MANILA (PND) --- President Gloria Macapagal Arroyo this morning (May 30) drove through the newly-opened P1-billion Ninoy Aquino International Airport (NAIA) interchange, a 1.5 to 2 kilometers of road network systems that lead to NAIA Passenger Terminal 3 and domestic airport terminal as well. The project ensures foreign and domestic travelers a speedy access to both domestic and international airports.
The President, aboard an open pick-up, viewed the newly-opened skyway interchange with Public Works and Highways Secretary Hermogenes Ebdane Jr. and local officials that included Paranaque Mayor Florencio Bernabe Jr., Pasay City Cong. Antonio Roxas, Pasig Cong. Roman Romulo, Paranaque Cong. Eduardo Zialcita and NAIA Assistant General Manager for Security and Emergency Services Angel Atutubo, representing NAIA General Manager (GM) Alfonso Cusi.
DPWH Undersecretary Romeo S. Momo, chief of staff of Secretary Ebdane, said the President was delighted to see the completion of Package 1, 2, 3 and 4-A of the interchange. Still to be completed is the package 4-B, he said
Began in 2003, the interchange took a long time to complete because of problems of relocating people residing on the ground level of the interchange, Momo said.
Momo said the DPWH is going to conduct an economic impact analysis and time and motion studies of the project and submit a report to the President, once the project is fully completed.
The toll at the new interchange is P85 for cars, jeeps and pickups and P117 for buses and bigger vehicles.
Those coming from the north passing through Tramo Street can get access to the new interchange through Sales Street at the ground level and those from Alabang, Taguig and any part of the south, can get to the new interchange via the Skyway or South Luzon Expressway (SLEX), Momo said.
At any given day, travel would only take 30 minutes from SLEX and Skyway through the interchange bound for the passenger terminals of NAIA and the domestic airport, Momo said.
The NAIA Expressway Flyover connects the existing Metro Manila Skyway and SLEX with the NAIA Passenger Terminals via elevated roadway or viaducts.
Saturday, 30 May 2009
MANILA (PNA)—President Gloria Macapagal-Arroyo is due to sign 10 agreements on labor, trade and energy with South Korean President Lee Myung Bak during her official visit to South Korea on May 30 and 31, according to the Department of Foreign Affairs.
After the two-day visit, President Arroyo moves to Jeju island, south of Seoul, for the Association of South East Asian Nations (ASEAN)-South Korea Commemorative Summit on June 1 and 2.
PGMA’s visit to South Korea comes when the two countries celebrate the propitious 60th anniversary of their diplomatic relations, with the Philippines declaring 2009 as “Philippine-Korea Friendship Year.”
South Korea was the first destination of the Philippines’ peace keeping operations contingent, known as the Philippine Expeditionary Forces(PEFTOK), in 1953 when hostilities broke out between the north and south factions of Korea.
Of the 10 agreements, DFA said five would be government-to government undertaking to be signed at the Korean Blue House, including the US$ 13-million grant-in-aid by the South Korean government for the construction of Rice Processing Complexes in Pangasinan, Bohol and Davao del Sur.
Signatories to the South Korean grant includes Foreign Affairs Secretary Alberto Romulo and South Korean Foreign Minister Yu Myung Hwan.
The other four are Memorandum of Understanding (MOUs) for employment permit system (EPSD), on labor and manpower development cooperation, feasibility study on the multi-industry cluster (MIC) program, and agricultural, scientific and technical cooperation.
The MOUs, EPS and Labor and Manpower Development Cooperation are to be signed between Labor Secretary Marianito Roque and Korean Labor Minister Yee Young-Hee.
According to the DFA, the EPS deal would allow skilled Filipino workers to avail of jobs in South Korea because it renews a similar agreement that had expired in 2006. The other MOU is an institutional cooperation agreement.
Both Romulo and Yu will also sign a deal on MIC where a feasibility study on synergistic cooperation is funded by the Korean International Cooperation Agency (KOICA).
Agriculture Secretary Arthur Yap and the president of the Korean Rural Development Authority are also slated to sign an agreement on agriculture cooperation.
The five government-to-private deals are MOUs on information exchange and cooperation between Philippine International Sisterhood and Twinning Association and the Korea Local Authorities Foundation for International Relations.
An MOU on friendship exchange between Benguet province and Chungcheungbukdo province is also to be signed.
The Department of Environment and Natural Resources (DENR) and the Korea Trade and Investment Promotion Agency will sign an intitutional cooperation agreement.
An agreement between the DENR and the Korea Energy Economics Institute is also scheduled to be signed. According to the DFA, PGMA is scheduled to meet with the Filipino community in Seoul who will witness the signing of the various government-to-private deals.
