Friday, 21 November 2008

Philippines in stronger position now to withstand global downturn

Lee C. Chipongian
The Manila Bulletin
http://www.mb.com.ph/BSNS20081121141505.html

The consensus among financial and banking giants, including multilateral funding agencies, is that the Philippines is "well-positioned" to withstand the global downturn for this year and in 2009.

"The Philippines is in a relatively strong position to weather the global downturn with 76 percent of the economy driven by private consumption and 50 percent by services, which are less vulnerable to external shocks," according to JP Morgan’s market strategist Kelly Lim-Bate.

JP Morgan expects the economy to grow by 4.6 percent this year, more optimistic than government’s growth targets of 4.1-4.8 percent, while the forecast for 2009 is four percent, mid-range of the official target of 3.7-4.7 percent.

"Pillars of growth should come from OFW remittances and the growing BPO (business process outsourcing) sector," said Bate. Remittances are expected to reach about $ 17 billion next year while the BPO revenues are targeted at $ 10 billion. "We expect remittances to remain resilient due to the growing proportion of permanent overseas workers and deployed white collar workers."

Citi Financial’s economist Jun Trinidad said the government’s growth downgrade is still considered positive.

"We think the extent of the downside would depend largely on the slack likely to come from narrower contribution of net exports to GDP (gross domestic product). The export drop with weaker external demand and declining commodity prices, net of imports the key source of payments outflow, would determine potential output and employment losses in the near-term," the Citi report said.

Citi expects GDP to grow to only 1.6 percent in 2009, lower than previous forecast of 3.5 percent. "Less buoyant remittances would also be a risk to consumption," said Trinidad.

As for other industries, Bate said the "global downturn should prompt companies to improve cost efficiency and offshore their businesses, especially in the medium to long term." JP Morgan also expects earnings downgrades to continue but that the "winners" in this market environment are companies that have formidable balance sheets, strong cash flow generation, management quality, and brand equity, which should all translate to higher return on invested capital.

"The main weaknesses in the Philippines ‘ dynamic are the lack of foreign direct investments and the small and illiquid stock market," Bate added. But, the analyst said, the Philippines will be "cushioned" by the monetary and fiscal flexibility. Inflation rate, for one thing, is expected to decelerate to single-digit levels in the first quarter next year. This gives the government more leeway to pump-prime to encourage growth.

As for monetary directions, Citi’s Trinidad said policy support to ensure a soft landing for GDP might require lower policy rates later to complement the liquidity injection by way of the bank reserve cut. The BSP cut reserve requirements by two-percentage point, thus releasing P60 billion into the system.

"Government’s GDP downgrade next year flagged weaker domestic demand prospects that also ascertain inflation’s downtrend to single-digit rate in 2009,†said Citi. "It’s our view that double-digit inflation may delay the timetable for policy rate adjustments to mid-first half next year."

Wednesday, 19 November 2008

Philippines counts blessings amid global financial crisis

The Manila Bulletin
http://www.mb.com.ph/BSNS20081119141119.html

Amid the global financial crisis, the Philippines "just has to count its blessings," among them the very low interest rates conducive to productive enterprises, inflation rate remaining at single-digit levels and continuing to decline, declining oil prices, and other positive aspects of the country and the economy.

Businessman Reghis M. Romero II, national president of the Chamber of Real Estate and Builders Associations (CREBA), underscored this in a speech at the recent CREBA national convention at the Subic Exhibition and Convention Center at the Subic Free Port, Olongapo City.
Romero cited, among others, the blessings that account for the country’s economic and financial stability amid a comparatively low-cost of living which can be the envy of other countries, including Association of Southeast Asian Nation (ASEAN) neighbors:

1. Despite the massive US financial meltdown and the resulting global credit crunch, the country’s banking system remains stable. The bans with investments in US derivatives or secondary commercial papers have very minimal exposure to such highly speculative financial concoctions. The country will be affected by the global situation, but only to up to a certain extent.

2. The youth-dominated 84-million population and the Overseas Filipino Workers’ consistently-rising remittances continue to power the consumer-driven economy in good or bad times.

3. The weakening of the peso against the dollar comes at a time of declining oil prices, thus curbing any rise in fuel imports while boosting the price-competitiveness of our exports.

