bonds. When the Republic makes payments
of principal and interest to you on the global bonds, no amount will be withheld
from such payments for, or on account of, any taxes of any kind imposed, levied,
withheld or assessed by the Philippines or any political subdivision or taxing
authority thereof or therein.
Taxation of Capital Gains. Non-Philippine holders of the global bonds will
not be subject to Philippine income or withholding tax in connection with the
sale, exchange, or retirement of a global bond if such sale, exchange or
retirement is made outside the Philippines or an exemption is available under an
applicable tax treaty in force between the Philippines and the country of
domicile of the non-Philippine holder.
Documentary Stamp Taxes. No documentary stamp tax is imposed upon the
transfer of the global bonds. A documentary stamp tax is payable upon the
issuance of the global bonds and will be for the account of the Republic.
Estate and Donor's Taxes. The transfer of a global bond by way of
succession upon the death of a non-Philippine holder will be subject to
Philippine estate tax at progressive rates ranging from 5% to 20% if the value
of the net estate of properties located in the Philippines is over P200,000.
The transfer of a global bond by gift to an individual who is related to
the nonresident holder will generally be subject to a Philippine donor's tax at
progressive rates ranging from 2% to 15% if the value of the net gifts of
properties located in the Philippines exceed P100,000 during the relevant
calendar year. Gifts to unrelated donees are generally subject to tax at a flat
rate of 30%. An unrelated donee is a person who is not a (i) brother, sister
(whether by whole or half blood), spouse, ancestor, or lineal descendant or (ii)
relative by consanguinity in the collateral line within the fourth degree of
relationship.
The foregoing apply even if the holder is a nonresident holder. However,
the Republic will not collect estate and donor's taxes on the transfer of the
global bonds by gift or succession if the deceased at the time of death, or the
donor at the time of donation, was a citizen and resident of a foreign country
that provides certain reciprocal rights to citizens of the Philippines (a
"Reciprocating Jurisdiction"). For these purposes, a
105
Reciprocating Jurisdiction is a foreign country which at the time of death or
donation (i) did not impose a transfer tax of any character in respect of
intangible personal property of citizens of the Philippines not residing in that
foreign country or (ii) allowed a similar exemption from transfer or death taxes
of every character or description in respect of intangible personal property
owned by citizens of the Philippines not residing in that foreign country.
UNITED STATES TAX CONSIDERATIONS
The following discussion summarizes certain US federal income tax
considerations that may be relevant to you if you invest in debt securities.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable US Treasury Regulations, published rulings, administrative
pronouncements, and court decisions in effect on the date of this prospectus,
all of which are subject to change, possibly with retroactive effect. Any such
change could affect the tax consequences described below. This summary deals
only with US holders that hold debt securities as capital assets. It does not
address considerations that may be relevant to you if you are an investor that
is subject to special tax rules, such as a bank, thrift, real estate investment
trust, regulated investment company, insurance company, dealer in securities or
currencies, trader in securities or commodities that elects mark to market
treatment, a person that will hold debt securities as a hedge against currency
risk or as a position in a "straddle" or conversion transaction, tax exempt
organization or a person whose "functional currency" is not the US dollar.
You will be a US holder if you are (i) an individual who is a citizen or
resident of the United States, (ii) a corporation for US federal income tax
purposes created or organized in or under the laws of the United States or any
state thereof (including the District of Columbia), (iii) an estate the income
of which is subject to US federal income taxation regardless of its source or
(iv) a trust if a court within the United States is able to execute primary
supervision over its administration and one or more US persons have authority to
control the substantial decisions of such trust. Notwithstanding the preceding
sentence, to the extent provided in US Treasury Regulations, certain trusts in
existence on August 20, 1996, and treated as United States persons prior to such
date, that elected to be treated as a United States person shall also be
considered US Holders. If you are a partner in a partnership that holds debt
securities, the tax consequences of an investment in debt securities will
generally depend on the status of the partners and the activities of the
partnership. If you are not a US holder, consult the discussions below under the
captions "Non-US Holders" and "Information Reporting and Backup Withholding."
You should consult your own tax advisor concerning the particular US
federal income tax consequences to you of ownership and disposition of debt
securities, as well as the consequences to you arising under the laws of any
other taxing jurisdiction.
United States Holders
Payments or Accruals of Interest
Payments or accruals of "qualified stated interest" (as defined below) on a
debt security will be taxable to you as ordinary interest income at the time
that you receive or accrue such amounts (in accordance with your regular method
of tax accounting). If you use the cash method of tax accounting and you receive
payments of interest pursuant to the terms of a debt security in a currency
other than US dollars (a "foreign currency"), the amount of interest income you
will realize will be the US dollar value of the foreign currency payment based
on the exchange rate in effect on the date you receive the payment regardless of
whether you convert the payment into US dollars. If you are an accrual basis US
holder, the amount of interest income you will realize will be based on the
average exchange rate in effect during the interest accrual period (or with
respect to an interest accrual period that spans two taxable years, at the
average exchange rate for the partial period within the taxable year).
Alternatively, as an accrual basis US holder, you may elect to translate all
interest income on foreign currency denominated debt securities at the spot rate
of exchange on the last day of the accrual period (or the last day of the
taxable year, in the case of an accrual period that spans more than one taxable
year) or on the date that you receive the interest payment if that date is
within five business days of the end of the accrual period. If you make this
election you must apply it consistently to all debt instruments from year to
106
year and you cannot change the election without the consent of the Internal
Revenue Service (the "IRS"). If you use the accrual method of accounting for tax
purposes you will recognize foreign currency gain or loss on the receipt of a
foreign currency interest payment if the exchange rate in effect on the date the
payment is received differs from the rate applicable to a previous accrual of
that interest income. This foreign currency gain or loss will be treated as
ordinary income or loss, but generally will not be treated as an adjustment to
interest income received on the debt security.
Payments of interest on the debt securities will be treated as foreign
source income for US federal income tax purposes. For US foreign tax credit
purposes, interest on the debt securities will generally constitute "passive
income," or in the case of certain US holders, "financial services income".
The Purchase, Sale and Retirement of Debt Securities
Initially, your tax basis in a debt security generally will equal the cost
of the debt security to you. Your basis will increase by any amounts that you
are required to include in income under the rules governing original issue
discount and market discount, and will decrease by the amount of any amortized
premium and any payments other than qualified stated interest made on the debt
security. The rules for determining these amounts are discussed below. If you
purchase a debt security that is denominated in a foreign currency, the cost to
you (and therefore generally your initial tax basis) will be the US dollar value
of the foreign currency purchase price on the date of purchase calculated at (i)
the exchange rate in effect on that date or (ii) if the foreign currency debt
security is traded on an established securities market and you are a cash basis
taxpayer, or if you are an accrual basis taxpayer that makes a special election,
the spot rate of exchange on the settlement date of your purchase. The amount of
any subsequent adjustments to your tax basis in a debt security in respect of
foreign currency denominated original issue discount, market discount and
premium will be determined in the manner described below. If you convert US
dollars into a foreign currency and then immediately use that foreign currency
to purchase a debt security, you generally will not have any taxable gain or
loss as a result of the conversion or purchase.
When you sell or exchange a debt security, or if a debt security is
retired, you generally will recognize gain or loss equal to the difference
between the amount you realize on the transaction (less any accrued but unpaid
interest not previously included in income, which will be subject to tax in the
manner described above under "Payments or Accruals of Interest") and your tax
basis in the debt security. If you sell or exchange a debt security for a
foreign currency, or receive foreign currency on the retirement of a debt
security, the amount you will realize for US tax purposes generally will be the
US dollar value of the foreign currency that you receive calculated at (i) the
exchange rate in effect on the date the foreign currency debt security is
disposed of or retired or (ii) if you dispose of a foreign currency debt
security that is traded on an established securities market and you are a cash
basis US holder, or if you are an accrual basis holder that makes a special
election, the spot rate of exchange on the settlement date of the sale, exchange
or retirement.
The special election available to you if you are an accrual basis taxpayer
in respect of the purchase and sale of foreign currency debt securities traded
on an established securities market, which is discussed in the two preceding
paragraphs, must be applied consistently to all debt instruments from year to
year and cannot be changed without the consent of the IRS.
Except as discussed below with respect to market discount and foreign
currency gain or loss, the gain or loss that you recognize on the sale, exchange
or retirement of a debt security generally will be long-term capital gain or
loss if you have held the debt security for more than one year. The Code
provides preferential treatment under certain circumstances for net long-term
capital gains recognized by individual non-corporate investors. Capital gain or
loss, if any, recognized by a US holder generally will be treated as US source
income or loss for US foreign tax credit purposes. The ability of US holders to
offset capital losses against income is limited.
Despite the foregoing, the gain or loss that you recognize on the sale,
exchange or retirement of a foreign currency debt security generally will be
treated as ordinary income or loss to the extent that the gain or loss is
attributable to changes in exchange rates during the period in which you held
the debt security. This foreign
107
currency gain or loss will not be treated as an adjustment to interest income
that you receive on the debt security.
Original Issue Discount
If the Republic issues debt securities at a discount from their stated
redemption price at maturity, and the discount is equal to or more than the
product of one-fourth of one percent (0.25%) of the stated redemption price at
maturity of the debt securities multiplied by the number of full years to their
maturity, the debt securities will be "OID debt securities". The difference
between the issue price and the stated redemption price at maturity of the debt
securities will be the "original issue discount" or "OID". The "issue price" of
the debt securities will be the first price at which a substantial amount of the
debt securities are sold to the public (i.e., excluding sales of debt securities
to underwriters, placement agents, wholesalers, or similar persons). The "stated
redemption price at maturity" will include all payments under the debt
securities other than payments of qualified stated interest. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments issued by the Republic) at
least annually during the entire term of a debt security at a single fixed
interest rate or, subject to certain conditions, based on one or more interest
indices.
If you invest in OID debt securities you generally will be subject to the
special tax accounting rules for OID obligations provided by the Code and
certain US Treasury Regulations. You should be aware that, as described in
greater detail below, if you invest in an OID debt security you generally will
be required to include OID in ordinary gross income for US federal income tax
purposes as it accrues, although you may not yet have received the cash
attributable to that income.
In general, and regardless of whether you use the cash or the accrual
method of tax accounting, if you are the holder of an OID debt security with a
maturity greater than one year, you will be required to include in ordinary
gross income the sum of the "daily portions" of OID on that debt security for
all days during the taxable year that you own the debt security. The daily
portions of OID on an OID debt security are determined by allocating to each day
in any accrual period a ratable portion of the OID allocable to that period.
Accrual periods may be any length and may vary in length over the term of an OID
debt security, so long as no accrual period is longer than one year and each
scheduled payment of principal or interest occurs on the first or last day of an
accrual period. If you are the initial holder of the debt security, the amount
of OID on an OID debt security allocable to each accrual period is determined
by:
(i) multiplying the "adjusted issue price" (as defined below) of the
debt security at the beginning of the accrual period by a fraction, the
numerator of which is the annual yield to maturity of the debt security and
the denominator of which is the number of accrual periods in a year; and
(ii) subtracting from that product the amount (if any) of qualified
stated interest payments allocable to that accrual period.
An OID debt security that is a floating rate debt security will be subject
to special rules. Generally, if a floating rate debt security qualifies as a
"variable rate debt instrument" (as defined in applicable US Treasury
Regulations), then (i) all stated interest with respect to such floating rate
debt security will be qualified stated interest and hence included in a US
holder's income in accordance with such US holder's normal method of accounting
for US federal income tax purposes, and (ii) the amount of OID, if any, will be
determined under the general OID rules (as described above) by assuming that the
variable rate is a fixed rate equal, in general, to the value, as of the issue
date, of the floating rate.
If a floating rate debt security does not qualify as a "variable rate debt
instrument", such floating rate debt security will be classified as a contingent
payment debt instrument and will be subject to special rules for calculating the
accrual of stated interest and original issue discount.
Any special considerations with respect to the tax consequences of holding
a floating rate debt security will be provided in the applicable prospectus
supplement.
108
The "adjusted issue price" of an OID debt security at the beginning of any
accrual period will generally be the sum of its issue price (including any
accrued interest) and the amount of OID previously includable in the gross
income of the holder, reduced by the amount of all payments other than any
qualified stated interest payments on the debt security in all prior accrual
periods. All payments on an OID debt security, other than qualified stated
interest, generally will be viewed first as payments of previously accrued OID
(to the extent of the previously accrued discount), with payments considered
made from the earliest accrual periods first, and then as a payment of
principal. The "annual yield to maturity" of a debt security is the discount
rate (appropriately adjusted to reflect the length of accrual periods) that
causes the present value on the issue date of all payments on the debt security
to equal the issue price. As a result of this "constant yield" method of
including OID income, you will generally be required to include in your gross
income increasingly greater amounts of OID over the life of OID debt security.
You generally may make an irrevocable election to include in income your
entire return on a debt security (i.e., the excess of all remaining payments to
be received on the debt security, including payments of qualified stated
interest, over the amount you paid for the debt security) under the constant
yield method described above. For debt securities purchased at a premium or
bearing market discount in your hands, if you make this election you will also
be deemed to have made the election (discussed below under the caption "Premium
and Market Discount") to amortize premium or to accrue market discount in income
currently on a constant yield basis.
In the case of an OID debt security that is also a foreign currency debt
security, you should determine the US dollar amount includible as OID for each
accrual period by (i) calculating the amount of OID allocable to each accrual
period in the foreign currency using the constant yield method, and (ii)
translating the foreign currency amount so determined at the average exchange
rate in effect during that accrual period (or, with respect to an interest
accrual period that spans two taxable years, at the average exchange rate for
the partial period within the taxable year). Alternatively, you may translate
the foreign currency amount so determined at the spot rate of exchange on the
last day of the accrual period (or the last day of the taxable year, for an
accrual period that spans two taxable years) or at the spot rate of exchange on
the date of receipt, if that date is within five business days of the last day
of the accrual period, provided that you have made the election described under
the caption "Payment or Accruals of Interest" above. Because exchange rates may
fluctuate, if you are the holder of an OID debt security that is also a foreign
currency debt security you may recognize a different amount of OID income in
each accrual period than would be the case if you were the holder of an
otherwise similar OID debt security denominated in US dollars. Upon the receipt
of an amount attributable to OID (whether in connection with a payment of an
amount that is not qualified stated interest or the sale or retirement of the
OID debt security), you will recognize ordinary income or loss measured by the
difference between the amount received, translated into US dollars at the
exchange rate in effect on the date of receipt or on the date of disposition of
the OID debt security, as the case may be, and the amount accrued, using the
exchange rate applicable to such previous accrual.
If you purchase an OID debt security outside of the initial offering at a
cost less than its "remaining redemption amount", or if you purchase an OID debt
security in the initial offering at a price other than the debt security's issue
price, you will also generally be required to include in gross income the daily
portions of OID, calculated as described above. However, if you acquire an OID
debt security at a price (i) less than or equal to the remaining redemption
amount but (ii) greater than its adjusted issue price, you will be entitled to
reduce your periodic inclusions to reflect the premium paid over the adjusted
issue price. (As discussed under "Premium and Market Discount" below, if you
purchase an OID debt security at a price greater than its remaining redemption
amount, the OID rules described in this section will not apply.) The "remaining
redemption amount" for an OID debt security is the total of all future payments
to be made on the debt security other than qualified stated interest.
Certain of the OID debt securities may be redeemed prior to maturity,
either at the option of the Republic or at the option of the holder, or may have
special repayment or interest rate reset features as indicated in the pricing
supplement. OID debt securities containing these features may be subject to
rules that differ from the general rules discussed above. If you purchase OID
debt securities with these features, you
109
should carefully examine the pricing supplement and consult your tax advisor
about their treatment since the tax consequences of OID will depend, in part, on
the particular terms and features of the debt securities.
OID accrued with respect to an OID debt security will be treated as foreign
source income for US federal income tax purposes. For US foreign tax credit
purposes, OID accrued with respect to an OID debt security will generally
constitute "passive income," or in the case of certain US holders, "financial
services income".
Short-Term Debt Securities
Special rules may apply to a debt security with a maturity of one year or
less ("a short-term debt security"). If you are an accrual basis holder, you
will be required to accrue OID on the short-term debt security on either a
straight line basis or, at the election of the holder, under a constant yield
method (based on daily compounding). No interest payments on a short-term debt
security will be qualified stated interest. Consequently, such interest payments
are included in the short-term debt security's stated redemption price at
maturity. Since the amount of OID is calculated in the same manner as described
above under "Original Issue Discount," such interest payments may give rise to
OID (or acquisition discount, as defined below) even if the short-term debt
securities are not actually issued at a discount. If you are a cash basis holder
and do not elect to include OID in income as it accrues, you will not be
required to include OID in income until you actually receive payments on the
debt security. However, you will be required to treat any gain upon the sale,
exchange or retirement of the debt security as ordinary income to the extent of
the accrued OID on the debt security that you have not yet taken into income at
the time of the sale. Also, if you borrow money (or do not repay outstanding
debt) to acquire or hold the debt security, you may not be allowed to deduct
interest on the borrowing that corresponds to accrued OID on the debt security
until you include the OID in your income.
Alternatively, regardless of whether you are a cash basis or accrual basis
holder, you can elect to accrue any "acquisition discount" with respect to the
short-term debt security on a current basis. Acquisition discount is the excess
of the stated redemption price at maturity of the debt security over the
purchase price. Acquisition discount will be treated as accruing rateably or, at
the election of the holder, under a constant yield method (based on daily
compounding). If you elect to accrue acquisition discount, the OID rules will
not apply. US holders should consult their own tax advisors as to the
application of these rules.
As described above, certain of the debt securities may be subject to
special redemption features. These features may affect the determination of
whether a debt security has a maturity of one year or less and thus is a
short-term debt security. If you purchase a debt security, you should carefully
examine the pricing supplement and consult your tax advisor about these
features.
Premium and Market Discount
If you purchase a debt security at a cost greater than the debt security's
remaining redemption amount, you will be considered to have purchased the debt
security at a premium, and you may elect to amortize the premium as an offset to
interest income, using a constant yield method, over the remaining term of the
debt security. If you make this election, it generally will apply to all debt
instruments that you hold at the time of the election, as well as any debt
instruments that you subsequently acquire. In addition, you may not revoke the
election without the consent of the IRS. If you elect to amortize the premium
you will be required to reduce your tax basis in the debt security by the amount
of the premium amortized during your holding period. In the case of premium on a
foreign currency debt security, you should calculate the amortization of the
premium in the foreign currency. Amortization deductions attributable to a
period reduce interest payments in respect of that period, and therefore are
translated into US dollars at the rate that you use for those interest payments.
Exchange gain or loss will be realized with respect to amortized premium on a
foreign currency debt security based on the difference between the exchange rate
computed on the date or dates the premium is amortized against interest payments
on the debt security and the exchange rate on the date when the holder acquired
the debt security. For a US holder that does not elect to amortize premium, the
amount of premium will be included in your tax basis when the debt security
matures or is disposed of. Therefore, if you do not elect to amortize premium
and you hold the debt security to maturity, you generally will be required to
treat the premium as capital loss when the debt security matures.
110
A debt security, other than a short-term debt security, will be treated as
purchased at a market discount (a "market discount debt security") if the debt
security's stated redemption price at maturity or, in the case of OID debt
security, the debt security's "revised issue price", exceeds the amount for
which the US Holder purchased the debt security by at least one-fourth of one
per cent (0.25%) of such debt security's stated redemption price at maturity or
revised issue price, respectively, multiplied by the number of complete years to
the debt security's maturity. For these purposes, the "revised issue price" of a
debt security generally equals its issue price, increased by the amount of any
OID that has accrued on the debt security.
Any gain recognized on the maturity or disposition of a market discount
debt security will be treated as ordinary income to the extent that such gain
does not exceed the accrued market discount on such debt security.
Alternatively, a US holder of a market discount debt security may elect to
include market discount in income currently over the life of the debt security.
Such an election shall apply to all debt instruments with market discount
acquired by the electing US holder on or after the first day of the first
taxable year to which the election applies. This election may not be revoked
without the consent of the Internal Revenue Service.
Market discount on a market discount debt security will accrue on a
straight line basis unless the US holder elects to accrue such market discount
on a constant yield method. Such an election shall apply only to the debt
security with respect to which it is made and may not be revoked. A US holder of
a market discount debt security that does not elect to include market discount
in income currently generally will be required to defer deductions for interest
on borrowings allocable to such debt security in an amount not exceeding the
accrued market discount on such debt security until the maturity or disposition
of such debt security. Any accrued market discount on a foreign currency debt
security that is currently includable in income will generally be translated
into US dollars at the average rate for the accrual periods (or portion thereof
within the holder's taxable year).
Warrants
A description of the tax consequences of an investment in warrants will be
provided in the applicable prospectus supplement.
Indexed Debt Securities and Other Debt Securities Providing for Contingent
Payment
Special rules govern the tax treatment of debt obligations that provide for
contingent payments ("contingent debt obligations"). These rules generally
require accrual of interest income on a constant yield basis in respect of
contingent debt obligations at a yield determined at the time of issuance of the
obligation, and may require adjustments to these accruals when any contingent
payments are made. In addition, special rules may apply to floating rate debt
securities if the interest payable on the debt securities is based on more than
one interest rate index. We will provide a detailed description of the tax
considerations relevant to US holders of any debt securities that are subject to
the special rules discussed in this paragraph in the relevant prospectus
supplement.
Non-US Holders
The following summary applies to you if you are not a US holder, as defined
above.
Subject to the discussion below under the caption "Information Reporting
and Backup Withholding", the interest income that you derive in respect of the
debt securities generally will be exempt from US federal income taxes, including
US withholding tax on payments of interest (including OID) unless such income is
effectively connected with the conduct of a trade or business within the United
States. Further, any gain you realize on a sale or exchange of debt securities
generally will be exempt from US federal income tax, including US withholding
tax, unless:
- your gain is effectively connected with your conduct of a trade or
business within the United States; or
- you are an individual holder and are present in the United States for 183
days or more in the taxable year of the sale, and either (i) your gain is
attributable to an office or other fixed place of business that you
maintain in the United States or (ii) you have a tax home in the United
States.
111
Information Reporting and Backup Withholding
In general, information reporting requirements may apply to certain
payments made within the United States of interest on a debt security, including
payments made by the US office of a paying agent, broker or other intermediary,
and to proceeds of a sale, exchange, or retirement of debt security effected at
the US office of a US or foreign broker. A "backup withholding" tax may apply to
such payments or proceeds if the beneficial owner fails to provide a correct
taxpayer identification number or to otherwise comply with the applicable backup
withholding rules. Certain persons (including, among others, corporations) and
non-US holders which provide an appropriate certification or otherwise qualify
for exemption are not subject to the backup withholding and information
reporting requirements.
The proceeds of the sale, exchange, retirement or other disposition of debt
securities effected through a foreign office of a broker that is a US controlled
person will be subject to information reporting, but are not generally subject
to backup withholding. A "US controlled person" is (i) a United States person,
(ii) a controlled foreign corporation for United States federal income tax
purposes, (iii) a foreign person for which 50% or more of its gross income from
all sources, over as specified three year period, is effectively connected with
a United States trade or business or (iv) a foreign partnership that, at any
time in its taxable year, is 50% or more (by income or capital interest) owned
by a United States person or is engaged in the conduct of a United States trade
or business.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment made to a US holder generally may be
claimed as a credit against such holder's US federal income tax liability
provided the appropriate information is furnished to the IRS.
112
PLAN OF DISTRIBUTION
The Republic may sell the debt securities or warrants in any of three ways:
- through underwriters or dealers;
- directly to one or more purchasers; or
- through agents.
The prospectus supplement relating to a particular series of debt
securities or warrants will set out:
- the names of any underwriters or agents;
- the purchase price of the securities;
- the proceeds to the Republic from the sale;
- any underwriting discounts and other compensation;
- the initial public offering price;
- any discounts or concessions allowed, reallowed or paid to dealers; and
- any securities exchanges on which the securities will be listed.
Any underwriter involved in the sale of securities will acquire the
securities for its own account. The underwriters may resell the securities from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices to be determined at the time
of sale. The securities may be offered to the public either by underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. Unless the prospectus supplement states otherwise, the underwriters
will benefit from certain conditions that must be satisfied before they are
obligated to purchase such securities and they will be obligated to purchase all
of the securities if any are purchased. The underwriters may change any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.
If the Republic sells debt securities or warrants through agents, the
prospectus supplement will identify the agent and indicate any commissions
payable by the Republic. Unless the prospectus supplement states otherwise, all
agents will act on a best efforts basis.
The Republic may authorize agents, underwriters or dealers to solicit
offers by certain specified entities to purchase the securities from the
Republic at the public offering price set forth in a prospectus supplement
pursuant to delayed delivery contracts. The prospectus supplement will set out
the conditions of the delayed delivery contracts and the commission receivable
by the agents, underwriters or dealers for soliciting the contracts.
The Republic may offer securities as full, partial or alternative
consideration for the purchase of other securities of the Republic, either in
connection with a publicly announced tender, exchange or other offer for such
securities or in privately negotiated transactions. The offer may be in addition
to or in lieu of sales of securities directly or through underwriters or agents.
Agents and underwriters may be entitled to indemnification by the Republic
against certain liabilities, including liabilities under the United States
Securities Act of 1933, or to contribution from the Republic with respect to
certain payments which the agents or underwriters may be required to make.
