Marketing Phantasma

Marketing phantasma

By Abdel Aziz Dimapunong

Founding chairman, Amanah Islamic Bank

Students of marketing must be familiar with the term “Marketing Myopia” by Theodore Levitt. According to Wikipedia, it is in indeed one of the most important papers ever written. This paper was published in the Harvard Business Review, a journal of which Levitt was an editor. Wikipedia says that commentators have even gone as far as to suggest that its publication marked the beginning of modern marketing.

I have read Marketing Myopia while taking an MBA course at the Asian Institute of Management. Until now, Levitt’s Marketing Myopia sticks in my mind.

Myopia was derived from the fact that the vision of most organizations in the past was constricted in terms of what they narrowly saw as the business they were in. In the past, managers of the railroad industry saw themselves as confined only to the railroad industry instead being actually in the transportation industry. This was also true in the radio industry which actually belongs to the communication industry.

Levitt exhorted CEOs to re-examine their corporate perspective to properly define their markets in terms of wider vision.

Today, the result of looking at business in the wider perspective is seen in the popular Information Technology. Radio is here via the Internet. The TV industry is here through You Tube, Google and others. Communication is here via email facilities including Yahoo, Gmail and so many others. Virtually all software programs are within the sphere of the IT.

However, to some sectors, it seems that the lessons in Marketing Myopia is overly extended to the point of fantasy by adopting the widest and wildest perspectives that include those in the lost horizon of Shangri-la and those prohibited by the blue sky law.

While making an analysis of the circumstances that are the subjects of my write up on the propose sale of 9 million shares of the Amanah Bank, I am convinced that what could be happening may be termed as marketing phantasma. It is characterized by fantastic imagery and incongruous juxtapositions. This is the case of chunking the abolished Philippine Amanah Bank with the new existing Amanah Islamic Bank. It is the more complicated imagery when their respective shares of stocks are chunk together in juxtapositions.

Last April 22, I wrote and posted my article about the shares of stocks which are now on sale by the Privatization Management Office (PMO) under the Department of Finance. The original Islamic Bank now calls this office as Phantasmagoric Management Office (PMO). Most of the shares on sale are wrongfully identified by the PMO as shares of stocks of the Amanah Islamic Bank.

Grande Dianaton, the incumbent chairman of the existing original Amanah Islamic Bank calls those shares the carcass of the defunct Philippine Amanah Bank.

The confusion about the abolished Philippine Bank and the existing Amanah Islamic Bank is a serious matter to the existing stockholders of the existing Islamic Bank. What is happening to the shares of stocks that they own? Are these shares the subject of the forthcoming bidding by the PMO on May 21, 2007? Many stockholders and investors frantically called me about the PMO and its wildest idea of selling shares that belong to them.

All the confusion started last Tuesday, April 3, 2007, when Mr. Guillermo Hernandez Chief Privatization Officer of the Privatization Management Office ran an advertisement on the Philippine Star about selling the shares of the Amanah Islamic Bank. The PMO invites all interested parties to participate in the bidding of nine million (9,000,000) issued and unissued shares of stocks of AIIBP at a minimum bid price of P900 million, representing 90% of the authorized capital stock of the bank.

The announcement of bidding was properly timed. It came out just the day after Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud arrived at Villamor Air Base. He arrived on his private jet and he left right after a dinner with Her Excellency President Macapagal Arroyo at the Malacañang Palace. The Saudi Prince came only to confirm his commitment and actually signed a deal with the Ayala group to put up a 300-room Fairmont Hotel, a 30-suite Raffles Hotel and 189 Raffles-branded residences at the corner of Makati and Arnaiz avenues in Makati City. The President hosted a dinner in Malacanang Palace on Monday for Alwaleed. President Macapagal Arroyo has said that the decision of Saudi Prince Alwaleed to invest US dollar 153 million in hotels in Makati City was a vote of confidence in the Philippines.

Obviously, the target of the bidding announcement was the Saudi Prince who happens to be the thirteenth richest man in the world.

The President also said that the Saudi prince wanted to put up hotel resorts in the Philippines. “He knows that we have many good beaches and dive spots. So he wants to find a good place for a resort,” she said. “He asked where it should be so I showed a map of central Philippines and I told him that’s the area where the bulk of tourists go and he... asked one of his top executives to see where the airports are located.”

The President suggested to the Saudi Prince areas in the Visayas, Bicol, Palawan, Romblon and Camiguin as ideal sites for resort hotels. President Arroyo said the $153-million investment in Makati was an offshoot of her visit to Saudi Arabia last year. “He kept stressing that this was the fruit of my visit to Saudi Arabia last year…”

It is said that Prince Alwaleed is worth over $20 billion. The US-educated prince, 50, is a nephew of Saudi Arabia’s King Abdullah. He is founder and chairman of Kingdom Hotel Investments, which on March 8 signed a joint venture agreement with Ayala Land Inc. to develop a luxury hotel complex in the Ayala Center in Makati business district. Ayala Land president Jaime Ayala said the project would break ground before the end of the year. “The project marks the start of the Ayala Center’s makeover into a world-class business destination as Fairmont and Raffles represent two of the world’s biggest luxury hotel brands,” Ayala said.

Alwaleed arrived at Villamor Air Base Tuesday evening on his private jet and left right after the Malacañang dinner.

After having posted my article on the announced sale of shares of the Islamic Bank by the PMO, I sent a link to many stockholders of the Amanah Islamic Bank. In turn, they sent email replies and most of them asked me information about the PMO, its creation, duties and powers.

Even when issues are brought to the court, I had been frequently asked to give my statement as among the founders of the bank. The issue on sales of shares of the Amanah Islamic Bank is understandable because there have been so many parties who wish to buy and own the bank. Those of them who have no means and no way to own a part of the Islamic Bank resort to dirty politics. This is also understandable because the Amanah Islamic Bank is basically a political bank having been established by politicians like the late Senator Mamintal A. Tamano, the late Speaker of the House of Representatives, Ramon Mitra, former Congressman Michael Mastura, and the former President of the Philippines, Corazon C. Aquino.

The Islamic Bank is coveted by many Muslims not only in the Philippines but Malaysia, Saudi Arabia, and others. Local politicians flex their muscles and use political influence. The former chairman of the Moro National Liberation Front, Chair Nur Misuari, made the issue in 1999 a political one and recommended to former President Joseph Estrada the group of the late Farouk Carpizo. The Autonomous Region of Muslim Mindanao had also signified its interest to control the Islamic Bank. Other parties include politicians, businessmen, and professionals. To them, ownership of the Islamic Bank is like an Olympiad contest. However, it is too late for those vying for a hold of the bank because it had already been privatized. At the end of the day, the truth prevails. The honorable courts of law – rather than the politicians, are the final arbiters.

As a founding chairman, I stand witness to the ownership of the Islamic Bank by those who invested in the Islamic Bank from 1992 t0 1998. These were made by subscribing to the shares of the bank in the manner prescribed by the charter of the Islamic Bank, Republic Act No. 6848. This is the special law that governs the ownership of the Islamic Bank, as provided for by this law (enacted in 1999) and as recently updated by the new General Banking Act of 2000.

The background of privatization in the Philippines is summarized below.

