US pension fund keeps RP on investment list

WASHINGTON – The Philippines has dodged a bullet that would have seriously wounded the country’s drive to attract foreign investments from the United States and other countries.

This, after the California Public Employees Retirement System (CalPERS), the largest pension fund in the US, voted on Tuesday to keep the Philippines on its list of "permissible" investment markets even as it excluded Indonesia, Malaysia and Thailand and nine other countries

CalPERS spokeswoman Patricia Macht told The STAR in a telephone interview the pension fund’s board set aside a recommendation by its advisers Wilshire Consulting to drop the country from the its "permissible country list" after a meeting with Finance Secretary Jose Isidro Camacho in California.

Macht said Wilshire recommended to strike 12 countries – China, Colombia, Egypt, India, Indonesia, Malaysia, Morocco, Pakistan, the Philippines, Sri Lanka, Thailand, Russia and Venezuela – from the list but the board decided to review the low investment climate rating it gave the Philippines.

CalPERS has some $133 billion in assets and about $30 million invested in the Philippine Stock Exchange.

Based on third-party reports and on a scale of 1 to 3, Wilshire lowered the Philippines score from 2.06 of 1.53 based on its political stability, transparency, labor practices, market liquidity and volatility, market and investment laws, capital market openness, settlement proficiency and transaction costs.

But Camacho objected to several points in the initial Wilshire recommendation and had to answer questions from CalPERS board members for over an hour to clarify many of the "patently wrong" issues that led to the low score.

"The board was very impressed with (Camacho’s) presentation which lasted one hour," Macht told The STAR in a telephone interview.

She said Wilshire was directed to meet with Philippine officials and review within 60 days the low score it gave the country.

Camacho, for his part, expressed willingness to work with Wilshire and validate the issues raised in its recommendation.

"We want to trace their third-party sources and determine which agency got which information from which Philippine institution," Camacho said.

"If Wilshire is still not satisfied and decides to stand by its original rating, which we consider to be unfair and unwarranted, it would not automatically mean we will be removed from the list," he added.

Camacho said the Philippines should get good ratings on at least four of seven performance criteria listed by Wilshire.

But Bangko Sentral ng Pilipinas (BSP) official Corazon Guidote, head of the BSP Investor Relations Office, said the rating review should also strive to correct errors in Wilshire’s initial report.

"There were just too many errors in the Wilshire report. Wilshire used third-party reports but they did not validate the information that they were getting," Guidote said.

Guidote said that Wilshire erroneously evaluated the country’s cost of trading stocks and erroneously asserted that audited financial statements were not required in the listing rules of the Philippine Stock Exchange.

"That is just plain and patently wrong," Guidote said. "They gave us a very low score. When we reviewed it, we determined that we should have gotten a higher score. Their report was just peppered with mistakes."

But Macht said there is still a chance for the country to stay on the list despite a low rating.

"If the scores improve, then the board can use that as evidence that the Philippines should remain on the investment list.

"If the scores don’t change or get worse then the board can say ‘because we’ve invested in them previously, we want to give them a chance to improve’ and keep them on the list," Macht said. – With a report from Des Ferriols