Agents and underwriters may be customers of, engage in transactions with, or
perform services (including commercial and investment banking services) for, the
Republic in the ordinary course of business.
113
Unless otherwise specified in the applicable prospectus supplement, if the
Republic offers and sells securities outside the United States, each underwriter
or dealer will acknowledge that:
- the securities offered have not been and will not be registered under the
US Securities Act of 1933; and
- may not be offered or sold in the United States except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the US Securities Act of 1933. Each participating
underwriter or dealer will agree that it has not offered or sold, and
will not offer or sell, any debt securities constituting part of its
allotment in the United States except in accordance with Rule 903 of
Regulation S under the US Securities Act of 1933. Accordingly, each
underwriter or dealer will agree that neither the underwriter nor dealer
nor its affiliates nor any persons acting on its or their behalf have
engaged or will engage in any directed selling efforts with respect to
the securities.
VALIDITY OF THE SECURITIES
The Secretary of the Department of Justice of the Republic will provide an
opinion on behalf of the Republic as to the validity of the securities under
Philippine law. Allen & Overy, United States counsel for the Republic, will
provide an opinion on behalf of the Republic as to the validity of the
securities under US and New York State law. US and Philippine counsel named in
the applicable prospectus supplement will provide an opinion as to certain legal
matters on behalf of the underwriters named in the applicable prospectus
supplement.
AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
The authorized agent of the Republic in the United States is Hon.
Linglingay Lacanlale, Consul General, the Philippine Consulate General, 556
Fifth Avenue, New York, New York 10036-5095.
EXPERTS; OFFICIAL STATEMENTS AND DOCUMENTS
Jose Isidro N. Camacho, in his official capacity as Secretary of the
Department of Finance of the Republic, reviewed the information set forth in the
prospectus relating to the Republic, which information is included in the
prospectus on his authority.
FURTHER INFORMATION
The Republic filed a registration statement with respect to the securities
with the Securities and Exchange Commission under the US Securities Act of 1933,
as amended, and its related rules and regulations. You can find additional
information concerning the Republic and the securities in the registration
statement and any pre- or post-effective amendment, including its various
exhibits, which may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549.
114
INDEX TO DEBT TABLES OF THE REPUBLIC OF THE PHILIPPINES
<Table>
<Caption>
PAGE
----
Guaranteed External Debts of the Republic of the
Philippines............................................... T-2
External Debt of the Republic of the Philippines............ T-9
Domestic Government Securities.............................. T-21
Government Guaranteed Corporate Bonds....................... T-34
Domestic Debt of the Republic (Other Than Securities)....... T-35
Guaranteed Domestic Debt of the Republic (Other Than
Securities)............................................... T-36
</Table>
T-1
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
GRAND TOTAL
I. NATIONAL GOVERNMENT DIRECT
GUARANTEE ON GOCC LOANS
A. LOANS
CANADIAN DOLLAR FIXED RATE 9.2000% 1991 2003
SWISS FRANC
FIXED RATE 8.8750% 1992 2004
SWISS EXPORT BASE RATE 1.3750% 1990 2003
SWISS EXPORT BASE RATE 1.3750% 1990 2003
SWISS EXPORT BASE RATE 1.3750% 1993 2004
SWISS EXPORT BASE RATE 1.3750% 1993 2004
DEUTSCHE MARK
FIXED RATE 7.0000% 1995 2035
FIXED RATE 2.0000% 1990 2020
FIXED RATE 2.0000% 1988 2018
FIXED RATE 9.0000% 1992 2032
FIXED RATE 9.0000% 1993 2033
FIXED RATE 9.0000% 1993 2023
FIXED RATE 2.0000% 1981 2016
FIXED RATE 2.0000% 1981 2011
FIXED RATE 7.5000% 1995 2035
FIXED RATE 2.0000% 1981 2011
FIXED RATE 2.0000% 1979 2009
FIXED RATE 2.0000% 1979 2015
FIXED RATE 7.5000% 1995 2035
FIXED RATE 2.0000% 1979 2009
FIXED RATE 9.0000% 1993 2033
FIXED RATE 9.0000% 1995 2036
FIXED RATE 6.5000% 1996 2036
GERMAN CAPITAL MARKET RATE 0.0000% 1991 2031
GERMAN CAPITAL MARKET RATE 0.0000% 1992 2005
GERMAN CAPITAL MARKET RATE 0.0000% 1993 2005
GERMAN CAPITAL MARKET RATE 0.0000% 1993 2005
LIBOR-6 MOS. DEPOSIT 1.0000% 1992 2004
LIBOR-6 MOS. DEPOSIT 0.0000% 1994 2004
EURO
INTEREST FREE 0.0000% 2000 2013
FIXED RATE 2001 2040
SPANISH PESETA
FIXED RATE 2.5000% 1993 2013
ORGANIZATION FOR ECONOMIC
COOPERATION DEVELOPMENT RATE 0.0000% 1993 2004
FRENCH FRANC
FIXED RATE 6.8500% 1994 2006
FIXED RATE 3.0000% 1990 2021
FIXED RATE 3.0000% 1990 2021
FIXED RATE 3.5000% 1979 2005
FIXED RATE 3.0000% 1990 2021
FIXED RATE 3.1000% 1994 2014
FIXED RATE 3.3000% 1994 2014
FIXED RATE 3.0000% 1990 2021
FIXED RATE 2.5000% 1991 2022
FIXED RATE 3.1000% 1994 2014
FIXED RATE 3.0000% 1990 2022
FIXED RATE 8.1000% 1994 2005
FIXED RATE 3.0000% 1988 2021
FIXED RATE 3.0000% 1990 2021
FIXED RATE 3.0000% 1990 2021
FIXED RATE 3.0000% 1990 2021
FIXED RATE 5.4500% 1990 2016
FIXED RATE 2.5000% 1991 2022
FIXED RATE 3.0000% 1990 2022
FIXED RATE 3.0000% 1990 2022
FIXED RATE 3.0000% 1990 2021
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
GRAND TOTAL 16,064.63 10,757.27
========= =========
I. NATIONAL GOVERNMENT DIRECT
GUARANTEE ON GOCC LOANS 15,641.70 10,459.05
========= =========
A. LOANS 12,366.46 6,816.13
========= =========
CANADIAN DOLLAR 23.54 15.11 1.18 0.76
---------- --------- ---------- ---------
SWISS FRANC 81.84 58.36 17.55 12.51
---------- --------- ---------- ---------
34.31 24.47 5.15 3.67
0.23 0.17 0.01 0.01
0.15 0.11 0.09 0.06
6.50 4.64 1.34 0.95
40.65 28.99 10.96 7.82
DEUTSCHE MARK 850.93 451.61 400.71 212.66
---------- --------- ---------- ---------
30.70 16.29 26.70 14.17
150.00 79.61 26.71 14.17
46.00 24.41 35.65 18.92
60.00 31.84 70.83 37.59
60.00 31.84 59.95 31.82
30.40 16.13 30.40 16.13
15.50 8.23 6.68 3.55
0.60 0.32 0.27 0.14
14.75 7.83 14.75 7.83
4.70 2.49 2.10 1.11
7.00 3.72 2.28 1.21
35.80 19.00 14.98 7.95
50.10 26.59 44.70 23.72
2.80 1.49 0.91 0.48
145.00 76.95 9.20 4.88
12.80 6.79 6.86 3.64
9.30 4.94 6.76 3.59
17.25 9.15 2.61 1.39
26.00 13.80 4.41 2.34
39.60 21.02 16.63 8.83
15.00 7.96 7.94 4.21
18.70 9.92 2.81 1.49
43.93 23.32 6.59 3.50
EURO 17.16 17.81 6.37 6.61
---------- --------- ---------- ---------
7.81 8.11 5.67 5.88
9.35 9.71 0.70 0.73
SPANISH PESETA 1,262.24 7.87 698.38 4.36
---------- --------- ---------- ---------
631.12 3.94 549.63 3.43
631.12 3.94 148.74 0.93
FRENCH FRANC 469.61 74.31 319.20 50.51
---------- --------- ---------- ---------
9.42 1.49 4.68 0.74
4.86 0.77 4.62 0.73
0.38 0.06 0.37 0.06
80.00 12.66 10.00 1.58
1.68 0.27 1.60 0.25
10.09 1.60 9.25 1.46
4.94 0.78 4.41 0.70
1.45 0.23 1.27 0.20
6.44 1.02 6.28 0.99
9.90 1.57 9.07 1.43
0.76 0.12 0.76 0.12
1.69 0.27 0.42 0.07
45.88 7.26 37.85 5.99
6.26 0.99 5.79 0.92
1.41 0.22 1.34 0.21
1.69 0.27 1.52 0.24
120.00 18.99 84.00 13.29
8.06 1.28 7.66 1.21
1.22 0.19 1.19 0.19
6.12 0.97 5.96 0.94
4.73 0.75 4.14 0.66
</Table>
T-2
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
FIXED RATE 3.0000% 1990 2022
FIXED RATE 3.0000% 1990 2022
FIXED RATE 3.0000% 1988 2021
FIXED RATE 8.1000% 1994 2006
FIXED RATE 3.1000% 1994 2014
FIXED RATE 6.8700% 1996 2017
FIXED RATE 1.5000% 1996 2022
FIXED RATE 1.5000% 1996 2022
FIXED RATE 1.5000% 1996 2022
FIXED RATE 1.5000% 1996 2022
FIXED RATE 1.5000% 1996 2026
FIXED RATE 5.4500% 1991 2018
FIXED RATE 3.3000% 1994 2014
FIXED RATE 3.0000% 1990 2022
FIXED RATE 3.0000% 1990 2022
KOREAN WON
FIXED RATE 3.5000% 1995 2015
FIXED RATE 3.5000% 1995 2015
POUND STERLING
FIXED RATE 5.9500% 1995 2007
JAPANESE YEN
FIXED RATE 2.5000% 1992 2022
FIXED RATE 6.5000% 1991 2003
FIXED RATE 3.0000% 1994 2024
FIXED RATE 2.5000% 1989 2006
FIXED RATE 2.5000% 1991 2021
FIXED RATE 2.7000% 1988 2004
FIXED RATE 6.5000% 1991 2011
FIXED RATE 3.0000% 1994 2024
FIXED RATE 5.5000% 1992 2010
FIXED RATE 4.7000% 1993 2009
FIXED RATE 5.8000% 1992 2004
FIXED RATE 2.5000% 1995 2025
FIXED RATE 2.1000% 1995 2025
FIXED RATE 2.5000% 1995 2025
FIXED RATE 2.1000% 1995 2025
FIXED RATE 2.7000% 1995 2025
FIXED RATE 2.3000% 1995 2025
FIXED RATE 2.7000% 1995 2025
FIXED RATE 2.7000% 1996 2026
FIXED RATE 2.3000% 1996 2026
FIXED RATE 2.7000% 1996 2026
FIXED RATE 2.3000% 1996 2026
FIXED RATE 2.5000% 1996 2026
FIXED RATE 2.1000% 1996 2026
FIXED RATE 2.3000% 1997 2027
FIXED RATE 2.7000% 1997 2027
FIXED RATE 2.3000% 1997 2027
FIXED RATE 2.7000% 1997 2027
FIXED RATE 2.3000% 1997 2027
FIXED RATE 2.7000% 1997 2027
FIXED RATE 2.3000% 1997 2027
FIXED RATE 2.5000% 1997 2027
FIXED RATE 2.1000% 1997 2027
FIXED RATE 2.5000% 1997 2027
FIXED RATE 2.1000% 1997 2027
FIXED RATE 2.5000% 1997 2027
FIXED RATE 2.1000% 1997 2027
FIXED RATE 2.2000% 1998 2028
FIXED RATE 0.7500% 1998 2038
FIXED RATE 2.2000% 1998 2028
FIXED RATE 0.7500% 1998 2038
FIXED RATE 2.2000% 1998 2028
FIXED RATE 1.7000% 1998 2028
FIXED RATE 0.7500% 1998 2038
FIXED RATE 2.2000% 1999 2028
FIXED RATE 1.7000% 1999 2028
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
0.36 0.06 0.35 0.05
2.25 0.36 2.02 0.32
4.12 0.65 3.60 0.57
5.00 0.79 1.73 0.27
42.62 6.74 35.66 5.64
24.65 3.90 13.56 2.15
8.42 1.33 8.42 1.33
4.46 0.71 4.46 0.71
7.49 1.18 7.49 1.18
10.46 1.66 10.46 1.66
0.45 0.07 2.99 0.47
30.00 4.75 24.15 3.82
1.14 0.18 0.98 0.15
0.48 0.08 0.45 0.07
0.70 0.11 0.70 0.11
KOREAN WON 8,249.00 6.87 13,577.06 11.31
---------- --------- ---------- ---------
8,249.00 6.87 7,109.12 5.92
8,645.00 7.20 6,467.94 5.39
POUND STERLING 7.74 12.39 3.87 6.20
---------- --------- ---------- ---------
7.74 12.39 3.87 6.20
JAPANESE YEN 694,868.21 5,794.51 397,441.45 3,314.26
---------- --------- ---------- ---------
6,686.00 55.75 6,359.85 53.03
13,214.97 110.20 1,319.30 11.00
15,000.00 125.09 12,699.81 105.90
5,003.68 41.73 3,707.76 30.92
30,084.00 250.87 27,148.97 226.40
1,936.96 16.15 1,291.30 10.77
12,215.94 101.87 7,145.10 59.58
22,500.00 187.63 22,500.00 187.63
20,550.00 171.37 4,046.94 33.75
17,812.50 148.54 6,348.55 52.94
27,885.85 232.54 4,769.59 39.77
5,283.00 44.05 329.13 2.74
848.00 7.07 403.73 3.37
1,104.00 9.21 1,021.72 8.52
248.00 2.07 328.78 2.74
11,394.00 95.01 9,885.69 82.44
921.00 7.68 1,232.32 10.28
2,224.00 18.55 1,366.30 11.39
22,837.00 190.44 11,022.74 91.92
1,875.00 15.64 4,301.65 35.87
10,184.00 84.92 10,240.00 85.39
310.00 2.59 250.04 2.09
5,000.00 41.70 4,900.47 40.87
158.00 1.32 157.99 1.32
8,760.00 73.05 502.89 4.19
14,011.00 116.84 1,337.04 11.15
449.00 3.74 40.28 0.34
7,747.00 64.60 5,734.96 47.82
339.00 2.83 284.70 2.37
14,638.00 122.07 8,201.74 68.39
334.00 2.79 259.24 2.16
5,903.00 49.23 262.31 2.19
1,325.00 11.05 842.32 7.02
386.00 3.22 291.91 2.43
648.00 5.40 505.95 4.22
1,927.00 16.07 0.00 0.00
819.00 6.83 144.39 1.20
13,788.00 114.98 1,347.91 11.24
767.00 6.40 232.24 1.94
19,532.00 162.88 4,179.83 34.86
458.00 3.82 298.80 2.49
3,064.00 25.55 388.53 3.24
2,193.00 18.29 292.16 2.44
815.00 6.80 197.26 1.64
3,064.00 25.55 12,314.44 102.69
2,193.00 18.29 1,872.49 15.61
</Table>
T-3
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
FIXED RATE 2.2000% 1999 2040
FIXED RATE 0.9500% 2001 2041
FIXED RATE 0.7500% 2001 2041
JAPAN LONG TERM PRIME 1.2500% 1994 2003
JAPAN LONG TERM PRIME 1.2500% 1994 2003
JAPAN LONG TERM PRIME LENDING
RATE 1.2500% 1994 2005
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1994 2014
JAPAN LONG TERM PRIME LENDING
RATE 1.2500% 1994 2005
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1992 2014
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1992 2015
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1999 2019
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 2001 2011
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 2000 2007
JAPAN LONG TERM PRIME LENDING
RATE -0.2000% 1999 2014
JAPAN SWAP RATE 1.6000% 1999 2009
LIBOR 6MOS DEPOSIT 1.6000% 1999 2009
LIBOR 6MOS DEPOSIT 0.0000% 1999 2003
LIBOR 6MOS DEPOSIT 0.0000% 1999 2004
ADB FLOATING RATE 0.0000% 1998 2013
ADB FLOATING RATE 0.5000% 1996 2015
LIBOR BASE RATE 0.0000% 2000 2014
LIBOR BASE RATE 0.0000% 2002 2021
CQB 0.1000% 2001 2011
LIBOR BASE RATE 0.5000% 1996 2016
US LIBOR 0.0000% 2001 2020
SPECIAL DRAWING RIGHT
INTEREST FREE 0.7500% 1992 2032
LIBOR 6MOS. DEPOSIT 0.8000% 1995 2034
LIBOR 6MOS. DEPOSIT 0.8000% 1995 2014
UNITED STATES DOLLAR
ADB FLOATING RATE 0.0000% 1993 2018
ADB FLOATING RATE 0.0000% 1989 2004
ADB FLOATING RATE 0.0000% 1991 2009
ADB FLOATING RATE 0.0000% 1992 2007
ADB FLOATING RATE 0.0000% 1989 2012
ADB FLOATING RATE 0.0000% 1988 2012
ADB FLOATING RATE 0.0000% 1991 2006
ADB FLOATING RATE 0.0000% 1986 2006
ADB FLOATING RATE 0.0000% 1995 2020
ADB FLOATING RATE 0.0000% 1993 2012
ADB FLOATING RATE 0.0000% 1991 2015
ADB FLOATING RATE 0.0000% 1988 2008
ADB FLOATING RATE 0.0000% 1989 2009
ADB FLOATING RATE 0.0000% 1995 2019
ADB FLOATING RATE 0.0000% 1992 2012
ADB FLOATING RATE 0.0000% 1992 2016
ADB FLOATING RATE 0.0000% 1993 2013
ADB FLOATING RATE 0.0000% 1998 2021
ADB FLOATING RATE 0.0000% 1996 2011
ADB FLOATING RATE 0.0000% 1998 2017
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 10.5000% 1984 2007
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 3.0000% 1995 2006
FIXED RATE 8.1000% 1980 2005
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
16,450.00 137.18 539.81 4.50
39,455.00 329.02 0.00 0.00
2,476.00 20.65 0.00 0.00
26,840.00 223.82 15,698.91 130.91
31,500.00 262.68 24,779.68 206.64
2,163.65 18.04 509.80 4.25
12,400.00 103.40 4,733.90 39.48
297.84 2.48 59.57 0.50
6,100.00 50.87 4,389.38 36.60
18,600.00 155.11 13,126.45 109.46
60,000.00 500.34 55,714.29 464.60
12,500.00 104.24 12,500.00 104.24
5,370.68 44.79 3,836.20 31.99
26,000.00 216.81 19,050.50 158.86
20,800.00 173.45 20,800.00 173.45
27,200.00 226.82 27,200.00 226.82
8,469.00 70.62 2,117.27 17.66
13,537.00 112.89 4,512.18 37.63
3,057.00 25.49 620.18 5.17
2,166.70 18.07 274.44 2.29
3,676.05 30.65 9.80 0.08
2,166.00 18.06 36.76 0.31
3,717.00 31.00 37.18 0.31
9,090.39 75.80 2,186.04 18.23
2,400.00 20.01 2,400.00 20.01
SPECIAL DRAWING RIGHT 13.50 18.23 11.37 15.35
---------- --------- ---------- ---------
3.00 4.05 2.33 3.14
3.50 4.73 3.48 4.70
7.00 9.45 5.56 7.51
UNITED STATES DOLLAR 5,719.09 5,919.09 3,181.59 3,181.59
---------- --------- ---------- ---------
43.20 43.20 18.71 18.71
130.00 130.00 85.61 85.61
25.00 25.00 10.50 10.50
2.60 2.60 0.96 0.96
26.40 26.40 19.17 19.17
43.50 43.50 31.27 31.27
100.00 100.00 15.21 15.21
92.00 92.00 37.63 37.63
92.00 92.00 83.15 83.15
138.00 138.00 98.15 98.15
200.00 200.00 164.66 164.66
120.00 120.00 61.25 61.25
160.00 160.00 100.03 100.03
244.00 244.00 151.92 151.92
75.00 75.00 60.80 60.80
31.40 31.40 7.99 7.99
164.00 164.00 96.65 96.65
50.00 50.00 7.67 7.67
5.35 5.35 4.12 4.12
20.22 20.22 31.61 31.61
0.17 0.17 0.14 0.14
0.03 0.03 0.02 0.02
39.30 39.30 12.07 12.07
0.08 0.08 0.06 0.06
0.05 0.05 0.04 0.04
0.50 0.50 0.37 0.37
42.80 42.80 6.30 6.30
</Table>
T-4
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
FIXED RATE 7.6000% 1979 2004
FIXED RATE 1.5000% 1990 2010
FIXED RATE 7.7000% 1978 2003
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 2.0000% 1993 2013
FIXED RATE 3.5750% 1995 2012
FIXED RATE 1.5000% 1990 2010
FIXED RATE 8.3000% 1989 2003
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 10.1000% 1981 2006
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 10.2500% 1984 2004
FIXED RATE 1.5000% 1990 2010
FIXED RATE 3.0000% 1995 2006
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.2500% 1993 2025
FIXED RATE 1.5000% 1990 2010
FIXED RATE 10.5000% 1984 2007
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 1.5000% 1990 2010
FIXED RATE 6.6000% 1995 2008
FIXED RATE 7.6500% 1996 2009
FIXED RATE 3.0000% 1994 2007
FIXED RATE 4.0000% 1995 2018
FIXED RATE 6.5000% 1997 2010
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1989 2009
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1993 2012
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1993 2013
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1989 2009
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1995 2002
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2013