Philippine-Korean bilateral trade amounts to US$ 5.06 billion. Korean investments here is estimated at US$ 3 billion. (PNA)
Arroyo leaves for Korea, Russia visits
MANILA, Philippines — President Gloria Macapagal Arroyo left the country Saturday morning for an official visit to South Korea.
According to GMA’s Flash Report, the President departed the Ninoy Aquino International Airport in Manila at 10:45 a.m. on board Philippine Airlines flight PR 001 with First Gentleman Mike Arroyo, Senator Miriam Santiago, and other Cabinet officials.
Government-run dzRB radio said Mrs. Arroyo is expected to arrive in the South Korean capital at 3:45 p.m.
The Department of Foreign Affairs (DFA) website (www.dfa.gov.ph) said Mrs. Arroyo is expected to witness the signing of 10 agreements between the two countries, which will focus on trade, energy, and labor during the visit.
She will also attend the Association of Southeast Asian Nations (Asean)-Republic of Korea Commemorative Summit in Jeju Island on June 1-2.
Mrs. Arroyo will then proceed to Russia from Seoul.
According to the DFA, Mrs. Arroyo will also meet members of the Filipino community, after which the five government-to-private deals will be signed.
The DFA said the five government-to-government agreements include:
• Memorandum of Understanding (MOU) for Employment Permit System (EPS);
• MOU on Labor and Manpower Development Cooperation;
• Notes on the Grant Aid for Rice Processing Complexes (RPCs);
• MOU on the Feasibility Study on the Multi-Industry Cluster (MIC) Program; and
• MOU on Agricultural Scientific and Technical Cooperation.
Labor Secretary Marianito Roque and ROK Minister for Labor Lee Young-Hee will sign the MOUs on EPS and Labor and Manpower Development Cooperation.
“The EPS deal is a labor arrangement allowing skilled Filipino workers to avail of job opportunities in South Korea and renews the expired 2006 arrangement. The second MOU is an institutional cooperation arrangement," the DFA said.
Foreign Affairs Secretary Alberto Romulo and ROK Foreign Minister Yu Myung Hwan will sign a $13-million grant aid to construct RPCs in the provinces of Pangasinan, Bohol, and Davao del Sur.
They will also ink the deal on Feasibility Study on the MIC which pledges the conduct of a KOICA-funded feasibility study on the synergistic cooperation activity envisioned under the MIC.
Agriculture Secretary Arthur Yap and the president of the Korean Rural Development Authority will sign an institutional cooperation agreement on agricultural cooperation.
On the other hand, five other government-to-private deals will also be signed. These include:
• MOU on Information Exchange and Cooperation between the Philippine International Sisterhood and Twinning Association and the Korea Local Authorities Foundation for International Relations;
• MOU on Cooperation and Friendship between Benguet Province and Chungcheungbukdo Province;
• MOU between the Department of Environment and Natural Resources (DENR) and Korea Trade and Investment Promotion Agency on institutional cooperation;
• Project Agreement between the DENR and the Korea Energy Economics Institute; and
• A commercial investment agreement between a Philippine energy firm and a Korean power company.
Mrs. Arroyo's May 30-31 official visit in South Korea is upon the invitation of South Korean President Lee Myung Bak.
Following the visit, she will participate in the Association of Southeast Asian Nations (Asean)-Republic of Korea (ROK) Commemorative Summit in Jeju Island on June 1-2.
The Philippines and ROK celebrate the 60th anniversary of bilateral diplomatic relations this year which the President has also declared “Philippines - Republic of Korea Friendship Year."
This year also marks the 20th anniversary of ASEAN-Republic of Korea Dialogue Relations, the DFA noted.
South Korea is one of the Philippines most dynamic partners with bilateral trade at around $5.06 billion and Korean investments in the Philippines at over $3 billion.
Annually, 600,000 Korean tourists take the largest share of the visitor arrivals to the Philippines. - Kimberly Jane T.Tan, GMANews.TV
Gerard S. dela Peña
Banco de Oro Unibank, Inc. sees a rebound in its net profit this year despite the economy likely falling into recession.
At its annual stockholders meeting yesterday, the bank, the country’s largest in terms of assets, said it expects a net income of P5.5 billion this year, 150% higher than in the previous year.
Its 2008 bottom line of P2.2 billion was 66% less than its 2007 net income of P6.6 billion. Last year, it incurred losses from securities trading. "Other" income and fees and charges also fell, even while interest income, trust fees and gains from foreign exchange trading rose.
"This year will be tough but we believe that basic commercial banking, which is lending and deposit-taking, will continue to be strong. There will be opportunities across the spectrum from large-ticket project financing to middle-market and consumer [lending]," BDO President Nestor V. Tan told a briefing.
He said it is too early to tell if near-recession conditions will have an adverse impact on banks’ lending business.
BDO sees net interest income rising by 42% to P32.78 billion from P23.04 billion last year.
