RSBS has P1B in NPLs

REPORT FROM BUSINESSWORLD The bankrupt pension fund of the Armed Forces of the Philippines (AFP) has P1 billion in uncollectible loans, an official admitted last week. A loan is considered uncollectible or a nonperforming loan (NPL) if it has remained unpaid for more than 90 days after becoming due. During a dialogue with employees of the AFP Retirement and Separation Benefits System (AFP-RSBS), officials, however, declined to divulge the amount of the fund’s total loans. They also refused to identify the RSBS’ delinquent borrowers. The military earlier admitted that billions of pesos intended for retired military personnel had been misspent on low-return real estate projects and loans over several years, causing the collapse of the retirement system. Officials have announced the closure of the RSBS by the end of the year after an investigation found some officials to have mismanaged the multibillion-peso fund. The billion-peso bad loans add to the financial woes of the fund whose total assets amount to a little more than P11 billion. A major chunk of the assets or P9.62 billion are invested in real estate and real-estate firms. The amount, like the P1-billion bad loans, is not easily convertible to cash. The fund has yet to account for about P400 million of the total assets. RSBS officials, although claiming full transparency, still refuse to release the agency’s complete financial statement. Soldiers interviewed by BusinessWorld noted that they had not received any financial reports from the fund even if they religiously remit 5% of their salaries to the RSBS. The pension fund has been ordered to turn over all real estate assets to state-owned Development Bank of the Philippines and Land Bank of the Philippines for disposal. The RSBS will cease operating by Dec. 31, but member soldiers have been assured that they would still receive their benefits. Despite evidence to the contrary, RSBS Executive Vice-President Jose Nano insists the fund is doing well. "We have a lot of money," he said in an interview before meeting his employees. "We are not bankrupt. We tried to rehabilitate." He blamed the RSBS charter for the fund’s woes. "We cannot manage the returns... Government funds are lacking," he said. Under the RSBS charter, soldiers are entitled to 6% interest on their total contributions plus pension benefits upon retirement. Mr. Nano also cited mismanagement of the fund by former officials. "There is a crack in our credibility and that is irreversible," he said. There are 91 criminal cases pending at the Sandiganbayan against several officials accused of malversation through falsification of public documents. AFP Spokesman Lt. Col. Bartolome Vicente O. Bacarro said they had been ordered by military Chief of Staff Hermogenes C. Esperon, Jr. to go after those who had mismanaged the fund. A number of past directors and senior managers of the fund, all retired generals, have been indicted for graft. One case now before the Sandiganbayan involves former AFP Chief of Staff Lisandro Abadia and eight other members of the RSBS executive committee who were allegedly involved in an unexplained P277-million loan. Aside from Mr. Abadia, also facing malversation suits are former RSBS officials Julian Alzaga, Manuel Satuito, Elizabeth Liang and Jesus Garcia. Another case, involving RSBS President Jose Ramiscal, a retired general, and three others involves the purchase of land worth P167.6 million. In 1998, the Senate blue ribbon committee found that the RSBS had been used to buy overpriced parcels of land in Calamba and Iloilo City amounting to about P500 million. The report also recommended the prosecution of former RSBS officials including Messrs. Abadia and Ramiscal. -- Ma. Elisa P. Osorio/BusinessWorld