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1991 2011
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1995 2011
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1992 2012
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
60.70 60.70 9.72 9.72
0.41 0.41 0.33 0.33
49.00 49.00 4.41 4.41
0.04 0.04 0.03 0.03
15.67 15.67 12.54 12.54
9.34 9.34 7.47 7.47
11.56 11.56 9.25 9.25
0.09 0.09 0.07 0.07
19.30 19.30 19.30 19.30
37.90 37.90 36.01 36.01
0.03 0.03 0.02 0.02
2.24 2.24 0.22 0.22
0.10 0.10 0.08 0.08
0.20 0.20 0.16 0.16
3.38 3.38 2.71 2.71
0.17 0.17 0.14 0.14
87.50 87.50 19.40 19.40
11.21 11.21 8.97 8.97
0.15 0.15 0.12 0.12
33.00 33.00 5.41 5.41
0.04 0.04 0.03 0.03
9.50 9.50 2.91 2.91
0.18 0.18 0.14 0.14
0.91 0.91 0.73 0.73
0.12 0.12 0.10 0.10
0.63 0.63 0.51 0.51
24.50 24.50 24.50 24.50
0.51 0.51 0.41 0.41
43.80 43.80 2.75 2.75
0.99 0.99 0.79 0.79
0.38 0.38 0.30 0.30
4.99 4.99 3.99 3.99
0.23 0.23 0.19 0.19
1.35 1.35 0.89 0.89
11.70 11.70 9.36 9.36
25.00 25.00 0.61 0.61
25.00 25.00 1.85 1.85
5.00 5.00 0.52 0.52
15.00 15.00 13.44 13.44
11.10 11.10 3.09 3.09
65.50 65.50 35.82 35.82
113.00 113.00 84.32 84.32
134.00 134.00 28.90 28.90
114.00 114.00 46.66 46.66
110.00 110.00 41.89 41.89
65.00 65.00 39.42 39.42
127.35 127.35 108.10 108.10
19.65 19.65 10.63 10.63
50.00 50.00 45.95 45.95
64.00 64.00 43.99 43.99
175.00 175.00 122.36 122.36
40.00 40.00 33.05 33.05
50.00 50.00 40.06 40.06
91.30 91.30 39.63 39.63
</Table>
T-5
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1988 2008
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1988 2008
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1991 2011
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1990 2010
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1990 2010
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1985 2005
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1991 2011
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1989 2009
INTEREST FREE 0.0000% 2000 2013
LIBOR 6 MOS DEPOSITS 0.6250% 1992 2003
LIBOR 6 MOS DEPOSITS 0.6250% 1992 2003
LIBOR 6 MOS DEPOSITS 0.6250% 1991 2003
LIBOR 6 MOS DEPOSITS 0.6250% 1992 2003
LIBOR 6 MOS DEPOSITS 0.6250% 1992 2003
LIBOR 6MOS. DEPOSIT 0.0000% 1992 2004
LIBOR 6MOS. DEPOSIT 0.0000% 1992 2004
LIBOR 6MOS. DEPOSIT 0.0000% 1992 2004
LIBOR BASE RATE 0.5000% 1996 2016
LIBOR BASE RATE 0.5000% 1996 2016
LIBOR BASE RATE 0.5000% 1996 2016
LIBOR BASE RATE 0.5000% 1995 2015
US CONCESSIONARY INTEREST
RELENDING RATE 0.0000% 1993 2004
LIBOR BASE RATE 0.5000% 1996 2017
LIBOR BASE RATE 0.5000% 1997 2017
LIBOR BASE RATE 0.5000% 1998 2018
LIBOR BASE RATE 0.5000% 1998 2019
LIBOR 6MOS. DEPOSIT 0.0000% 1998 2014
LIBOR 6MOS. DEPOSIT 0.0000% 1998 2008
US FLOATING RATE 0.9000% 1999 2014
US FLOATING RATE 0.3000% 2000 2003
B. BONDS
UNITED STATES DOLLAR
FIXED RATE 9.7500% 1994 2009
FIXED RATE 7.8750% 1996 2006
FIXED RATE 8.4000% 1996 2016
FIXED RATE 9.6250% 1998 2028
FIXED RATE 9.8750% 2000 2010
FIXED RATE 9.5750% 2000 2012
FIXED RATE 8.4750% 2000 2009
FIXED RATE 0.0000% 2002 2010
JAPANESE YEN
FIXED RATE 4.6500% 1995 2015
FIXED RATE 3.1500% 1997 2003
FIXED RATE 2.3500% 2000 2010
FIXED RATE 3.2000% 2002 2020
FIXED RATE 3.5000% 2002 2022
EURO
FIXED RATE 9.5750% 2001 2006
II. GFI GUARANTEE ASSUMED BY NATIONAL GOVERNMENT
BELGIAN FRANC
BIBOR 6 MOS. 0.6000% 1992 2007
BIBOR 6 MOS. 0.6000% 1992 2007
BIBOR 6 MOS. 0.6000% 1992 2007
CANADIAN DOLLAR Upon
INTEREST FREE 0.0000% 1986 Demand
DEUTSCHE MARK
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
41.00 41.00 22.06 22.06
59.00 59.00 27.82 27.82
150.00 150.00 109.22 109.22
150.00 150.00 88.85 88.85
200.00 200.00 127.74 127.74
100.00 100.00 19.96 19.96
15.00 15.00 1.05 1.05
40.00 40.00 22.71 22.71
7.50 7.50 3.89 3.89
19.52 19.52 1.95 1.95
4.87 4.87 0.22 0.22
19.52 19.52 0.98 0.98
6.21 6.21 0.62 0.62
4.52 4.52 0.23 0.23
25.50 25.50 5.10 5.10
17.44 17.44 2.46 2.46
18.77 18.77 2.48 2.48
100.00 100.00 31.86 31.86
57.00 57.00 6.10 6.10
150.00 150.00 94.03 94.03
50.00 50.00 43.34 43.34
2.13 2.13 0.02 0.02
60.00 60.00 21.07 21.07
54.50 54.50 7.63 7.63
150.00 150.00 65.03 65.03
23.30 23.30 5.57 5.57
160.00 160.00 65.56 65.56
25.00 25.00 18.75 18.75
200.00 200.00 180.00 180.00
200.00 200.00 175.00 175.00
B. BONDS 3,275.24 3,642.92
========= =========
UNITED STATES DOLLAR 2,310.00 2,310.00 2,158.68 2,158.68
---------- --------- ---------- ---------
100.00 100.00 100.00 100.00
200.00 200.00 200.00 200.00
160.00 160.00 160.00 160.00
300.00 300.00 300.00 300.00
500.00 500.00 500.00 500.00
250.00 250.00 250.00 250.00
500.00 500.00 500.00 500.00
300.00 300.00 148.68 148.68
JAPANESE YEN 115,750.00 965.24 115,750.00 965.24
---------- --------- ---------- ---------
12,000.00 100.07 12,000.00 100.07
20,000.00 166.78 20,000.00 166.78
22,000.00 183.46 22,000.00 183.46
24,750.00 206.39 24,750.00 206.39
37,000.00 308.54 37,000.00 308.54
EURO 500.00 519.00 500.00 519.00
---------- --------- ---------- ---------
500.00 519.00 500.00 519.00
II. GFI GUARANTEE ASSUMED BY NAT 422.92 298.22
========= =========
BELGIAN FRANC 1,005.34 25.87 646.29 16.63
---------- --------- ---------- ---------
158.97 4.09 102.19 2.63
722.14 18.58 464.24 11.95
124.23 3.20 79.86 2.05
CANADIAN DOLLAR
0.27 0.17 0.27 0.17
---------- --------- ---------- ---------
DEUTSCHE MARK 3.84 2.04 1.93 1.02
---------- --------- ---------- ---------
</Table>
T-6
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
DM LIBOR 0.8125% 1986 2003
DM LIBOR 0.8125% 1986 2003
DM LIBOR 0.8125% 1986 2003
FIXED RATE 8.6000% 1992 2007
SPANISH PESETA
FIXED RATE 11.0000% 1991 2007
FRENCH FRANC
Upon
INTEREST FREE 0.0000% 1986 Demand
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1991 2007
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1991 2007
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1989 2007
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1989 2007
POUND STERLING
Upon
0.0000% 1986 Demand
GBP LIBOR 0.5000% 1991 2007
JAPANESE YEN
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
Upon
INTEREST FREE 0.0000% 1986 Demand
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2007
LONG TERM PRIME RATE 0.1000% 1992 2000
SAUDI RIAL
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
UNITED STATES DOLLAR
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1986 Demand
Upon
INTEREST FREE 0.0000% 1988 Demand
FIXED RATE 3.4750% 1992 2007
FIXED RATE 3.4750% 1992 2007
FIXED RATE 3.4750% 1992 2007
LIBOR 6 MOS 0.8125% 1986 2003
LIBOR 6 MOS 0.8125% 1986 2003
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
0.33 0.18 0.03 0.02
0.33 0.18 0.03 0.02
0.33 0.18 0.03 0.02
2.84 1.51 1.83 0.97
SPANISH PESETA 6,989.98 43.61 4,493.56 28.03
---------- --------- ---------- ---------
6,989.98 43.61 4,493.56 28.03
FRENCH FRANC 21.86 3.46 15.17 2.40
---------- --------- ---------- ---------
3.13 0.50 3.13 0.50
4.36 0.69 2.80 0.44
0.11 0.02 0.07 0.01
13.01 2.06 8.36 1.32
1.24 0.20 0.80 0.13
POUND STERLING 1.03 1.65 0.66 1.06
---------- --------- ---------- ---------
0.00 0.00 0.00 0.00
1.03 1.65 0.66 1.06
JAPANESE YEN 26,248.48 218.89 16,875.01 140.72
---------- --------- ---------- ---------
4,968.73 41.43 3,194.18 26.64
16,886.81 140.82 10,855.81 90.53
216.83 1.81 139.39 1.16
2.74 0.02 2.74 0.02
412.07 3.44 264.90 2.21
701.63 5.85 451.05 3.76
1,194.42 9.96 767.84 6.40
158.65 1.32 101.99 0.85
747.41 6.23 480.48 4.01
801.78 6.69 515.43 4.30
157.43 1.31 101.20 0.84
SAUDI RIAL 27.34 7.29 27.34 7.29
---------- --------- ---------- ---------
5.92 1.58 5.92 1.58
18.46 4.92 18.46 4.92
2.96 0.79 2.96 0.79
UNITED STATES DOLLAR 119.95 119.95 100.89 100.89
---------- --------- ---------- ---------
0.97 0.97 0.97 0.97
8.33 8.33 8.33 8.33
33.09 33.09 33.09 33.09
18.60 18.60 18.60 18.60
0.72 0.72 0.72 0.72
0.51 0.51 0.51 0.51
2.18 2.18 2.18 2.18
5.22 5.22 5.22 5.22
0.51 0.51 0.51 0.51
4.40 4.40 4.40 4.40
11.55 11.55 7.51 7.51
11.25 11.25 7.23 7.23
5.28 5.28 3.39 3.39
0.80 0.80 0.51 0.51
0.09 0.09 0.01 0.01
0.05 0.05 0.00 0.00
</Table>
T-7
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
INTEREST RATE/
SPREAD/
SERVICE CHARGE YEAR YEAR OF
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY
- -------- ------------------------------- -------------- ---------- --------
LIBOR 6 MOS 0.8125% 1991 2007
LIBOR 6 MOS 0.8125% 1986 2003
LIBOR 6 MOS 0.8125% 1992 2007
LIBOR 6 MOS 0.8125% 1991 2007
LIBOR 6 MOS 0.8125% 1986 2003
LIBOR 6 MOS 0.8125% 1991 2007
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1991 2007
<Caption>
OUTSTANDING BALANCE
ORIGINAL AMOUNT AS OF
CONTRACTED DECEMBER 31, 2002
------------------------- -------------------------
(IN ORIGINAL (IN US (IN ORIGINAL (IN US
CURRENCY CURR) DOLLAR)(2) CURR) DOLLAR)(2)
- -------- ------------ ---------- ------------ ----------
0.32 0.32 0.20 0.20
0.59 0.59 0.06 0.06
0.11 0.11 0.07 0.07
1.22 1.22 0.79 0.79
4.66 4.66 0.47 0.47
0.19 0.19 0.12 0.12
5.61 5.61 3.60 3.60
0.10 0.10 0.06 0.06
3.63 3.63 2.33 2.33
</Table>
- ---------------
(1) Includes government guarantee on GOCC (loans and bonds) GFI guarantee
assumed by the government per Proc. 50.
(2) Amounts in original currencies were converted to US Dollars using reference
rate on December 27, 2002.
T-8
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
GRAND TOTAL 40,764.03
----------
I. DIRECT DEBT OF THE REPUBLIC 26,430.22
----------
A. AVAILED OF BY GOVERNMENT
AGENCIES 22,866.43
----------
AUSTRIAN SCHILLING 102.27 7.71
------------ ----------
FIXED RATE 4.0000% 31/03/1997 30/06/2014 14.53 1.10
FIXED RATE 4.5000% 02/03/2002 30/12/2019 15.06 1.14
FIXED RATE 4.5000% 23/07/1999 31/12/2022 72.67 5.48
BELGIAN FRANC 200.00 5.15
------------ ----------
INTEREST FREE 0.0000% 06/04/1977 31/12/2006 50.00 1.29
INTEREST FREE 0.0000% 11/06/1976 31/12/2005 50.00 1.29
FIXED RATE 2.0000% 15/12/1975 31/12/2004 50.00 1.29
FIXED RATE 2.0000% 21/08/1974 31/12/2003 50.00 1.29
CANADIAN DOLLAR 3.89 2.50
------------ ----------
INTEREST FREE 0.0000% 12/11/1974 03/09/2024 3.89 2.50
SWISS FRANC 103.98 74.15
------------ ----------
FIXED RATE 0.0125% 01/01/1998 30/04/2005 6.64 4.73
FIXED RATE 0.0125% 01/05/1990 31/12/2003 1.71 1.22
FIXED RATE 4.6300% 01/01/1998 30/04/2014 37.60 26.81
CHF LIBOR 0.0125% 14/09/1998 15/11/2005 1.62 1.15
CHF LIBOR 0.0000% 25/09/2001 20/09/2014 22.77 16.24
CHF LIBOR 0.0000% 25/09/2001 20/09/2008 22.77 16.24
LIBOR 6 MONTHS DEPOSIT 0.0138% 10/03/1989 31/12/2008 10.87 7.75
DEUTSCHE MARK 67.33 35.73
------------ ----------
FIXED RATE 2.0000% 03/08/1984 31/12/2014 13.50 7.16
FIXED RATE 2.0000% 03/08/1984 31/12/2014 16.50 8.76
FIXED RATE 2.0000% 12/10/1990 31/12/2020 6.60 3.50
FIXED RATE 2.0000% 12/05/1982 31/12/2012 2.73 1.45
FIXED RATE 2.0000% 10/04/1981 30/06/2011 3.00 1.59
FIXED RATE 2.0000% 20/06/1974 30/06/2004 10.00 5.31
FIXED RATE 2.0000% 23/06/1978 30/06/2008 15.00 7.96
DANISH KRONE 80.00 11.18
------------ ----------
INTEREST FREE 0.0000% 26/06/1981 01/04/2006 65.00 9.08
INTEREST FREE 0.0000% 20/02/1985 01/10/2009 15.00 2.10
EURO 154.37 160.23
------------ ----------
INTEREST FREE 0.0000% 29/03/2000 21/03/2016 8.48 8.80
INTEREST FREE 0.0000% 22/09/2000 15/10/2017 1.84 1.91
FIXED RATE 0.4700% 22/01/1998 30/09/2030 0.74 0.77
FIXED RATE 0.4700% 22/01/1998 30/09/2030 3.20 3.32
FIXED RATE 0.7500% 14/02/2002 30/06/2042 7.39 7.67
FIXED RATE 0.7500% 14/02/2002 30/06/2042 10.69 11.09
FIXED RATE 1.5000% 17/02/1995 29/11/2014 8.12 8.42
FIXED RATE 3.4500% 28/02/2002 31/03/2012 18.17 18.86
FIXED RATE 3.6500% 28/02/2002 31/03/2025 36.34 37.72
FIXED RATE 4.0000% 16/11/2000 30/06/2023 31.25 32.44
FIXED RATE 4.4000% 11/12/2001 31/12/2024 23.99 24.90
FIXED RATE 4.9400% 17/08/1999 30/04/2010 3.40 3.53
FIXED RATE 4.9400% 17/08/1999 30/04/2010 0.77 0.80
FRENCH FRANC 1,581.90 250.32
------------ ----------
FIXED RATE 1.4000% 31/12/1994 31/12/2016 102.36 16.20
FIXED RATE 1.4000% 31/12/1994 31/12/2016 17.65 2.79
FIXED RATE 1.5000% 18/12/1995 31/12/2018 24.00 3.80
FIXED RATE 1.5000% 18/12/1995 31/12/2023 12.60 1.99
FIXED RATE 1.5000% 18/12/1995 31/12/2022 3.20 0.51
FIXED RATE 1.5000% 18/12/1995 31/12/2022 4.80 0.76
FIXED RATE 1.5000% 15/01/1997 30/09/2023 36.06 5.71
FIXED RATE 1.5000% 15/01/1997 30/09/2023 98.98 15.66
FIXED RATE 2.0000% 20/05/1992 31/12/2024 4.86 0.77
FIXED RATE 2.0000% 20/05/1992 01/09/2003 3.24 0.51
FIXED RATE 2.0000% 20/05/1992 31/12/2023 18.90 2.99
FIXED RATE 2.0000% 17/01/1992 31/12/2024 69.00 10.92
FIXED RATE 2.0000% 07/12/1990 31/12/2023 14.22 2.25
FIXED RATE 2.0000% 20/05/1992 31/12/2022 4.98 0.79
FIXED RATE 2.5000% 09/02/1990 31/12/2022 27.25 4.31
FIXED RATE 2.5000% 09/02/1990 31/12/2022 29.07 4.60
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
GRAND TOTAL 25,339.61
---------
I. DIRECT DEBT OF THE REPUBLIC 13,297.15
---------
A. AVAILED OF BY GOVERNMENT
AGENCIES 11,560.63
---------
AUSTRIAN SCHILLING 1,287.43 97.12
---------- ---------
183.21 13.82
207.26 15.63
896.96 67.66
BELGIAN FRANC 25.00 0.64
---------- ---------
10.00 0.26
7.50 0.19
5.00 0.13
2.50 0.06
CANADIAN DOLLAR 2.14 1.37
---------- ---------
2.14 1.37
SWISS FRANC 46.27 32.99
---------- ---------
3.32 2.37
0.14 0.10
19.92 14.20
0.92 0.66
18.34 13.08
3.64 2.59
0.00 0.00
DEUTSCHE MARK 30.99 16.44
---------- ---------
7.91 4.20
9.67 5.13
5.94 3.15
1.34 0.71
1.28 0.68
0.73 0.39
4.13 2.19
DANISH KRONE 18.67 2.61
---------- ---------
12.80 1.79
5.87 0.82
EURO 63.06 65.46
---------- ---------
8.48 8.80
1.84 1.91
0.74 0.77
3.24 3.36
0.00 0.00
0.00 0.00
8.08 8.39
3.09 3.21
7.66 7.95
14.15 14.68
12.11 12.57
3.06 3.18
0.61 0.64
FRENCH FRANC 824.29 130.44
---------- ---------
96.73 15.31
17.64 2.79
8.56 1.35
12.60 1.99
1.95 0.31
4.88 0.77
36.06 5.71
47.07 7.45
4.78 0.76
0.16 0.03
18.90 2.99
68.35 10.82
14.22 2.25
4.98 0.79
26.91 4.26
28.51 4.51
</Table>
T-9
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 2.5000% 09/02/1990 31/12/2022 17.40 2.75
FIXED RATE 2.5000% 22/01/1992 31/12/2023 6.67 1.06
FIXED RATE 3.0000% 10/10/1989 31/12/2023 28.50 4.51
FIXED RATE 3.0000% 31/07/1989 21/03/2020 9.50 1.50
FIXED RATE 3.1000% 08/12/1993 31/12/2014 80.00 12.66
FIXED RATE 3.1000% 08/12/1993 31/12/2014 42.40 6.71
FIXED RATE 3.1000% 08/12/1993 31/12/2014 8.00 1.27
FIXED RATE 3.3000% 05/11/1993 30/06/2013 10.40 1.65
FIXED RATE 3.3000% 05/11/1993 30/06/2013 18.40 2.91
FIXED RATE 3.3000% 04/08/1993 31/12/2013 73.42 11.62
FIXED RATE 3.3000% 05/11/1993 30/06/2013 21.60 3.42
FIXED RATE 3.5000% 21/12/1992 30/09/2015 21.60 3.42
FIXED RATE 3.5000% 21/12/1992 30/09/2015 128.00 20.25
FIXED RATE 3.5000% 21/12/1993 30/09/2016 15.00 2.37
FIXED RATE 3.5000% 21/12/1994 30/09/2017 55.20 8.73
FIXED RATE 3.5000% 21/12/1992 30/09/2015 53.36 8.44
FIXED RATE 3.5000% 21/12/1995 30/09/2015 15.00 2.37
FIXED RATE 3.5000% 21/12/1995 31/12/2017 5.00 0.79
FIXED RATE 3.5000% 21/12/1996 30/09/2018 49.70 7.86
FIXED RATE 3.5000% 21/12/1997 30/12/2019 24.00 3.80
FIXED RATE 5.6800% 15/01/1997 08/02/2010 39.99 6.33
FIXED RATE 5.8200% 08/05/1997 30/12/2010 24.04 3.80
FIXED RATE 6.9100% 31/12/1995 30/12/2008 8.40 1.33
FIXED RATE 7.3500% 31/12/1995 31/12/2017 21.16 3.35
FIXED RATE 7.3500% 31/12/1994 31/12/2016 7.35 1.16
FIXED RATE 7.3500% 31/12/1994 31/12/2016 42.64 6.75
FIXED RATE 7.3500% 31/12/1995 31/12/2017 8.37 1.32
FIXED RATE 7.5000% 31/12/1995 31/12/2017 34.45 5.45
FIXED RATE 7.5000% 31/12/1992 30/09/2008 32.00 5.06
FIXED RATE 7.5000% 31/12/1992 30/09/2008 13.34 2.11
FIXED RATE 7.5000% 31/12/1992 30/09/2008 5.40 0.85
FIXED RATE 7.5500% 23/06/1993 05/07/2004 5.40 0.85
FIXED RATE 7.5500% 08/12/1993 31/12/2004 20.00 3.16
FIXED RATE 7.5500% 08/12/1993 31/12/2004 2.00 0.32
FIXED RATE 7.5500% 23/06/1992 05/07/2004 4.60 0.73
FIXED RATE 7.5500% 23/06/1992 05/05/2004 2.60 0.41
FIXED RATE 7.5500% 08/12/1993 31/12/2004 10.60 1.68
FIXED RATE 8.3000% 28/04/1989 31/12/2003 28.50 4.51
FIXED RATE 9.2000% 07/12/1990 09/11/2004 9.48 1.50
FIXED RATE 9.2000% 17/01/1991 09/06/2004 12.60 1.99
FIXED RATE 9.2000% 09/02/1990 01/11/2003 19.73 3.12
FIXED RATE 9.2000% 23/06/1992 30/06/2005 18.35 2.90
FIXED RATE 9.2000% 22/01/1992 01/12/2003 4.83 0.76
FIXED RATE 9.2000% 17/01/1992 19/07/2003 51.77 8.19
POUND STERLING 186.32 298.31
------------ ----------
FIXED RATE 5.9500% 14/07/1995 01/06/2008 69.23 110.85
FIXED RATE 6.6000% 05/07/1996 01/08/2007 13.34 21.36
FIXED RATE 6.7400% 31/03/2001 28/02/2013 16.25 26.02
