Saturday, 21 April 2007

Philippine Bonds Slump, Peso Strengthens: World's Biggest Mover

By Karl Lester M. Yap
Original report in Bloomberg

April 20 (Bloomberg) -- Philippine bonds fell, the biggest fluctuation of any government debt market today, after the central bank introduced new rules to curb growth in money supply. The peso gained, headed for a third weekly advance.

Five-year bonds fell the most in at least a month after Bangko Sentral ng Pilipinas yesterday expanded access to its deposit accounts, offering higher interest rates to government pension funds, state-owned companies and some investment trusts. They were previously available only to banks. The central bank held its overnight policy rate at 7.5 percent and maintained lower rates for larger deposits.

``Everybody's expecting yields to go up,'' said Horacio Ricky Cebrero, executive vice president and treasurer at East West Banking Corp. in Manila. ``The new measures were meant to address the existing excess liquidity in the market.''

The yield on the 5 3/4 percent note due February 2012 rose 18 basis points, or 0.18 percentage point, to 6.26 percent, according to the Philippine Dealing & Exchange Corp.'s daily 11:15 a.m. fixing in Manila. The price fell 0.7341, or 73 pesos per 10,000 pesos face amount, to 97.8829. Bond yields move inversely to prices. The yield on the one-year securities gained 45 basis points to 5.21 percent.

The peso, which is near its highest in six years against the dollar, rose 0.5 percent to 47.505 in Manila, according to data compiled by Bloomberg. That was the biggest gain since March 8.

``The immediate implication is that the peso may appreciate as peso interest rates become more favorable,'' said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. Higher bond yields may spur demand for pesos, strengthening the currency, he said.

Peso Advance

Since the start of the month, the peso has gained 1.6 percent, driven by record inflows from Filipinos working abroad. Remittances jumped 25 percent in February and are expected to reach $14 billion this year after surging 19.4 percent last year.

An appreciating peso and lower yields reduce payments on overseas debt, freeing cash for roads, bridges and other infrastructure to attract investments.

President Gloria Arroyo wants to accelerate growth to at least 6.1 percent this year from 5.4 percent in 2006. A rising peso also damps inflation by holding down the cost of imports.

The central bank's longer-term deposit accounts pay as much as 8 percent interest on placements from two weeks to six months. That compares with an average 3.3 percent that lenders pay depositors. Interest payments for deposits at the central bank exceeding 5 billion pesos ($105 million) are 5.5 percent. The new policy takes effect on May 10.

Money Supply

Bangko Sentral's broadest measure of money supply grew almost 23 percent in both January and February, the fastest pace in at least two years. The increase was fueled in part by cash taken by lenders from the central bank's vaults after the introduction of tiered interest rates for different sized deposits in November.

Bangko Sentral Deputy Governor Diwa Guinigundo said money supply growth will slow to less than 20 percent, declining to say when.

National Treasurer Omar Cruz said before markets opened that government bonds will ``react well to such short-term monetary measures as they provide greater assurance about inflation being under control.''

The world's biggest movers are based on changes in price or yield and are screened for the size of the market and amount of daily trading.

To contact the reporters for this story: Clarissa Batino in Manila at ; Karl Lester M. Yap in Manila at .

Friday, 20 April 2007

A talk with GMA (2)

By Tony Lopez
Original article at The Manila Times

Here is the second part of my recent interview with President Arroyo:

Q: Can you say that the economy will grow 8 percent in 2008, 9 percent in 2009, and 10 percent in 2010?

PGMA: I would rather under-promise and overdeliver. My Medium Term Plan does say 7 percent by 2010. (Presidential Chief of Staff) Joey (Salceda) says we can do higher than that, provided we do some reforms.

In a frictionless society that could be our potential. To achieve that potential, we have (to remedy the) massive backlog in investments and infrastructure. It’s only now that we’re beginning to have the long overdue investments in major infrastructure that can take our growth rate to a new level.

What that growth rate can be, let’s see. Let’s see how we can work on removing the frictions in our economy to be able to achieve our target.

Q: When you say friction, politics?

PGMA: Politics, transaction costs, bureaucratic dealings, things like that.

Like for instance, if a project is to be financed by foreign debt, it takes so long to bid it out, and if awarded, it goes to the creditor, for their approval and you don’t know how long it will take.

And if your project is also on foreign debt, before you could even start bidding out the project, you must bid out the consultant.

And it takes seven months to bid out the consultant. So you know, things like that. Look at the privatization, the number of failed bids. So those are the frictions, aside from the political noise, which is a very obvious friction. But you also have economic friction.

Q: Is it safe to assume your Team Unity ticket will win the majority of senatorial seats?