Before the fall of President Ferdinand Marcos, he issued two successive Presidential Decrees, PD 2029 and PD 2030. These two Decrees declared privatization as a matter of national policy. Privatization was actually an implementation of the Structural Adjustment Program that was imposed by the International Monetary Fund and the World Bank.

On February 1986, President Cory Aquino succeeded Marcos by the popular people power. Aquino pursued vigorously the implementation of the privatization laws. In addition to PDs No. 2029 and 2030, Aquino signed into law Proclamation No. 50, creating the Committee on Privatization (COP) and the Assets Privatization Trust (APT) to administer the implementation of privatization.

In 1989, the Congress of the Philippines passed a bill that eventually was signed into law as R. A. 6848. Former Pres. Corazon C. Aquino signed this special law on January 26, 1990. This is a special for the creation and eventual privatization of the new Al Amanah Islamic Investment Bank of the Philippines (AIIBP).

In 1998, Executive Order No. 12 was issued and reaffirmed the privatization policy of the Government by encouraging all heads of departments, bureaus, agencies and instrumentalities including government owned and controlled corporations to identify assets and activities that can be efficiently and effectively undertaken by the private sector; by broadening the coverage of privatization activities with the inclusion of some authorities such as Bases Conversion and Development Authority (BCDA), Public Estates Authority (PEA), Philippine Tourism Authority (PTA), Philippine Economic Zone Authority (PEZA) and Subic Bay Metropolitan Authority (SBMA).

Executive Order No. 12 also directed the COP to consider other alternative modes of privatization such as leasing, management and maintenance contracts, BOT schemes or joint venture arrangements.

Pursuant to Republic Act No. 8758 (1999), the life of the Committee on Privatization (COP) and the Asset Privatization Trust (APT) expired on December 31, 2000. Republic Act No. 8758 provided that, “All assets held by the Asset Privatization Trust, all moneys and other properties belonging to it, and all its liabilities outstanding upon the expiration of its term shall revert to and be assumed by the National Government”. Republic Act No. 8758 mandated the transfer for disposition of the assets held by the APT by the President of the Philippines to the trust department of the appropriate government agency upon the expiration of the term of APT.

As of December 2001, there were remaining partially sold and undisposed accounts approved for privatization consisting of 150 transferred assets, of which 88 are partially sold and 62 are still undisposed, 57 government-owned and controlled corporations, of which 31 have been partially sold and 26 are still undisposed. This includes the government shareholdings in the abolished Philippine Amanah Bank.

The abolished Philippine Amanah Bank was created by the Marcos Administration under Presidential Decree No. 264. On the other hand, the Amanah Islamic Bank was created by the Aquino Administration with a special law known as the charter of the Al Amanah Islamic Investment Bank of the Philippines.

The Philippine Amanah Bank does not exist anymore. It follows that it has no existing shares that can be legally sold. It follows; therefore that the Privatization Management Office is selling 9 million NON-EXISTING SHARES for a price of Pesos 900 million, as advertised.

So what do I say to the private stockholders who own the Islamic Bank? I say: keep your cool. The Saudi Prince, 50, with western education in the USA knows the intricacies of investments including the prohibition of the internationally known blue sky law.

Below is a copy of Executive Order No. 323 that created the PMO.

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MALACAÑANG

MANILA

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER NO. 323

CONSTITUTING AN INTER-AGENCY PRIVATIZATION COUNCIL (PC) AND

CREATING A PRIVATIZATION AND MANAGEMENT OFFICE (PMO)

UNDER THE DEPARTMENT OF FINANCE FOR THE CONTINUING PRIVATIZATION OF GOVERNMENT ASSETS AND CORPORATIONS

Whereas, pursuant to Republic Act No. 8758 s. 1999, the life of the Committee on Privatization (COP) and the Asset Privatization Trust (APT) will expire on December 31, 2000.

Whereas, Republic Act No. 8758 provided that, “All assets held by the Asset Privatization Trust, all moneys and other properties belonging to it, and all its liabilities outstanding upon the expiration of its term shall revert to and be assumed by the National Government”.

Whereas, Republic Act No. 8758 mandated the transfer for disposition of the assets held by the APT by the President of the Philippines to the trust department of the appropriate government agency upon the expiration of the term of APT;

Whereas, Executive Order No. 12, s. 1998 reaffirmed the privatization policy of the Government by encouraging all heads of departments, bureaus, agencies and instrumentalities including government owned and controlled corporations to identify assets and activities that can be efficiently and effectively undertaken by the private sector; by broadening the coverage of privatization activities with the inclusion of some authorities such as Bases Conversion and Development Authority (BCDA), Public Estates Authority (PEA), Philippine Tourism Authority (PTA), Philippine Economic Zone Authority (PEZA) and Subic Bay Metropolitan Authority (SBMA); and by directing the COP to consider other alternative modes of privatization such as leasing, management and maintenance contracts, BOT schemes or joint venture arrangements;

Whereas, under the Constitution and under the Administrative Code of 1987, the President, as Chief Executive, has control and supervision over, and the authority to reorganize, the Executive Branch of the Government, including the Office of the President;

Whereas, the Government’s privatization program has proven beneficial and helpful to the economy in terms of generating revenues, improving investment climate, attracting foreign capital and investments, broadening ownership base, developing capital markets and fostering private sector participation;

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Whereas, there are remaining partially sold and undisposed accounts approved for privatization consisting of 150 transferred assets, of which 88 are partially sold and 62 are still undisposed, 57 government owned and controlled corporations, of which 31 have been partially sold and 26 are still undisposed, and several surrendered properties with sizeable amount of projected revenues for the much-needed resources of the Government;

Whereas, there is a vast opportunity for greater private sector participation in the development of the Philippine economy with the successful launching of Government’s PROGRESS Bonds and the pending enactment by Congress of the bill restructuring of the power industry and privatizing the National Power Corporation;

NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the Philippines, by virtue of the powers vested in me by law, do hereby order: Article I. Restatement of the Policy

Section 1. Restatement of Policy. The National Government hereby restates its privatization policy to promote an orderly, coordinated and efficient privatization of remaining government corporations, assets, activities and idle properties which have been identified as unnecessary and inappropriate for the government sector to maintain.

Article II. The Privatization Council

Section 1. Organization. There is hereby established a Privatization Council (PC), referred to as the “Council”, to oversee the privatization program of the Government.

Section 2. Composition. The Council shall be composed of the Secretary of Finance as Chairman, with the Secretary of Budget and Management, Trade and Industry, National Economic and Development Authority and Justice as members. The National Treasurer and the Chairman of the Presidential Commission on Good Government shall be non-voting members of the Council. The Technical Committee shall also be established to be composed of the representative of the Department of Finance as Chairman, and representatives of the Department of Justice, Department of Budget and Management, Department of Trade and Industry, National Economic Development Authority, Bureau of Treasury and the PCGG, as members.

Section 3. Objectives, Powers and Functions. The Council shall direct, supervise and coordinate all privatization and similar disposition efforts undertaken by the Government in order to promote private sector participation in developing the Philippine economy and to generate maximum cash recovery for the National Government. In pursuit of these objectives, the Council shall assume all the powers, functions, duties and responsibilities, all properties, real or personal assets, equipment and records, as well as the obligations and liabilities previously held or exercised by the COP under Proclamation No. 50, as amended, which have been devolved to the National Government pursuant to Republic Act No. 8758.

