AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 2004
REGISTRATION NO. 333-114312
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
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. CECILIA B. REBONG
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 YONG G. LEE, ESQ.
9TH FLOOR, THREE EXCHANGE SQUARE CLEARY, GOTTLIEB, STEEN & HAMILTON
CENTRAL BANK OF CHINA TOWER
HONG KONG SAR ONE GARDEN ROAD
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.
---------------------
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 $196,985,000 REGISTERED UNDER THE REGISTRANT'S
REGISTRATION STATEMENT NO. 333-113450 UNDER SCHEDULE B AND NOT PREVIOUSLY SOLD
IN THE UNITED STATES FOR WHICH THE REGISTRANT PAID A REGISTRATION FEE OF
$24,958. THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION STATEMENT,
ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO.
333-113450 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 APRIL 15, 2004
PROSPECTUS
(REPUBLIC OF THE PHILIPPINES LOGO)
REPUBLIC OF THE PHILIPPINES
$2,000,000,000
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 April --, 2004.
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................................................ 9
Recent Developments....................................... 13
Philippine Economy........................................ 17
GDP and Major Financial Indicators........................ 21
Principal Sectors of the Economy.......................... 25
Prices, Employment and Wages.............................. 30
Balance of Payments....................................... 34
Monetary System........................................... 53
The Philippine Financial System........................... 60
The Philippine Securities Markets......................... 65
Public Finance............................................ 67
The Government Budget..................................... 73
Debt...................................................... 73
Description of the Securities............................... 85
Description of the Debt Securities........................ 85
Description of the Warrants............................... 94
Limitations on Issuance of Bearer Debt Securities......... 94
Collective Action Securities................................ 96
Taxation.................................................... 100
Philippine Taxation....................................... 100
United States Tax Considerations.......................... 101
Plan of Distribution........................................ 108
Validity of the Securities.................................. 109
Authorized Representative in the United States.............. 109
Experts; Official Statements and Documents.................. 109
Further Information......................................... 109
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. As used
in this prospectus, the term "N/A" identifies statistical or financial data that
is not available.
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. The Republic's population
is estimated at approximately 82.7 million.
GOVERNMENT AND POLITICS
The Republic's current constitution was adopted by plebiscite in 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 vested in the President, who is elected by direct popular
vote and who may serve one 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 various
lower courts.
In January 2001, Gloria Macapagal-Arroyo became President after the
impeachment of former President Joseph Estrada. Criminal charges for perjury 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. The next presidential
election is scheduled to take place on May 10, 2004.
Over the past three decades, groups of communist rebels and Muslim
separatists in the Republic have periodically fought with Government forces. 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.
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.
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's major policy objectives
are:
- protecting the vulnerable;
- establishing good governance and rule of law;
- modernizing agriculture and fisheries; and
- encouraging equitable macroeconomic growth based on free enterprise.
The principal sectors of the Philippine economy are services, industry and
agriculture (including fishery and forestry). The services sector accounted for
46.3% of real gross domestic product ("GDP") in 2003, including the subsectors
of trade (16.5% of real GDP), transportation, communications and storage (8.0%
of real GDP) and private services (7.5% of real GDP). The industry sector
accounted for 34.0% of real GDP in
4
2003, of which 24.0% of real GDP came from manufacturing. The agriculture sector
accounted for 19.6% of real GDP in 2003.
In 2003, real gross national product ("GNP") grew 5.5% and real GDP grew
4.5%, compared with real GNP growth of 4.5% and real GDP growth of 4.4% for
2002.
Foreign trade is important to the Philippine economy. In 2003, exports of
goods and services were equal to 43.8% of the country's GNP and imports were
equal to 46.6% of GNP. The country's trade strategy emphasizes export promotion.
Total exports of goods were $35.8 billion in 2003; the average annual goods
export growth rate from 1999 to 2003 was 0.5%. Manufactured goods accounted for
87% of the Republic's exports in 2003. Electronics, machinery and transport
equipment and garments have historically been the Republic's leading
manufactured exports.
In 2003, the balance of payments recorded a surplus of $111 million,
compared to the $663 million surplus in 2002. The current account recorded a
surplus of $3,347 million, lower than the $4,383 million recorded in 2002. The
continued surplus reflected robust net inflows throughout the year, particularly
from overseas Filipino workers, which offset a decline in the trade balance. The
income account recorded a surplus of $5,215 million in 2003 compared to $4,490
million in 2002, primarily on account of higher remittances of overseas Filipino
workers. The trade-in-goods balance recorded a deficit of $1,253 million after
recording a surplus of $407 million in 2002, mainly because of weak exports in
the early part of 2003. The trade-in-services account recorded a deficit in 2003
of $1,227 million, higher than the deficit of $1,017 million recorded in 2002.
The capital and financial account posted a deficit of $5,319 million in
2003. Both direct and portfolio investment accounts were weak in 2003 relative
to 2002, weighed down by global uncertainty during the first half of 2003,
domestic political uncertainty and corporate restructuring. Net inflows for
direct investments declined to $161 million in 2003 from $1,733 million in 2002
due to the deferral of several approved investments as well as a divestment by a
significant foreign investor. The portfolio investment account posted net
outflows of $706 million in 2003, a reversal of the net inflow of $1,122 million
in 2002. This development was due to the repayment of bonds and the purchase of
local debt, which more than offset Government bond issuances. The other
investment account recorded a net outflow of $4,795 million, higher than the net
outflow of $4,480 million in 2002, mainly because of net repayment of loans.
As of December 31, 2003, Bangko Sentral-approved external debt amounted to
$57.4 billion, a 7.0% increase from the $53.6 billion recorded as of December
31, 2002. The increase in debt resulted from net inflows of foreign exchange to
finance the Government's budgetary requirements and from foreign exchange
revaluation losses.
As of December 31, 2003, Bangko Sentral-approved medium and long term
external debt amounted to $51.2 billion. Of this amount, 57.8% carried fixed
rates, 39.5% had variable rates, and the remaining 2.7% was non-interest
bearing. The average cost of fixed rate debt was 6.0%. For liabilities with
floating interest rates, the margin over the applicable base rate averaged 1.7%.
Approximately 54% of total Bangko Sentral-approved external debt (including
short-term debt) was denominated in US dollars while 28% was denominated in
Japanese yen. Multi-currency loans from the World Bank and the Asian Development
Bank accounted for 9.2% of total Bangko Sentral-approved external debt.
The average interest rates for 91-day Treasury bills decreased from 9.9% in
2001 to 5.4% in 2002, following the decline in global interest rates, but
subsequently increased to 6.0% in 2003.
On January 27, 2004, Moody's Investors Service lowered its rating of the
Republic's long-term foreign currency bonds and notes from Ba1 to Ba2, and
lowered its rating of the Republic's long-term domestic currency obligations
from Baa3 to Ba2. Moody's retained its negative ratings outlook on the
Republic's long-term foreign and domestic currency obligations. Moody's noted
concerns over the Government's fiscal imbalances and the country's uncertain
political dynamics, as well as relatively high public-sector debt ratios. 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
5
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.
6
SUMMARY ECONOMIC INFORMATION OF THE REPUBLIC OF THE PHILIPPINES
<Table>
<Caption>
1999 2000 2001 2002 2003
------- ------- ------- ------- ------
(IN BILLIONS, EXCEPT AS INDICATED)(1)
GDP (at current market prices)......................... P 2,977 P 3,355 P 3,674 P 4,023 P4,359
GDP (at constant 1985 prices).......................... 918 973 1,002 1,046 1,093
GDP per capita (in US dollars at current market
prices).............................................. $ 992 $ 989 $ 917 $ 970 $1,050
GDP growth rate (at constant 1985 prices).............. 3.4% 4.4% 3.0% 4.4% 4.5%
GNP growth rate (at constant 1985 prices).............. 3.7% 4.8% 3.5% 4.5% 5.5%
Inflation rate......................................... 6.7% 4.4% 6.1% 3.1% 3.1%
Unemployment rate...................................... 9.8% 11.2% 11.1% 11.4% 11.4%
Government revenues.................................... P 479 P 515 P 564 P 567 P 627
Government expenditures................................ 590 649 711 778 827
Government surplus (deficit)........................... (111.7) (134.2) (147.0) (210.7) (199.9)
Public sector borrowing requirement(2)................. (138.0) (174.6) (189.8) (268.3) N/A
Consolidated public sector financial position(3)....... (100.5) (151.7) (169.3) (234.3) N/A
</Table>
<Table>
<Caption>
1999 2000 2001 2002 2003
-------- -------- -------- -------- -------
(IN MILLIONS, EXCEPT AS INDICATED)
Goods trade -- exports...................... $ 34,211 $ 37,295 $ 31,243 $ 34,377 $34,842
Goods trade -- imports...................... (29,252) (33,481) (31,986) (33,970) (36,095)
Services trade -- exports................... 4,803 3,972 3,148 3,055 2,970
Services trade -- imports................... (7,515) (6,402) (5,198) (4,072) (4,197)
Current transfer (net)...................... 512 437 447 503 612
Current account (deficit)................... 7,219 6,258 1,323 4,383 3,347
As a percentage of GNP.................... 9.0% 7.9% 1.7% 5.3% 3.9%
Total capital and financial account......... $ (2,333) $ (4,119) $ (1,080) $ (1,644) $(5,319)
Overall balance of payments position........ 3,586 (513) (192) 663 111
As a percentage of GNP.................... 4.5% (0.6)% (0.3)% 0.8% 0.1
Gross international reserves(4)............. $ 15,024 $ 15,024 $ 15,645 $ 16,171 $16,866
</Table>
<Table>
<Caption>
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------
(IN BILLIONS, END OF PERIOD)(5)
Direct domestic debt of the Republic(6)........... P 978.4 P1,068.2 P1,247.7 P1,471.2 P1,703.8
Direct external debt of the Republic(6)........... $ 19.8 $ 22.0 $ 22.1 $ 25.3 $ 29.6
Public sector domestic debt(7).................... P2,196.6 P2,542.0 P2,286.3 P2,765.4 N/A
Public sector external debt(8).................... $ 27.0 $ 26.3 $ 25.0 $ 27.9 $ 32.1
</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) Represents the aggregate deficit of the Government, the Central Bank-Board
of Liquidation (the "CB-BOL"), the Oil Price Stabilization Fund and the 14
GOCCs whose debt comprises virtually all the debt incurred by GOCCs (the
"14 monitored GOCCs").
(3) Comprises the aggregate deficit or surplus of the Government, the CB-BOL's
accounts, the 14 monitored GOCCs, the Social Security System, the
Government Service Insurance System, Bangko Sentral, the Government
financial institutions ("GFIs") and the local government units.
(4) 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. Figures [from 2001] have been revised to
reflect the change in the treatment of offshore banking units from
non-resident to resident entities.
(5) 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.
7
(6) 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.
(7) Represents debt of the Government, the 14 monitored GOCCs, the CB-BOL,
Bangko Sentral and the GFIs.
(8) Includes public sector debt whether or not guaranteed by the Government.
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 17 administrative regions.
Forests cover approximately 50% of the Philippines, and 47% of the country
is under agricultural cultivation. Agriculture, forestry and fishery employed
35.4% of the labor force in January 2004 and provided 5.0% of the Republic's
export earnings (including exports of agriculture-based products) in 2003. 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 88.2% of the Republic's
exports in 2003. Electronics, machinery and transport equipment and garments
have historically been the Republic's leading manufactured exports.
The Republic's population was 76.5 million according to the 2000 census,
and is estimated at 82.7 million in 2004. 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
GOVERNMENTAL STRUCTURE. Since 1935, the Republic has had three
Constitutions. The country adopted the current Constitution by plebiscite in
February 1987 after Ferdinand Marcos, who had ruled for 20 years, was ousted a
year earlier in favor of Corazon Aquino following 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, Gloria
Macapagal-Arroyo became President after the impeachment of
9
former President Joseph Estrada. Criminal charges for perjury 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. The next presidential
election is scheduled to take place on May 10, 2004.
- 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, Municipal Trial Courts and 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.
ADMINISTRATIVE ORGANIZATION. As of April 12, 2004, the Republic had 17
regions and 43,663 local Government units. Local Government units included 79
provinces, 115 cities, 1,500 municipalities (subdivisions of provinces) and
41,969 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 grouped 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>
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. Originally 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, 2002, these 14 corporations had aggregate domestic and
external debt of P1,370 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, 2002, the monitored
Governmental financial institutions had aggregate domestic and external debt of
P387.5 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 820.7
International Bank for
Reconstruction and
Development(2).................. December 1945 $ 825.6 0.4% $ 48.9 $ 3,352.0
Asian Development Bank(3)......... December 1966 $ 1,142.0 2.4% $ 80.0 $ 2,551.5
</Table>
- ---------------
(1) As of November 30, 2003; Source: IMF.
(2) As of June 30, 2003; 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 December 2003, the IMF completed its most recent 10-day review of the
Philippine economy as part of its PPM. The IMF emphasized the need for the
Republic to address the recent rise in Government debt, introduce
revenue-enhancing measures, privatize the power sector and further strengthen
the banking system. The Department of Finance has indicated that it intends to
continue the PPM through 2004.
RECENT DEVELOPMENTS
PRESIDENTIAL ELECTIONS SCHEDULED FOR MAY 2004
The next presidential elections are scheduled to take place on May 10,
2004. On October 4, 2003, President Gloria Macapagal-Arroyo announced that she
would seek election to a full six-year term as president of the Republic.
President Arroyo formally filed her candidacy for president on January 6, 2004.
President Arroyo's challengers include Senator Panfilo Lacson, movie actor
Fernando Poe, Jr., and former Senator and Education Secretary Raul Roco.
13
RECENT CHANGES IN THE ARROYO ADMINISTRATION
In November 2003, Secretary of Finance Jose Isidro Camacho resigned, citing
personal reasons. On December 9, 2003, President Arroyo appointed Undersecretary
Juanita Amatong as his replacement. Standard & Poor's issued a statement that
the Camacho resignation in itself would not directly affect its sovereign credit
ratings of the Republic.
In December 2003, Secretary of Foreign Affairs Blas P. Ople died of natural
causes. He has been replaced by Delia Domingo Albert.
In December 2003, Edgardo del Fonso, president and chief executive officer
of Power Sector Assets and Liabilities Management Corporation ("PSALM")
resigned, citing health reasons. PSALM is the Government-owned corporation
formed to privatize the assets and liabilities of National Power Corporation as
part of the restructuring of the Philippine electric power industry. Mr. del
Fonso has been replaced by Raphael Lotilla, chief operating officer of PSALM.
Also, several members of the Arroyo administration have resigned for
reasons related to the upcoming Philippine elections. Secretary of Justice
Simeon Datumanong resigned to run for Congress, and has been replaced by
Merceditas Gutierrez. Secretary of Trade and Industry Manuel Roxas II resigned
to run for the Senate, and has been replaced by Cesar Purisima, who previously
served as chairman of a major Philippine auditing firm. Secretary of Tourism
Richard Gordon also resigned to run for the Senate. Presidential Legal Counsel
Avelino Cruz resigned to join President Arroyo's campaign team, and has been
replaced by Joe Nathan Tenefrancia, who previously served as partner in a
Philippine law firm. Presidential Management Staff Chief Silvestre Afable took
an indefinite leave to join President Arroyo's campaign team, and has been
replaced by deputy presidential spokesman Ricardo Saludo.
FUNDS RELEASED FROM MARCOS ACCOUNTS
In November 2003, the Supreme Court rejected several appeals, filed by the
family of former President Ferdinand Marcos, of its July 2003 ruling that the
Government may claim assets worth approximately $684 million from the Marcos
family's frozen Swiss bank accounts. In addition, the Supreme Court rejected an
injunction of the US federal court in Hawaii against transfer of the funds.
Approximately $624 million has been transferred to the Philippine National
Treasury. The Government has indicated that the funds received by the National
Treasury will be set aside for compensation of victims of martial law and for
agrarian reform, subject to Congressional approval.
AGREEMENT TO ESTABLISH ASEAN ECONOMIC COMMUNITY
On October 8, 2003, the Philippines entered into the Bali Concord II
agreement with the nine other countries of the Association of South-East Asian
Nations ("ASEAN") to improve cooperation on security and social issues. The
ASEAN member nations plan, pursuant to the agreement, to establish a free trade
zone, the ASEAN Economic Community, by 2020.
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 have filed motions for
reconsideration with the Court of Appeals. This motion for reconsideration
remains pending. The suspensions have not yet taken effect, and the Supreme
Court has dismissed criminal charges against Mr. Buenaventura and other BSP
officials in connection with the 2000 bank closure. The Government does not
expect the suspensions to affect the operations of Bangko Sentral.
14
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 will 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.
INTERNAL CONFLICT WITH REBEL GROUPS. Over the past three decades, rebel
groups 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.
Abu Sayyaf and Moro Islamic Liberation Front
Since March 2003, a series of bombings and raids in the southern region of
Mindanao have killed almost 100 civilians. In response the Armed Forces of the
Philippines ("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.
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, in
February 2004, approximately 2,300 Filipino soldiers trained with approximately
4,600 U.S. soldiers as part of an annual training exercise to counter external
threats and terrorism. 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.
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 recent terrorist bombings in the Philippines and have denied any link to
Jemaah Islamiah or al-Qaeda. The United States and the United Kingdom have
issued advisories against travel to Mindanao, where rebel groups are most
active.
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. The cease-fire remains in effect.
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 negotiations between the Government and the MILF are scheduled
to resume near the end of April 2004. On March 25, 2004 an advanced survey party
of a Malaysian-led international monitoring team arrived in the southern
Philippines to inspect MILF rebel camps before the upcoming peace negotiations.
The United States has pledged diplomatic and financial support for the peace
negotiations.
15
Communists and Affiliated Groups
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. In January 2004, guerillas of the NPA attacked
a power plant outside of Manila and made assassination attempts on two
politicians in Mindanao. However, from February 1 through February 14, 2004,
four days of formal peace talks were held in Oslo, Norway, between the Arroyo
administration and the National Democratic Front ("NDF"), a political
organization closely aligned with the CPP and NPA, with the two sides agreeing
to form a joint monitoring committee to oversee implementation of a
comprehensive agreement. Another round of peace negotiations between the
Government and the NDF was held from March 30, 2004 to April 3, 2004 and
facilitated by the government of Norway. The next round of peace negotiations is
scheduled to begin on April 26, 2004 in Oslo.
According to the AFP, the number of NPA guerrillas has decreased from 9,200
in 2003 to 8,800 in 2004; however, according to the AFP, the NPA has continued
to procure firearms and gain influence in the Philippine countryside.
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.
The disease spread from China to more than 25 countries around the world; at
least 8,400 people were infected and more than 900 of them died. Hong Kong,
China, Taiwan, and Singapore were especially hard hit by the disease. There were
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. It is impossible to predict whether another outbreak might occur and what
the long-term effect of SARS on Philippine public health or on the Philippine
economy might be.
RECENT ECONOMIC INDICATORS
The following table sets out the performance of certain of the Republic's
principal economic indicators for the specified periods.
<Table>
<Caption>
2001 2002 2003
----- ----- ----
GDP growth (%).............................................. 3.0(1) 4.4(1) 4.5
GNP growth (%).............................................. 3.5(1) 4.5(1) 5.5
Inflation rate (%).......................................... 6.1 3.1 3.1
Unemployment rate (%)....................................... 11.1(2) 11.4(2) 11.4(2)
91-day T-bill rate (%)...................................... 9.9 5.4 6.0
External position
Balance of payments ($ million)........................... (192) 663 (111)
Trade-in-goods balance/GNP (%)............................ (1.0) 0.5 (1.4)
Export growth (%)...................................... (16.2) 10.1 1.4
Import growth (%)...................................... (4.5) 6.2 6.3
External debt ($ billion)(3)(4)........................... 51.9 53.6 57.4
</Table>
16
<Table>
<Caption>
2001 2002 2003
----- ----- ----
International reserves
Gross ($ billion)(4)................................... 15.7 16.2 16.9
Net ($ billion)(4)..................................... 11.4 12.8 13.9
Months of retained imports(4)(5)....................... 4.6 4.7 4.7
Domestic credit growth (%).................................. 0.9 4.8 4.8
</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" in the accompanying prospectus.
(2) 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.
(3) Includes Bangko Sentral obligations, public sector debt whether or not
guaranteed by the Government and private sector debt registered and approved
by Bangko Sentral. Does not include intercompany accounts of Philippine
branches of foreign banks, private sector debt not registered with Bangko
Sentral or private sector obligations under capital lease arrangements.
Figures have been revised beginning 1990 to reflect the change in treatment
of offshore banking units from non-resident to resident entities, pursuant
to the fifth edition of the IMF Balance of Payments Manual ("BPM5").
(4) As of December 31 of the relevant year.
(5) Number of months of average imports of merchandise goods and payments of
services and income that can be financed by gross reserves.
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 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 increasing 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
17
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. 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, though the
pace of economic growth slowed again in 2001.
NATIONAL SOCIO-ECONOMIC SUMMIT OF 2001. In December 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.
The policy initiatives of the summit included more than 30 specific action items
in the following areas: peace, order and security; financial and fiscal reforms;
agriculture; trade and industry; tourism-related industries; telecommunications
and information technology; labor and employment; infrastructure; housing; and
health and other social services. In a speech before Congress on January 14,
2003, President Arroyo called for Congress to accelerate passage of several of
these measures.
The Government has implemented a number of the specific measures
recommended by the National Socio-Economic Summit of 2001, including:
- Rationalizing the documentary stamp tax;
- Implementing the Special Purpose Vehicle Act (see "The Philippine
Financial System -- Structure of the Financial System");
- Creating job corps programs and employment facilitation services;
- Encouraging micro-business enterprises;
- Increasing access to lower-priced medicines;
- Implementing anti-smuggling measures and more closely monitoring trading
warehouses;
- Monitoring local government compliance with withholding tax legislation;
- Intensifying tourism campaigns and liberalizing civil aviation
regulations;
- Streamlining housing permits and environmental compliance certificates;
- Expanding housing assistance programs for overseas Filipino workers;
- Expanding the National Health Insurance Program; and
- Passing legislation to combat domestic violence and trafficking of women.
A monitoring body composed of presidential advisers and assistants
continues to provide quarterly status reports on the specific initiatives
proposed pursuant to the National Socio-Economic Summit of 2001.
ARROYO ADMINISTRATION ECONOMIC POLICY. 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. 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 to
allow overseas Filipinos to vote in national elections and the dual citizenship
bill to grant dual citizenship to Filipinos abroad to encourage them to invest
in the Philippines.
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 Govern-
18
ment 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.
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, 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
19
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 2003, remittances to the National Treasury from privatizations amounted
to P570 million.
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, two disposition entities have
been created pursuant to the EPIRA:
- 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, which began in 2003 with respect to certain
generation assets. 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 Cost Adjustment ("PPCA"), 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 PPCA
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 PPCA
charge, in connection with the unbundling of its transmission and generation
rates. In addition, the PPCA has been replaced by the
20
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. In response to a second filing by NPC under the GRAM, in January
2004 the ERC set revised rates under the GRAM that were, on average, lower than
the rates previously approved by the ERC. NPC estimates that implementation of
the revised rates as approved by the ERC, compared to implementation of the rate
NPC requested, reduced NPC's revenues from energy sales by P720 million for the
year ending December 31, 2003. NPC expects that the current rates under the
GRAM, if not subsequently revised by the ERC, will continue to impair NPC's
future operating revenues.
In January 2004, Transco signed a deed of conditional sale for power lines
with a total length of 12.2 circuit-kilometers and price of P12.6 million. The
sale will be completed once the ERC approves the transaction.
Under the EPIRA, a "Universal Charge" 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 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 PPCA 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 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 and January 2004, in response to NPC's applications, are lower than
the rates NPC had requested.
For the year ended December 31, 2002, NPC received approximately P3.1
billion in cash advances from the Government to finance its debt service
requirements. In 2003, NPC obtained approximately $1.9 billion from the
Government to cover its total cash flow deficit for 2003. NPC has not yet repaid
these amounts to the Government. In addition, NPC anticipates that it will need
approximately $1.8 billion in additional external financing to cover its cash
flow deficit for 2004, of which $1.5 billion is expected to be provided by bond
issuances and the Government and $300 million through export credits under
bilateral assistance arrangements. The remainder of NPC's capital expenditures
will be financed through internal cash generation and continued privatization of
NPC assets. 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 Government to provide NPC with the
sufficient capital to meet its obligations. The Government 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
21
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 2003, GDP grew by 4.5%, compared to growth of 4.4% in
2002 and GNP grew by 5.5%, compared to growth of 4.4% in 2002. Robust consumer
spending, low interest rates, and modest inflation contributed to the growth.
The services sector grew 5.9% in 2003, compared to 5.4% in 2002. The
fastest growing subsector was transportation, communication and storage, which
grew 8.6% in 2003, slightly slower than 8.9% in 2002. The finance subsector grew
6.9% in 2003, a substantial acceleration from the 3.4% growth in 2002, due to
robust income growth of banks, insurance firms, and other financial firms. The
trade subsector grew 5.8% in 2003, the same growth rate as in 2002. The
dwellings and real estate subsector grew 3.8% in 2003, compared to 1.7% in 2002.
The private services subsector slowed to 5.3% in 2003 from 5.5% in 2002. Growth
in the government services subsector declined to 3.8% in 2003 from 4.7% in 2002.
The industry sector recorded 3.0% growth in 2003, slower than the 3.7%
growth in 2002. The manufacturing subsector grew 4.2% in 2003, compared to 3.5%
in 2002. Growth in the mining and quarrying subsector slowed to 17.5% in 2003
from 51.0% in 2002, and growth in the electricity, gas and water subsector
slowed to 2.9% in 2003 from 4.3% in 2002. The construction subsector continued
to decline, contracting 5.9% in 2003 after a contraction of 3.3% in 2002.
The agriculture, forestry and fishery sector grew 3.9% in 2003, faster than
the 3.3% growth recorded in 2002. This growth was due to higher production of
major crops, particularly sugarcane and corn, and growth in fishery and forestry
production. Growth in the agriculture and fishery subsector was 3.6% in 2003,
slightly less than the 3.7% growth in 2002, but the forestry sector expanded by
193.3% in 2003 following a 66.4% decline in 2002.
Net factor income from abroad, which is a component of GNP (but not
included in GDP), grew 18.9% in 2003 compared to growth of 5.0% in 2002.
Compensation inflow increased by 6.9% as a result of the decline in the value of
the peso relative to the US dollar, and despite a decrease in the number of
overseas Filipino workers.
22
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>
PERCENTAGE
OF GDP
-------------
1999 2000(1) 2001(1) 2002(1) 2003 1999 2003
-------- -------- -------- -------- -------- ----- -----
(IN BILLIONS, EXCEPT AS INDICATED)
Agriculture, fishery and
forestry.................... P 510.5 P 528.9 P 548.7 P 592.1 P 632.0 17.2% 14.4%
-------- -------- -------- -------- -------- ----- -----
Industry sector
Mining and quarrying........ 18.0 21.8 21.7 33.5 43.6 0.6 1.0
Manufacturing............... 644.0 745.9 831.6 915.2 998.2 21.7 22.8
Construction................ 162.9 217.2 222.1 235.4 235.4 5.5 5.4
Electricity, gas and
water..................... 86.1 97.5 116.3 124.1 116.3 2.9 2.6
-------- -------- -------- -------- -------- ----- -----
Total..................... 911.1 1,082.4 1,191.7 1,308.2 1,409.6 30.6 32.3
Service sector
Transportation,
communications and
storage................... 159.3 199.0 247.6 276.9 313.2 5.4 7.1
Trade....................... 419.3 473.0 517.6 556.3 603.3 14.1 13.8
Finance..................... 141.6 149.1 160.1 170.5 187.8 4.8 4.3
Ownership of dwellings and
real estate............... 208.9 220.9 236.7 252.9 269.6 7.0 6.1
Private services............ 335.4 381.6 433.7 484.9 539.2 11.3 12.3
Government services......... 290.8 319.8 337.7 380.9 404.4 9.8 9.2
-------- -------- -------- -------- -------- ----- -----
Total..................... 1,555.3 1,743.4 1,933.2 2,122.3 2,317.5 52.3 53.1
-------- -------- -------- -------- -------- ----- -----
Total GDP..................... P2,976.9 P3,354.8 P3,673.7 P4,022.7 4,359.0 100.0% 100.0%
======== ======== ======== ======== ======== ===== =====
Total GNP..................... P3,136.2 P3,566.1 P3,918.7 P4,290.2 P4,685.4
Total GDP (in billions of US
dollars)(2)................. $ 76.2 $ 76.0 $ 72.0 $ 78.0 $ 86.4
GDP per capita (in US
dollars)(2)................. $ 992.0 $ 988.7 $ 916.8 $ 969.5 $ 1,050.0
</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."
23
GROSS DOMESTIC PRODUCT BY MAJOR SECTORS
(AT CONSTANT MARKET PRICES(1))
<Table>
<Caption>
PERCENTAGE
OF GDP
----------------
1999 2000(2) 2001(2) 2002(2) 2003 1999 2003
------ -------- -------- -------- -------- -------- -----
(IN BILLIONS, EXCEPT AS INDICATED)
Agriculture, fishery and forestry... P184.5 P 190.6 P 199.6 P 206.2 P 214.3 20.1% 19.6%
------ -------- -------- -------- -------- -------- -----
Industry sector
Mining and quarrying.............. 9.7 10.7 10.1 15.3 18.0 1.1 1.6
Manufacturing..................... 224.7 237.3 244.1 252.6 263.2 29.5 24.0
Construction...................... 51.0 51.7 61.2 59.2 55.7 5.6 5.0
Electricity, gas and water........ 31.3 32.6 32.8 34.2 35.2 3.4 3.2
------ -------- -------- -------- -------- -------- -----
Total........................... 316.7 332.3 348.2 361.2 372.0 39.5 34.0
Service sector
Transportation, communications and
storage......................... 61.7 68.2 74.2 80.8 87.7 6.7 8.0
Trade............................. 145.4 152.9 161.5 170.8 180.8 15.8 16.5
Finance........................... 46.3 46.7 47.3 48.9 52.3 5.0 4.7
Ownership of dwellings and real
estate.......................... 48.4 48.3 48.1 48.9 50.8 5.3 4.6
Private services.................. 67.6 70.9 74.0 78.0 82.2 7.4 7.5
Government services............... 47.7 48.5 48.9 51.2 53.1 5.2 4.8
------ -------- -------- -------- -------- -------- -----
Total........................... 417.0 435.5 454.0 478.7 500.9 45.4 46.3
------ -------- -------- -------- -------- -------- -----
Total GDP........................... P918.2 P 958.4 P1,001.7 P1,046.1 P1,093.3 100.0% 100.0%
====== ======== ======== ======== ======== ======== =====
Total GNP........................... P969.3 P1,016.1 P1,073.1 P1,121.0 P1,182.4
Yearly growth in GDP................ 3.4% 4.4% 3.0% 4.4% 4.5%
Yearly growth in GNP................ 3.7% 4.8% 3.5% 4.5% 5.5%
</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".
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>
1999 2000 2001 2002 2003
----- ----- ----- ----- -----
Personal consumption................................... 79.1% 78.5% 77.8% 77.5% 77.9%
Government consumption................................. 8.2 8.3 7.5 7.4 6.9
Capital formation
Fixed capital........................................ 21.8 21.5 23.1 22.6 21.8
Changes in stocks.................................... (0.8) (0.3) 1.3 (0.1) 0.1
----- ----- ----- ----- -----
Total capital formation........................... 21.0 21.2 24.4 22.5 21.9
Exports of goods and services 41.5 46.8 43.0 42.6 42.1
Imports of goods and services.......................... (51.3) (51.1) (50.7) (50.9) (53.7)
Statistical discrepancy................................ 1.5 (3.7) (1.9) 0.9 4.2
----- ----- ----- ----- -----
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.
24
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.
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
be carried out 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.
25
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 3.6%
in 2003 compared to growth of 3.3% in 2002 at constant market prices. The
agriculture subsector grew by 2.7% in 2003 compared to growth of 3.0% in 2002,
with the adverse effects of a typhoon in the third quarter of 2003 offsetting
increased yields for corn. The fishery subsector grew 7.4% in 2003 compared to
growth of 6.4% in 2002 at constant market prices, mainly due to improved
aquaculture technologies as well as higher output from commercial and municipal
fisheries. The forestry subsector grew by 196.4% in 2003, following a 66.4%
contraction in 2002, due to renewed harvests from a major paper plantation.
INDUSTRY SECTOR
The industry sector comprises, in order of importance: manufacturing;
construction; electricity, gas and water; and mining and quarrying. The sector
contributed approximately 39.5% of GDP in 1999 and 34.0% in 2003, at constant
market prices. The sector grew by 3.0% in 2003 compared to 3.7% in 2002 with
accelerated growth in manufacturing offset by a contraction in the construction
sector and decelerated growth in the mining and quarrying and electricity, gas
and water 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.
26
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 94,623
Beverage industries.................... 9,003 8,896 9,175 8,820 8,740
Tobacco manufactures................... 5,538 5,681 5,886 6,133 6,639
Textile manufactures................... 5,085 4,660 4,128 3,778 4,201
Footwear/wearing apparel............... 12,699 10,801 12,327 12,801 13,688
Wood and cork products................. 2,769 2,451 2,220 2,060 2,016
Furniture and fixtures................. 2,881 2,852 3,172 3,232 2,994
Paper and paper products............... 2,132 2,033 2,627 2,258 2,040
Publishing and printing................ 3,093 3,055 2,964 2,967 3,154
Leather and leather products........... 224 222 229 254 266
Rubber products........................ 1,849 2,065 2,115 1,743 1,652
Chemical and chemical products......... 14,169 13,868 13,523 14,648 14,295
Petroleum and coal products............ 37,472 37,137 39,896 38,929 34,131
Non-metallic mineral products.......... 6,614 5,834 5,625 5,215 5,721
Basic metal industries................. 4,745 4,206 3,600 3,851 3,803
Metal industries....................... 4,231 4,272 4,645 5,257 6,268
Machinery (except electrical).......... 3,540 3,555 4,219 5,326 4,346
Electrical machinery................... 19,284 22,277 27,678 29,009 34,499
Transport equipment.................... 1,810 1,984 2,125 2,325 2,421
Miscellaneous manufactures............. 5,269 5,769 6,527 7,249 7,056
-------- -------- -------- -------- --------
Gross value added in manufacturing..... P221,151 P224,667 P237,271 P244,082 P252,553
======== ======== ======== ======== ========
</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
27
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 results remained negative in
chemical products, paper products, rubber products, petroleum and coal products
and non-electrical machinery products.
In 2003, the manufacturing sector grew 4.2% from 2002 with output of P263.2
at constant prices. The growth in manufacturing was due to continued growth in
food manufactures, as well as to the recovery of basic metal industries,
petroleum and coal products, chemical products and non-electrical machinery, all
four of which declined in 2002 and expanded in 2003. The annual growth rate
increased to 14.3% for food manufactures (up from 7.2% in 2002), to 115% for
basic metal industries (up from negative 1.2% in 2002), to 7.4% for petroleum
and coal products (up from negative 12.3% in 2002), by 9.6% for chemical and
chemical products (up from negative 2.4% in 2002), and to 20.6% for machinery
other than electrical machinery (up from negative 18.4% in 2002).
Construction. The construction subsector's contribution to GDP, at
constant market prices, decreased from 5.6% in 1999 to 5.1% in 2003. The
construction subsector contracted by 5.9% in 2003 after a contraction of 3.3% in
2003. The declines in the construction subsector for 2002 and 2003 were
primarily due to a decrease in public construction prompted by budget austerity
measures.