FIXED RATE 8.1000% 30/07/1992 31/01/2005 11.95 19.14
LIBOR 6 MONTHS DEPOSIT 0.0000% 31/12/1997 31/07/2012 75.54 120.95
ITALIAN LIRA 10,185.74 5.46
------------ ----------
LIBOR 6 MONTHS DEPOSIT 1.5000% 30/06/1990 25/05/2011 10,185.74 5.46
JAPANESE YEN 1,354,861.96 11,298.19
------------ ----------
LONG TERM PRIME
LENDING RATE -0.0200% 17/02/1999 15/09/2018 43,800.00 365.25
LONG TERM PRIME
LENDING RATE -0.0200% 17/02/2000 15/09/2019 43,800.00 365.25
LONG TERM PRIME
LENDING RATE 0.5000% 23/06/1997 15/05/2021 20,800.00 173.45
FIXED RATE 0.7500% 10/03/1999 20/03/2039 36,300.00 302.71
FIXED RATE 0.7500% 28/12/1999 20/12/2039 813.00 6.78
FIXED RATE 0.7500% 28/12/1999 20/12/2039 432.00 3.60
FIXED RATE 0.7500% 28/12/1999 20/12/2039 722.00 6.02
FIXED RATE 0.7500% 28/12/1999 20/12/2039 2,828.00 23.58
FIXED RATE 0.7500% 28/12/1999 20/12/2039 967.00 8.06
FIXED RATE 0.7500% 28/12/1999 20/12/2039 844.00 7.04
FIXED RATE 0.7500% 28/12/1999 20/12/2039 747.00 6.23
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
17.18 2.72
6.58 1.04
25.56 4.04
8.41 1.33
73.51 11.63
38.41 6.08
7.66 1.21
8.83 1.40
15.77 2.49
64.10 10.14
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
11.85 1.87
4.14 0.65
6.31 1.00
23.98 3.80
21.39 3.38
16.25 2.57
4.20 0.66
0.00 0.00
4.41 0.70
25.80 4.08
0.00 0.00
22.03 3.49
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
6.99 1.11
0.80 0.13
1.15 0.18
0.65 0.10
3.70 0.59
0.00 0.00
0.47 0.07
1.26 0.20
0.00 0.00
5.51 0.87
0.71 0.11
4.40 0.70
POUND STERLING 13.61 21.80
---------- ---------
0.00 0.00
8.26 13.22
2.37 3.79
2.99 4.78
0.00 0.00
ITALIAN LIRA 8,717.61 4.67
---------- ---------
8,717.61 4.67
JAPANESE YEN 676,786.57 5,643.72
---------- ---------
12,080.00 100.74
35,553.75 296.48
7,183.29 59.90
24,200.00 201.80
0.00 0.00
221.31 1.85
142.70 1.19
817.69 6.82
282.15 2.35
176.59 1.47
250.29 2.09
</Table>
T-10
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 0.7500% 28/12/1999 20/12/2039 444.00 3.70
FIXED RATE 0.7500% 28/12/1999 20/12/2039 1,221.00 10.18
FIXED RATE 0.7500% 28/12/1999 20/12/2039 1,022.00 8.52
FIXED RATE 0.7500% 07/04/2000 20/04/2040 1,071.00 8.93
FIXED RATE 0.7500% 31/08/2000 20/08/2040 14,724.00 122.78
FIXED RATE 0.7500% 31/08/2000 20/08/2040 3,549.00 29.60
FIXED RATE 0.7500% 10/09/1998 20/09/2038 894.00 7.46
FIXED RATE 0.7500% 10/09/1998 20/09/2038 3,077.00 25.66
FIXED RATE 0.7500% 10/09/1998 20/09/2038 580.00 4.84
FIXED RATE 0.7500% 10/09/1998 20/09/2038 1,041.00 8.68
FIXED RATE 0.7500% 10/09/1998 20/09/2038 54.00 0.45
FIXED RATE 0.7500% 10/09/1998 20/09/2038 404.00 3.37
FIXED RATE 0.7500% 10/09/1998 20/09/2038 5,349.00 44.61
FIXED RATE 0.7500% 10/09/1998 20/09/2038 2,910.00 24.27
FIXED RATE 0.7500% 10/09/1998 20/09/2038 2,252.00 18.78
FIXED RATE 0.7500% 10/09/1998 20/09/2038 393.00 3.28
FIXED RATE 0.7500% 20/05/2001 20/05/2041 1,346.00 11.22
FIXED RATE 0.7500% 20/05/2001 20/05/2041 856.00 7.14
FIXED RATE 0.7500% 20/05/2001 20/05/2041 1,098.00 9.16
FIXED RATE 0.7500% 20/05/2001 20/05/2041 1,070.00 8.92
FIXED RATE 0.7500% 20/05/2001 20/05/2041 1,080.00 9.01
FIXED RATE 0.7500% 20/05/2001 20/05/2041 992.00 8.27
FIXED RATE 0.7500% 20/05/2001 20/05/2041 233.00 1.94
FIXED RATE 0.7500% 20/05/2001 20/05/2041 1,134.00 9.46
FIXED RATE 0.7500% 20/05/2001 20/05/2041 2,034.00 16.96
FIXED RATE 0.9500% 31/08/2000 20/08/2040 14,724.00 122.78
FIXED RATE 0.9500% 31/08/2000 20/08/2040 3,549.00 29.60
FIXED RATE 1.0000% 07/04/2000 20/04/2040 7,858.00 65.53
FIXED RATE 1.3000% 28/12/1999 20/12/2029 519.00 4.33
FIXED RATE 1.3000% 28/12/1999 20/12/2029 255.00 2.13
FIXED RATE 1.3000% 28/12/1999 20/12/2029 1,436.00 11.97
FIXED RATE 1.3000% 28/12/1999 20/12/2029 7,792.00 64.98
FIXED RATE 1.3000% 28/12/1999 20/12/2029 145.00 1.21
FIXED RATE 1.7000% 10/09/1998 20/09/2028 6,734.00 56.15
FIXED RATE 1.7000% 10/09/1998 20/09/2028 291.00 2.43
FIXED RATE 1.7000% 10/09/1998 20/09/2028 2,428.00 20.25
FIXED RATE 1.7000% 20/05/2001 20/05/2041 2,556.00 21.31
FIXED RATE 1.7000% 20/05/2001 20/05/2041 5,175.00 43.15
FIXED RATE 1.8000% 28/12/1999 20/12/2029 6,397.00 53.34
FIXED RATE 1.8000% 28/12/1999 20/12/2029 5,356.00 44.66
FIXED RATE 1.8000% 28/12/1999 20/12/2029 15,299.00 127.58
FIXED RATE 1.8000% 28/12/1999 20/12/2029 12,556.00 104.70
FIXED RATE 1.8000% 28/12/1999 20/12/2029 4,885.00 40.74
FIXED RATE 1.8000% 28/12/1999 20/12/2029 6.59 0.05
FIXED RATE 1.8000% 28/12/1999 20/12/2029 4,321.00 36.03
FIXED RATE 1.8000% 28/12/1999 20/12/2029 4,270.00 35.61
FIXED RATE 1.9500% 22/09/2000 14/10/2013 16,600.00 138.43
FIXED RATE 2.1000% 25/03/1999 15/12/2011 20,308.18 169.35
FIXED RATE 2.1000% 25/08/1999 15/06/2011 9,697.89 80.87
FIXED RATE 2.1000% 30/08/1995 20/08/2025 789.00 6.58
FIXED RATE 2.1000% 29/03/1996 20/03/2026 1,048.00 8.74
FIXED RATE 2.1000% 18/03/1997 20/03/2027 1,192.00 9.94
FIXED RATE 2.1000% 18/03/1997 20/03/2027 1,226.00 10.22
FIXED RATE 2.2000% 10/09/1998 20/09/2028 4,955.00 41.32
FIXED RATE 2.2000% 10/09/1998 20/09/2028 10,487.00 87.45
FIXED RATE 2.2000% 10/09/1998 20/09/2028 5,148.00 42.93
FIXED RATE 2.2000% 10/09/1999 20/09/2028 2,387.00 19.91
FIXED RATE 2.2000% 10/09/1998 20/09/2028 11,884.00 99.10
FIXED RATE 2.2000% 20/05/2001 20/05/2041 6,948.00 57.94
FIXED RATE 2.2000% 20/05/2001 20/05/2041 4,687.00 39.08
FIXED RATE 2.2000% 20/05/2001 20/05/2041 10,645.00 88.77
FIXED RATE 2.2000% 20/05/2001 20/05/2041 5,135.00 42.82
FIXED RATE 2.2000% 20/05/2001 20/05/2041 4,130.00 34.44
FIXED RATE 2.2000% 20/05/2001 20/05/2041 5,523.00 46.06
FIXED RATE 2.3000% 30/08/1995 20/08/2025 795.00 6.63
FIXED RATE 2.3000% 30/08/1995 20/08/2025 586.00 4.89
FIXED RATE 2.3000% 30/08/1995 20/08/2025 1,327.00 11.07
FIXED RATE 2.3000% 30/08/1995 20/08/2025 597.00 4.98
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
185.42 1.55
626.35 5.22
769.00 6.41
451.73 3.77
425.86 3.55
270.74 2.26
507.14 4.23
1,191.28 9.93
290.78 2.42
281.29 2.35
26.23 0.22
312.52 2.61
711.82 5.94
399.59 3.33
841.79 7.02
203.57 1.70
326.39 2.72
0.00 0.00
0.00 0.00
0.00 0.00
141.30 1.18
1,028.43 8.58
0.00 0.00
382.02 3.19
199.59 1.66
0.00 0.00
0.00 0.00
0.00 0.00
46.48 0.39
33.41 0.28
531.45 4.43
2,460.96 20.52
0.00 0.00
193.72 1.62
0.00 0.00
619.81 5.17
266.70 2.22
0.00 0.00
166.69 1.39
81.95 0.68
3,794.81 31.64
585.18 4.88
0.00 0.00
0.00 0.00
233.34 1.95
0.00 0.00
12,957.70 108.05
5,727.58 47.76
8,494.47 70.84
638.37 5.32
954.78 7.96
505.76 4.22
640.44 5.34
2,368.30 19.75
2,153.42 17.96
104.11 0.87
0.00 0.00
2,126.81 17.74
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
785.96 6.55
479.62 4.00
1,493.54 12.45
568.85 4.74
</Table>
T-11
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 2.3000% 30/08/1995 20/08/2025 640.00 5.34
FIXED RATE 2.3000% 30/08/1995 20/08/2025 1,792.00 14.94
FIXED RATE 2.3000% 30/08/1995 20/08/2025 490.00 4.09
FIXED RATE 2.3000% 30/08/1995 20/08/2025 1,658.00 13.83
FIXED RATE 2.3000% 30/08/1995 20/08/2025 569.00 4.74
FIXED RATE 2.3000% 29/03/1996 20/03/2026 305.00 2.54
FIXED RATE 2.3000% 18/03/1997 20/03/2027 902.00 7.52
FIXED RATE 2.3000% 18/03/1997 20/03/2027 985.00 8.21
FIXED RATE 2.3000% 18/03/1997 20/03/2027 821.00 6.85
FIXED RATE 2.3000% 18/03/1997 20/03/2027 4,019.00 33.51
FIXED RATE 2.5000% 30/08/1995 20/08/2025 7,523.00 62.73
FIXED RATE 2.5000% 29/03/1996 20/03/2026 5,863.00 48.89
FIXED RATE 2.5000% 18/03/1997 20/03/2027 8,219.00 68.54
FIXED RATE 2.5000% 18/03/1997 20/03/2027 6,753.00 56.31
FIXED RATE 2.7000% 28/03/1991 20/03/2016 10,575.00 88.18
FIXED RATE 2.7000% 16/07/1991 20/06/2021 20,020.00 166.95
FIXED RATE 2.7000% 26/12/1988 20/12/2013 15,000.00 125.09
FIXED RATE 2.7000% 26/12/1988 20/12/2013 25,000.00 208.48
FIXED RATE 2.7000% 26/12/1988 20/12/2013 12,500.00 104.24
FIXED RATE 2.7000% 23/11/1989 20/11/2014 40,000.00 333.56
FIXED RATE 2.7000% 21/12/1990 20/12/2020 28,200.00 235.16
FIXED RATE 2.7000% 28/03/1991 20/03/2016 13,219.00 110.23
FIXED RATE 2.7000% 16/07/1991 20/06/2016 13,219.00 110.23
FIXED RATE 2.7000% 26/05/1989 20/05/2019 2,130.40 17.77
FIXED RATE 2.7000% 09/02/1990 20/02/2020 2,304.00 19.21
FIXED RATE 2.7000% 09/02/1990 20/02/2020 4,238.00 35.34
FIXED RATE 2.7000% 09/02/1990 20/02/2020 2,079.00 17.34
FIXED RATE 2.7000% 09/02/1990 20/02/2020 5,708.00 47.60
FIXED RATE 2.7000% 09/02/1990 20/02/2020 8,634.00 72.00
FIXED RATE 2.7000% 09/02/1990 20/02/2020 316.25 2.64
FIXED RATE 2.7000% 09/02/1990 20/02/2020 4,986.00 41.58
FIXED RATE 2.7000% 09/02/1990 20/02/2020 5,080.00 42.36
FIXED RATE 2.7000% 09/02/1990 20/02/2020 10,560.00 88.06
FIXED RATE 2.7000% 09/02/1990 20/02/2020 21,752.00 181.39
FIXED RATE 2.7000% 09/02/1990 20/02/2020 4,867.00 40.59
FIXED RATE 2.7000% 09/02/1990 20/02/2020 4,301.00 35.87
FIXED RATE 2.7000% 16/07/1991 20/06/2021 2,065.00 17.22
FIXED RATE 2.7000% 16/07/1991 20/06/2021 1,663.00 13.87
FIXED RATE 2.7000% 16/07/1991 20/06/2021 1,795.00 14.97
FIXED RATE 2.7000% 16/07/1991 20/06/2021 5,266.00 43.91
FIXED RATE 2.7000% 16/07/1991 20/06/2021 10,790.00 89.98
FIXED RATE 2.7000% 16/07/1991 20/06/2021 3,516.00 29.32
FIXED RATE 2.7000% 16/07/1991 20/06/2021 9,427.00 78.61
FIXED RATE 2.7000% 20/03/1992 20/03/2022 7,655.00 63.84
FIXED RATE 2.7000% 30/08/1995 20/08/2025 5,356.00 44.66
FIXED RATE 2.7000% 30/08/1995 20/08/2025 3,454.00 28.80
FIXED RATE 2.7000% 30/08/1995 20/08/2025 17,064.00 142.30
FIXED RATE 2.7000% 30/08/1995 20/08/2025 4,982.00 41.54
FIXED RATE 2.7000% 30/08/1995 20/08/2025 5,746.00 47.92
FIXED RATE 2.7000% 30/08/1995 20/08/2025 11,103.00 92.59
FIXED RATE 2.7000% 30/08/1995 20/08/2025 4,275.00 35.65
FIXED RATE 2.7000% 30/08/1995 20/08/2025 7,893.00 65.82
FIXED RATE 2.7000% 30/08/1995 20/08/2025 2,303.00 19.20
FIXED RATE 2.7000% 18/03/1997 20/03/2027 4,844.00 40.39
FIXED RATE 2.7000% 18/03/1997 20/03/2027 6,698.00 55.85
FIXED RATE 2.7000% 18/03/1997 20/03/2027 5,772.00 48.13
FIXED RATE 2.7000% 18/03/1997 20/03/2027 7,103.00 59.23
FIXED RATE 2.7000% 26/05/1989 20/05/2019 2,063.00 17.20
FIXED RATE 2.7000% 26/05/1989 20/05/2019 4,776.00 39.83
FIXED RATE 2.7000% 26/05/1989 20/05/2019 2,500.00 20.85
FIXED RATE 2.7000% 26/05/1989 20/05/2019 2,633.00 21.96
FIXED RATE 2.7000% 26/05/1989 20/05/2019 5,500.00 45.86
FIXED RATE 3.0000% 17/12/1987 20/12/2012 30,000.00 250.17
FIXED RATE 3.0000% 03/09/1992 20/09/2017 25,380.00 211.64
FIXED RATE 3.0000% 19/08/1993 20/08/2023 6,872.00 57.31
FIXED RATE 3.0000% 19/08/1993 20/08/2023 4,633.00 38.63
FIXED RATE 3.0000% 19/08/1993 20/08/2023 3,803.00 31.71
FIXED RATE 3.0000% 19/08/1993 20/08/2023 3,055.00 25.48
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
662.32 5.52
1,313.38 10.95
455.48 3.80
2,292.06 19.11
559.10 4.66
227.20 1.89
593.34 4.95
885.94 7.39
473.93 3.95
1,627.17 13.57
4,611.39 38.45
5,956.00 49.67
1,675.99 13.98
1,626.60 13.56
7,716.87 64.35
18,066.77 150.66
8,918.91 74.37
14,864.85 123.96
7,432.41 61.98
25,945.94 216.36
24,760.94 206.48
9,646.29 80.44
9,646.29 80.44
1,714.68 14.30
1,942.71 16.20
3,119.73 26.02
1,724.52 14.38
4,591.16 38.29
6,332.90 52.81
269.96 2.25
4,243.61 35.39
2,711.00 22.61
5,360.88 44.70
13,953.80 116.36
3,279.99 27.35
3,671.15 30.61
1,638.29 13.66
1,364.49 11.38
1,135.46 9.47
4,355.90 36.32
9,546.07 79.60
3,146.41 26.24
8,386.16 69.93
4,432.35 36.96
5,030.11 41.95
2,836.65 23.65
11,368.72 94.80
4,693.66 39.14
3,114.35 25.97
6,110.79 50.96
3,388.18 28.25
5,777.11 48.18
1,256.70 10.48
2,133.19 17.79
2,610.98 21.77
4,385.39 36.57
1,647.01 13.73
1,631.65 13.61
2,653.00 22.12
2,012.18 16.78
1,572.85 13.12
4,057.35 33.83
16,216.20 135.23
20,578.35 171.60
6,665.85 55.59
3,967.75 33.09
3,557.21 29.66
3,054.99 25.48
</Table>
T-12
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 3.0000% 19/08/1993 20/08/2023 9,294.00 77.50
FIXED RATE 3.0000% 20/12/1994 20/12/2024 9,620.00 80.22
FIXED RATE 3.0000% 20/12/1994 20/12/2024 11,754.00 98.02
FIXED RATE 3.0000% 20/06/1980 20/06/2010 5,400.00 45.03
FIXED RATE 3.0000% 20/06/1980 20/06/2010 62.28 0.52
FIXED RATE 3.0000% 20/06/1980 20/06/2010 577.55 4.82
FIXED RATE 3.0000% 20/06/1980 20/06/2010 1,860.00 15.51
FIXED RATE 3.0000% 20/06/1980 20/06/2010 85.18 0.71
FIXED RATE 3.0000% 20/06/1980 20/06/2010 149.90 1.25
FIXED RATE 3.0000% 20/06/1980 20/06/2010 5,410.00 45.11
FIXED RATE 3.0000% 20/06/1980 20/06/2010 810.07 6.76
FIXED RATE 3.0000% 20/06/1980 20/06/2010 979.81 8.17
FIXED RATE 3.0000% 16/06/1981 20/06/2011 5,000.00 41.70
FIXED RATE 3.0000% 16/06/1981 20/06/2011 3,825.52 31.90
FIXED RATE 3.0000% 16/06/1981 20/06/2011 7,571.84 63.14
FIXED RATE 3.0000% 31/05/1982 20/05/2012 3,985.19 33.23
FIXED RATE 3.0000% 31/05/1982 20/05/2012 2,765.83 23.06
FIXED RATE 3.0000% 31/05/1982 20/05/2012 301.37 2.51
FIXED RATE 3.0000% 31/05/1982 20/05/2012 3,420.92 28.53
FIXED RATE 3.0000% 31/05/1982 10/05/2012 3,773.45 31.47
FIXED RATE 3.0000% 09/09/1983 20/09/2013 2,943.82 24.55
FIXED RATE 3.0000% 09/09/1983 20/09/2013 2,123.40 17.71
FIXED RATE 3.0000% 09/09/1983 20/09/2013 1,140.00 9.51
FIXED RATE 3.0000% 09/09/1983 20/09/2013 4,600.00 38.36
FIXED RATE 3.0000% 27/01/1988 20/01/2018 2,254.00 18.80
FIXED RATE 3.0000% 27/01/1988 20/01/2018 4,837.00 40.34
FIXED RATE 3.0000% 27/01/1988 20/01/2018 10,818.00 90.21
FIXED RATE 3.0000% 27/01/1988 20/01/2018 2,090.00 17.43
FIXED RATE 3.0000% 27/01/1988 20/01/2018 5,735.00 47.82
FIXED RATE 3.0000% 27/01/1988 20/01/2018 3,193.00 26.63
FIXED RATE 3.0000% 27/01/1988 20/01/2018 4,611.00 38.45
FIXED RATE 3.0000% 27/01/1988 20/01/2018 3,372.00 28.12
FIXED RATE 3.0000% 27/01/1988 20/01/2018 2,000.00 16.68
FIXED RATE 3.0000% 27/01/1988 20/01/2018 707.00 5.90
FIXED RATE 3.0000% 27/01/1988 20/01/2018 313.93 2.62
FIXED RATE 3.0000% 27/01/1988 20/01/2018 300.44 2.51
FIXED RATE 3.0000% 31/05/1988 20/05/2018 14,003.00 116.77
FIXED RATE 3.0000% 20/12/1994 20/12/2024 4,616.00 38.49
FIXED RATE 3.2500% 14/01/1978 20/01/2003 329.75 2.75
FIXED RATE 3.2500% 14/01/1978 20/01/2003 1,773.53 14.79
FIXED RATE 3.2500% 14/01/1978 20/01/2003 2,986.50 24.90
FIXED RATE 3.2500% 09/11/1978 20/11/2008 4,554.10 37.98
FIXED RATE 3.2500% 09/11/1978 20/11/2008 1,257.12 10.48
FIXED RATE 3.2500% 09/11/1978 20/11/2008 2,913.08 24.29
FIXED RATE 3.2500% 09/11/1978 20/11/2008 5,263.39 43.89
FIXED RATE 3.2500% 09/11/1978 20/05/2008 8,128.00 67.78
FIXED RATE 3.2500% 09/11/1978 20/11/2008 290.07 2.42
FIXED RATE 3.2500% 09/11/1978 20/11/2008 176.78 1.47
FIXED RATE 3.2500% 09/11/1978 20/11/2008 155.99 1.30
FIXED RATE 3.2500% 09/11/1978 20/11/2008 2,185.29 18.22
FIXED RATE 3.5000% 22/12/1994 31/05/2007 48,000.00 400.27
FIXED RATE 3.5000% 26/11/1986 20/11/2006 32,895.00 274.31
FIXED RATE 3.5000% 07/05/1984 20/05/2014 2,997.01 24.99
FIXED RATE 3.5000% 07/05/1984 20/05/2014 1,381.00 11.52
FIXED RATE 3.5000% 30/05/1986 20/05/2016 102.06 0.85
FIXED RATE 3.5000% 30/05/1986 20/05/2016 457.38 3.81
FIXED RATE 3.5000% 30/05/1986 20/05/2016 7,595.00 63.33
FIXED RATE 3.5000% 30/05/1986 20/05/2016 3,979.50 33.19
FIXED RATE 3.5000% 30/05/1986 20/05/2016 1,439.00 12.00
FIXED RATE 3.5000% 30/05/1986 20/05/2016 1,457.60 12.15
FIXED RATE 4.2500% 26/03/1979 20/03/2004 10,855.20 90.52
FIXED RATE 5.0000% 01/10/1987 20/06/2003 39,120.00 326.22
FIXED RATE 6.0000% 11/03/1993 01/02/2013 25,000.00 208.48
FIXED RATE 6.0000% 27/04/1990 15/06/2009 48,000.00 400.27
LIBOR 6 MONTHS 2.2500% 22/09/2000 25/04/2015 2,940.00 24.52
LIBOR 6 MONTHS 2.5000% 13/09/2001 12/12/2006 3,583.80 29.89
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
4,407.96 36.76
9,471.92 78.99
11,753.90 98.02
1,975.59 16.47
22.77 0.19
211.28 1.76
680.48 5.67
31.16 0.26
54.83 0.46
1,979.27 16.51
296.36 2.47
358.46 2.99
1,976.57 16.48
1,586.17 13.23
3,139.53 26.18
1,846.76 15.40
1,281.70 10.69
139.63 1.16
1,585.28 13.22
1,748.67 14.58
1,579.60 13.17
1,095.42 9.13
554.25 4.62
2,411.11 20.11
119.75 1.00
3,362.23 28.04
6,815.72 56.84
1,547.15 12.90
4,302.65 35.88
2,047.36 17.07
3,397.35 28.33
2,055.21 17.14
1,057.81 8.82
457.06 3.81
237.34 1.98
227.14 1.89
10,543.04 87.92
4,323.47 36.05
8.91 0.07
47.93 0.40
80.72 0.67
1,332.90 11.12
367.93 3.07
852.60 7.11
1,540.49 12.85
2,368.27 19.75
84.89 0.71
51.73 0.43
45.65 0.38
639.58 5.33
19,399.25 161.77
8,489.03 70.79
1,681.23 14.02
314.64 2.62
67.18 0.56
301.19 2.51
4,809.67 40.11
2,620.62 21.85
634.96 5.29
959.88 8.00
880.15 7.34
3,401.73 28.37
14,851.58 123.85
17,052.75 142.20
2,940.00 24.52
3,583.80 29.89
</Table>
T-13
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