Section 4. Meetings. The Council shall meet at least twice a month, or as frequently as necessary to effectively discharge its functions and responsibilities and expedite the disposition of GOCCs, assets, activities and other government properties. The presence of the majority of the voting members shall constitute a quorum and the concurrence of said majority should be adequate for any decision of the Council: Provided, that were a disposition or rehabilitation proposal is involved, the decision of the Council must be unanimous. In case they are unable to attend, the Chairman and Members may designate any of their immediate subordinates with the rank of Undersecretary or its equivalent to represent them in the meetings of the Council. The Council shall act on any recommendation for disposition not later than thirty (30) days from the date of its submission to the Council.

Section 5. Legal Counsel. The Secretary of Justice shall be the ex-officio adviser to the Council on legal matters. Section 6. Funding. The Council shall be provided with an initial budget of Ten Million Pesos (P10, 000,000.00) to be drawn from the Organizational Adjustment Fund. Appropriations for the succeeding years shall be incorporated in the budget proposal for the Office of the President.

Article III. Privatization and Management Office

Section 1. Organization – There is hereby organized under the Department of Finance an Office called Privatization and Management Office (PMO), hereinafter referred to as the “Office”. The Office shall be headed by a Chief Privatization Officer (CPO) who shall be appointed by the President of the Philippines upon recommendation of the Secretary of Finance. The Chief Privatization Officer shall be assisted by four (4) Deputy Privatization Officers who shall be in charge of specific operations and undertakings as directed by the Chief Privatization Officer. These Deputy Privatization Officers shall be appointed by the Secretary of Finance upon recommendation by the Chief Privatization Officer.

Section 2. Powers and Functions. In addition to the powers, duties and functions under Proclamation No. 50, as amended, the Office shall be empowered to implement the actual marketing/disposition program of the government corporations, assets and idle properties after securing prior approval of the Council, to execute and deliver, on behalf of the National Government, the deeds of sale, contracts and other instruments as may be necessary or appropriate to convey title to such assets, to take title to and possession and conserve assets transferred to it, to engage external expertise as necessary in the fulfillment of its tasks, to adopt internal rules and regulations and to submit periodic reports to the Council on the status of the disposition program.

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Any and all sales and other modes of privatization or disposition shall not be considered final unless and until approved by the Council. All receipts from the sale of assets of the Office, except portions thereof for reimbursable custodianship and/or operational expenses, shall be remitted to the National Treasury.

Section 3. Powers and Functions of the CPO. The CPO shall have the following powers and functions.

1. To enter into management and other contracts as may be appropriate; and

2. To develop the staffing requirements of the Office, and for this purpose, appoint, remove and fix the remuneration of the personnel of the Office: Provided, That as far as practicable, the CPO should rely on secondment from government entities undertaking related functions, and or qualified external expertise in an advisory capacity and on a contractual basis.

Section 4. Qualifications. No personal shall be appointed an Officer unless he or she is of good moral character, of unquestionable integrity and responsibility, and of recognized business competence. No person, or director, officer, consultant or stockholder of corporations constituting or having any interest in the assets assigned to the Office may be appointed as an Officer.

Section 5. Internal Guidelines. The Office, through its Chief Privatization Officer, may adopt and implement such internal rules and regulations necessary or convenient for the proper discharge of the functions of the Office. Provided, That such internal rules and regulations must be in accordance with existing laws, orders, decrees and proclamations. Provided further, That such rules and regulations may be subsequently amended, abrogated or disapproved by the Secretary of Finance.

Section 6. Funding. The Office shall be provided with an initial budget of Thirty Million Pesos (P30, 000,000.00) to be drawn from the Organizational Adjustment Fund. The Office shall be allowed to retain commissions, due diligence fees and proceeds from the sale of Asset Bidding Rules, information memoranda and similar documents, as well as a portion or percentage of proceeds from disposition efforts, not to exceed ten percent (10%), to be approved by the Council to maintain a revolving fund to be utilized for the payment of fees and reimbursable expenses and of the costs and expenses incurred by the Office in the conservation and disposition of the assets held by it or in the performance of its other responsibilities under this Executive Order. Appropriations for the succeeding year shall be incorporated in the budget proposal for the Department of Finance.

Article IV. Operational Provisions

Section 1. Transfer of Assets. Pursuant to the provisions of Republic Act No. 8758, the financial assets of APT shall be transferred for disposition by the President to a trust department of the Land Bank of the Philippines. The physical assets remaining at the end of the term of APT shall immediately be transferred to the Office under the Department of Finance for appropriate disposition.

Section 2. Utilization of Proceeds. Upon the effectivity of this Executive Order, all receipts from the sale of assets shall be remitted to the National Treasury in the following proportion: sixty percent (60%) to the special account of the Agrarian Reform Fund and forty percent (40%) to the general fund: Provided further, That except for the subsidiaries of the Government Service Insurance System and the Social Security System, all government owned and controlled corporations shall remit to the National Treasury at least fifty percent (50%) of the net proceeds derived from the sale of shares or assets effective October 1, 1992. Provided further that the net proceeds shall mean gross proceeds less related liabilities and selling expenses as stipulated in the provisions of Republic Act No. 7661.

Section 3. Sale of Small Local Investors. Pursuant to the provisions of Republic Act No. 7886, a minimum of 10% of the sale of assets in corporate form shall be reserved to small local investors to develop the domestic capital market. Any of the following transactions shall be deemed compliance on the sale to small local investors: (a) Initial Public Offering (IPO), (b) Employee Stock Option/Ownership Plans (ESOPs). Provided, that the Social Security System and Government Service Insurance System shall grant loans to qualified employees of the firms under privatization who would like to avail the ten percent (10%) stock offering as provided in this Executive Order, (c) sale to private and government employees, overseas workers, small farmers/fisherfolks and cooperatives through Government Financial Institutions such as GSIS, LBP, DBP and HDMF, (d) sales of assets/shares to individual investors not exceeding a maximum of P100,000.00, (e) sale of retirement funds, pension funds and other funds managed on behalf of employees and other individuals, (f) sale of privatization bonds issued by the Republic of the Philippines provided that the terms of such privatization bonds give the option to holders thereof to exercise the exchange option contained in such bonds either into shares in corporate assets privatized through the IPO or into a cash amount where the privatized corporate asset is being sold to one or more block investors.

Article V. Miscellaneous Provisions

Section 1. Separability Clause – Any portion or provision of this Executive Order that may be declared unconstitutional or invalid shall not have the effect of the nullifying the other provisions thereof: Provided, That the remaining portions can still stand and be given effect in their entirety to accomplish the objectives of this Order.

Section 2. Repealing Clause – All executive orders, rules and regulations and other issuances or parts thereof that are inconsistent with the provisions of this Executive Order are hereby repealed and modified accordingly.

Section 3. Effectivity – This Executive Order shall take effect upon publication but not earlier than January 1, 2001.

DONE in the City of Manila, this 6th day of December in the year of our Lord, two thousand one.

(Sgd.) JOSEPH EJERCITO ESTRADA

President

Republic of the Philippines

By the President:

(Sgd.) RONALDO B. ZAMORA

Executive Secretary

Get well wish card for Mike Arroyo

Her Excellency, President Gloria Macapagal Arroyo, taking her oath as President of the Philippines. Beside her is the First Gentleman, Jose Miguel (Mike) Arroyo.