Electricity, Gas and Water. The electricity, gas and water subsector grew
by 2.9% in 2003, compared to 4.3% in 2002. The slower growth was attributable
primarily to reduced electricity demand.
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.
Mining and Quarrying. The mining and quarrying subsector grew by 17.5% in
2003, compared to growth of 51.0% during 2002. Most of the growth in the mining
and quarrying subsector in 2002 was attributable to production from the
Camago-Malampaya Gas Project. Growth was sustained in 2003, although each
quarter of 2003 had slower growth than the corresponding quarter of 2002. Growth
was slower in 2003 because there was no comparable increase in production of
crude oil or production from the Camago-Malampaya Gas Project.
SERVICE SECTOR
The service 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 46.4% of GDP at constant market prices in
2003, 45.8% of GDP in 2002 and 45.3% in 2001. In 2003, the service sector as a
whole grew by 5.9%.
Trade. The trade subsector, which consists of wholesale and retail
activities, accounted for 16.5% of GDP at constant market prices in 2003. Total
trade is comprised of approximately 75% retail trade and 25% wholesale trade.
The trade subsector grew by 5.8% in 2003 at constant market prices, the same
level of growth as in 2002. Increased growth in retail trade offset decreased
growth in wholesale trade in 2003. Growth in retail trade increased to 6.3% in
2003 from 6.0% in 2002. Although sales from malls, warehouse clubs, supermarkets
28
and pharmaceutical products provided growth for wholesale trade, growth was 4.6%
for 2003, down from 5.2% for 2002.
Finance. The finance subsector's contribution to GDP at constant market
prices decreased slightly from 5.0% in 1999 to 4.7% in 2003.
The finance subsector grew by 6.9% in 2003 after growing by 3.4% in 2002.
Increased growth in 2003 was due to substantially higher levels of bank loans
and higher earnings from fee-based transactions, as well as trading gains from
investments in government securities. For a discussion of the country's
financial system, see "-- The Philippine Financial System."
Ownership of Dwellings and Real Estate. The ownership of dwellings and
real estate subsector grew by 3.8% in 2003 at constant market prices after
growing by 1.7% in 2002. Higher growth was due primarily to increased revenues
from leases and rentals and improved residential lot sales.
Private Services. The private services subsector includes educational,
medical and health, recreational and hotel and restaurant services. The
subsector contributed 7.5% to GDP in 2003. The private services subsector grew
by 5.3% in 2003 at constant market prices, compared to growth of 5.5% in 2002.
In 2003, increased growth in personal and educational services offset diminished
growth in tourism-related services due to the SARS outbreak and concerns over
terrorism. Personal services, comprising services provided by funeral parlors,
washing and drying businesses and other related services, grew 6.2% in 2003 from
5.5% in 2002. Consumer consumption increased to 5.7% from 5.3% for education,
personal care and effects, medical and health, recreation and other
miscellaneous expenditures.
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.
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 three-line light-rail transit system in Metro Manila, financed by
a build, lease and transfer arrangement, and has started work on a fourth line
of the light-rail transit system.
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 more than 10 million international passengers per year, is
scheduled to open in the summer of 2004. The Government plans to complete
construction and take over operations of the new terminal after the Supreme
Court voided the private concession contract which had originally been awarded
to a private consortium in 1997. 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.
29
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 transport, communications and storage subsector's contribution to GDP,
at constant market prices, grew from 6.7% in 1999 to 8.0% in 2003. At constant
market prices the subsector grew by 8.6% in 2003, compared to growth of 8.9% in
2002. This reduced growth was caused primarily by a significant decrease in
growth of air transport, which offset increased growth in land transport and
communication services.
Government Services. The Government services subsector grew by 3.8% in
2003, compared to 4.7% in 2002, at constant market prices.
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. 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 National Statistics Office conducts a nationwide Family Income and
Expenditure Survey every six years, and the 2000-based CPI basket will
officially replace the 1994-based CPI basket after June 2004.
The following table sets out the principal components of the 1994 and 2000
CPI baskets.
PRINCIPAL COMPONENTS OF 1994 AND 2000 CPI BASKETS
<Table>
<Caption>
1994 2000
CATEGORY CPI BASKET CPI BASKET
- -------- ---------- ----------
Food items (including beverages and tobacco), total......... 55.1% 50.1
Rice...................................................... 11.8 9.4
Non-food items, total....................................... 44.9 50.0
Housing and repairs....................................... 14.7 16.8
Services.................................................. 12.3 15.9
Fuel, light and water..................................... 5.7 7.0
Clothing.................................................. 3.7 3.0
Miscellaneous............................................. 8.5 7.3
</Table>
30
The following table sets out the consumer price index (based on the 1994
CPI basket) and the manufacturing sector's equivalent, the producer price index
(based on the 1994 PPI benchmark), as well as the annual percentage changes in
each index.
CHANGES IN CONSUMER AND PRODUCER PRICE INDEX
<Table>
<Caption>
1999 2000 2001 2002 2003 2004
----- ----- ----- ----- ----- -----
Consumer Price Index......................... 145.9 152.3 161.6 166.6 171.7 175.5(1)
Increase over previous year.................. 6.7% 4.4% 6.1% 3.1% 3.1% 3.5%(1)
Producer Price Index for manufacturing....... 125.9 141.5 165.6 170.4 184.5 188.1(2)
Increase/(decrease) over previous year....... 7.0% 12.4% 17.0% 2.9% 8.3% 4.6%(2)
</Table>
- ---------------
Source: National Statistics Office.
(1) As of March 2004.
(2) As of January 2004.
In 1999, inflation declined to 6.7%. 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
6.7% 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 6.1% in 2001, 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 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.
Inflation, measured using the 1994 CPI basket, remained at 3.1% in 2003.
The 2003 inflation of 3.1% was below the Government's full-year inflation target
of 4.5-5.5 percent. The lower-than-targeted inflation rate in 2003 was due to a
lack of significant demand-driven pressure as well as to unused productive
capacity.
For the first three months of 2004, inflation measured using the 1994 CPI
basket averaged 3.5%. Based on the 2000 CPI basket, inflation was 4.2% in March
2004 compared to 4.0% in February 2004 and averaged 4.0% for the first three
months of 2004.
31
EMPLOYMENT AND WAGES
The following table presents selected employment information for various
sectors of the economy.
SELECTED EMPLOYMENT INFORMATION(1)
<Table>
<Caption>
JANUARY
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ -------
Labor force (in thousands)(2)(3).......... 30,759 30,911 32,809 33,936 34,560 35,421
Unemployment rate......................... 9.8% 11.2% 11.1% 11.4% 11.4% 11.0%
Employment share by sector:
Agriculture, fishery and forestry......... 38.8% 32.9% 37.2% 37.0% 36.6% 35.4%
Industry sector
Mining and quarrying.................... 0.4 0.4 0.4 0.4 0.3 0.4
Manufacturing........................... 9.9 10.0 10.0 9.5 9.6 9.9
Construction............................ 5.5 5.4 5.4 5.3 5.5 5.4
Electricity, gas and water.............. 0.5 0.4 0.4 0.4 0.4 0.3
------ ------ ------ ------ ------ ------
Total industry sector................ 16.3% 16.2% 16.2% 15.6% 15.9% 16.0%
Service sector
Transportation, communication and
storage.............................. 6.9 7.2 7.3 7.2 7.6 7.7
Trade................................... 15.7 16.3 18.0 18.7 18.3 18.5
Finance and housing..................... 2.6 2.6 2.8 2.8 3.1 3.3
Services................................ 19.7 20.5 18.6 18.7 18.7 19.2
------ ------ ------ ------ ------ ------
Total services sector................ 44.9% 46.6% 46.7% 47.4% 47.6% 48.6%
------ ------ ------ ------ ------ ------
Total employed..................... 100.0% 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 1999 to 2003 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.
In January 2004, the Filipino labor force, not including overseas workers,
totalled 35.4 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 865,000 Filipino workers were working overseas from
January to December 2003, a decrease of approximately 3.0% from the same period
in 2002. The decline in overseas Filipino workers in 2003 was attributed to the
SARS outbreak, the war in Iraq and a reduction in wages for domestic helpers in
Hong Kong.
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
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.
32
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 2003, the average national unemployment rate remained at 11.4%.
In January 2004, the economy created 1.4 million net new jobs, but 1.7
million new entrants to the labor force raised the unemployment rate to 11.0%
from the previous quarterly figure of 10.2% in October 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 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.
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;
33
- rationalizing financial taxes (e.g., gross receipts tax, documentary
stamp tax, initial public offerings tax);
- broadening of the scope and coverage of small denomination 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
earnings from overseas Filipino workers and investment income; 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 monetization of gold for
Bangko Sentral reserves.
34
The following table sets out the consolidated financial position on a cash
basis for the Republic for the years 1999-2003.
BALANCE OF PAYMENTS(1)(2)
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1999 2000 2001 2002 2003(3)
-------- ------- ------- ------- -------
(IN MILLIONS)
OVERALL BOP POSITION:(4)......................... $ 3,586 $ (513) $ (192) $ 663 $ 111
======== ======= ======= ======= =======
CURRENT ACCOUNT:(2).............................. $ 7,219 $ 6,258 $ 1,323 $ 4,383 3,347
-------- ------- ------- ------- -------
Goods and services:.............................. 2,247 1,384 (2,793) (610) (2,480)
Exports(5)..................................... 39,014 41,267 34,391 37,432 37,812
Imports(5)..................................... 36,767 39,883 37,184 38,042 40,292
Goods.......................................... 4,959 3,814 (743) 407 (1,253)
Credit: Exports(5).......................... 34,211 37,295 31,243 34,377 34,842
Debit: Imports(5)........................... 29,252 33,481 31,986 33,970 36,095
Services....................................... (2,712) (2,430) (2,050) (1,017) (1,227)
Credit: Exports............................. 4,803 3,972 3,148 3,055 2,970
Debit: Imports.............................. 7,515 6,402 5,198 4,072 4,197
Income:.......................................... 4,460 4,437 3,669 4,490 5,215
Credit: Receipts............................ 8,082 7,804 7,152 7,946 8,415
Debit: Disbursements........................ 3,622 3,367 3,483 3,456 3,200
Current transfers:............................... 512 437 447 503 612
Credit: Receipts............................ 607 552 517 594 682
Debit: Disbursements........................ 95 115 70 91 70
Capital and financial account:(2)................ (2,333) (4,119) (1,080) (1,644) (5,319)
-------- ------- ------- ------- -------
Capital account:............................... (8) 38 (12) (19) 21
Credit: Receipts............................ 44 74 12 2 40
Debit: Disbursements........................ 52 36 24 21 19
Financial account:............................. (2,325) (4,157) (1,068) (1,625) (5,340)
Direct investment........................... 1,754 1,453 1,142 1,733 161
Debit: Assets, residents' investments
abroad................................. (29) (108) (160) 59 158
Credit: Liabilities, non-residents'
investments in the Philippines......... 1,725 1,345 982 1,792 319
Portfolio Investment:....................... 6,874 207 1,050 1,122 (706)
Debit: Assets, residents' investments
abroad................................. 807 812 399 449 1,586
Credit: Liabilities, non-residents'
investments in the Philippines......... 7,681 1,019 1,449 1,571 880
Other Investment:........................... (10,953) (5,817) (3,260) (4,480) (4,795)
Debit..................................... 18,639 15,313 13,898 13,165 13,307
Credit.................................... 7,686 9,496 10,638 8,685 8,512
NET UNCLASSIFIED ITEMS:.......................... (1,300) (2,652) (435) (2,076) 2,083
-------- ------- ------- ------- -------
</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) Preliminary.
(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.
(5) Data on exports and imports from the National Statistics Office were
adjusted to exclude temporary exports and imports and returned goods.
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
35
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, 2001 and
2002, 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 7.9% and 1.7% 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 $3.8 billion.
Overall Balance of Payments Performance. 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, as revised, 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 was $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 $6.9 billion in 1999.
In 2001, the balance of payments, as revised, 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 security concerns 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 $1.1 billion, compared to a $1.5 billion net
inflow in 2000. The net inflow in portfolio investments increased to $1.1
billion in 2001 from $207 million in 2000.
In 2002, the balance of payments registered a surplus of $663 million,
compared to a deficit of $192 million in 2001. This improvement can mainly be
attributed to the stronger performance of the current account, which offset the
weaker performance of the capital and financial account. The current account
surplus more than tripled to $4.4 billion for 2002 from $1.3 billion in 2001.
This positive development was mainly caused by higher net inflows in the income
account, the reversal of the trade-in-goods balance from a deficit to a surplus
and lower net outflows in services. The trade-in-goods balance for 2002 posted a
surplus of $407 million, as compared to a deficit of $743 million for 2001 as
growth of exports outpaced growth of imports. The strong export performance was
supported by increasing intra-regional trade in Asia, offsetting 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-services account for 2002 recorded a net
outflow of $1.0 billion, 50.4% 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 22.4% to $4.5 billion. The higher surplus was
due mainly to an increase in the number of deployed overseas Filipino workers
sending
36
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
mainly to higher transfers from migrant workers. However, the capital and
financial account for 2002 posted a net outflow of $1.6 billion, compared to the
net outflow of $1.1 billion in 2001. The weaker performance of this account was
attributed to the increase in the net outflow in other investments, which rose
to $4.5 billion in 2002 from $3.3 billion in 2001. These changes offset the net
inflow of portfolio investments of $1.1 billion, the same level as in 2001,
mainly because of the substantially higher non-residents' investments in
resident-issued foreign-denominated debt securities and the higher net inflow of
direct investments.
In 2003, the balance of payments recorded a surplus of $111 million,
compared to the $663 million surplus in 2002. The current account recorded
surplus of $3,347 million, lower than the $4,383 million recorded in 2002. The
continued surplus reflected robust net inflows throughout the year, particularly
from overseas Filipino workers, which offset a decline in the trade balance. The
income account recorded a surplus of $5,215 million in 2003 compared to $4,490
million in 2002, primarily caused by higher remittances of overseas Filipino
workers. The trade-in-goods balance recorded a deficit of $1,253 million after
recording a surplus of $407 million in 2002, mainly because of weak exports in
the early part of 2003. The trade-in-services account recorded a deficit in 2003
of $1,227 million, higher than the deficit of $1,017 million recorded in 2002.
The capital and financial account posted a deficit of $5,319 million in
2003. Both direct and portfolio investment accounts were weak in 2003 relative
to 2002, weighed down by global uncertainty during the first half of 2003,
domestic political uncertainty and corporate restructuring. Net inflows for
direct investments declined to $161 million in 2003 from $1,733 million in 2002
due to the deferral of several approved investments as well as a divestment by a
significant foreign investor. The portfolio investment account recorded net
outflows of $706 million in 2003, a reversal of the net inflow of $1,122 million
in 2002. This development was due to the repayment of bonds and the purchase of
local debt, which more than offset Government bond issuances. The other
investment account recorded a net outflow of $4,795 million, higher than the net
outflow of $4,480 million in 2002, mainly because of net repayment of loans.
Current Account
In 2003, the current account posted a surplus of $3.3 billion, a 23.6%
decrease from 2002. The surplus is attributable to the robust net inflow in the
income account throughout 2003, in large part from higher remittances from
overseas foreign workers. These remittances resulted in inflows of $5.2 billion,
an amount 16.1% higher than the 2002 level of remittances.
Goods Trade. Trading in goods significantly affects the Philippine
economy. From 1999 to 2003, exports (as reported by the National Statistics
Office) were equal to an average of 43.3% of the country's GNP and imports were
equal to an average of 42.0% of GNP.
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
peso has been depreciating for a number of years and is currently near its
historical low relative to the US dollar. See "-- Foreign Exchange System".
37
Exports of Goods. The following table sets out the Republic's exports of
goods by major commodity group, as reported by the National Statistics Office.
EXPORTS OF GOODS BY COMMODITY GROUP
<Table>
<Caption>
PERCENTAGE OF
TOTAL EXPORTS
-------------
1999 2000 2001 2002 2003 1999 2003
------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
Manufactures
Electronics and electrical
equipment/parts................ $21,166 $22,179 $16,699 $18,583 $18,255 60.4% 51.1%
Garments.......................... 2,267 2,563 2,403 2,391 2,269 6.5 6.3
Textile yarns/fabrics............. 219 249 226 247 243 0.6 0.7
Footwear.......................... 86 76 73 47 47 0.2 0.1
Travel goods and handbags......... 154 177 174 83 62 0.4 0.2
Wood manufactures................. 129 212 119 112 131 0.4 0.4
Furniture & fixtures.............. 354 381 298 316 278 1.0 0.8
Chemicals......................... 294 328 318 360 393 0.8 1.1
Non-metallic mineral
manufactures................... 111 133 123 113 128 0.3 0.4
Machinery and transport
equipment...................... 4,950 5,909 6,136 7,067 7,184 14.1 20.1
Processed food and beverages...... 256 267 337 385 476 0.7 1.3
Iron and steel.................... 18 25 14 17 18 0.1 0.1
Baby carriages, toys, games and
sporting goods................. 158 165 145 140 127 0.5 0.4
Basketwork, wickerwork and other
articles of plaiting
materials...................... 85 95 83 74 69 0.2 0.2
Miscellaneous manufactured
articles, not elsewhere
specified...................... 212 229 220 231 285 0.6 0.8
Others............................ 850 999 974 1,014 1,216 2.4 3.4
------- ------- ------- ------- ------- ----- -----
Total manufactures............. 31,309 33,987 28,340 31,181 31,182 89.4 87.2
Agro-based products
Coconut products.................. 466 577 532 484 640 1.3 1.8
Sugar and sugar products.......... 71 57 32 47 70 0.2 0.2
Fruits and vegetables............. 455 528 552 544 602 1.3 1.7
Other agro-based products......... 476 486 427 453 470 1.4 1.3
------- ------- ------- ------- ------- ----- -----
Total agro-based products...... 1,468 1,648 1,544 1,527 1,781 4.2 5.0
Mineral products.................... 646 650 537 519 637 1.8 1.8
Petroleum products.................. 216 436 242 353 533 0.6 1.5
Forest products..................... 20 44 23 23 37 0.1 0.1
Others.............................. 1,379 1,313 1,464 1,607 1,582 3.9 4.4
------- ------- ------- ------- ------- ----- -----
Total.......................... $35,037 $38,078 $32,150 $35,209 $35,751 100.0% 100.0%
======= ======= ======= ======= ======= ===== =====
</Table>
- ---------------
Source: National Statistics Office.
Exports of goods, as reported by the National Statistics Office, grew by
18.8% in 1999, 8.7% in 2000, 9.5% in 2002 and 1.5% in 2003, but declined by
15.6% in 2001. As a percentage of total exports, manufactured goods decreased
from 89.4% in 1999 to 87.2% in 2003. Exports of electronics, electrical
equipment and parts, and telecommunications equipment decreased slightly as a
proportion of total exports from 60.4% in 1999 to
38
51.1% in 2003. During the same period, exports of garments as a proportion of
total exports decreased from 6.5% in 1999 to 6.3% in 2003 because of increased
international competition and a general decline in global demand. Exports of
agriculture products, including coconut products, sugar products, fruits and
vegetables, increased as a proportion of total exports from 4.2% in 1999 to 5.0%
in 2003. On the other hand, increased production helped exports of machinery and
transport equipment increase from $5.0 billion in 1999 to $7.2 billion in 2003.
As a percentage of total exports, machinery and transport grew from 14.1% in
1999 to 20.1% in 2003.
In 1999, exports of goods 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 of goods totalled $38.1 billion, 8.7% more than 1999.
Among the merchandise exports, electronics maintained its position as the top
earner and continued growing, but at a decelerated rate of 4.8% in 2000 compared
to 23.5% in 1999. Garments, the third top earner, had a 13.0% increase in 2000
after a 3.8% contraction in 1999. Machinery and transport, the second top earner
in 2000, experienced decelerated growth, from 49.3% in 1999 to only 19.2% in
2000.
In 2001, exports of goods declined by 15.6% 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 grew 4.5%, and machinery and transport equipment, which
grew 3.8%. Electronics, machinery and transport equipment and garments remained
the top three export commodities.
Exports of goods for 2002 were $35.2 billion, or 9.5% higher than exports
of goods in 2001. Higher demand for Philippine goods from Japan, Taiwan, Hong
Kong, South Korea, Malaysia and China made up for a decrease in exports to the
US, which accounted for approximately 25% of the country's export market in
2002. The following table sets out the destinations of the Republic's exports.
Exports of goods, as reported by the National Statistics Office, were $35.8
billion for 2003, 1.5% more than the $35.2 billion in exports of goods for 2002,
with most of the growth coming in the fourth quarter. The improvement for the
year was attributed to increases in external demand for machinery and transport
equipment. Increased exports of machinery and transport equipment resulted, in
part, from increased demand in trading partner countries based on expectations
of an improving global economy.
EXPORTS OF GOODS BY DESTINATION
<Table>
<Caption>
PERCENTAGE OF
TOTAL EXPORTS
-------------
1999 2000 2001 2002 2003 1999 2003
------- ------- ------- ------- ------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
United States................. $10,445 $11,365 $ 8,979 $ 8,683 $ 7,119 29.8% 19.9%
ASEAN countries(1)............ 4,916 5,894 4,914 5,416 6,285(2) 14.0 17.6
Japan......................... 4,660 5,606 5,054 5,292 5,756 13.3 16.1
Hong Kong SAR................. 1,947 1,907 1,580 2,359 3,071 5.6 8.8
The Netherlands............... 2,865 2,982 2,976 3,055 2,922 8.2 8.2
Taiwan........................ 2,993 2,861 2,127 2,485 2,341 8.5 6.5
People's Republic of
China(3).................... 575 663 793 1,356 2,143 1.6 6.0
South Korea................... 1,032 1,173 1,044 1,339 1,311 2.9 3.7
Germany....................... 1,229 1,329 1,323 1,386 1,219 3.5 3.4
United Kingdom................ 1,766 1,506 997 946 694 5.0 1.9
Others........................ 2,609 2,792 2,362 2,892 2,891 7.4 8.1
------- ------- ------- ------- ------- ----- -----
Total....................... $35,037 $38,078 $32,150 $35,209 $35,751 100.0% 100.0%
======= ======= ======= ======= ======= ===== =====
</Table>
39
- ---------------
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.
The United States accounted for, on average, 26.4% of total exports from
1999 to 2003. Japan accounted for, on average, 15.0% of Philippine exports from
1998 to 2003. 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, which provides for reduced tariffs among ASEAN nations as well as
plans for intra-regional investments, industrial linkages and banking and
financial integration. The Republic's overall average trade-weighted tariff
rates declined from 5.0% in 2000 to 3.6% in 2003. By sector, average
trade-weighted tariff rates declined from 15.7% in 2000 to 10.3% in 2003 for
agricultural products, from 3.1% in 2000 to 2.9% in 2003 for mining products,
and from 3.9% in 2000 to 3.0% in 2003 for manufactures. Tariff rates currently
range from 0% to 65% for agricultural products, from 1% to 5% for mining
products and from 0% to 30% for manufactures.
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 imports of goods, as reported by the National
Statistics Office, has been adjusted from $33.5 billion to $35.4 billion. For
2001, the value of total imports of goods has been adjusted from $29.6 billion
to $33.1 billion. For 2000, the value of total imports of goods has been
adjusted from $31.4 billion to $34.5 billion.
IMPORTS OF GOODS BY COMMODITY GROUP
<Table>
<Caption>
PERCENTAGE OF
TOTAL IMPORTS
-------------
1999 2000 2001 2002 2003 1999 2003
------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
Raw materials and intermediate goods
Unprocessed raw materials(1)............... $ 1,517 $ 1,337 $ 1,368 $ 1,416 $ 1,335 4.9% 3.6%
Semi-processed raw materials(2)............ 11,083 13,825 13,585 13,376 13,234 36.1 35.3
------- ------- ------- ------- ------- ----- -----
Total raw materials and intermediate
goods.................................... $12,600 $15,163 $14,953 $14,792 $14,568 41.0% 38.9%
Capital goods................................ 11,828 12,162 11,438 13,533 15,023 38.5 40.1
Consumer goods
Durable.................................... 1,093 1,070 947 981 1,155 3.6 3.1
Non-durable................................ 1,551 1,452 1,536 1,595 1,565 5.0 4.2
------- ------- ------- ------- ------- ----- -----
Total consumer goods....................... $ 2,644 $ 2,523 $ 2,483 $ 2,576 $ 2,720 8.6% 7.3%
Mineral fuels and lubricants................. 2,433 3,877 3,372 3,273 3,761 7.9 10.0
Other........................................ 1,237 765 812 1,253 1,379 4.0 3.7
------- ------- ------- ------- ------- ----- -----
Total...................................... $30,742 $34,491 $33,057 $35,427 $37,452 100.0% 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.
In 1999, imports of goods totalled $30.7 billion. This represented an
increase of 4.1% from 1998. The increase was due mainly to an increase in
imports of electronics and components, minerals, fuel and lubricants.
In 2000, imports of goods increased by 12.2% to $34.5 billion, compared to
a 4.1% increase in 1999. Most of the increase in reported imports from 1999 to
2000 can be attributed to the fact that the 2000 import figures
40
were revised upwards by 9.9% in early 2003, whereas the 1999 figures have not
been revised. However, the growth was also 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 59.4% following the increase in the average price
of petroleum crude in 2000 to $27.89 per barrel, from $16.31 per barrel in 1999.
In 2001, imports of goods fell by 4.2% to $33.1 billion, a reversal of the
12.2% 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.
In 2002, imports of goods increased by 7.2% to reach $35.4 billion. Imports
of all major categories of goods except for semi-processed raw minerals and
mineral fuels and lubricants increased from 2001 to 2002. Of the total $35.4
billion in imports of goods, capital goods accounted for $13.5 billion, or
38.2%, raw materials and intermediate goods accounted for $14.8 billion, or
41.8%, mineral fuels and lubricants accounted for $3.3 billion, or 9.2%, and
consumer goods accounted for $2.6 billion, or 7.3%.
Imports of goods, as reported by the National Statistics Office, were $37.4
billion for 2003, a 5.7% increase from 2002. The increase in imports was due
largely to the build-up of inventories of raw materials and oil products in
anticipation of a possible supply disruption in the Middle East, as well as an
increase in imports of electronic products.
The following table sets out the sources of the Philippines' imports of
goods by country, reflecting import data revisions for 2000, 2001 and 2002. See
"Balance of Payments -- Recent Revisions".
IMPORTS OF GOODS BY SOURCE
<Table>
<Caption>
PERCENTAGE OF
TOTAL IMPORTS
-------------
1999 2000 2001 2002 2003 1999 2003
------- ------- ------- ------- --------- ----- -----
(IN MILLIONS, EXCEPT PERCENTAGES)
Japan.............................. $ 6,136 $ 6,511 $ 633 $ 7,233 $ 7,640 20.0% 20.4%
US................................. 6,365 6,411 6,411 7,286 7,389 20.7 19.7
ASEAN countries(1)................. 4,248 5,203 4,837 5,421 5,262(2) 13.8 14.0
Hong Kong SAR...................... 1,226 1,243 1,335 1,583 1,602 4.0 4.3
Saudi Arabia....................... 810 1,048 887 1,000 1,198 2.6 3.2
Taiwan............................. 1,614 2,255 1,970 1,783 1,860 5.3 5.0
South Korea........................ 2,723 2,754 2,082 2,754 2,400 8.9 6.4
Australia.......................... 757 817 645 575 491 2.5 1.3
Germany............................ 801 371 792 708 926 2.6 2.5
People's Republic of China(3)...... 1,040 786 75 1,252 1,793 3.4 4.8
Others............................. 5,023 6,692 7,490 5,832 6,891 16.3 18.4
------- ------- ------- ------- ------- ----- -----
Total............................ $30,742 $34,491 $33,057 $35,427 $37,452 100.0% 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) Includes (from 1999 to 2002) only Indonesia, Malaysia, Singapore and
Thailand.
(2) Includes only Malaysia, Singapore and Thailand.
(3) Excludes Hong Kong SAR.
41
Services Trade. The following table sets out the Republic's services trade
by sector compiled in accordance with the BPM5 framework for the periods
indicated.
SERVICES TRADE
<Table>
<Caption>
1999 2000 2001 2002 2003(1)
------- ------- ------- ------- ----------
(IN MILLIONS)
TOTAL SERVICES TRADE......................... $(2,712) $(2,430) $(2,050) $(1,017) $(1,227)
======= ======= ======= ======= =======
Exports.................................... 4,803 3,972 3,148 3,055 2,970
Imports.................................... 7,515 6,402 5,198 4,072 4,197
TRANSPORTATION............................... (1,369) (2,097) (1,758) (1,370) (1,655)
------- ------- ------- ------- -------
Exports.................................... 575 891 659 630 581
Imports.................................... 1,944 2,988 2,417 2,000 2,236
of which: Passenger........................ (117) (73) (237) (302) (268)
Exports................................. 15 243 99 87 85
Imports................................. 132 316 336 389 353
of which: Freight.......................... (1,167) (1,950) (1,452) (990) (1,286)
Exports................................. 428 481 380 444 416
Imports................................. 1,595 2,431 1,832 1,434 1,702
of which: Other............................ (85) (74) (69) (78) (101)
Exports................................. 132 167 180 99 80
Imports................................. 217 241 249 177 181
TRAVEL....................................... 1,246 1,129 494 869 832
------- ------- ------- ------- -------
Exports.................................... 2,554 2,134 1,723 1,740 1,464
Imports.................................... 1,308 1,005 1,229 871 632
COMMUNICATION SERVICES....................... (307) (79) 113 224 393
------- ------- ------- ------- -------
Exports.................................... 424 182 328 310 475
Imports.................................... 731 261 215 86 82
CONSTRUCTION SERVICES........................ (108) (27) (235) (95) (15)
------- ------- ------- ------- -------
Exports.................................... 58 97 64 28 50
Imports.................................... 166 124 299 123 65
INSURANCE SERVICES........................... (30) (96) (75) (247) (252)
------- ------- ------- ------- -------
Exports.................................... 51 66 48 35 54
Imports.................................... 81 162 123 282 308
FINANCIAL SERVICES........................... (250) (389) (42) (13) 4
------- ------- ------- ------- -------
Exports.................................... 67 80 33 32 58
Imports.................................... 317 469 75 45 54
COMPUTER AND INFORMATION SERVICES............ (38) (18) (61) (25) (16)
------- ------- ------- ------- -------
Exports.................................... 57 76 22 21 25
Imports.................................... 95 94 83 46 41
ROYALTIES AND LICENSE FEES................... (104) (190) (158) (229) (271)
------- ------- ------- ------- -------
Exports.................................... 6 7 1 1 2
Imports.................................... 110 197 159 230 273
</Table>
42
<Table>
<Caption>
1999 2000 2001 2002 2003(1)
------- ------- ------- ------- ----------
(IN MILLIONS)
OTHER BUSINESS SERVICES...................... (1,672) (595) (320) (139) (232)
------- ------- ------- ------- -------
Exports.................................... 929 359 219 224 235
Imports.................................... 2,601 954 539 363 467
Merchanting and other trade-related
services.............................. (230) (200) 16 29 (6)
Exports............................... 186 59 24 35 11
Imports............................... 416 259 8 6 17
Operational leasing services............ (47) (58) (61) (16) (16)
Exports............................... 15 23 10 7 7
Imports............................... 62 81 71 23 23
Misc. business, professional and
technical services.................... (1,395) (337) (275) (152) (210)
Exports............................... 728 277 185 182 217
Imports............................... 2,123 614 460 334 427
Personal, cultural and recreational..... (81) (87) (42) (10) (5)
Exports............................... 58 43 15 7 10
Imports............................... 139 130 57 17 15
Audio-visual and related................ (3) (9) (10) (10) (3)
Exports............................... 14 15 6 6 10
Imports............................... 17 24 16 16 13
Other personal, cultural and
recreational services................. (78) (78) (32) 0 (2)
Exports............................... 44 28 9 1 0
Imports............................... 122 106 41 1 2
GOVERNMENT SERVICES.......................... 1 19 34 18 (10)
------- ------- ------- ------- -------
Exports.................................... 24 37 36 27 16
Imports.................................... 23 18 2 9 26
</Table>
- ---------------
Source: Bangko Sentral.
(1) Provisional.
In 1999, under the BPM5 framework, the services account recorded a net
outflow of $2.7 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 trade account recorded a net outflow of $2.4 billion,
10.4% lower than the net outflow of $2.7 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 recorded a net outflow of $2.1 billion,
15.6% lower than the $2.4 billion deficit recorded in 2000. 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 from a net
outflow to a net inflow also contributed to the narrower deficit.
In 2002, the services trade account recorded a net outflow of $1.0 billion,
50.4% lower than the level in the comparable period in 2001. The narrowing of
the deficit was triggered by lower net payments for transportation services,
construction services and miscellaneous business, professional and technical
services.
43
Meanwhile, net receipts from travel services, which rose by 75.9% to $869
million, helped trim the net outflow in the services account. The lower travel
payments reflected in part the weaker peso and the Government program to promote
local tourism.