PGMA: I’m completely focused on governance, on guiding the economy, on assuring peace and order. I’m not pre-occupied with the elections, although I do hope that the elections will be about the future rather than the past, about policies and issues rather than personalities and history. I have great faith in Filipino voters. The greatest test of a candidate’s character is his or her position on issues. Are they new ideas or old prejudices?

Either we need to make tough choices or do what is expedient and popular, to win. So I leave it to the people to decide.

But what you can count on me is more reform legislation to keep the nation moving forward. But of course, it will be easier to get that if we have the majority.

It’s easier to get the reform legislation done (if we get majority of the Senate).

Q: Any pending reform legislation on the economy?

PGMA: We will still want to continue tax reform. Like incentives rationalization, amend­ing the Electric Power Industry Reform Act (Epira), and number of important legislative reforms.

Q: Why do you have to amend the Epira?

PGMA: That’s really part of this friction that I’m talking about. For without (amending) it, you cannot set up the right infrastructure to bring down power rates. These are frictions coming from difficult provisions, like the preconditions in the Epira such as the 70 percent minimum for privatization of state generating plants. Also, imagine to bring down power rates, you have to go to the ERC (Energy Regulatory Commission (for approval). Who’s gonna oppose reduction in power rates, anyway? That’s what’s required in the Epira.

The Supreme Court has ruled that you cannot do that without hearings.

That’s what the law says. So those are examples of the frictions you have to overcome when you do economic reform. We have to lower electricity rates.

Thursday, 19 April 2007

A talk with GMA (1)

By Tony Lopez
Original article at The Manila Times

Recently, I had an exclusive interview with President Gloria Macapagal-Arroyo at the presidential palace. It was one of the very few she granted a journalist this year. I am running portions of the interview (with some editing) in three parts. Here is the first part:

Q: Where and what will the Philippines be in the year 2010?

PGMA: My vision goes beyond the end of my term in 2010. We will take our place among the First-World countries in 2020. I would hope that by the end of my term in 2010, we would have made substantial progress toward that.

By 2010, we should have hopefully $2,000 per-capita income. Our Medium-Term Plan says that we will have 7-percent economic growth by then.

Seven years of 7-percent economic growth will make us graduate from poverty.

We would like to bring it (poverty incidence) down from 28 percent (of families) in 2000 to 18 percent in 2010.

As for competitiveness, we will be in the top one-third (among 140 countries) in competitiveness ranking. (To do that), we would want to invest more than P1 trillion in infrastructure.

Q: An obvious strength of your administration has been your success on the economic front. To what do you attribute your success?

PGMA: Focus. I’m very, very focused. Completely focused and disciplined on the economic goals. I don’t get caught up in every political barb that comes my way. I have goals and then I really track compliance with these goals. And it’s not been easy to comply with the goals.

For instance, we had goals on reducing our fiscal deficit, reaching a balanced budget by 2010, which the economic managers want to happen in 2008.

To do that, we had to raise taxes. That’s stepping on a lot of toes. The (tax) legislation is not pleasing for everybody. The antitax cheat drive is not pleasing to everybody. And then getting value for money for the service, you have to drive the civil servants, reduce bureaucracy and red tape, improve services to the consumers and to the business community.

And that’s why my popularity suffered. But it’s a price worth paying to see the Philippines turn around. So we have been able to produce five million new jobs.

In 2001, for instance, I said that ICT would be a growth sector. But we had to improve the cost of connectivity and we had to improve the human resource development.

And here, six years later, from a virtually nonexistent industry, we have half a million (seats) already, not just in call centers but in the BPO (business-process outsourcing) industry.

My single-minded focus is on delivering genuine reform, paying for the vital investments that are consistent with a modernizing nation. They’re not easy, but they’re essential.

When I had to work on the value-added tax (VAT), I was very unpopular. I could have just taken the easy way out. But then, the economy would perish. So it’s reform or perish. I would rather choose reform. Somebody else could pursue the populis policies that would eventually fail. I wouldn’t want to do that.

Q: The Philippines has become one of the most competitive areas for call centers . . .

PGMA: They just talk only about India and the Philippines (when it comes to call centers). Everybody else has a very minor share. We are going to earn from business-process out­sourcing $3 billion. This year, we will have half a million jobs (in call centers and BPO). In the year 2000, there were only about 2,000 (jobs in call centers).

Q: How come we’re so competitive now?

PGMA: It’s the (lower) cost of connectivity. And our human resources. Good English-speaking, very good human resources. The same caring that makes our nurses famous aside from their competence. We have a very short solution time¯1.4 (calls) is our average solution time, shorter than India’s and other countries’.

(To be continued)

Wednesday, 18 April 2007

Three million Filipinos rise from poverty

Original report from Gov.Ph News

The incidence of poverty in the country has continuously been decreasing, what with the bullish economy and the progress-oriented and pro-poor programs under the Arroyo administration.