Get well wish card

for Mike Arroyo

By Abdel Aziz Dimapunong

Imam, Masjid Alkhari, Manila

Here is a wish card for the First Gentleman of the Republic of the Philippines, Jose Miguel Tuason Arroyo, to get well soon. The President’s husband underwent the high-risk open heart surgery last Easter Sunday, April 9, 2007 at the St. Luke’s Medical Center in Quezon City. The First Gentleman bravely underwent the heart operation after he was diagnosed with a heart ailment known as dissecting aortic aneurysm.

The First Gentleman with the President while taking her oath of office as

President of the Philippines

The day he bravely faced the surgeon’s knife was Easter Sunday, a Special Holiday in Christendom. It is also a holiday to me. On the eve of Easter Sunday in 1975, I was rushed to the Makati Medical Center for treatment after having met a serious car accident where my car was totally wrecked. One half of my car (the rear half) was left at Paseo De Roxas and the other half swerved to De La Rosa Street, Makati City.

The thing that I remember most during my confinement inside the Makati Medical Center was a visit of a well wisher classmate. He was Diosdado Macapagal, Jr. (Buboy), brother in law of the First Gentleman, Mike Arroyo.

Twenty years later, I was again in an Emergency Room. This time I was hastened to the ER of the Philippine Heart Center. I had a heart attack. I had to face immediate open heart surgery, the same emergency situation as that of the First Gentleman. On an emergency like this persons that could help come to mind. Buboy was one of them. As soon as he came to know my situation, he sent a check to help out. He also called me by phone and wished me good just before my open heart surgery. I will not forget that concern. My gratitude to Buboy extends to his sister, Her Excellency, President Gloria Macapagal Arroyo and to his brother-in-law, the First Gentleman, Jose Miguel Arroyo, and all members of the First Family.

To the President, Your Excellency, Mike Arroyo is already out of danger, Insha Allah. Open heart surgery has already been perfected in our country. We have the best of heart surgeons and cardiologists in the world.

In only few days, the First Gentleman could be playing again with his grand daughter.

All my best wishes for the First Family. Rahimakom Allah. May The Almighty God bless you.

Sincerely,

Abdel Aziz Dimapunong

Imam, Masjid Al Khairi, Manila

Mr. Diesel and the original biofuel visionaries

By Abdel Aziz Dimapunong

Chancellor, Islamic Banking Institute

Founding Chairman, Amanah Islamic Bank

Mr. Rudolph Diesel and his Prototype diesel engine

There cannot be a complete discussion on biofuels and biodiesel without mention of Mr. Rudolph Diesel, the inventor of diesel engine and a biofuel visionary. And when we speak of blending one form of engine fuel like gasoline with another kind like ethanol, or fossil diesel with biodiesel, we have to learn from another inventor and pioneer of blending fuels, Mr. Fairbanks and his associate Mr. Morse. Speaking of engine and diesel, we can not overlook Ford, Cummins and Benz. Looking back at these pioneering scientists and their remarkable inventions in our search for alternative renewable energy, we realize that we are actually going back to the 19^th century. We are not moving forward. History is just repeating itself after more than a century.

Mr. Rudolph Diesel (1858-1913)

The development of the diesel engine by Mr. Rudolph Diesel runs concurrent with the use of biofuels. The diesel engine actually began using biofuels until it was replaced by fossil fuels. Now, therefore, we should not find it hard to get back to biofuels as used by the inventor himself. As we look back to history, we find that it was global politics that relegated biofuels to the background. The story of Diesel and his diesel engine is the technical aspect of the history of biofuels.

Mr. Rudolph Diesel (1858-1813) was born to the era of the steam engine. As a scientist, Rudolph Diesel developed a theory that revolutionized the engines of his day. Diesel envisioned an engine in which air is compressed to such a degree that there is an extreme rise in temperature. When fuel is injected into the piston chamber with this air, the fuel is ignited by the high temperature of the air, exploding it, forcing the piston down. Diesel designed his engine in response to the heavy resource consumption and inefficiency of the steam engine of his time, which was rated at only 12% efficiency.

On February 27, 1892, Diesel filed for a patent at the Imperial Patent Office in Germany. His application was granted for a Working Method and Design for Combustion Engine. With contracts from machine manufacturers, Diesel began building working models of his engine. In 1893, the first model ran under its own power and it was rated with 26% efficiency. This was remarkable because the rating was more than double the efficiency of the steam engines that were in use. Finally, in February of 1897, he ran the first diesel engine suitable for practical use, which operated at 75% efficiency.

In 1898, Rudolph Diesel demonstrated his engine at the Exhibition Fair in Paris. This engine stood as an example of Diesel's vision because it was fueled by peanut oil - the original pure vegetable oil (PVO) which we now call biodiesel. He thought that the utilization of PVO was the real future of his engine. That is why when we start to use PVO again, we are actually following the visions of Mr. Diesel. He hoped that it would provide a way for the smaller industries and the farmers a means of competing with the monopolizing industries. Just like what we strive for today, Mr. Diesel look at his diesel invention as an alternative for the then existing fuel consumption. Our version of today’s alternative is to replace an existing fossil fuel with a renewable pure vegetable oil (PVO).

As a result of Diesel's vision, compression ignited engines were powered by vegetable oil until the 1920's. Today, as we try to get back to biodiesel, we are actually driving ourselves back to that era of discovery. We now wish to power our engines with biodiesel again. I should think we should call it rediscovery.

The early diesel engines were so heavy for many technical reasons. First, the cylinder of a diesel engine was naturally longer because piston displacement requires it in order to have more compression. Second, the diesel engine was heavy because of the size of the fuel injection pump. They were not really suitable for motor vehicles. Their market was for stationary use such as power for industrial and shipping in the early 1900's. Ships and submarines benefited greatly from the efficiency of this new engine, which was slowly beginning to gain popularity.

Rudolph Diesel disappeared in 1913. There were controversies and some questions about his death. Some think it might have been accidental or even a suicide. That’s what I believed in. However, others considered a possible political motivation. Whether by accident, suicide or murder, the world had lost a brilliant scientist and biofuel visionary.

Thaddeus Fairbanks

The idea of blending gasoline with a certain percentage of another kind of fuel such as ethanol had actually been considered by the Thaddeus Fairbanks. Yet it now appears to be an innovation, some kind of a new technology.

Fairbanks, Morse & Company had its beginning in 1823 when inventor Thaddeus Fairbanks began his business in ironworks. Fairbanks was the leading manufacturer in the United States during his time. He was the best known in the whole world until he was overshadowed by the rise to popularity of Henry Ford.

Fairbanks and Morse began producing oil engines in the 1890s. We can say that Fairbanks was a contemporary of Mr. Diesel. While Diesel was working on diesel engines, Fairbanks was also working on kerosene engines. The Fairbanks and Morse gas engine was widely accepted by farmers. It was used mainly for irrigation and electricity generation. It was also used for oilfield work.

In summary, Fairbanks and Morse power plants evolved by burning kerosene in 1893, then to semi-diesel engines in 1913 and to full diesel engines in 1924.

Fairbanks and Morse Model Z engine

(Blending gasoline with kerosene)

In 1916 the company began production of the Model Z single cylinder engine in one, three and six horsepower sizes.