In 2003, the trade-in-services account recorded a net outflow of $1.2
billion, an increase of 20.6% over a net outflow of $1.0 billion in 2002. The
higher outflow was due to a decrease in travel receipts, reflecting the slowdown
in the global economy, tension in the Middle East, the outbreak of SARS in East
Asia 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>
1999 2000 2001 2002 2003(1)
------- ------- ------- ------- -------
(IN MILLIONS)
TOTAL INCOME................................. $ 4,460 $ 4,437 $ 3,669 $ 4,490 $ 5,215
======= ======= ======= ======= =======
Receipts................................... 8,082 7,804 7,804 7,446 8,415
Disbursements.............................. 3,622 3,367 3,367 3,456 3,200
COMPENSATION OF EMPLOYEES, INCL. BORDER,
SEASONAL AND OTHER WORKERS................. 6,794 6,050 6,031 7,189 7,640
------- ------- ------- ------- -------
INVESTMENT INCOME............................ (2,334) (1,613) (2,362) (2,699) (2,425)
------- ------- ------- ------- -------
Receipts................................... 1,288 1,754 1,121 757 775
Disbursements.............................. 3,622 3,367 3,483 3,456 3,200
Direct investment income................... (594) (122) (608) (894) 599
Receipts................................ 35 57 10 15 13
Disbursements........................... 629 179 618 909 612
Income on equity........................ (554) (66) (527) (872) (538)
Receipts.............................. 35 57 10 15 13
Disbursements......................... 589 123 537 887 551
Dividends and distributed branch
profits............................ (184) (240) (654) (653) (538)
Receipts........................... 35 57 10 15 13
Disbursements...................... 219 297 664 668 551
Reinvested earnings and undistributed
branch profits..................... (370) (174) (127) (219) 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 370 174 (127) 219 0
Income on debt (interest)............... 40 (56) (81) (22) (61)
Receipts.............................. 0 0 0 0 0
Disbursements......................... 40 56 81 22 61
Portfolio investment income................ (622) (571) (545) (744) (796)
Receipts................................ 451 645 634 425 543
Disbursements........................... 1,073 1,216 1,179 1,171 1,339
Income on equity (dividends)............ (22) (8) (23) (16) (49)
Receipts.............................. 16 8 6 0 0
Disbursements......................... 38 16 29 (16) (49)
</Table>
44
<Table>
<Caption>
1999 2000 2001 2002 2003(1)
------- ------- ------- ------- -------
(IN MILLIONS)
Income on debt (interest)............... (600) (563) (522) (728) (747)
Receipts.............................. 435 637 628 425 543
Disbursements......................... 1,035 1,200 1,150 1,153 1,290
Bonds and notes....................... (546) (555) (554) (739) (801)
Receipts........................... 430 621 584 413 489
Disbursements...................... 976 1,176 1,138 1,152 1,290
Monetary authorities.................. 180 305 304 141 267
Receipts........................... 266 443 417 297 417
Disbursements...................... 86 138 113 156 150
General government.................... (575) (586) (642) (701) (716)
Receipts........................... 0 0 0 0 0
Disbursements...................... 575 586 642 701 (716)
Banks................................. 35 0 0 0 0
Receipts........................... 35 0 0 0 0
Disbursements...................... 0 0 0 0 0
Other sectors......................... (186) (274) (216) (179) (352)
Receipts........................... 129 178 167 116 72
Disbursements...................... 315 452 383 295 424
Money market instruments................ (54) (8) 32 11 54
Receipts.............................. 5 16 44 12 54
Disbursements......................... 59 24 12 1 0
Monetary authorities.................. (5) (5) 0 0 0
Receipts........................... 0 0 0 0 0
Disbursements...................... 5 5 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......................... (54) (3) 32 11 54
Receipts........................... 5 16 44 12 54
Disbursements...................... 59 19 12 1 0
Other investment income................. (1,118) (920) (1,209) (1,061) (1,030)
Receipts.............................. 802 1,052 477 317 219
Disbursements......................... 1,920 1,972 1,686 1,378 1,249
Monetary authorities.................. 129 227 (31) (21) (7)
Receipts........................... 313 472 232 116 78
Disbursements...................... 184 245 263 137 85
General government.................... (873) (789) (724) (621) (410)
Receipts........................... 0 0 0 0 0
Disbursements...................... 873 789 724 621 410
</Table>
45
<Table>
<Caption>
1999 2000 2001 2002 2003(1)
------- ------- ------- ------- -------
(IN MILLIONS)
Banks................................. (91) 56 (102) (122) (108)
Receipts........................... 410 503 206 144 106
Disbursements...................... 501 447 308 266 214
Other sectors......................... (283) (414) (352) (297) (505)
Receipts........................... 79 77 39 57 35
Disbursements...................... 362 491 391 354 540
</Table>
- ---------------
(1) Provisional
In 2002, the surplus in the income account increased by 22.4% from its $3.7
billion mark for 2001 to reach $4.5 billion. In 2002, the investment income
account yielded a net outflow of $2.7 billion, which represented an increase of
14.3% 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 19.2% from 2001. The income account's recorded surplus of
$4.5 billion was propelled by the 2.8% 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 2003, the income account posted a net inflow of $5.2 billion, a 16.1%
increase from 2002. Remittances from overseas Filipino workers reached $7.6
billion in 2003, an increase of 6.3% from 2002. Overall, receipts in the income
account were up 5.9% for the year, while payments were down 7.4%.
Capital and Financial Account
Since the implementation of the BPM5 framework, the Capital and 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.
46
DIRECT INVESTMENTS
<Table>
<Caption>
1999 2000 2001 2002 2003
------ ------ ------ ------ ---------
(IN MILLIONS)
TOTAL DIRECT INVESTMENTS.......................... $1,754 $1,453 $1,142 $1,733 $161
====== ====== ====== ====== ====
ASSETS: RESIDENTS' INVESTMENTS ABROAD............. (29) (108) (160) 59 158
------ ------ ------ ------ ----
Equity capital.................................. (45) (95) (162) 51 130
Claims on affiliated enterprises............. (45) (95) (162) 51 130
Placements................................. 63 46 33 54 147
Withdrawals................................ 108 141 195 3 17
Liabilities to affiliated enterprises........ 0 0 0 0 0
Reinvested earnings............................. 0 0 0 0 0
Other capital................................... 16 (13) 2 8 28
LIABILITIES: NON-RESIDENTS' INVESTMENTS IN THE
PHILIPPINES..................................... 1,725 1,345 982 1,792 319
------ ------ ------ ------ ----
Equity capital.................................. 1,145 1,024 628 1,467 226
Liabilities to direct investors.............. 1,145 1,024 628 1,467 226
Placements................................. 1,267 1,209 697 1,497 808
Withdrawals................................ 122 185 69 30 582
Reinvested earnings............................. 370 (174) (127) 219 0
Other capital................................ 210 495 481 106 93
Claims on direct investors................... 0 0 0 0 0
Liabilities to direct investors................. 210 495 481 106 93
</Table>
- ---------------
Source: Bangko Sentral.
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>
1999 2000 2001 2002 2003
------- ------- ------ ------ ------
(IN MILLIONS)
TOTAL PORTFOLIO INVESTMENTS..................... $ 6,874 $ 207 $1,050 $1,122 $ (706)
======= ======= ====== ====== ======
ASSETS: RESIDENTS' INVESTMENTS ABROAD........... 807 812 399 449 1,586
------- ------- ------ ------ ------
Equity securities............................. 55 42 4 26 43
Debt securities............................... 752 770 395 423 1,543
Banks...................................... 319 363 341 341 694
Other sectors.............................. 433 407 54 115 849
LIABILITIES: NON-RESIDENTS' INVESTMENTS IN THE
PHILIPPINES................................... 7,681 1,019 1,449 1,571 880
------- ------- ------ ------ ------
Equity securities............................. 1,410 (183) 383 404 457
Debt securities............................... 6,271 1,202 1,066 1,167 423
Monetary authorities....................... 1,158 88 11 55 (149)
General Government......................... 2,912 2,223 950 999 1,273
Banks...................................... 1,031 326 239 (336) (185)
Other sectors.............................. 1,170 (1,435) (134) 449 (516)
</Table>
- ---------------
Source: Bangko Sentral.
47
The following table sets out the Republic'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>
1999 2000 2001 2002 2003
-------- ------- ------- ------- -------
(IN MILLIONS)
TOTAL OTHER INVESTMENTS..................... $(10,953) $(5,817) $(3,260) $(4,480) $(4,795)
======== ======= ======= ======= =======
ASSETS: RESIDENTS' INVESTMENTS ABROAD....... 18,639 15,313 13,898 13,165 13,307
-------- ------- ------- ------- -------
Trade credits(1).......................... 16,381 17,401 13,774 12,820 12,510
Loans(2).................................. 257 (1,307) 830 359 (243)
Currency and deposits..................... 2,276 (759) (509) 216 572
Banks.................................. 959 (936) (1,098) (490) (734)
Other sectors.......................... 1,317 177 589 706 1,306
Other assets(3)........................... (275) (22) (197) (230) 468
LIABILITIES: NON-RESIDENTS' INVESTMENTS IN
THE PHILIPPINES........................... 7,686 9,496 10,638 8,685 8,512
-------- ------- ------- ------- -------
Trade credits(1).......................... 9,958 10,260 10,981 9,953 9,667
Loans..................................... 575 354 178 (225) (710)
Monetary authorities................... 0 51 177 (40) 201
Drawings(4).......................... 0 105 117 118 331
Repayments(4)........................ 0 54 50 158 130
General Government..................... 340 (125) 16 (131) (154)
Drawings(4).......................... 1,465 933 931 870 1,067
Repayments(4)........................ 1,125 1,058 915 1,001 1,221
Banks(5)............................... 626 (250) (647) 920 68
Other sectors.......................... (391) 678 692 (974) (825)
Long-term............................ (494) 952 916 (780) (940)
Drawings.......................... 2,610 2,428 3,142 1,030 1,232
Repayments........................ 3,104 1,476 2,226 1,810 2,172
Short-term........................... 103 (274) (224) (194) 115
Currency and deposits(6).................. (2,629) (1,286) 401 (1,112) (335)
Other Liabilities(7)...................... (218) 168 (922) 69 (90)
</Table>
- ---------------
Source: Bangko Sentral.
(1) All trade credits are short-term credits in non-governmental sectors.
(2) All loans are 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.
48
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 enterprise's
equity capital. The Constitution also prohibits foreign ownership in certain
sectors, such as the media.
In 1999, net investment inflows declined by 29.4% to $1.2 billion compared
to $1.7 billion in 1998. In 1999, under the BPM5 framework, a net outflow of
$2.3 billion was registered in the capital and financial account due to the net
outflow of $11.0 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 capital and
financial account reached $4.1 billion, an increase of 76.6% from the net
outflow of $2.3 billion recorded in 1999. However, sustained net inflows of both
direct and portfolio investments mitigated the contraction in the capital and
financial account.
In 2001, the capital and financial account registered a net outflow of $1.1
billion, an 73.8% improvement from the net outflow of $4.1 billion 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 43.1% lower than the $5.8 billion
in 2000.
In 2002, the net outflow in the capital and financial account reached $1.6
billion (including a net outflow of $19 million from the capital account). The
slight increase in the net inflow in the portfolio investment account to $1.12
billion from a net inflow of $1.05 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.
In 2003, the net outflow in the capital and financial account was $5.3
billion, compared to a net outflow of $1.6 billion net outflow in 2002. This
increased net outflow was due to the increased net outflow of other investments
and the reversal in net portfolio investments from a net inflow to net outflow,
reflecting a weakened global economy and the higher net repayment of loans.
The direct investment account posted a net inflow of $161 million in 2003,
a decline from the net inflow of $1.7 billion in 2002. This decline was the
result of the decline in non-residents' investment in equity capital and the
decline in new capital in 2003, including a divestment by a significant foreign
investor and the deferral of several approved investments.
Portfolio investments in 2003 recorded a net outflow of $706 million, a
reversal from the net inflow of $1.1 billion in 2002. Non-residents' investments
in debt securities contracted during this period, due to investors' concerns
over geopolitical uncertainties. The repayment of bonds and residents' purchases
of foreign-issued debt in the secondary market also contributed to the weaker
portfolio investment account.
In 2003 the other investment account posted a $4.8 billion net outflow,
slightly higher than the $4.5 billion outflow for 2002. The larger net outflow
resulted from the higher net repayment of loans by banks, the national
Government and private companies.
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.
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 2004 Investments Priorities Plan is working to sustain globally
competitive industries as a means to generate jobs, provide food and deliver
basic services.
49
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.
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>
1999 2000 2001 2002 2003
-------- -------- ------ -------- --------
(IN MILLIONS)
Banks and other financial institutions...... $ 258.3 $ 483.9 $476.4 $ 153.0 $ 530.5
Manufacturing............................... 1,049.1 171.7 262.9 943.1 215.2
Mining...................................... 27.3 239.5 66.2 114.6 138.8
Commerce and real estate.................... 166.3 62.3 23.2 26.6 57.7
Services.................................... 16.7 5.2 8.4 21.5 11.7
Public utilities............................ 552.5 423.5 20.6 131.8 433.5
Others(1)................................... 36.5 12.2 0.2 40.9 100.8
-------- -------- ------ -------- --------
Total investments........................... $2,106.7 $1,398.2 $857.8 $1,431.5 $1,488.2
======== ======== ====== ======== ========
</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
AS OF DECEMBER 31, MARCH 31,
----------------------------------------------- ---------
1999(1) 2000(2) 2001(3) 2002 2003 2004(4)
------- ------- ------- ------- ------- ---------
(IN MILLIONS, EXCEPT MONTHS AND PERCENTAGES)
Gold(5)............................ $ 1,782 $ 1,973 $ 2,216 $ 3,036 $ 3,408 $ 3,317
SDRs............................... 19 2 14 10 2 2
Foreign investments(6)............. 12,881 12,371 12,786 12,570 12,782 12,366
Foreign exchange................... 222 565 520 437 544 492
Reserve position in the IMF(7)..... 120 113 109 118 130 129
------- ------- ------- ------- ------- -------
Total.............................. $15,024 $15,024 $15,645 $16,171 $16,866 $16,306
======= ======= ======= ======= ======= =======
Total as number of months of
imports of goods and services.... 4.5 4.2 4.6 4.7 4.7 4.5
Total as a % of short-term debt
Original maturity................ 303.6% 273.4% 260.8% 290.9% 273.0% 267.1%
Residual maturity................ 187.5 163.5 143.2 142.0 145.6 143.7
</Table>
50
- ---------------
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, 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) Beginning January 2001, Bangko Sentral has revised data on gross
international reserves to treat offshore banking units as resident entities
(rather than non-resident entities) in accordance with BPM5. Data for
previous years is also subject to revision to reflect the change in
treatment of offshore banking units.
(4) Preliminary.
(5) Of these amounts, 83.3% in 1999 served as collateral for gold-backed loans.
Under the new accounting system adopted in 2000, 82.9% of the amount as of
December 31, 2000, 85.7% as of December 31, 2001, 62.6% as of December 31,
2002 and 62.5% as of December 31, 2003 served as collateral for gold-backed
loans and gold swap arrangements.
(6) Consists of time deposits, investments in securities issued or guaranteed by
government or international organizations and repurchase agreements.
(7) 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 1999, gross international reserves increased significantly to reach
$15.0 billion as of the end of 1999, equivalent to 4.5 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 4.2 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).
As of December 31, 2001, gross international reserves rose to $15.6
billion. The increase in gross international reserves during the year 2001 was
attributed mainly to foreign exchange inflows arising from
51
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.
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
foreign loans and bond issuances 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.
As of December 31, 2003, gross international reserves were $16.9 billion,
4.3% higher than the end-December 2002 level of $16.2 billion. The increase was
largely due to the Government's pre-funding of some of its 2004 financing
requirements. The gross international reserves remained broadly above the $16.0
billion mark throughout the year on account of major inflows from the following
sources: deposit by the Government of the proceeds from bond and note issuances
and other borrowings; loan availments by the BSP; and investment income.
Reserves were used mainly to service the Government's maturing foreign debt
obligations as well as the BSP's own foreign exchange requirements. A large part
of reserves was in the form of foreign investments (75.8%), with the balance in
gold (20.2%), foreign exchange (3.2%) and combined SDRs and reserve position in
the IMF (0.8%). By currency composition of reserves (excluding gold), 83.8% were
in US dollars, 8.2% in euros, 5.0% in Japanese yen, 1.8% in pounds sterling and
1.2% in other foreign currencies.
Gross international reserves as of December 31, 2003 were adequate to cover
4.7 months of imports of goods and payments of services and income.
Alternatively, gross international reserves were adequate to cover 2.9 times the
Republic's short-term external obligations based on original maturity or 1.5
times the Republic's short-term external obligations based on residual 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 $13.9 billion
as of December 31, 2003, higher than the $12.8 billion as of December 31, 2002.
The Republic's gross international reserves stood at $16.3 billion as of
end-March 2004, lower than the $16.9 billion level of reserves as of
end-December 2003. Reserves declined from December 2003 because of debt service
requirements of the Government and Bangko Sentral.
Gross international reserves as of end-March 2004 were adequate to cover
4.5 months of imports of goods and payments of services and income.
Alternatively, gross international reserves were adequate to cover 2.7 times the
Republic's short-term external obligations based on original maturity or 1.4
times the Republic's short-term external obligations based on residual maturity.
The Republic's net international reserves stood at $13.6 billion as of
end-March 2004, lower than the $13.9 billion as of end-December 2003.
52
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 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 December 31, 2003, Bangko Sentral had total assets of
P1,358.3 billion, of which international reserves accounted for P930.6 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.
53
MONEY SUPPLY. The following table presents certain information regarding
the Philippines' money supply:
MONEY SUPPLY
<Table>
<Caption>
AS OF
AS OF DECEMBER 31, FEBRUARY 29,
---------------------------------------------------- ------------
1999 2000 2001 2002 2003 2004(1)
-------- -------- -------- -------- -------- ------------
(IN BILLIONS, EXCEPT FOR PERCENTAGES)
M1(2)
Currency in circulation........ P 218.5 P 192.3 P 194.7 P 220.0 P 238.6 P 213.7
Current account deposits....... 175.6 194.7 193.3 250.0 271.7 269.4
-------- -------- -------- -------- -------- --------
Total.......................... 394.1 387.0 388.0 470.1 510.3 483.2
percentage increase
(decrease)................ 40% (1.8)% 0.3% 21.2% 8.6% 9.2%
M2(3).......................... P1,357.9 P1,423.2 P1,521.1 P1,666.3 P1,721.5 P1,688.2
percentage increase.......... 19.3% 4.8% 6.9% 9.6% 3.3% 4.4%
M3(4).......................... P1,365.1 P1,427.0 P1,525.0 P1,669.7 P1,725.0 P1,691.7
percentage increase.......... 19.3% 4.6% 6.8% 9.5% 3.3% 4.4%
</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.
The Republic's money supply, as measured by domestic liquidity (M3), was
P1.7 trillion as of December 31, 2003, a 3.3% increase from December 31, 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 December 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 Republic's money supply, as measured by domestic liquidity (M3),
remained at approximately P1.7 trillion as of end-February 2004.
The following table presents information regarding domestic interest and
deposit rates.
DOMESTIC INTEREST AND DEPOSIT RATES
<Table>
<Caption>
1999 2000 2001 2002 2003 2004(1)
----- ----- ----- ----- ----- --------
(WEIGHTED AVERAGES IN PERCENTAGES PER PERIOD)
91-day Treasury bill rates........................... 10.2 9.9 9.9 5.4 6.0 6.4
90-day Manila Reference rate(2)...................... 10.1 8.8 10.1 6.4 9.8 10.4
Bank average lending rates(3)........................ 11.8 10.9 12.4 8.9 9.5 9.4
</Table>
- ---------------
Source: Bangko Sentral, Department of Economic Research.
(1) First three months.
(2) Based on promissory notes and time deposit transactions of sample commercial
banks.
(3) 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.
54
MONETARY REGULATION
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 a range of 18.1% to 21.5% in
1998 to a range of 12.6% to 16.0% in 1999. 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,
in October 2000, Bangko Sentral increased the overnight borrowing rate and the
overnight lending rate (the "policy rates") to 15.0% and 17.25%, respectively,
from 8.75% and 11% in January 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 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 policy rates by a total of 150 basis points to 13.5% and 15.75% from the
October 2000 levels of 15.0% and 17.25%. 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 the central bank'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
55
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 targeting inflation.
The 2003 inflation of 3.1% was below the Government's target for 2003 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 March 20, 2003, Bangko Sentral removed the tiering
structure to avoid inflationary risks caused by a decline in the relative value
of the peso. Also, on March 21, 2003, Bangko Sentral raised banks' liquidity
reserve requirement to 8.0%. On July 2, 2003, Bangko Sentral lowered its policy
rates by 25 basis points to 6.75%, their lowest levels since 1992. At the same
time, the tiered rates for banks' overnight placements with Bangko Sentral were
reinstated as follows: 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. However, on
August 28, 2003, Bangko Sentral again removed the tiering structure on rates for
overnight placements. The overnight borrowing and lending rates currently stand
at 6.75% and 9.0%, respectively.
With effect from February 6, 2004, to address the potential inflationary
impact of volatility in the foreign exchange market, Bangko Sentral increased
the liquidity reserve requirement to 10 percent.
In recent months, domestic market interest rates increased slightly on
concerns over political uncertainties related to the May 2004 election. The
91-day Treasury bill rate was at 7.616% during the March 15, 2004 auction,
higher than the average of 6.0% in 2003 and 5.4% in 2002.
Commercial bank lending rates also eased steadily over the past five years,
from an average range of 12.6-16.0% in 1999, 12.9-15.6% in 2000, 13.7-15.3% in
2001, 8.7-10.4% in 2002 and 8.9-10.8% in 2003. In March 2004, commercial bank
lending rates ranged from 9.9% to 11.8%.
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)
- ---- ------ ----------
1999........................................................ 40.313 39.089
2000........................................................ 49.998 44.194
2001........................................................ 50.404 50.993
2002........................................................ 53.096 51.604
2003........................................................ 55.569 54.203
2004 (first three months)................................... 56.357 55.966
</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.
56
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.
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 P49.34 per US dollar on May 20, 2002, the peso has steadily
depreciated. The peso declined in value from P53.25 per US dollar at the end of
December 2002 to a monthly average of P53.40 per US dollar in June 2003, then
depreciated further to P55.53 per US dollar on August 27, 2003. The peso
continued to depreciate through the end of 2003, to an average of P55.45 per US
dollar in December 2003, compared to an average of P53.52 per US dollar in
December 2002. The average value of the peso in 2003 was P54.20 per US dollar,
representing a depreciation of 4.8% from the average value in 2002 of P51.60 per
US dollar. The weakening of the peso in 2003 could be attributed to concerns
over the budget deficit, political and security concerns related to the May 2004
national election and the conflict in Mindanao, downgrades in
57
the Republic's external currency credit rating, the weak global economic
outlook, higher demand for US dollars by Philippines oil companies in order to
fund their inventory build-up, and regional tensions involving North Korea.
During the first three months of 2004 the peso continued to depreciate. The
average value of the peso during the three-month period was P55.97 per US
dollar, representing a 2.53% depreciation compared to the first three months of
2003. The decline is attributable to increased demand for US dollars by
companies to cover import requirements and service obligations, lower remittance
inflows by overseas Filipino workers, and a decision by Moody's Investors
Service to downgrade the Republic's credit rating.
On April 13, 2004, the peso to US dollar exchange rate was P56.18 per US
dollar, reflecting a 1.1% decrease in the value of the peso from the end of
December 2003.
STABILIZATION OF THE PESO. Since it allowed the peso to float on July 11,
1997, Bangko Sentral has intervened minimally in the foreign exchange market. It
has, however, adopted measures 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 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.
58
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
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 January 1, 2002, any person who brings foreign
currency valued at more than $10,000 into or out of the Philippines to
document the source and purpose of the transport of such currency.
In the first half of 2003, Bangko Sentral adopted a number of measures
designed to mitigate expected downward pressure on the peso:
- In March 2003, the tenor of forward contracts was limited to a maximum of
six months. However, this limit was modified on September 30, 2003, such
that the maturity of forward or swap contracts may not be later than the
maturity of the underlying foreign exchange obligation or the approximate
due date or settlement of the foreign exchange exposure.
- On March 13, 2003, the allowable overbought position of banks was reduced
to 2.5% of unimpaired capital or US$5 million, whichever is lower.
- Sanctions were imposed against banks for violation of Bangko Sentral's
foreign exchange regulations.
In the second half of 2003 and the first quarter of 2004, Bangko Sentral
adopted further measures designed to curb the downward pressure on the peso, to
moderate market volatility and to preserve overall stability of the financial
markets amid the political uncertainties surrounding the national election in
May 2004:
- In September 2003, to guard against the use of derivative products in
ways that would destabilize the foreign exchange market, Bangko Sentral
established documentary requirements for foreign exchange forward and
swap transactions. Under these requirements, parties to certain foreign
exchange transactions are required to provide supporting documents to
demonstrate that the transaction is for a genuine trade purpose.
- On October 28, 2003, Bangko Sentral required persons bringing foreign
currency into or out of the Philippines in excess of US$10,000 or its
equivalent to submit relevant documentation to the Anti-Money Laundering
Council rather than Bangko Sentral.
- In December 2003, Bangko Sentral adopted measures to address the interest
rate and foreign exchange risks brought about by US dollar-linked peso
notes.
- In February 2004, Bangko Sentral issued policy guidelines on the
conversion and transfer of foreign currency-denominated loans to prevent
losses to unhedged borrowers due to the depreciation of the peso.
- With effect from February 6, 2004, Bangko Sentral increased the liquidity
reserve requirement for commercial banks from 8 percent to 10 percent.
59
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 DECEMBER 31,
----------------------------------------------------
1999 2000 2001 2002(2) 2003(2)
-------- -------- -------- -------- --------
(IN BILLIONS)
Banks
Commercial banks......................... P2,722.3 P3,013.6 P3,070.5 P3,250.2 P3,419.3
Thrift banks............................. 223.5 245.8 259.0 262.0(2) 274.1(3)
Rural banks.............................. 61.9 67.4 73.8 83.5 89.4(4)
-------- -------- -------- -------- --------
Total banks........................... 3,007.7 3,326.8 3,403.3 3,595.7 N/A
-------- -------- -------- -------- --------
Non-bank financial institutions.......... 733.6 697.2 696.3 730.2(2) 767.5(4)
-------- -------- -------- -------- --------
Total assets.......................... P3,741.3 P4,024.0 P4,099.6 P4,325.9 N/A
======== ======== ======== ======== ========
</Table>
- ---------------
Source: Bangko Sentral
(1) Excludes assets of Bangko Sentral.
(2) Preliminary.
(3) As of October 31, 2003.
(4) As of September 30, 2003.
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 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;
- 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, 2003, the country had 42
commercial banks, with 4,254 branch offices.
60
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,
-------------------------------------------------------------------------
1999 2000 2001 2002
------------------ ------------------ ------------------ ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
Agriculture, fishery and
forestry.......................... P58,859 4.3% P62,101 4.3% P56,823 4.1% P72,428
Mining and quarrying............... 16,466 1.2 21,166 1.5 19,890 1.4 14,448
Manufacturing...................... 382,267 28.2 404,224 27.8 372,906 26.7 379,404
Electricity, gas and water......... 53,274 3.9 75,398 5.2 70,359 5.0 71,372
Construction....................... 53,384 4.0 46,949 3.2 42,151 3.0 35,390
Wholesale and retail............... 203,177 15.0 201,233 13.9 210,306 15.0 206,215
Transportation, storage and
communication..................... 91,024 6.7 99,653 6.9 83,068 5.9 71,947
Financial institutions, real estate
and business services............. 342,673 25.3 386,797 26.6 359,199 25.7 380,739
Community, social and personal
services.......................... 153,104 11.3 153,983 10.6 184,534 13.2 200,719
---------- ----- ---------- ----- ---------- ----- ----------
Total............................. P1,354,228 100.0% P1,451,504 100.0% P1,399,236 100.0% P1,432,663
========== ===== ========== ===== ========== ===== ==========
<Caption>
AS OF
AS OF DECEMBER 31, JANUARY 31,
-------------------------- ------------------
2002 2003 2004
----- ------------------ ------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
Agriculture, fishery and
forestry.......................... 5.1% P78,877 5.3% P74.514 5.1%
Mining and quarrying............... 1.0 14,111 1.0 25,190 1.7
Manufacturing...................... 26.5 367,538 29.9 354,325 24.4
Electricity, gas and water......... 5.0 64,608 4.3 65,635 4.5
Construction....................... 2.5 36,014 2.4 44,006 3.0
Wholesale and retail............... 14.4 210,639 14.2 200,264 13.8
Transportation, storage and
communication..................... 5.0 77,802 5.2 74,386 5.1
Financial institutions, real estate
and business services............. 26.6 396,862 26.7 389,018 26.8
Community, social and personal
services.......................... 14.0 241,296 16.2 226,096 15.6
----- ---------- ----- ---------- -----
Total............................. 100.0% P1,487,747 100.0% P1,453,434 100.0%
===== ========== ===== ========== =====
</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, 2003, the country had 92 thrift banks, with 1,185 branch
offices.
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, 2003, the
country had 765 rural banks, with 1,156 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 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 facilitate short-term placements in other
financial institutions. As of March 31, 2003, Bangko Sentral regulated or
supervised 28 investment houses, 33 finance companies, 18 security
dealers/brokers, 5,451 pawnshops, 10 investment companies, five lending
investors, 85 non-stock savings and loan associations, seven venture capital
corporations, two Government non-bank financial institutions and eight credit
companies.
61
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, JANUARY 31,
---------------------------------------------------- -----------
1999 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- -----------
(IN BILLIONS, EXCEPT PERCENTAGES)
Expanded commercial banks(1)
Total loans........................ P1,086.1 P1,025.0 P 992.2 P1,041.9 P1,118.7 P1,081.8
Total non-performing loans......... 141.6 172.4 192.6 180.0 181.4 181.8
Ratio of non-performing loans to
total loans..................... 13.0% 16.8% 19.4% 17.3% 16.2% 16.8%
Non-expanded commercial banks(2)
Total loans........................ 139.7 184.3 182.7 155.8 158.3 160.5
Total non-performing loans......... 23.0 32.4 41.7 26.9 29.2 29.8
Ratio of non-performing loans to
total loans..................... 16.4% 17.6% 22.8% 17.2% 18.5% 18.6%
Government banks(3)
Total loans........................ 201.0 222.4 200.3 192.6 215.0 217.1
Total non-performing loans......... 25.4 33.5 35.7 30.3 28.6 28.7
Ratio of non-performing loans to
total loans..................... 12.6% 15.1% 17.8% 15.7% 13.3% 13.2%
Foreign banks(4)
Total loans........................ 156.2 196.5 249.9 249.0 255.2 241.4
Total non-performing loans......... 5.4 7.5 11.9 7.9 6.3 5.9
Ratio of non-performing loans to
total loans..................... 3.5% 3.8% 4.8% 3.2% 2.5% 2.4%
Total loans.......................... P1,582.9 P1,628.2 P1,625.1 P1,639.4 P1,747.2 P1,700.8
Total non-performing loans........... 195.4 245.8 281.9 245.1 245.5 246.2
Ratio of non-performing loans to
total loans........................ 12.3% 15.1% 17.3% 15.0% 14.1% 14.5%
</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 from the previous year was
due in part to a redefinition of "non-performing loan" which took effect
62
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 December 2003, the ratio of non-performing loans to total loans in
the commercial banking system stood at 14.1%, lower than the December 2002 ratio
of 15.0%. The improvement in the NPL ratio in December 2003 was due primarily to
the 3.5% decrease in the level of non-performing loans to P245.5 billion from
P254.5 billion in November 2003 and the 1.5% growth in the total loan portfolio
level to P1,747.2 billion in December 2003 from P1,720.9 billion in November
2003. The NPL ratio averaged 15.1% for the full year 2003.
As of January 2004 the NPL ratio stood at 14.5%, higher than the 14.1% as
of December 2003. The NPL coverage ratio (loan reserves to non-performing loans)
stood at 53.1% at the end of January 2004, slightly higher than the 53.0%
recorded as at the end of December 2003.
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-performing 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
9, 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 Government expects that passage of the SPV Act will further reduce the
NPL ratio as private asset management companies are created pursuant to the SPV
Act. Bangko Sentral has recently relaxed the rules on the sale of non-performing
assets under the SPV Act.
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. However, the
increased minimum capital requirements were set aside in 2000 with the
adoption of the risk-based capital framework.
- 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
63
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.
- 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, acquisitions, rural banks in unserved areas and
microfinance banks) is to remain in place.
The General Banking Law of 2000, which amended the General Banking Act,
enhanced Bangko Sentral's supervisory and enforcement powers, improved
prudential standards and liberalized foreign ownership of banks (foreign banks
are now permitted to acquire up to 100% of the voting stock of a Philippines
bank starting seven years after the effective date of the law). 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. In September 2001, the
Anti-Money Laundering Act of 2001 (the "AMLA") was passed. The new legislation
makes money laundering a criminal offense and forms the foundation of a central
monitoring and implementing council called the Anti-Money Laundering Council
(the "AMLC"). The important features of the AMLA include:
- Reporting of unusual or suspicious transactions. Institutions including
banks, non-banks, quasi-banks and securities brokers are required to
report transactions with no underlying legal or trade obligation, with
clients who are not properly identified, that involve amounts not
commensurate with the business or financial capacity of the client, or
that deviate from the client's past transactions.
- Criminalizing money laundering. Imprisonment and fines are imposed for
certain offenses.
- International cooperation. The AMLC may request any foreign country to
assist in locating and freezing proceeds of unlawful activities and
obtaining information relating to money laundering.
On March 7, 2003, President Arroyo signed into law amendments to the 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.
64
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 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 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.
65
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 25% 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;
- updated securities regulations to be more consistent with international
practices; and
- strengthened the SEC's rule-making and corporate reorganization powers.
As of March 31, 2004, the Philippine Stock Exchange had 148 local and 36
foreign members and 236 listed companies.
The stock market rebounded from the Asian financial crisis in late 1999, as
the Philippine Stock Exchange Composite Index reached 2,143.0 at the end of
December 1999, an 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 listing of its shares on the Exchange took effect on December
15, 2003 and 40% of the unissued shares were sold through a private placement on
February 18, 2004.
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.
66
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 rise in the composite index in the first half of 2003. As of
April 6, 2004, the Philippine Stock Exchange composite index had risen to close
at 1516.81.
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 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 P1,703.8 billion as
of December 31, 2003, an increase of 74.1% from P978.4 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 Liquidation's accounts, the Oil Price Stabilization Fund
and the 14 monitored Government-owned corporations.
67
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>
1999 2000 2001 2002 2003(1)
------- ------- ------- ------- -------
(IN BILLIONS, EXCEPT PERCENTAGES)
Public sector borrowing requirement:
National Government........................ P(111.7) P(134.2) P(147.0) P(210.7) P(199.9)
Central Bank-Board of Liquidation.......... (20.5) (19.1) (23.5) (15.1) (15.7)
Oil Price Stabilization Fund(2)............ 1.9 0.3 0.8 0.0 0.0
Monitored Government-owned corporations.... (4.6) (19.2) (24.5) (46.4) (65.3)
Government transfers to Government-owned
corporations............................ 3.0 4.2 4.4 3.9 5.8
Other adjustments.......................... (6.1) (6.6) 0.0 0.0 0.0
------- ------- ------- ------- -------
Total public sector borrowing
requirement........................... P(138.0) P(174.6) P(189.8) P(268.3) P(275.6)
------- ------- ------- ------- -------
As a percentage of GNP....................... (4.4)% (5.0)% (4.8)% (6.3)% (5.9)%
Other public sector:
Social Security System and Government
Service Insurance System................ P 36.4 P 15.5 P 15.6 P 25.6 P 7.8
Bangko Sentral(3).......................... (4.0) 0.2 (0.1) 1.2 6.9
Government financial institutions.......... 3.3 2.8 3.9 5.4 4.9
Local Government units..................... 3.2 3.8 1.2 18.9 7.9
Timing adjustment of interest payments to
Bangko Sentral.......................... (2.3) 0.5 (0.2) (1.6) 0.7
Other adjustments.......................... 0.8 0.1 0.1 0.0 2.2
------- ------- ------- ------- -------
Total other public sector............... 37.5 22.9 20.5 49.6 30.4
------- ------- ------- ------- -------
Consolidated public sector financial
position.............................. P(100.5) P(151.7) P(169.3) P(218.7) P(245.2)
======= ======= ======= ======= =======
As a percentage of GNP....................... (3.2)% (4.3)% (4.3)% (5.1)% (5.2)%
</Table>
- ---------------
Source: Fiscal Policy and Planning Office, Department of Finance.
(1) Preliminary.
(2) 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.
(3) Amounts are net of interest rebates, dividends and other amounts remitted to
the Government and the Central Bank-Board of Liquidation.
For 1999, the consolidated financial deficit reached 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
68
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 P169.3
billion or 4.3% 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 P20.5
billion during 2001, of which P15.6 billion was attributable to the social
security institutions.
For 2002, the consolidated financial position of the Republic recorded a
deficit of P218.7 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 P49.6 billion for the other public
sector entities during 2002. Of the surplus, P25.6 billion was attributable to
the social security institutions.
According to preliminary figures, the consolidated financial position of
the Republic recorded a deficit of P245.2 billion in 2003. The Government
recorded a P199.9 billion deficit, the Central Bank restructuring accounted for
an additional P15.7 billion and the monitored Government-owned corporations
accounted for a P65.3 billion deficit. The total public sector borrowing
requirement of P275.6 billion was offset in part by a P30.4 billion combined
surplus for the other public sector entities. Of the surplus, P7.8 billion was
attributable to social security institutions.