4. Modest improvements in government tax collection efficiency, with some help from thr 12 percent EVAT, keep the country’s fiscal position relatively healthy.

Romero said that many people abroad are losing their homes because of subprime mortgage fiasco. On the other hand, he said decent mass housing units are cropping up across the Philippine urban centers.

"Thanks to our industry and our own safety nets for installment sales; to our banking system for adhering to sound policies that limit exposure to high-risk ventures, thus minimizing their non-performing loans and assets; to the government for its commitment to continue stimulating and pump-priming the economy while keeping inflation in check. All these amount to continued rise in real estate, housing and construction projects."

Talking of opportunities for the country, Romero said: "In other words, the global crisis presents itself as an opportunity for our country and our industry to put its best foot forward and be noticed. As such, we don’t have to look elsewhere for greener pastures. Neither you nor I have do a Moses to lead and bring us all to the promised land. The fact is, we are standing on it. And it’s where we Filipinos proudly belong. We just have to do what we have to do, and rise to the occasion."

"Ironically, the global credit crunch tends to highlight the unique advantage of the Philippines as a destination for foreign investments and tourism, and a preferred source of imports and skilled labor. It is just a matter of marketing the country all the more and even more vigorously. We have to find alternatives to whatever markets or foreign investors that we may lose. And we will get them in droves."

Romero cited "the strides that international marketing efforts of CREBA members under the CREBA International Foundation Inc. is proving to be the right direction for the industry. We shall push for more sales blitzes of this kind."

CREBA also started talking to the Contact Centers Association of the Philippins, the biggest association of call centers and BPO’s to close in on this ever-growig market for specialized housing requirements.

The CREBA convention coincided with its 35th foundation anniversary as the country’s largest industry organization. Composed of real estate companies, developers, professionals and allied sectors, it has chapters nationwide and affiliates in the United States, Europe and Southeast Asian countries. It is a member of the International Real Estate Federation (FIABCI) based in Paris, France. FIABCI with 64 country-members,is the official consultative body of the United Nations on real estate matters.

Tuesday, 18 November 2008

Pres Arroyo opens Busuanga's 'holiday airport'

President Gloria Macapagal-Arroyo, accompanied by DOTC Secretary Leandro Mendoza, Korean Ambassador Choi Joong Kyung, Palawan 1st District Rep. Antonio Alvarez and Palawan Gov. Joel Reyes, inspects the newly-concreted tarmac of the Busuanga Airport which was renovated with a $3-million grant from Korea and P60 million counterpart fund of the national government on Monday (Nov. 17). (Alfredo Francisco/OPS-NIB Photo)


MONDAY, NOVEMBER 17, 2008 | INFRASTRUCTURE
http://www.gov.ph/news/?i=22830

BUSUANGA, Palawan -- President Gloria Macapagal-Arroyo officially opened today the newly-rehabilitated Busuanga Airport here in time for the expected influx of tourists to this Central Philippines for tourist haven during the Christmas holidays.

In her speech keynoting the event, the President expressed elation that tourist traffic to Palawan had tripled since the Busuanga Airport's rehabilitation project was launched in 2007.

"Tamang tama ang pagbukas nitong airport para sa Christmas holidays kasi ayon kay (Transportation) Secretary Larry Mendoza, punung-puno na raw, three times bigger ang (tourist) traffic dito sa Coron and Busanga mula noong nagsimula ang pag-ayos ng airport na ito at by the end of the year, baka maabot na ang full capacity ng airport," she said.

The President had announced the upgrading of the Busuanga Airport in her 2006 State of the Nation Address (SONA) as she underscores the huge potential of the airport to Palawan's economic and tourism programs.

In response to the President's call, the Korea International Cooperation Agency (KOICA) put up $3 million for the project, with the Philippine government raising P60 million as counterpart fund.

The upgrading project involves the concreting of the airport’s macadam runway, rehabilitation of the existing runway, provision of a stopway, expansion/concreting of the apron, construction of a new passenger terminal, renovation of the passenger terminal, completion of the administration building and the improvement of the fire-fighting building.

The upgrading project also involves the construction of a new parking area, improvement of drainage system, rehabilitation of perimeter fence, provision of fire-fighting and rescue vehicles, and training of Philippine personnel on airport planning and design.

The safety of aircraft operation will also be enhanced in accordance with international civil aviation standards and best practices.