Over three million Filipinos have so far risen from extreme poverty since 2000, Cabinet Secretary Ricardo Saludo said in a statement today, citing a report by the World Bank, the world’s leading institution for development.

The WB estimates that by the end of this year, only some 8.4 percent of Filipinos would be living on a dollar a day – the standard by which the said institution measures extreme poverty.

Saludo said the WB forecast is buoyed up by the continuous improvement in the Philippine economy, which is projected to grow by as much as 5.7 percent this year.

With this, the WB believes that some three million Filipinos have been lifted so far from extreme poverty, or a decline to 8.4 percent at the end of 2007 from the 13.5 percent in 2000, reflecting a slash of 5.1 percent, according to figures released by the WB as published in the "East Asia Update: Managing Through a Global Downturn."

"Now that the government has increased its fund sources and earnings, public infrastructure and public service will surely follow, thus providing employment opportunities and expanding education, health, housing and other services for the people," Saludo said.

"Through these measures, the government shall accomplish its dream of slashing by half the number of poor Filipinos by the year 2010," he added.

Tuesday, 17 April 2007

PGMA: Flourishing RP economy due to tough fiscal reforms

Original article at Gov.Ph News

A flourish of fresh and favorable outlooks on the Philippine economy marked by lower interest and inflation rates has resulted in renewed investor confidence and a stronger peso, President Gloria Macapagal-Arroyo said today.

In a roundtable discussion with National Economic and Development Authority (NEDA) Director General Romulo Neri, one of her most trusted economic managers, the President said this flourish was brought about by the "tough decisions" to implement radical fiscal reforms, most notably the Expanded Value Added Tax (E-VAT) Law.

The EVAT Law increased the rate of VAT imposed on goods and services from the previous 10 percent to 12 percent.

It also imposed VAT on other high impact luxury and previously VAT-exempt goods such as fuel and Sport Utility Vehicles, more commonly known as SUVs.

Because of the E-VAT Law, the President said, the government was able to raise important cash resources that were used to fund vital infrastructure, health and education projects without the need of external borrowing from financial institutions.

The government was also able to provide "soft loans" to Filipino entrepreneurs who availed themselves of the grants given to small and medium enterprises (SMEs) to put up their own businesses.

All these activities did not go unnoticed as the International Monetary Fund (IMF) forecast recently that the Philippines' economic growth would be "higher than average" among its neighboring countries.

Even the World Bank, in its twice-a-year Philippine economic monitor report, had predicted three consecutive years of economic growth, a first for the country and the region since 1970.

Neri pointed out that because of these positive indicators, investor confidence on the country had picked up.

He reported that for the first quarter of 2007, the Board of Investments had recorded a 51 percent increase in foreign investments, resulting in a P28-billion influx of fresh investments.

He said these investments were mainly concentrated in the areas of the electronics sector, call centers and hotels and resorts.

He added that the lending activities of banks have increased by 10 percent due to the low interest rates on their loans, making it palatable to the prospective borrowers and investors.

Furthermore, inflation is at its lowest in 10 years at 2.2 percent, making borrowing from banks more appealing, according to Neri.

This trend in borrowing, he said, will translate to more jobs as more entrepreneurs put up their own businesses.

The President thanked the SMEs and encouraged those planning to put up their own business to partake of the flourishing economy.

"Ako'y nagpapasalamat sa mga nagpo-produce ng kayamanan ng ating bansa, maging large, medium, small or micro-enterprise, yung mga nagtra-trabaho, yung mga naglilingkod sa taong bayan," she said.

CebuPac reviving P1 1-way seat sale

By Lennie Lectura
Original report at the Business Mirror

CEBU Pacific Airways is reviving its P1 one-way seat sale for all of its 20 domestic destinations after the promotion received “overwhelming response.”

The airline, part of the Gokongwei group, announced Monday that it has allocated more than 50,000 seats for the seat sale running from April 16 to April 22 or until seats are sold out; and is good for travel from June 16 to December 15, 2007.

“With the overwhelming response we received from our recent P1 seat sale, we are bringing back the domestic seat sale to give those unable to avail themselves of this earlier another chance to get their seats. We hope that the public will take advantage of this seat sale to explore what our wonderful country has to offer,” said Candice Iyog, vice president for marketing.

The seat sale is expected to further boost domestic travel during the traditionally slow travel season. “With this offering, many people will be able to afford air travel as they visit relatives, friends, and go around the different destinations in our country. We remain steadfast to our commitment to bringing air travel closer to more Filipinos,” added Iyog. The seat sale fare is nonrefundable and is exclusive of government taxes and surcharges.