Fee income is expected to grow by about 8% to P9.26 billion, and gains from securities and foreign exchange trading, by 42% to P2.47 billion.
"Remittances, trust and investment management, as well as wealth management will continue to be very strong," Mr. Tan said.
Operating expenses are expected to reach P33.42 billion, 20% higher compared to a year ago, while provisions for losses are projected to reach P5.26 billion, slightly higher than last year’s P5.23 billion.
Mr. Tan also said the bank’s total resources are projected to grow by 19% to P950.82 billion from P802.03 billion in end-2008.
This will be buoyed by a 25% increase in its reserves and investments, as well as a 15% growth in gross loans.
Mr. Tan said this will come from organic growth since its acquisition of GE Money Bank is "insignificant."
The bank announced on Thursday it signed a deal with GE Capital, the financial services arm of American conglomerate General Electric Co. (GE), for the takeover of the latter’s Philippine unit.
This followed BDO’s merger with Equitable PCI Bank and the acquisition of the Philippine unit of American Express in 2007.
Mr. Tan also said the bank is not keen on raising fresh capital in the near future, saying there is no urgency to do so.
The bank had planned to raise P13 billion from issuance of Tier 2 capital and a rights offering this year, and has already raised P3 billion through Tier 2 debt.
Mr. Tan said the bank will no longer push through with the rights offer.
"The plan to raise more capital was meant for a major acquisition. But since the acquisition of Philamlife is no longer on the horizon, then there is no urgency to raise capital," he said.
BDO had bid, together with Italian insurer Assicurazioni Generali, for the Philippine American Life and General Insurance Company in February but this was rejected, along with other bids, for being too low. The insurer’s mother company, the American International Group, Inc., thereafter decided not to sell Philamlife anymore.
BDO had consolidated assets totaling P801.05 billion as of the first quarter. It rose to P33 per share Friday from P32.50 on Thursday.
Index surges to 2,389.31
Kristine Jane R. Liu
Share prices rose yesterday, boosted by Wall Street’s rebound and the usual month-end window dressing.
The benchmark Philippine Stock Exchange index gained 1.48% or 34.94 points to 2,389.31, while the all-shares index climbed by 2.47% or 37.91 points to 1,567.87.
A total of 4.43 billion shares worth P3.97 billion were traded, with foreign buyers edging out sellers with P175 million.
Advancers swept decliners 76 to 36 while 48 shares did not move.
Jeng T. Calma of A&A Securities, Inc. said the usual window dressing pushed up prices. It also helped that US stocks rallied on Thursday.
The 0.4% gross domestic product (GDP) growth in the first quarter did not discourage local and foreign investors, she said, who were already bullish about the economy.
And while investors already priced in a 25-basis point cut in the central bank’s key rates last Thursday, it was still welcome news.
The central bank slashed rates by 25 basis points late afternoon on Thursday, bring down its overnight borrowing rate to a new 17-year low of 4.25%.
Astro C. del Castillo of First Grade Holdings, Inc. said investors were focused on individual companies with good value, pushing up the prices of select issues.
He warned, however, that investors might do a reality check in the coming days due to the first quarter GDP data and the possibility of the country falling into recession.
Wall Street rallied on Thursday, pulled up by energy stocks that rose on rising oil prices and by easing bond yields. Rising bond yields the day before had raised worries over borrowing costs.
The Dow Jones industrial average climbed by 1.25% or 103.78 points to 8,403.80, while the Standard & Poor’s 500 index added 1.54% or 13.77 points to 906.83. The Nasdaq composite index gained 1.20% or 20.71 points to 1,751.79.
At home, holding firms shot up by 6.27% or 83.21 points to 1,409.69.
Property stocks added 2.74% or 22.14 points to 829.74 while industrial shares gained 0.99% or 31.02 points to 3,163.20.
Financial companies rose by 0.97% or 5.54 points to 571.19 while mining and oil stocks advanced by 0.02% or 1.33 points to 5,493.90.
The service sector, however, lost 0.28% or 3.60 points to 1,261.42.
Most blue chips rallied, with Pangilinan-led Metro Pacific Investments Corp. surging by 27% or P1.35% to P6.20 following the company’s announcement on Thursday it will sell new shares to the public.
Sy-led holding firm SM Investments Corp. jumped by 14.52% or P42.50 to P335, while Manila Electric Co. shot up by 7.47% or P8 to P115.
Ayala Land, Inc. gained 3.57% or P0.30 to P8.70, while Sy-led Banco de Oro Unibank, Inc. rallied by 1.53% or P0.50 to P33.
Ayala-led Bank of the Philippine Islands, however, lost 1.12% or P0.50 to P44 along with index heavyweight Philippine Long Distance Telephone Co., which shed 0.67% or P15 to P2,210.
With a report from Alexis Douglas B. Romero
The government is looking at revising its growth goals following a disappointing first quarter result, but is holding out hope that rebounds for the rest of the year will allow it to meet existing targets.
