Sale of gov’t stake in SMC, Meralco key to budget consolidation, say officials

Finance officials said the sale of the government’s interests in San Miguel Corp. (SMC) and Manila Electric Co. (Meralco) would be central to its budget consolidation program in 2007.

Increasing worries over the ability of the Bureau of Internal Revenue (BIR) to meet its collection targets have been stoking proposals to accelerate the tax reform program and compel Congress to attend to proposed new taxes next year.

The BIR was reported by the Department of Finance (DOF) to be P27-billion short of its collection target for the first 11 months of the year.

The performance of the BIR in the last 11 months bolstered fears by credit rating agencies which have expressed concern over sustaining the tax collection effort after the increase in the value-added tax rate.

New taxes have been suggested but finance officials are pessimistic that legislation would be able to address the 2008 deadline for balancing the budget, especially since 2007 is an election year.

Finance Secretary Margarito B. Teves said the DOF is planning instead to unload state-owned holdings in SMC and Meralco to generate possibly over P70 billion.

"There really are other alternatives to coming up with new tax measures," said Teves, expressing optimism that the sale of government assets would more than compensate from expected revenues from new tax measures.

According to Teves, untangling the legal mess blocking the sale of government’s shares in SMC and Meralco could be done in 2007 and increase the chances of meeting the government’s deficit target of P63 billion.

Teves would not reveal what progress, if any, has been made in the decades-long effort to sell government stake in SMC but said the Arroyo administration was "working quietly" with some of the stakeholders in the country’s biggest conglomerate.

"Hopefully we can work something out," Teves said. Teves admitted that the sale of the government’s SMC shares would not be as easy as selling its shares in the Philippine Telecommunications Investment Corp. or PTIC.

"But it can be done," he said.

On the other hand, Teves said he is also optimistic that the sale of government’s stake in Meralco would happen in 2007, probably faster than the sale of its SMC shares.

"It’s not as complicated as SMC and there are buyers," he said. All told, he said the government holds 24 to 25 percent of Meralco, including the portions owned by state-owned pension funds.

"All that needs to be done is to convince our colleagues that it is time to sell," he said. "It will be a matter of timing and temper of the market."