Court order stalls DBP takeover of Al-Amanah

MANILA, Philippines - The saga of government attempts to privatize Al-Amanah Islamic Investment Bank of the Philippines has taken a new twist, with a legal battle now brewing between the bank’s old leadership and the new owner. Al-Amanah was supposed to hold its stockholders’ meeting last Wednesday — the first since state-run Development Bank of the Philippines (DBP) took over — but the event was shelved after former bank chief Ali B. Sangki obtained a restraining order from the Supreme Court. "May TRO si Mr. Sangki [Mr. Sangki was able to secure a temporary restraining order] so we have of course to abide by that," DBP President Reynaldo G. David told BusinessWorld. "He filed a complaint saying it’s not privatization," Mr. David said, referring to the DBP takeover. Mr. Sangki, who is now undersecretary for the Office of Muslim Affairs and remains a director in the bank board, said he had yet to see a copy of the court ruling. Both parties refused to elaborate on the case, but Mr. David said DBP would file a reply to the court order next week. The case apparently stems from the disapproval of Al Amanah’s Muslim investors, led by Mr. Sangki, of DBP’s taking full control. DBP earlier this year clinched an agreement with the Government Service Insurance System (GSIS) and the Social Security System (SSS) that would allow the bank to fully take over Al Amanah. Central bank approval was secured in April. The DBP initially had a 10% stake in Al Amanah, the country’s first and lone Islamic bank. The government stake was 69%, the SSS-GSIS bloc a combined 20%, and private individuals took up the rest. Mr. David said the DBP now effectively holds 80%. The takeover came almost a year after the government failed for the fourth time to sell Al Amanah, which has been in the red since 1991. Mr. Sangki had earlier proposed to Malacañang a package of interventions aimed at helping Al Amanah get back on its feet prior to privatization, including making the bank a depository of local government funds. He argued that President Gloria Macapagal Arroyo’s order for the bank to be privatized still stands, and that the sale should be governed by its charter and relevant bids and awards laws. "The order of the President is to privatize the bank and to invite investors. There are investors, but if the DBP will take control, how are we going to privatize?," Mr. Sangki told BusinessWorld. "As early as the time I was with the bank, we have been focusing on resuscitating the bank and make it operate as an Islamic bank," he pointed out. Al Amanah adheres to Islamic law, treating depositors and borrowers as partners who do not earn or pay interest but share in the profits of businesses where the bank’s funds are used. The central bank allowed Al-Amanah to operate as a commercial bank in 2006 to make it profitable and make it easier for the government to sell its assets. Mr. David said that under the DBP, Al Amanah would be transformed in five years, and would also be part of the disbursement system of local governments in the southern regions. - BusinessWorld