KOREAN WON 24,961.98 20.79
------------ ----------
FIXED RATE 2.5000% 24/02/1998 20/02/2028 21,172.00 17.64
FIXED RATE 3.5000% 12/03/1991 20/03/2011 3,789.98 3.16
KUWAIT DINAR 11.05 38.26
------------ ----------
FIXED RATE 3.5000% 06/05/1998 15/08/2018 6.15 21.29
FIXED RATE 4.5000% 26/12/1984 15/02/2008 4.90 16.97
NETHERLANDS GUILDER 2.30 1.08
------------ ----------
FIXED RATE 2.5000% 27/04/1984 31/12/2014 2.30 1.08
SWEDISH KRONA 18.31 2.08
------------ ----------
INTEREST FREE 0.0000% 13/02/1998 30/12/2008 18.31 2.08
SPECIAL DRAWING RIGHT 909.36 1,228.00
------------ ----------
INTEREST FREE 1.0000% 22/11/1990 15/08/2025 16.73 22.59
INTEREST FREE 1.0000% 27/12/1988 15/11/2023 5.91 7.98
INTEREST FREE 1.0000% 09/11/1990 15/11/2025 35.87 48.45
INTEREST FREE 1.0000% 11/07/1991 15/02/2026 50.00 67.52
INTEREST FREE 1.0000% 06/03/1992 01/06/2027 26.40 35.65
INTEREST FREE 1.0000% 27/12/1988 15/10/2023 18.68 25.22
INTEREST FREE 1.0000% 25/01/1991 15/08/2025 24.19 32.67
INTEREST FREE 1.0000% 24/06/1992 15/11/2026 27.16 36.68
INTEREST FREE 1.0000% 22/11/1990 15/08/2025 69.70 94.12
INTEREST FREE 1.0000% 18/12/1989 01/10/2024 25.04 33.82
INTEREST FREE 1.0000% 20/01/1995 15/10/2029 11.93 16.10
INTEREST FREE 1.0000% 25/10/1990 15/09/2025 18.25 24.64
INTEREST FREE 1.0000% 12/09/1988 15/05/2023 53.41 72.12
INTEREST FREE 1.0000% 17/02/1989 15/11/2023 14.77 19.95
INTEREST FREE 1.0000% 05/11/1993 15/06/2028 18.02 24.34
INTEREST FREE 1.0000% 17/02/1989 15/10/2023 25.85 34.91
INTEREST FREE 1.0000% 04/07/1988 01/04/2023 43.44 58.66
INTEREST FREE 1.0000% 05/10/1989 15/08/2024 39.77 53.70
INTEREST FREE 1.0000% 28/11/1991 15/11/2026 35.25 47.59
INTEREST FREE 1.0000% 20/01/1995 15/10/2029 36.80 49.69
INTEREST FREE 1.0000% 21/04/1988 01/02/2023 11.61 15.68
INTEREST FREE 1.0000% 28/11/1991 15/11/2026 22.03 29.75
INTEREST FREE 1.0000% 22/11/1993 01/06/2028 50.50 68.20
INTEREST FREE 1.0000% 11/01/1996 15/09/2029 15.65 21.13
INTEREST FREE 1.0000% 22/11/1990 15/11/2025 14.36 19.39
INTEREST FREE 1.0000% 24/12/1992 01/10/2027 34.65 46.79
INTEREST FREE 1.0000% 24/04/1986 15/05/2026 43.40 58.60
INTEREST FREE 1.0000% 27/11/1995 15/05/2030 9.63 13.00
INTEREST FREE 1.0000% 27/11/1995 15/04/2030 17.64 23.82
INTEREST FREE 1.0000% 04/06/1996 15/03/2021 12.76 17.23
INTEREST FREE 1.0000% 23/07/1997 15/05/2021 13.84 18.69
INTEREST FREE 1.0000% 21/01/1998 01/09/2032 11.02 14.88
INTEREST FREE 1.0000% 15/04/1998 15/11/2032 6.49 8.76
INTEREST FREE 0.0000% 29/11/2000 15/01/2040 4.50 6.08
INTEREST FREE 0.0000% 25/09/2000 15/01/2040 6.00 8.10
FIXED RATE 0.7500% 06/03/1996 15/03/2030 6.15 8.30
FIXED RATE 0.7500% 29/04/1998 15/03/2038 11.00 14.85
FIXED RATE 4.0000% 18/05/1992 01/04/2012 11.00 14.85
FIXED RATE 4.0000% 16/11/1982 01/08/2002 6.95 9.38
FIXED RATE 4.0000% 22/04/1987 01/03/2007 3.02 4.08
UNITED STATES DOLLAR 9,427.26 9,427.26
------------ ----------
ADB FLOATING RATE 0.0000% 22/11/1990 15/11/2015 9.00 9.00
ADB FLOATING RATE 0.0000% 17/02/1989 15/10/2003 65.00 65.00
ADB FLOATING RATE 0.0000% 25/10/1990 15/09/2020 33.00 33.00
ADB FLOATING RATE 0.0000% 23/12/1986 01/04/2012 82.00 82.00
ADB FLOATING RATE 0.0000% 27/11/1995 15/05/2022 15.00 15.00
ADB FLOATING RATE 0.0000% 20/01/1995 15/10/2019 41.00 41.00
ADB FLOATING RATE 0.0000% 23/12/1986 15/06/2016 18.80 18.80
ADB FLOATING RATE 0.0000% 05/10/1989 15/08/2004 30.00 30.00
ADB FLOATING RATE 0.0000% 04/07/1988 01/04/2003 60.00 60.00
ADB FLOATING RATE 0.0000% 23/12/1986 01/10/2010 24.00 24.00
ADB FLOATING RATE 0.0000% 09/11/1990 15/11/2005 50.00 50.00
ADB FLOATING RATE 0.0000% 11/01/1996 15/09/2021 9.50 9.50
ADB FLOATING RATE 0.0000% 04/02/1991 15/08/2015 150.00 150.00
ADB FLOATING RATE 0.0000% 27/11/1995 15/04/2020 30.00 30.00
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
KOREAN WON 4,223.42 3.52
---------- ---------
2,075.81 1.73
2,147.61 1.79
KUWAIT DINAR 2.00 6.91
---------- ---------
0.16 0.56
1.84 6.36
NETHERLANDS GUILDER 0.00 0.00
---------- ---------
0.00 0.00
SWEDISH KRONA 18.21 2.07
---------- ---------
18.21 2.07
SPECIAL DRAWING RIGHT 670.08 904.87
---------- ---------
11.61 15.68
5.32 7.18
34.08 46.02
48.13 64.99
24.09 32.53
14.43 19.49
22.98 31.04
22.65 30.59
64.81 87.52
14.53 19.62
7.05 9.52
17.00 22.95
41.66 56.25
13.09 17.67
14.25 19.24
23.27 31.42
38.55 52.06
36.79 49.68
28.35 38.29
21.88 29.54
9.30 12.56
21.48 29.00
25.28 34.14
4.24 5.72
12.80 17.29
12.43 16.79
37.75 50.98
7.34 9.91
9.47 12.79
5.85 7.89
1.96 2.65
3.37 4.55
1.76 2.37
0.00 0.00
0.00 0.00
2.73 3.69
3.19 4.31
5.56 7.50
0.18 0.24
0.87 1.17
UNITED STATES DOLLAR 4,625.99 4,625.99
---------- ---------
6.84 6.84
8.76 8.76
29.91 29.91
57.75 57.75
7.92 7.92
32.45 32.45
14.77 14.77
7.71 7.71
4.14 4.14
14.21 14.21
18.39 18.39
5.54 5.54
120.55 120.55
8.37 8.37
</Table>
T-14
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
ADB FLOATING RATE 0.0000% 20/01/1995 01/10/2016 23.50 23.50
ADB FLOATING RATE 0.0000% 24/12/1992 01/10/2017 50.00 50.00
ADB FLOATING RATE 0.0000% 02/05/1996 01/05/2010 150.00 150.00
ADB FLOATING RATE 0.0000% 03/06/1997 15/03/2021 18.50 18.50
ADB FLOATING RATE 0.0000% 23/06/1997 15/05/2021 167.00 167.00
ADB FLOATING RATE 0.0000% 24/04/1986 15/05/2006 50.00 50.00
ADB FLOATING RATE 0.0000% 21/12/1998 15/08/2013 300.00 300.00
ADB FLOATING RATE 0.0000% 21/12/1998 01/08/2013 200.00 200.00
ADB FLOATING RATE 0.0000% 21/01/1998 01/09/2022 93.00 93.00
ADB FLOATING RATE 0.0000% 21/01/1998 01/09/2022 20.22 20.22
ADB FLOATING RATE 0.0000% 15/04/1998 15/11/2022 15.70 15.70
ADB FLOATING RATE 0.0000% 21/01/1998 15/11/2022 22.00 22.00
ADB FLOATING RATE 0.0000% 21/12/1998 01/08/2022 71.00 71.00
ADB FLOATING RATE 0.0000% 01/03/1999 01/08/2025 53.00 53.00
ADB FLOATING RATE 0.0000% 01/03/1999 01/12/2023 24.30 24.30
ADB FLOATING RATE 0.0000% 01/03/1999 15/12/2023 93.16 93.16
ADB FLOATING RATE 0.0000% 01/03/1999 15/08/2023 60.00 60.00
ADB FLOATING RATE 0.0000% 18/07/2000 15/08/2014 100.00 100.00
ADB FLOATING RATE 0.0000% 18/07/2000 15/08/2024 75.00 75.00
ADB FLOATING RATE 0.0000% 21/07/2000 15/02/2015 100.00 100.00
ADB FLOATING RATE 0.0000% 21/07/2000 15/02/2015 75.00 75.00
ADB FLOATING RATE 0.0000% 16/11/2000 15/08/2025 25.00 25.00
ADB FLOATING RATE 0.0000% 19/11/2001 15/08/2016 75.00 75.00
ADB FLOATING RATE 0.0000% 22/10/2001 15/09/2025 75.00 75.00
COST QUA. BOR. IBRD 6M 0.5000% 22/12/1989 15/03/2010 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 04/06/1984 01/07/2004 90.95 90.95
COST QUA. BOR. IBRD 6M 0.5000% 19/01/1990 01/02/2010 40.00 40.00
COST QUA. BOR. IBRD 6M 0.5000% 31/05/1989 15/06/2009 300.00 300.00
COST QUA. BOR. IBRD 6M 0.5000% 26/09/1984 01/10/2004 150.00 150.00
COST QUA. BOR. IBRD 6M 0.5000% 09/11/1989 15/09/2009 70.10 70.10
COST QUA. BOR. IBRD 6M 0.5000% 10/08/1984 15/08/2004 35.81 35.81
COST QUA. BOR. IBRD 6M 0.5000% 16/03/1990 15/04/2010 40.00 40.00
COST QUA. BOR. IBRD 6M 0.5000% 09/06/1993 01/08/2013 28.36 28.36
COST QUA. BOR. IBRD 6M 0.5000% 09/06/1993 01/08/2013 22.94 22.94
COST QUA. BOR. IBRD 6M 0.5000% 23/12/1992 01/02/2013 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 05/02/1992 15/03/2012 90.79 90.79
COST QUA. BOR. IBRD 6M 0.5000% 05/02/1992 15/03/2012 59.21 59.21
COST QUA. BOR. IBRD 6M 0.5000% 15/07/1993 01/03/2013 37.54 37.54
COST QUA. BOR. IBRD 6M 0.5000% 15/07/1993 01/03/2013 25.46 25.46
COST QUA. BOR. IBRD 6M 0.5000% 19/06/1986 01/01/2006 82.00 82.00
COST QUA. BOR. IBRD 6M 0.5000% 01/09/1988 01/08/2008 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 09/07/1990 15/09/2010 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 07/02/1984 01/02/2004 24.97 24.97
COST QUA. BOR. IBRD 6M 0.5000% 13/06/1988 15/08/2008 45.00 45.00
COST QUA. BOR. IBRD 6M 0.5000% 28/04/1995 01/04/2015 1.30 1.30
COST QUA. BOR. IBRD 6M 0.5000% 28/04/1995 01/04/2015 16.70 16.70
COST QUA. BOR. IBRD 6M 0.5000% 10/06/1983 01/06/2003 35.92 35.92
COST QUA. BOR. IBRD 6M 0.5000% 30/03/1987 01/01/2007 300.00 300.00
COST QUA. BOR. IBRD 6M 0.5000% 11/07/1991 15/08/2011 139.44 139.44
COST QUA. BOR. IBRD 6M 0.5000% 11/07/1991 15/08/2011 18.56 18.56
COST QUA. BOR. IBRD 6M 0.5000% 02/04/1985 01/05/2005 3.95 3.95
COST QUA. BOR. IBRD 6M 0.5000% 01/09/1988 15/08/2008 125.26 125.26
COST QUA. BOR. IBRD 6M 0.5000% 27/04/1983 15/05/2003 302.25 302.25
INTEREST FREE 1.0000% 20/12/1974 01/10/2014 5.77 5.77
INTEREST FREE 1.0000% 10/11/1978 01/10/2018 14.00 14.00
INTEREST FREE 1.0000% 27/08/1979 01/02/2019 12.34 12.34
INTEREST FREE 1.0000% 22/10/1980 15/09/2020 12.20 12.20
INTEREST FREE 1.0000% 12/10/1981 01/09/2021 12.11 12.11
INTEREST FREE 1.0000% 05/01/1973 01/09/2022 12.70 12.70
INTEREST FREE 1.0000% 05/04/1974 15/04/2024 9.50 9.50
INTEREST FREE 1.0000% 21/04/1978 15/12/2027 21.52 21.52
INTEREST FREE 1.0000% 27/06/1979 01/06/2029 32.22 32.22
FIXED RATE 0.3000% 28/05/2002 30/11/2032 4.40 4.40
FIXED RATE 0.3000% 28/05/2002 30/11/2032 6.78 6.78
FIXED RATE 0.3000% 28/05/2002 30/11/2032 18.56 18.56
FIXED RATE 1.0000% 22/09/2000 04/10/2030 7.01 7.01
FIXED RATE 1.0000% 03/08/2001 31/12/2031 40.00 40.00
FIXED RATE 1.5000% 11/07/1996 17/03/2026 25.18 25.18
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
19.19 19.19
16.45 16.45
52.12 52.12
7.73 7.73
66.14 66.14
18.56 18.56
286.18 286.18
90.79 90.79
10.18 10.18
5.07 5.07
4.27 4.27
1.24 1.24
6.45 6.45
3.28 3.28
2.40 2.40
18.56 18.56
8.30 8.30
30.00 30.00
2.50 2.50
40.00 40.00
1.49 1.49
1.46 1.46
75.00 75.00
1.81 1.81
126.52 126.52
11.52 11.52
26.35 26.35
171.44 171.44
20.00 20.00
41.02 41.02
4.46 4.46
19.84 19.84
23.53 23.53
15.29 15.29
161.31 161.31
66.90 66.90
46.47 46.47
30.17 30.17
16.36 16.36
21.78 21.78
107.60 107.60
116.91 116.91
2.06 2.06
12.63 12.63
1.17 1.17
8.99 8.99
1.08 1.08
90.00 90.00
100.71 100.71
3.99 3.99
0.62 0.62
67.38 67.38
10.08 10.08
2.77 2.77
8.96 8.96
8.14 8.14
8.75 8.75
9.20 9.20
7.62 7.62
6.13 6.13
16.14 16.14
25.62 25.62
1.95 1.95
2.12 2.12
5.96 5.96
6.91 6.91
39.73 39.73
25.75 25.75
</Table>
T-15
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 1.7500% 06/08/2000 15/12/2016 10.00 10.00
FIXED RATE 2.0000% 24/12/1980 01/10/2021 4.87 4.87
FIXED RATE 2.0000% 23/07/1982 15/04/2023 4.15 4.15
FIXED RATE 2.0000% 03/04/1984 19/08/2021 0.04 0.04
FIXED RATE 2.0000% 24/03/1975 31/05/2017 15.00 15.00
FIXED RATE 2.0000% 29/07/1975 16/02/2017 3.47 3.47
FIXED RATE 2.0000% 22/12/1975 13/09/2017 4.84 4.84
FIXED RATE 2.0000% 11/03/1974 07/12/2016 1.38 1.38
FIXED RATE 2.0000% 28/04/1976 25/04/2017 8.90 8.90
FIXED RATE 2.0000% 27/06/1977 27/04/2018 2.93 2.93
FIXED RATE 2.0000% 13/01/1978 18/05/2019 4.86 4.86
FIXED RATE 2.0000% 13/01/1978 09/11/2018 1.46 1.46
FIXED RATE 2.0000% 18/08/1978 14/10/2018 0.68 0.68
FIXED RATE 2.0000% 23/02/1979 08/04/2020 10.61 10.61
FIXED RATE 2.0000% 28/03/1980 05/03/2021 6.36 6.36
FIXED RATE 2.0000% 15/02/1979 28/04/2021 4.13 4.13
FIXED RATE 2.0000% 15/02/1978 15/05/2021 3.98 3.98
FIXED RATE 2.0000% 16/07/1979 15/09/2020 3.63 3.63
FIXED RATE 2.0000% 01/08/1979 11/01/2022 0.83 0.83
FIXED RATE 2.0000% 01/08/1978 06/01/2024 0.44 0.44
FIXED RATE 2.0000% 29/08/1980 13/10/2021 0.39 0.39
FIXED RATE 2.0000% 06/11/1981 06/11/2021 9.65 9.65
FIXED RATE 2.0000% 28/05/1981 26/08/2022 0.91 0.91
FIXED RATE 2.0000% 29/08/1980 01/06/2021 2.09 2.09
FIXED RATE 2.0000% 25/09/1981 15/03/2022 3.04 3.04
FIXED RATE 2.0000% 30/09/1981 17/08/2021 0.82 0.82
FIXED RATE 2.0000% 31/08/1982 14/06/2023 0.81 0.81
FIXED RATE 2.0000% 29/09/1982 28/04/2023 0.21 0.21
FIXED RATE 2.0000% 23/05/1984 02/06/2023 0.04 0.04
FIXED RATE 2.0000% 31/08/1983 16/11/2024 0.18 0.18
FIXED RATE 2.0000% 24/08/1979 20/02/2021 1.05 1.05
FIXED RATE 2.0000% 28/10/1980 16/12/2023 3.74 3.74
FIXED RATE 2.0000% 04/12/1980 28/10/2023 0.49 0.49
FIXED RATE 2.0000% 21/07/1982 12/09/2023 0.29 0.29
FIXED RATE 2.0000% 30/07/1983 16/04/2025 0.98 0.98
FIXED RATE 2.0000% 29/07/1983 01/10/2024 0.06 0.06
FIXED RATE 2.0000% 26/03/1984 10/10/2024 0.35 0.35
FIXED RATE 2.0000% 15/02/1979 22/11/2022 0.74 0.74
FIXED RATE 2.0000% 30/06/1980 14/02/2023 2.30 2.30
FIXED RATE 2.0000% 01/06/1994 23/11/2019 14.97 14.97
FIXED RATE 2.0000% 20/06/1986 13/10/2016 31.99 31.99
FIXED RATE 2.0000% 19/05/1988 03/07/2018 29.99 29.99
FIXED RATE 2.0000% 31/07/1990 25/10/2020 21.00 21.00
FIXED RATE 2.0000% 02/08/1999 30/12/2019 15.13 15.13
FIXED RATE 2.0000% 02/08/1999 11/02/2020 14.87 14.87
FIXED RATE 2.0000% 04/05/1972 26/12/2002 9.64 9.64
FIXED RATE 2.0000% 08/07/1985 25/10/2015 40.00 40.00
FIXED RATE 2.0000% 12/07/2000 19/01/2021 23.35 23.35
FIXED RATE 2.0000% 12/07/2000 19/01/2021 16.65 16.65
FIXED RATE 2.5000% 30/06/1997 28/04/2014 9.48 9.48
FIXED RATE 3.0000% 29/06/1973 01/05/2003 6.00 6.00
FIXED RATE 3.0000% 04/12/1980 06/04/2022 2.30 2.30
FIXED RATE 3.0000% 06/07/1989 06/07/2007 100.00 100.00
FIXED RATE 3.0000% 17/05/1991 01/10/2021 15.00 15.00
FIXED RATE 3.0000% 30/01/1992 05/04/2022 20.00 20.00
FIXED RATE 3.0000% 30/04/1993 26/11/2023 20.00 20.00
FIXED RATE 3.0000% 30/10/2001 30/10/2011 35.00 35.00
FIXED RATE 3.0000% 19/09/2002 01/12/2016 41.25 41.25
FIXED RATE 3.0250% 30/03/1988 15/10/2004 6.50 6.50
FIXED RATE 3.2500% 27/09/1990 15/04/2006 4.89 4.89
FIXED RATE 3.2500% 22/09/1997 22/03/2014 10.00 10.00
FIXED RATE 3.4000% 01/03/1996 15/12/2012 22.95 22.95
FIXED RATE 3.4000% 06/06/1997 15/12/2014 36.82 36.82
FIXED RATE 3.4000% 01/05/1998 15/05/2014 38.51 38.51
FIXED RATE 3.9500% 23/12/1994 28/01/2006 6.13 6.13
FIXED RATE 4.0000% 16/07/1998 05/11/2018 10.00 10.00
FIXED RATE 4.5500% 28/05/2002 31/01/2009 4.40 4.40
FIXED RATE 4.5500% 28/05/2002 30/11/2008 6.78 6.78
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
1.65 1.65
3.52 3.52
4.20 4.20
0.03 0.03
8.81 8.81
2.04 2.04
2.92 2.92
0.79 0.79
5.23 5.23
1.82 1.82
3.08 3.08
0.92 0.92
0.45 0.45
7.22 7.22
4.52 4.52
2.93 2.93
2.83 2.83
2.52 2.52
0.61 0.61
0.35 0.35
0.28 0.28
6.98 6.98
0.68 0.68
1.48 1.48
2.24 2.24
0.61 0.61
0.62 0.62
0.16 0.16
0.03 0.03
0.15 0.15
0.74 0.74
2.92 2.92
0.40 0.40
0.23 0.23
0.81 0.81
0.05 0.05
0.29 0.29
0.55 0.55
1.76 1.76
12.12 12.12
17.22 17.22
18.45 18.45
14.54 14.54
15.13 15.13
14.87 14.87
0.00 0.00
20.00 20.00
23.35 23.35
16.64 16.64
9.01 9.01
0.18 0.18
1.67 1.67
42.22 42.22
11.87 11.87
16.67 16.67
17.50 17.50
0.00 0.00
41.25 41.25
1.08 1.08
1.71 1.71
1.69 1.69
22.95 22.95
27.81 27.81
38.51 38.51
0.00 0.00
10.00 10.00
0.00 0.00
0.00 0.00
</Table>
T-16
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 4.5500% 28/05/2002 30/09/2008 18.56 18.56
FIXED RATE 5.2000% 05/03/1998 15/10/2010 24.99 24.99
FIXED RATE 5.2000% 08/11/1999 15/11/2012 99.45 99.45
FIXED RATE 5.9500% 23/12/1994 01/03/2006 34.75 34.75
FIXED RATE 7.1800% 22/09/2000 05/04/2008 7.01 7.01
FIXED RATE 7.5000% 29/06/1973 01/05/2003 3.59 3.59
FIXED RATE 7.5000% 26/11/1973 01/09/2003 4.20 4.20
FIXED RATE 7.6000% 07/11/1979 01/09/2009 39.65 39.65
FIXED RATE 7.7000% 09/06/1978 15/04/2008 23.50 23.50
FIXED RATE 7.7300% 06/04/1990 15/07/2010 40.88 40.88
FIXED RATE 7.7300% 06/04/1990 15/07/2010 80.92 80.92
FIXED RATE 7.7300% 09/07/1990 15/09/2010 85.00 85.00
FIXED RATE 7.7300% 08/11/1990 01/08/2010 18.63 18.63
FIXED RATE 7.7300% 08/11/1990 01/08/2010 27.57 27.57
FIXED RATE 7.7300% 08/11/1990 01/11/2010 125.00 125.00
FIXED RATE 7.7300% 05/02/1992 15/04/2012 61.00 61.00
FIXED RATE 7.7300% 31/03/1992 15/06/2012 33.25 33.25
FIXED RATE 7.7300% 31/03/1992 15/06/2012 34.75 34.75
FIXED RATE 7.7500% 31/05/1989 01/03/2009 60.00 60.00
FIXED RATE 8.0000% 23/07/1996 20/10/2006 25.75 25.75
FIXED RATE 8.0000% 20/06/1997 30/05/2013 9.48 9.48
FIXED RATE 8.0600% 14/09/1994 15/04/2006 20.42 20.42
FIXED RATE 8.3000% 06/09/1977 15/04/2007 17.53 17.53
FIXED RATE 8.6000% 31/12/1991 30/11/2004 51.95 51.95
FIXED RATE 8.7500% 07/07/1975 01/05/2005 12.80 12.80
FIXED RATE 8.7500% 18/12/1975 01/11/2005 25.98 25.98
FIXED RATE 8.9000% 15/12/1976 15/07/2006 14.60 14.60
FIXED RATE 9.0000% 06/11/1980 15/07/2004 30.00 30.00
FIXED RATE 9.2000% 07/11/1989 15/10/2003 8.76 8.76
FIXED RATE 10.0000% 12/10/1981 01/09/2011 20.79 20.79
FIXED RATE 10.1000% 17/11/1981 01/08/2006 20.17 20.17
FIXED RATE 10.1000% 04/12/1981 01/09/2006 2.48 2.48
FIXED RATE 10.2500% 28/12/1984 15/04/2008 20.63 20.63
FIXED RATE 10.5000% 23/12/1983 15/11/2013 38.30 38.30
FIXED RATE 10.5000% 23/12/1983 01/10/2003 4.17 4.17
FIXED RATE 10.5000% 23/12/1983 15/10/2013 25.15 25.15
FIXED RATE 11.0000% 03/11/1982 01/09/2012 18.80 18.80
