MANILA, JUNE 10, 2007
(STAR) By Ted P. Torres - The Australian government has extended a three-year, A$100.6 million (approximately P4 billion) grant to the Philippines with Southern Mindanao as key focus geographic area.

Australia, the third largest aid donor to the Philippines after Japan and the United States, has granted a total A$570 million grant to the country.

“Further increases is possible over a five-year period after annual reviews and assessments,” said Australian Ambassador Tony Hely during the formal signing of the new development aid program.

The Australian diplomat said the grant will immediately be utilized in the areas of reducing poverty, enhancing economic growth, maintaining national stability and human security, including supporting peace initiatives in Mindanao.

Improved conditions in Mindanao favor not only the Philippines but also Australia, which has a large number of investments in southern Philippines including mining and infrastructure-related business activities.

A noteworthy provision in the grant program is that calling for the implementation of an anti-corruption plan of action, noting that corruption is a major impediment to economic growth, effective government and poverty reduction in the Philippines, and undermines aid effectiveness.

The anti-corruption plan of action, with the cooperation of the national authorities, will focus on minimizing the risk from corruption to Australian aid funds, and instituting anti-corruption measures.

In a survey made by Hong Kong-based Political and Economic Risk Consultancy, the Philippines earned the tag as one of the most corrupt countries in Asia.

Banks’ bad loans ratio drops to 5.27% in April By Des Ferriols - The bad loans ratio of universal and commercial banks (U/KBs) improved in April as the proportion of non-performing loans to total loans dropped to 5.27 percent from 5.28 percent in March and 8.08 percent a year ago.

Data from the Bangko Sentral ng Pilipinas (BSP) revealed that the total loans of U/KBs expanded by 1.49 percent, overtaking the 1.4-percent expansion in non-performing loans (NPLs).

The BSP said this year’s actual bad loans amounted to P110 billion compared with P150.96 billion last year. Total loan portfolio (TLP), on the other hand, was recorded at P2.091 trillion compared with P1.87 trillion the previous year.

Excluding interbank lending, the BSP said the industry’s NPL ratio dropped from 6.58 percent in March to 6.45 percent in April, fueled by the 3.43 percent expansion in regular loans to P1.709 trillion. Year-on-year, this level was also better over the base ratio of 9.77 percent.

According to the BSP, the proportion of restructured loans (RLs) to TLP also dropped to 3.59 percent from 3.64 percent in March and last year’s 5.32 percent.

As of end-April, the BSP said total RLs was reported at P75.81 billion from P100.22 billion last year.

On the other hand, the BSP said the real and other properties acquired (ROPA) to gross assets (GAs) ratio was lower at 3.57 percent from 4.85 percent last year. Similarly, the industry’s non-performing asset (NPA) ratio slightly declined to 5.79 percent from 8.45 percent last year.

BSP Governor Amando M. Tetangco said the latest bad assets data indicated the possibility the overall NPL ratio of the industry could drop to below five percent this year.

Bank regulators said the bad loans of banks could shrink to as low as four percent of the industry’s total loan portfolio by the end of the year, restoring the industry to its pre-1997 status.

The BSP said banks are steadily coming back to health with improving profitability and cleaner loan portfolios. The industry’s return-on-equity is now at 10 percent, rising from only about two-five percent in the years that followed the Asian financial crisis in 1997.

Based on the latest estimate of the BSP, the proportion of non-performing loans (NPLs) to the total loan portfolio of banks is projected to drop below five percent by September this year. By the end of the year, this ratio could drop to as low as four percent as a result of the continuous unloading of bad assets as well as the growth in the TLP itself.

According to the BSP, the major driver was the Special Purpose Vehicles Act (SPVA) which allowed banks to unload their bad loans at a loss and gave them the opportunity to book these losses over time instead of all at once.

Tetangco said that at the end of the year, the industry would be on the threshold of restoring their financial health and profile to pre-1997 levels.

The BSP had estimated that the SPVA would allow banks to unload at least P100 billion worth of bad assets when the law was extended for another two years.

Chief News Editor: Sol Jose Vanzi

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