69
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
----------------------------------------------- -----------------
1999 2000 2001 2002 2003 2003 2004
------- ------- ------- ------- ------- ------- -------
(IN BILLIONS, EXCEPT PERCENTAGES)
REVENUES
Tax revenues
Bureau of Internal Revenue..................... P 341.3 P 360.8 P 388.7 P 394.5 P 425.4 P 424.0 P 488.6
Bureau of Customs.............................. 86.5 95.0 96.2 96.3 106.1 100.1 105.2
Others(1)...................................... 3.9 4.2 4.9 5.6 5.9 6.7 7.6
------- ------- ------- ------- ------- ------- -------
Total tax revenues........................... 431.7 460.0 489.8 496.4 557.4 530.8 601.4
As a percentage of GNP..................... 13.9% 13.2% 13.3% 12.3% 11.9% N/A N/A
Non-tax revenues
Bureau of the Treasury income(2)............... P 26.2 P 30.8 P 46.4 P 47.2 P 56.7 P 30.9 P 30.5
Fees and other charges(3)...................... 16.0 17.9 24.3 21.9 30.8 21.0 23.2
Privatizations(4).............................. 4.2 4.6 1.2 0.6 0.6 1.0 1.0
Comprehensive Agrarian Reform Program (land
acquisition and credit)...................... 0.2 0.1 0.0 0.0 0.0 0.0 14.8
Foreign grants................................... 0.3 1.4 2.0 1.1 1.2 0.4 0.3
------- ------- ------- ------- ------- ------- -------
Total non-tax revenues....................... 46.5 53.4 71.9 70.8 89.2 53.3 69.8
------- ------- ------- ------- ------- ------- -------
Total revenues............................. 478.5 514.8 563.7 567.1 626.6 584.1 671.2
------- ------- ------- ------- ------- ------- -------
As a percentage of GNP................... 15.2% 14.7% 15.3% 14.3% 13.4% N/A N/A
EXPENDITURES
Personnel........................................ P 202.7 P 225.2 P 238.9 266.0 P 276.1 P 265.7 P 286.3
Maintenance and operating expense................ 77.0 83.6 88.0 83.4 78.5 76.6 84.0
Interest payments
Foreign........................................ 31.3 47.3 62.2 65.9 147.6 N/A N/A
Domestic....................................... 75.0 93.6 112.6 120.0 78.8 N/A N/A
------- ------- ------- ------- ------- ------- -------
Total interest payments...................... 106.3 140.9 174.8 185.9 226.4 230.7 265.8
Subsidies to Government corporation.............. 6.6 6.8 7.8 5.6 12.2 6.5 3.9
Allotment to local government units.............. 96.4 99.8 116.6 137.6 144.7 147.3 144.4
Comprehensive Agrarian Reform Program (land
acquisition and credit)........................ 0.0 2.3 4.4 2.0 2.7 2.9 4.3
Infrastructure and other capital outlays......... 96.5 87.3 75.8 93.3 77.6 49.3 75.4
Equity and net lending........................... 4.7 3.2 4.4 4.1 8.2 7.1 10.1
------- ------- ------- ------- ------- ------- -------
Total expenditures............................. 590.2 649.0 710.8 777.9 826.5 786.1 874.2
------- ------- ------- ------- ------- ------- -------
As a percentage of GNP....................... 18.8% 18.5% 18.6% 18.4% 17.6% N/A N/A
Surplus/(Deficit)................................ P(111.7) P(134.2) P(147.0) P(210.7) P(199.9) (202.0) (197.8)
FINANCING
Domestic financing............................. P 28.9 P 55.5 P 124.1 P 101.6 P 56.0 P 103.3 P 120.1
Net domestic borrowings...................... 98.8 119.5 152.3 155.0 143.0 N/A N/A
Non-budgetary accounts....................... 32.6 (57.6) (50.4) (55.1) 61.2 N/A N/A
Use of cash balances......................... 37.4 (6.5) 22.2 (1.7) 25.8 N/A N/A
Foreign financing.............................. 82.8 78.8 22.9 109.1 143.9 95.3 21.2
------- ------- ------- ------- ------- ------- -------
Total financing............................ P 111.7 P 134.2 P 147.0 P 214.9 P 199.9 P 198.6 P 141.3
======= ======= ======= ======= ======= ======= =======
</Table>
- ---------------
Source: Department of Finance; Department of Budget and Management.
(1) Represents tax revenues of the Department of Environment and Natural
Resources, Bureau of Immigration and Deportation, Land Transportation Office
and other Government entities.
(2) 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.
(3) Represents receipts from the Land Transportation Office, Department of
Foreign Affairs and other Government agencies.
(4) 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.
70
RECENT RESULTS
In 2003, Government revenues were P626.6 billion and expenditures were
P826.5 billion, resulting in a deficit of P199.9 billion. The full-year deficit
was 5.2% lower than the P210.7 billion deficit reported for 2002. Of the P626.6
billion in revenues in 2003, P425.4 billion came from the BIR, P106.1 billion
from the Bureau of Customs and P56.7 billion from the Bureau of the Treasury.
The P826.5 billion in expenditures in 2003 included P226.4 billion for interest
payments and P145.5 billion in allotments to local government units. In 2003,
the BIR had total tax collections of P425.4 billion, 8.3% higher than 2002 and
104.4% of the full-year target.
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 ("VAT")
and customs duties. The main sources of non-tax revenue consist of interest on
deposits, amounts earned from Government-owned corporations and privatization
receipts.
Since 2001, the BIR 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 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 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 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 BIR increased to P360.8 billion
but were P37.0 billion short of target estimates. The shortfall was attributable
primarily to lower BIR 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. 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
71
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 BIR 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 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 covering the first half of
2002. The BIR has so far collected approximately P6 billion of this amount, and
is investigating underreporting of income for the second half of 2002. 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 addition,
in order to encourage better tax compliance, the BIR under the new Commissioner
has simplified the filing process and the payment of taxes.
Government revenues 2003 were P626.6 million in 2003, a 10.5% increase from
2002. The overall increase in revenues was attributable mainly to recent reforms
in the BIR and the Bureau of Customs, including technological improvements,
stricter enforcement measures and expanded tax audits. BIR collections in 2003
were P425.4 billion, 7.8% more than in 2002, and Bureau of Customs revenues were
P106.1 billion in 2003, 10.2% more than in 2002. Remittances to the Bureau of
Treasury were P56.7 billion in 2003, 20.1% more than in 2002, and taxes from
other government offices and non-tax revenues accounted for P38.5 billion, an
increase of 32.2% from 2002.
EXPENDITURES
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.
72
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.
Government expenditures in 2003 were P826.5 billion, 6.2% more than
expenditures in 2002. The increase in expenditures was largely due to a
substantial increase in interest payments on foreign debt, which were P65.9
billion in 2003 compared to P147.6 billion in 2002. The increase in foreign debt
interest payments resulted from the decline in the value of the peso and
issuance of new foreign debt. Personnel expenditures, subsidies to Government
corporations and allotments to local government units also increased from 2002
to 2003. These increases together more than offset declines in expenditures from
2002 to 2003 for infrastructure and capital outlays, domestic interest payments
and maintenance and operating expenses.
THE GOVERNMENT BUDGET
THE BUDGET PROCESS. The Administrative Code of 1987 requires the
Government to formulate and implement a national budget. 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.
2004 BUDGET. 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.
Subsequent to the administration's submission of its proposed budget, the
House of Representatives and the Senate each passed a different budget, but
Congress adjourned in February 2004 before a bicameral committee was able to
approve an agreed budget. Thus, the 2003 appropriations have been provisionally
reenacted for 2004. However, these provisional appropriations for 2004 differ in
certain respects from expenditures in the 2003 budget. These differences arise
in part from the fact that savings from projects that were completed in 2003 are
to be used to implement certain priority projects under the proposed 2004
budget. The 2004 budget also reflects additional appropriations approved for
2004, including P4.7 billion in election-related expenditures and P2.9 billion
in salary increases for the AFP.
DEBT
EXTERNAL DEBT. The following table sets out the total outstanding Bangko
Sentral-approved and registered external debt.
73
BANGKO SENTRAL APPROVED EXTERNAL DEBT
<Table>
<Caption>
AS OF DECEMBER 31,
-----------------------------------------------
1999 2000 2001 2002 2003
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
By Maturity:
Short-term(2).............................. $ 4,949 $ 5,495 $ 6,000 $ 5,560 $ 6,179
Medium and long-term....................... 46,048 45,711 45,900 48,086 51,216
------- ------- ------- ------- -------
Total................................... $50,997 $51,206 $51,900 $53,645 $57,395
======= ======= ======= ======= =======
By Debtor:(3)
Banking system............................. $11,391 $11,248 $11,603 $10,969 $11,250
Public sector(4)........................... 26,958 26,319 24,988 27,946 32,058
Private sector............................. 12,647 13,637 15,309 14,728 14,090
------- ------- ------- ------- -------
Total................................... $50,997 $51,206 $51,900 $53,645 $57,395
======= ======= ======= ======= =======
By Creditor Type:
Multilateral............................... $10,245 $ 9,665 $ 9,553 $ 8,970 $ 9,031
Bilateral.................................. 16,429 15,336 14,531 15,621 16,895
Banks and financial institutions........... 9,145 10,411 11,621 11,790 10,681
Bondholders/noteholders.................... 12,951 13,447 13,678 14,785 17,111
Others..................................... 2,227 2,347 2,517 2,479 3,677
------- ------- ------- ------- -------
Total................................... $50,997 $51,206 $51,900 $53,645 $57,395
======= ======= ======= ======= =======
Ratios:
Debt service burden to exports of goods and
services(5)............................. 14.1% 12.4% 15.8% 16.4% 17.2%
Debt service burden to GNP................. 8.3% 7.5% 8.5% 9.0% 9.2%
External debt to GNP....................... 63.6% 63.5% 67.5% 64.5% 66.4%
</Table>
- ---------------
Source: Bangko Sentral.
(1) External debt data have been revised to reflect the reclassification of
offshore banking units ("OBUs") from non-resident to resident entities for
statistical purposes in conformity with the BPM5 framework.
(2) Debt with original maturity of one year or less.
(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;
does not include public banks.
(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.
In 2002, Bangko Sentral-approved external debt increased 3.4% from the
$51.9 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, 2003, Bangko Sentral-approved external debt amounted to
$57.4 billion, a 7.0% increase from the $53.6 billion recorded as of December
31, 2002. The increase in debt resulted from net inflows of foreign exchange to
finance the Government's budgetary requirements and from foreign exchange
revaluation losses.
As of December 31, 2003, Bangko Sentral-approved medium and long term
external debt amounted to $51.2 billion. Of this amount, 57.8% carried fixed
rates, 39.5% had variable rates, and the remaining 2.7% was non-interest
bearing. The average cost of fixed rate credits was 6.0%. For liabilities with
floating interest rates,
74
the margin over the applicable base rate averaged 1.7%. Approximately 54% of
total Bangko Sentral-approved external debt (including short-term debt) was
denominated in US dollars while 28% was denominated in Japanese yen.
Multi-currency loans from the World Bank and the Asian Development Bank
accounted for 9.2% of total Bangko Sentral-approved external debt.
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 ("ADB") and the Metro Manila air quality enhancement program
with the ADB.
In July 2000, the Republic entered into a $100 million grain sector
development program loan agreement with the ADB. The ADB disbursed $30 million
under this program in 2000; however, the undisbursed balance of $70 million was
cancelled in April 2003. Also in July 2000, the Republic signed a $100 million
program loan agreement with the ADB to support the Pasig River Environment
Management and Rehabilitation Program. As of December 31, 2003, this loan had
been fully disbursed.
In November 2001, the Republic entered into a $75 million program loan
agreement with ADB to support the Non-Bank Financial Governance Program. This
loan was fully disbursed in the same year. 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 $400 million.
In September 2003, the Republic entered into a $150 million program loan
with the ADB for the second Non-Bank Financial Governance Program. In October
2003, the first $75 million under this program was released.
As of December 31, 2002, the Republic had received a total of $600 million
in loans from the ADB and JBIC to support power sector reforms. Also as of
December 31, 2003, the Republic had received $400 million in loans from the ADB
and JBIC 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 January 27, 2004, Moody's Investors Service lowered its
rating of the Republic's long-term foreign currency bonds and notes from Ba1 to
Ba2, and lowered its rating of the Republic's long-term domestic currency
obligations from Baa3 to Ba2. Moody's retained its negative ratings outlook on
the Republic's long-term foreign and domestic currency obligations. Moody's
noted concerns over the Government's fiscal imbalances and the country's
uncertain political dynamics, as well as relatively high public-sector debt
ratios.
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 stable to negative. 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.
75
The following table sets out the changes in the Republic's credit ratings
or rating outlooks for the three years preceding the date of this prospectus.
<Table>
<Caption>
DATE RATING AGENCY INSTRUMENT CREDIT RATING OR RATING OUTLOOK
- ---------------------------- ----------------- ---------------------------- -------------------------------
March 15, 2001.............. Fitch-IBCA Long-term local currency Downgraded outlook from
obligations "positive" to "stable"(1)
February 4, 2002............ Moody's Long-term foreign currency Upgraded outlook from
obligations "negative" to "stable"(2)
April 4, 2002............... Standard & Poor's Long-term foreign currency Upgraded outlook from
obligations "negative" to "stable"(3)
October 29, 2002............ Standard & Poor's Long-term foreign currency Downgraded outlook from
obligations "stable" to "negative"(4)
November 25, 2002........... Fitch-IBCA Long-term foreign currency Downgraded outlook from
obligations "stable" to "negative"(5)
January 8, 2003............. Moody's Local currency obligations Downgraded outlook from
"stable" to "negative"(6)
April 24, 2003.............. Standard & Poor's Long-term foreign currency Downgraded from BB+ to BB(7)
obligations
Local currency obligations Downgraded from BBB+ to BBB(7)
June 12, 2003............... Fitch Ratings Long-term foreign currency Downgraded from BB+ to BB(8),
obligations with outlook "stable"
Long-term local currency Downgraded from BBB- to BB+(8),
obligations with outlook "stable"
January 27, 2004............ Moody's Long-term foreign currency Downgraded from Ba1 to Ba2(9)
obligations
Long-term local currency Downgraded from Baa3 to Ba2(9)
obligations
</Table>
- ---------------
(1) Fitch noted the continuing deterioration of public finances and its impact
on public indebtedness.
(2) Moody's noted that the upgrade reflected the Republic's success in meeting
its fiscal targets and a stronger economic outlook.
(3) 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.
(4) 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.
(5) Fitch noted that further evidence of falling tax revenues had undermined
the Government's fiscal credibility and raised concerns about rising public
indebtedness.
(6) 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.
(7) 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.
(8) Fitch noted that existing and prospective fiscal trends amounted to a
material deterioration in sovereign creditworthiness.
(9) Moody's noted concerns over the Government's fiscal imbalances and the
country's uncertain political dynamics, as well as relatively high
public-sector debt ratios.
76
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, AS OF SEPTEMBER 30,
---------------------------------------------------- -------------------
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- -------------------
(IN BILLIONS, EXCEPT PERCENTAGES)
Government(2)
Domestic................... P 859.6 P 986.7 P1,080.7 P1,270.9 P1,492.3 P1,677.6
External................... 940.8 1,555.5 1,568.2 1,609.8 1,914.9 2,208.2
-------- -------- -------- -------- -------- --------
Total.................... P1,800.4 P2,142.2 P2,648.8 P2,880.7 P3,407.2 P3,885.8
======== ======== ======== ======== ======== ========
Monitored GOCCs(3)
Domestic................... 419.1 644.8 810.6 744.9 895.7 841.2
External................... 224.8 286.1 308.1 395.0 474.4 585.5
-------- -------- -------- -------- -------- --------
Total.................... P 643.9 P 930.9 P1,118.7 P1,139.9 P1,370.1 P1,426.7
======== ======== ======== ======== ======== ========
CB-BOL(4)
Domestic................... 0.0 0.0 0.0 0.0 0.0 0.0
External................... 102.2 74.9 81.8 73.9 67.1 67.1
-------- -------- -------- -------- -------- --------
Total.................... P 102.2 P 74.9 P 81.8 P 73.9 P 67.1 P 67.1
======== ======== ======== ======== ======== ========
Bangko Sentral(4)
Domestic................... 123.3 193.5 202.6 118.3 164.3 213.0
External................... 264.2 299.3 385.2 475.5 450.4 485.2
-------- -------- -------- -------- -------- --------
Total.................... P 387.5 P 492.8 P 587.8 P 593.8 P 614.7 P 698.2
======== ======== ======== ======== ======== ========
GFIs(3)
Domestic................... 327.9 379.9 460.6 175.3 234.2 8.2
External................... 68.9 95.3 74.3 126.1 153.4 107.6
-------- -------- -------- -------- -------- --------
Total.................... P 396.8 P 475.2 P 534.9 P 301.4 P 387.5 P 115.9
======== ======== ======== ======== ======== ========
Less loans on-lent or
guaranteed by the
Government
Domestic................... 8.7 8.3 12.5 23.2 21.1 20.9
External................... 370.6 441.4 562.3 555.2 662.8 776.4
-------- -------- -------- -------- -------- --------
Total.................... P 379.3 P 449.7 P 574.8 P 578.4 P 683.9 P 797.4
======== ======== ======== ======== ======== ========
Total public sector(5)
Domestic................... 1,721.2 2,196.6 2,542.0 2,286.3 2,765.4 2,719.0
External................... 1,230.3 1,469.7 1,855.2 2,125.1 2,397.3 2,671.9
-------- -------- -------- -------- -------- --------
Total.................... P2,951.5 P3,666.3 P4,397.2 P4,411.3 P5,162.7 P5,391.0
======== ======== ======== ======== ======== ========
As a percentage of GNP (at
current prices)
Public sector debt(5)........ 105.3% 116.9% 125.7% 112.6% 120.3% 161.3%
Public sector domestic
debt(5).................... 61.4% 70.0% 72.7% 58.3% 64.5% 81.4%
Public sector external
debt(5).................... 43.9% 46.9% 53.1% 54.2% 55.9% 55.9%
National Government
debt(2).................... 50.7% 54.0% 59.3% 58.8% 63.5% 92.4%
National Government domestic
debt(2).................... 30.7% 31.5% 30.9% 32.4% 34.8% 50.2%
National Government external
debt(2).................... 33.6% 36.8% 44.8% 41.1% 44.6% 66.1%
</Table>
77
- ---------------
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 P5,162.7 billion as of December 31, 2002 and P4,411.3 billion as of December
31, 2001. As of December 31, 2002, the Government accounted for P3,407.2
billion, or 66.0%, of outstanding public sector debt. Public sector debt as a
proportion of GNP increased from 112.6% as of December 31, 2001 to 120.3% as of
December 31, 2002. As of September 30, 2003, public sector debt was P5,391.0
billion, an increase of 4.4% from December 31, 2002. Government debt was
P3,885.8 as of September 30, 2003, which was 72.1% of total public sector debt.
DIRECT DEBT OF THE REPUBLIC. The following table summarizes the
outstanding direct debt of the Republic as of the dates indicated.
OUTSTANDING DIRECT DEBT OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
------------------------------------------------------------------------
1999 2000 2001 2002 2003
---------- ---------- ---------- ---------- --------------------
(IN MILLIONS)
Medium/long-term debt(3)
Domestic................. P 513,667 P 600,925 P 822,269 P1,065,976 P1,207,816 $21,743
External................. $ 19,800 $ 21,992 $ 22,082 $ 25,340 $ 29,627(4) $29,627(4)
Short-term debt(5)
Domestic................. P 464,737 P 467,275 P 425,414 P 405,226 P 495,964 $ 8,928
---------- ---------- ---------- ---------- ---------- -------
Total debt............... P1,775,356 P2,166,700 P2,384,917 P2,815,468 P3,349,552 $60,298
========== ========== ========== ========== ========== =======
</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 $820 million of external debt
since December 31, 2003.
(5) Debt with original maturities of less than one year.
78
DIRECT DOMESTIC DEBT OF THE REPUBLIC. The following table summarizes the
outstanding direct domestic debt of the Republic as of the dates indicated.
OUTSTANDING DIRECT DOMESTIC DEBT OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
----------------------------------------------------------------------
1999 2000 2001 2002 2003
-------- ---------- ---------- ---------- --------------------
(IN MILLIONS)
Loans
Direct....................... P 39,743 P 15,541 P 15,317 P 15,609 P 15,560 $ 280
Assumed...................... 20,369 19,117 13,858 8,251 2,297 41
-------- ---------- ---------- ---------- ---------- -------
Total loans............... 60,112 34,658 29,175 23,860 17,856 321
Securities
Treasury bills............... 464,737 467,275 425,414 405,226 495,964 8,928
Treasury notes/bonds......... 453,555 566,267 793,094 1,042,115 1,189,960 21,421
-------- ---------- ---------- ---------- ---------- -------
Total securities.......... 918,292 1,033,542 1,218,508 1,447,342 1,685,924 30,350
-------- ---------- ---------- ---------- ---------- -------
Total debt................ P978,404 P1,068,200 P1,247,683 P1,471,202 P1,703,781 $30,671
======== ========== ========== ========== ========== =======
</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.
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(2)
- ---- ---------- -------- -------------------
(IN MILLIONS)
1999............................................... P 61,552 P 74,980 P136,532 $3,392
2000............................................... 45,429 93,575 139,004 2,783
2001............................................... 54,039 112,592 166,631 3,268
2002............................................... 80,944 119,985 200,929 3,928
2003............................................... 147,322 147,565 294,887 5,308
2004(3)............................................ 150,453 134,728 285,181 5,134
2005(3)............................................ 237,934 112,721 350,655 6,312
2006(3)............................................ 213,034 87,710 300,744 5,414
2007(3)............................................ 187,780 60,492 248,273 4,469
</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) For 1999 to 2003, amounts in pesos were converted to US dollars using the
applicable Bangko Sentral reference exchange rates at the end of each
period. For 2004 through 2007, amounts in pesos were converted to US dollars
using the applicable Bangko Sentral reference exchange rates as of December
31, 2003.
(3) Projected, based on debt outstanding as of December 31, 2003.
79
DIRECT EXTERNAL DEBT OF THE REPUBLIC. The following table summarizes the
outstanding external direct debt of the Republic as of the dates indicated.
OUTSTANDING DIRECT EXTERNAL DEBT OF THE REPUBLIC(1)(2)
<Table>
<Caption>
AS OF DECEMBER 31,
-------------------------------------------------------
1999 2000 2001 2002 2003
------- ------- ------- ------- ---------------
(IN MILLIONS)
Loans
Multilateral.......................... $ 4,468 $ 4,388 $ 4,323 $ 4,390 $ 4,626
Bilateral............................. 9,055 8,193 7,236 8,167 9,277
Commercial............................ 256 651 841 925 829
------- ------- ------- ------- -------
Total loans........................ 13,779 13,232 12,400 13,482 14,732
Securities
Eurobonds............................. 352 514 915 1,062 1,637
Brady Bonds........................... 1,482 1,385 1,287 1,190 1,092
Yen Bonds............................. 391 655 949 959 794
Notes................................. -- 810 1,010 400 200
Global Bonds.......................... 3,796 5,396 5,396 8,246 10,546
T-Bills............................... -- -- 125 -- 625
------- ------- ------- ------- -------
Total securities................... 6,021 8,760 9,682 11,857 14,895
------- ------- ------- ------- -------
Total.............................. $19,800 $21,992 $22,082 $25,340 $29,627(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 $820 million of external debt
since December 31, 2003.
80
The following table sets out, by designated currency and the equivalent
amount in US dollars, the outstanding direct external debt of the Republic as of
December 31, 2003.
SUMMARY OF OUTSTANDING DIRECT EXTERNAL
DEBT BY THE REPUBLIC BY CURRENCY(1)
(AS OF DECEMBER 31, 2003)
<Table>
<Caption>
AMOUNT IN EQUIVALENT
ORIGINAL AMOUNT IN % OF
CURRENCY US DOLLARS(2) TOTAL
--------- ------------- ------
(IN MILLIONS, EXCEPT PERCENTAGES)
US Dollar................................................... 17,282 $17,282 58.33%
Japanese Yen................................................ 994,953 9,289 31.35
European Currency Unit...................................... 1,253 1,564 5.28
Special Drawing Right....................................... 698 1,034 3.49
French Franc................................................ 774 147 0.50
Austrian Schilling.......................................... 1,251 114 0.38
Deutsche Mark............................................... 111 71 0.24
Swiss Franc................................................. 72 57 0.19
Pound Sterling.............................................. 13 23 0.08
Belgian Franc............................................... 651 20 0.07
Danish Krone................................................ 47 8 0.03
Kuwait Dinar................................................ 2 7 0.02
Italian Lire................................................ 7,749 5 0.02
Korean Won.................................................. 3,971 3 0.01
Swedish Krona............................................... 15 2 0.01
Canadian Dollar............................................. 2 2 0.01
------- ------
Total..................................................... $29,627(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 31, 2003.
(3) The Government has incurred an aggregate of $820 million of external debt
since December 31, 2003.
81
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)
1999........................................................ $ 933 $ 778 $1,711
2000........................................................ 831 947 1,778
2001........................................................ 887 1,209 2,095
2002........................................................ 1,718 1,243 2,961
2003........................................................ 1,713 1,419 3,152
2004(3)..................................................... 1,980 1,481 3,461
2005(3)..................................................... 2,083 1,501 3,584
2006(3)..................................................... 2,052 1,452 3,504
2007(3)..................................................... 1,365 1,336 2,701
</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 1999 through 2003, amounts in original currencies were converted to US
dollars using the applicable Bangko Sentral reference exchange rates
prevailing on the date of payment. For 2004 through 2007, amounts in
original currencies were converted to US dollars using the applicable Bangko
Sentral reference exchange rates as of December 31, 2003.
(3) Projected, based on debt outstanding as of December 31, 2003.
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,
--------------------------------------------------------
1999 2000 2001 2002 2003
------ ------- ------- ------- -----------------
(IN MILLIONS)
Domestic............................. P8,320 P12,451 P23,167 P19,070 P22,635 $ 407
External............................. $8,908 $ 9,402 $ 9,177 $10,757 $12,348 $12,348
------ ------- ------- ------- ------- -------
Total.............................. $12,755
=======
</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.
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.
82
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.
83
In February 2004, the Republic exchanged approximately $46 million original
principal amount of its Principal Collateralized Interest Reduction Bonds, $123
million original principal amount of its Interest Reduction Bonds, $141 million
original principal amount of its Floating Rate Debt Conversion Bonds and $917
million of outstanding global bonds for approximately $1.2 billion in 8.375%
Global Bonds due 2011. In addition, the Republic issued approximately $120
million in 8.375% Global Bonds due 2011 pursuant to a concurrent cash offering.
The Republic has requested the release of approximately $46 million in
collateral pursuant to the retirement of the Brady Bonds.
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, 2003
------------- -----------------
(IN MILLIONS)
Brady Bonds(1)
Interest Reduction Bonds.................................. $ 757 $ 204
Principal Collateralized Interest Reduction Bonds......... 1,894 583
Debt Conversion Bonds..................................... 697 306
------- -------
Total.................................................. $ 3,348 $ 1,092
Japanese Yen Bonds(2)
Seventh Series............................................ 327 327
Shibosai Series A......................................... 467 467
------- -------
Total....................................................... $ 794 $ 794
Notes....................................................... 200 200
Global bonds................................................ 10,546 10,546
Eurobonds(2)................................................ 1,637 1,637
T-Bills..................................................... 625 625
------- -------
Total foreign bonds.................................... $17,151 $14,895(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 31, 2003.
(3) The Government has incurred an aggregate of $820 million of external debt
since December 31, 2003. In February 2004, the Government cancelled
approximately $310 million in original principal amount of Brady Bonds and
approximately $917 million in global bonds, which were redeemed in exchange
for approximately $1.2 billion in new global bonds.
84
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;
- Whether the debt securities will be designated "Collective Action
Securities" (as described below under "Collective Action Securities").
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.
85
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
86
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.
87
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
88
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
The following description does not apply to any series of debt securities
that has been designated Collective Action Securities. See "Collective Action
Securities -- Events of Default" below for a description of the corresponding
terms of Collective Action Securities.
89
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 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.
90
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;
- 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
The following description does not apply to any series of debt securities
that has been designated Collective Action Securities. See "Collective Action
Securities -- Modifications and Amendments; Bondholders' Meetings" for a
description of the corresponding terms of Collective Action Securities.
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;
91
- 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.
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 following description does not apply to any series of debt securities
that has been designated Collective Action Securities. See "Collective Action
Securities -- Further Issues of Debt Securities" for a description of the
corresponding terms of Collective Action 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.
92
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 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.
93
"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 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
94
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 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.
95
COLLECTIVE ACTION SECURITIES
The Philippines may designate a particular series of debt securities to be
"Collective Action Securities," the specific terms of which will be described in
the prospectus supplement relating to such series of debt securities. Collective
Action Securities will have the same terms and conditions as the securities
described under the heading "Debt Securities" above, except that such Collective
Action Securities shall contain different provisions relating to certain aspects
of default, acceleration, voting on amendments, modifications, changes waivers
and further issues of debt securities as follows:
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 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
bank of the Philippines 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 bank of the
Republic does not at all times exercise full control over the Republic's
International Monetary Assets; or
96
8. IMF MEMBERSHIP: The Philippines ceases to be a member of the IMF
or loses 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. The holders of more than 50% of the
aggregate principal amount of the outstanding debt securities of the affected
series may rescind a declaration of acceleration if the event or events of
default giving rise to the declaration have been cured or waived.
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 holders of the debt
securities;
- 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
The Philippines and the Fiscal Agent may, with the consent of the holders
of not less than 75% of the aggregate principal amount of the outstanding debt
securities, voting at a meeting or by written consent, make any amendment,
modification, change or waiver with respect to the debt securities or the Fiscal
Agency Agreement that would:
- change the stated maturity of the principal of the debt securities or the
due date of 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 any additional amounts on
account of withholding taxes or deductions;
- reduce the percentage of the outstanding principal amount needed to
modify or amend the related Fiscal Agency Agreement, any amendment or
supplement thereto, or the terms of such series of debt securities;
- change the definition of "outstanding" with respect to the debt
securities of such series;
- permit early redemption of the debt securities of the series or, if early
redemption is already permitted, set a redemption date earlier than the
date previously specified or reduce the redemption price;
- change the governing law provision of the debt securities of that series;
- change the courts to the jurisdiction of which the Philippines has
submitted, the Philippines' obligation to appoint and maintain an agent
for service of process in the Borough of Manhattan, The City of New York,
or the Philippines's waiver of immunity, in respect of actions or
proceedings brought by any holder based upon the debt securities of that
series;
- in connection with an exchange offer for the debt securities of that
series, amend any event of default under the debt securities of that
series; or
97
- change the pari passu ranking of the debt securities.
We refer to the above subjects as "reserved matters." A change to a
reserved matter, including the payment terms of the debt securities, can be made
without your consent, as long as a supermajority of the holders (that is, the
holders of at least 75% of the aggregate principal amount of the outstanding
debt securities) agree to the change.
With respect to other types of amendment or modification, the Philippines
may, with the consent of the holders of at least 66 2/3% in principal amount of
the debt securities that are outstanding, modify and amend the debt securities
or, to the extent the modification or amendment affects the debt securities, the
Fiscal Agency Agreement or any amendment or supplement thereto.
The Philippines may at any time call a meeting of the holders of debt
securities to seek the holders' approval of the modification, or amendment, or
obtain a waiver, of any provision of the 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.
The holders of at least 10% of the aggregate principal amount of the debt
securities that are outstanding may compel the fiscal agent to call a meeting of
all holders of the debt securities.
For purposes of a meeting of the holders of the debt securities that does
not propose to discuss reserved matters, the persons entitled to vote a majority
in principal amount of the debt securities that are outstanding at the time will
constitute a quorum. However, if such a meeting is adjourned for a lack of a
quorum, then holders or proxies representing 25% of the outstanding principal
amount will constitute a quorum when the meeting is rescheduled. For purposes of
any meeting of holders that proposes to discuss reserved matters, as specified
above, holders or proxies representing 75% of the aggregate principal amount of
the outstanding notes will constitute a quorum. To vote at a meeting, a person
must either hold outstanding debt securities 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 the 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.
For purposes of determining whether the required percentage of holders of
the debt securities of a series has approved any amendment, modification or
change to, or waiver of, the debt securities or the fiscal agency agreement, or
whether the required percentage of holders has delivered a notice of
acceleration of the debt securities of that series, debt securities owned,
directly or indirectly, by the Philippines or any public sector instrumentality
of the Philippines will be disregarded and deemed not to be outstanding (except
that in determining whether the fiscal agent shall be protected in relying upon
any amendment, modification, change or waiver, or any notice from holders, only
debt securities that the fiscal agent knows to be so owned shall be so
disregarded). As used in this paragraph, "public sector instrumentality" means
Bangko Sentral, any department, ministry or agency of the Philippines or any
corporation, trust, financial institution or other entity owned or controlled by
the Philippines or any of the foregoing, and "control" means the power, directly
or indirectly, through the ownership of voting securities or other ownership
interests or otherwise, to direct the management of or elect or appoint a
majority of the board of directors or other persons performing similar functions
in lieu of, or in addition to, the board of directors of a corporation, trust,
financial institution or other entity.
98
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) provided, however, that such additional notes do not have a greater
amount of original issue discount for U.S. federal tax purposes ("OID") than the
outstanding notes have as of the date of the issue of such additional notes. 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 supplement to such relevant
Fiscal Agency Agreement.
99
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
100
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
101
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
102
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.
103
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
104
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.
105
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.
106
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.
107
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.
In compliance with NASD guidelines the maximum compensation to any
underwriters or agents in connection with the sale of any securities pursuant to
the prospectus and applicable prospectus supplements will not exceed 8% of the
aggregate total offering price to the public of such securities as set forth on
the cover page of the applicable prospectus supplement; however, it is
anticipated that the maximum compensation paid will be significantly less than
8%.
108
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. Cecilia
B. Rebong, Consul General, the Philippine Consulate General, 556 Fifth Avenue,
New York, New York 10036-5095.
EXPERTS; OFFICIAL STATEMENTS AND DOCUMENTS
Mina Figueroa, in her official capacity as National Treasurer 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.