From 1916 to 1946, Fairbanks and Morse produced over half a million units of Model Z. That was a period of 30 years. In our estimate, about fifty thousand of these units found their way to the Philippine Islands. Most of the units were probably brought into the country by the United States army during World War II. More than a dozen of these units found their way in 1960 to our shed in Lanao Del Norte, Mindanao. My father collected them as a matter of hobby. We excavated most of them from where they were abandoned. Some of them were bought by my father “por kilo” a way of buying steel based on its weight. As I will explain later, this is the first engine that uses a blend of fuels.

After the expiration of Rudolph Diesel’s of license in America in 1912, Fairbanks entered the large engine business. As noted earlier, Mr. Diesel died in 1913. Fairbanks and Morse took over the development of the diesel engine. The company's larger Model Y semi-diesel became a standard engine of its time. The model Y was available in sizes from one through six cylinders.

The Y-VA Fairbanks engine was the first high compression using full diesel. This machine was developed in Beloit and introduced in 1924.

Fairbanks and Morse continued to build diesel and gas engines. Export offices were established in Rio de Janero and Buenos Aires. The model Z engines were built into the 1970s in Mexico. An Australian branch factory, similar to the Canadian Branch operation, was also opened. Many Fairbanks engines dutifully served into the late twentieth century,

Henry Ford into diesel

As noted earlier, Fairbanks was the best known in the whole world until the rise of Henry Ford in the car industry. But this popularity had to do with the idea of the assembly line of production. And it had to do with the popularly known Ford Model T. Early American Ford automobiles were not diesel driven, but they were powered by ethanol. Yes, this is the ethanol that we are now considering for rediscovery. This is the ethanol that is provided for in the Philippines Biofuel of 2000.

Henry Ford shared a similar vision with Rudolph Diesel. He believed that pure vegetable oil should the fuel of the transportation industry. In a partnership with Standard Oil, he helped developed the biofuel industry. But ethanol disappeared from the scene as a result of the development of the petroleum industry.

Cummins, a diesel engine mechanic inventor

It was Clessie L Cummins, a mechanic-inventor who actually worked on the design problems of the diesel engine. The problems of diesel engine at that time had to do with the size and weight. There was also the issue on the instability created by its fuel system. In 1919, Cummins developed a single disk system that measured the fuel injected. Like the other early engines, Cummins' products were stationary engines and his main market was the marine industry.

It was also during the 1920's that diesel engine manufacturers created a major challenge for the biofuel industry. Diesel engines were altered to utilize the lower viscosity of the fossil fuel residue rather than a biomass based fuel. The petroleum industries were growing and establishing themselves during this period. Their business tactics and the wealth that many of these oil tycoons already possessed greatly influenced the development of all engines and machinery.

It was in the 1920s that the alteration to the original engines was first introduced as a step in the elimination of the production structure for purely vegetable oils. It was also a step in forcing the concept of biomass as a potential fuel base into obscurity, erasing the possibilities from the public awareness.

In 1929, the Stock Market crashed. This brought the threat of bankruptcy to Cummins. In an innovative move, however, he installed a diesel engine in a limousine and took his backer, Irwin, for a ride, assuring further investment. Cummins continued to experiment with the diesel motor vehicles.

In 1931, Cummins set a speed record and distance record by driving a truck with a Cummins diesel engine coast to coast in the United States. With this distance, Cummins established an endurance record of 13,535 miles at Indianapolis Speedway. Cummins' diesel engines were then established and trucks as well as other fleets began using them. Over the years, Cummins has continued to improve the efficiency of the diesel engine, providing technological innovations. Their engines have set a high standard for the industry.

The Mercedes Benz diesel engines.

The 1920's brought a new injection pump design, allowing the metering of fuel as it entered the engine without the need of pressurized air and its accompanying tank. The engine was now small enough to be mobile and utilized in vehicles. In 1936, Mercedes Benz built the first automobile with a diesel engine. These were dependable, enduring automobiles that lasted well into the second half of the 20^th century.

The oil crisis

The 1970's arrived and the riding public, who were firmly dependent on foreign oil, yet, unaware of the depth of their dependence, were suddenly faced with a crisis.

In 1973, OPEC, the Middle Eastern organization controlling the majority of the world's oil, reduced the supply of oil and raised the price, sending the United States and other countries into a crisis. Long lines at pump stations started to appear. I was among them. I remember the gas ration system. This crisis was recreated in 1978. Long lines became more longer at the gas pumps. People panicked as they realized that they depended on the consistent supply of oil - foreign oil. Conservation and alternatives became important.

Because of the oil crisis, the riding public looked to diesel fuel which was more efficient and economical and they began buying diesel-powered automobiles. These automobiles include the Mercedes Benz, Isuzu Volkswagen, plus a good portion of Audi, Volvo and Datsun during the 1970's. For the first time, American manufacturers began producing automobiles with diesel engines. General Motors made and sold diesel automobiles in the late 1970's, accounting for 60% of all diesel sales in the United States. This surge of diesel only started to decline in the 1980's when the price of oil had been re-stabilized. Along with this, the automobiles produced by General Motors were basically converted gasoline engines.

No war for oil

As we entered the 21st Century, we had become conscious of and focus on our environment, clean air, the greenhouse effect, and pollution. It has become fashionable to speak of alternative energy, renewable energy, bioethanol, biodiesel, and many kinds of biofuels. Laws were passed in many countries. Nations discussed oil supply and the reduction of dependence on fossil fuel.

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Then came the Iraq war. On March 20, 2003, the United States invaded Iraq. There was debate on the reason why war erupted. Was it because of the so-called Weapons of Mass Destruction? Was it because of oil? At any rate, there has been a popular slogan: No war for oil.

Looking forward to our future, our dependency on foreign oil and its rising prices as well as probable instability due to conflicts that could lead to war will drive us to explore alternatives with a more open mind.

Rudolph Diesel designed his first engine at a point in time when there was no Organization of Petroleum Exporting Countries (OPEC). There was no oil phenomenon. Mr. Diesel simply invented the diesel engine that will use the available local fuel sources such as pure vegetable oil that is what we call now as biodiesel. It has been in used since 1890! These fuels were from sustainable renewable sources, easily accessible by the average person. Diesel’s intention was to empower the small industries, farmers, craftsmen, and artisans who were struggling to survive the steam-engines industrial monopolies. This humanitarian vision is now being revived by us with the resurgence of the biofuel industry here and abroad. Along with this revival of a vision comes the possibility of re-empowering ourselves and our communities.

The biodiesel alternative

What is biodiesel? Biodiesel is made from animal fats and vegetable oils. Scientifically, biodiesel is fatty acid alkyl esters. Biodiesel burns cleaner than petroleum diesel. It can be used in compression-ignition engines just like diesel. Biodiesel is being viewed as an alternative to fossil fuel. The greatest benefit is seen when used in its purest form, 100% biodiesel, or B100.

Biodiesel can be mixed with regular petroleum diesel. This is usually referred to as blends.

There is now a great deal of excitement and optimism surrounding biodiesel as real replacement to petroleum diesel. Since biodiesel is cleaner burning, emissions are greatly reduced. To put this in perspective, biodiesel reduces the carbon monoxide emissions by half. Also, biodiesel is non-toxic and is also biodegradable. Many stations are offering biodiesel now. Biodiesel shows a great deal of promise to help in solving some of our most pressing needs.