FIXED RATE 11.0000% 01/12/1982 01/05/2006 47.39 47.39
FIXED RATE 11.0000% 20/05/1983 01/01/2010 21.77 21.77
LIBOR 6 MONTHS DEPOSIT 0.0000% 03/06/1994 01/06/2024 5.00 5.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 03/06/1994 01/06/2024 10.00 10.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 05/02/1992 01/02/2022 50.00 50.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 10/03/1995 10/03/2015 26.50 26.50
LIBOR 6 MONTHS DEPOSIT 0.0000% 14/12/1999 15/12/2019 27.50 27.50
LIBOR 6 MONTHS DEPOSIT 0.0000% 25/02/2000 04/15/2020 10.00 10.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 10/04/2000 15/02/2020 150.00 150.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 20/10/2000 09/01/2020 4.79 4.79
LIBOR 6 MONTHS DEPOSIT 0.0000% 08/08/2001 01/05/2021 60.00 60.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 20/12/1996 15/01/2017 113.40 113.40
LIBOR 6 MONTHS DEPOSIT 0.5000% 20/12/1996 15/01/2018 50.00 50.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 20/12/1997 15/01/2019 58.00 58.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 09/09/1997 15/06/2018 50.00 50.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 08/04/1998 15/06/2018 10.00 10.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 08/04/1998 15/06/2018 19.00 19.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 12/09/2002 15/04/2019 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 07/10/2002 15/04/2022 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 0.6250% 18/03/1992 15/12/2003 9.39 9.39
LIBOR 6 MONTHS DEPOSIT 0.6250% 01/04/1992 15/06/2003 4.29 4.29
LIBOR 6 MONTHS DEPOSIT 0.6250% 06/08/1992 15/06/2003 0.99 0.99
LIBOR 6 MONTHS DEPOSIT 0.7500% 11/12/1998 15/09/2018 300.00 300.00
LIBOR 6 MONTHS DEPOSIT 0.7500% 23/03/1999 15/05/2019 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 1.1000% 19/10/2000 24/10/2003 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 1.6000% 19/10/2000 24/10/2005 300.00 300.00
LIBOR 6 MONTHS DEPOSIT 2.9000% 04/07/2001 15/12/2003 100.00 100.00
B. RELENT TO GOCC's 3,563.79
----------
BELGIAN FRANC 1,231.67 31.69
------------ ----------
INTEREST FREE 0.0000% 30/10/1992 31/12/2022 150.00 3.86
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
0.56 0.56
12.72 12.72
86.13 86.13
15.50 15.50
6.32 6.32
0.16 0.16
0.37 0.37
19.63 19.63
9.70 9.70
19.71 19.71
50.64 50.64
29.24 29.24
6.40 6.40
17.09 17.09
72.53 72.53
41.71 41.71
20.97 20.97
25.29 25.29
34.28 34.28
13.63 13.63
5.56 5.56
6.28 6.28
6.21 6.21
0.00 0.00
2.87 2.87
6.73 6.73
4.95 4.95
5.85 5.85
1.34 1.34
13.59 13.59
7.58 7.58
0.92 0.92
9.96 9.96
27.16 27.16
0.53 0.53
17.86 17.86
12.31 12.31
16.20 16.20
13.28 13.28
5.00 5.00
19.50 19.50
10.00 10.00
14.35 14.35
5.69 5.69
63.52 63.52
37.35 37.35
1.26 1.26
3.31 3.31
30.76 30.76
46.15 46.15
26.77 26.77
12.67 12.67
9.83 9.83
8.22 8.22
1.00 1.00
0.00 0.00
1.41 1.41
0.43 0.43
0.10 0.10
100.00 100.00
4.62 4.62
100.00 100.00
300.00 300.00
100.00 100.00
B. RELENT TO GOCC's 1,736.52
---------
BELGIAN FRANC 664.71 17.10
---------- ---------
140.13 3.61
</Table>
T-17
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
INTEREST FREE 0.0000% 23/12/1983 31/12/2013 100.00 2.57
INTEREST FREE 0.0000% 29/11/1982 31/12/2012 100.00 2.57
INTEREST FREE 0.0000% 04/11/1981 31/12/2011 300.00 7.72
INTEREST FREE 0.0000% 11/08/1980 31/12/2010 450.00 11.58
INTEREST FREE 0.0000% 11/03/1996 31/12/2025 131.67 3.39
SWISS FRANC 12.07 8.61
------------ ----------
FIXED RATE 8.3000% 10/03/1989 31/12/2003 12.07 8.61
DEUTSCHE MARK 131.93 70.02
------------ ----------
FIXED RATE 2.0000% 10/07/1989 31/12/2019 32.40 17.20
FIXED RATE 2.0000% 22/03/1982 30/06/2012 9.70 5.15
FIXED RATE 2.0000% 10/07/1989 31/12/2019 14.40 7.64
FIXED RATE 2.0000% 10/07/1989 31/12/2019 62.80 33.33
FIXED RATE 2.0000% 10/04/1981 31/12/2015 12.63 6.70
DANISH KRONE 110.00 15.37
------------ ----------
INTEREST FREE 0.0000% 20/02/1985 01/04/2009 95.00 13.28
INTEREST FREE 0.0000% 20/02/1985 01/10/2009 15.00 2.10
POUNDS STERLING 5.49 8.78
------------ ----------
FIXED RATE 2.0000% 12/03/1980 12/03/2005 3.52 5.64
FIXED RATE 2.0000% 23/09/1980 23/09/2005 1.97 3.15
JAPANESE YEN 378,891.88 3,159.58
------------ ----------
FIXED RATE 0.7500% 07/04/2000 20/04/2040 1,587.00 13.23
FIXED RATE 0.7500% 07/04/2000 20/04/2040 821.00 6.85
FIXED RATE 0.7500% 10/09/1998 20/09/2038 23,668.00 197.37
FIXED RATE 1.0000% 07/04/2000 20/04/2040 20,675.00 172.41
FIXED RATE 1.0000% 07/04/2000 20/04/2040 7,445.00 62.08
FIXED RATE 2.0000% 05/09/1973 31/08/2003 4,513.55 37.64
FIXED RATE 2.0000% 16/08/1995 31/07/2025 545.40 4.55
FIXED RATE 2.7000% 26/05/1989 20/05/2019 6,300.00 52.54
FIXED RATE 2.7000% 28/06/1990 15/11/2010 5,066.00 42.25
FIXED RATE 2.7000% 16/07/1991 20/04/2021 2,005.00 16.72
FIXED RATE 2.7000% 16/07/1991 20/06/2021 5,788.00 48.27
FIXED RATE 2.7000% 26/05/1992 20/05/2022 1,094.00 9.12
FIXED RATE 2.7000% 16/07/1991 20/06/2021 8,283.00 69.07
FIXED RATE 2.7000% 16/07/1991 20/06/2021 4,028.00 33.59
FIXED RATE 2.7000% 18/03/1997 20/03/2027 25,665.00 214.02
FIXED RATE 2.7000% 18/03/1997 20/03/2027 679.00 5.66
FIXED RATE 2.7000% 26/05/1989 20/05/2019 5,054.00 42.15
FIXED RATE 3.0000% 29/01/1993 20/07/2022 3,563.90 29.72
FIXED RATE 3.0000% 31/03/1993 20/03/2023 6,112.00 50.97
FIXED RATE 3.0000% 19/08/1993 20/08/2023 18,120.00 151.10
FIXED RATE 3.0000% 19/08/1993 20/08/2023 1,259.00 10.50
FIXED RATE 3.0000% 12/08/1994 20/08/2024 11,433.00 95.34
FIXED RATE 3.0000% 07/12/1994 20/12/2024 7,056.00 58.84
FIXED RATE 3.0000% 07/12/1994 20/12/2024 6,630.00 55.29
FIXED RATE 3.0000% 20/12/1994 20/12/2024 5,513.00 45.97
FIXED RATE 3.0000% 20/12/1994 20/12/2024 10,756.00 89.69
FIXED RATE 3.0000% 20/12/1994 20/12/2024 2,896.00 24.15
FIXED RATE 3.0000% 20/12/1994 20/12/2024 457.00 3.81
FIXED RATE 3.0000% 20/12/1994 20/12/2024 9,795.00 81.68
FIXED RATE 3.0000% 20/12/1994 20/12/2024 6,212.00 51.80
FIXED RATE 3.0000% 20/06/1980 20/06/2010 14,832.73 123.69
FIXED RATE 3.0000% 20/06/1980 20/06/2010 1,529.75 12.76
FIXED RATE 3.0000% 16/06/1981 20/06/2011 8,516.35 71.02
FIXED RATE 3.0000% 16/06/1981 20/06/2011 7,554.76 63.00
FIXED RATE 3.0000% 16/06/1981 20/06/2011 4,507.27 37.59
FIXED RATE 3.0000% 16/06/1981 20/06/2011 136.58 1.14
FIXED RATE 3.0000% 31/05/1982 20/05/2012 25,489.96 212.56
FIXED RATE 3.0000% 31/05/1982 20/05/2012 467.92 3.90
FIXED RATE 3.0000% 31/05/1982 20/05/2012 149.16 1.24
FIXED RATE 3.0000% 09/09/1983 20/09/2013 6,510.19 54.29
FIXED RATE 3.0000% 09/09/1983 20/09/2013 4,500.00 37.53
FIXED RATE 3.0000% 09/09/1983 20/09/2013 169.79 1.42
FIXED RATE 3.0000% 27/01/1988 20/01/2018 1,272.00 10.61
FIXED RATE 3.0000% 27/01/1988 20/01/2018 6,015.00 50.16
FIXED RATE 3.0000% 27/01/1988 20/01/2018 2,478.00 20.66
FIXED RATE 3.0000% 27/01/1988 20/01/2018 192.00 1.60
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
41.25 1.06
37.50 0.96
135.00 3.47
180.00 4.63
130.83 3.37
SWISS FRANC 0.08 0.05
---------- ---------
0.08 0.05
DEUTSCHE MARK 89.42 47.45
---------- ---------
14.93 7.92
4.74 2.52
11.94 6.34
52.30 27.76
5.51 2.92
DANISH KRONE 38.76 5.42
---------- ---------
32.89 4.60
5.87 0.82
POUNDS STERLING 0.33 0.52
---------- ---------
0.00 0.00
0.33 0.52
JAPANESE YEN 183,955.70 1,534.01
---------- ---------
510.65 4.26
513.51 4.28
1,140.33 9.51
435.79 3.63
2,074.35 17.30
225.68 1.88
541.35 4.51
3,998.61 33.34
4,224.01 35.22
1,673.70 13.96
4,960.70 41.37
750.13 6.26
6,690.67 55.79
3,018.68 25.17
17,363.11 144.79
0.00 0.00
4,053.89 33.81
3,155.77 26.32
2,987.05 24.91
18,014.15 150.22
1,195.84 9.97
9,739.81 81.22
1,369.25 11.42
696.63 5.81
5,164.02 43.06
320.15 2.67
1,218.99 10.17
213.91 1.78
9,325.00 77.76
1,524.35 12.71
5,426.60 45.25
559.65 4.67
3,531.16 29.45
3,132.45 26.12
1,868.86 15.58
56.61 0.47
11,812.40 98.50
216.83 1.81
69.10 0.58
3,493.25 29.13
2,412.63 20.12
91.08 0.76
714.71 5.96
4,487.16 37.42
46.41 0.39
127.84 1.07
</Table>
T-18
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
FIXED RATE 3.2500% 14/01/1978 20/01/2003 10,404.52 86.76
FIXED RATE 3.2500% 14/01/1978 20/01/2003 3,957.73 33.00
FIXED RATE 3.2500% 09/11/1978 20/11/2008 4,433.24 36.97
FIXED RATE 3.2500% 02/02/1979 20/02/2009 6,999.93 58.37
FIXED RATE 3.2500% 14/01/1978 20/01/2003 3,013.92 25.13
FIXED RATE 3.5000% 07/05/1984 20/05/2014 2,900.51 24.19
FIXED RATE 3.5000% 30/05/1986 20/05/2016 142.80 1.19
FIXED RATE 4.0000% 09/09/1983 20/09/2013 9,297.91 77.54
FIXED RATE 4.0000% 25/09/1987 20/09/2017 40,400.00 336.90
SPECIAL DRAWING RIGHT 35.17 47.50
------------ ----------
INTEREST FREE 0.7500% 08/05/1996 01/01/2036 10.15 13.71
INTEREST FREE 1.0000% 04/06/1991 15/08/2025 11.18 15.10
INTEREST FREE 1.0000% 08/05/1997 01/01/2031 13.84 18.69
UNITED STATES DOLLAR 222.23 222.23
------------ ----------
ADB FLOATING RATE 0.0000% 04/06/1991 15/08/2014 6.00 6.00
COST QUA. BOR. IBRD 6M 0.5000% 30/06/1987 01/06/2007 32.00 32.00
COST QUA. BOR. IBRD 6M 0.5000% 10/04/1986 15/11/2006 38.00 38.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 09/09/1997 15/09/2017 2.30 2.30
INTEREST FREE 1.0000% 03/04/1972 01/03/2022 10.02 10.02
INTEREST FREE 1.0000% 27/06/1979 15/02/2029 19.22 19.22
FIXED RATE 2.0000% 24/03/1975 24/03/2016 19.88 19.88
FIXED RATE 2.0000% 06/08/1976 13/04/2017 14.95 14.95
FIXED RATE 2.0000% 09/01/1988 30/06/2014 10.00 10.00
FIXED RATE 2.0000% 06/08/1976 11/04/2017 19.93 19.93
FIXED RATE 2.0000% 21/07/1989 21/07/2014 2.63 2.63
FIXED RATE 3.0000% 07/10/1994 18/04/2011 6.00 6.00
FIXED RATE 7.6000% 07/11/1979 01/10/2003 16.81 16.81
FIXED RATE 10.1000% 04/12/1981 01/09/2006 24.50 24.50
II. NG ASSUMED DEBT (REAL) 2,087.23 317.88
------------ ----------
AUSTRIAN SCHILLING 21.81 1.65
------------ ----------
AUSTRIAN STATUTORY
EXPORT PROMO SCHEME 0.6000% 1992 2007 21.81 1.65
BELGIAN FRANC 50.00 1.29
------------ ----------
FREE 0.0000% 1986 2012 25.00 0.64
FREE 0.0000% 1986 2013 25.00 0.64
DEUTSCHE MARK 0.29 0.15
------------ ----------
FIXED RATE 8.6000% 1992 2007 0.29 0.15
FRENCH FRANC 2.57 0.41
------------ ----------
TAUX DU MARCHE
OBLIGATAIRE 0.4000% 1991 2007 2.57 0.41
POUND STERLING 0.17 0.27
------------ ----------
LIBOR 6 MONTHS DEPOSIT 0.0000% 1992 2007 0.17 0.27
JAPANESE YEN 1,712.56 14.28
------------ ----------
FIXED RATE 6.3000% 1993 2007 1,296.62 10.81
LONG TERM PRIME RATE 0.1000% 1992 2007 415.94 3.47
UNITED STATES DOLLAR 299.83 299.83
------------ ----------
FIXED RATE 3.0000% 1992 2007 0.23 0.23
FIXED RATE 3.0000% 1992 2007 0.40 0.40
FIXED RATE 3.0000% 1992 2007 0.25 0.25
FIXED RATE 3.5000% 1992 2007 1.06 1.06
FIXED RATE 3.5000% 1992 2007 0.60 0.60
FIXED RATE 5.0000% 1981 2004 5.49 5.49
FIXED RATE 5.0000% 1981 2006 5.49 5.49
FIXED RATE 5.0000% 1981 2004 5.49 5.49
LIBOR 6 MONTHS DEPOSIT 0.2000% 1992 2007 25.47 25.47
LIBOR 6 MONTHS DEPOSIT 0.2000% 1992 2007 2.63 2.63
LIBOR 6 MONTHS DEPOSIT 0.2000% 1992 2007 0.58 0.58
LIBOR 6 MONTHS DEPOSIT 0.2500% 1990 2007 2.01 2.01
LIBOR 6 MONTHS DEPOSIT 0.5000% 1991 2007 3.13 3.13
LIBOR 6 MONTHS DEPOSIT 0.5000% 1991 2007 1.24 1.24
LIBOR 6 MONTHS DEPOSIT 0.8125% 1986 2003 1.29 1.29
LIBOR 6 MONTHS DEPOSIT 0.8125% 1986 2003 2.10 2.10
LIBOR 6 MONTHS DEPOSIT 0.8125% 1986 2003 8.73 8.73
LIBOR 6 MONTHS DEPOSIT 0.8125% 1986 2003 11.50 11.50
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
281.20 2.34
106.97 0.89
1,297.52 10.82
2,219.49 18.51
81.46 0.68
1,627.09 13.57
94.01 0.78
4,989.09 41.60
28,112.07 234.43
SPECIAL DRAWING RIGHT 31.17 42.10
---------- ---------
8.39 11.33
9.41 12.71
13.37 18.06
UNITED STATES DOLLAR 89.86 89.86
---------- ---------
2.03 2.03
8.96 8.96
8.08 8.08
1.81 1.81
5.86 5.86
15.28 15.28
11.03 11.03
8.79 8.79
3.08 3.08
11.71 11.71
1.68 1.68
1.55 1.55
1.54 1.54
8.47 8.47
II. NG ASSUMED DEBT (REAL) 1,319.15 185.01
---------- ---------
AUSTRIAN SCHILLING 14.02 1.06
---------- ---------
14.02 1.06
BELGIAN FRANC 28.75 0.74
---------- ---------
13.75 0.35
15.00 0.39
DEUTSCHE MARK 0.19 0.10
---------- ---------
0.19 0.10
FRENCH FRANC 1.65 0.26
---------- ---------
1.65 0.26
POUND STERLING 0.11 0.18
---------- ---------
0.11 0.18
JAPANESE YEN 1,100.93 9.18
---------- ---------
833.54 6.95
267.39 2.23
UNITED STATES DOLLAR 173.50 173.50
---------- ---------
0.22 0.22
0.38 0.38
0.24 0.24
1.01 1.01
0.57 0.57
0.92 0.92
1.83 1.83
1.37 1.37
1.69 1.69
16.37 16.37
0.37 0.37
1.29 1.29
2.01 2.01
0.80 0.80
0.13 0.13
0.21 0.21
1.15 1.15
0.09 0.09
</Table>
T-19
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ -------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIG. (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR) DOLLAR)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ ----------
NEW SHORT TERM EXIMBANK
BORROWING 0.3750% 1991 2007 0.31 0.31
NEW SHORT TERM EXIMBANK
BORROWING 0.3750% 1991 2007 0.30 0.30
NEW SHORT TERM EXIMBANK
BORROWING 0.3750% 1991 2007 0.00 0.00
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007 151.35 151.35
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007 32.99 32.99
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007 14.16 14.16
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007 23.02 23.02
III. NG SECURITIZED LOANS
(BRADY BONDS) 14,015.94
----------
UNITED STATES DOLLAR 11,994.53 11,994.53
OPTION I -- IRB 757.38 757.38
------------ ----------
SERIES A STEP UP 4.00% - 7.50% 1992 2007 130.76 130.76
SERIES B STEP UP 4.00% - 7.50% 1992 2008 626.62 626.62
OPTION II -- PCIRB 1,894.09 1,894.09
------------ ----------
SERIES A STEP UP 4.25% - 7.50% 1992 2018 153.49 153.49
SERIES B STEP UP 4.25% - 7.50% 1992 2017 1,740.60 1,740.60
OPTION III -- DEBT
CONVERSION BONDS 696.78 696.78
------------ ----------
SERIES A STEP UP 4.00% - 7.50% 1992 2010 5.31 5.31
SERIES B STEP UP 4.00% - 7.50% 1992 2009 691.47 691.47
FIXED RATE BONDS FIXED 8.7500% 1996 2016 690.00 690.00
JAPANESE YEN BONDS (SAMURAI) 86,600.00 1,139.11
------------ ----------
JAPANESE YEN 86,600.00 1,139.11
------------ ----------
FIXED 1.8850% 2001 2011 50,000.00 416.95
FIXED 3.2000% 2000 2005 35,000.00 291.87
FIXED 4.3000% 2002 2011 21,600.00 180.12
FIXED 5.0000% 1996 2003 30,000.00 250.17
GLOBAL BONDS 8,838.59
----------
UNITED STATES DOLLAR 7,956.29 7,956.29
------------ ----------
FIXED 7.5000% 2002 2007 300.00 300.00
FIXED 8.3750% 2002 2009 1,000.00 1,000.00
FIXED 8.3750% 2002 2009 300.00 300.00
FIXED 8.8750% 1998 2008 500.00 500.00
FIXED 8.8750% 1998 2008 500.00 500.00
FIXED 9.0000% 2002 2013 500.00 500.00
FIXED 9.3750% 2002 2017 750.00 750.00
FIXED 9.5000% 1999 2024 1,006.29 1,006.29
FIXED 9.8750% 1999 2019 500.00 500.00
FIXED 9.8750% 1999 2019 200.00 200.00
FIXED 9.8750% 1999 2019 400.00 400.00
FIXED 9.8750% 2000 2010 600.00 600.00
FIXED 10.6250% 2000 2025 1,000.00 1,000.00
LIBOR 6 MONTHS DEPOSIT 4.2000% 2000 2003 200.00 200.00
LIBOR 6 MONTHS DEPOSIT 3.0500% 2001 2004 200.00 200.00
EURO 850.00 882.30
------------ ----------
FIXED 8.0000% 1999 2004 350.00 363.30
FIXED 9.3750% 2001 2006 500.00 519.00
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2002
-------------------------
(IN ORIG. (IN US
CURRENCY CURR) DOLLAR)(2)
- -------- ------------ ----------
0.25 0.25
0.19 0.19
0.00 0.00
97.30 97.30
21.21 21.21
9.10 9.10
14.80 14.80
III. NG SECURITIZED LOANS
(BRADY BONDS) 11,857.44
---------
UNITED STATES DOLLAR 9,836.03 9,836.03
OPTION I -- IRB 250.04 250.04
---------- ---------
SERIES A 49.15 49.15
SERIES B 200.89 200.89
OPTION II -- PCIRB 582.68 582.68
---------- ---------
SERIES A 127.52 127.52
SERIES B 455.16 455.16
OPTION III -- DEBT
CONVERSION BONDS 357.03 357.03
---------- ---------
SERIES A 3.07 3.07
SERIES B 353.96 353.96
FIXED RATE BONDS 690.00 690.00
JAPANESE YEN BONDS (SAMURAI) 136,600.00 1,139.11
---------- ---------
JAPANESE YEN 136,600.00 1,139.11
---------- ---------
50,000.00 416.95
35,000.00 291.87
21,600.00 180.12
30,000.00 250.17
GLOBAL BONDS 8,838.59
---------
UNITED STATES DOLLAR 7,956.29 7,956.29
---------- ---------
300.00 300.00
1,000.00 1,000.00
300.00 300.00
500.00 500.00
500.00 500.00
500.00 500.00
750.00 750.00
1,006.29 1,006.29
500.00 500.00
200.00 200.00
400.00 400.00
600.00 600.00
1,000.00 1,000.00
200.00 200.00
200.00 200.00
EURO 850.00 882.30
---------- ---------
350.00 363.30
500.00 519.00
</Table>
- ---------------
(1) Excludes external debt guaranteed by the Republic.
(2) Amounts in original currencies converted into US Dollars using BSP reference
rate as of December 27, 2002.