The Busuanga airport serves as a jump-off point to the nearby Calamian Group of Islands and the rest of Palawan, two of the country's major tourist destinations.

Philippines offers indefinite stay for foreign employers

Visa scheme aimed at foreign investors
BusinessWorld Online
http://www.bworldonline.com/BW111808/content.php?id=003

FOREIGN INVESTORS employing at least 10 Filipinos can stay indefinitely in the Philippines via a new visa scheme announced by Malacañang yesterday.

Executive Order (EO) 758 provides for the issuance of a Special Visa for Employment Generation (SVEG), which will grant qualified foreigners non-immigrant status.

The visa can be extended to spouses and dependents under 18 years old whether legitimate, illegitimate or adopted.

"[If we make it easy for foreign investors to acquire a visa that allows them to stay indefinitely ... we encourage them to infuse their capital ... and thus provide jobs to Filipinos," Immigration Commissioner MarceliC. no Libanan said.

The scheme, he added, is expected to create at least 100,000 jobs.

"The order was signed so foreigners would invest here. What is important is for them to create jobs," Mr. Libanan said.

"We have so many OFWs (overseas Filipino workers) ... If we attract foreign investors, our workers can work here especially now that other countries may be hit by a recession."

Foreigners who want to secure SVEGs should satisfy four conditions:

he or she should be engaged in a viable and sustainable commercial investment or enterprise in the Philippines;

he/she should demonstrate a genuine intention to indefinitely remain in the country;

he/she should not pose a risk to national security; and

the commercial investment or enterprise should employ at least 10 Filipinos.

The Immigration commissioner is required to resolve SVEG applications within 15 days from filing. If denied, a motion for reconsideration should be filed within 15 days. Only one appeal can be made.

The SVEG can be revoked if the holder fails to maintain compliance with the conditions set, if the visa was obtained through fraud, if a court issues a final conviction against the holder, and if authorities declare the holder a risk to national security.

Mr. Libanan said the rules implementing the EO would be finalized before yearend, with the EO itself to take effect 15 days after it has been published in at least two broadsheets.

"This is one of the [results] of the long discussions we had with various foreign chambers on how we could further enhance investments, and what kind of non-fiscal incentives can we come up with," Trade Secretary Peter B. Favila said. — Alexis Douglas B. Romero

Monday, 17 November 2008

UK firm to invest $200M for 5 Philippine projects

INVESTMENTS TO REACH $1B
Paul Anthony A. Isla / Reporter
Business Mirror
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=2012:uk-firm-to-invest-200m-for-5-projects&catid=24:companies&Itemid=59

EYEING to use of agricultural residues to generate electricity, UK-based Global Green Power Plc. Corp. (GGPC) is looking at investing a total of $200 million for five biomass power projects.

“We will be putting up 17.5-megawatt [MW] biomass power plants that would cost $40 million each in five different areas in the country,” David de Montaigne, GGPC chief executive and founder, said.

The GGPC official said the biomass plants will be constructed in areas where agricultural residues exist, like in Panay, Nueva Ecija, Pangasinan and Samar.

De Montaigne said phase one would entail the construction of five 17.5-MW biomass power plants that deliver clean baseload, decentralized, cost-competitive electricity utilizing European technology.

He added that they are working with the Land Bank of the Philippines and other banks to secure funding for construction. GGPC replaces fossil fuel power-generation facilities with biomass sourced from agricultural waste residues, sustainable forestry and energy crops.

De Montaigne pointed out that each GGPC power plant will provide more than 900 direct and indirect jobs to local communities.

For Panay, the company is set to sign the electricity sales agreement (ESA) with the local cooperatives for the supply of 35 MW.

The 25-year ESA is tagged to the consumer price index, with no foreign exchange charges and fuel pass on costs, he added.

Once the agreement is signed, he added that GGPC will start construction of the facilities, which will take around 18 to 24 months to complete. “We would like to start construction of the Panay biomass plants by February 2009,” he said.

GGPC has tapped the services of European contractor AREVA Bioenergies of France to construct the plants.

“AREVA is building the power plants to European standards and the project will generate significant carbon credits,” Simon MacKinnon, GGPC chairman, said.

He added that each power plant project is environmentally sound and will serve to mitigate global climate change.