When I was young, my father taught me how to operate our rice mills that were powered by Fairbanks and Morse engines. Then he taught me how to run our saw mill that was powered by a huge diesel engine known as Deutz.

As noted earlier, Fairbanks and Morse Company has produced a wide variety of products, including the Fairbanks model Z engine. I had the occasion to be trained in the operation of Model Z engines which runs on gasoline, a blend of gasoline with kerosene, and finally full kerosene.

I had experimented on the use of alcohol as a prime fuel for Model Z engine before it runs on full kerosene. This is actually the idea of fuel blending.

The Biodix initiative

Biodix was formed early this year out of a desire to provide ecologically sustainable local alternatives to fossil fuels. Biodix refers to the group of ERA Petroleum Co. Ltd. and the Amanah Islamic Bank. They regard biofuels as renewable fuels and this is central to their business philosophy.

Ashroff Gaffoor

President ERA Petroleum Company

Biodix is dedicated to expanding the biofuels industry, in particular, the use of biodiesel in the Philippines. The group also strives to increase awareness of alternative fuels and their production. Finally, and most important, Biodix is committed to the empowerment of individuals, farms, and businesses within the Autonomous Region in Muslim Mindanao by providing the information, equipment, products, and services necessary to make the shift in fuel responsibility.

Biodix is a brand of biodiesel that is being developed by ERA Petroleum Company Limited of Hong Kong and the Amanah Islamic Bank.

Senator Tamano and Islamic banking

By Abdel Aziz Dimapunong
Chancellor, Islamic Banking Research Institute
Founding chairman, Amanah Islamic Bank


Last October 2006, I wrote a blog about the founders of Islamic banking based on documented records compiled by the Islamic Banking Research Institute. The research covers historical background of pioneering Islamic banks as well as their founders. These are existing and operational Islamic banks and Islamic financial institutions that were founded in the early 1970s. In the world of Islamic banking, their founders are well known. They were listed by the Institute as composing of only two types: individuals and governments. The individuals are composed mainly of three personalities, the “Bankers Par Excellence”, namely: His Highness, Prince Muhammad Faisal Al Saud of the Faisal chain of Islamic banks, His Excellency, Saleh Abdullah Kamel of the Al Baraka group of banks, and His Excellency, Ahmad Muhammad Ali, president of the Islamic Development Bank. The multi-lateral organization that is otherwise known as the Organization of Islamic Conference was the founder of the Islamic Development Bank whose president from the start has been Dr. Ahmad Mohammad Ali.

It has been suggested by one Grande Dianaton, incumbent chairman and chief executive officer of the Amanah Islamic Bank, that the late Senator Mamintal A. Tamano be considered as among the founders of Islamic banking. This is also the view of Datu Muamar Badio, former chairman of the said bank. Of late, I also received some email messages that echoes the same opinion as that of Dianaton and Badio. The Institute then reviewed its research on the founders of Islamic banking. After some reflections, we consider the late Senator Mamintal A Tamano as among the founders of Islamic banking.

The late Senator started to conceptualize a Muslim bank in the Philippines as early as 1971. That was the time Islamic banking was in its infancy stage. Although some scholars claimed that Islamic banking started in the late 1950s, others insisted that it actually goes back to the sixties. But it is quite popular to claim that it was only in 1972 that stable Islamic banks were established in Egypt. They were the Nasser Social Bank of Egypt and the Faisal Islamic Bank of Egypt.
The concept of a Muslim bank by Senator Mamintal Tamano was later to become the Philippine Amanah Bank that was created by Presidential Decree No. 124. This bank existed from 1973 to 1989. It was the precursor of what is now the Al Amanah Islamic Investment Bank of the Philippines created under Republic Act No. 6848. Senator Tamano played a key role in the establishments of these two banks in the Philippines.
The birth of a Muslim leader


Mamintal Tamano was born in Tamparan, Lanao Del Sur on December 25, 1928. He finished his secondary course at Lanao High School as valedictorian. He graduated Bachelor of Arts in 1952 and Bachelor of Laws in 1953 both at the University of the Philippines, the premier institution of higher learning in the country.

On 31 May 1958 Senator Mamintal Tamano was married to Putri Zorayda Abbas with whom he had nine children. Mamintal Tamano, as a lawyer became Justice of the Peace in the province of Lanao.

Tamano’s marriage life did not stop him to pursue higher education in law. In 1958, he was graduated Master of Laws at the Cornell University, U.S.A. When he returns home, he entered the political arena. He was elected vice-governor for ten years from 1959 to 1968 in the province of Lanao del Sur.

After being a vice governor, Mamintal Tamano was appointed as Commissioner of the Commission on National Integration, a cabinet rank in the Marcos administration. The Commission provides study scholarship to deserving members of the cultural minority groups. They usually belong to the poor but belonging to the upper 15% of the graduating class in high school. Tamano was Commissioner until 1969 when he filed his candidacy for senator. It was this time that I met the then Commissioner Tamano, only months before he became a senator. I served as volunteer to his campaign headquarters at Syquia Apartments until the election was over. Fortunately, he was elected senator. I was among the employees of his office until the Senate was abolished and Martial Law was declared by President Ferdinand Marcos.

In the Philippines where the Muslims were in the minority, it was a rarity for a Muslim to be elected senator. The Philippine Congress has a limited record on Muslim representation in its chamber. Under the American regime, the Senate first elected in 1941 a Muslim sultan by the name of Alauya Alonto. When sovereignty was handed back to the Philippines in 1946, two senators were elected in the First Congress, namely: Alonto and Salipada Pendatun. The Second Congress had no Muslim senator. In 1955 Domocao Alonto, son of Sultan Alauya Alonto, was elected to the Senate to serve in the Third and Fourth Congress. Again, there was no Muslim senator in the Fifth and Sixth. It was on the Seventh Congress that Mamintal Tamano was elected during the 1969 election. In the Eighth Congress two Muslims were elected after the end of Martial Law. They were Mamintal Tamano and Santanina Rasul.


Conceptualizing the Philippine Amanah Bank

As a legislator during his first term, Senator Mamintal Tamano intended to sponsor a bill for the passage of a charter of what he initially called as the Philippine Muslim Bank (PMB). I was then a working student, and I was a registered employee of the Senate under the Office of Senator Tamano, then chairman of the Senate Committee on Banks and Currencies. And I was privileged to have typewritten Tamano’s drafted bill for the charter of PMB. This draft did not materialize into a law because just as soon as the proposed charter was drafted, martial law in the Philippines was declared by Pres. Ferdinand Marcos. The entire Congress (includes the Senate) of the Philippines was abolished.

In later part of 1972, Senator (this time already ex-Senator) Tamano made some revisions to the proposed charter. The name was changed from Philippine Muslim Bank to Philippine Amanah Bank. The draft format was changed into a presidential decree format without a trace to Tamano. The Senator asked me to deliver the draft to a member of the Marcos cabinet who was among his close friends. I delivered the final draft to Tamano’s friend in the Palace. The following year it became the Presidential Decree No. 264, otherwise known as the Charter of the Philippine Amanah Bank.