Now in its 12th year, Cebu Pacific services the most number of domestic destinations and has the youngest fleet in the Philippines at just one year old—14 brand-new Airbus aircraft for its 20 domestic destinations and soon to be eight regional destinations with the addition of Taipei beginning June 13, 2007.

People feeling economic gains, Arroyo says

By Mia Gonzalez
Original report at the Business Mirror

PRESIDENT Arroyo on Monday sought to dispel the findings of a private pollster indicating that most Filipinos feel worse off now despite her administration’s intensive campaign to let the people partake of the fruits of her economic reforms.

In her first televised roundtable conference since her husband, Jose Miguel, was confined for a major surgery last week, the President cited the forecast of the International Monetary Fund and the World Bank, that projected 5.8-percent and 5.7-percent growth for the country, respectively.

She said that the optimism displayed by the leading foreign multilateral institutions is based on good economic figure brought about by her fiscal reforms, especially the expanded value-added tax.

She said that such projection would mean that this year, there will be “more jobs and trade, and bigger earnings for the people.”

“Because of this, there will be even less Filipinos living on just $1 per day,” she said.

Mrs. Arroyo said that economic growth is nurtured by investor confidence through fiscal reforms like the expanded value-added tax which has also helped lower interest rates and strengthen the peso.

When Socioeconomic Planning Secretary Romulo Neri told Mrs. Arroyo that foreign direct investments grew by 51 percent in January mostly in electronics, call centers and tourism, the President asked her guest, Councilor Cynthia Bawag of Alfonso, Cavite, whether people in her area are feeling such impact.

Bawag said that in her observation, she has noticed that more formerly jobless people are employed particularly in electronics, prompting the Chief Executive to say: “Praise God. Thank God.”

The President asked Bawag if she has felt the impact of reduced fuel prices and stable prices of goods, which she again attributed to her fiscal reforms, Bawag again responded positively.

She also said that the government will continue to help the export sector remain competitive, even with the export growth forecast of 10.9 percent despite a stronger peso.

“When the peso was getting stronger, the people are happy because fuel prices are lower, prices of imported goods are lower. Romy [Neri] is worried about the exporters but we cannot just stop the peso from getting stronger so what we are doing is to help exporters become more competitive,” she said.

Neri said that the government is trying to find ways of lowering the freight costs of exporters. The President told Bawag that such efforts are being made to let the people feel “as soon as possible the fruits of our reforms.”

Pulse Asia said in its latest survey on the national quality of life that even with the administration’s insistence that the people are beginning to enjoy the fruits of economic progress, 54 percent still feel that their quality of life has worsened between 2004 and 2007.

It also showed that nearly two out of three, or 65 percent, feel the national QOL, or the quality of life, for most Filipinos has worsened since 2004.

Teves sees 6.1% GDP rise in 2007

Original report at the Manila Bulletin

WASHINGTON (Dow Jones) — The Philippine Finance Secretary over the weekend said the government expects gross domestic product to grow 6.1 percent this year versus 5.4 percent in 2006 and sees the country’s currency appreciating further if the government can deliver better macroeconomic results.

"I see, of course, the currency continuing to improve if we are successful in continuously improving our macroeconomic fundamentals," Margarito Teves told Dow Jones Newswires in an interview on the sidelines of the International Monetary Fund and World Bank’s weekend meetings in Washington.

He declined to give a target range for the country’s currency, the peso, saying that currency management was a job for the central bank.

Last week the peso rose to its strongest levels in six years against the US dollar. The dollar was at P47.89 on Friday in New York foreign exchange markets and economists believe it could see further gains due to a strong stock market and money transfers by millions of Filipinos working overseas.

The US is the Philippines’ largest export market, accounting for around 18 percent.

"Any peso appreciation should as much as possible be gradual rather than very abrupt or steep to allow precisely those affected by it to gradual adjust to the new challenges or new levels," Teves said.

He said small and medium-sized exporters were taking the biggest hit due to currency appreciation and the government should consider measures to help.

"Especially those (exporters) that are sourcing their raw material locally that are hurting more than those importing their raw materials," he said.

Teves said the government would consider additional tax increases later this year to boost government revenues after a disappointing start in the first two months, including a new tax on overseas Filipinos.

"We must continue to improve on our effort to increase revenues through continued implementation of some tax administration measures," Teves said. He said the government would try to improve coordination between agencies to identify individuals and companies who are underreporting taxable income.

"We’ve not had a very good performance for the first two months with respect to revenue collection," he said.

Low revenue collection as a ratio of GDP has been a concern among credit rating agencies, which rate Philippine credit several notches below investment grade.

Teves said he supported a new tax on rich overseas Filipinos, who haven’t been taxed in the past, but the finance ministry hadn’t conducted a detailed analysis of such a measure.

"It’s a good idea in terms of the principle of taxation — it’s supposed to be based on the ability to pay," he said.