MacKinnon added that the $200-million initial investment is only the beginning of the company’s long-term plan for the Philippine operations.

Gordon Thomson, GGPC chief financial officer, said the longer-term vision is to infuse about $1 billion into the Philippines for various renewable energy projects.

Thomson said they are not only looking into biomass but also biogas, geothermal, hydro, ocean, solar and wind facilities and that the GGPC team are working on a dedicated fund to facilitate the said projects.

GGPC was formed by Filipino and UK investors with a vision of becoming Asia’s single largest biomass supplier by 2012. The company recently inaugurated its office at The Taipan Place in Ortigas, and also maintains an office in Berkshire in the United Kingdom.

Alabang viaduct opens to motorists ahead of deadline

ABS-CBN News
http://www.abs-cbnnews.com/nation/metro-manila/11/14/08/alabang-viaduct-opens-motorists

South Luzon Tollway Corporation (SLTC) has opened the northbound side of the rehabilitated Alabang Viaduct to motorists before holiday traffic sets in.

In a statement, SLTC said a new 8-lane superstructure replacing the old 6-lane deck built in 1977 was opened in November 11 ahead of the original completion date of December 28, 2008.

"While additional features such as CCTV cameras for traffic monitoring and new traffic control devices still have to be installed, the soft opening heads off the expected increase in traffic towards the holiday season," SLTC said.

Until the northbound opening, 2-way passage on the bridge had been accommodated on the southbound side which was finished in June this year. Motorist lanes and pedestrian crossing on the ground level roadway had remained unchanged throughout the bridge rehabilitation.

The old structure, which had deteriorated over time and was in danger of collapsing from a strong earthquake, required the retrofitting of over 300 bridge piers and footings, replacement of all concrete slabs and girders and widening of the bridgedeck.

SLTC said the completed 1.2 km structure conforms to international seismic code and road safety requirements.

Tricky weather still hounds the project, but SLTC president Isaac David said that since much of the work on the Alabang Viaduct were above ground, project contractors MTD Construction Phils. Inc. and FF Cruz were able to beat their deadline.

David said the more daunting challenge in the viaduct reconstruction "is the installation of hundreds of 80-ton concrete girders over the heads of millions of pedestrians, commuters and motorists without harm to any of them."

The rest of the project includes reconstructing, widening and paving 30 kms of road and 15 bridges that are also being used by up to 250,000 vehicles per day, the heaviest vehicle volume of any expressway in the country.

As the major crossroad between South Luzon and Metro Manila, the Alabang Viaduct and its ground level roadway bear most of the impact of this heavy vehicular crowding.

To reduce traffic on the bridge during its reconstruction MTDCPI built the South Station Exit , a P90-million temporary tollroad for south-bound vehicles exiting into Filinvest.

The 4-lane tollroad serves up to 16,000 vehicles per day, and offers a shorter route to Filinvest Corporate City and the Alabang villages.

For their part MTD traffic managers warned that the public should be less concerned about traffic congestion and more about the proper observance of traffic rules and speed limits to avoid accidents on the widened expressway.

Philippine Government Aligns Growth Targets With Recent Developments in the Global Economy

Media Releases
Bangko Sentral
11.17.2008
http://www.bsp.gov.ph/publications/media.asp?id=1942

The Philippine Government has adjusted the country’s growth targets for this year and next following a continuing and careful assessment by the Cabinet-level Development Budget Coordination Committee (DBCC) of the possible effects of adverse global developments on the domestic economy.

“Given the extreme volatility in the global economy, we are taking a very conservative stance in our economic projections and, because of this, we have chosen to align our growth targets with recent external developments that may generate knock-on impact on our overall economic activity,” DBCC Chairman and Budget Secretary Rolando Andaya said.

In doing this, the DBCC changed this year’s target GDP growth range to between 4.1-4.8% from the previous 5.5-6.4% range submitted to Congress in August. The DBCC also considered global economic data regarding projections for 2009 and revised the GDP growth target for next year to between 3.7-4.7% from the previous 6.1- 7.1% range, which was made before the severe unwinding of the global financial crisis. These targets are a downward adjustment from the initial adjustments made in September.