Economists and research groups, however, said economic managers appear to have no choice but reduce their 2009 projections.
The January to March growth of just 0.4%, well below the government’s forecast of 1.8-2.8%, has prompted some government officials to declare the country as teetering on the brink of a recession.
But Rolando Tungpalan, deputy presidential spokesman for economic affairs, said the 3.1-4.1% growth target for 2009 could still be achieved if the government "works harder over the next three quarters."
"We would like a 4.5% growth every quarter to achieve the target. The DBCC (Development Budget Coordinating Committee) will look at assumptions and targets again and measures to be put in place," he told Palace reporters on Friday.
The 2009 growth goal has already been revised twice this year, to 3.7-4.4% in February from the original 3.7-4.7%, and then to 3.1-4.1% in April.
Gary B. Olivar, another deputy presidential spokesman for economic affairs, stressed that the Philippines was not yet in a recession.
"Other agencies said we are teetering into or on the verge of a recession but we’re not in a recession. Recession occurs when an economy goes through two consecutive quarters of year-on-year negative growth or contraction," he said.
Mr. Tungpalan added "We don’t see the Philippines going into recession based on the April and May global recession impact monitoring ... Business and consumer confidence are improving."
He pointed to an increase in overseas Filipino workers remittances, an easing in export contraction, and government delivery of infrastructure and social protection programs as likely boosting growth.
"We see real spending taking place this quarter. That should take up the slack in private sector investment ... With consumer confidence picking up, [the] April-June performance would not be worse than the first quarter," Mr. Tungpalan said.
But Ateneo de Manila University economist Leonardo A. Lanzona said lower consumption and weak exports would make it hard for the government to achieve the 3.1-4.1% target.
"Definitely it (full-year growth) will be lower than 3.1%," he said in a telephone interview.
"Investments are not coming in and exports are slow. Consumption is being affected by job losses abroad," he added.
University of Asia and the Pacific economist Peter Lee U said that in order to attain growth within the 3.1-4.1% range, the economy should expand by around 4% in the next three quarters.
"That may be tough. They have to make it (the growth target) a bit lower," he said.
Both said the government needed to increase revenues and boost spending on programs that would spur economic activity.
"The government should increase its revenues and should have a plan to hike its tax collection," Mr. Lanzona said.
Mr. Lee, for his part, said "I favor infrastructure spending. There should also be expenditures on education and health."
Research firm Global Source Philippines, meanwhile, said 2009 growth could fall below 2.5% due to weaker consumption.
"Given the developments, especially as it is personal consumption spending (comprising roughly 80% of GDP) that has surprised most on the downside, our full-year growth forecast of 2.5% no longer appears to be viable and we are inclined to undertake downward revisions in our subsequent reports," it said in a research note.
Global Source noted that government spending did not contribute much to first quarter growth.
"The fiscal stimulus only modestly helped support growth in the first quarter as government consumption expanded by about 3.8% while public construction actually dipped by 4.4%," it said.
The Development Bank of Singapore, in a separate note, said the 0.4% growth was "disappointing" and reflected inefficient public spending and weaker consumption.
"Disappointing is how we would describe the first-quarter GDP report ... The breakdown of the data showed an economy weighed down not so much by weak exports, as we thought it would, but by extremely weak consumer spending," it said
"Other aspects of domestic demand were also weak, underscoring the inefficacy of public stimulus spending."
The bank said it was cutting its growth forecast for the Philippines to 0.5% from its previous estimate of 2.5%.
MANILA (PNA) -- Another job fair, aptly slated in time with the country's 111th Independence Day celebration, will be staged on June 12-14, offering some 170,000 jobs, including local and overseas and government hiring, to provide employment to Filipinos.
"We urge jobseekers to take advantage of this affair. Also, if you want to work in the government, this could be good opportunity," Department of Labor and Employment (DOLE) Undersecretary Lourdes Trasmonte said during the event's soft launch held Friday at Club Intramuros in Manila.
Over 50,000 government slots, both plantilla and emergency employment positions, will be available with 10,000 jobs in the National Capital Region (NCR) alone.
The Department of Environment and Natural Resources opens doors to some 6,000 applicants, while the Department of Education will be needing 8,000 workers. The Department of National Defense, Department of Health, Department of Trade and Industry and Metro Manila Development Authority will also allot employment slots at the three-day event.
About 30,000 emergency jobs will also be provided to displaced and other unemployed workers under President Gloria Macapagal-Arroyo's Comprehensive Livelihood and Emergency Employment Program (CLEEP).
The second day of the job fair on June 13 would feature private local companies offering some 70,000 jobs.
Among the available positions are those for baristas, accounting executives, store managers, mechanics, tellers, call center agents, to name a few.