109
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
Domestic Debt of the Republic (Other Than Securities)....... T-33
Guaranteed Domestic Debt of the Republic (Other Than
Securities)............................................... T-34
</Table>
T-1
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES(1)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- -------------------------------- -------------- ---------- -------- ------------ -----------
GRAND TOTAL 18,527.93
=========
I. NATIONAL GOVERNMENT DIRECT GUARANTEE ON GOCC LOANS 18,069.45
=========
A. LOANS 13,091.27
=========
SWISS FRANCS 81.46 65.18
---------- ---------
FIXED RATE 8.8750% 1992 2004 34.31 27.45
SWISS EXPORT BASE RATE 1.3750% 1993 2004 6.50 5.20
SWISS EXPORT BASE RATE 1.3750% 1993 2004 40.65 32.53
DEUTSCHE MARKS 850.93 543.19
---------- ---------
FIXED RATE 7.0000% 1995 2035 30.70 19.60
FIXED RATE 2.0000% 1990 2020 150.00 95.75
FIXED RATE 2.0000% 1988 2018 46.00 29.36
FIXED RATE 9.0000% 1992 2032 60.00 38.30
FIXED RATE 9.0000% 1993 2033 60.00 38.30
FIXED RATE 9.0000% 1993 2023 30.40 19.41
FIXED RATE 2.0000% 1981 2016 15.50 9.89
FIXED RATE 2.0000% 1981 2011 0.60 0.38
FIXED RATE 7.5000% 1995 2035 14.75 9.42
FIXED RATE 2.0000% 1981 2011 4.70 3.00
FIXED RATE 2.0000% 1979 2009 7.00 4.47
FIXED RATE 2.0000% 1979 2015 35.80 22.85
FIXED RATE 7.5000% 1995 2035 50.10 31.98
FIXED RATE 2.0000% 1979 2009 2.80 1.79
FIXED RATE 9.0000% 1993 2033 145.00 92.56
FIXED RATE 6.5000% 1996 2008 15.00 9.58
FIXED RATE 9.0000% 1995 2036 12.80 8.17
FIXED RATE 6.5000% 1996 2036 9.30 5.94
GERMAN CAPITAL MARKET RATE 0.0000% 1991 2031 17.25 11.01
GERMAN CAPITAL MARKET RATE 0.0000% 1992 2005 26.00 16.60
GERMAN CAPITAL MARKET RATE 0.0000% 1993 2005 39.60 25.28
GERMAN CAPITAL MARKET RATE 0.0000% 1993 2005 15.00 9.58
LIBOR-6MOS. DEPOSIT 1.0000% 1992 2004 18.70 11.94
LIBOR-6MOS. DEPOSIT 0.0000% 1994 2004 43.93 28.05
EURO 39.33 49.10
---------- ---------
INTEREST FREE 0.0000% 2000 2013 7.81 9.75
FIXED RATE 3.0000% 1999 2039 14.69 18.34
FIXED RATE 3.0000% 2001 2040 9.35 11.67
LIBOR-6MOS. DEPOSIT 0.0000% 2003 2010 7.48 9.34
SPANISH PESETAS 1,262.24 9.47
---------- ---------
FIXED RATE 2.5000% 1993 2013 631.12 4.74
ORGANIZATION FOR ECONOMIC
COOPERATION DEVELOPMENT RATE 0.0000% 1993 2004 631.12 4.74
FRENCH FRANCS 469.61 89.38
---------- ---------
FIXED RATE 6.8500% 1994 2006 9.42 1.79
FIXED RATE 3.0000% 1990 2021 4.86 0.93
FIXED RATE 3.0000% 1990 2021 0.38 0.07
FIXED RATE 3.5000% 1979 2005 80.00 15.23
FIXED RATE 3.0000% 1990 2021 1.68 0.32
FIXED RATE 3.1000% 1994 2014 10.09 1.92
FIXED RATE 3.3000% 1994 2014 4.94 0.94
FIXED RATE 3.0000% 1990 2021 1.45 0.28
FIXED RATE 2.5000% 1991 2022 6.44 1.22
FIXED RATE 3.1000% 1994 2014 9.90 1.89
FIXED RATE 3.0000% 1990 2022 0.76 0.14
FIXED RATE 8.1000% 1994 2005 1.69 0.32
FIXED RATE 3.0000% 1988 2021 45.88 8.73
FIXED RATE 3.0000% 1990 2021 6.26 1.19
FIXED RATE 3.0000% 1990 2021 1.41 0.27
FIXED RATE 3.0000% 1990 2021 1.69 0.32
FIXED RATE 5.4500% 1990 2016 120.00 22.84
FIXED RATE 2.5000% 1991 2022 8.06 1.53
FIXED RATE 3.0000% 1990 2022 1.22 0.23
FIXED RATE 3.0000% 1990 2022 6.12 1.16
FIXED RATE 3.0000% 1990 2021 4.73 0.90
FIXED RATE 3.0000% 1990 2022 0.36 0.07
FIXED RATE 3.0000% 1990 2022 2.25 0.43
FIXED RATE 3.0000% 1988 2021 4.12 0.78
FIXED RATE 8.1000% 1994 2006 5.00 0.95
FIXED RATE 3.1000% 1994 2014 42.62 8.11
FIXED RATE 6.8700% 1996 2017 24.65 4.69
FIXED RATE 1.5000% 1996 2022 8.42 1.60
FIXED RATE 1.5000% 1996 2022 4.46 0.85
FIXED RATE 1.5000% 1996 2022 7.49 1.43
FIXED RATE 1.5000% 1996 2022 10.46 1.99
FIXED RATE 1.5000% 1996 2022 0.45 0.09
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS CURR.) DOLLARS)(2)
- -------- -------------------------------- ------------ -----------
GRAND TOTAL 12,347.51
=========
I. NATIONAL GOVERNMENT DIRECT GUARANTEE ON GOCC LOANS 12,075.21
=========
A. LOANS 7,097.04
=========
SWISS FRANCS 7.70 6.16
---------- ---------
FIXED RATE 1.72 1.37
SWISS EXPORT BASE RATE 0.50 0.40
SWISS EXPORT BASE RATE 5.48 4.39
DEUTSCHE MARKS 387.13 247.12
---------- ---------
FIXED RATE 26.70 17.04
FIXED RATE 25.22 16.10
FIXED RATE 33.35 21.29
FIXED RATE 68.87 43.96
FIXED RATE 59.95 38.27
FIXED RATE 30.40 19.41
FIXED RATE 6.02 3.84
FIXED RATE 0.24 0.15
FIXED RATE 14.75 9.42
FIXED RATE 1.86 1.19
FIXED RATE 1.93 1.23
FIXED RATE 13.20 8.43
FIXED RATE 44.70 28.53
FIXED RATE 0.77 0.49
FIXED RATE 9.20 5.87
FIXED RATE 0.00 0.00
FIXED RATE 6.86 4.38
FIXED RATE 16.54 10.56
GERMAN CAPITAL MARKET RATE 2.52 1.61
GERMAN CAPITAL MARKET RATE 1.81 1.15
GERMAN CAPITAL MARKET RATE 12.93 8.26
GERMAN CAPITAL MARKET RATE 6.18 3.94
LIBOR-6MOS. DEPOSIT 0.94 0.60
LIBOR-6MOS. DEPOSIT 2.20 1.40
EURO 11.12 13.88
---------- ---------
INTEREST FREE 7.81 9.75
FIXED RATE 0.21 0.26
FIXED RATE 1.97 2.45
LIBOR-6MOS. DEPOSIT 1.14 1.42
SPANISH PESETAS 597.83 4.49
---------- ---------
FIXED RATE 523.46 3.93
ORGANIZATION FOR ECONOMIC
COOPERATION DEVELOPMENT RATE 74.37 0.56
FRENCH FRANCS 294.25 56.01
---------- ---------
FIXED RATE 3.79 0.72
FIXED RATE 4.37 0.83
FIXED RATE 0.35 0.07
FIXED RATE 6.00 1.14
FIXED RATE 1.44 0.27
FIXED RATE 8.54 1.63
FIXED RATE 4.06 0.77
FIXED RATE 1.20 0.23
FIXED RATE 6.11 1.16
FIXED RATE 8.37 1.59
FIXED RATE 0.74 0.14
FIXED RATE 0.25 0.05
FIXED RATE 35.56 6.77
FIXED RATE 5.48 1.04
FIXED RATE 1.27 0.24
FIXED RATE 1.51 0.29
FIXED RATE 78.00 14.85
FIXED RATE 7.26 1.38
FIXED RATE 1.13 0.21
FIXED RATE 5.66 1.08
FIXED RATE 3.91 0.74
FIXED RATE 0.33 0.06
FIXED RATE 1.91 0.36
FIXED RATE 3.40 0.65
FIXED RATE 1.24 0.24
FIXED RATE 33.40 6.36
FIXED RATE 11.09 2.11
FIXED RATE 7.98 1.52
FIXED RATE 4.34 0.83
FIXED RATE 7.49 1.43
FIXED RATE 10.46 1.99
FIXED RATE 2.99 0.57
</Table>
T-2
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- -------------------------------- -------------- ---------- -------- ------------ -----------
FIXED RATE 5.4500% 1991 2018 30.00 5.71
FIXED RATE 3.3000% 1994 2014 1.14 0.22
FIXED RATE 3.0000% 1990 2022 0.48 0.09
FIXED RATE 3.0000% 1990 2022 0.70 0.13
KOREAN WON 16,894.00 14.11
---------- ---------
FIXED RATE 3.5000% 1995 2015 8,249.00 6.89
FIXED RATE 3.5000% 1995 2015 8,645.00 7.22
POUNDS STERLING 7.74 13.72
---------- ---------
FIXED RATE 5.9500% 1995 2007 7.74 13.72
JAPANESE YEN 684,547.25 6,390.93
---------- ---------
FIXED RATE 2.5000% 1992 2022 6,686.00 62.42
FIXED RATE 6.5000% 1991 2004 13,214.97 123.37
FIXED RATE 3.0000% 1994 2024 15,000.00 140.04
FIXED RATE 2.5000% 1989 2006 5,003.68 46.71
FIXED RATE 2.5000% 1991 2021 30,084.00 280.86
FIXED RATE 2.7000% 1988 2004 1,936.96 18.08
FIXED RATE 6.5000% 1991 2011 12,215.94 114.05
FIXED RATE 3.0000% 1994 2024 22,500.00 210.06
FIXED RATE 5.5000% 1992 2010 20,550.00 191.85
FIXED RATE 4.7000% 1993 2009 17,812.50 166.30
FIXED RATE 5.8000% 1992 2004 27,885.85 260.34
FIXED RATE 2.5000% 1995 2025 5,283.00 49.32
FIXED RATE 2.1000% 1995 2025 848.00 7.92
FIXED RATE 2.5000% 1995 2025 1,104.00 10.31
FIXED RATE 2.1000% 1995 2025 248.00 2.32
FIXED RATE 2.7000% 1995 2025 11,394.00 106.37
FIXED RATE 2.3000% 1995 2025 921.00 8.60
FIXED RATE 2.7000% 1995 2025 2,224.00 20.76
FIXED RATE 2.7000% 1996 2026 22,837.00 213.21
FIXED RATE 2.3000% 1996 2026 1,875.00 17.51
FIXED RATE 2.7000% 1996 2026 10,184.00 95.08
FIXED RATE 2.3000% 1996 2026 310.00 2.89
FIXED RATE 2.5000% 1996 2026 5,000.00 46.68
FIXED RATE 2.1000% 1996 2026 158.00 1.48
FIXED RATE 2.3000% 1997 2027 8,760.00 81.78
FIXED RATE 2.7000% 1997 2027 14,011.00 130.81
FIXED RATE 2.3000% 1997 2027 449.00 4.19
FIXED RATE 2.7000% 1997 2027 7,747.00 72.33
FIXED RATE 2.3000% 1997 2027 339.00 3.16
FIXED RATE 2.7000% 1997 2027 14,638.00 136.66
FIXED RATE 2.3000% 1997 2027 334.00 3.12
FIXED RATE 2.5000% 1997 2027 5,903.00 55.11
FIXED RATE 2.1000% 1997 2027 1,325.00 12.37
FIXED RATE 2.5000% 1997 2027 386.00 3.60
FIXED RATE 2.1000% 1997 2027 648.00 6.05
FIXED RATE 2.5000% 1997 2027 1,927.00 17.99
FIXED RATE 2.1000% 1997 2027 819.00 7.65
FIXED RATE 2.2000% 1998 2028 13,788.00 128.72
FIXED RATE 0.7500% 1998 2038 767.00 7.16
FIXED RATE 2.2000% 1998 2028 19,532.00 182.35
FIXED RATE 0.7500% 1998 2038 458.00 4.28
FIXED RATE 2.2000% 1998 2028 3,064.00 28.61
FIXED RATE 1.7000% 1998 2028 2,193.00 20.47
FIXED RATE 0.7500% 1998 2038 815.00 7.61
FIXED RATE 2.2000% 1999 2028 3,064.00 28.61
FIXED RATE 1.7000% 1999 2028 2,193.00 20.47
FIXED RATE 2.2000% 1999 2040 16,450.00 153.58
FIXED RATE 0.9500% 2001 2041 39,455.00 368.35
FIXED RATE 0.7500% 2001 2041 2,476.00 23.12
JAPAN LONG TERM PRIME LENDING
RATE 1.2500% 1994 2019 26,840.00 250.58
JAPAN LONG TERM PRIME LENDING
RATE 1.2500% 1994 2008 31,500.00 294.08
JAPAN LONG TERM PRIME LENDING
RATE 1.2500% 1994 2005 2,163.65 20.20
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1994 2014 12,400.00 115.77
JAPAN LONG TERM PRIME LENDING
RATE 1.2500% 1994 2005 297.84 2.78
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1992 2014 6,100.00 56.95
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1992 2015 18,600.00 173.65
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 1999 2019 60,000.00 560.16
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 2001 2011 12,500.00 116.70
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS CURR.) DOLLARS)(2)
- -------- -------------------------------- ------------ -----------
FIXED RATE 22.65 4.31
FIXED RATE 0.90 0.17
FIXED RATE 0.42 0.08
FIXED RATE 0.67 0.13
KOREAN WON 13,572.73 11.33
---------- ---------
FIXED RATE 6,562.27 5.48
FIXED RATE 7,010.47 5.85
POUNDS STERLING 3.10 5.49
---------- ---------
FIXED RATE 3.10 5.49
JAPANESE YEN 398,516.95 3,720.55
---------- ---------
FIXED RATE 6,033.70 56.33
FIXED RATE 328.60 3.07
FIXED RATE 12,699.81 118.57
FIXED RATE 2,471.84 23.08
FIXED RATE 25,681.46 239.76
FIXED RATE 645.65 6.03
FIXED RATE 6,304.50 58.86
FIXED RATE 22,500.00 210.06
FIXED RATE 3,507.32 32.74
FIXED RATE 5,371.85 50.15
FIXED RATE 2,384.79 22.26
FIXED RATE 716.44 6.69
FIXED RATE 488.96 4.56
FIXED RATE 1,021.72 9.54
FIXED RATE 328.78 3.07
FIXED RATE 10,211.48 95.33
FIXED RATE 1,338.70 12.50
FIXED RATE 1,366.30 12.76
FIXED RATE 12,325.11 115.07
FIXED RATE 4,741.61 44.27
FIXED RATE 10,240.00 95.60
FIXED RATE 250.04 2.33
FIXED RATE 4,900.47 45.75
FIXED RATE 157.99 1.48
FIXED RATE 502.89 4.69
FIXED RATE 2,086.83 19.48
FIXED RATE 97.17 0.91
FIXED RATE 6,373.03 59.50
FIXED RATE 284.70 2.66
FIXED RATE 8,862.82 82.74
FIXED RATE 292.69 2.73
FIXED RATE 938.36 8.76
FIXED RATE 914.62 8.54
FIXED RATE 291.91 2.73
FIXED RATE 505.95 4.72
FIXED RATE 50.35 0.47
FIXED RATE 148.83 1.39
FIXED RATE 2,670.27 24.93
FIXED RATE 362.85 3.39
FIXED RATE 6,825.34 63.72
FIXED RATE 370.57 3.46
FIXED RATE 390.74 3.65
FIXED RATE 970.75 9.06
FIXED RATE 671.82 6.27
FIXED RATE 15,422.28 143.98
FIXED RATE 7,915.12 73.90
FIXED RATE 641.84 5.99
FIXED RATE 1,078.12 10.07
FIXED RATE 0.00 0.00
JAPAN LONG TERM PRIME LENDING
RATE 14,775.13 137.94
JAPAN LONG TERM PRIME LENDING
RATE 20,649.67 192.79
JAPAN LONG TERM PRIME LENDING
RATE 305.88 2.86
JAPAN LONG TERM PRIME LENDING
RATE 4,320.55 40.34
JAPAN LONG TERM PRIME LENDING
RATE 29.78 0.28
JAPAN LONG TERM PRIME LENDING
RATE 4,007.61 37.42
JAPAN LONG TERM PRIME LENDING
RATE 12,116.47 113.12
JAPAN LONG TERM PRIME LENDING
RATE 47,142.85 440.13
JAPAN LONG TERM PRIME LENDING
RATE 22,500.00 210.06
</Table>
T-3
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- -------------------------------- -------------- ---------- -------- ------------ -----------
JAPAN LONG TERM PRIME LENDING
RATE 0.0000% 2000 2007 5,370.68 50.14
JAPAN LONG TERM PRIME LENDING
RATE -0.2000% 1999 2014 26,000.00 242.74
JAPAN SWAP RATE 1.6000% 1999 2009 20,800.00 194.19
LIBOR 6MOS DEPOSIT 1.6000% 1999 2009 27,200.00 253.94
LIBOR 6MOS DEPOSIT 0.0000% 1999 2004 13,537.00 126.38
ADB FLOATING RATE 0.0000% 1998 2013 3,057.00 28.54
ADB FLOATING RATE 0.5000% 1996 2016 2,166.00 20.22
ADB FLOATING RATE 0.5000% 2002 2021 3,676.05 34.32
LIBOR 6MOS DEPOSIT 0.0000% 2000 2014 314.75 2.94
CQB 0.1000% 2001 2011 3,717.00 34.70
LIBOR BASE RATE 0.5000% 1996 2016 9,090.39 84.87
US LIBOR 0.0000% 2001 2020 2,400.00 22.41
SPECIAL DRAWING RIGHTS 18.50 27.39
---------- ---------
INTEREST FREE 0.7500% 1992 2032 3.00 4.44
INTEREST FREE 0.5000% 1998 2017 5.00 7.40
LIBOR 6MOS. DEPOSIT 0.8000% 1995 2034 3.50 5.18
LIBOR 6MOS. DEPOSIT 0.8000% 1995 2014 7.00 10.36
UNITED STATES DOLLARS 5,688.80 5,888.80
---------- ---------
ADB FLOATING RATE 0.0000% 1993 2018 43.20 43.20
ADB FLOATING RATE 0.0000% 1989 2004 130.00 130.00
ADB FLOATING RATE 0.0000% 1991 2009 25.00 25.00
ADB FLOATING RATE 0.0000% 1992 2007 2.60 2.60
ADB FLOATING RATE 0.0000% 1989 2012 26.40 26.40
ADB FLOATING RATE 0.0000% 1988 2012 43.50 43.50
ADB FLOATING RATE 0.0000% 1991 2006 100.00 100.00
ADB FLOATING RATE 0.0000% 1986 2006 92.00 92.00
ADB FLOATING RATE 0.0000% 1995 2020 92.00 92.00
ADB FLOATING RATE 0.0000% 1993 2012 138.00 138.00
ADB FLOATING RATE 0.0000% 1991 2015 200.00 200.00
ADB FLOATING RATE 0.0000% 1988 2008 120.00 120.00
ADB FLOATING RATE 0.0000% 1989 2009 160.00 160.00
ADB FLOATING RATE 0.0000% 1995 2019 244.00 244.00
ADB FLOATING RATE 0.0000% 1992 2012 75.00 75.00
ADB FLOATING RATE 0.0000% 1992 2016 31.40 31.40
ADB FLOATING RATE 0.0000% 1993 2013 164.00 164.00
ADB FLOATING RATE 0.0000% 1998 2021 50.00 50.00
ADB FLOATING RATE 0.0000% 1996 2011 5.35 5.35
ADB FLOATING RATE 0.0000% 1998 2017 20.22 20.22
FIXED RATE 1.5000% 1990 2010 0.17 0.17
FIXED RATE 1.5000% 1990 2010 0.03 0.03
FIXED RATE 10.5000% 1984 2007 39.30 39.30
FIXED RATE 1.5000% 1990 2010 0.08 0.08
FIXED RATE 1.5000% 1990 2010 0.05 0.05
FIXED RATE 3.0000% 1995 2006 0.50 0.50
FIXED RATE 8.1000% 1980 2005 42.80 42.80
FIXED RATE 7.6000% 1979 2004 60.70 60.70
FIXED RATE 1.5000% 1990 2010 0.41 0.41
FIXED RATE 1.5000% 1990 2010 0.04 0.04
FIXED RATE 1.5000% 1990 2010 15.67 15.67
FIXED RATE 1.5000% 1990 2010 9.34 9.34
FIXED RATE 1.5000% 1990 2010 11.56 11.56
FIXED RATE 1.5000% 1990 2010 0.09 0.09
FIXED RATE 2.0000% 1993 2013 19.30 19.30
FIXED RATE 3.5750% 1995 2012 37.90 37.90
FIXED RATE 1.5000% 1990 2010 0.03 0.03
FIXED RATE 1.5000% 1990 2010 0.10 0.10
FIXED RATE 1.5000% 1990 2010 0.20 0.20
FIXED RATE 1.5000% 1990 2010 3.38 3.38
FIXED RATE 1.5000% 1990 2010 0.17 0.17
FIXED RATE 10.1000% 1981 2006 87.50 87.50
FIXED RATE 1.5000% 1990 2010 11.21 11.21
FIXED RATE 1.5000% 1990 2010 0.15 0.15
FIXED RATE 10.2500% 1984 2004 33.00 33.00
FIXED RATE 1.5000% 1990 2010 0.04 0.04
FIXED RATE 3.0000% 1995 2006 9.50 9.50
FIXED RATE 1.5000% 1990 2010 0.18 0.18
FIXED RATE 1.5000% 1990 2010 0.91 0.91
FIXED RATE 1.5000% 1990 2010 0.12 0.12
FIXED RATE 1.5000% 1990 2010 0.63 0.63
FIXED RATE 1.2500% 1993 2025 24.50 24.50
FIXED RATE 1.5000% 1990 2010 0.51 0.51
FIXED RATE 1.5000% 1990 2010 0.99 0.99
FIXED RATE 1.5000% 1990 2010 0.38 0.38
FIXED RATE 1.5000% 1990 2010 4.99 4.99
FIXED RATE 1.5000% 1990 2010 0.23 0.23
FIXED RATE 1.5000% 1990 2010 1.35 1.35
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS CURR.) DOLLARS)(2)
- -------- -------------------------------- ------------ -----------
JAPAN LONG TERM PRIME LENDING
RATE 3,068.96 28.65
JAPAN LONG TERM PRIME LENDING
RATE 19,050.50 177.86
JAPAN SWAP RATE 20,800.00 194.19
LIBOR 6MOS DEPOSIT 27,200.00 253.94
LIBOR 6MOS DEPOSIT 1,504.06 14.04
ADB FLOATING RATE 671.86 6.27
ADB FLOATING RATE 507.93 4.74
ADB FLOATING RATE 104.21 0.97
LIBOR 6MOS DEPOSIT 23.23 0.22
CQB 92.86 0.87
LIBOR BASE RATE 2,558.41 23.89
US LIBOR 2,400.00 22.41
SPECIAL DRAWING RIGHTS 11.07 16.39
---------- ---------
INTEREST FREE 2.28 3.37
INTEREST FREE 0.21 0.32
LIBOR 6MOS. DEPOSIT 3.48 5.15
LIBOR 6MOS. DEPOSIT 5.10 7.55
UNITED STATES DOLLARS 3,015.62 3,015.62
---------- ---------
ADB FLOATING RATE 18.20 18.20
ADB FLOATING RATE 81.67 81.67
ADB FLOATING RATE 9.40 9.40
ADB FLOATING RATE 0.80 0.80
ADB FLOATING RATE 17.99 17.99
ADB FLOATING RATE 29.33 29.33
ADB FLOATING RATE 11.38 11.38
ADB FLOATING RATE 29.55 29.55
ADB FLOATING RATE 81.35 81.35
ADB FLOATING RATE 92.07 92.07
ADB FLOATING RATE 158.06 158.06
ADB FLOATING RATE 53.37 53.37
ADB FLOATING RATE 89.57 89.57
ADB FLOATING RATE 148.26 148.26
ADB FLOATING RATE 57.03 57.03
ADB FLOATING RATE 7.95 7.95
ADB FLOATING RATE 91.50 91.50
ADB FLOATING RATE 14.92 14.92
ADB FLOATING RATE 3.82 3.82
ADB FLOATING RATE 35.95 35.95
FIXED RATE 0.12 0.12
FIXED RATE 0.02 0.02
FIXED RATE 9.85 9.85
FIXED RATE 0.06 0.06
FIXED RATE 0.03 0.03
FIXED RATE 0.37 0.37
FIXED RATE 3.93 3.93
FIXED RATE 5.04 5.04
FIXED RATE 0.29 0.29
FIXED RATE 0.03 0.03
FIXED RATE 10.97 10.97
FIXED RATE 6.53 6.53
FIXED RATE 8.09 8.09
FIXED RATE 0.06 0.06
FIXED RATE 17.46 17.46
FIXED RATE 32.22 32.22
FIXED RATE 0.02 0.02
FIXED RATE 0.07 0.07
FIXED RATE 0.14 0.14
FIXED RATE 2.37 2.37
FIXED RATE 0.12 0.12
FIXED RATE 15.24 15.24
FIXED RATE 7.85 7.85
FIXED RATE 0.11 0.11
FIXED RATE 2.84 2.84
FIXED RATE 0.03 0.03
FIXED RATE 2.08 2.08
FIXED RATE 0.13 0.13
FIXED RATE 0.64 0.64
FIXED RATE 0.09 0.09
FIXED RATE 0.44 0.44
FIXED RATE 23.90 23.90
FIXED RATE 0.36 0.36
FIXED RATE 0.69 0.69
FIXED RATE 0.26 0.26
FIXED RATE 3.49 3.49
FIXED RATE 0.16 0.16
FIXED RATE 0.78 0.78
</Table>
T-4
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- -------------------------------- -------------- ---------- -------- ------------ -----------
FIXED RATE 1.5000% 1990 2010 11.70 11.70
FIXED RATE 6.6000% 1995 2008 25.00 25.00
FIXED RATE 7.6500% 1996 2009 25.00 25.00
FIXED RATE 3.0000% 1994 2007 5.00 5.00
FIXED RATE 4.0000% 1995 2018 15.00 15.00
FIXED RATE 6.5000% 1997 2010 11.10 11.10
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1989 2009 65.50 65.50
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014 113.00 113.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1993 2012 134.00 134.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014 114.00 114.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1993 2013 110.00 110.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1989 2009 65.00 65.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014 127.35 127.35
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014 19.65 19.65
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1995 2015 50.00 50.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2013 64.00 64.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1991 2011 175.00 175.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1994 2014 40.00 40.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1995 2011 50.00 50.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1992 2012 91.30 91.30
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1988 2008 41.00 41.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1988 2008 59.00 59.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1991 2011 150.00 150.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1990 2010 150.00 150.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1990 2010 200.00 200.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1985 2005 100.00 100.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1991 2011 15.00 15.00
IBRD COST OF QUALIFIED
BORROWINGS 0.5000% 1989 2009 40.00 40.00
INTEREST FREE 0.0000% 2000 2013 7.50 7.50
LIBOR 6MOS. DEPOSIT 0.0000% 1992 2004 25.50 25.50
LIBOR 6MOS. DEPOSIT 0.0000% 1992 2004 17.44 17.44
LIBOR 6MOS. DEPOSIT 0.0000% 1992 2004 18.77 18.77
LIBOR 6MOS. DEPOSIT 0.0000% 1998 2004 160.00 160.00
LIBOR 6MOS. DEPOSIT 0.0000% 1997 2008 25.00 25.00
LIBOR 6MOS. DEPOSIT 0.0000% 1998 2014 160.00 160.00
LIBOR 6MOS. DEPOSIT 0.0000% 1998 2008 25.00 25.00
LIBOR-6MOS. DEPOSIT 0.0000% 2003 2010 7.50 7.50
LIBOR BASE RATE 0.5000% 1996 2016 100.00 100.00
LIBOR BASE RATE 0.5000% 1996 2016 57.00 57.00
LIBOR BASE RATE 0.5000% 1996 2016 150.00 150.00
LIBOR BASE RATE 0.5000% 1995 2015 50.00 50.00
LIBOR BASE RATE 0.5000% 1996 2017 60.00 60.00
LIBOR BASE RATE 0.5000% 1997 2017 54.50 54.50
LIBOR BASE RATE 0.5000% 1998 2018 150.00 150.00
LIBOR BASE RATE 0.5000% 1998 2019 150.00 150.00
LIBOR BASE RATE 0.5000% 1998 2019 23.30 23.30
US FLOATING RATE 0.9000% 1999 2014 200.00 200.00
US FLOATING RATE 0.3000% 2000 2004 200.00 200.00
B. BONDS 4,978.17
=========
UNITED STATES DOLLARS 3,460.00 3,460.00
---------- ---------
FIXED RATE 9.7500% 1994 2009 100.00 100.00
FIXED RATE 7.8750% 1996 2006 200.00 200.00
FIXED RATE 8.4000% 1996 2016 160.00 160.00
FIXED RATE 9.6250% 1998 2028 300.00 300.00
FIXED RATE 9.8750% 2000 2010 500.00 500.00
FIXED RATE 9.5750% 2000 2012 250.00 250.00
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS CURR.) DOLLARS)(2)
- -------- -------------------------------- ------------ -----------
FIXED RATE 8.19 8.19
FIXED RATE 0.50 0.50
FIXED RATE 1.63 1.63
FIXED RATE 0.39 0.39
FIXED RATE 12.50 12.50
FIXED RATE 5.41 5.41
IBRD COST OF QUALIFIED
BORROWINGS 31.78 31.78
IBRD COST OF QUALIFIED
BORROWINGS 79.42 79.42
IBRD COST OF QUALIFIED
BORROWINGS 26.89 26.89
IBRD COST OF QUALIFIED
BORROWINGS 43.95 43.95
IBRD COST OF QUALIFIED
BORROWINGS 39.31 39.31
IBRD COST OF QUALIFIED
BORROWINGS 34.99 34.99
IBRD COST OF QUALIFIED
BORROWINGS 101.87 101.87
IBRD COST OF QUALIFIED
BORROWINGS 10.02 10.02
IBRD COST OF QUALIFIED
BORROWINGS 43.70 43.70
IBRD COST OF QUALIFIED
BORROWINGS 41.29 41.29
IBRD COST OF QUALIFIED
BORROWINGS 111.71 111.71
IBRD COST OF QUALIFIED
BORROWINGS 31.24 31.24
IBRD COST OF QUALIFIED
BORROWINGS 34.68 34.68
IBRD COST OF QUALIFIED
BORROWINGS 36.67 36.67
IBRD COST OF QUALIFIED
BORROWINGS 19.04 19.04
IBRD COST OF QUALIFIED
BORROWINGS 24.01 24.01
IBRD COST OF QUALIFIED
BORROWINGS 100.43 100.43
IBRD COST OF QUALIFIED
BORROWINGS 79.72 79.72
IBRD COST OF QUALIFIED
BORROWINGS 114.61 114.61
IBRD COST OF QUALIFIED
BORROWINGS 13.29 13.29
IBRD COST OF QUALIFIED
BORROWINGS 0.96 0.96
IBRD COST OF QUALIFIED
BORROWINGS 20.15 20.15
INTEREST FREE 7.50 7.50
LIBOR 6MOS. DEPOSIT 2.55 2.55
LIBOR 6MOS. DEPOSIT 0.82 0.82
LIBOR 6MOS. DEPOSIT 0.83 0.83
LIBOR 6MOS. DEPOSIT 65.06 65.06
LIBOR 6MOS. DEPOSIT 0.00 0.00
LIBOR 6MOS. DEPOSIT 0.00 0.00
LIBOR 6MOS. DEPOSIT 16.25 16.25
LIBOR-6MOS. DEPOSIT 1.42 1.42
LIBOR BASE RATE 30.37 30.37
LIBOR BASE RATE 11.81 11.81
LIBOR BASE RATE 98.43 98.43
LIBOR BASE RATE 40.01 40.01
LIBOR BASE RATE 23.18 23.18
LIBOR BASE RATE 11.54 11.54
LIBOR BASE RATE 88.72 88.72
LIBOR BASE RATE 0.00 0.00
LIBOR BASE RATE 4.75 4.75
US FLOATING RATE 180.00 180.00
US FLOATING RATE 175.00 175.00
B. BONDS 4,978.17
=========
UNITED STATES DOLLARS 3,460.00 3,460.00
---------- ---------
FIXED RATE 100.00 100.00
FIXED RATE 200.00 200.00
FIXED RATE 160.00 160.00
FIXED RATE 300.00 300.00
FIXED RATE 500.00 500.00
FIXED RATE 250.00 250.00
</Table>
T-5
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- -------------------------------- -------------- ---------- -------- ------------ -----------
FIXED RATE 8.4750% 2000 2009 500.00 500.00
FIXED RATE 0.0000% 2002 2010 300.00 300.00
FIXED RATE 0.0000% 2002 2010 400.00 400.00
FIXED RATE 8.5000% 2003 2014 450.00 450.00
FIXED RATE 8.5000% 2003 2014 300.00 300.00
JAPANESE YEN 95,750.00 893.92
---------- ---------
FIXED RATE 4.6500% 1995 2015 12,000.00 112.03
FIXED RATE 2.3500% 2000 2010 22,000.00 205.39
FIXED RATE 3.2000% 2000 2020 24,750.00 231.07
FIXED RATE 3.5000% 2000 2022 37,000.00 345.43
EURO 500.00 624.25
---------- ---------
FIXED RATE 9.5750% 2001 2006 500.00 624.25
II. GFI GUARANTEE ASSUMED BY NATIONAL GOVERNMENT 458.48
=========
BELGIAN FRANCS 1,005.34 31.11
---------- ---------
BIBOR 6 MOS. 0.6000% 1992 2007 158.97 4.92
BIBOR 6 MOS. 0.6000% 1992 2007 722.14 22.35
BIBOR 6 MOS. 0.6000% 1992 2007 124.23 3.84
CANADIAN DOLLARS 0.27 0.20
---------- ---------
INTEREST FREE 0.0000% 1986 Upon 0.27 0.20
Demand
DEUTSCHE MARKS 2.84 1.81
---------- ---------
FIXED RATE 8.6000% 1992 2007 2.84 1.81
SPANISH PESETAS 6,989.98 52.45
---------- ---------
FIXED RATE 11.0000% 1991 2007 6,989.98 52.45
FRENCH FRANCS 21.86 4.16
---------- ---------
INTEREST FREE 0.0000% 1986 Upon 3.13 0.60
Demand
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1991 2007 4.36 0.83
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1991 2007 0.11 0.02
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1989 2007 13.01 2.48
TAUX DU MARCHE OBLIGATAIRE 0.4000% 1989 2007 1.24 0.24
POUNDS STERLING 1.03 1.83
---------- ---------
0.0000% 1986 Upon 0.00 0.00
Demand
GBP LIBOR 0.5000% 1991 2007 1.03 1.83
JAPANESE YEN 26,248.48 245.06
---------- ---------
LONG TERM PRIME RATE 0.1000% 1992 2007 4,968.73 46.39
LONG TERM PRIME RATE 0.1000% 1992 2007 16,886.81 157.66
LONG TERM PRIME RATE 0.1000% 1992 2007 216.83 2.02
INTEREST FREE 0.0000% 1986 Upon 2.74 0.03
Demand
LONG TERM PRIME RATE 0.1000% 1992 2007 412.07 3.85
LONG TERM PRIME RATE 0.1000% 1992 2007 701.63 6.55
LONG TERM PRIME RATE 0.1000% 1992 2007 1,194.42 11.15
LONG TERM PRIME RATE 0.1000% 1992 2007 158.65 1.48
LONG TERM PRIME RATE 0.1000% 1992 2007 747.41 6.98
LONG TERM PRIME RATE 0.1000% 1992 2007 801.78 7.49
LONG TERM PRIME RATE 0.1000% 1992 2007 157.43 1.47
SAUDI RIAL 27.34 7.29
---------- ---------
INTEREST FREE 0.0000% 1986 Upon 5.92 1.58
Demand
INTEREST FREE 0.0000% 1986 Upon 18.46 4.92
Demand
INTEREST FREE 0.0000% 1986 Upon 2.96 0.79
Demand
UNITED STATES DOLLARS 114.56 114.56
---------- ---------
INTEREST FREE 0.0000% 1986 Upon 0.97 0.97
Demand
INTEREST FREE 0.0000% 1986 Upon 8.33 8.33
Demand
INTEREST FREE 0.0000% 1986 Upon 33.09 33.09
Demand
INTEREST FREE 0.0000% 1986 Upon 18.60 18.60
Demand
INTEREST FREE 0.0000% 1986 Upon 0.72 0.72
Demand
INTEREST FREE 0.0000% 1986 Upon 0.51 0.51
Demand
INTEREST FREE 0.0000% 1986 Upon 2.18 2.18
Demand
INTEREST FREE 0.0000% 1986 Upon 5.22 5.22
Demand
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS CURR.) DOLLARS)(2)
- -------- -------------------------------- ------------ -----------
FIXED RATE 500.00 500.00
FIXED RATE 300.00 300.00
FIXED RATE 400.00 400.00
FIXED RATE 450.00 450.00
FIXED RATE 300.00 300.00
JAPANESE YEN 95,750.00 893.92
---------- ---------
FIXED RATE 12,000.00 112.03
FIXED RATE 22,000.00 205.39
FIXED RATE 24,750.00 231.07
FIXED RATE 37,000.00 345.43
EURO 500.00 624.25
---------- ---------
FIXED RATE 500.00 624.25
II. GFI GUARANTEE ASSUMED BY NATIONAL GOVERNMENT 272.30
=========
BELGIAN FRANCS 502.67 15.56
---------- ---------
BIBOR 6 MOS. 79.48 2.46
BIBOR 6 MOS. 361.07 11.18
BIBOR 6 MOS. 62.11 1.92
CANADIAN DOLLARS 0.27 0.20
---------- ---------
INTEREST FREE 0.27 0.20
DEUTSCHE MARKS 1.42 0.91
---------- ---------
FIXED RATE 1.42 0.91
SPANISH PESETAS 3,494.99 26.23
---------- ---------
FIXED RATE 3,494.99 26.23
FRENCH FRANCS 12.49 2.38
---------- ---------
INTEREST FREE 3.13 0.60
TAUX DU MARCHE OBLIGATAIRE 2.18 0.42
TAUX DU MARCHE OBLIGATAIRE 0.05 0.01
TAUX DU MARCHE OBLIGATAIRE 6.50 1.24
TAUX DU MARCHE OBLIGATAIRE 0.62 0.12
POUNDS STERLING 0.52 0.91
---------- ---------
0.00 0.00
GBP LIBOR 0.52 0.91
JAPANESE YEN 13,125.61 122.54
---------- ---------
LONG TERM PRIME RATE 2,484.36 23.19
LONG TERM PRIME RATE 8,443.41 78.83
LONG TERM PRIME RATE 108.41 1.01
INTEREST FREE 2.74 0.03
LONG TERM PRIME RATE 206.03 1.92
LONG TERM PRIME RATE 350.81 3.28
LONG TERM PRIME RATE 597.21 5.58
LONG TERM PRIME RATE 79.32 0.74
LONG TERM PRIME RATE 373.70 3.49
LONG TERM PRIME RATE 400.89 3.74
LONG TERM PRIME RATE 78.71 0.73
SAUDI RIAL 27.34 7.29
---------- ---------
INTEREST FREE 5.92 1.58
INTEREST FREE 18.46 4.92
INTEREST FREE 2.96 0.79
UNITED STATES DOLLARS 96.28 96.28
---------- ---------
INTEREST FREE 0.97 0.97
INTEREST FREE 8.33 8.33
INTEREST FREE 33.09 33.09
INTEREST FREE 18.60 18.60
INTEREST FREE 0.72 0.72
INTEREST FREE 0.51 0.51
INTEREST FREE 2.18 2.18
INTEREST FREE 5.22 5.22
</Table>
T-6
GUARANTEED EXTERNAL DEBTS OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
INTEREST RATE/ CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- -------------------------------- -------------- ---------- -------- ------------ -----------
INTEREST FREE 0.0000% 1986 Upon 0.51 0.51
Demand
INTEREST FREE 0.0000% 1986 Upon 4.40 4.40
Demand
INTEREST FREE 0.0000% 1988 Upon 11.55 11.55
Demand
FIXED RATE 3.4750% 1992 2007 11.25 11.25
FIXED RATE 3.4750% 1992 2007 5.28 5.28
FIXED RATE 3.4750% 1992 2007 0.80 0.80
LIBOR 6 MOS 0.8125% 1991 2007 0.32 0.32
LIBOR 6 MOS 0.8125% 1992 2007 0.11 0.11
LIBOR 6 MOS 0.8125% 1991 2007 1.22 1.22
LIBOR 6 MOS 0.8125% 1991 2007 0.19 0.19
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007 5.61 5.61
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1992 2007 0.10 0.10
NEW SHORT TERM EXIMBANK
BORROWING 0.5000% 1991 2007 3.63 3.63
<Caption>
OUTSTANDING BALANCE
AS OF
DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS CURR.) DOLLARS)(2)
- -------- -------------------------------- ------------ -----------
INTEREST FREE 0.51 0.51
INTEREST FREE 4.40 4.40
INTEREST FREE 7.51 7.51
FIXED RATE 5.62 5.62
FIXED RATE 2.64 2.64
FIXED RATE 0.40 0.40
LIBOR 6 MOS 0.16 0.16
LIBOR 6 MOS 0.05 0.05
LIBOR 6 MOS 0.61 0.61
LIBOR 6 MOS 0.09 0.09
NEW SHORT TERM EXIMBANK
BORROWING 2.80 2.80
NEW SHORT TERM EXIMBANK
BORROWING 0.05 0.05
NEW SHORT TERM EXIMBANK
BORROWING 1.81 1.81
</Table>
- ---------------
(1) Includes government guarantee on GOCC (loans and bonds) GFI guarantee
assumed by the government per Proc. 50
(2) Amount in original currencies were converted to US Dollars using Bangko
Sentral reference rate on December 31, 2003.