“Against a backdrop of recession expected in some of the world’s largest markets, we have to be realistic with our expectations for our economy now and in the coming year. Having said that, what we are projecting is a respectable level of growth that has been made possible by the economic reforms that our government has instituted in recent years. Those reforms have helped to make our economy more diversified and more resilient than before,” Secretary Andaya added.

National Economic and Development Authority (NEDA) Director General Ralph Recto said that the Philippine economy expects to benefit from the increase in government spending on agriculture and infrastructure. “We also see bright spots in areas such as halal exports, telecommunications, real estate, utilities, and the very successful BPO industry that is already expanding as companies around the world seek more cost-effective outsourcing alternatives,” he said.

Finance Secretary Gary Teves said that the adjustments in the growth targets will result in a small reduction in government revenues and a slight increase in expenditures arising from higher interest payments but he agreed that the conservative approach to projecting GDP growth is prudent during this period of global economic uncertainty.

With the change in the growth target, the government revised the 2009 programmed budget deficit to P102 billion from P75 billion this year. Secretary Teves said much of this deficit increase is due largely to “the need for additional government capital outlay to take up the expected slack in private investments.”

Secretary Teves added that while the Government has had to make minor adjustments to its fiscal program in view of continued challenges in the global economy, “our commitment to fiscal reform and deficit reduction remains unchanged and we will continue to strike the appropriate balance in meeting these objectives in a way that will address the real needs of our people and at the same time maintain fiscal discipline.”

In line with the revisions on GDP growth and fiscal program, the DBCC has also revisited other key macroeconomic indicators.

Export growth has been revised from 5% to between 2-4% in 2008 and from 7% to 1-3% in 2009 while imports growth is expected to grow between 10-12% in 2008, which is largely consistent with the original forecast of 10%. Imports are forecast to grow between 4-6% in 2009, a revision from the original projection of 10%.

The forecast for the average Peso/USD exchange rate for 2008 remains unchanged at P42-45 while for 2009, the DBCC’s earlier forecast of P42-45 has been revised to P45-48. Inflation forecasts also remain largely unchanged at 9-11% for this year and 6-8% in 2009 as global oil and food prices have started to decline.

Commenting on the change in the projection for the Philippine economy, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo noted that such is broadly consistent with the projection of the International Monetary Fund (IMF) which showed a lower world growth forecast of 2.2% in 2009 from 3%. For the ASEAN region, the IMF is now projecting a growth rate of 4.2% for 2009.

Secretary Andaya said that the DBCC and the other members of the Economic Team will continue to closely watch the global economic situation to ensure that the country’s macroeconomic assumptions and targets are attuned with external developments.

Philippine Bank Lending Continues to Expand in September

Media Releases
Bangko Sentral
11.17.2008
http://www.bsp.gov.ph/publications/media.asp?id=1943
CLICK HERE TO VIEW TABLE

Outstanding loans of commercial banks including reverse repurchase agreements or RRPs increased in September by 24.1 percent year-on-year, growing at the same pace as in August. Bank lending net of banks’ RRP placements with the BSP accelerated to 24.8 percent in September from 22.1 percent in August.

Preliminary data for September were obtained from the new system of bank reporting under the Financial Reporting Package (FRP), which replaced the Consolidated Statement of Condition (CSOC) reports. The FRP adopts the detailed classification of the amended 1994 Philippine Standard Industrial Classification (PSIC) for international comparability. The FRP also classifies lending by production activities (which covers 16 economic sectors) and by household consumption purposes (with three economic categories). Previously, bank reports classified loans into only nine economic sectors.

Loans for production activities drove the expansion, as these grew by 22.4 percent in September compared to 19.8 percent in August. The following production sectors contributed significantly to lending growth: wholesale and retail trade (which grew by 49.4 percent); agriculture, hunting, and forestry (37.8 percent); transportation, storage and communication (82.1 percent); electricity, gas and water (54.4 percent); real estate, renting, and business services (15.4 percent); and manufacturing (8.5 percent).

The growth of consumption loans also accelerated in September, rising by 23.4 percent from 20.2 percent in August. Consumption loan growth came mostly from credit card receivables which expanded by 26.3 percent, down slightly from 27.0 percent in August. Auto loans rose by 12.2 percent in September from 10.6 percent in the previous month. The growth of other household loans accelerated to 29.6 percent from 4.6 percent over the same period.