T-20
DOMESTIC GOVERNMENT SECURITIES(1)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
TOTAL (I + II) 1,466,145.27
============
I. ACTUAL OBLIGATIONS 1,447,341.91
------------
A. TREASURY BILLS 405,226.40
------------
ADAPS Various 2002-2003 74,055.00
TAP Various 2002-2003 2,567.00
GOCC Series Various 2002-2003 124,539.60
LGUs Various 2002-2003 333.30
TEIs Various 2002-2003 29,163.20
CB-BOL Floating Rate 2002-2003 174,568.30
B. TREASURY NOTES RA 245 2,438.06 2,415.55
---------- ------------
Fixed Rate 3.500% 1984 2005 337.59 334.31
Fixed Rate 3.500% 1984 2005 153.43 153.43
Fixed Rate 3.500% 1984 2005 55.81 55.81
Fixed Rate 3.500% 1985 2005 145.99 145.99
Fixed Rate 3.500% 1985 2005 91.85 91.85
Fixed Rate 3.500% 1985 2005 8.92 8.92
Fixed Rate 3.500% 1985 2005 1.40 1.40
Fixed Rate 3.500% 1985 2005 51.65 42.88
Fixed Rate 3.500% 1985 2005 2.44 2.44
Fixed Rate 3.500% 1985 2006 4.44 4.44
Fixed Rate 3.500% 1985 2006 70.00 70.00
Fixed Rate 3.500% 1985 2006 37.86 37.86
Fixed Rate 3.500% 1985 2006 0.52 0.52
Fixed Rate 3.500% 1985 2006 1.57 1.57
Fixed Rate 3.500% 1985 2006 0.72 0.72
Fixed Rate 3.500% 1985 2006 2.26 2.26
Fixed Rate 3.500% 1985 2006 31.12 31.12
Fixed Rate 3.500% 1986 2006 39.93 39.93
Fixed Rate 3.500% 1986 2006 188.86 188.86
Fixed Rate 3.500% 1986 2006 126.90 126.90
Fixed Rate 3.500% 1986 2006 26.67 26.67
Fixed Rate 3.500% 1986 2006 200.84 200.84
Fixed Rate 3.500% 1986 2006 139.64 139.64
Fixed Rate 3.500% 1986 2006 13.47 3.01
Fixed Rate 3.500% 1986 2006 295.60 295.60
Fixed Rate 3.500% 1986 2006 26.68 26.68
Fixed Rate 3.500% 1986 2007 44.90 44.90
Fixed Rate 3.500% 1986 2007 1.04 1.04
Fixed Rate 3.500% 1986 2007 5.10 5.10
Fixed Rate 3.500% 1986 2007 20.91 20.91
Fixed Rate 3.500% 1986 2007 309.95 309.95
C. BONDS 83,916.86 90,707.71
---------- ------------
TREASURY BONDS 8,959.40 5,892.14
---------- ------------
T/BONDS R.A. 245 7,396.74 4,807.10
---------- ------------
Fixed Rate 2.000% 1973 2003 93.00 91.46
Fixed Rate 3.250% 1978 2003 34.83 34.83
Fixed Rate 3.250% 1978 2003 37.32 37.32
Fixed Rate 3.250% 1978 2003 90.97 90.97
Fixed Rate 3.250% 1980 2005 95.00 95.00
Fixed Rate 4.000% 1980 2005 2,100.00 1,099.98
Fixed Rate 4.000% 1981 2006 1,600.00 1,179.53
Fixed Rate 4.000% 1982 2007 2,700.00 1,746.22
Fixed Rate 4.000% 1983 2008 30.00 9.69
</Table>
T-21
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 4.000% 1983 2004 6.89 0.26
Fixed Rate 4.000% 1983 2004 42.03 39.38
Fixed Rate 4.000% 1983 2003 100.00 5.93
Fixed Rate 4.000% 1983 2008 50.00 3.95
Fixed Rate 4.000% 1983 2008 4.87 0.26
Fixed Rate 4.000% 1983 2008 200.00 200.00
Fixed Rate 4.000% 1983 2008 50.00 50.00
Fixed Rate 4.000% 1983 2008 100.00 100.00
Fixed Rate 4.000% 1983 2008 6.83 6.83
Fixed Rate 4.000% 1983 2008 15.00 15.00
Fixed Rate 7.000% 1979 2004 20.00 0.45
Fixed Rate 10.750% 1978 2003 20.00 0.04
T/BONDS PD NO. 4 500.26 497.75
---------- ------------
Fixed Rate 2.000% 1973 2003 490.07 487.56
Fixed Rate 2.000% 1973 2003 10.19 10.19
T/BONDS PD NO. 195 922.00 447.73
---------- ------------
Fixed Rate 3.750% 1973 2003 307.00 306.85
Fixed Rate 5.000% 1973 2003 100.28 16.51
Fixed Rate 6.000% 1973 2003 514.72 124.37
T/BONDS PD NO. 694 140.40 139.56
---------- ------------
Fixed Rate 3.000% 1978 2008 100.00 100.00
Fixed Rate 3.000% 1979 2009 40.40 39.56
30 YR FXTB 97.05 97.05
---------- ------------
Fixed Rate 12.840% 1996 2025 97.05 97.05
TREASURY BONDS (CB-BOL) 50,000.00 50,000.00
---------- ------------
182-Day T-Bill Rate 1993 2018 50,000.00 50,000.00
12 YR PESO DENOMINATED T/BONDS 24,860.41 24,860.41
---------- ------------
91-Day T-Bill Rate 1995 2007 3,226.41 3,226.41
91-Day T-Bill Rate 1995 2007 21,634.00 21,634.00
---------- ------------
AGRARIAN REFORM BONDS 9,858.12
------------
91-Day T-Bill Rate
D. FIXED RATE T/BONDS 879,276.67 878,276.67
---------- ------------
2 YR FXTB 176,832.80 176,832.80
---------- ------------
ADAPS 55,375.00 55,375.00
---------- ------------
Fixed Rate 16.000% 2001 2003 3,000.00 3,000.00
Fixed Rate 14.125% 2001 2003 3,000.00 3,000.00
Fixed Rate 13.625% 2001 2003 3,000.00 3,000.00
Fixed Rate 13.250% 2001 2003 4,000.00 4,000.00
Fixed Rate 13.250% 2001 2003 2,000.00 2,000.00
Fixed Rate 13.250% 2001 2003 2,000.00 2,000.00
Fixed Rate 13.250% 2001 2003 2,000.00 2,000.00
Fixed Rate 13.250% 2001 2003 2,000.00 2,000.00
Fixed Rate 13.250% 2001 2003 4,000.00 4,000.00
Fixed Rate 12.750% 2001 2003 3,500.00 3,500.00
Fixed Rate 12.750% 2001 2003 1,270.00 1,270.00
Fixed Rate 9.500% 2002 2004 3,605.00 3,605.00
Fixed Rate 9.500% 2002 2004 4,000.00 4,000.00
Fixed Rate 8.875% 2002 2004 3,000.00 3,000.00
Fixed Rate 8.875% 2002 2004 9,000.00 9,000.00
Fixed Rate 8.875% 2002 2004 6,000.00 6,000.00
</Table>
T-22
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
TAP 25,448.00 25,448.00
---------- ------------
Fixed Rate 16.000% 2001 2003 4,300.00 4,300.00
Fixed Rate 13.625% 2001 2003 8,088.00 8,088.00
Fixed Rate 13.250% 2001 2003 7,100.00 7,100.00
Fixed Rate 13.250% 2001 2003 3,560.00 3,560.00
Fixed Rate 12.750% 2001 2003 2,000.00 2,000.00
Fixed Rate 8.875% 2002 2004 400.00 400.00
GOCCS 77,024.20 77,024.20
---------- ------------
Fixed Rate 16.000% 2001 2003 6,966.90 6,966.90
Fixed Rate 14.125% 2001 2003 2,020.30 2,020.30
Fixed Rate 13.625% 2001 2003 13,166.10 13,166.10
Fixed Rate 13.250% 2001 2003 1,572.00 1,572.00
Fixed Rate 13.250% 2001 2003 847.70 847.70
Fixed Rate 13.250% 2001 2003 678.90 678.90
Fixed Rate 13.250% 2001 2003 8,714.70 8,714.70
Fixed Rate 12.750% 2001 2003 16,783.10 16,783.10
Fixed Rate 9.500% 2002 2004 10,561.10 10,561.10
Fixed Rate 8.875% 2002 2004 2,278.30 2,278.30
Fixed Rate 8.875% 2002 2004 6,062.00 6,062.00
Fixed Rate 8.875% 2002 2004 7,373.10 7,373.10
TEIS 18,985.60 18,985.60
---------- ------------
Fixed Rate 14.400% 2001 2003 215.10 215.10
Fixed Rate 16.000% 2001 2003 500.00 500.00
Fixed Rate 12.7125% 2001 2003 37.80 37.80
Fixed Rate 14.125% 2001 2003 200.00 200.00
Fixed Rate 13.625% 2001 2003 441.60 441.60
Fixed Rate 12.2625% 2001 2003 1,184.10 1,184.10
Fixed Rate 13.250% 2001 2003 400.00 400.00
Fixed Rate 11.925% 2001 2003 345.60 345.60
Fixed Rate 11.925% 2001 2003 117.40 117.40
Fixed Rate 11.925% 2001 2003 334.50 334.50
Fixed Rate 13.250% 2001 2003 205.90 205.90
Fixed Rate 11.925% 2001 2003 94.80 94.80
Fixed Rate 13.250% 2001 2003 200.00 200.00
Fixed Rate 11.925% 2001 2003 39.70 39.70
Fixed Rate 12.750% 2001 2003 4,293.70 4,293.70
Fixed Rate 11.475% 2001 2003 1,713.50 1,713.50
Fixed Rate 8.550% 2002 2004 771.00 771.00
Fixed Rate 9.500% 2002 2004 1,416.40 1,416.40
Fixed Rate 7.9875% 2002 2004 34.00 34.00
Fixed Rate 8.875% 2002 2004 211.20 211.20
Fixed Rate 8.875% 2002 2004 500.00 500.00
Fixed Rate 7.9875% 2002 2004 465.70 465.70
Fixed Rate 8.875% 2002 2004 4,659.00 4,659.00
Fixed Rate 7.9875% 2002 2004 604.60 604.60
3 YR FXTB 36,076.50 36,076.50
---------- ------------
ADAPS 12,000.00 12,000.00
---------- ------------
Fixed Rate 10.2500% 2002 2005 6,000.00 6,000.00
Fixed Rate 10.0000% 2002 2005 3,000.00 3,000.00
Fixed Rate 9.1250% 2002 2005 3,000.00 3,000.00
GOCCS 15,884.10 15,884.10
---------- ------------
Fixed Rate 10.2500% 2002 2005 7,235.10 7,235.10
</Table>
T-23
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 10.0000% 2002 2005 8,470.00 8,470.00
Fixed Rate 9.1250% 2002 2005 179.00 179.00
TEIS 8,192.40 8,192.40
---------- ------------
Fixed Rate 10.2500% 2002 2005 5,608.40 5,608.40
Fixed Rate 9.2250% 2002 2005 589.90 589.90
Fixed Rate 10.0000% 2002 2005 400.00 400.00
Fixed Rate 9.0000% 2002 2005 432.70 432.70
Fixed Rate 9.1250% 2002 2005 1,123.70 1,123.70
Fixed Rate 8.2125% 2002 2005 37.70 37.70
4 YR FXTB 14,706.30 14,706.30
---------- ------------
ADAPS 10,585.00 10,585.00
---------- ------------
Fixed Rate 10.3750% 2002 2006 6,000.00 6,000.00
Fixed Rate 10.3750% 2002 2006 4,585.00 4,585.00
GOCCS 2,464.00 2,464.00
---------- ------------
Fixed Rate 10.3750% 2002 2006 2,086.90 2,086.90
Fixed Rate 10.3750% 2002 2006 377.10 377.10
TEIS 1,657.30 1,657.30
---------- ------------
Fixed Rate 10.3750% 2002 2006 500.00 500.00
Fixed Rate 9.3375% 2002 2006 141.10 141.10
Fixed Rate 10.3750% 2002 2006 1,000.00 1,000.00
Fixed Rate 9.3375% 2002 2006 16.20 16.20
3 YR RETAIL T/BONDS 23,259.75 23,259.75
---------- ------------
Fixed Rate 10.750% 2002 2005 23,259.75 23,259.75
4 YR RETAIL T/BONDS 37,993.16 37,993.16
---------- ------------
Fixed Rate 14.250% 2001 2005 15,635.38 15,635.38
Fixed Rate 14.250% 2001 2005 22,357.78 22,357.78
5 YR RETAIL T/BONDS 39,670.53 39,670.53
---------- ------------
Fixed Rate 12.375% 2002 2007 39,670.53 39,670.53
5 YR FXTB 210,900.78 210,900.78
---------- ------------
ADAPS 115,012.00 115,012.00
---------- ------------
Fixed Rate 20.000% 1998 2003 2,000.00 2,000.00
Fixed Rate 21.000% 1998 2003 3,000.00 3,000.00
Fixed Rate 20.000% 1998 2003 2,000.00 2,000.00
Fixed Rate 16.125% 1998 2003 3,000.00 3,000.00
Fixed Rate 14.000% 1999 2004 3,000.00 3,000.00
Fixed Rate 13.625% 1999 2004 1,730.00 1,730.00
Fixed Rate 14.250% 1999 2004 890.00 890.00
Fixed Rate 14.250% 1999 2004 2,000.00 2,000.00
Fixed Rate 14.125% 1999 2004 2,000.00 2,000.00
Fixed Rate 13.750% 2000 2005 3,000.00 3,000.00
Fixed Rate 13.500% 2000 2005 3,000.00 3,000.00
Fixed Rate 13.500% 2000 2005 3,000.00 3,000.00
Fixed Rate 12.750% 2000 2005 3,000.00 3,000.00
Fixed Rate 13.250% 2000 2005 1,610.00 1,610.00
Fixed Rate 13.000% 2000 2005 3,000.00 3,000.00
Fixed Rate 13.500% 2000 2005 1,230.00 1,230.00
Fixed Rate 13.875% 2000 2005 765.00 765.00
Fixed Rate 16.750% 2000 2005 1,349.00 1,349.00
Fixed Rate 15.875% 2001 2006 3,000.00 3,000.00
Fixed Rate 15.000% 2001 2006 2,961.00 2,961.00
Fixed Rate 14.500% 2001 2006 3,000.00 3,000.00
Fixed Rate 14.000% 2001 2006 1,000.00 1,000.00
</Table>
T-24
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 15.250% 2001 2006 1,948.00 1,948.00
Fixed Rate 15.250% 2001 2006 2,000.00 2,000.00
Fixed Rate 15.500% 2001 2006 3,500.00 3,500.00
Fixed Rate 16.250% 2001 2006 905.00 905.00
Fixed Rate 14.125% 2001 2004 1,891.00 1,891.00
Fixed Rate 14.125% 2001 2004 2,000.00 2,000.00
Fixed Rate 14.250% 2001 2004 1,260.00 1,260.00
Fixed Rate 14.250% 2001 2004 2,000.00 2,000.00
Fixed Rate 13.750% 2001 2005 2,000.00 2,000.00
Fixed Rate 13.750% 2001 2005 2,000.00 2,000.00
Fixed Rate 13.875% 2001 2005 2,095.00 2,095.00
Fixed Rate 12.750% 2002 2005 4,000.00 4,000.00
Fixed Rate 13.875% 2002 2005 4,000.00 4,000.00
Fixed Rate 12.750% 2002 2005 4,000.00 4,000.00
Fixed Rate 13.500% 2002 2005 4,000.00 4,000.00
Fixed Rate 13.000% 2002 2005 3,000.00 3,000.00
Fixed Rate 13.000% 2002 2007 3,848.00 3,848.00
Fixed Rate 13.000% 2002 2007 1,025.00 1,025.00
Fixed Rate 13.000% 2002 2007 3,000.00 3,000.00
Fixed Rate 10.750% 2002 2007 2,935.00 2,935.00
Fixed Rate 10.750% 2002 2007 3,000.00 3,000.00
Fixed Rate 10.750% 2002 2007 3,000.00 3,000.00
Fixed Rate 11.000% 2002 2007 2,000.00 2,000.00
Fixed Rate 11.000% 2002 2007 1,000.00 1,000.00
Fixed Rate 11.000% 2002 2007 3,000.00 3,000.00
Fixed Rate 14.000% 2002 2006 2,070.00 2,070.00
TAP 23,856.00 23,856.00
---------- ------------
Fixed Rate 20.000% 1998 2003 4,300.00 4,300.00
Fixed Rate 16.125% 1998 2003 2,350.00 2,350.00
Fixed Rate 14.000% 1999 2004 1,050.00 1,050.00
Fixed Rate 14.125% 1999 2004 1,000.00 1,000.00
Fixed Rate 13.875% 2000 2005 3,300.00 3,300.00
Fixed Rate 16.750% 2000 2005 400.00 400.00
Fixed Rate 15.875% 2001 2006 1,000.00 1,000.00
Fixed Rate 15.000% 2001 2006 800.00 800.00
Fixed Rate 14.500% 2001 2006 3,950.00 3,950.00
Fixed Rate 14.000% 2001 2006 1,000.00 1,000.00
Fixed Rate 14.250% 2001 2004 2,706.00 2,706.00
Fixed Rate 14.250% 2001 2004 500.00 500.00
Fixed Rate 13.000% 2002 2005 1,500.00 1,500.00
GOCCS 53,524.98 53,524.98
---------- ------------
Fixed Rate 20.000% 1998 2003 191.00 191.00
Fixed Rate 21.000% 1998 2003 1,949.80 1,949.80
Fixed Rate 20.000% 1998 2003 143.20 143.20
Fixed Rate 16.125% 1998 2003 910.50 910.50
Fixed Rate 14.000% 1999 2004 1,586.60 1,586.60
Fixed Rate 13.625% 1999 2004 45.80 45.80
Fixed Rate 14.250% 1999 2004 1,485.10 1,485.10
Fixed Rate 14.250% 1999 2004 938.70 938.70
Fixed Rate 14.125% 1999 2004 2,975.60 2,975.60
Fixed Rate 13.750% 2000 2005 2,227.40 2,227.40
Fixed Rate 13.500% 2000 2005 1.40 1.40
Fixed Rate 13.500% 2000 2005 1,563.10 1,563.10
Fixed Rate 12.750% 2000 2005 53.00 53.00
</Table>
T-25
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 13.250% 2000 2005 118.40 118.40
Fixed Rate 13.000% 2000 2005 48.20 48.20
Fixed Rate 13.500% 2000 2005 2,998.40 2,998.40
Fixed Rate 13.875% 2000 2005 2,439.00 2,439.00
Fixed Rate 16.750% 2000 2005 1,825.90 1,825.90
Fixed Rate 15.875% 2001 2006 990.50 990.50
Fixed Rate 15.000% 2001 2006 587.20 587.20
Fixed Rate 14.500% 2001 2006 2,181.70 2,181.70
Fixed Rate 14.000% 2001 2006 463.20 463.20
Fixed Rate 15.250% 2001 2006 230.10 230.10
Fixed Rate 15.250% 2001 2006 2,457.90 2,457.90
Fixed Rate 14.125% 2001 2006 1,977.48 1,977.48
Fixed Rate 14.250% 2001 2004 454.30 454.30
Fixed Rate 15.500% 2001 2006 581.60 581.60
Fixed Rate 16.250% 2001 2006 2,269.10 2,269.10
Fixed Rate 13.750% 2001 2005 1,524.80 1,524.80
Fixed Rate 13.875% 2001 2005 2,037.90 2,037.90
Fixed Rate 12.750% 2002 2005 2,540.70 2,540.70
Fixed Rate 13.500% 2002 2005 5,140.10 5,140.10
Fixed Rate 13.000% 2002 2007 155.20 155.20
Fixed Rate 13.000% 2002 2007 4,911.50 4,911.50
Fixed Rate 11.000% 2002 2007 477.90 477.90
Fixed Rate 13.000% 2002 2005 2,146.30 2,146.30
Fixed Rate 14.000% 2002 2006 896.40 896.40
TEIS 18,507.80 18,507.80
---------- ------------
Fixed Rate 18.9000% 1998 2003 500.00 500.00
Fixed Rate 18.0000% 1998 2003 1,018.50 1,018.50
Fixed Rate 20.0000% 1998 2003 200.00 200.00
Fixed Rate 14.5125% 1998 2003 370.20 370.20
Fixed Rate 14.0000% 1999 2004 500.00 500.00
Fixed Rate 12.6000% 1999 2004 211.90 211.90
Fixed Rate 12.8250% 1999 2004 1.00 1.00
Fixed Rate 12.8250% 1999 2004 10.00 10.00
Fixed Rate 13.7500% 2000 2005 100.00 100.00
Fixed Rate 13.5000% 2000 2005 200.00 200.00
Fixed Rate 12.1500% 2000 2005 10.00 10.00
Fixed Rate 12.1500% 2000 2005 30.00 30.00
Fixed Rate 12.7500% 2000 2005 200.00 200.00
Fixed Rate 13.5000% 2000 2005 100.00 100.00
Fixed Rate 12.1500% 2000 2005 30.00 30.00
Fixed Rate 13.8750% 2000 2005 200.00 200.00
Fixed Rate 12.4875% 2000 2005 18.00 18.00
Fixed Rate 15.0750% 2000 2005 223.40 223.40
Fixed Rate 16.7500% 2000 2005 500.00 500.00
Fixed Rate 14.2875% 2001 2006 24.60 24.60
Fixed Rate 15.8750% 2001 2006 200.00 200.00
Fixed Rate 15.0000% 2001 2006 200.00 200.00
Fixed Rate 13.5000% 2001 2006 45.00 45.00
Fixed Rate 14.5000% 2001 2006 600.00 600.00
Fixed Rate 13.0500% 2001 2006 150.70 150.70
Fixed Rate 12.6000% 2001 2006 19.50 19.50
Fixed Rate 15.2500% 2001 2006 800.00 800.00
Fixed Rate 13.7250% 2001 2006 100.40 100.40
Fixed Rate 13.7250% 2001 2006 194.10 194.10
</Table>
T-26
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 15.2500% 2001 2006 200.00 200.00
Fixed Rate 15.5000% 2001 2006 400.00 400.00
Fixed Rate 13.9500% 2001 2006 75.80 75.80
Fixed Rate 16.2500% 2001 2006 500.00 500.00
Fixed Rate 14.6250% 2001 2006 203.60 203.60
Fixed Rate 14.1250% 2001 2004 468.00 468.00
Fixed Rate 12.7125% 2001 2004 19.50 19.50
Fixed Rate 14.2500% 2001 2004 200.00 200.00
Fixed Rate 12.8250% 2001 2004 94.10 94.10
Fixed Rate 14.2500% 2001 2004 200.00 200.00
Fixed Rate 13.7500% 2001 2005 200.00 200.00
Fixed Rate 12.3750% 2001 2005 246.90 246.90
Fixed Rate 12.4875% 2001 2005 41.70 41.70
Fixed Rate 13.8750% 2001 2005 200.00 200.00
Fixed Rate 12.375% 2001 2005 235.50 235.50
Fixed Rate 11.475% 2002 2005 248.00 248.00
Fixed Rate 12.4875% 2002 2005 400.00 400.00
Fixed Rate 12.150% 2002 2005 554.70 554.70
Fixed Rate 13.500% 2002 2005 518.40 518.40
Fixed Rate 11.700% 2002 2007 719.50 719.50
Fixed Rate 13.000% 2002 2007 200.00 200.00
Fixed Rate 11.700% 2002 2007 533.40 533.40
Fixed Rate 11.000% 2002 2007 2,309.20 2,309.20
Fixed Rate 9.900% 2002 2007 108.50 108.50
Fixed Rate 11.700% 2002 2005 318.40 318.40
Fixed Rate 13.000% 2002 2005 1,185.00 1,185.00
Fixed Rate 14.000% 2002 2006 1,370.30 1,370.30
SMALL DENOMINATED T/BONDS 30,260.24 30,260.24
---------- ------------
Fixed Rate 13.6250% 1999 2004 30,260.24 30,260.24
PROGRESS BONDS 8,000.00 8,000.00
---------- ------------
Fixed Rate 13.875% 2000 2005 8,000.00 8,000.00
7 YR FXTB 147,447.10 147,447.10
---------- ------------
ADAPS 75,499.00 75,499.00
---------- ------------
Fixed Rate 15.500% 1996 2003 3,000.00 3,000.00
Fixed Rate 15.375% 1996 2003 3,000.00 3,000.00
Fixed Rate 15.375% 1996 2003 3,000.00 3,000.00
Fixed Rate 15.375% 1996 2003 4,000.00 4,000.00
Fixed Rate 15.750% 1996 2003 2,585.00 2,585.00
Fixed Rate 14.875% 1996 2003 2,000.00 2,000.00
Fixed Rate 14.000% 1996 2003 2,000.00 2,000.00
Fixed Rate 13.500% 1997 2004 3,340.00 3,340.00
Fixed Rate 20.875% 1997 2004 1,987.00 1,987.00
Fixed Rate 20.500% 1998 2005 1,887.00 1,887.00
Fixed Rate 20.000% 1998 2005 1,164.00 1,164.00
Fixed Rate 18.375% 1998 2005 2,500.00 2,500.00
Fixed Rate 16.500% 1999 2006 1,805.00 1,805.00
Fixed Rate 14.000% 1999 2006 750.00 750.00
Fixed Rate 14.000% 1999 2006 21.00 21.00
Fixed Rate 15.000% 1999 2006 2,000.00 2,000.00
Fixed Rate 14.750% 1999 2006 2,000.00 2,000.00
Fixed Rate 14.625% 1999 2006 2,000.00 2,000.00
Fixed Rate 14.500% 1999 2006 2,000.00 2,000.00
Fixed Rate 14.500% 2000 2007 2,775.00 2,775.00
</Table>
T-27
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 14.250% 2000 2007 3,000.00 3,000.00
Fixed Rate 14.000% 2000 2007 3,000.00 3,000.00
Fixed Rate 13.375% 2000 2007 3,000.00 3,000.00
Fixed Rate 13.875% 2000 2007 1,250.00 1,250.00
Fixed Rate 13.500% 2000 2007 3,000.00 3,000.00
Fixed Rate 14.000% 2000 2007 1,165.00 1,165.00
Fixed Rate 14.250% 2000 2007 1,640.00 1,640.00
Fixed Rate 14.250% 2000 2007 2,116.00 2,116.00
Fixed Rate 14.500% 2000 2007 1,020.00 1,020.00
Fixed Rate 17.250% 2000 2007 1,039.00 1,039.00
Fixed Rate 16.000% 2001 2008 3,000.00 3,000.00
Fixed Rate 15.625% 2001 2008 3,000.00 3,000.00
Fixed Rate 13.500% 2001 2004 2,000.00 2,000.00
Fixed Rate 13.500% 2001 2004 1,000.00 1,000.00
Fixed Rate 15.000% 2001 2006 2,000.00 2,000.00
Fixed Rate 14.000% 2002 2006 455.00 455.00
TAP 11,680.00 11,680.00
---------- ------------
Fixed Rate 14.000% 1996 2003 1,000.00 1,000.00
Fixed Rate 13.500% 1997 2004 3,180.00 3,180.00
Fixed Rate 20.500% 1998 2005 1,200.00 1,200.00
Fixed Rate 18.375% 1998 2005 2,100.00 2,100.00
Fixed Rate 16.000% 2001 2008 2,200.00 2,200.00
Fixed Rate 15.625% 2001 2008 2,000.00 2,000.00
GOCCS 37,803.70 37,803.70
---------- ------------
Fixed Rate 15.500% 1996 2003 5,513.70 5,513.70
Fixed Rate 15.375% 1996 2003 193.00 193.00
Fixed Rate 15.375% 1996 2003 1,884.10 1,884.10
Fixed Rate 15.750% 1996 2003 98.60 98.60
Fixed Rate 14.175% 1996 2003 1,000.00 1,000.00
Fixed Rate 14.875% 1996 2003 0.80 0.80
Fixed Rate 14.000% 1996 2003 6.40 6.40
Fixed Rate 20.875% 1997 2004 65.00 65.00
Fixed Rate 16.500% 1999 2006 1,446.70 1,446.70
Fixed Rate 15.000% 1999 2006 13.20 13.20
Fixed Rate 14.750% 1999 2006 1.00 1.00
Fixed Rate 14.625% 1999 2006 1,958.80 1,958.80
Fixed Rate 14.500% 1999 2006 867.70 867.70
Fixed Rate 14.500% 2000 2007 3,091.00 3,091.00
Fixed Rate 14.250% 2000 2007 379.40 379.40
Fixed Rate 14.000% 2000 2007 552.70 552.70
Fixed Rate 13.875% 2000 2007 1,047.60 1,047.60
Fixed Rate 13.500% 2000 2007 10.60 10.60
Fixed Rate 14.000% 2000 2007 37.00 37.00
Fixed Rate 14.250% 2000 2007 10.50 10.50
Fixed Rate 14.250% 2000 2007 99.90 99.90
Fixed Rate 14.500% 2000 2007 573.20 573.20
Fixed Rate 17.250% 2000 2007 3,043.70 3,043.70
Fixed Rate 16.000% 2001 2008 2,514.30 2,514.30
Fixed Rate 15.625% 2001 2008 8,319.10 8,319.10
Fixed Rate 16.000% 2001 2008 509.00 509.00
Fixed Rate 13.500% 2001 2004 403.10 403.10
Fixed Rate 15.000% 2001 2006 1,953.40 1,953.40
Fixed Rate 14.000% 2002 2006 2,210.20 2,210.20
</Table>
T-28
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
TEIS 22,464.40 22,464.40
---------- ------------
Fixed Rate 13.8375% 1996 2003 8,000.00 8,000.00
Fixed Rate 14.175% 1996 2003 1,201.00 1,201.00
Fixed Rate 12.150% 1997 2004 100.00 100.00
Fixed Rate 18.7875% 1997 2004 2,800.00 2,800.00
Fixed Rate 18.000% 1998 2005 200.00 200.00
Fixed Rate 16.5375% 1998 2005 50.00 50.00
Fixed Rate 14.850% 1999 2006 116.10 116.10
Fixed Rate 12.600% 1999 2006 1.20 1.20