Teves added that the idea had been proposed to him by rich overseas Filipinos who thought they could do more to support the government. "They themselves have seen that it’s not equitable."

Teves also said further mergers in the country’s state banks could boost their competitiveness and capital base.

"There could be room for the Land Bank of the Philippines and the Development Bank of the Philippines to consolidate," he said.

Monday, 16 April 2007

Gov't fast-tracking completion of 8 priority railway projects --Remonde

Original report from Positive News Media

MANILA, April 17 (PNA) - The government is fast-tracking the completion of eight priority railway projects in Metro Manila and outlying provinces to provide an alternative, affordable, efficient and environment-friendly mode of transportation to the commuting public, according to Presidential Management Staff (PMS) Director General Cerge Remonde.

In his weekly press conference in Malacañang on Monday morning, Remonde said, the bulk of the projects involves the interconnection, improvement, upgrading and extension of the mass transport system in Metro Manila (Light Rail Transit 1, LRT 2, and Metro Rail Transit 3) and the Northrail and Southrail systems and will cost US $ 4.23 billion or about P202.8 billion.

Remonde said when the projects are completed, the provinces of Bulacan and Pampanga in the north and Laguna, Quezon and Bicol in the south will be easily accessible to anyone from Metro Manila via the Northrail and its interconnections with the Southrail and LRT and MRT systems.

"These priority railway projects will cut travel time, reduce travel and transport cost, abate traffic and air pollution, attract investments and stimulate overall countryside growth," he said.

Aside from this, the PMS chief said the railway projects "shall promote ease in mobility of passengers, encouraging both local and foreign tourists to travel around the country."

"Railway transport shall likewise encourage the development of areas outside Metro Manila like Subic and Clark in Central Luzon; Cavite, Laguna, and Quezon in Region IV-A; and Albay and Sorsogon in the Bicol region. Ease of mobility and our growing information and communication infrastructures will encourage investors to set up business operations outside Metro Manila where office spaces for back-end operations are still available," Remonde said.

He explained that seven of the railway projects are in the Luzon Urban Beltway and include five new lines namely:

Northrail from Caloocan to the Clark Freeport Zone in Pampanga, a double-track at grade and elevated carriageway, utilizing diesel-powered locomotives or rolling stocks.

Light Rail Transit (LRT) Line 1 North Extension, a 5.4-kilometer elevated line from LRT 1 in Monumento, Caloocan to Metro Rail Transit (MRT) 3 in North Avenue, Quezon City station.

LRT Line 1 South Extension, from Baclaran station to Bacoor, Cavite, a length of 11.7 kms. with eight stations, with an option for two additional stations.

LRT Line 1 Ninoy Aquino International Airport (NAIA) connector from Baclaran station to NAIA, a 6.2-km. extension with four single track passenger stations.

This will serve around 40,000 passengers per day during the initial year of operation, and puts the country’s premier airport at par with other international airports served by commuter trains.

MRT 7 from Tala, Caloocan City to MRT 3 North Avenue Station, a combined 23-km. MRT and 22-km. road access from the Marilao exit of the North Luzon Expressway.

The MRT commences at Tala, passes through Lagro/Fairview along Quirino Avenue in Novaliches, then along Commonwealth Avenue up to the North Avenue-MRT 3 station.

It also provides for an elevated rail connection to LRT 2 at the Katipunan-Aurora Blvd. section.

In addition, the existing Southrail will be extended from Albay to Sorsogon (Southrail Phase II), a 112-km. new railway line.

The three existing railways to be rehabilitated are:

The Northrail-Southrail linkage from Caloocan to Calamba City, Laguna.

The Southrail Project Phase 1-A from Calamba, Laguna to Lucena City, Quezon.

The Southrail Project Phase 1-B from Lucena City, Quezon to Legazpi City, Albay.

Remonde said Phase 1-A of the Southrail Project is set to be completed in December 2009. The Northrail from Caloocan to Clark and the Northrail-Southrail Linkage Phases 1 and 2 will be finished in 2010.

The LRT Line 1 South Extension and MRT 7 are both slated for completion in 2011, and the Southrail Project Phases 1-B and 2 from Lucena to Sorsogon in 2013.

These eight priority railway projects will be funded from national government appropriations, official development assistance, corporate funds of government-owned and controlled corporations, and private sector investments, Remonde said. (PNA)

Solons propose monitoring of foreign-assisted projects

Original report from Positive News Media

MANILA, April 17 (PNA) -– Lawmakers on Monday proposed the creation of a Cabinet monitoring team to oversee the implementation of foreign-assisted projects and programs.

Bulacan Reps. Wilhelmino Sy-Alvarado and Zamboanga del Sur Rep. Isidoro Real made the proposal following reports that over US$ 57 million fine have been imposed by foreign aid donors to the Philippine government for delayed implementation of foreign-funded projects and programs.