BSP Governor Amando M. Tetangco, Jr. said that the BSP monitors bank lending trends in order to generate an advance indicator on the direction of future economic activity. He noted that data on lending indicate that there is sufficient liquidity in the economy that could support growth despite current tight conditions in global financial markets.

Philippine OF Remittances Sustain Growth, Reach US$12.3 B in 1st Nine Months

Bangko Sentral
Media Releases
11.17.2008
http://www.bsp.gov.ph/publications/media.asp?id=1944
CLICK HERE TO VIEW TABLE

Remittances of overseas Filipinos coursed through banks continued to show strength, growing by 16.9 percent year-on-year in September 2008 to US$1.3 billion. Remittances have remained above the one billion dollar-level for the past 29 months. Total remittances for the first nine months of the year totalled US$12.3 billion, 17.1 percent higher than the level posted during the same period a year ago.

The continuous stream of remittances from overseas Filipinos remains a source of strength for the economy amid the challenging external environment according to BSP Governor Amando M. Tetangco, Jr. “Robust remittance flows have been shored up by strong overseas demand for Filipino skills, and the greater availability of expanded money transfer services to overseas Filipinos and their beneficiaries,” he said .

Preliminary data from the Philippine Overseas Employment Administration (POEA) showed that, during the first three quarters of 2008, the number of Filipinos deployed abroad had already breached the one-million level (1,005,767), marking a 25.9 percent increase from the level a year ago (798,731). Newly-hired Filipinos were mostly deployed to the Middle East (Saudi Arabia, United Arab Emirates, Qatar and Kuwait) and Asia (Taiwan and Hong Kong). Prospects of more employment opportunities in selected destinations (e.g., Canada and some other Middle Eastern countries) as well as enhanced collaboration with potential employers on skills certification and training programs are expected to help sustain the demand for Filipino workers abroad and boost remittance flows to the country. For example, the Department of Labor and Employment reported that it has begun to work on memoranda of understanding (MOU) with various Canadian provinces to strengthen cooperation in the areas of human resource development, training and credentials recognition, and workers’ protection.

Governor Tetangco further explained that the increase in the number of remittance centers abroad and the establishment of more tie-ups with foreign financial institutions have resulted in greater capture of remittances. Based on preliminary reports from eight large commercial banks, the number of foreign branches of local banks, remittance centers, correspondent banks and tie-ups abroad rose by more than twofold to 3,015 as of end-September 2008 from 1,183 as of end-2007.

For the period January-September, the major sources of remittances were the U.S., Saudi Arabia, Canada, the U.K., Italy, United Arab Emirates, Japan, Singapore and Hong Kong.

Philippine economy strong, will weather global crisis, says expert

By SHIANEE MAMANGLU
The Manila Bulletin
http://www.mb.com.ph/MAIN20081117141114.html

The Philippine fiscal position is strong and manageable despite the looming economic recession in the United States, according to a finance expert who is an alumnus of Harvard Business School (HBS) of the 362-year-old Harvard University.

Speaking on "Philippine Economic and Investment Outlook’’ before fellow alumni at the HBS Club of the Philippines’ 100th anniversary at Tower Club in Makati City, Manuel N. Tordesillas, who belongs to MBA batch 1982 and president of ATR KIMENG Capital Partners, Inc., said the country is now in a healthy position to weather the economic slowdown compared to 10 years ago when the Dotcom Bubble collapsed and former president Joseph Estrada was impeached.

"Philippine 2007 GDP growth was very strong, so companies/credits are relatively strong and well-positioned to cope with the current crisis,’’ Tordesillas said, adding that the country’s current market index has yet to beat its record low market index of 69 percent during the 1997 Asian Financial Crisis.

Philippine market dropped only by 39 percent during the 2001 dotcom bubble collapse and declined by 45 percent in 2007-08 subprime mortgage crisis.

He added that the government’s move to quickly intercede in the rice crisis yielded good results for the country’s economy.

"Government did the right thing by immediately intervening when prices of rice went up. Rice prices are vital since they account for a large part of inflation,’’ he said, adding the inflation rate used to be higher at 18.7 percent in 1991.

The decline in oil prices from a record high of $ 141.33 a barrel in early 2008 to $ 53.46 in October also indicates that the Philippines is now in a stable position, he said.

According to him, OFW remittances continue to be strong and more than sufficient to compensate for the deficiencies in the trade balance, which was negatively impacted by rice and oil prices.

