In a CalPERS-commissioned annual report prepared by the Wilshire Associates, the Philippines was dropped from the list of "permissible countries" along with China, Egypt, Indonesia, Pakistan, Russia and Venezuela.
Wilshire’s evaluation of the Philippines raised eyebrows among finance officials still smarting from Wilshire’s report last year which caused the country’s removal from CalPERS’ folder.
CalPERS first removed the Philippines from its folder last year when Wilshire was quoted as reporting that the country was still using manual settlement, chalks and blackboard in its stock trading.
In the controversy and embarrassment that ensued following the erroneous report, CalPERS was forced to put the Philippines back in its list of permissible list but market sources said the decision made little difference.
"No money actually came back," said one trader. "They said they would return but they never did."
"I hope this is not Wilshire getting back at us for having proven them wrong in their earlier evaluation," said Finance Secretary Jose Isidro Camacho.
Camacho said Wilshire’s recommendation came as a surprise. "I am surprised that issues of political stability and market practices were raised after we had already presented a strong case earlier," he said.
If anything, we are more stable now," Camacho went on. "If we talk about instability, the whole world is unstable."
Camacho observed, however, that CalPERS itself had been fairly passive in recent months. "They are neither in nor out," he said.
According to Wilshire, it evaluated a total of 27 countries in the CalPERS portfolio and only 20 made it to the list of permissible countries, namely Argentina, Brazil, Chile, Colombia, Czech Republic, Hungary, India, Israel, Jordan, Malaysia, Mexico, Morocco, Peru, Poland, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, and Turkey.
"The purpose of this annual report, completed specifically for CalPERS, is to provide a framework for evaluating a market’s ability to support institutional investment," Wilshire said. "It is not intended to evaluate the current attractiveness of any individual market; that decision is delegated to the appropriate investment manager."
CalPERS itself was scheduled to make its decision during their next board meeting on Feb. 18, 2003.
Reacting to the news, BSP Deputy Governor Armando Tetangco said investors should consider the recent shift in the political environment in the Philippines, referring to the decision of President Arroyo not to run for re-election in 2004.
"The environment is now better for instituting reforms," Tetangco said. "They should consider this when they are making an assessment of our outlook."