Fixed Rate 14.000% 1999 2006 500.00 500.00
Fixed Rate 13.500% 1999 2006 158.00 158.00
Fixed Rate 15.000% 1999 2006 200.00 200.00
Fixed Rate 14.625% 1999 2006 200.00 200.00
Fixed Rate 13.1625% 1999 2006 2.30 2.30
Fixed Rate 13.050% 1999 2006 8.00 8.00
Fixed Rate 14.500% 2000 2007 200.00 200.00
Fixed Rate 13.050% 2000 2007 7.00 7.00
Fixed Rate 14.250% 2000 2007 200.00 200.00
Fixed Rate 12.825% 2000 2007 15.00 15.00
Fixed Rate 14.000% 2000 2007 200.00 200.00
Fixed Rate 13.375% 2000 2007 500.00 500.00
Fixed Rate 13.875% 2000 2007 500.00 500.00
Fixed Rate 13.500% 2000 2007 300.00 300.00
Fixed Rate 14.500% 2000 2007 200.00 200.00
Fixed Rate 17.250% 2000 2007 200.00 200.00
Fixed Rate 15.525% 2000 2007 75.10 75.10
Fixed Rate 14.4000% 2001 2008 435.30 435.30
Fixed Rate 16.000% 2001 2008 1,209.50 1,209.50
Fixed Rate 15.625% 2001 2008 823.10 823.10
Fixed Rate 14.0625% 2001 2008 1,121.60 1,121.60
Fixed Rate 12.150% 2001 2004 142.30 142.30
Fixed Rate 13.500% 2001 2004 900.00 900.00
Fixed Rate 12.150% 2001 2004 137.80 137.80
Fixed Rate 15.000% 2001 2006 200.00 200.00
Fixed Rate 13.500% 2001 2006 911.80 911.80
Fixed Rate 12.600% 2002 2006 149.30 149.30
Fixed Rate 14.000% 2002 2006 500.00 500.00
10 YR FXTB 118,769.45 117,769.45
---------- ------------
ADAPS 69,407.00 69,407.00
---------- ------------
Fixed Rate 16.000% 1996 2006 2,000.00 2,000.00
Fixed Rate 14.125% 1997 2007 5,000.00 5,000.00
Fixed Rate 13.875% 1997 2007 3,500.00 3,500.00
Fixed Rate 22.875% 1997 2007 1,759.00 1,759.00
Fixed Rate 19.000% 1998 2008 2,000.00 2,000.00
Fixed Rate 20.000% 1998 2008 446.00 446.00
Fixed Rate 18.000% 1998 2008 3,000.00 3,000.00
Fixed Rate 16.500% 1999 2009 3,000.00 3,000.00
Fixed Rate 14.625% 1999 2009 1,550.00 1,550.00
Fixed Rate 15.000% 1999 2009 1,578.00 1,578.00
Fixed Rate 15.500% 1999 2009 2,000.00 2,000.00
Fixed Rate 15.125% 1999 2009 2,000.00 2,000.00
Fixed Rate 15.000% 1999 2009 2,000.00 2,000.00
Fixed Rate 14.875% 1999 2009 2,000.00 2,000.00
Fixed Rate 14.750% 2000 2010 3,000.00 3,000.00
</Table>
T-29
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 14.625% 2000 2010 3,000.00 3,000.00
Fixed Rate 13.875% 2000 2010 3,000.00 3,000.00
Fixed Rate 13.875% 2000 2010 2,563.00 2,563.00
Fixed Rate 14.250% 2000 2010 1,430.00 1,430.00
Fixed Rate 14.125% 2000 2010 3,000.00 3,000.00
Fixed Rate 14.500% 2000 2010 2,918.00 2,918.00
Fixed Rate 14.625% 2000 2010 1,825.00 1,825.00
Fixed Rate 14.625% 2000 2010 3,000.00 3,000.00
Fixed Rate 17.500% 2000 2010 1,750.00 1,750.00
Fixed Rate 17.500% 2001 2011 2,195.00 2,195.00
Fixed Rate 16.500% 2001 2011 2,893.00 2,893.00
Fixed Rate 13.000% 2002 2012 3,000.00 3,000.00
Fixed Rate 13.000% 2002 2012 2,000.00 2,000.00
Fixed Rate 12.125% 2002 2012 2,000.00 2,000.00
TAP 18,390.00 18,390.00
---------- ------------
Fixed Rate 16.000% 1996 2006 500.00 500.00
Fixed Rate 21.000% 1997 2007 40.00 40.00
Fixed Rate 19.000% 1998 2008 3,800.00 3,800.00
Fixed Rate 17.800% 1998 2008 1,000.00 1,000.00
Fixed Rate 18.000% 1998 2008 1,100.00 1,100.00
Fixed Rate 16.500% 1999 2009 2,150.00 2,150.00
Fixed Rate 14.625% 1999 2009 400.00 400.00
Fixed Rate 15.500% 1999 2009 1,650.00 1,650.00
Fixed Rate 15.000% 1999 2009 600.00 600.00
Fixed Rate 14.750% 2000 2010 500.00 500.00
Fixed Rate 14.625% 2000 2010 1,450.00 1,450.00
Fixed Rate 17.500% 2000 2010 1,200.00 1,200.00
Fixed Rate 17.500% 2001 2011 1,000.00 1,000.00
Fixed Rate 13.000% 2002 2012 3,000.00 3,000.00
GOCCS 17,163.75 17,163.75
---------- ------------
Fixed Rate 16.000% 1996 2006 1,792.64 1,792.64
Fixed Rate 14.400% 1996 2006 1,000.00 1,000.00
Fixed Rate 12.840% 1997 2007 4.71 4.71
Fixed Rate 14.125% 1997 2007 30.20 30.20
Fixed Rate 22.875% 1997 2007 1,784.80 1,784.80
Fixed Rate 20.000% 1998 2008 163.00 163.00
Fixed Rate 18.000% 1998 2008 1,387.50 1,387.50
Fixed Rate 16.500% 1999 2009 183.10 183.10
Fixed Rate 15.500% 1999 2009 189.80 189.80
Fixed Rate 15.125% 1999 2009 3,302.50 3,302.50
Fixed Rate 15.000% 1999 2009 4,909.10 4,909.10
Fixed Rate 14.875% 1999 2009 162.70 162.70
Fixed Rate 14.750% 2000 2010 756.10 756.10
Fixed Rate 14.625% 2000 2010 231.40 231.40
Fixed Rate 13.875% 2000 2010 181.50 181.50
Fixed Rate 13.875% 2000 2010 94.20 94.20
Fixed Rate 14.250% 2000 2010 4.90 4.90
Fixed Rate 14.125% 2000 2010 355.50 355.50
Fixed Rate 14.500% 2000 2010 48.10 48.10
Fixed Rate 14.625% 2000 2010 5.50 5.50
Fixed Rate 14.625% 2000 2010 197.40 197.40
Fixed Rate 17.500% 2000 2010 1.10 1.10
Fixed Rate 17.500% 2001 2011 45.30 45.30
</Table>
T-30
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
Fixed Rate 16.500% 2001 2011 301.70 301.70
Fixed Rate 13.000% 2002 2012 31.00 31.00
TEIS 13,808.70 12,808.70
---------- ------------
Fixed Rate 14.4000% 1996 2006 5,801.50 4,801.50
Fixed Rate 20.5875% 1997 2007 3,900.00 3,900.00
Fixed Rate 18.0000% 1998 2008 200.00 200.00
Fixed Rate 16.200% 1998 2008 58.50 58.50
Fixed Rate 16.500% 1999 2009 500.00 500.00
Fixed Rate 15.000% 1998 2008 100.00 100.00
Fixed Rate 15.500% 1998 2008 100.00 100.00
Fixed Rate 15.000% 1998 2008 200.00 200.00
Fixed Rate 14.625% 2000 2010 200.00 200.00
Fixed Rate 14.250% 2000 2010 200.00 200.00
Fixed Rate 14.125% 2000 2010 200.00 200.00
Fixed Rate 14.625% 2000 2010 200.00 200.00
Fixed Rate 17.500% 2000 2010 200.00 200.00
Fixed Rate 17.500% 2001 2011 744.70 744.70
Fixed Rate 15.750% 2001 2011 4.50 4.50
Fixed Rate 16.500% 2001 2011 700.00 700.00
Fixed Rate 14.800% 2001 2011 300.40 300.40
Fixed Rate 11.700% 2002 2012 181.70 181.70
Fixed Rate 11.700% 2002 2012 17.40 17.40
20 YRS XTB 18,000.36 18,000.36
---------- ------------
ADAPS 7,000.00 7,000.00
---------- ------------
Fixed Rate 14.375% 1997 2017 2,000.00 2,000.00
Fixed Rate 15.000% 2002 2022 4,000.00 4,000.00
Fixed Rate 12.750% 2002 2022 1,000.00 1,000.00
TAP 3,804.90 3,804.90
---------- ------------
Fixed Rate 14.375% 1997 2017 3,804.90 3,804.90
GOCCS 7,160.46 7,160.46
---------- ------------
Fixed Rate 14.375% 1997 2017 4,020.10 4,020.10
Fixed Rate 12.840% 1998 2018 9.97 9.97
Fixed Rate 12.840% 1998 2018 0.48 0.48
Fixed Rate 12.840% 1999 2019 4.97 4.97
Fixed Rate 12.840% 1999 2019 0.48 0.48
Fixed Rate 12.840% 1999 2019 0.05 0.05
Fixed Rate 12.840% 1999 2019 1.02 1.02
Fixed Rate 12.840% 2000 2020 2.20 2.20
Fixed Rate 12.840% 2001 2021 2.42 2.42
Fixed Rate 12.840% 2002 2022 2.67 2.67
Fixed Rate 15.000% 2002 2022 3,116.10 3,116.10
TEI 35.00 35.00
---------- ------------
Fixed Rate 13.500% 2002 2022 35.00 35.00
25 YR FXTB 8,202.10 8,202.10
---------- ------------
ADAPS 5,286.00 5,286.00
---------- ------------
Fixed Rate 18.250% 2000 2025 5,286.00 5,286.00
TAP 2,320.00 2,320.00
---------- ------------
Fixed Rate 18.250% 2000 2025 2,320.00 2,320.00
GOCCS 96.10 96.10
---------- ------------
Fixed Rate 18.250% 2000 2025 96.10 96.10
</Table>
T-31
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
TEIS 500.00 500.00
---------- ------------
Fixed Rate 18.250% 2000 2025 500.00 500.00
10 YR SPECIAL PURPOSE T/BONDS FOR CARP 9,157.62 9,157.62
---------- ------------
ADAPS 5,988.00 5,988.00
---------- ------------
Fixed Rate 15.500% 2001 2011 3,173.00 3,173.00
Fixed Rate 14.000% 2002 2012 2,815.00 2,815.00
TAP
Fixed Rate 15.500% 2001 2011 2,769.62 2,769.62
TEIS
Fixed Rate 15.500% 2001 2011 400.00 400.00
E. ZERO COUPON PEACE BOND 35,000.00 35,000.00
---------- ------------
2001 2011 35,000.00 35,000.00
F. FIXED RATE PESO NOTES (CURR SWAP) 11,810.00 11,810.00
---------- ------------
3 YR 6,330.00 6,330.00
---------- ------------
Fixed Rate
5 YR 14.000% 2001 2004 6,330.00 6,330.00
---------- ------------
Fixed Rate 5,480.00 5,480.00
---------- ------------
14.250% 2001 2006 5,480.00 5,480.00
G. US DOLLAR LINKED PHP. PESO NOTES (DLPNS)(2) 12,000.00 12,080.50
---------- ------------
2 YR 3,500.00 3,571.63
---------- ------------
Fixed Rate 8.5625% 2001 2003 3,500.00 3,571.63
3 YR 8,500.00 8,508.86
---------- ------------
Fixed Rate 10.4375% 2001 2004 3,500.00 3,567.17
Fixed Rate 7.5625% 2002 2005 5,000.00 4,941.69
---------- ------------
H. FIXED RATE PROMISSORY NOTES 11,520.00 11,520.00
---------- ------------
3 YR
Fixed Rate 8.125% 2002 2005 6,230.00 6,230.00
5 YR
Fixed Rate 9.625% 2002 2007 5,290.00 5,290.00
I. FIXED TERM DEPOSIT Various 2002 2003 305.08 305.08
II. CONTINGENT OBLIGATIONS 18,140.70 18,803.37
---------- ------------
A. NPC BONDS 140.70 140.70
---------- ------------
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 10.00 10.00
Fixed Rate 8.500% 1978 2003 10.70 10.70
B. LAND BANK BONDS 662.67
------------
Fixed Rate 6.000% 662.67
C. NDC AGRI-AGRA (ERAP BONDS) 7,000.00 7,000.00
---------- ------------
Fixed Rate 7.875% 1999 2004 5,000.00 5,000.00
Fixed Rate 6.875% 2002 2009 2,000.00 2,000.00
D. PAG-IBIG HOUSING BONDS BOND 4,000.00 4,000.00
---------- ------------
Fixed Rate 8.250% 2000 2005 4,000.00 4,000.00
</Table>
T-32
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2002
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING
INTEREST AS OF
RATE YEAR YEAR OF ORIGINAL DECEMBER 31,
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT 2002
------------------- ------------- ---------- --------- ---------- ------------
E. HGC ZERO COUPON BOND 7,000.00 7,000.00
---------- ------------
ADAPS 2002 2007 5,000.00 5,000.00
TAP 2002 2007 2,000.00 2,000.00
</Table>
- ---------------
(1) Excludes external securities of the Republic.
(2) Based on reference rate of P/US$ of P53.05 as of December 27, 2002.
T-33
GOVERNMENT GUARANTEED CORPORATE BONDS
AS OF DECEMBER 31, 2001
(IN MILLIONS OF PESOS)
<Table>
<Caption>
OUTSTANDING BALANCE
INTEREST AS OF
RATE/SPREAD YEAR YEAR OF ORIGINAL AMOUNT DECEMBER 31, 2001
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY (IN PESOS) (IN PESOS)
------------------- ----------- ------------ -------- --------------- -------------------
National Power Corporation Bonds
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 20.00 20.00
Fixed Rate 8.500% 1978 2003 10.00 10.00
Fixed Rate 8.500% 1978 2003 10.70 10.70
--------- ---------
TOTAL NPC BONDS 140.70 140.70
--------- ---------
MWSS Angat Bonds
91-Day Treasury Bill Rate 0.000%* 1992 2002 230.00 17.71
--------- ---------
TOTAL MWSS ANGAT BONDS 230.00 17.71
--------- ---------
NDC Agri-Agra (Erap Bonds)
Fixed Rate 7.875% 1999 2004 5,000.00 5,000.00
--------- ---------
TOTAL ERAP BONDS 5,000.00 5,000.00
--------- ---------
HDMF Bonds (PAG-IBIG)
Fixed Rate 8.250% 2000 2005 4,000.00 4,000.00
--------- ---------
TOTAL HDMF BONDS 4,000.00 4,000.00
--------- ---------
Land Bank Bonds
Fixed Rate 6.000% 807.75
--------- ---------
TOTAL LBP BONDS 807.75
--------- ---------
NPC Negotiated T/Bills
Fixed Rate 13.062% 2001 2002 11,000.00 11,000.00
--------- ---------
TOTAL NP NEGOTIATED T/BILLS 11,000.00 11,000.00
--------- ---------
GRAND TOTAL CONTINGENT OBLIGATIONS 20,370.70 20,966.16
========= =========
</Table>
- ---------------
Source: Bureau of the Treasury, Department of Finance.
T-34
DOMESTIC DEBT OF THE REPUBLIC (OTHER THAN SECURITIES)(1)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT OUTSTANDING BALANCE
CONTRACTED AS OF DECEMBER 31, 2002
--------------------- -----------------------
INTEREST IN IN IN IN
RATE YEAR YEAR OF ORIGINAL PHILIPPINE ORIGINAL PHILIPPINE
INTEREST RATE BASIS SPREAD CONTRACTED MATURITY CURR CURR PESO(2) CURR PESO(2)
------------------- -------- ---------- ----------- ---- -------- ---------- --------- -----------
TOTAL 62,061 23,860
------ ------
DIRECT LOANS 216 15,609
------ ------
AGENCIES 216 15,609
------ ------
UNITED STATES DOLLARS 4
------
LIBOR 6 MOS. 0.8125% 1986 2003 USD 4 216 0 4
PHILIPPINE PESOS 0 15,605 15,605
INTEREST FREE 0.0000% 1953 PHP 79 79
INTEREST FREE 0.0000% 1953 PHP 48 48
INTEREST FREE 0.0000% 1953 PHP 29 29
INTEREST FREE 0.0000% 1953 PHP 6,821 6,821
INTEREST FREE 0.0000% 1945 PHP 6,599 6,599
INTEREST FREE 0.0000% 1945 PHP 1,686 1,686
INTEREST FREE 0.0000% 1945 PHP 21 21
INTEREST FREE 0.0000% 1960 PHP 217 217
INTEREST FREE 0.0000% 1985 PHP 64 64
INTEREST FREE 0.0000% 1993 PHP 28 28
INTEREST FREE 0.0000% 1989 PHP 14 14
ASSUMED LOANS (REAL) 61,845 8,251
------ ------
PHILIPPINE PESOS 2,297 2,297 2,297 2,297
----- ------ ------ ------
INTEREST FREE 0.00% 1986 Upon Demand PHP 63 63 63 63
INTEREST FREE 0.00% 1986 Upon Demand PHP 134 134 134 134
INTEREST FREE 0.00% 1986 Upon Demand PHP 120 120 120 120
INTEREST FREE 0.00% 1986 Upon Demand PHP 72 72 72 72
INTEREST FREE 0.00% 1986 Upon Demand PHP 50 50 50 50
INTEREST FREE 0.00% 1986 Upon Demand PHP 200 200 200 200
INTEREST FREE 0.00% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.00% 1986 Upon Demand PHP 66 66 66 66
INTEREST FREE 0.00% 1986 Upon Demand PHP 3 3 3 3
INTEREST FREE 0.00% 1986 Upon Demand PHP 3 3 3 3
INTEREST FREE 0.00% 1986 Upon Demand PHP 4 4 4 4
INTEREST FREE 0.00% 1986 Upon Demand PHP 8 8 8 8
INTEREST FREE 0.00% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.00% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.00% 1986 Upon Demand PHP 9 9 9 9
INTEREST FREE 0.00% 1986 Upon Demand PHP 84 84 84 84
INTEREST FREE 0.00% 1986 Upon Demand PHP 3 3 3 3
INTEREST FREE 0.00% 1986 Upon Demand PHP 6 6 6 6
INTEREST FREE 0.00% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.00% 1986 Upon Demand PHP 261 261 261 261
INTEREST FREE 0.00% 1986 Upon Demand PHP 913 913 913 913
INTEREST FREE 0.00% 1986 Upon Demand PHP 6 6 6 6
INTEREST FREE 0.00% 1986 Upon Demand PHP 54 54 54 54
INTEREST FREE 0.00% 1986 Upon Demand PHP 229 229 229 229
</Table>
T-35
GUARANTEED DOMESTIC DEBT OF THE REPUBLIC (OTHER THAN SECURITIES)(1)
AS OF DECEMBER 31, 2002
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL AMOUNT
CONTRACTED
---------------------
INTEREST IN IN
RATE YEAR YEAR OF ORIGINAL PHILIPPINE
INTEREST RATE BASIS SPREAD CONTRACTED MATURITY CURR PESO(2)
------------------- -------- ---------- ----------- -------- ----------
TOTAL 2,358
------
A. NATIONAL GOVERNMENT
DIRECT GUARANTEE 2,078
------
US DOLLARS LIBOR 6 MOS. 0.8125% 1986 2007 39 2,078
B. GFI GUARANTEE ASSUMED
BY THE GOVERNMENT
PER PROC. 50. 280 280
------
PHILIPPINE PESOS
INTEREST FREE 0.0000% 1986 Upon Demand 7 7
INTEREST FREE 0.0000% 1986 Upon Demand 30 30
91 DAY T/BILL 0.0000% 1986 2007 12 12
92 DAY T/BILL 0.0000% 1986 2007 17 17
93 DAY T/BILL 0.0000% 1986 2007 35 35
94 DAY T/BILL 0.0000% 1986 2007 7 7
95 DAY T/BILL 0.0000% 1986 2007 6 6
96 DAY T/BILL 0.0000% 1986 2007 5 5
97 DAY T/BILL 0.0000% 1986 2007 3 3
98 DAY T/BILL 0.0000% 1986 2007 1 1
99 DAY T/BILL 0.0000% 1986 2007 18 18
100 DAY T/BILL 0.0000% 1986 2007 19 19
101 DAY T/BILL 0.0000% 1986 2007 32 32
102 DAY T/BILL 0.0000% 1986 2007 32 32
103 DAY T/BILL 0.0000% 1986 2007 8 8
104 DAY T/BILL 0.0000% 1986 2007 42 42
105 DAY T/BILL 0.0000% 1986 2007 4 4
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2002
------------------------
IN IN
ORIGINAL PHILIPPINE
CURR PESO(2)
--------- -----------
TOTAL 2,261
------
A. NATIONAL GOVERNMENT
DIRECT GUARANTEE 39 2,078
------
US DOLLARS 39 2,078
B. GFI GUARANTEE ASSUMED
BY THE GOVERNMENT
PER PROC. 50. 183 183
------ ------
PHILIPPINE PESOS
7 7
30 30
12 12
17 17
15 15
7 7
6 6
5 5
3 3
1 1
5 5
19 19
1 1
5 5
3 3
42 42
4 4
</Table>
- ---------------
(1) Excludes securities issued by GOCCs
(2) FX rate used: BSP reference rate as of December 27, 2002.
T-36
(REPUBLIC OF THE PHILIPPINES LOGO)
PART II
(AS REQUIRED BY ITEMS (11), (13) AND (14) OF SCHEDULE B OF THE SECURITIES ACT OF
1933.)
ITEM 11. ESTIMATED EXPENSES
It is estimated that the expenses in connection with the sale of the Debt
Securities hereunder, exclusive of compensation payable to underwriters and
agents, will be as follows:
<Table>
SEC Registration Fee...................................... $ 45,522
NASD Filing Fee........................................... 30,500
Printing Costs............................................ 250,000
Legal Fees and Expenses................................... 350,000
Fiscal Agent Fees and Expenses............................ 20,000
Blue Sky Fees and Expenses................................ 2,000
Miscellaneous............................................. 200,000
--------
Total.................................................. $898,022
========
</Table>
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Act") each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-1
CONTENTS OF REGISTRATION STATEMENT
<Table>
This Registration Statement consists of:
(1) Facing sheet.
(2) Part I consisting of the Prospectus.
(3) Part II consisting of pages numbered II-1 through II-5.
(4) The following exhibits;
A. Fiscal Agency Agreement.*
B. Form of Debt Securities (attached to the form of Fiscal
Agency Agreement under A above).*
C. Form of Warrant Agreement.**
D. Form of Underwriting Agreement.*
E. Opinion of the Secretary of the Department of Justice, the
Republic of the Philippines as to the legality of the Debt
Securities.***
F. Opinion of Allen & Overy, US counsel to the Republic of the
Philippines, as to the legality of the Debt Securities.****
G. Consent of the Secretary of the Department of Justice of the
Republic of the Philippines (included in Exhibit (E)).***
H. Consent of Allen & Overy (included in Exhibit (F)).****
I. Consent of Hon. Jose Isidro N. Camacho, Secretary,
Department of Finance Republic of the Philippines, (included
on signature page).
</Table>
- ---------------
* Incorporated by reference to Registration Statement No. 333-10960.
** To be filed concurrently with the applicable prospectus supplement in a
post-effective amendment to this Registration Statement relating to a
particular issue of debt securities or warrants.
*** Filed herewith.
**** Previously filed.
II-2
SIGNATURE OF THE REPUBLIC OF THE PHILIPPINES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Republic of the Philippines has duly caused this Registration Statement or
amendment thereto to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Manila, Republic of the Philippines on the 28th day
of August, 2003.
REPUBLIC OF THE PHILIPPINES
By /s/ JOSE ISIDRO N. CAMACHO
------------------------------------
Jose Isidro N. Camacho*
Secretary, Department of Finance
- ---------------
* Consent is hereby given to use of his name in connection with the
information specified in this Registration Statement or amendment thereto to
have been supplied by him and stated on his authority.
II-3
SIGNATURE OF AUTHORIZED REPRESENTATIVE
OF THE REPUBLIC OF THE PHILIPPINES
Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly
authorized representative of the Republic of the Philippines in the United
States, has signed this Registration Statement or amendment thereto in The City
of New York, New York on the 28th day of August, 2003.
By: /s/ LINGLINGAY LACANLALE
------------------------------------
Name: Linglingay Lacanlale
Title: Consul General
II-4
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
(4)A. Fiscal Agency Agreement*....................................
B. Form of Debt Securities (attached to the form of Fiscal
Agency Agreement under A above)*............................
C. Form of Warrant Agreement**.................................
D. Form of Underwriting Agreement***...........................
E. Opinion of the Secretary of the Department of Justice of the
Republic of the Philippines as to the legality of the Debt
Securities****..............................................
F. Opinion of Allen & Overy, US counsel to the Republic of the
Philippines, as to the legality of the Debt Securities***...
G. Consent of the Secretary of the Department of Justice of the
Republic of the Philippines (included in Exhibit E)****.....
H. Consent of Allen & Overy (included in Exhibit F)***.........
I. Consent of Jose Isidro N. Camacho, Secretary, Department of
Finance, the Republic of the Philippines (included on
signature page)***..........................................
</Table>
- ---------------
* Incorporated by reference to Registration Statement No. 333-10960.
** To be filed concurrently with the applicable prospectus supplement in a
post-effective amendment to this Registration Statement relating to a
particular issue of debt securities or warrants.
*** Filed herewith.
**** To be filed prior to effectiveness of this Registration Statement.
II-5