The following day, June 14, would feature recruitment agencies offering some 50,000 sea-based and land-based overseas employment.
Overseas employment, mostly in services and sales industry and skilled sector, makes up almost half of job orders from the Kingdom of Saudi Arabia, United Arab Emirates, Qatar, Hong Kong, Russia and Bahrain, Philippine Overseas Employment Administration Deputy Administrator Hans Leo Cacdac said.
The affair, to be held in 19 cities nationwide on June 12-14, is in celebration of the country's 111th Independence Day.
About 1,000 employers, including those from the overseas recruitment industry, would participate in the mega event.
In the DOLE's Jobapalooza job fair held last May 1, a total of 10,000 jobseekers were hired on the spot. The DoLE attributed this to an online pre-registration process where a computer program matched the skills of the applicants with the jobs being offered by the employers.
Labor and Employment Secretary Marianito D. Roque said it would be advantageous for jobseekers to register with PhilJobNet (http://phil-job.net) as early as possible as some participating firms may start to hire applicants prior to the actual job fair.
Walk-in applicants are also welcome at the event site, Quirino Grandstand in Luneta, Roque said.
The pre-registration system would enable the job fair participating private firms and government agencies to pre-screen applicants and subsequently hasten the selection and on-the-spot hiring of those who are qualified during the three-day mega event.
For the first time, government-owned corporations and state schools will participate along with local government units and other government offices in accordance with the President's Executive Order No. 782. The order provides for the temporary filling up of vacancies in the government using 1.5 percent of a government agency's maintenance and other operating expenses (MOOEs). (PNA)
MANILA (PND) --- The traffic jams on roads to the Ninoy Aquino International Airport and the domestic airport terminals will be a thing of the past when President Gloria Macapagal Arroyo inaugurates tomorrow morning (Saturday, May 30) the 1.5 to 2- kilometer viaduct and other road systems in Pasay City.
In inaugurating the 1-B flyover, the President will drive through and hold a brief program in the site before entering the NAIA Terminal 2 to board her Philippine Airlines flight to Korea and Russia at 11 a.m. for official trips to these two countries.
The NAIA Expressway Flyover connects the existing Metro Manila Skyway and South Luzon Expressway (SLEX) with the NAIA Passenger Terminals via elevated roadway or viaducts.
The President will arrive at the NAIA Flyover Ramp 4 (Phase 1 Package 2 section) via Skyway.
She will be received by Public Works and Highways Secretary Hermogenes Ebdane, Metro Manila Development Authority Chairman Bayani Fernando, Transportation and Communication Secretary Leandro Mendoza, NAIA General Manager Alfonso Cusi and Mayors Wenceslao Trinidad of Pasay City and Sigfrido Tinga of Taguig City.
The flyover is expected to down travel time to the NAIA from Alabang, Makati and towns/cities north or south of Metro Manila and will greatly benefit frequent travelers, overseas Filipino workers, businessmen and even local and foreign tourists using both international and domestic airports.
Malacañang today belied reports that the Philippines is headed for a recession, saying the National Statistics Coordination Board (NSCB) report of a 0.4 percent growth in the first quarter of 2009 is “still a growth no matter how small.”
In a radio interview this morning, Presidential Deputy Spokesperson Anthony Golez said it’s true there was a contraction in the first quarter GDP (gross domestic product) but “the 0.4 percent growth is still good news as this is still a growth while 75 percent of the world is having a recession.”
“No matter how modest, the Philippine economy is still growing. And if we include the GNP which includes remittances of Filipino workers abroad, our GDP will grow even more,” Golez said.
What this means is that the country remains on a good track, noting that world economists project that by the second half, the world economy will recover and “we will benefit from such recovery,” Golez added.
He said President Gloria Macapagal-Arroyo, had correctly foreseen the economic slowdown much earlier and adopted steps to avert its impact on the country through such steps as pump priming, job generation and increased infrastructure spending.
She has also adopted safety nets or programs to cushion the impact of the global crisis on the poor as well as frontloaded the bidding of infrastructure projects before the second semester so that when the time comes for their implementation, the funds would already be in place.
He pointed out that during a previous Cabinet meeting, the President ordered the fast-tracking of the bidding for all projects before the second semester.
He added that the government has enough funds for its projects under the newly-approved General Appropriations Act.
MANILA (PNA) -- The National Economic and Development Authority said the economy is unlikely to fall into recession, thanks to the expected improvement in government and consumer spending this year.
"I don't expect a recession," Socio-economic Planning Secretary Ralph Recto said, adding that the second quarter would be "better" due to improved government spending as most of the budget of the agencies have already been released.
"You will see the effect of the full spending by the second quarter. Especially when payment[s] are already made to the contractors so that these money turns around the economy," Recto said.
Romulo Virola, secretary general of NSCB, said a big challenge to the economic managers during the remaining month of the second quarter is the fact that the economy is now "teetering into recession."
