WASHINGTON, April 21, 2004
By Jose Katigbak (STAR Washington Bureau)  – The Philippines came back from the brink of disqualification as an investment site by the California Public Employees Retirement System (CalPERS) after presenting new data on its economic status, allowing the pension fund to continue investing in the country.

"Given the long-standing relationship between CalPERS and the Philippines, I am pleased that we will continue investing in the country," said California State Controller and CalPERS board member Steve Westly from Sacramento on Monday, after the fund decided not to pull out.

The CalPERS board unanimously voted to retain the Philippines in its list of "permissible emerging markets" along with India and Peru.

The Philippine embassy in Washington said CalPERS’ move "reaffirms its confidence on the country as a viable location for its portfolio investments amounting to about $80 million and sends a positive message to foreign investors that the Philippines is investment-worthy."

CalPERS estimated its investment in the Philippines earlier this year at about $67 million. It is the largest pension fund in the United States and the third largest in the world with some $167 billion in assets, about $2.6 billion of which is currently invested in emerging markets.

New technical information submitted by the Philippines to CalPERS improved the country’s score to 2.12 points, a fraction above the 2.0 points needed to be included in the fund’s list of permissible equity investments, the embassy statement said.

"This is the highest performance score which the Philippines has ever attained in the CalPERS assessment system," it added.

Christopher Fedderson, head of Philippine affairs at the Washington-based US-ASEAN Business Council welcomed CalPERS’ decision not to divest its investments in Philippine stocks.

He said the international profile of the Philippines as an investment destination could have suffered had CalPERS decided to pull out.

"CalPERS doesn’t have a lot of money invested in the Philippines but there are other investment funds that always keep an eye on what CalPERS is doing just because they’re so big," he said.

The California pension fund decides which emerging equity markets it will invest in based on a report prepared by its consultant, Wilshire Associates, which evaluates candidates on economic factors such as market liquidity and volatility, as well as political stability, financial transparency and labor standards.

In February, Wilshire gave the Philippines a failing score of 1.87 points.

After appealing Wilshire’s evaluation report, the Philippines in March received a 30-day reprieve to enable it to present additional information that might improve its score and allow CalPERS to hold on to its Manila stocks.

Fedderson said the Philippines, in appealing CalPERS‘ decision to divest its stake in local stocks, did a great service not just for itself but for the rest of Southeast Asia.

"They helped to change the check list of things that CalPERS uses to make their investment decisions, especially their divestment decisions," he said.

In a statement issued at Malacanang yesterday, presidential spokesman Ignacio Bunye said Philippine ambassador to Washington Albert del Rosario reported the "good news" in a telephone call to President Arroyo.

"This morning, I got news that they (CalPERS) have given my administration the highest grade in the history of their rating in the Philippines," Arroyo said. "Mananatili sila sa Pilipinas habang ako ay Pangulo," she said over local radio station DzRH.

Arroyo attended yesterday a political rally in Lucban, Quezon ahead of the May 10 national elections. She faces five other rivals for the presidency, with movie actor Fernando Poe Jr. as her closest opponent according to opinion surveys.

"We view this development as an endorsement of the economic reforms initiated by the President and a positive statement that the Philippines remains an important investment destination," Bunye added.

The equities market also reacted positively to the news, with the Philippine Stock Exchange (PSE) composite index rising 1.9 percent to 1,525.96 points.

"The market cheered CalPERS decision and some investors may also be speculating that the fund will even increase its exposure to the Philippines," said Nestor Aguila of DA market Securities.

CalPERS investments in Philippine stocks account for only about three percent of the entire equities market.

PSE chairman Alicia Arroyo commented that the CalPERS decision was very good for the country. "It confirms that the reforms implemented have begun to reap its benefits. It affirms that the Philippines is still a good investment site."

About 600 Filipinos and Filipino-Americans turned up in Sacramento on Monday in response to an appeal by Amb. del Rosario for support "to convince CalPERS that the Philippines and the Filipino nation must be treated with respect and fairness." They burst into cheers and waved small flags at the CalPERS auditorium as the fund announced its unanimous decision to remain in the Philippines.

CalPERS board president Sean Harrigan congratulated del Rosario for "so professionally representing the Philippines and managing the dialogue between the Philippines and CalPERS."

Board member Charles Valdes suggested to the Filipinos at the CalPERS meeting that they write officials in Manila to recommend del Rosario for a medal in recognition of his efforts.

In addition to retaining the Philippines as an investment partner CalPERS decided to review its investment committee’s policy regarding permissible equity markets.

"CalPERS policy should focus on two main goals: measuring the potential risk and reward of investing in various emerging markets, and providing incentives for countries to seek greater economic and political stability," a fund statement said.

Changes to be considered include:

• Establishing specific deadlines for countries to submit relevant data;

• Allowing all parties to review annual scores and correct or submit data used for scoring prior to board adoption; and

• Changing the current country scoring formula, including factors considered, weighting and final rounding;

• Other members of the Philippine delegation to the CalPERS meeting were Assistant Finance Secretary Jeremias Paul, PSE director Francis Lim and Lourdes Yparraguirre, the embassy’s political minister. – with reports from Des Ferriols, Marichu Villanueva, Zinnia dela Pena.

Reported by: Sol Jose Vanzi

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