The Governor, Central Bank of the Philippines
        Chairmen, Board Members and Heads of Government Owned or Controlled Corporations
        The Heads of Government Financial Institutions

1.    A government owned or controlled corporation, including any of its subsidiaries organized by virtue of its corporate Charter and/or the Corporation Law, may borrow only when the funds raised are used for activities or projects that will yield the necessary return on investment and generate the necessary cash flows in order to enable the prompt repayment of interest and principal on the borrowings as they fall due; 

2.    The Minister of Finance shall require conclusive showing of return on investment and cash flow adequacy before acting on any applications for the Republic's guarantee on any borrowings;

3.    The Boards of Directors of government owned or controlled corporations whose obligations are automatically guaranteed by the Republic by virtue of their Charters shall not approve any borrowings without a similar conclusive showing of adequate return on investment and cash flows. They shall establish a review and approval mechanism for controlling the obligations incurred by their subsidiaries or affiliates, applying the same criteria;

4.    Notwithstanding any automatic guarantee provision in the Charter of a government owned or controlled corporation, the corporation concerned shall obtain the prior concurrence of the Minister of Finance and of the Central Bank Governor on the borrowing to be undertaken. The Minister of Finance and the Governor of the Central Bank shall see to the observance of the criteria established under this letter and in general to the observance of pertinent government debt policy; 

5.    The Central Bank of the Philippines or other government financial institution shall not approve any domestic or foreign borrowing application of government owned or controlled corporation unless the criteria established under this Letter are observed;

6.    The Boards of Directors and the management of all government owned or controlled corporations shall immediately assess their current and projected cash flows from operations, for purposes of determining corporate ability to meet existing obligations promptly. In cases where operations are unable to support existing debt service needs, the Boards concerned shall direct the preparation and implementation of a program of action to raise corporate revenue by increasing fees and charges for services rendered or by other means, or to reduce expenses in order that they may meet debt payment needs without recourse to the National Treasury.

7.    Heads of government owned or controlled corporations shall submit the results of the assessment of operating returns and cash flows relative to debt service needs, including their program of adjusting revenues and costs to make up for any deficiencies, and shall report on their findings to the Minister of Finance;

8.    The rules and regulations necessary to implement this Letter shall be promulgated by the Minister of Finance and the Central Bank.

Since 19.07.98.