Virola said the leading economic indicators from April to June breached the negative territory confirming the "all too real threat to a recession."
He said the LEI posted a negative 0.195 in the second quarter from a revised positive 0.045 in the first quarter.
The LEI serves as a basis for short-term forecasting of macroeconomic activity, as it incorporates the behavior of indicators that consistently move upward or downward before the actual expansion or contraction of the economy.
Given the first-quarter results, Recto is less confident to hit the 3.1 percent to 4.1 percent GDP growth target for the year.
In the first quarter of the year, the economy grew by only 0.4 percent from 3.9 percent in the same period last year.
"There might be a need to readjust our growth projections for the year," Recto said.
"To attain this growth, succeeding quarters should post GDP growth of 4.1 percent to 5.4 percent," he said.
"We need to reinforce the socio-economic defense shield. Considering that the appetite of the private sector to spend remains weak and given the below-expected performance of public construction in the first quarter, there is a need for the government to further press on with the implementation of its fiscal stimulus program," Recto added.
He said the government needs to ensure that its frontloading strategy and budget program for the rest of the year would indeed produce real and tangible outputs that would help mitigate the impact of the global economic crisis and ensure that the country will join other economies when the global economy rebounds.
It is also crucial to maintain the improving level of consumer and business confidence by intensifying the implementation of measures to meet the revenue target, ensuring a sound expenditure and debt management, and showing that actions speak louder than words.
"Stronger government commitment in implementing the Economic Resiliency Plan will help defend the economy from more damaging effects of the global economic crisis and help realize the growth target," the NEDA chief said.
Speedy and quality actions are important, Recto said, adding that the "positive prospects from some industries that remain resilient amid the crisis should encourage us to keep our guards up.
"More importantly, hard work and cooperation among all sectors of the society will help the economy perform better in the coming quarters."
"As the government fine-tunes fiscal and monetary policies and provide the necessary support to all sectors in order to mitigate the lingering impact of the crisis, our economy is expected to remain afloat in 2009," Recto said.
While some economic analysts remain conservative on the outlook on the global economy, there are increasing reports that hint to the bottoming out of the global crisis earlier that expected.
He adds, "This may spur a race to recovery, hence, a business-as usual mode for the Philippines would not be acceptable - we must strive to be a step ahead if not at the head of the recovery." (PNA)
Friday, 29 May 2009
At its meeting today, the Monetary Board decided to reduce the BSP’s key policy interest rates by another 25 basis points to 4.25 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6.25 percent for the overnight lending or repurchase (RP) facility, effective immediately. This is the fifth rate cut since December 2008, and represents a cumulative reduction of 175 basis points in the BSP’s key policy rates. This RRP rate is the lowest since 15 May 1992. The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were also reduced accordingly.
The Monetary Board decided to further cut policy rates based on the latest baseline forecasts which indicated that average inflation is expected to remain within the target ranges in 2009 and 2010. In addition, the Monetary Board considered that, on balance, the downside risks to the inflation outlook continue to dominate as the decline in domestic and global demand has dampened inflationary pressures. Inflation expectations also remain well anchored. Meanwhile, the rebound in global oil prices and volatility in the foreign exchange market are possible sources of upside risk to future inflation.
The Board observed that while there are encouraging signs that the global slowdown may be bottoming out, it is too early to conclude that global economic conditions are clearly moving towards normalcy. There are still large imbalances in the global financial markets which could prolong the adjustment process. The Board also noted the lower-than-expected GDP growth of 0.4 percent for the first quarter of 2009. In this connection, the decision to lower policy rates could provide additional boost to spending and investment in the economy and support market confidence.
The BSP is prepared to move quickly to address potential risks to price stability while continuing to support domestic activity consistent with a non-inflationary path.
Philippine Daily Inquirer
MANILA, Philippines—Retail tycoon Henry Sy’s Banco De Oro Unibank (BDO) is acquiring the local banking unit of American conglomerate General Electric Co. (GE), cementing its lead as the country’s biggest financial institution.
The bank disclosed to the Philippine Stock Exchange (PSE) Thursday that it had signed a definitive agreement to purchase GE Money Bank for an undisclosed amount. GE, in turn, will acquire a minority stake in BDO equivalent to about 1.5 percent with an option to increase this to 10 percent.
“It’s a sale and share subscription transaction since seller and buyer are different entities within the GE group,” BDO president Nestor Tan explained. “We are very pleased to be working with GE and look forward to exploring opportunities for future collaboration.”
The sale of GE Money Bank and the entry of GE as a minority stakeholder in BDO are subject to closing conditions, including regulatory approvals, and are expected to be completed within the third quarter of 2009.