The early seventies was the age of the oil phenomenon. Enthusiasm on Islamic banking shifted from Egypt to Saudi Arabia. The pioneering Islamic banker was HRH Prince Mohammed al Faisal Al Saud. To his credit, the Islamic Development Bank of Jeddah, Saudi Arabia was established. He was also the founder of the Faisal chain of Islamic banks and financial institutions. Among these were: the Faisal Islamic Bank of Egypt, Faisal Islamic Bank of Sudan, Faisal Islamic Bank of Kibris, Masraf Faisal Al Islami Bahrain, Masraf Faisal Al Islami Niger, Masraf Faisal de Guinea, Masraf Faisal de Senegal, Islamic Finance House, Faisal Finance Institution (Istanbul), and the Dar Al Maal Al Islami in the Bahamas. Another Islamic banker from Saudi Arabia was Sheikh Saleh Abdullah Kamel, a prominent businessman, and founder of the Al Baraka Group of companies. He was very closely related to Prince Faisal Al Saud. Sheikh Kamel was also a founder of a chain of Islamic financial institution. Among them were: the Al Baraka Al Sudani, Al Baraka Bank Bahrain, Al Baraka Turkish Finance House in Istanbul, Al Baraka Islamic Bank Mauritania, Al Baraka Investment Company in London, Al Baraka Finance House in London, Al Baraka International in London, and Al Baraka Banking Corporation in Houston, Texas.

Our Philippine Amanah Bank was followed in 1975 by the first Islamic bank in the Middle East which was chartered in the United Arab Emirates. That was the Dubai Islamic Bank.

In the 1970s, there was no clear legal definition of what Islamic banking means. At least, this was the case in the Philippines. Sharia’ counsels were not popular then. In the Philippines, Islamic banking was not even mentioned in the General Banking Law or the Central Bank Act. There was no reference to Islamic banking. There were no rules and no regulation specific for Islamic banking. People simply thought that by being called Amanah bank, Al Amanah Bank, or any Arabic named bank with Moslem officers and holding branches in predominantly Muslim areas, such a bank could already be branded as an Islamic Bank.

In the 1980s, the Ulama counsels (i.e., the Islamic scholars) were already complaining about misleading the general public, making them believe that the Amanah Bank was Islamic Bank. They insisted that charging interest is violative of Islamic tenets. So, in 1986 the Majlis Da’wah Philippine Al Islami was formally organized by then Mohammad Mauyag Tamano, then Philippine Ambassador to Saudi Arabia. One of the objectives of this organization was to clamor for the establishment of a truly Islamic Bank in the Philippines. That means banking sans interest rates. This organized move was partly inspired by Malaysia’s successful passage in 1983 of its Islamic Bank Act 1983, and by the eventual establishment of the Bank Islamic Malaysia Bhd on July of that year. This bank was designed to cater for the banking of Malaysia’s predominantly Muslim population who perceive the western banking to be inappropriate for their needs as Muslims.


The return of Tamano to the Senate and the creation of Amanah Islamic Bank

Upon the end of Martial Law in March 1980, the Kilusang Bagong Lipunan (KBL) had become the ruling party in the Philippines. During that time, other parties were being formed. Senator Gil Puyat resumed the Presidency of the Nacionalista Party upon the strong representation of high officials of the Party including Vice-President Fernando Lopez, and Speaker Jose B. Laurel Jr., President Gil Puyat issued Executive Order No.1, Series of 1980 which authorized him to create an Ad Hoc Committee. The revitalization and strengthening of the Nacionalista Party was the purpose of the Ad Hoc Committee. But this suffered a setback when Gil Puyat passed away on March 22, 1981 of a heart attack. The task of revitalizing the party was then pursued by the Ad Hoc Committee of which Mamintal Tamano was a member.

With his return to politics, Tamano became a member of President Corazon C. Aquino’s cabinet as Deputy Minister of Foreign Relations in 1986.

On May 11, 1987, elections were held for 200 members of the House of Representatives and 24 Senators. Elected as senators were 22 candidates of the Aquino coalition Lakas ng Bayan, namely: Jovito Salonga, Liberal Party; Agapito Aquino, Lakas ng Bayan; Orlando Mercado, Unido; John Osmena, Unido-Lakas; Edgardo Angara, Independent; Alberto Romulo, Lakas; Leticia Shahani, Lakas; Neptali Gonzales, Lakas; Rene Saguisag, Independent; Joey Lina, PDP-Laban; Wigberto Tanada, Nationalist bloc; Sotero Laurel, Unido; Heherson Alvarez, Lakas; Raul Manglapus, NUCD; Teofisto Guingona, Bandila; Vicente Paterno, Independent; Vitor Ziga, Independent; Ernesto Maceda, Unido; and Aquilino Pimentel, PDP-Laban; Ernesto Herrera, Laban; Mamintal Tamano, Laban; Santanina Rasul, independent. Only two opposition candidates make it to the Senate: Joseph Estrada and Juan Ponce Enrile, both from the opposition coalition Grand Alliance for Democracy.

Mamintal Tamano’s term as elected Senator of the Philippines was for the period 1987 to 1992. As a Senator, he worked for the autonomy for the Muslims and the rest of Mindanao and on Mindanao’s natural resources. Tamano also worked for the creation of a new Islamic Bank.

By 1987, there were already thirty-three Islamic banks in the Islamic countries and nine others in the western world.

In 1988, the charter of the Al Amanah Islamic Investment Bank of the Philippines was also drafted. By this time, the Philippine Amanah Bank was already perceived to be a total failure. Actually, it was already bankrupt.

To abolish and replace the PAB with a Sharia’ compliant bank, a special law, Republic Act No. 6848 was enacted in 1989. In the formulation of this law, the international Muslim bankers were consulted. Dr. Abdullah Omar Nasseef, then Secretary General of the World Muslim League, was among those consulted. Prominent Muslim bankers like Sheik Hassan Kamel and the Al Baraka Group had also been asked for advice.
On January 26, 1990, President Corazon C. Aquino signed into law R. A. No. 6848, otherwise known as the Charter of the Al Amanah Islamic Investment Bank of the Philippines. On June 25, 1991, I was designated by the office of the President of the Philippines to organize this bank pursuant to the provisions of its charter.
Republic Act No. 6848 repealed Presidential Decree No. 264, the charter of the Philippine Amanah Bank. Hence, this old bank was abolished. The services of its board of directors and all its employees were not terminated outright but they were reclassified by section 49 of the new law, RA 6848, to continue as personnel compliment "in the interim" until the Islamic Bank shall have been properly organized.

On January 16, 1992, an audience with former President Corazon C Aquino was granted by Malacanang Palace. Then Senator Mamintal A Tamano, then chairman of the Committee on Banks and Currencies attended the meeting with Her Excellency in the Palace, with me as the sole government representative to the Islamic Bank. The senator and I briefed Her Excellency on the legal manner of organizing the Al Amanah Islamic Investment Bank of the Philippines, or Islamic Bank, for short. The senator and I were glad to have the blessing of her Excellency.

After coordinating with concerned government agencies and the private stockholders, the Islamic Bank was officially organized by a general shareholders meeting on April 28, 1992 in accordance with its charter. The chairman and president of the abolished Philippine Amanah Bank were disqualified and therefore not elected nor appointed to any position of the new Islamic Bank.