T-7
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
GRAND TOTAL 45,510.39
----------
I. DIRECT DEBT OF THE REPUBLIC 27,559.46
----------
A. AVAILED OF BY GOVERNMENT
AGENCIES 23,801.68
----------
AUSTRIAN SCHILLINGS 102.27 9.28
------------ ----------
FIXED RATE 4.0000% 03/31/1997 06/30/2014 14.53 1.32
FIXED RATE 4.5000% 03/02/2002 12/30/2019 15.06 1.37
FIXED RATE 4.5000% 07/23/1999 12/31/2022 72.67 6.59
BELGIAN FRANCS 150.00 4.64
------------ ----------
INTEREST FREE 0.0000% 04/06/1977 12/31/2006 50.00 1.55
INTEREST FREE 0.0000% 06/11/1976 12/31/2005 50.00 1.55
FIXED RATE 2.0000% 12/15/1975 12/31/2004 50.00 1.55
CANADIAN DOLLARS 3.89 2.97
------------ ----------
INTEREST FREE 0.0000% 11/12/1974 09/03/2024 3.89 2.97
SWISS FRANCS 103.98 83.20
------------ ----------
FIXED RATE 0.0125% 01/01/1998 04/30/2005 6.64 5.31
FIXED RATE 0.0125% 05/01/1990 06/30/2006 1.71 1.37
FIXED RATE 4.6300% 01/01/1998 04/30/2014 37.60 30.09
CHF LIBOR 0.0125% 09/14/1998 11/15/2005 1.62 1.29
CHF LIBOR 0.0000% 09/25/2001 09/20/2014 22.77 18.22
CHF LIBOR 0.0000% 09/25/2001 09/20/2008 22.77 18.22
LIBOR 6 MONTHS DEPOSIT 0.0138% 03/10/1989 12/31/2008 10.87 8.70
DEUTSCHE MARKS 67.33 42.98
------------ ----------
FIXED RATE 2.0000% 08/03/1984 12/31/2014 13.50 8.62
FIXED RATE 2.0000% 08/03/1984 12/31/2014 16.50 10.53
FIXED RATE 2.0000% 10/12/1990 12/31/2020 6.60 4.21
FIXED RATE 2.0000% 05/12/1982 12/31/2012 2.73 1.74
FIXED RATE 2.0000% 04/10/1981 06/30/2011 3.00 1.92
FIXED RATE 2.0000% 06/20/1974 06/30/2004 10.00 6.38
FIXED RATE 2.0000% 06/23/1978 06/30/2008 15.00 9.58
DANISH KRONER 80.00 13.42
------------ ----------
INTEREST FREE 0.0000% 06/26/1981 04/01/2006 65.00 10.90
INTEREST FREE 0.0000% 02/20/1985 10/01/2009 15.00 2.52
EURO 154.37 192.73
------------ ----------
INTEREST FREE 0.0000% 03/29/2000 03/21/2016 8.48 10.59
INTEREST FREE 0.0000% 09/22/2000 10/15/2017 1.84 2.30
FIXED RATE 0.4700% 01/22/1998 09/30/2030 0.74 0.93
FIXED RATE 0.4700% 01/22/1998 09/30/2030 3.20 4.00
FIXED RATE 0.7500% 02/14/2002 06/30/2042 7.39 9.22
FIXED RATE 0.7500% 02/14/2002 06/30/2042 10.69 13.34
FIXED RATE 1.5000% 02/17/1995 11/29/2014 8.12 10.13
FIXED RATE 3.4500% 02/28/2002 03/31/2012 18.17 22.68
FIXED RATE 3.6500% 02/28/2002 03/31/2025 36.34 45.37
FIXED RATE 4.0000% 11/16/2000 06/30/2023 31.25 39.01
FIXED RATE 4.4000% 12/11/2001 12/31/2024 23.99 29.95
FIXED RATE 4.9400% 08/17/1999 04/30/2010 3.40 4.24
FIXED RATE 4.9400% 08/17/1999 04/30/2010 0.77 0.97
FRENCH FRANCS 1,127.93 214.68
------------ ----------
FIXED RATE 1.4000% 12/31/1994 12/31/2016 102.36 19.48
FIXED RATE 1.4000% 12/31/1994 12/31/2016 17.65 3.36
FIXED RATE 1.5000% 12/18/1995 12/31/2018 24.00 4.57
FIXED RATE 1.5000% 12/18/1995 12/31/2023 12.60 2.40
FIXED RATE 1.5000% 12/18/1995 12/31/2022 3.20 0.61
FIXED RATE 1.5000% 12/18/1995 12/31/2022 4.80 0.91
FIXED RATE 1.5000% 01/15/1997 09/30/2023 36.06 6.86
FIXED RATE 1.5000% 01/15/1997 09/30/2023 98.98 18.84
FIXED RATE 2.0000% 05/20/1992 12/31/2024 4.86 0.93
FIXED RATE 2.0000% 05/20/1992 12/31/2023 18.90 3.60
FIXED RATE 2.0000% 01/17/1992 12/31/2024 69.00 13.13
FIXED RATE 2.0000% 12/07/1990 12/31/2023 14.22 2.71
FIXED RATE 2.0000% 05/20/1992 12/31/2022 4.98 0.95
FIXED RATE 2.5000% 02/09/1990 12/31/2022 27.25 5.19
FIXED RATE 2.5000% 02/09/1990 12/31/2022 29.07 5.53
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
GRAND TOTAL 29,626.84
---------
I. DIRECT DEBT OF THE REPUBLIC 14,588.42
---------
A. AVAILED OF BY GOVERNMENT
AGENCIES 12,546.63
---------
AUSTRIAN SCHILLINGS 1,240.35 112.54
---------- ---------
166.55 15.11
207.26 18.81
866.53 78.62
BELGIAN FRANCS 15.00 0.46
---------- ---------
7.50 0.23
5.00 0.15
2.50 0.08
CANADIAN DOLLARS 2.04 1.56
---------- ---------
2.04 1.56
SWISS FRANCS 71.53 57.23
---------- ---------
1.99 1.59
0.07 0.06
17.58 14.06
0.69 0.55
41.72 33.38
9.48 7.59
0.00 0.00
DEUTSCHE MARKS 27.67 17.66
---------- ---------
7.25 4.63
8.86 5.66
5.61 3.58
1.21 0.77
1.13 0.72
0.24 0.16
3.38 2.15
DANISH KRONER 14.24 2.39
---------- ---------
9.20 1.54
5.04 0.85
EURO 102.56 128.05
---------- ---------
7.85 9.80
1.84 2.30
0.74 0.93
3.24 4.05
0.31 0.39
0.23 0.29
8.08 10.09
5.09 6.35
23.43 29.25
29.66 37.03
18.83 23.51
2.72 3.40
0.54 0.67
FRENCH FRANCS 772.63 147.06
---------- ---------
95.58 18.19
17.52 3.33
6.96 1.32
12.52 2.38
1.63 0.31
4.88 0.93
36.06 6.86
47.07 8.96
4.68 0.89
18.47 3.52
66.76 12.71
14.04 2.67
4.73 0.90
25.67 4.88
27.06 5.15
</Table>
T-8
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 2.5000% 02/09/1990 12/31/2022 17.40 3.31
FIXED RATE 2.5000% 01/22/1992 12/31/2023 6.67 1.27
FIXED RATE 3.0000% 10/10/1989 12/31/2023 28.50 5.42
FIXED RATE 3.0000% 07/31/1989 03/21/2020 9.50 1.81
FIXED RATE 3.1000% 12/08/1993 12/31/2014 80.00 15.23
FIXED RATE 3.1000% 12/08/1993 12/31/2014 42.40 8.07
FIXED RATE 3.1000% 12/08/1993 12/31/2014 8.00 1.52
FIXED RATE 3.3000% 11/05/1993 06/30/2013 10.40 1.98
FIXED RATE 3.3000% 11/05/1993 06/30/2013 18.40 3.50
FIXED RATE 3.3000% 08/04/1993 12/31/2013 73.42 13.97
FIXED RATE 3.5000% 12/21/1995 09/30/2015 15.00 2.85
FIXED RATE 3.5000% 12/21/1995 12/31/2017 5.00 0.95
FIXED RATE 3.5000% 12/21/1996 09/30/2018 49.70 9.46
FIXED RATE 3.5000% 12/21/1997 12/30/2019 24.00 4.57
FIXED RATE 5.6800% 01/15/1997 02/08/2010 39.99 7.61
FIXED RATE 5.8200% 05/08/1997 12/30/2010 24.04 4.58
FIXED RATE 6.9100% 12/31/1995 12/30/2008 8.40 1.60
FIXED RATE 7.3500% 12/31/1994 12/31/2016 7.35 1.40
FIXED RATE 7.3500% 12/31/1994 12/31/2016 42.64 8.12
FIXED RATE 7.5000% 12/31/1995 12/31/2017 34.45 6.56
FIXED RATE 7.5500% 12/08/1993 12/31/2004 20.00 3.81
FIXED RATE 7.5500% 12/08/1993 12/31/2004 2.00 0.38
FIXED RATE 7.5500% 06/23/1992 07/05/2004 4.60 0.88
FIXED RATE 7.5500% 06/23/1992 05/05/2004 2.60 0.49
FIXED RATE 7.5500% 12/08/1993 12/31/2004 10.60 2.02
FIXED RATE 9.2000% 06/23/1992 06/30/2005 18.35 3.49
FIXED RATE 9.2000% 01/22/1992 06/30/2005 4.83 0.92
FIXED RATE 9.2000% 01/17/1992 07/19/2004 51.77 9.85
POUNDS STERLING 186.32 330.32
------------ ----------
FIXED RATE 5.9500% 07/14/1995 06/01/2008 69.23 122.74
FIXED RATE 6.6000% 07/05/1996 08/01/2007 13.34 23.65
FIXED RATE 6.7400% 03/31/2001 02/28/2013 16.25 28.81
FIXED RATE 8.1000% 07/30/1992 01/31/2005 11.95 21.19
LIBOR 6 MONTHS DEPOSIT 0.0000% 12/31/1997 07/31/2012 75.54 133.93
ITALIAN LIRA 10,185.74 6.57
------------ ----------
LIBOR 6 MONTHS DEPOSIT 1.5000% 06/30/1990 05/25/2011 10,185.74 6.57
JAPANESE YEN 1,345,877.18 12,565.11
------------ ----------
FIXED RATE 0.7500% 03/10/1999 03/20/2039 36,300.00 338.90
FIXED RATE 0.7500% 12/28/1999 12/20/2039 813.00 7.59
FIXED RATE 0.7500% 12/28/1999 12/20/2039 432.00 4.03
FIXED RATE 0.7500% 12/28/1999 12/20/2039 722.00 6.74
FIXED RATE 0.7500% 12/28/1999 12/20/2039 2,828.00 26.40
FIXED RATE 0.7500% 12/28/1999 12/20/2039 967.00 9.03
FIXED RATE 0.7500% 12/28/1999 12/20/2039 844.00 7.88
FIXED RATE 0.7500% 12/28/1999 12/20/2039 747.00 6.97
FIXED RATE 0.7500% 12/28/1999 12/20/2039 444.00 4.15
FIXED RATE 0.7500% 12/28/1999 12/20/2039 1,221.00 11.40
FIXED RATE 0.7500% 12/28/1999 12/20/2039 1,022.00 9.54
FIXED RATE 0.7500% 04/07/2000 04/20/2040 1,071.00 10.00
FIXED RATE 0.7500% 08/31/2000 08/20/2040 14,724.00 137.46
FIXED RATE 0.7500% 08/31/2000 08/20/2040 3,549.00 33.13
FIXED RATE 0.7500% 09/10/1998 09/20/2038 894.00 8.35
FIXED RATE 0.7500% 09/10/1998 09/20/2038 3,077.00 28.73
FIXED RATE 0.7500% 09/10/1998 09/20/2038 580.00 5.41
FIXED RATE 0.7500% 09/10/1998 09/20/2038 1,041.00 9.72
FIXED RATE 0.7500% 09/10/1998 09/20/2038 54.00 0.50
FIXED RATE 0.7500% 09/10/1998 09/20/2038 404.00 3.77
FIXED RATE 0.7500% 09/10/1998 09/20/2038 5,349.00 49.94
FIXED RATE 0.7500% 09/10/1998 09/20/2038 2,910.00 27.17
FIXED RATE 0.7500% 09/10/1998 09/20/2038 2,252.00 21.02
FIXED RATE 0.7500% 09/10/1998 09/20/2038 393.00 3.67
FIXED RATE 0.7500% 05/20/2001 05/20/2041 1,346.00 12.57
FIXED RATE 0.7500% 05/20/2001 05/20/2041 856.00 7.99
FIXED RATE 0.7500% 05/20/2001 05/20/2041 1,098.00 10.25
FIXED RATE 0.7500% 05/20/2001 05/20/2041 1,070.00 9.99
FIXED RATE 0.7500% 05/20/2001 05/20/2041 1,080.00 10.08
FIXED RATE 0.7500% 05/20/2001 05/20/2041 992.00 9.26
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
16.31 3.10
6.50 1.24
24.25 4.61
7.93 1.51
68.15 12.97
35.44 6.75
7.09 1.35
8.08 1.54
14.45 2.75
58.86 11.20
10.97 2.09
3.84 0.73
5.89 1.12
23.98 4.56
18.54 3.53
13.85 2.64
3.36 0.64
3.68 0.70
23.38 4.45
21.17 4.03
4.99 0.95
0.60 0.11
0.69 0.13
0.39 0.07
2.65 0.50
3.68 0.70
0.24 0.05
0.06 0.01
POUNDS STERLING 12.49 22.15
---------- ---------
0.00 0.00
6.60 11.70
4.10 7.26
1.79 3.18
0.00 0.00
ITALIAN LIRA 7,748.99 5.00
---------- ---------
7,748.99 5.00
JAPANESE YEN 690,754.68 6,448.89
---------- ---------
36,300.00 338.90
266.32 2.49
243.34 2.27
214.19 2.00
1,009.11 9.42
328.03 3.06
237.83 2.22
313.82 2.93
213.08 1.99
700.25 6.54
873.93 8.16
523.75 4.89
489.49 4.57
289.85 2.71
690.13 6.44
1,388.85 12.97
304.24 2.84
328.57 3.07
26.23 0.24
312.52 2.92
872.24 8.14
567.92 5.30
984.44 9.19
260.72 2.43
527.60 4.93
32.67 0.31
159.09 1.49
178.79 1.67
282.17 2.63
240.86 2.25
</Table>
T-9
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 0.7500% 05/20/2001 05/20/2041 233.00 2.18
FIXED RATE 0.7500% 05/20/2001 05/20/2041 1,134.00 10.59
FIXED RATE 0.7500% 05/20/2001 05/20/2041 2,034.00 18.99
FIXED RATE 0.9500% 08/31/2000 08/20/2040 14,724.00 137.46
FIXED RATE 0.9500% 08/31/2000 08/20/2040 3,549.00 33.13
FIXED RATE 1.0000% 04/07/2000 04/20/2040 7,858.00 73.36
FIXED RATE 1.3000% 12/28/1999 12/20/2029 519.00 4.85
FIXED RATE 1.3000% 12/28/1999 12/20/2029 255.00 2.38
FIXED RATE 1.3000% 12/28/1999 12/20/2029 1,436.00 13.41
FIXED RATE 1.3000% 12/28/1999 12/20/2029 7,792.00 72.75
FIXED RATE 1.3000% 12/28/1999 12/20/2029 145.00 1.35
FIXED RATE 1.7000% 09/10/1998 09/20/2028 6,734.00 62.87
FIXED RATE 1.7000% 09/10/1998 09/20/2028 291.00 2.72
FIXED RATE 1.7000% 09/10/1998 09/20/2028 2,428.00 22.67
FIXED RATE 1.7000% 05/20/2001 05/20/2041 2,556.00 23.86
FIXED RATE 1.7000% 05/20/2001 05/20/2041 5,175.00 48.31
FIXED RATE 1.8000% 12/28/1999 12/20/2029 6,397.00 59.72
FIXED RATE 1.8000% 12/28/1999 12/20/2029 5,356.00 50.00
FIXED RATE 1.8000% 12/28/1999 12/20/2029 15,299.00 142.83
FIXED RATE 1.8000% 12/28/1999 12/20/2029 12,556.00 117.22
FIXED RATE 1.8000% 12/28/1999 12/20/2029 4,885.00 45.61
FIXED RATE 1.8000% 12/28/1999 12/20/2029 6.59 0.06
FIXED RATE 1.8000% 12/28/1999 12/20/2029 4,321.00 40.34
FIXED RATE 1.8000% 12/28/1999 12/20/2029 4,270.00 39.86
FIXED RATE 2.1000% 08/30/1995 08/20/2025 789.00 7.37
FIXED RATE 2.1000% 03/29/1996 03/20/2026 1,048.00 9.78
FIXED RATE 2.1000% 03/18/1997 03/20/2027 1,192.00 11.13
FIXED RATE 2.1000% 03/18/1997 03/20/2027 1,226.00 11.45
FIXED RATE 2.2000% 09/10/1998 09/20/2028 4,955.00 46.26
FIXED RATE 2.2000% 09/10/1998 09/20/2028 10,487.00 97.91
FIXED RATE 2.2000% 09/10/1998 09/20/2028 5,148.00 48.06
FIXED RATE 2.2000% 09/10/1999 09/20/2028 2,387.00 22.29
FIXED RATE 2.2000% 09/10/1998 09/20/2028 11,884.00 110.95
FIXED RATE 2.2000% 05/20/2001 05/20/2041 6,948.00 64.87
FIXED RATE 2.2000% 05/20/2001 05/20/2041 4,687.00 43.76
FIXED RATE 2.2000% 05/20/2001 05/20/2041 10,645.00 99.38
FIXED RATE 2.2000% 05/20/2001 05/20/2041 5,135.00 47.94
FIXED RATE 2.2000% 05/20/2001 05/20/2041 4,130.00 38.56
FIXED RATE 2.2000% 05/20/2001 05/20/2041 5,523.00 51.56
FIXED RATE 2.3000% 08/30/1995 08/20/2025 795.00 7.42
FIXED RATE 2.3000% 08/30/1995 08/20/2025 586.00 5.47
FIXED RATE 2.3000% 08/30/1995 08/20/2025 1,327.00 12.39
FIXED RATE 2.3000% 08/30/1995 08/20/2025 597.00 5.57
FIXED RATE 2.3000% 08/30/1995 08/20/2025 640.00 5.98
FIXED RATE 2.3000% 08/30/1995 08/20/2025 1,792.00 16.73
FIXED RATE 2.3000% 08/30/1995 08/20/2025 490.00 4.57
FIXED RATE 2.3000% 08/30/1995 08/20/2025 1,658.00 15.48
FIXED RATE 2.3000% 08/30/1995 08/20/2025 569.00 5.31
FIXED RATE 2.3000% 03/29/1996 03/20/2026 305.00 2.85
FIXED RATE 2.3000% 03/18/1997 03/20/2027 902.00 8.42
FIXED RATE 2.3000% 03/18/1997 03/20/2027 985.00 9.20
FIXED RATE 2.3000% 03/18/1997 03/20/2027 821.00 7.66
FIXED RATE 2.3000% 03/18/1997 03/20/2027 4,019.00 37.52
FIXED RATE 2.5000% 08/30/1995 08/20/2025 7,523.00 70.23
FIXED RATE 2.5000% 03/29/1996 03/20/2026 5,863.00 54.74
FIXED RATE 2.5000% 03/18/1997 03/20/2027 8,219.00 76.73
FIXED RATE 2.5000% 03/18/1997 03/20/2027 6,753.00 63.05
FIXED RATE 2.7000% 03/28/1991 03/20/2016 10,575.00 98.73
FIXED RATE 2.7000% 07/16/1991 06/20/2021 20,020.00 186.91
FIXED RATE 2.7000% 12/26/1988 12/20/2013 15,000.00 140.04
FIXED RATE 2.7000% 12/26/1988 12/20/2013 25,000.00 233.40
FIXED RATE 2.7000% 12/26/1988 12/20/2013 12,500.00 116.70
FIXED RATE 2.7000% 11/23/1989 11/20/2014 40,000.00 373.44
FIXED RATE 2.7000% 12/21/1990 12/20/2020 28,200.00 263.28
FIXED RATE 2.7000% 03/28/1991 03/20/2016 13,219.00 123.41
FIXED RATE 2.7000% 07/16/1991 06/20/2016 13,219.00 123.41
FIXED RATE 2.7000% 05/26/1989 05/20/2019 2,130.40 19.89
FIXED RATE 2.7000% 02/09/1990 02/20/2020 2,304.00 21.51
FIXED RATE 2.7000% 02/09/1990 02/20/2020 4,238.00 39.57
FIXED RATE 2.7000% 02/09/1990 02/20/2020 2,079.00 19.41
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
0.00 0.00
516.50 4.82
322.70 3.01
0.00 0.00
0.00 0.00
1,118.88 10.45
46.48 0.43
53.15 0.50
767.81 7.17
4,095.60 38.24
0.00 0.00
659.48 6.16
7.43 0.07
746.05 6.97
1,511.76 14.11
0.00 0.00
345.84 3.23
455.41 4.25
6,449.10 60.21
893.52 8.34
0.00 0.00
248.16 2.32
249.20 2.33
0.00 0.00
745.91 6.96
954.78 8.91
589.83 5.51
783.10 7.31
3,626.72 33.86
4,562.98 42.60
293.42 2.74
0.00 0.00
2,450.26 22.88
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
1,029.97 9.62
785.96 7.34
523.97 4.89
1,643.92 15.35
568.85 5.31
856.18 7.99
1,524.22 14.23
455.48 4.25
2,431.15 22.70
559.10 5.22
227.20 2.12
622.34 5.81
1,030.27 9.62
535.88 5.00
1,946.65 18.17
6,037.36 56.36
5,956.00 55.61
2,719.44 25.39
2,632.92 24.58
7,145.25 66.71
17,090.19 159.55
8,108.10 75.70
13,513.50 126.16
6,756.74 63.08
23,783.78 222.05
23,385.34 218.33
8,931.75 83.39
8,931.75 83.39
1,610.76 15.04
1,831.70 17.10
2,941.46 27.46
1,625.98 15.18
</Table>
T-10
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 2.7000% 02/09/1990 02/20/2020 5,708.00 53.29
FIXED RATE 2.7000% 02/09/1990 02/20/2020 8,634.00 80.61
FIXED RATE 2.7000% 02/09/1990 02/20/2020 316.25 2.95
FIXED RATE 2.7000% 02/09/1990 02/20/2020 4,986.00 46.55
FIXED RATE 2.7000% 02/09/1990 02/20/2020 5,080.00 47.43
FIXED RATE 2.7000% 02/09/1990 02/20/2020 10,560.00 98.59
FIXED RATE 2.7000% 02/09/1990 02/20/2020 21,752.00 203.08
FIXED RATE 2.7000% 02/09/1990 02/20/2020 4,867.00 45.44
FIXED RATE 2.7000% 02/09/1990 02/20/2020 4,301.00 40.15
FIXED RATE 2.7000% 07/16/1991 06/20/2021 2,065.00 19.28
FIXED RATE 2.7000% 07/16/1991 06/20/2021 1,663.00 15.53
FIXED RATE 2.7000% 07/16/1991 06/20/2021 1,795.00 16.76
FIXED RATE 2.7000% 07/16/1991 06/20/2021 5,266.00 49.16
FIXED RATE 2.7000% 07/16/1991 06/20/2021 10,790.00 100.74
FIXED RATE 2.7000% 07/16/1991 06/20/2021 3,516.00 32.83
FIXED RATE 2.7000% 07/16/1991 06/20/2021 9,427.00 88.01
FIXED RATE 2.7000% 03/20/1992 03/20/2022 7,655.00 71.47
FIXED RATE 2.7000% 08/30/1995 08/20/2025 5,356.00 50.00
FIXED RATE 2.7000% 08/30/1995 08/20/2025 3,454.00 32.25
FIXED RATE 2.7000% 08/30/1995 08/20/2025 17,064.00 159.31
FIXED RATE 2.7000% 08/30/1995 08/20/2025 4,982.00 46.51
FIXED RATE 2.7000% 08/30/1995 08/20/2025 5,746.00 53.64
FIXED RATE 2.7000% 08/30/1995 08/20/2025 11,103.00 103.66
FIXED RATE 2.7000% 08/30/1995 08/20/2025 4,275.00 39.91
FIXED RATE 2.7000% 08/30/1995 08/20/2025 7,893.00 73.69
FIXED RATE 2.7000% 08/30/1995 08/20/2025 2,303.00 21.50
FIXED RATE 2.7000% 03/18/1997 03/20/2027 4,844.00 45.22
FIXED RATE 2.7000% 03/18/1997 03/20/2027 6,698.00 62.53
FIXED RATE 2.7000% 03/18/1997 03/20/2027 5,772.00 53.89
FIXED RATE 2.7000% 03/18/1997 03/20/2027 7,103.00 66.31
FIXED RATE 2.7000% 05/26/1989 05/20/2019 2,063.00 19.26
FIXED RATE 2.7000% 05/26/1989 05/20/2019 4,776.00 44.59
FIXED RATE 2.7000% 05/26/1989 05/20/2019 2,500.00 23.34
FIXED RATE 2.7000% 05/26/1989 05/20/2019 2,633.00 24.58
FIXED RATE 2.7000% 05/26/1989 05/20/2019 5,500.00 51.35
FIXED RATE 3.0000% 12/17/1987 12/20/2012 30,000.00 280.08
FIXED RATE 3.0000% 09/03/1992 09/20/2017 25,380.00 236.95
FIXED RATE 3.0000% 08/19/1993 08/20/2023 6,872.00 64.16
FIXED RATE 3.0000% 08/19/1993 08/20/2023 4,633.00 43.25
FIXED RATE 3.0000% 08/19/1993 08/20/2023 3,803.00 35.50
FIXED RATE 3.0000% 08/19/1993 08/20/2023 3,055.00 28.52
FIXED RATE 3.0000% 08/19/1993 08/20/2023 9,294.00 86.77
FIXED RATE 3.0000% 12/20/1994 12/20/2024 9,620.00 89.81
FIXED RATE 3.0000% 12/20/1994 12/20/2024 11,754.00 109.74
FIXED RATE 3.0000% 06/20/1980 06/20/2010 5,400.00 50.41
FIXED RATE 3.0000% 06/20/1980 06/20/2010 62.28 0.58
FIXED RATE 3.0000% 06/20/1980 06/20/2010 577.55 5.39
FIXED RATE 3.0000% 06/20/1980 06/20/2010 1,860.00 17.36
FIXED RATE 3.0000% 06/20/1980 06/20/2010 85.18 0.80
FIXED RATE 3.0000% 06/20/1980 06/20/2010 149.90 1.40
FIXED RATE 3.0000% 06/20/1980 06/20/2010 5,410.00 50.51
FIXED RATE 3.0000% 06/20/1980 06/20/2010 810.07 7.56
FIXED RATE 3.0000% 06/20/1980 06/20/2010 979.81 9.15
FIXED RATE 3.0000% 06/16/1981 06/20/2011 5,000.00 46.68
FIXED RATE 3.0000% 06/16/1981 06/20/2011 3,825.52 35.72
FIXED RATE 3.0000% 06/16/1981 06/20/2011 7,571.84 70.69
FIXED RATE 3.0000% 05/31/1982 05/20/2012 3,985.19 37.21
FIXED RATE 3.0000% 05/31/1982 05/20/2012 2,765.83 25.82
FIXED RATE 3.0000% 05/31/1982 05/20/2012 301.37 2.81
FIXED RATE 3.0000% 05/31/1982 05/20/2012 3,420.92 31.94
FIXED RATE 3.0000% 05/31/1982 05/10/2012 3,773.45 35.23
FIXED RATE 3.0000% 09/09/1983 09/20/2013 2,943.82 27.48
FIXED RATE 3.0000% 09/09/1983 09/20/2013 2,123.40 19.82
FIXED RATE 3.0000% 09/09/1983 09/20/2013 1,140.00 10.64
FIXED RATE 3.0000% 09/09/1983 09/20/2013 4,600.00 42.95
FIXED RATE 3.0000% 01/27/1988 01/20/2018 2,254.00 21.04
FIXED RATE 3.0000% 01/27/1988 01/20/2018 4,837.00 45.16
FIXED RATE 3.0000% 01/27/1988 01/20/2018 10,818.00 101.00
FIXED RATE 3.0000% 01/27/1988 01/20/2018 2,090.00 19.51
FIXED RATE 3.0000% 01/27/1988 01/20/2018 5,735.00 53.54
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
4,328.81 40.41
5,971.02 55.75
254.53 2.38
4,001.12 37.35
2,556.08 23.86
5,054.54 47.19
13,156.44 122.83
3,620.73 33.80
3,461.37 32.32
1,549.73 14.47
1,290.73 12.05
1,074.08 10.03
4,120.45 38.47
9,030.07 84.30
2,976.33 27.79
7,932.86 74.06
4,205.05 39.26
5,030.11 46.96
2,980.93 27.83
12,306.05 114.89
4,693.66 43.82
4,316.78 40.30
8,644.96 80.71
3,388.18 31.63
6,498.73 60.67
1,256.70 11.73
2,664.87 24.88
3,627.98 33.87
5,309.15 49.57
3,679.47 34.35
1,532.76 14.31
2,492.21 23.27
1,890.23 17.65
1,477.52 13.79
3,811.45 35.58
14,594.58 136.25
19,206.46 179.31
6,503.24 60.71
3,870.96 36.14
3,470.44 32.40
2,980.44 27.83
5,598.96 52.27
9,557.24 89.23
11,753.90 109.73
1,712.18 15.98
19.73 0.18
183.11 1.71
589.75 5.51
27.00 0.25
47.52 0.44
1,715.36 16.01
256.84 2.40
310.66 2.90
1,744.04 16.28
1,399.56 13.07
2,770.17 25.86
1,652.37 15.43
1,146.79 10.71
124.93 1.17
1,418.41 13.24
1,564.60 14.61
1,436.00 13.41
995.84 9.30
503.86 4.70
2,191.92 20.46
112.03 1.05
3,145.31 29.36
6,376.00 59.53
1,447.33 13.51
4,025.06 37.58
</Table>
T-11
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 3.0000% 01/27/1988 01/20/2018 3,193.00 29.81
FIXED RATE 3.0000% 01/27/1988 01/20/2018 4,611.00 43.05
FIXED RATE 3.0000% 01/27/1988 01/20/2018 3,372.00 31.48
FIXED RATE 3.0000% 01/27/1988 01/20/2018 2,000.00 18.67
FIXED RATE 3.0000% 01/27/1988 01/20/2018 707.00 6.60
FIXED RATE 3.0000% 01/27/1988 01/20/2018 313.93 2.93
FIXED RATE 3.0000% 01/27/1988 01/20/2018 300.44 2.80
FIXED RATE 3.0000% 05/31/1988 05/20/2018 14,003.00 130.73
FIXED RATE 3.0000% 12/20/1994 12/20/2024 4,616.00 43.09
FIXED RATE 3.2500% 11/09/1978 11/20/2008 4,554.10 42.52
FIXED RATE 3.2500% 11/09/1978 11/20/2008 1,257.12 11.74
FIXED RATE 3.2500% 11/09/1978 11/20/2008 2,913.08 27.20
FIXED RATE 3.2500% 11/09/1978 11/20/2008 5,263.39 49.14
FIXED RATE 3.2500% 11/09/1978 05/20/2008 8,128.00 75.88
FIXED RATE 3.2500% 11/09/1978 11/20/2008 290.07 2.71
FIXED RATE 3.2500% 11/09/1978 11/20/2008 176.78 1.65
FIXED RATE 3.2500% 11/09/1978 11/20/2008 155.99 1.46
FIXED RATE 3.2500% 11/09/1978 11/20/2008 2,185.29 20.40
FIXED RATE 3.5000% 11/26/1986 11/20/2006 32,895.00 307.11
FIXED RATE 3.5000% 05/07/1984 05/20/2014 2,997.01 27.98
FIXED RATE 3.5000% 05/07/1984 05/20/2014 1,381.00 12.89
FIXED RATE 3.5000% 05/30/1986 05/20/2016 102.06 0.95
FIXED RATE 3.5000% 05/30/1986 05/20/2016 457.38 4.27
FIXED RATE 3.5000% 05/30/1986 05/20/2016 7,595.00 70.91
FIXED RATE 3.5000% 05/30/1986 05/20/2016 3,979.50 37.15
FIXED RATE 3.5000% 05/30/1986 05/20/2016 1,439.00 13.43
FIXED RATE 3.5000% 05/30/1986 05/20/2016 1,457.60 13.61
FIXED RATE 4.2500% 03/26/1979 03/20/2004 10,855.20 101.34
FIXED RATE 2.2000% 03/20/2012 03/20/2032 5,582.00 52.11
FIXED RATE 0.7500% 03/20/2012 03/20/2042 1,141.00 10.65
FIXED RATE 2.2000% 03/20/2012 03/20/2032 2,651.00 24.75
FIXED RATE 0.7500% 03/20/2012 03/20/2042 573.00 5.35
FIXED RATE 1.7000% 03/20/2012 03/20/2032 5,389.00 50.31
FIXED RATE 0.7500% 03/20/2012 03/20/2042 1,401.00 13.08
FIXED RATE 0.9500% 03/20/2012 03/20/2042 16,310.00 152.27
FIXED RATE 0.7500% 03/20/2012 03/20/2042 2,178.00 20.33
FIXED RATE 3.5000% 12/22/1994 05/31/2007 48,000.00 448.13
FIXED RATE 6.0000% 03/11/1993 02/01/2013 25,000.00 233.40
FIXED RATE 6.0000% 04/27/1990 06/15/2009 48,000.00 448.13
FIXED RATE 1.9500% 09/22/2000 10/14/2013 16,600.00 154.98
FIXED RATE 2.1000% 03/25/1999 12/15/2011 20,308.18 189.60
FIXED RATE 2.1000% 08/25/1999 06/15/2011 9,697.89 90.54
LIBOR 6 MONTHS 2.2500% 09/22/2000 04/25/2015 2,940.00 27.45
LIBOR 6 MONTHS 2.5000% 09/13/2001 12/12/2006 3,583.80 33.46
LONG TERM PRIME LENDING
RATE -0.0200% 02/17/1999 09/15/2018 43,800.00 408.92
LONG TERM PRIME LENDING
RATE -0.0200% 02/17/2000 09/15/2019 43,800.00 408.92
LONG TERM PRIME LENDING
RATE 0.5000% 06/23/1997 05/15/2021 20,800.00 194.19
KOREAN WON 24,961.98 20.84
------------ ----------
FIXED RATE 2.5000% 02/24/1998 02/20/2028 21,172.00 17.68
FIXED RATE 3.5000% 03/12/1991 03/20/2011 3,789.98 3.16
KUWAIT DINAR 11.05 38.26
------------ ----------
FIXED RATE 3.5000% 05/06/1998 08/15/2018 6.15 21.29
FIXED RATE 4.5000% 12/26/1984 02/15/2008 4.90 16.97
SWEDISH KRONER 18.31 2.52
------------ ----------
INTEREST FREE 0.0000% 02/13/1998 12/30/2008 18.31 2.52
SPECIAL DRAWING RIGHT 914.01 1,353.01
------------ ----------
INTEREST FREE 1.0000% 11/22/1990 08/15/2025 16.73 24.76
INTEREST FREE 1.0000% 12/27/1988 11/15/2023 5.91 8.75
INTEREST FREE 1.0000% 11/09/1990 11/15/2025 35.87 53.11
INTEREST FREE 1.0000% 07/11/1991 02/15/2026 50.00 74.02
INTEREST FREE 1.0000% 03/06/1992 06/01/2027 26.40 39.08
INTEREST FREE 1.0000% 11/22/1993 06/01/2028 50.50 74.76
INTEREST FREE 1.0000% 12/27/1988 10/15/2023 18.68 27.65
INTEREST FREE 1.0000% 01/25/1991 08/15/2025 24.19 35.81
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
1,915.28 17.88
3,178.17 29.67
1,922.61 17.95
989.57 9.24
427.58 3.99
222.02 2.07
212.48 1.98
9,862.84 92.08
4,323.47 40.36
1,110.75 10.37
306.61 2.86
710.50 6.63
1,283.74 11.98
1,973.56 18.43
70.74 0.66
43.11 0.40
38.04 0.36
532.98 4.98
6,366.77 59.44
1,535.04 14.33
287.28 2.68
62.20 0.58
278.88 2.60
4,453.40 41.58
2,426.50 22.65
587.93 5.49
888.78 8.30
293.38 2.74
0.00 0.00
170.85 1.60
0.00 0.00
129.37 1.21
24.20 0.23
253.26 2.36
0.00 0.00
71.57 0.67
16,974.34 158.47
13,437.14 125.45