The two lawmakers said the hefty amount was a wasteful expenditure of government’s limited resources, stressing the importance of addressing this serious problem immediately.

“The President should immediately create a monitoring agency to ensure that foreign-aided projects and programs are implemented on schedule. The delays are one of the major causes of the country’s funds hemorrhage and this cannot go on like this forever because we have other priorities for the people,” Real said.

Alvarado said concerned agencies should justify the delays in implementing foreign-assisted projects or programs.

“Something must be done to prevent project delays in the future because it is our government that is shouldering the payment for fines imposed by foreign donors, which should otherwise go to urgent ocial services and infrastructure projects,” Alvarado said.

Alvarado said that based on the documents from the National Economic and Development Authority (NEDA), the commitment fees, which represent penalties for delayed foreign-assisted programs and projects, totaled US$ 56.57 million at the end of year 2006, reflecting an 11.4 percent increase from US$ 50.9 million in 2005.

Alvarado said among the agencies that had pending donor-assisted projects and penalties are the Department of Public Works and Highways, US$ 10.18 million; Department of Transportation and Communications, US$ 5.63 million; Department of Finance, US$ 4.27 million; Department of Agriculture, US$ 4.16 million; National Power Corp, US$ 3.79 million; Department of Agrarian Reform, US$ 3.65 million; Department of Environment and Natural Resources, US$ 3.68 million; Department of Education, US$ 3.47 million; Department of Social Welfare and Development, US$ 2.85 million; and, Pasig River Environment and Rehabilitation Sector and Development, US$ 2.26 million.

The fines were reportedly imposed by the Asian Development Bank amounting to US$ 31.3 million; World Bank, US$ 17.28 million; and others, US$ 7.99 million.

The two lawmakers said the amount could have gone a long way if spent to anti-poverty, housing, health, education or livelihood projects for the people.

They also warned that if not addressed, the project delays may affect the confidence of the country’s foreign donors. (PNA)

Slow pace of public spending worries experts

By Jun Vallecera
Original report in the Business Mirror

THERE is increasing dissatisfaction in and out of government over the slow pace of public spending, particularly on infrastructure, and how this has made monetary management, for example, more complicated.

The private sector has taken notice and has advocated for intelligent and more rapid infrastructure development than is displayed by Malacañang at the moment.

The Economic and Policy Reform Agenda (Epra), a private advocacy group led by former socioeconomic planning chief Cielito F. Habito, has noted the diminishing public spending on infrastructure, down to only 2.2 percent of local output or the gross domestic product in 2005 from 3.5 percent in 2000.

Senior government officials, speaking anonymously, said on Friday the strengthening public sector has created more space for spending on vital projects as ports, roads and bridges.

“Surely there is scope for additional spending,” officials said, more in frustration than anything else.

That government has mishandled its own objective is shown by the Bureau of Treasury’s penchant for rejecting bids or canceling the sale of government IOUs altogether.

While this has allowed domestic interest rates to move down and approach levels enjoyed by First-World economies, the government forgets it still operates on a sizeable budget deficit this year, officials said.

BTr chief Omar Cruz never hesitates to reject bids or cancel the scheduled sale of government bonds, knowing his revenue stream—boosted by foreign inflows—keeps the treasury well-stocked.

“Sooner or later something has to give,” officials said, hinting of likely complications arising from holding back on infrastructure spending.

Lead Epra advocate Habito has noted Manila ranked even lower regionally on infrastructure spending, from 47th place in a roster of 61 countries in 2002 to 56th place in 2006.

Malaysia was ranked 31st and Thailand 48th place.

“From the point of view of competitiveness, we clearly lack infrastructure. As to how much more the government should spend, well, the national government has outperformed its deficit goal for some time now,” frustrated government officials said.

Public expenditures in the first two months this year quickened by only two percent, just a fraction from year ago growth of 15.8 percent, data from the Department of Finance show.

Although revenue collection also quickened due to a number of fiscal reforms, the deficit this year should not be substantially higher this year than last year’s P62.2 billion.

These are frustrating numbers for senior government officials.

‘Cheerleading’ forecast not borne out by early growth data

By Rommer M. Balaba
Original report in the Business Mirror

ECONOMISTS in separate interviews have hinted at the need for the government to reconsider this early its “cheerleading forecast” in order to reflect relatively unenthusiastic data which may fall short of expectations vis-à-vis local economic growth.

This amid declarations that a bunch of well-performing indicators could translate into a strong first-quarter gross domestic product (GDP) performance, including that of exports, investments and remittances.

“Frankly, I hate to say I told you so [to the government]… I have no quarrel with the projections but I do not see any room for growth to be faster this year,” former socioeconomic planning secretary Cielito F. Habito said in a telephone interview with BusinessMirror.