At the time the Islamic Bank was organized in 1992, the national government was the controlling stockholder and there were very few private stockholders with minimal investments. However, when the provisions of RA 6848 were implemented, the number of private stockholders rose to several hundreds in 1993, and more in 1994. So the equation on ownership was reversed gradually owing to the failure of the government to put up its share (Series "A") of investments. Only the private stockholders were able to put up investments by subscribing to Series "B" and "C' shares. And so from 1994, the private stockholders held the controlling interest.



The enactment of RA 6848, the charter of the Al Amanah Islamic Investment Bank of the Philippines was a very important development in the area of international banking. In the years to follow, the Islamic Bank charter was believed to be a model legal framework for Islamic banking and finance that could be adopted by other countries. This charter is applicable to any country whether it belongs to the World of Muslims or to the Western World.

Today, the principles of Islamic banking now reverberate not only in the global banking industry but also in many sectors of the business world and some academies of higher learning. The ethical standards of review that are now being introduced by the so called Sharia’ advisory counsels, such as the one provided in the Islamic Bank charter, is now being adopted by western business entities.

The Sharia’ advisory boards not only consider the conventional project viability and feasibility – but they also look beyond the traditional way. This is the “Sharia’” standard which could include appropriateness, fairness, trust, transparency, the ethical nature of transactions, as well as social responsibility, especially to the poor, the wayfarer, those afflicted with illness, victims of calamities such as the “Tsunami”, and all those in need. That is why the charter provides for “zakat” or tithe. It also provides for “Qard Al Hassan” which means benevolent loans. A “zakat” is paid by every God-fearing believer for the benefit of the poor and the needy. A benevolent loan (qard al Hassan) does not bear interest and repayment may not be expected. It is provided as a loan in much the same manner as a developed country providing development assistance to an underdeveloped country. It is being practiced by the government of the United States of America through the USAID. It is also being done by the government of Japan through JICA. In the Philippines, it is being done by the government of Australia through its Direct Aid Program (DAP). These foreign nations are providing benevolent loans and financial assistance without them knowing that these loans are in the form of “qard al Hassan”.

All business dealings with Islamic banking, finance, trade, commerce, and, in fact all about Islamic economics, can be found in a common reference of all Muslims of the World today and tomorrow. This is the standard under Sharia’. It is common to all Muslims around the World. It is a standard that will never change for all time. That is a fact about Sharia. Its foundation, the Holy Qur’an will never change. The Hadith likewise will never change. Any deviation from the standard that was set by the Holy Qur’an and the Hadith is called “bida’a” and it will be rejected by any real Sharia’ counsel. Said “Bida’a“or deviation from standard will be returned to innovators. There is no compromise. For instance, interest charges maybe disguised as bank charges. Islamic banking under the principles of Sharia’ represents a standard way of economic life. Muslims and non-Muslims alike will learn from these moral standards in all business deals. .

In its mandate to formulate the rules and regulations for the Islamic Bank, the Monetary Board in the Philippines was required by law under Section 48 of RA 6848 to observe “the universal principle of the Islamic Sharia’”.
Paramount of this significant development in international banking is the fact that the Muslim way of doing business is gaining understanding and acceptance in the world of business. This could be the start of international harmony among nations.
The charter of the Islamic Bank provides for a Sharia’ Advisory Counsel to review transactions of the bank in accordance with the Sharia’ standards. The law also provides that the Board of Directors shall sit as a Board of Arbitration to settle intra-corporate disputes among shareholders and investors. To implement this mandate, the Board of Directors was authorized by this law to set the rules and procedure that it shall follow in the arbitration while the Monetary Board was mandated to formulate the rules and regulation

The bank was formally organized on April 28, 1992. Soon after, the Rules of Practice and Procedure before the Board of Arbitration was adopted and promulgated by the Board of Directors. Even if it was rather late, the Monetary Board also issued the Implementing Rules and Regulation (IRR) for the Islamic Bank under BSP Circular 105.
Exactly ten years after its adoption today, the thickness of the IRR is back to the thinness of what it should have been. Today, with some exceptions the IRR is back to being the image-file of the charter of the Islamic Bank. It should now be known as the New Rules and Regulations (NRR) reflecting the new laws of the Millennium in the Philippines, such as the New Central Bank Act, and the New General Banking Law of 2000. And a new development in international banking and finance.

When the IRR for the Islamic Bank was formulated by the Monetary Board in 1996, it includes all sort of rules and regulations applicable to all banks in general including the receipt and payment of interests (riba) which is what the charter prohibits, made illegal and punishable. The rules and regulations applicable to the conventional banks under the old General Banking Act, RA 337 was also made part of the IRR for the Islamic Bank. Sad to say, the Monetary Board in the Philippines never had a Muslim member. The Monetary Board cannot be blamed for something they are not familiar with. Consequently, the Islamic Bank regular lobbyists, namely: the Filipino Muslim Chamber of Agriculture and Fisheries, Inc., ( a major stockholder of the Islamic Bank) and the National Alliance of Muslim NGOs of the Philippines lobbied in Congress relentlessly to remove, revise, or reconstruct the general banking law..
Consequently, Congress not only revised the old GBA, RA 337, but replaced it with the New General Banking Law (GBL 2000), RA 8791. Under this new law, some of the powers of the old Monetary Board were clipped, most of them transferred to the Department of Finance, and some of them to the Securities and Exchange Commission (SEC). And yet some of them were eliminated. Some other banks are now governed by other banking laws, placing the Monetary Board as “still supervising” but along with other authorities.

There are now many banking laws in the Philippines. Thrift banks, rural banks and cooperative banks are now governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code. Cooperative banks are not only monitored but also supervised by the Cooperative Development Authority. Section 94 of 8791 also provides the "phase out of Bangko Sentral Powers over building and loan associations. All the relevant supervisory and regulatory powers of the Monetary Board under that Section were transferred to the Home Insurance and Guarantee Corporation.
As for the Islamic Bank, it is now governed by special laws as provided in Section 71, RA 8791 - rather than the general banking law. This governance covers the "organization" of the Islamic Bank, "its ownership and capital requirements, powers, supervision and general conduct of business".

As an update to IRR under BSP Circular 106 and in pursuance to the provisions of the new GBL 2000, the Monetary Board, in its Resolution No. 2154 dated December 15, 2000, approved Circular No. 271, Series of 2001, otherwise known as the regulations implementing Section 3 and other related sections of R.A. No. 8791. Under this new rules and regulations (NRR), the Islamic Bank is classified as one kind of its own, with its own sets of rules and regulations as distinguished from the other banks.

It has been a dozen years since the Philippines had no Muslim Senators. The 10th, 11th, 12th and 13th Congresses mark the longest period in Philippine history without a Muslim senator. During this period of time, however, the Muslims enjoyed a regional autonomous government in the Autonomous Region of Muslim Mindanao (ARMM). Serving their banking needs is being done by the Amanah Islamic Bank. This is a legacy of Senator Mamintal A. Tamano. It is but fitting to formally recognize him as the brain and founder of the Islamic Bank and its predecessor, the Philippine Amanah Bank. Because he started them all in 1971, Mamintal Tamano is certainly among the founders of Islamic banking worldwide.

Senator Mamintal Tamano passed away on May 18, 1994. Inna lillahi wa inna ilaihi raji-on. (Surely we belong to Allah and to him is our journey).