14,429.25 134.71
15,095.59 140.93
11,253.61 105.06
7,639.85 71.33
2,940.00 27.45
4,320.00 40.33
12,080.00 112.78
32,321.59 301.75
9,274.37 86.59
KOREAN WON 3,970.76 3.32
---------- ---------
2,075.81 1.73
1,894.95 1.58
KUWAIT DINAR 1.90 6.57
---------- ---------
0.31 1.08
1.59 5.49
SWEDISH KRONER 15.37 2.11
---------- ---------
15.37 2.11
SPECIAL DRAWING RIGHT 665.79 985.57
---------- ---------
11.31 16.74
5.17 7.65
33.18 49.12
46.88 69.39
23.48 34.76
24.96 36.95
14.03 20.77
22.38 33.13
</Table>
T-12
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
INTEREST FREE 1.0000% 06/24/1992 11/15/2026 27.16 40.21
INTEREST FREE 1.0000% 11/22/1990 08/15/2025 69.70 103.17
INTEREST FREE 1.0000% 12/18/1989 10/01/2024 25.04 37.07
INTEREST FREE 1.0000% 01/20/1995 10/15/2029 11.93 17.65
INTEREST FREE 1.0000% 10/25/1990 09/15/2025 18.25 27.01
INTEREST FREE 1.0000% 09/12/1988 05/15/2023 53.41 79.06
INTEREST FREE 1.0000% 02/17/1989 11/15/2023 14.77 21.87
INTEREST FREE 1.0000% 11/05/1993 06/15/2028 18.02 26.68
INTEREST FREE 1.0000% 02/17/1989 10/15/2023 25.85 38.27
INTEREST FREE 1.0000% 07/04/1988 04/01/2023 43.44 64.31
INTEREST FREE 1.0000% 10/05/1989 08/15/2024 39.77 58.87
INTEREST FREE 1.0000% 11/28/1991 11/15/2026 35.25 52.17
INTEREST FREE 1.0000% 01/20/1995 10/15/2029 36.80 54.48
INTEREST FREE 1.0000% 04/21/1988 02/01/2023 11.61 17.19
INTEREST FREE 1.0000% 11/28/1991 11/15/2026 22.03 32.61
INTEREST FREE 1.0000% 01/11/1996 09/15/2029 15.65 23.16
INTEREST FREE 1.0000% 11/22/1990 11/15/2025 14.36 21.26
INTEREST FREE 1.0000% 12/24/1992 10/01/2027 34.65 51.29
INTEREST FREE 1.0000% 04/24/1986 05/15/2026 43.40 64.24
INTEREST FREE 1.0000% 11/27/1995 05/15/2030 9.63 14.26
INTEREST FREE 1.0000% 11/27/1995 04/15/2030 17.64 26.11
INTEREST FREE 1.0000% 06/04/1996 03/15/2021 12.76 18.89
INTEREST FREE 1.0000% 07/23/1997 05/15/2021 13.84 20.49
INTEREST FREE 1.0000% 01/21/1998 09/01/2032 11.02 16.31
INTEREST FREE 1.0000% 04/15/1998 11/15/2032 6.49 9.61
INTEREST FREE 0.0000% 11/29/2000 01/15/2040 4.50 6.66
INTEREST FREE 0.0000% 09/25/2000 01/15/2040 6.00 8.88
FIXED RATE 0.7500% 03/06/1996 03/15/2030 6.15 9.10
FIXED RATE 0.7500% 04/29/1998 03/15/2038 11.00 16.28
FIXED RATE 4.0000% 05/18/1992 04/01/2012 11.00 16.28
FIXED RATE 0.7500% 05/08/2002 10/01/2041 11.60 17.17
FIXED RATE 4.0000% 04/22/1987 03/01/2007 3.02 4.48
UNITED STATES DOLLARS 8,921.16 8,921.16
------------ ----------
ADB FLOATING RATE 0.0000% 11/22/1990 11/15/2015 9.00 9.00
ADB FLOATING RATE 0.0000% 10/25/1990 09/15/2020 33.00 33.00
ADB FLOATING RATE 0.0000% 12/23/1986 04/01/2012 82.00 82.00
ADB FLOATING RATE 0.0000% 11/27/1995 05/15/2022 15.00 15.00
ADB FLOATING RATE 0.0000% 01/20/1995 10/15/2019 41.00 41.00
ADB FLOATING RATE 0.0000% 12/23/1986 06/15/2016 18.80 18.80
ADB FLOATING RATE 0.0000% 10/05/1989 08/15/2004 30.00 30.00
ADB FLOATING RATE 0.0000% 12/23/1986 10/01/2010 24.00 24.00
ADB FLOATING RATE 0.0000% 11/09/1990 11/15/2005 50.00 50.00
ADB FLOATING RATE 0.0000% 01/11/1996 09/15/2021 9.50 9.50
ADB FLOATING RATE 0.0000% 02/04/1991 08/15/2015 150.00 150.00
ADB FLOATING RATE 0.0000% 11/27/1995 04/15/2020 30.00 30.00
ADB FLOATING RATE 0.0000% 01/20/1995 10/01/2016 23.50 23.50
ADB FLOATING RATE 0.0000% 12/24/1992 10/01/2017 50.00 50.00
ADB FLOATING RATE 0.0000% 05/02/1996 05/01/2010 150.00 150.00
ADB FLOATING RATE 0.0000% 06/03/1997 03/15/2021 18.50 18.50
ADB FLOATING RATE 0.0000% 06/23/1997 05/15/2021 167.00 167.00
ADB FLOATING RATE 0.0000% 04/24/1986 05/15/2006 50.00 50.00
ADB FLOATING RATE 0.0000% 12/21/1998 08/15/2013 300.00 300.00
ADB FLOATING RATE 0.0000% 12/21/1998 08/01/2013 200.00 200.00
ADB FLOATING RATE 0.0000% 01/21/1998 09/01/2022 93.00 93.00
ADB FLOATING RATE 0.0000% 01/21/1998 09/01/2022 20.22 20.22
ADB FLOATING RATE 0.0000% 04/15/1998 11/15/2022 15.70 15.70
ADB FLOATING RATE 0.0000% 01/21/1998 11/15/2022 22.00 22.00
ADB FLOATING RATE 0.0000% 12/21/1998 08/01/2022 71.00 71.00
ADB FLOATING RATE 0.0000% 03/01/1999 08/01/2025 53.00 53.00
ADB FLOATING RATE 0.0000% 03/01/1999 12/01/2023 24.30 24.30
ADB FLOATING RATE 0.0000% 03/01/1999 12/15/2023 93.16 93.16
ADB FLOATING RATE 0.0000% 03/01/1999 08/15/2023 60.00 60.00
ADB FLOATING RATE 0.0000% 07/18/2000 08/15/2014 100.00 100.00
ADB FLOATING RATE 0.0000% 07/18/2000 08/15/2024 75.00 75.00
ADB FLOATING RATE 0.0000% 07/21/2000 02/15/2015 100.00 100.00
ADB FLOATING RATE 0.0000% 07/21/2000 02/15/2015 75.00 75.00
ADB FLOATING RATE 0.0000% 11/16/2000 08/15/2025 25.00 25.00
ADB FLOATING RATE 0.0000% 11/19/2001 08/15/2016 75.00 75.00
ADB FLOATING RATE 0.0000% 10/22/2001 09/15/2025 75.00 75.00
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
22.07 32.67
63.11 93.42
14.14 20.93
7.05 10.44
16.55 24.50
40.48 59.93
12.72 18.84
14.07 20.83
22.62 33.49
37.47 55.46
35.79 52.98
27.63 40.90
21.88 32.39
9.04 13.39
20.93 30.98
5.01 7.42
12.47 18.45
12.12 17.94
36.89 54.60
8.66 12.82
11.88 17.58
6.34 9.39
1.96 2.91
4.34 6.43
4.28 6.34
0.62 0.92
0.00 0.00
3.44 5.09
3.71 5.50
5.37 7.95
1.07 1.59
0.67 1.00
UNITED STATES DOLLARS 4,606.08 4,606.08
---------- ---------
6.57 6.57
29.27 29.27
53.88 53.88
10.51 10.51
34.77 34.77
14.22 14.22
4.04 4.04
12.97 12.97
12.85 12.85
7.67 7.67
115.72 115.72
10.94 10.94
18.52 18.52
15.94 15.94
47.16 47.16
8.16 8.16
86.72 86.72
13.87 13.87
270.94 270.94
183.43 183.43
11.77 11.77
6.34 6.34
6.93 6.93
1.25 1.25
11.58 11.58
6.79 6.79
2.74 2.74
29.18 29.18
12.24 12.24
27.08 27.08
4.78 4.78
99.10 99.10
3.17 3.17
4.04 4.04
75.00 75.00
3.56 3.56
</Table>
T-13
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
ADB FLOATING RATE 0.0000% 09/02/2003 08/15/2018 100.00 100.00
COST QUA. BOR. IBRD 6M 0.5000% 12/22/1989 03/15/2010 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 06/04/1984 07/01/2004 90.95 90.95
COST QUA. BOR. IBRD 6M 0.5000% 01/19/1990 02/01/2010 40.00 40.00
COST QUA. BOR. IBRD 6M 0.5000% 05/31/1989 06/15/2009 300.00 300.00
COST QUA. BOR. IBRD 6M 0.5000% 09/26/1984 10/01/2004 150.00 150.00
COST QUA. BOR. IBRD 6M 0.5000% 11/09/1989 09/15/2009 70.10 70.10
COST QUA. BOR. IBRD 6M 0.5000% 08/10/1984 08/15/2004 35.81 35.81
COST QUA. BOR. IBRD 6M 0.5000% 03/16/1990 04/15/2010 40.00 40.00
COST QUA. BOR. IBRD 6M 0.5000% 06/09/1993 08/01/2013 28.36 28.36
COST QUA. BOR. IBRD 6M 0.5000% 06/09/1993 08/01/2013 22.94 22.94
COST QUA. BOR. IBRD 6M 0.5000% 12/23/1992 02/01/2013 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 02/05/1992 03/15/2012 90.79 90.79
COST QUA. BOR. IBRD 6M 0.5000% 02/05/1992 03/15/2012 59.21 59.21
COST QUA. BOR. IBRD 6M 0.5000% 07/15/1993 03/01/2013 37.54 37.54
COST QUA. BOR. IBRD 6M 0.5000% 07/15/1993 03/01/2013 25.46 25.46
COST QUA. BOR. IBRD 6M 0.5000% 06/19/1986 01/01/2006 82.00 82.00
COST QUA. BOR. IBRD 6M 0.5000% 09/01/1988 08/01/2008 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 07/09/1990 09/15/2010 200.00 200.00
COST QUA. BOR. IBRD 6M 0.5000% 02/07/1984 02/01/2004 24.97 24.97
COST QUA. BOR. IBRD 6M 0.5000% 06/13/1988 08/15/2008 45.00 45.00
COST QUA. BOR. IBRD 6M 0.5000% 04/28/1995 04/01/2015 1.30 1.30
COST QUA. BOR. IBRD 6M 0.5000% 04/28/1995 04/01/2015 16.70 16.70
COST QUA. BOR. IBRD 6M 0.5000% 03/30/1987 01/01/2007 300.00 300.00
COST QUA. BOR. IBRD 6M 0.5000% 07/11/1991 08/15/2011 139.44 139.44
COST QUA. BOR. IBRD 6M 0.5000% 07/11/1991 08/15/2011 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% 09/01/1988 08/15/2008 125.26 125.26
INTEREST FREE 1.0000% 12/20/1974 10/01/2014 5.77 5.77
INTEREST FREE 1.0000% 11/10/1978 10/01/2018 14.00 14.00
INTEREST FREE 1.0000% 08/27/1979 02/01/2019 12.34 12.34
INTEREST FREE 1.0000% 10/22/1980 09/15/2020 12.20 12.20
INTEREST FREE 1.0000% 10/12/1981 09/01/2021 12.11 12.11
INTEREST FREE 1.0000% 01/05/1973 09/01/2022 12.70 12.70
INTEREST FREE 1.0000% 04/05/1974 04/15/2024 9.50 9.50
INTEREST FREE 1.0000% 04/21/1978 12/15/2027 21.52 21.52
INTEREST FREE 1.0000% 06/27/1979 06/01/2029 32.22 32.22
FIXED RATE 0.3000% 05/28/2002 11/30/2032 4.40 4.40
FIXED RATE 0.3000% 05/28/2002 11/30/2032 6.78 6.78
FIXED RATE 0.3000% 05/28/2002 11/30/2032 18.56 18.56
FIXED RATE 0.3000% 05/28/2002 11/30/2032 12.90 12.90
FIXED RATE 1.0000% 09/22/2000 10/04/2030 7.01 7.01
FIXED RATE 1.0000% 08/03/2001 12/31/2031 40.00 40.00
FIXED RATE 1.0000% 06/28/2002 12/27/2032 14.55 14.55
FIXED RATE 1.0000% 06/28/2002 02/13/2033 5.43 5.43
FIXED RATE 1.5000% 07/11/1996 03/17/2026 25.18 25.18
FIXED RATE 1.7500% 08/06/2000 12/15/2016 10.00 10.00
FIXED RATE 2.0000% 12/24/1980 10/01/2021 4.87 4.87
FIXED RATE 2.0000% 07/23/1982 04/15/2023 4.15 4.15
FIXED RATE 2.0000% 04/03/1984 08/19/2021 0.04 0.04
FIXED RATE 2.0000% 03/24/1975 05/31/2017 15.00 15.00
FIXED RATE 2.0000% 07/29/1975 02/16/2017 3.47 3.47
FIXED RATE 2.0000% 12/22/1975 09/13/2017 4.84 4.84
FIXED RATE 2.0000% 03/11/1974 12/07/2016 1.38 1.38
FIXED RATE 2.0000% 04/28/1976 04/25/2017 8.90 8.90
FIXED RATE 2.0000% 06/27/1977 04/27/2018 2.93 2.93
FIXED RATE 2.0000% 01/13/1978 05/18/2019 4.86 4.86
FIXED RATE 2.0000% 01/13/1978 11/09/2018 1.46 1.46
FIXED RATE 2.0000% 08/18/1978 10/14/2018 0.68 0.68
FIXED RATE 2.0000% 02/23/1979 04/08/2020 10.61 10.61
FIXED RATE 2.0000% 03/28/1980 03/05/2021 6.36 6.36
FIXED RATE 2.0000% 02/15/1979 04/28/2021 4.13 4.13
FIXED RATE 2.0000% 02/15/1978 05/15/2021 3.98 3.98
FIXED RATE 2.0000% 07/16/1979 09/15/2020 3.63 3.63
FIXED RATE 2.0000% 08/01/1979 01/11/2022 0.83 0.83
FIXED RATE 2.0000% 08/01/1978 01/06/2024 0.44 0.44
FIXED RATE 2.0000% 08/29/1980 10/13/2021 0.39 0.39
FIXED RATE 2.0000% 11/06/1981 11/06/2021 9.65 9.65
FIXED RATE 2.0000% 05/28/1981 08/26/2022 0.91 0.91
FIXED RATE 2.0000% 08/29/1980 06/01/2021 2.09 2.09
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
75.00 75.00
114.61 114.61
5.76 5.76
22.54 22.54
150.19 150.19
10.00 10.00
36.40 36.40
2.21 2.21
17.74 17.74
22.08 22.08
14.35 14.35
150.80 150.80
61.90 61.90
43.01 43.01
28.16 28.16
15.32 15.32
16.33 16.33
92.88 92.88
105.88 105.88
0.66 0.66
10.91 10.91
1.11 1.11
8.53 8.53
70.00 70.00
92.60 92.60
3.74 3.74
0.35 0.35
58.16 58.16
2.54 2.54
8.40 8.40
7.65 7.65
8.26 8.26
8.72 8.72
7.24 7.24
5.84 5.84
15.49 15.49
24.65 24.65
2.87 2.87
6.78 6.78
11.42 11.42
7.27 7.27
7.01 7.01
39.73 39.73
14.55 14.55
5.43 5.43
25.75 25.75
7.55 7.55
3.38 3.38
4.05 4.05
0.03 0.03
8.32 8.32
1.93 1.93
2.77 2.77
0.74 0.74
4.94 4.94
1.72 1.72
2.93 2.93
0.88 0.88
0.43 0.43
6.90 6.90
4.33 4.33
2.81 2.81
2.71 2.71
2.42 2.42
0.59 0.59
0.33 0.33
0.27 0.27
6.71 6.71
0.66 0.66
1.42 1.42
</Table>
T-14
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 2.0000% 09/25/1981 03/15/2022 3.04 3.04
FIXED RATE 2.0000% 09/30/1981 08/17/2021 0.82 0.82
FIXED RATE 2.0000% 08/31/1982 06/14/2023 0.81 0.81
FIXED RATE 2.0000% 09/29/1982 04/28/2023 0.21 0.21
FIXED RATE 2.0000% 05/23/1984 06/02/2023 0.04 0.04
FIXED RATE 2.0000% 08/31/1983 11/16/2024 0.18 0.18
FIXED RATE 2.0000% 08/24/1979 02/20/2021 1.05 1.05
FIXED RATE 2.0000% 10/28/1980 12/16/2023 3.74 3.74
FIXED RATE 2.0000% 12/04/1980 10/28/2023 0.49 0.49
FIXED RATE 2.0000% 07/21/1982 09/12/2023 0.29 0.29
FIXED RATE 2.0000% 07/30/1983 04/16/2025 0.98 0.98
FIXED RATE 2.0000% 07/29/1983 10/01/2024 0.06 0.06
FIXED RATE 2.0000% 03/26/1984 10/10/2024 0.35 0.35
FIXED RATE 2.0000% 02/15/1979 11/22/2022 0.74 0.74
FIXED RATE 2.0000% 06/30/1980 02/14/2023 2.30 2.30
FIXED RATE 2.0000% 06/01/1994 11/23/2019 14.97 14.97
FIXED RATE 2.0000% 06/20/1986 10/13/2016 31.99 31.99
FIXED RATE 2.0000% 05/19/1988 07/03/2018 29.99 29.99
FIXED RATE 2.0000% 07/31/1990 10/25/2020 21.00 21.00
FIXED RATE 2.0000% 08/02/1999 12/30/2019 15.13 15.13
FIXED RATE 2.0000% 08/02/1999 02/11/2020 14.87 14.87
FIXED RATE 2.0000% 07/08/1985 10/25/2015 40.00 40.00
FIXED RATE 2.0000% 07/12/2000 01/19/2021 23.35 23.35
FIXED RATE 2.0000% 07/12/2000 01/19/2021 16.65 16.65
FIXED RATE 2.5000% 06/30/1997 04/28/2014 9.48 9.48
FIXED RATE 3.0000% 12/04/1980 04/06/2022 2.30 2.30
FIXED RATE 3.0000% 07/06/1989 07/06/2007 100.00 100.00
FIXED RATE 3.0000% 05/17/1991 10/01/2021 15.00 15.00
FIXED RATE 3.0000% 01/30/1992 04/05/2022 20.00 20.00
FIXED RATE 3.0000% 04/30/1993 11/26/2023 20.00 20.00
FIXED RATE 3.0000% 10/30/2001 10/30/2011 35.00 35.00
FIXED RATE 3.0000% 09/19/2002 12/01/2016 41.25 41.25
FIXED RATE 3.0250% 03/30/1988 10/15/2004 6.50 6.50
FIXED RATE 3.2500% 09/27/1990 04/15/2006 4.89 4.89
FIXED RATE 3.2500% 09/22/1997 03/22/2014 10.00 10.00
FIXED RATE 3.4000% 03/01/1996 12/15/2012 22.95 22.95
FIXED RATE 3.4000% 06/06/1997 12/15/2014 36.82 36.82
FIXED RATE 3.4000% 05/01/1998 05/15/2014 38.51 38.51
FIXED RATE 3.9500% 12/23/1994 01/28/2006 6.13 6.13
FIXED RATE 4.0000% 07/16/1998 11/05/2018 10.00 10.00
FIXED RATE 4.5500% 05/28/2002 01/31/2009 4.40 4.40
FIXED RATE 4.5500% 05/28/2002 11/30/2008 6.78 6.78
FIXED RATE 4.5500% 05/28/2002 09/30/2008 18.56 18.56
FIXED RATE 4.5500% 05/28/2002 09/30/2008 12.90 12.90
FIXED RATE 5.2000% 03/05/1998 10/15/2010 24.99 24.99
FIXED RATE 5.2000% 11/08/1999 11/15/2012 99.45 99.45
FIXED RATE 5.9500% 12/23/1994 03/01/2006 34.75 34.75
FIXED RATE 7.1800% 09/22/2000 04/05/2008 7.01 7.01
FIXED RATE 7.6000% 11/07/1979 09/01/2009 39.65 39.65
FIXED RATE 7.7000% 06/09/1978 04/15/2008 23.50 23.50
FIXED RATE 7.7300% 04/06/1990 07/15/2010 40.88 40.88
FIXED RATE 7.7300% 04/06/1990 07/15/2010 80.92 80.92
FIXED RATE 7.7300% 07/09/1990 09/15/2010 85.00 85.00
FIXED RATE 7.7300% 11/08/1990 08/01/2010 18.63 18.63
FIXED RATE 7.7300% 11/08/1990 08/01/2010 27.57 27.57
FIXED RATE 7.7300% 11/08/1990 11/01/2010 125.00 125.00
FIXED RATE 7.7300% 02/05/1992 04/15/2012 61.00 61.00
FIXED RATE 7.7300% 03/31/1992 06/15/2012 33.25 33.25
FIXED RATE 7.7300% 03/31/1992 06/15/2012 34.75 34.75
FIXED RATE 7.7500% 05/31/1989 03/01/2009 60.00 60.00
FIXED RATE 8.0000% 07/23/1996 10/20/2006 25.75 25.75
FIXED RATE 8.0000% 06/20/1997 05/30/2013 9.48 9.48
FIXED RATE 8.0600% 09/14/1994 04/15/2006 20.42 20.42
FIXED RATE 8.3000% 09/06/1977 04/15/2007 17.53 17.53
FIXED RATE 8.7500% 07/07/1975 05/01/2005 12.80 12.80
FIXED RATE 8.7500% 12/18/1975 11/01/2005 25.98 25.98
FIXED RATE 8.9000% 12/15/1976 07/15/2006 14.60 14.60
FIXED RATE 9.0000% 11/06/1980 07/15/2004 30.00 30.00
FIXED RATE 9.2000% 11/07/1989 04/15/2004 8.76 8.76
FIXED RATE 10.0000% 10/12/1981 09/01/2011 20.79 20.79
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
2.16 2.16
0.59 0.59
0.60 0.60
0.16 0.16
0.03 0.03
0.14 0.14
0.71 0.71
2.81 2.81
0.39 0.39
0.23 0.23
0.78 0.78
0.05 0.05
0.28 0.28
0.53 0.53
1.70 1.70
11.41 11.41
15.99 15.99
17.30 17.30
13.73 13.73
15.13 15.13
14.87 14.87
18.46 18.46
23.35 23.35
16.64 16.64
9.01 9.01
1.60 1.60
33.33 33.33
11.25 11.25
15.83 15.83
16.67 16.67
0.79 0.79
38.02 38.02
0.54 0.54
1.22 1.22
2.39 2.39
20.65 20.65
27.81 27.81
38.51 38.51
0.00 0.00
9.37 9.37
3.76 3.76
5.86 5.86
11.42 11.42
7.27 7.27
14.92 14.92
79.76 79.76
11.85 11.85
5.43 5.43
17.41 17.41
8.22 8.22
17.85 17.85
45.87 45.87
26.48 26.48
5.79 5.79
15.47 15.47
65.68 65.68
38.44 38.44
19.41 19.41
23.40 23.40
30.03 30.03
10.60 10.60
4.45 4.45
4.71 4.71
5.02 5.02
1.79 1.79
4.68 4.68
3.87 3.87
3.05 3.05
0.45 0.45
12.60 12.60
</Table>
T-15
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 10.1000% 11/17/1981 08/01/2006 20.17 20.17
FIXED RATE 10.1000% 12/04/1981 09/01/2006 2.48 2.48
FIXED RATE 10.2500% 12/28/1984 04/15/2008 20.63 20.63
FIXED RATE 10.5000% 12/23/1983 11/15/2013 38.30 38.30
FIXED RATE 10.5000% 12/23/1983 10/15/2013 25.15 25.15
FIXED RATE 11.0000% 11/03/1982 09/01/2012 18.80 18.80
FIXED RATE 11.0000% 12/01/1982 05/01/2006 47.39 47.39
FIXED RATE 11.0000% 05/20/1983 01/01/2010 21.77 21.77
LIBOR 6 MONTHS DEPOSIT 0.0000% 06/03/1994 06/01/2024 5.00 5.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 06/03/1994 06/01/2024 10.00 10.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 02/05/1992 02/01/2022 50.00 50.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 03/10/1995 03/10/2015 26.50 26.50
LIBOR 6 MONTHS DEPOSIT 0.0000% 12/14/1999 12/15/2019 27.50 27.50
LIBOR 6 MONTHS DEPOSIT 0.0000% 02/25/2000 04/15/2020 10.00 10.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 04/10/2000 02/15/2020 150.00 150.00
LIBOR 6 MONTHS DEPOSIT 0.0000% 10/20/2000 01/09/2020 4.79 4.79
LIBOR 6 MONTHS DEPOSIT 0.0000% 08/08/2001 05/01/2021 60.00 60.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 12/20/1996 01/15/2017 113.40 113.40
LIBOR 6 MONTHS DEPOSIT 0.5000% 12/20/1996 01/15/2018 50.00 50.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 12/20/1997 01/15/2019 58.00 58.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 09/09/1997 06/15/2018 50.00 50.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 04/08/1998 06/15/2018 10.00 10.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 04/08/1998 06/15/2018 19.00 19.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 09/12/2002 04/15/2019 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 10/07/2002 04/15/2022 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 0.7500% 12/11/1998 09/15/2018 300.00 300.00
LIBOR 6 MONTHS DEPOSIT 0.7500% 03/23/1999 05/15/2019 100.00 100.00
LIBOR 6 MONTHS DEPOSIT 1.6000% 10/19/2000 10/24/2005 300.00 300.00
VARIABLE 0.0000% 01/22/2003 10/15/2022 50.00 50.00
VARIABLE 0.0000% 01/20/2003 06/30/2008 33.60 33.60
VARIABLE 0.0000% 10/02/2003 04/15/2023 21.90 21.90
B. RELENT TO GOCC's 3,757.78
------------ ----------
BELGIAN FRANCS 1,231.67 38.12
------------ ----------
INTEREST FREE 0.0000% 10/30/1992 12/31/2022 150.00 4.64
INTEREST FREE 0.0000% 12/23/1983 12/31/2013 100.00 3.09
INTEREST FREE 0.0000% 11/29/1982 12/31/2012 100.00 3.09
INTEREST FREE 0.0000% 11/04/1981 12/31/2011 300.00 9.28
INTEREST FREE 0.0000% 08/11/1980 12/31/2010 450.00 13.93
INTEREST FREE 0.0000% 03/11/1996 12/31/2025 131.67 4.08
DEUTSCHEMARK 131.93 84.22
------------ ----------
FIXED RATE 2.0000% 07/10/1989 12/31/2019 32.40 20.68
FIXED RATE 2.0000% 03/22/1982 06/30/2012 9.70 6.19
FIXED RATE 2.0000% 07/10/1989 12/31/2019 14.40 9.19
FIXED RATE 2.0000% 07/10/1989 12/31/2019 62.80 40.09
FIXED RATE 2.0000% 04/10/1981 12/31/2015 12.63 8.06
DANISH KRONER 110.00 18.45
------------ ----------
INTEREST FREE 0.0000% 02/20/1985 04/01/2009 95.00 15.93
INTEREST FREE 0.0000% 02/20/1985 10/01/2009 15.00 2.52
POUNDS STERLING 5.49 9.73
------------ ----------
FIXED RATE 2.0000% 03/12/1980 03/12/2005 3.52 6.24
FIXED RATE 2.0000% 09/23/1980 09/23/2005 1.97 3.49
JAPANESE YEN 357,002.16 3,332.97
------------ ----------
FIXED RATE 0.7500% 04/07/2000 04/20/2040 1,587.00 14.82
FIXED RATE 0.7500% 04/07/2000 04/20/2040 821.00 7.66
FIXED RATE 0.7500% 09/10/1998 09/20/2038 23,668.00 220.96
FIXED RATE 1.0000% 04/07/2000 04/20/2040 20,675.00 193.02
FIXED RATE 1.0000% 04/07/2000 04/20/2040 7,445.00 69.51
FIXED RATE 2.0000% 08/16/1995 07/31/2025 545.40 5.09
FIXED RATE 2.7000% 05/26/1989 05/20/2019 6,300.00 58.82
FIXED RATE 2.7000% 06/28/1990 11/15/2010 5,066.00 47.30
FIXED RATE 2.7000% 07/16/1991 04/20/2021 2,005.00 18.72
FIXED RATE 2.7000% 07/16/1991 06/20/2021 5,788.00 54.04
FIXED RATE 2.7000% 05/26/1992 05/20/2022 1,094.00 10.21
FIXED RATE 2.7000% 07/16/1991 06/20/2021 8,283.00 77.33
FIXED RATE 2.7000% 07/16/1991 06/20/2021 4,028.00 37.61
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
5.96 5.96
0.72 0.72
8.53 8.53
25.76 25.76
16.93 16.93
11.58 11.58
12.17 12.17
12.06 12.06
5.00 5.00
18.50 18.50
10.00 10.00
22.50 22.50
14.35 14.35
89.85 89.85
65.82 65.82
2.49 2.49
5.95 5.95
46.05 46.05
46.50 46.50
32.44 32.44
19.42 19.42
9.69 9.69
12.92 12.92
29.67 29.67
5.09 5.09
100.00 100.00
8.85 8.85
300.00 300.00
1.50 1.50
1.62 1.62
0.22 0.22
B. RELENT TO GOCC's 2,041.79
---------- ---------
BELGIAN FRANCS 612.21 18.95
---------- ---------
132.63 4.10
37.50 1.16
33.75 1.04
120.00 3.71
157.50 4.87
130.83 4.05
DEUTSCHEMARK 83.49 53.30
---------- ---------
14.05 8.97
4.03 2.57
11.24 7.18
49.30 31.47
4.87 3.11
DANISH KRONER 32.65 5.48
---------- ---------
27.61 4.63
5.04 0.85
POUNDS STERLING 0.22 0.38
---------- ---------
0.00 0.00
0.22 0.38
JAPANESE YEN 196,742.17 1,836.78
---------- ---------
733.39 6.85
629.90 5.88
6,701.04 62.56
1,398.91 13.06
5,446.25 50.85
541.35 5.05
3,756.27 35.07
3,982.64 37.18
1,583.23 14.78
4,692.56 43.81
711.66 6.64
6,329.02 59.09
2,855.51 26.66
</Table>
T-16
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 2.7000% 03/18/1997 03/20/2027 25,665.00 239.61
FIXED RATE 2.7000% 03/18/1997 03/20/2027 679.00 6.34
FIXED RATE 2.7000% 05/26/1989 05/20/2019 5,054.00 47.18
FIXED RATE 3.0000% 01/29/1993 07/20/2022 3,563.90 33.27
FIXED RATE 3.0000% 03/31/1993 03/20/2023 6,112.00 57.06
FIXED RATE 3.0000% 08/19/1993 08/20/2023 18,120.00 169.17
FIXED RATE 3.0000% 08/19/1993 08/20/2023 1,259.00 11.75
FIXED RATE 3.0000% 08/12/1994 08/20/2024 11,433.00 106.74
FIXED RATE 3.0000% 12/07/1994 12/20/2024 7,056.00 65.87
FIXED RATE 3.0000% 12/07/1994 12/20/2024 6,630.00 61.90
FIXED RATE 3.0000% 12/20/1994 12/20/2024 5,513.00 51.47
FIXED RATE 3.0000% 12/20/1994 12/20/2024 10,756.00 100.42
FIXED RATE 3.0000% 12/20/1994 12/20/2024 2,896.00 27.04
FIXED RATE 3.0000% 12/20/1994 12/20/2024 457.00 4.27
FIXED RATE 3.0000% 12/20/1994 12/20/2024 9,795.00 91.45
FIXED RATE 3.0000% 12/20/1994 12/20/2024 6,212.00 58.00
FIXED RATE 3.0000% 06/20/1980 06/20/2010 14,832.73 138.48
FIXED RATE 3.0000% 06/20/1980 06/20/2010 1,529.75 14.28
FIXED RATE 3.0000% 06/16/1981 06/20/2011 8,516.35 79.51
FIXED RATE 3.0000% 06/16/1981 06/20/2011 7,554.76 70.53
FIXED RATE 3.0000% 06/16/1981 06/20/2011 4,507.27 42.08
FIXED RATE 3.0000% 06/16/1981 06/20/2011 136.58 1.28
FIXED RATE 3.0000% 05/31/1982 05/20/2012 25,489.96 237.97
FIXED RATE 3.0000% 05/31/1982 05/20/2012 467.92 4.37
FIXED RATE 3.0000% 05/31/1982 05/20/2012 149.16 1.39
FIXED RATE 3.0000% 09/09/1983 09/20/2013 6,510.19 60.78
FIXED RATE 3.0000% 09/09/1983 09/20/2013 4,500.00 42.01
FIXED RATE 3.0000% 09/09/1983 09/20/2013 169.79 1.59
FIXED RATE 3.0000% 01/27/1988 01/20/2018 1,272.00 11.88
FIXED RATE 3.0000% 01/27/1988 01/20/2018 6,015.00 56.16
FIXED RATE 3.0000% 01/27/1988 01/20/2018 2,478.00 23.13
FIXED RATE 3.0000% 01/27/1988 01/20/2018 192.00 1.79
FIXED RATE 3.2500% 11/09/1978 11/20/2008 4,433.24 41.39
FIXED RATE 3.2500% 02/02/1979 02/20/2009 6,999.93 65.35
FIXED RATE 3.5000% 05/07/1984 05/20/2014 2,900.51 27.08
FIXED RATE 3.5000% 05/30/1986 05/20/2016 142.80 1.33
FIXED RATE 4.0000% 09/09/1983 09/20/2013 9,297.91 86.81
FIXED RATE 4.0000% 09/25/1987 09/20/2017 40,400.00 377.17
SPECIAL DRAWING RIGHT 35.17 52.07
------------ ----------
INTEREST FREE 0.7500% 05/08/1996 01/01/2036 10.15 15.03
INTEREST FREE 1.0000% 06/04/1991 08/15/2025 11.18 16.55
INTEREST FREE 1.0000% 05/08/1997 01/01/2031 13.84 20.49
UNITED STATES DOLLAR 222.23 222.23
------------ ----------
ADB FLOATING RATE 0.0000% 06/04/1991 08/15/2014 6.00 6.00
COST QUA. BOR. IBRD 6M 0.5000% 06/30/1987 06/01/2007 32.00 32.00
COST QUA. BOR. IBRD 6M 0.5000% 04/10/1986 11/15/2006 38.00 38.00
LIBOR 6 MONTHS DEPOSIT 0.5000% 09/09/1997 09/15/2017 2.30 2.30
INTEREST FREE 1.0000% 04/03/1972 03/01/2022 10.02 10.02
INTEREST FREE 1.0000% 06/27/1979 02/15/2029 19.22 19.22
FIXED RATE 2.0000% 03/24/1975 03/24/2016 19.88 19.88
FIXED RATE 2.0000% 08/06/1976 04/13/2017 14.95 14.95
FIXED RATE 2.0000% 01/09/1988 06/30/2014 10.00 10.00
FIXED RATE 2.0000% 08/06/1976 04/11/2017 19.93 19.93
FIXED RATE 2.0000% 07/21/1989 07/21/2014 2.63 2.63
FIXED RATE 3.0000% 10/07/1994 04/18/2011 6.00 6.00
FIXED RATE 7.6000% 11/07/1979 10/01/2003 16.81 16.81
FIXED RATE 10.1000% 12/04/1981 09/01/2006 24.50 24.50