“Although I can say things are not too bad [for the economy] this early, it is just that the higher end of the growth target is a shot at the moon,” Peter Lee U, dean of the economics department at the University of Asia and the Pacific, added in a separate interview.

The Development Budget Coordinating Committee (DBCC) is targeting a growth range of 6.1-6.7 percent this year. Habito’s Ateneo Center for Economic Research and Development sees economic expansion anywhere from 5 percent to 5.6 percent growth, while UA&P’s U points to a 5.7-percent growth.

The government’s hopes of continued resilience in the export industry, especially semiconductors, supposedly riding on new electronic products introduced into the global market, may be a bit over-hyped, Habito insinuated. “There is excess inventory of chips in the global market and that may be felt at least for the first half [by the local electronics industry],” he said, adding this can be linked further to an ongoing trend in imports since the latter part of 2006.

Electronics make up as much as 65 percent of the country’s trade portfolio. A senior planning official earlier told BusinessMirror exports remain robust despite a growth slowdown in February at 7 percent, from 27.3 percent the month before.

In a previous paper, UA&P’s U commented that investment levels into the electronics industry are at risk of being overtaken by Vietnam, a country earlier considered a dark horse in terms of attracting capital.

“We are doing pretty badly compared with Vietnam because we could be overtaken by that country soon in terms of attracting FDIs. We have not been pulling the same type of investments as our neighbors,” he commented.

And it is in this vein that Habito thinks there might not be enough growth push from investments and exports during the first half.

“I rule out growth in investments and exports at least in the first half,” he commented, adding that even personal consumption must grow dramatically to have a dent on economic growth.

But investments, according to economist Victor A. Abola, may be given a boost only if the private sector takes advantage of a long-term loan window now being offered by the financial market.

“It is the first time there is a commercially available 25-year loan. Before, only official development assistance offered that tenor,” Abola said in a telephone interview.

But he admitted that the manufacturing sector—including the semiconductor industry—which could have utilized that loan scheme had been “taking a beating.”

Philippines sees higher growth for 2007

04/16 5:43:55 PM
Full article at Philippine Star

MANILA (AFP) - The Philippines could see economic growth of between 6.1 and 6.7 percent for 2007, with an outside chance of 7.0 percent, a senior government official said Monday.

"The economy is now robust and quite healthy. Economic indicators point to a high growth," said Economic Planning Undersecretary Dennis Arroyo.

Achieving seven percent growth is possible if the government manages to finish programmed infrastructure projects this year, he told a news conference.

Earlier this year, Congress passed a 1.126 trillion-peso (23.52 billion-dollar) national budget for 2007.

The government will issue a more specific growth target for the year once the gross domestic product (GDP) growth data for the three months to March is released next month, Arroyo added.

At the same news briefing, Economic Planning Secretary Romulo Neri said the agriculture sector is expected to have performed well in the first three months, given the favourable weather conditions.

The government expects full-year growth of 3.9 percent for agriculture, 6.4 percent for the industrial sector, and 6.7 percent for the services sector.

Arroyo said these growth projections were made on the assumption that inflation will stabilise at a range of 3.3 to 3.8 percent this year and that foreign direct investments reach three billion dollars and exports will grow 11 percent.

OFW Remittances in February Posted Anew a Billion Mark; First Two Months Reach US$2.2 Billion

Media Release
Central Bank


Overseas Filipino workers’ (OFWs) remittances coursed through banks in February recorded over a billion mark at US$1.1 billion, expanding year-on-year by 25.4 percent. This brought the year-to-date level of remittances to US$2.2 billion, or 22.6 percent higher than the US$1.8 billion recorded a year ago. Remittances coursed through banks are expected to grow by 10 percent to US$14.0 billion in 2007.

The robust growth of remittances was achieved mainly on the back of banks’ wider network, as well as enhanced and efficient financial services to OFWs and their beneficiaries, combined with continued demand for higher-skilled, thus better-paid, Filipino workers by host countries. Financial intermediaries, acting as channels to facilitate the delivery of remittances and financial services to OFWs and their beneficiaries, continued to capture a large segment of the growing remittance market. Enhanced products and services introduced in recent years─such as the increase in the number of remittance centers and tie-ups abroad, phone banking, internet/online banking, bills payment services─as well as competitive service charges and conversion rates provided the incentives for OFWs to course remittances through the formal channels. The level of remittances is expected to increase further as banks remain dynamic in providing innovative remittance and financial services to OFWs, and introduce aggressive marketing programs (including promotional discounts).