The deal appears similar to that hatched by BDO with United Overseas Bank of Singapore, when BDO took over its Philippine operations in 2005. The new acquisition, BDO’s first since taking over the former Equitable PCI Bank in 2006, will expand the local banking giant’s P801-billion asset base by another P10 billion.
“We welcome the opportunity to be partners with an institution like GE. With GE’s expertise in the financial sector, we hope this partnership will ultimately provide our customers with better consumer products and flexible financing solutions,” BDO chair Teresita Sy-Coson said.
The consolidation of GE Money Bank’s business into BDO, including its 30,000 customers, 350 employees and network of 31 branch licenses and 38 ATMs nationwide, is seen enabling BDO to accelerate the growth of its consumer banking business. As of end-March, GE Money had a loan portfolio of P6.88 billion and a deposit base of P8.46 billion.
GE, for its part, will bring in considerable value to BDO in the form of marketing, risk management and operational expertise, the PSE disclosure said.
“BDO’s superior market presence and clear strategy for growth will provide the business with the best opportunities for success. In addition, key customers and depositors will benefit from the best that both banks have to offer, with greater convenience and a wider range of products and services than ever before,” said Mark Arnold, GE Capital chief executive officer for Southeast Asia banking.
Asked by the Inquirer whether BDO will also join an upcoming bidding for a controlling stake in medium-sized Philippine Bank of Communications, Tan said they had “no plans to participate.”
Philippine Daily Inquirer
MANILA, Philippines—Who said remittances from overseas Filipino workers would plunge drastically due to the global financial crisis?
Today, more and more OFWs, aside from regularly sending money back home to their families, tend to band together to raise funds to help develop their hometowns.
The agricultural town of Pozorrubio in Pangasinan province, for instance, was cited in a recent study commissioned by leading global money transfer company Western Union as an example of a new phenomenon called “collective remittance.”
Because of the huge development potential of such inflows, especially in the Philippines which is one of the world’s largest recipients of remittances, Western Union said it planned to pilot-test in the country a project aimed at ramping up collective remittances.
“Migrant worker remittances are mainly family to family paying for basic necessities. But if remittances are pooled and invested in creating economic opportunities for the whole community, the impact would be greater,” said Western Union vice president Angela Heng, who was in Manila Thursday to host a one-day conference on collective remittance.
Ahead of the meet, Western Union commissioned the Economist Intelligence Unit (EIU) to conduct a study on communal or collective remittances in different parts of the world, their impact, and what could be done to make them more effective.
Pozorrubio, which has about 10 percent of its population working overseas, was cited in the study for having a local government that was able to encourage its overseas residents to make collective remittances to support local public works projects.
Since 1986, town officials have been visiting Pozorrubians in California, Chicago, Hawaii, New York, Washington and Hong Kong to encourage them to form themselves into solidarity groups, elect officers, and identify projects and programs in their hometown that they could support monetarily.
“For example, Pozorrubio had no street lights, but after the mayor encouraged the migrant workers’ families to put up lampposts in front of their homes, the whole town lit up,” the EIU study said.
As the Pozzorubian migrants became better organized, the study said the local government began encouraging them to hand their donations directly to the beneficiaries, and invited them to return home to see for themselves the impact their remittances were having.
“Return migration was the theme of the 2002 town fiesta,” the study said.
It said Pozorrubian migrant communities were able to finance the construction of a park and library, and refurbish a high school’s English learning center.
The community hospital received an electrocardiograph, computer, stethoscopes, toilet, septic tank, window screens, electric fans, beddings and medicines.
On top of these, the hospital is visited annually by locally born doctors who perform medical missions.
“The multiplier effect of these remittances has been enormous. By 2001, this rural town of 56,000 had Internet cafés, car rental services for visiting migrants, video rental shops, and a rural bank with over $2 million in deposits and only a few borrowers,” the study said.
It also built 12 public and private irrigation facilities, 50 manufacturing establishments, six big private housing subdivisions and 32 day-care centers.
“This level of development is almost never seen in rural Philippines, even in the larger municipalities. Moreover, the town’s tax collection is one of the highest in the region, with most of the revenue coming from the busy public market,” the study said.
The EIU said other LGUs had taken different approaches to encourage their migrant populations to invest in local enterprises.
“The most visible example is the province of Bohol which set up an investment center and enacted a local investment code to assist investors in identifying, organizing and matching their resources with local partners,” it said.
The Island Garden City of Samal, near Davao City, passed a similar code geared toward developing local tourism, it noted.
Another area where migrants make collective remittances is charity.
Cited as an example was the Filipino community in South Puget Sound in Washington state which raised more than $200,000 that it remitted to a foundation in Bislig City in Surigao del Sur to finance rehabilitation and livelihood projects.
Thursday, 28 May 2009
MANILA (PNA) –- Malacañang on Thursday cited the expansion of the Philippine economy by 0.4 percent in the first quarter of the year.