II. NG ASSUMED DEBT (REAL) 2,087.23 320.32
------------ ----------
AUSTRIAN SCHILLINGS 21.81 1.98
------------ ----------
AUSTRIAN STATUTORY
EXPORT PROMO SCHEME 0.6000% 1992 2007 21.81 1.98
BELGIAN FRANCS 50.00 1.55
------------ ----------
FREE 0.0000% 1986 2012 25.00 0.77
FREE 0.0000% 1986 2013 25.00 0.77
DEUTSCHEMARKS 0.29 0.19
------------ ----------
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
25,709.95 240.03
397.25 3.71
3,808.20 35.55
3,001.79 28.02
2,841.31 26.53
17,574.76 164.08
1,166.64 10.89
9,739.81 90.93
3,888.16 36.30
1,304.99 12.18
5,164.02 48.21
320.15 2.99
1,218.99 11.38
213.91 2.00
9,325.00 87.06
2,327.57 21.73
4,703.05 43.91
485.03 4.53
3,115.73 29.09
2,763.93 25.80
1,649.00 15.40
49.95 0.47
10,568.99 98.67
194.00 1.81
61.83 0.58
3,175.68 29.65
2,193.30 20.48
82.80 0.77
668.60 6.24
4,197.66 39.19
43.41 0.41
119.60 1.12
1,081.27 10.09
1,878.03 17.53
1,485.60 13.87
87.05 0.81
4,535.54 42.34
26,237.93 244.96
SPECIAL DRAWING RIGHT 32.39 47.94
---------- ---------
9.85 14.58
9.16 13.56
13.38 19.81
UNITED STATES DOLLAR 78.95 78.95
---------- ---------
1.94 1.94
6.98 6.98
5.77 5.77
1.87 1.87
5.56 5.56
14.70 14.70
10.35 10.35
8.21 8.21
2.86 2.86
11.14 11.14
1.56 1.56
1.37 1.37
0.00 0.00
6.65 6.65
II. NG ASSUMED DEBT (REAL) 143.75
---------- ---------
AUSTRIAN SCHILLINGS 10.90 0.99
---------- ---------
10.90 0.99
BELGIAN FRANCS 23.75 0.74
---------- ---------
11.25 0.35
12.50 0.39
DEUTSCHEMARKS 0.15 0.09
---------- ---------
</Table>
T-17
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED RATE 8.6000% 1992 2007 0.29 0.19
FRENCH FRANCS 2.57 0.49
------------ ----------
TAUX DU MARCHE
OBLIGATAIRE 0.4000% 1991 2007 2.57 0.49
POUNDS STERLING 0.17 0.30
------------ ----------
LIBOR 6 MONTHS DEPOSIT 0.0000% 1992 2007 0.17 0.30
JAPANESE YEN 1,712.56 15.99
------------ ----------
FIXED RATE 6.3000% 1993 2007 1,296.62 12.11
LONG TERM PRIME RATE 0.1000% 1992 2007 415.94 3.88
UNITED STATES DOLLARS 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
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 17,630.61
UNITED STATES DOLLARS 3,348.24 3,348.24
------------ ----------
(Brady Bonds)
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 136,600.00 1,275.30
------------ ----------
FIXED 1.8850% 2001 2011 50,000.00 466.80
FIXED 3.2000% 2000 2005 35,000.00 326.76
FIXED 4.3000% 2002 2011 21,600.00 201.66
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
0.15 0.09
FRENCH FRANCS 1.28 0.24
---------- ---------
1.28 0.24
POUNDS STERLING 0.09 0.15
---------- ---------
0.09 0.15
JAPANESE YEN 856.28 7.99
---------- ---------
648.31 6.05
207.97 1.94
UNITED STATES DOLLARS 133.54 133.54
---------- ---------
0.20 0.20
0.34 0.34
0.21 0.21
0.90 0.90
0.51 0.51
0.46 0.46
1.37 1.37
0.92 0.92
1.32 1.32
12.74 12.74
0.29 0.29
1.00 1.00
1.57 1.57
0.62 0.62
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.20 0.20
0.15 0.15
0.00 0.00
75.68 75.68
16.49 16.49
7.08 7.08
11.51 11.51
III. NG SECURITIZED LOANS 14,894.67
UNITED STATES DOLLARS 1,092.38 1,092.38
---------- ---------
(Brady Bonds)
OPTION I -- IRB 203.68 203.68
---------- ---------
SERIES A 39.32 39.32
SERIES B 164.36 164.36
OPTION II -- PCIRB 582.68 582.68
---------- ---------
SERIES A 127.52 127.52
SERIES B 455.16 455.16
OPTION III -- DEBT CONVERSIO 306.02 306.02
---------- ---------
SERIES A 2.63 2.63
SERIES B 303.39 303.39
FIXED RATE BONDS 690.00 690.00
---------- ---------
JAPANESE YEN 106,600.00 995.22
---------- ---------
50,000.00 466.80
35,000.00 326.76
21,600.00 201.66
</Table>
T-18
EXTERNAL DEBT OF THE REPUBLIC OF THE PHILIPPINES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
IN MILLIONS OF CURRENCY INDICATED
<Table>
<Caption>
ORIGINAL
INTEREST RATE/ AMOUNT CONTRACTED
SPREAD/ --------------------------
SERVICE CHARGE YEAR YEAR OF (IN ORIGINAL (IN US
CURRENCY INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY CURR.) DOLLARS)(2)
- -------- ------------------------ -------------- ---------- ---------- ------------ -----------
FIXED 5.0000% 1996 2003 30,000.00 280.08
GLOBAL BONDS 10,256.29 10,256.29
------------ ----------
UNITED STATES DOLLARS 10,256.29 10,256.29
------------ ----------
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 9.0000% 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
FIXED 10.6250% 2000 2025 300.00 300.00
LIBOR 6 MONTHS DEPOSIT 4.2000% 2000 2003 200.00 200.00
LIBOR 6 MONTHS DEPOSIT 3.0500% 2001 2004 200.00 200.00
FIXED 8.2500% 2003 2014 750.00 750.00
FIXED 8.2500% 2003 2014 750.00 750.00
1,150.00 1,435.78
------------ ----------
EURO FIXED 8.0000% 1999 2004 350.00 436.98
FIXED 9.3750% 2001 2006 500.00 624.25
FIXED 9.1250% 2003 2010 300.00 374.55
625.00 625.00
------------ ----------
TREASURY BILLS/ INTEREST FREE 2003 2004 200.00 200.00
NOTES/BONDS INTEREST FREE 2003 2005 175.00 175.00
FIXED 5.6250% 2003 2006 250.00 250.00
<Caption>
OUTSTANDING BALANCE
AS OF DECEMBER 31, 2003
--------------------------
(IN ORIGINAL (IN US
CURRENCY CURR.) DOLLARS)(2)
- -------- ------------ -----------
0.00 0.00
GLOBAL BONDS 10,056.29 10,056.29
---------- ---------
UNITED STATES DOLLARS 10,056.29 10,056.29
---------- ---------
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
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
300.00 300.00
0.00 0.00
200.00 200.00
750.00 750.00
750.00 750.00
1,150.00 1,435.78
---------- ---------
EURO 350.00 436.98
500.00 624.25
300.00 374.55
625.00 625.00
---------- ---------
TREASURY BILLS/ 200.00 200.00
NOTES/BONDS 175.00 175.00
250.00 250.00
</Table>
- ---------------
(1) Excludes external debt guaranteed by the Republic
(2) Amounts in original currencies converted into US Dollars using Bangko
Sentral reference rate prevailing on December 30, 2003
T-19
DOMESTIC GOVERNMENT SECURITIES(1)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
TOTAL (I + II) 1,706,200.00
============
I. ACTUAL OBLIGATIONS 1,685,924.50
------------
A. TREASURY BILLS 495,964.08
------------
ADAPS Various 2003-2004 67,222.00
TAP Various 2003-2004 1,050.00
GOCC Series Various 2003-2004 218,318.08
LGUs Various 2003-2004 319.90
TEIs Various 2003-2004 34,485.80
CB-BOL Floating Rate 2003-2004 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 82,118.48 90,080.19
---------- ------------
TREASURY BONDS 7,161.02 4,686.11
---------- ------------
T/BONDS R.A. 245 7,020.62 4,546.55
---------- ------------
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
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 2008 50.00 3.95
Fixed Rate 4.000% 1983 2008 4.87 0.26
</Table>
T-20
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
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
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 10,436.62
------------
91-Day T-Bill Rate
D. FIXED RATE T/BONDS 985,089.02 985,089.02
---------- ------------
2 YR FXTB 90,386.03 90,386.03
---------- ------------
ADAPS 40,655.00 40,655.00
---------- ------------
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
Fixed Rate 8.250% 2003 2005 6,050.00 6,050.00
Fixed Rate 8.625% 2003 2005 6,000.00 6,000.00
Fixed Rate 8.750% 2003 2005 3,000.00 3,000.00
TAP 1,400.00 1,400.00
---------- ------------
Fixed Rate 8.875% 2002 2004 400.00 400.00
Fixed Rate 8.250% 2003 2005 1,000.00 1,000.00
GOCCS 34,832.93 34,832.93
---------- ------------
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
Fixed Rate 8.250% 2003 2005 3,660.50 3,660.50
Fixed Rate 8.250% 2003 2005 3,211.20 3,211.20
Fixed Rate 8.625% 2003 2005 268.40 268.40
Fixed Rate 8.750% 2003 2005 1,418.33 1,418.33
TEIS 13,498.10 13,498.10
---------- ------------
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
Fixed Rate 8.2500% 2003 2005 360.10 360.10
</Table>
T-21
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
Fixed Rate 7.4250% 2003 2005 46.90 46.90
Fixed Rate 8.6250% 2003 2005 1,438.70 1,438.70
Fixed Rate 7.7625% 2003 2005 19.50 19.50
Fixed Rate 8.7500% 2003 2005 2,970.00 2,970.00
Fixed Rate 7.8750% 2003 2005 1.00 1.00
3 YR FXTB 73,669.50 73,669.50
---------- ------------
ADAPS 31,000.00 31,000.00
---------- ------------
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
Fixed Rate 9.2500% 2003 2006 3,500.00 3,500.00
Fixed Rate 11.1250% 2003 2006 7,000.00 7,000.00
Fixed Rate 10.1250% 2003 2006 2,500.00 2,500.00
Fixed Rate 9.0000% 2003 2006 6,000.00 6,000.00
GOCCS 30,805.40 30,805.40
---------- ------------
Fixed Rate 10.2500% 2002 2005 7,235.10 7,235.10
Fixed Rate 10.0000% 2002 2005 8,470.00 8,470.00
Fixed Rate 9.1250% 2002 2005 179.00 179.00
Fixed Rate 9.2500% 2003 2006 1,020.80 1,020.80
Fixed Rate 11.1250% 2003 2006 5,606.80 5,606.80
Fixed Rate 10.1250% 2003 2006 6,588.90 6,588.90
Fixed Rate 9.0000% 2003 2006 1,704.80 1,704.80
TEIS 11,864.10 11,864.10
---------- ------------
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
Fixed Rate 8.3250% 2003 2006 3.00 3.00
Fixed Rate 11.1250% 2003 2006 3,000.00 3,000.00
Fixed Rate 10.0125% 2003 2006 50.20 50.20
Fixed Rate 10.1250% 2003 2006 485.50 485.50
Fixed Rate 9.1125% 2003 2006 133.00 133.00
4 YR FXTB 48,048.12 48,048.12
---------- ------------
ADAPS 22,023.00 22,023.00
---------- ------------
Fixed Rate 10.3750% 2002 2006 6,000.00 6,000.00
Fixed Rate 10.3750% 2002 2006 4,585.00 4,585.00
Fixed Rate 10.5000% 2003 2007 1,938.00 1,938.00
Fixed Rate 10.6250% 2003 2007 3,500.00 3,500.00
Fixed Rate 10.0000% 2003 2007 3,000.00 3,000.00
Fixed Rate 10.1250% 2003 2007 3,000.00 3,000.00
TAP 2,000.00 2,000.00
---------- ------------
Fixed Rate 10.6250% 2003 2007 2,000.00 2,000.00
GOCCS 19,423.12 19,423.12
---------- ------------
Fixed Rate 10.3750% 2002 2006 2,086.90 2,086.90
Fixed Rate 10.3750% 2002 2006 377.10 377.10
Fixed Rate 10.5000% 2003 2007 328.00 328.00
Fixed Rate 10.6250% 2003 2007 8,785.80 8,785.80
Fixed Rate 10.0000% 2003 2007 1,592.60 1,592.60
Fixed Rate 10.1250% 2003 2007 6,252.72 6,252.72
TEIS 4,602.00 4,602.00
---------- ------------
Fixed Rate 10.3750% 2002 2006 500.00 500.00
</Table>
T-22
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
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
Fixed Rate 10.5000% 2003 2007 500.00 500.00
Fixed Rate 9.4500% 2003 2007 27.00 27.00
Fixed Rate 10.6250% 2003 2007 500.00 500.00
Fixed Rate 9.5625% 2003 2007 95.00 95.00
Fixed Rate 10.0000% 2003 2007 1,500.00 1,500.00
Fixed Rate 9.1125% 2003 2007 322.70 322.70
5 YR FXTB 224,361.88 224,361.88
---------- ------------
ADAPS 124,262.00 124,262.00
---------- ------------
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
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
</Table>
T-23
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
Fixed Rate 14.000% 2002 2006 2,070.00 2,070.00
Fixed Rate 10.750% 2003 2008 6,750.00 6,750.00
Fixed Rate 11.625% 2003 2008 3,500.00 3,500.00
Fixed Rate 9.875% 2003 2008 3,000.00 3,000.00
Fixed Rate 10.250% 2003 2008 6,000.00 6,000.00
TAP 20,206.00 20,206.00
---------- ------------
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
Fixed Rate 11.625% 2003 2008 2,000.00 2,000.00
Fixed Rate 10.250% 2003 2008 1,000.00 1,000.00
GOCCS 56,887.48 56,887.48
---------- ------------
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
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
Fixed Rate 10.750% 2003 2008 6.70 6.70
Fixed Rate 11.625% 2003 2008 2,403.40 2,403.40
</Table>
T-24
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
Fixed Rate 10.250% 2003 2008 4,146.90 4,146.90
TEIS 23,006.40 23,006.40
---------- ------------
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
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
Fixed Rate 10.750% 2003 2008 1,243.50 1,243.50
</Table>
T-25
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
Fixed Rate 9.675% 2003 2008 274.80 274.80
Fixed Rate 10.4625% 2003 2008 652.00 652.00
Fixed Rate 11.6250% 2003 2008 500.00 500.00
Fixed Rate 9.8750% 2003 2008 500.00 500.00
Fixed Rate 8.8875% 2003 2008 100.00 100.00
Fixed Rate 10.2500% 2003 2008 3,000.00 3,000.00
Fixed Rate 9.2250% 2003 2008 317.00 317.00
7 YR FXTB 121,622.50 121,622.50
---------- ------------
ADAPS 62,914.00 62,914.00
---------- ------------
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
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
Fixed Rate 11.875% 2003 2010 7,000.00 7,000.00
TAP 13,680.00 13,680.00
---------- ------------
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
Fixed Rate 11.875% 2003 2010 3,000.00 3,000.00
GOCCS 30,172.70 30,172.70
---------- ------------
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
</Table>
T-26
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
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
Fixed Rate 11.875% 2003 2010 1,065.60 1,065.60
TEIS 14,855.80 14,855.80
---------- ------------
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
Fixed Rate 10.6875% 2003 2010 1,592.40 1,592.40
10 YR FXTB 128,342.45 128,342.45
---------- ------------
ADAPS 78,646.00 78,646.00
---------- ------------
</Table>
T-27
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
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
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
Fixed Rate 12.750% 2003 2013 1,689.00 1,689.00
Fixed Rate 11.750% 2003 2013 4,550.00 4,550.00
Fixed Rate 11.000% 2003 2013 3,000.00 3,000.00
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 16,245.45 17,245.45
---------- ------------
Fixed Rate 16.000% 1996 2006 1,792.64 1,792.64
Fixed Rate 14.400% 1996 2006 0.00 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
</Table>
T-28
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
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
Fixed Rate 16.500% 2001 2011 301.70 301.70
Fixed Rate 13.000% 2002 2012 31.00 31.00
Fixed Rate 12.750% 2003 2013 26.10 26.10
Fixed Rate 11.750% 2003 2013 5.30 5.30
Fixed Rate 11.000% 2003 2013 50.30 50.30
TEIS 15,061.00 14,061.00
---------- ------------
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
Fixed Rate 12.750% 2003 2013 500.00 500.00
Fixed Rate 11.475% 2003 2013 564.40 564.40
Fixed Rate 10.575% 2003 2013 177.60 177.60
Fixed Rate 09.900% 2003 2013 10.30 10.30
20 YR FXTB 36,254.01 36,254.01
---------- ------------
ADAPS 21,472.00 21,472.00
---------- ------------
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
Fixed Rate 13.000% 2003 2023 4,500.00 4,500.00
Fixed Rate 11.875% 2003 2023 6,972.00 6,972.00
Fixed Rate 11.375% 2003 2023 3,000.00 3,000.00
TAP 6,374.90 6,374.90
---------- ------------
</Table>
T-29
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
Fixed Rate 14.375% 1997 2017 3,804.90 3,804.90
Fixed Rate 13.000% 2003 2023 1,900.00 1,900.00
Fixed Rate 11.375% 2003 2023 670.00 670.00
GOCCS 7,185.11 7,185.11
---------- ------------
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
Fixed Rate 12.840% 2003 2023 2.95 2.95
Fixed Rate 13.000% 2003 2023 5.40 5.40
Fixed Rate 11.875% 2003 2023 14.50 14.50
Fixed Rate 11.375% 2003 2023 1.80 1.80
TEI 1,222.00 1,222.00
---------- ------------
Fixed Rate 13.500% 2002 2022 35.00 35.00
Fixed Rate 13.000% 2003 2023 900.00 900.00
Fixed Rate 11.700% 2003 2023 287.00 287.00
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
TEIS 500.00 500.00
---------- ------------
Fixed Rate 18.250% 2000 2025 500.00 500.00
RETAIL TREASURY BONDS 206,784.59 206,784.59
---------- ------------
3 YR RETAIL T/BONDS 91,494.73 91,494.73
---------- ------------
Fixed Rate 10.750% 2002 2005 23,259.75 23,259.75
Fixed Rate 09.500% 2003 2006 36,686.70 36,686.70
Fixed Rate 10.000% 2003 2006 31,548.29 31,548.29
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 77,296.70 77,296.70
---------- ------------
Fixed Rate 12.375% 2002 2007 39,670.53 39,670.53
Fixed Rate 10.375% 2003 2008 37,626.18 37,626.18
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
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
</Table>
T-30
DOMESTIC GOVERNMENT SECURITIES(1) -- (CONTINUED)
AS OF DECEMBER 31, 2003
(IN MILLIONS OF PESOS)
<Table>
<Caption>
INTEREST OUTSTANDING
RATE YEAR YEAR OF ORIGINAL AS OF
INTEREST RATE BASIS (PER ANNUM) CONTRACTED MATURITY AMOUNT DECEMBER 31, 2003
- ------------------- ------------- ---------- --------- ---------- -----------------
TAP 2,769.62 2,769.62
---------- ------------
Fixed Rate 15.500% 2001 2011 2,769.62 2,769.62
TEIS 400.00 400.00
---------- ------------
Fixed Rate 15.500% 2001 2011 400.00 400.00
E. ZERO COUPON BOND 40,645.90 40,645.90
---------- ------------
7 Yr 2003 2010 5,645.90 5,645.90
10 Yr Peace Bond 2001 2011 35,000.00 35,000.00
F. FIXED RATE NOTES (US$/PHP CURRENCY SWAP) 11,810.00 11,810.00
---------- ------------
3 YR 6,330.00 6,330.00
---------- ------------
Fixed Rate 14.000% 2001 2004 6,330.00 6,330.00
5 YR 5,480.00 5,480.00
---------- ------------
Fixed Rate 14.250% 2001 2006 5,480.00 5,480.00
G. US DOLLAR LINKED PHP PESO NOTES (DLPNS)(2) 13,500.00 14,112.91
---------- ------------
3 YR 13,500.00 14,112.91
---------- ------------
Fixed Rate 10.4375% 2001 2004 3,500.00 3,735.28
Fixed Rate 7.5625% 2002 2005 5,000.00 5,174.57
Fixed Rate 7.3750% 2003 2006 5,000.00 5,203.06
H. FIXED RATE PROMISSORY NOTES 45,590.00 45,590.00
---------- ------------
3 YR 8,230.00 8,230.00
---------- ------------
Fixed Rate 8.125% 2002 2005 6,230.00 6,230.00
Fixed Rate 10.250% 2003 2006 2,000.00 2,000.00
5 YR 30,660.00 30,660.00
---------- ------------
Fixed Rate 9.625% 2002 2007 5,290.00 5,290.00
Fixed Rate 11.375% 2003 2008 3,750.00 3,750.00
Fixed Rate 10.125% 2003 2008 8,250.00 8,250.00
Fixed Rate 9.750% 2003 2008 13,370.00 13,370.00
7 YR 6,700.00 6,700.00
---------- ------------
Fixed Rate 10.250% 2003 2010 6,700.00 6,700.00
I. FIXED TERM DEPOSIT Various 2002 2004 216.86 216.86
---------- ------------
II. CONTINGENT OBLIGATIONS 19,740.00 20,275.54
---------- ------------
A. LAND BANK BONDS 535.54
------------
Fixed Rate 6.000% 535.54
B. 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
C. PAG-IBIG HOUSING BONDS 4,000.00 4,000.00
---------- ------------
Fixed Rate 8.250% 2000 2005 4,000.00 4,000.00
D. 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
E. TXTER INVST. CERT. (LBPT) 1,740.00 1,740.00
---------- ------------
2003 2005 1,740.00 1,740.00
</Table>
- ---------------
(1) Excludes external securities of the Republic.
(2) Amounts in original currencies converted into US Dollars using Bangko
Sentral reference rate prevailing on December 31, 2003.
T-31
DOMESTIC DEBT OF THE REPUBLIC (OTHER THAN SECURITIES)(1)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT OUTSTANDING BALANCE
CONTRACTED AS OF 31 DECEMBER, 2003
--------------------- -----------------------
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 2,297 17,856
------ ------
DIRECT LOANS 0 15,560
------ ------
AGENCIES 0 15,560 15,560
------
PHILIPPINE PESOS 0 15,560 15,560
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 1,675 1,675
INTEREST FREE 0.0000% 1945 PHP 21 21
INTEREST FREE 0.0000% 1960 PHP 177 177
INTEREST FREE 0.0000% 1985 PHP 67 67
INTEREST FREE 0.0000% 1993 PHP 29 29
INTEREST FREE 0.0000% 1989 PHP 15 15
ASSUMED LOANS (REAL) 2,297 2,297 2,297 2,297
----- ------ ------ ------
PHILIPPINE PESOS 2,297 2,297 2,297 2,297
----- ------ ------ ------
INTEREST FREE 0.0000% 1986 Upon Demand PHP 63 63 63 63
INTEREST FREE 0.0000% 1986 Upon Demand PHP 134 134 134 134
INTEREST FREE 0.0000% 1986 Upon Demand PHP 120 120 120 120
INTEREST FREE 0.0000% 1986 Upon Demand PHP 72 72 72 72
INTEREST FREE 0.0000% 1986 Upon Demand PHP 50 50 50 50
INTEREST FREE 0.0000% 1986 Upon Demand PHP 200 200 200 200
INTEREST FREE 0.0000% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.0000% 1986 Upon Demand PHP 66 66 66 66
INTEREST FREE 0.0000% 1986 Upon Demand PHP 3 3 3 3
INTEREST FREE 0.0000% 1986 Upon Demand PHP 3 3 3 3
INTEREST FREE 0.0000% 1986 Upon Demand PHP 4 4 4 4
INTEREST FREE 0.0000% 1986 Upon Demand PHP 8 8 8 8
INTEREST FREE 0.0000% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.0000% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.0000% 1986 Upon Demand PHP 9 9 9 9
INTEREST FREE 0.0000% 1986 Upon Demand PHP 84 84 84 84
INTEREST FREE 0.0000% 1986 Upon Demand PHP 3 3 3 3
INTEREST FREE 0.0000% 1986 Upon Demand PHP 6 6 6 6
INTEREST FREE 0.0000% 1986 Upon Demand PHP 1 1 1 1
INTEREST FREE 0.0000% 1986 Upon Demand PHP 261 261 261 261
INTEREST FREE 0.0000% 1986 Upon Demand PHP 913 913 913 913
INTEREST FREE 0.0000% 1986 Upon Demand PHP 6 6 6 6
INTEREST FREE 0.0000% 1986 Upon Demand PHP 54 54 54 54
INTEREST FREE 0.0000% 1986 Upon Demand PHP 229 229 229 229
91 DAY T-BILL 0.0000% 1986 2007 PHP 6 6 6 6
</Table>
- ---------------
(1) Excludes government securities and debt guaranteed by the Republic
(2) Amount in original currencies were converted to Pesos using reference rate
prevailing on December 31, 2003
T-32
GUARANTEED DOMESTIC DEBT OF THE REPUBLIC (OTHER THAN SECURITIES)(1)
AS OF DECEMBER 31, 2003
IN MILLIONS
<Table>
<Caption>
ORIGINAL AMOUNT
CONTRACTED
---------------------
INTEREST IN IN
RATE YEAR YEAR OF ORIGINAL PHILIPPINE
INTEREST RATE BASIS SPREAD CONTRACTED MATURITY CURR. PESO(2)
------------------- -------- ---------- ----------- -------- ----------
TOTAL 2,456
-----
A. NATIONAL GOVERNMENT
DIRECT GUARANTEE 2,176
-----
US DOLLARS LIBOR 6 MOS 0.8125% 1986 2007 39 2,176
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, 2003
------------------------
IN IN
ORIGINAL PHILIPPINE
CURR. PESO(2)
--------- -----------
TOTAL 2,359
-----
A. NATIONAL GOVERNMENT
DIRECT GUARANTEE 39 2,176
-----
US DOLLARS 39 2,176
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 prevailing on 31 December, 2003
T-33
(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...................................... $ 228,442
NASD Filing Fee........................................... 32,500
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.................................................. $1,082,942
==========
</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
<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. Mina Figueroa, National Treasurer, Republic
of the Philippines, (included on signature page).
J. Form of Supplement No. 1 to the Fiscal Agency Agreement
(including form of Debt Securities)****
</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.
**** Incorporated by reference to Registration Statement No. 333-108310.
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 15th day
of April, 2004.
REPUBLIC OF THE PHILIPPINES
By /s/ MINA FIGUEROA
------------------------------------
Mina Figueroa*
National Treasurer
- ---------------
* Consent is hereby given to use of her name in connection with the
information specified in this Registration Statement or amendment thereto to
have been supplied by her and stated on her 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 15th day of April, 2004.
By: /s/ CECILIA B. REBONG
------------------------------------
Name: Cecilia B. Rebong
Title: Consul General
II-4
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
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. Mina Figueroa, National Treasurer, Republic
of the Philippines, (included on signature page).
J. Form of Supplement No. 1 to the Fiscal Agency Agreement
(including form of Debt Securities)****
</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.
**** Incorporated by reference to Registration Statement No. 333-108310.
II-5