Remittances remained strong even as the number of deployed Filipino workers overseas recorded a decline in the first two months of 2007 from the year-ago level. Preliminary data from the Philippine Overseas Employment Administration (POEA) showed that total deployment declined by 12.1 percent year-on-year to 170,072. Classified by type of worker, the number of land-based and sea-based workers was lower by 10.1 percent and 18.8 percent to 134,644 and 35,428, respectively.

To date, the U.S.A., Canada, the United Kingdom, Italy, Saudi Arabia, United Arab Emirates, Japan, Hong Kong, and Singapore remained to be the major sources of remittances. It was noted that 47.1 percent of remittances emanated from the U.S. even as more than 80 percent of OFWs are deployed in the Middle East and Asian countries due to the common practice of remittance centers in various cities abroad to course remittances through correspondent banks mostly located in the U.S.

Export sector to post double-digit growth till 2010

By Des Ferriols
Full article at The Philippine Star 04/16/2007

Export growth is expected to be sustained over the next four years from 11 percent this year to at least 14 percent by 2010 due mainly to the continued strength of the electronics sector.

The Development Budget Coordination Committee (DBCC) is reviewing its macro-economic projections for the remaining years of the Arroyo administration and the emerging numbers, although conservative, appeared positive.

In dollar terms, the numbers now being discussed by the DBCC indicated that exports are expected to grow by 11 percent to $51.843 billion this year from $46.705 billion last year.

Cash-rich GSIS plans P20-B index fund

By Zinnia B. Dela Peña
Original article at The Philippine Star 04/16/2007

Awash with cash from a string of stock divestments, the Government Service Insurance System (GSIS) is planning to put up a P15-billion to P20-billion index fund patterned after the Standard and Poor’s 500 stock index

GSIS president and general manager Winston Garcia said the fund aims to track the Philippine Stock Exchange (PSE) index with the objective of duplicating the general performance of the market in which it invests.

Garcia said the fund which he hopes to put in place within six months or one year, will be invested in the 30 companies comprising the PSE index. The fund will be unitized and eventually sold to the public, Garcia said.

Aside from this, GSIS is allotting $1 billion for offshore investments in line with efforts to achieve greater capital gains.

Garcia said the fund is planning to hire two global asset managers, with funds under management of at least $100 million each, to manage its overseas portfolio.

"Our target is to invest some 25 percent to 35 percent abroad of the P280 billion fund that is ready for investment. We want our investments to be spread across the globe," Garcia said.

The GSIS is also considering dabbling in the booming real estate market, fueled by the robust remittances from overseas Filipino workers (OFWs) and the low interest environment.

Joseph Andres, who handles the disposition of properties at GSIS, said the agency has received offers from various parties for its properties in Quezon City, Ortigas and Makati.

Andres said the Ortigas property which was formerly the headquarters of the MMDA, will be developed similar to Home Depot which provides products and services for home improvement.

The GSIS also owns the Philcomcen property in Ortigas Avenue which Robinsons Land Corp. was planning to acquire.

The Philcomcen property, on the other hand, has been condemned for many years now. It served as the office building for several government agencies such as the Department of Transportation and Communication, the Presidential Commission on Good Government and several radio stations.

Andres said the three-hectare property in Quezon City may be converted into retail or commercial use.

Philcomcen is one of the 200 establishments that owe GSIS a total of P10 billion in unpaid loans. Other companies with outstanding overdue loans include Puerto Azul, A. Francisco Realty, The Manila Hotel, Pinugay Property, Kanlaon Towers, Phimeco Property, Meno Property, Mecamir Realty, Philippine Village Hotel, Serenity Memorial Park, Felipe Ang and Emir Corp.

The GSIS earned P9.7 billion in trading gains from the sale of P25 billion worth of stocks over the last three weeks. Of this amount, the state-run pension fund realized P5.7 billion in net gains, Garcia said.

Just last Friday, GSIS sold its six percent stake in food and beverage giant San Miguel Corp. (SMC) for around P14 billion. A total of 199.35 million shares in San Miguel were sold at P71.50 each share, a 10 percent premium to the prevailing market price of P65 per share. The transaction, crossed through the PSE, was handled by the Philippine Equity Partners Inc.

"This is the loudest and strongest statement of confidence in the Philippine economy under the Arroyo Administration. There is so much liquidity in the market and interest going into our country. We just wanted to cash in on our profits and take advantage of the market’s continued upswing,"Garcia said.

By the end of the year, GSIS hopes to realize P15 billion in trading gains from the stock market.

Garcia said the fund will continue to reinvest in the stock market and has tapped Metropolitan Bank and Trust Co., Bank of the Philippine Islands and Banco De Oro Universal Bank to manage P6 billion for a period of three years starting this year.

GSIS, one of the biggest investors in the Philippines with more than P400 billion in assets, is eyeing a net income of P44 billion this year compared with P40 billion in 2005.