"The increased deployment of overseas Filipino workers (OFWs) has cushioned the potential drop in remittances,’’ said the banker.

The Philippines is also likely to weather the stress because it is "not over leveraged.’’

"Significant de-leveraging took place due to the 1997 financial crisis, and borrowing only picked up in 2007. Philippines Inc. being generally not over leveraged is well positioned to cope with current economic stress, though not indefinitely,’’ he said.

He said that after recovering from the Asian financial crisis, the Philippines will have a less worrisome external debt than in 1997. The reduction in external debt is largest in the private sector reflecting the deleveraging that took place after the 1997 Asian crisis, he explained.

While reports state that money is scarce in the country, the expert said there is actually plenty of cash to go around because the "system remains relatively liquid.’’

Philippine banks are also liquid and well-capitalized, according to him, since these are not reliant on the inter-bank market. "Its primary source of funding continues to be deposits. Leverage (assets/equity) of Philippine bank is about average for Asia, and is very low relative to the US (average leverage of 20) and Europe (40).’’

Similarly, he said interbank rates are well-behaved relative to international rates in spite of some spikes.

The country’s loan growth is up by 22 percent high implying there is no credit crunch in case US Congress might not be able to provide a bailout package, he said.

"Lending activity, particularly for consumer consumption such as housing loans, car loans, etc. continues to be healthy," he added.

While noting that US economic influence continues to be very important for the country, Tordesillas said it is declining in almost all aspects - OFW remittances dropped from 72 percent in 1997 to 56 percent today; export destinations from 38 percent to 18 percent; tourist arrivals from 23 percent to 4 percent and direct investments from 18 percent to 17 percent in 2007.

He said the influence of Asian economies (ASEAN, China, South Korea) is increasing in almost all aspects.

The finance expert, however, cautioned that the risk is not over yet and the slower GDP growth in 2008 is still not enough to reduce unemployment.

"While it seems we have learned from our past mistakes and that Philippines Inc. is able to take on some stress, I would caution the bulls among you that there is still risk out there,’’ he said, noting that the efficiency of the government bailout package is yet to be worked out and/or if there will really be a global recession and how long this could last.

He warned that while credit markets may have loosened up, it still remain tight indicating that there continues to be credit concerns over counterpart risk.

Earlier, the government said that it has already taken steps to avert the looming economic recession by proposing more spending by next year, particularly for infrastructure and determining how to temper inflation and strengthening the banking system.

Government has proposed P1.4-trillion national budget for 2009.

"The government is prepared to manage inflationary pressures, provide a safety net to those hit hardest by these global developments and deliver the growth that will continue to generate jobs, and the tax revenues we need to invest in our nation’s future,’’ said President Arroyo.

To ensure stable food supply, Mrs. Arroyo said the government is delivering staple food to targeted poor recipients and reached out to neighbors like Vietnam in Asian and elsewhere.

The President also assured that the government is not complacent and continues to monitor the global situation despite the country’s current healthy economic condition.

Socio-Economic Planning Secretary Ralph Recto described the Philippines’ action plan to cushion the possible US recession as "the best shield or the Philippine economy from external shocks.’’

Tordesillas, who has been into investment banking for 30 years in the Philippines and all over Asia, believes that the government is "doing the right thing’’ to counter the economic fall down.

He suggested that government invest on four sectors, namely infrastructure, food, mining and resources, and services (including business processing outsources, tourism) to ensure its competitive advantage.

"These four sectors will do well in the long term. Some of it are recession-proof,’’ he told the Bulletin.

The HBS Club Philippines Centennial celebration gathered some 50 members last Friday evening. The night’s discussion dubbed "From Hindsight to Foresight: Lessons from 100 Years of Market Volatility’’ featured HBS Professor Howard Stevenson with his "Centennial Dialogue" to fellow alumni via live video conferencing.

Prof. Stevenson reiterated to the HBS grads to "remain humble, practice what you preach and share what you learned in school."

Since 40 years ago, he disclosed that the HBS has changed for the better, attracting more minority and women. Of the 900 students enrolled for 2008, women now represent over a third at 35 percent which is a great push towards diversity given that only two percent were women in 1965.

International students, on the other hand, represent 33 percent of today’s class population.