Philippines Agency Plans to Sell Mining Assets: Southeast Asia

Philippines President Benigno Aquino
Benigno Aquino, president of the Philippines. Photographer: Julian Abram Wainwright/Bloomberg

The Philippines will sell stakes in mining holdings as President Benigno Aquino seeks to nudge forward efforts to boost investment after two years in office.

The government will auction stakes in four nickel, copper and gold mines, as well as shares in Semirara Mining Corp., said Karen Singson, executive director of the Privatization and Management Office, one of several state agencies managing asset sales. She declined to give the potential value of the disposals.

“We’re lining up the projects we plan to privatize in the near- and medium-term,” Singson, 33, said in an interview in her office in Manila yesterday. “There are more foreign investors talking to us because of improvements in governance and transparency.”

Aquino has struggled to accelerate asset sales and bidding of infrastructure projects, with the government awarding just one project under its private-partnership program since he took office in 2010. The momentum may be aided by rising investor confidence after credit rating upgrades from Standard & Poor’s and Fitch Ratings, as the nation takes steps to reduce corruption and contain the budget deficit.

Ayala Land Inc. was the highest bidder in an auction of 74 hectares of state-owned Food Terminal Inc.’s property in Manila, Singson said today. The company bid 24.33 billion pesos ($580 million) compared to a reserve price of 10.25 billion pesos set by the government, beating offers from rivals including Robinsons Land Corp. and Empire East Land Holdings Inc.

The nation aims to raise about 2 billion pesos each in 2012 and 2013 from privatization. The government is seeking more than $16 billion of investments in roads, schools and airports, with the goal of boosting growth to as much as 8.5 percent by 2016.

Investor Favorite

“Management of the economy and fiscal consolidation have paid off with a lot of inflows,” said Trinh Nguyen, a Hong Kong-based economist at HSBC Holdings Plc. “The Philippines has become a favorite among investors. The fact that the government is taking steps to improve investment bodes well for growth.”

The peso has risen more than 4 percent this year, becoming Asia’s best performer among the 11 most-traded currencies tracked by Bloomberg. The Philippine Stock Exchange Index surged to a record in July.

The $225 billion economy expanded 6.4 percent in the first quarter, the fastest in Southeast Asia and the most since 2010. S&P in July raised the country’s credit rating to one level below investment grade, its highest since 2003.

The Privatization and Management Office plans to sell three or four entities to net 500 million pesos in 2013, excluding the mining shares, said Singson, who previously managed $2 billion of emerging-market stocks at Boston Company Asset Management.

Hiring Advisors

The government plans to hire financial advisors to assess the value of the mining stakes, said Singson, declining to provide any further details on the timing of the sales or the size of stakes being sold.

The only private-partnership project awarded in Aquino’s term was a contract to build a four-kilometer (2.5-mile), four-lane paved toll road to provinces south of the capital. It was won last December by a consortium led by Ayala Corp. that bid 902 million pesos.

The country’s last big asset sale was the 2007 auction of a 25-year contract to operate and expand the nation’s power transmission system, which was awarded to a group that included State Grid Corp. of China after it offered $3.95 billion.

The Privatization and Management Office owns 769,450 shares in mining company Semirara, according to Singson. That is about 0.2 percent of the company and amounts to 171 million pesos, based on today’s prices as calculated by Bloomberg News.

Neighbors including Vietnam and Indonesia have also stepped up plans to sell state assets and lure more foreign investors.

Investor Confidence

Vietnam has made the restructuring of state-owned companies one of three areas of focus through 2015 as it tries to revive a more than decade-old share-sale program known as equitization. In Indonesia, President Susilo Bambang Yudhoyono’s efforts to fight corruption and spend more on infrastructure have helped restore investor confidence.

The Philippines climbed to 129th place on the Transparency International Corruption Perceptions Index in 2011 from 141st in 2008, below Thailand at 80 and Indonesia at 100, according to the Berlin-based watchdog’s website.

The Philippine Senate in May ousted Chief Justice Renato Corona for concealing his wealth. Aquino had sought to remove the judge as a crucial step in ridding the nation of corruption.

The nation is seeking to harmonize national and local mining policies, even as Xstrata Plc, which is pursuing a $5.9 billion gold and copper project in South Cotabato, is appealing the government’s denial of an environmental permit.

Aquino last month unveiled a new order expanding a mining ban and extending a moratorium on project approvals until Congress legislates a higher government share in resource contracts. The privatization office has implemented rules to prevent irregularities including collusion among bidders, Singson said yesterday.

“We’re asking them for a lot of paperwork,” said Singson, a graduate of Harvard Business School. “We want to check the financial strength of the bidder. We don’t want bids from black-listed companies. Everyone is on equal ground; we’re making it a competitive process.”

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