”A growth is still growth as we have heard and seen the report, but we should try to reflect the gross national product (GNP) [4.4%] which includes the number of remittances by the Overseas Filipino Workers (OFWs) that contributes greatly to the Philippine economy,” said Deputy Presidential Spokesperson Dr. Anthony Golez, in an interview with reporters at the New Executive Building (NEB) in San Miguel, Manila.
Golez, however said, this is not yet a time to celebrate because it’s common knowledge that the global economic situation will improve by the second half of the year.
He said President Gloria Macapagal-Arroyo will continue to focus, among others, in job generation.
Arriving and departing passengers can now experience faster processing of their papers at the airport as the Bureau of Immigration launched Tuesday the new machine-readable arrival/departure card (A/D card).
"The new A/D card will help the BI have an accurate, timely and efficient recording and retrieval of the arrival and departure record," said Commissioner Marcelino C. Libanan who led the launching of the A/D card at the Ninoy Aquino International Airport (NAIA) Terminal 3.
The new A/D cards will allow passengers to write the required information in the cards and the hand-written information would already be recognizable by computers. Through this new system, BI would do away with the encoding of information, which makes the processing of travel documents longer and more tedious.
"The new A/D card will likewise help us effectively track the movement of people who are likely involved in terrorism, human trafficking, drugs and arms smuggling, and other transnational crimes," said Libanan.
"The launch of this card is likewise very timely, because this will help us accurately identify and locate any passengers afflicted with a dangerous disease," the BI chief added.
The shift to the machine-readable arrival/departure cards is another component of Libanan’s program to cut processing time in the bureau to give better services to the people.
Anti-fraud division chief Simeon Vallada said the machine-readable arrival/departure cards gets rid of at least one step in the processing of travel documents of arriving and departing passengers.
Last year, while watching Bloomberg, a technical analyst who follows the Elliot Wave in charting the stock market predicted that the Dow would hit 9t. At that time, the Dow was trading at 13t level. It seemed ridiculous and crazy then, but we saw that it collapsed to 6500t. Today, it has rallied to 8t.
As I spent some time with my family in San Francisco, I still feel that the American problem is just beginning. While the US Government is doing everything it can, a problem like this cannot be solved overnight. Wealth has definitely been destroyed. For example, a lot of Americans have lost so much from their 401K Retirement Plan. It may not even be enough to secure them a comfortable life during their retirement days. People are still losing jobs. Most of people I know in America have been laid off or have been asked to go on long leaves.
The shopping malls are quite empty when you compare it to malls in Manila, Hong Kong and the rest of Asia. Houses are also still losing value. People ask me if this was the time to buy a house. I advise them to postpone, as financing to foreigners have been stopped. Banks are now exactly the opposite in terms of credit. From their lax standards in the past, they are now very extreme with their strict lending qualifications. Default rates on credit cards are now reaching historical heights and it will continue.
Most American families are in quite a bind. I would say most of their income is leveraged. This is why, if countries expect America to return to being a consumer-led country, they might end up waiting endlessly as most of them will have to deleverage and start to save.
When Japan felt the worst recession about 15 years ago, their savings rate was high. On the other hand, the American’s do not have savings to take them through this problem. A lot of American dreams have been shattered with this financial crisis. We are definitely blessed with our country’s service-based business model.
Meanwhile, let me share with you other BIG dreams of other Filipino entrepreneurs back home.
“I hope that I am able to do my job until I’m a hundred years old! I hope that the Philippines becomes even more progressive, so that business will improve even more.”
-Nanay Coring Ramos (general manager and founder, National Bookstore)
“My dream is for a first world Philippines - out of poverty and corruption by 2024, where there is peace, justice and abundance for all; a nation that will no longer be an exporter of cheap raw materials but producers of high value world class products; a nation not just of cheap labor to the world but of entrepreneurs, inventors and innovators; a nation that will be a top destination for visitors and investors; a nation where our citizens live with dignity and honor; a nation that every Filipino can be proud of.”
-Tony Meloto (president, Gawad Kalinga)
“My wishes for this country: that corruption may be a thing of the past and that all corrupt men and women are put to jail; that hunger and poverty will finally end; that education be a right and not a privilege, even if and especially if one is poor; that PEACE will reign; and that the business sector and entrepreneurs will prosper in order to create more jobs.”
-Tintin Bersola-Babao (owner, Precious Memories)
“I always say that I want to make the Philippines beautiful, one person at a time. I’ve been doing this through the Belo Medical Group, which offers world-class services to Filipinos. It’s my way of giving back because when you give back, it makes your spirit soar. I also want to improve the country’s tourism. I’ve travelled so much and I have seen what makes tourists happy, yet we don’t do it. The only thing that can resuscitate the country without spending so much money is to increase tourism.”
-Dr. Vicki Belo (medical director, Belo Medical Group)
“I dream for my country to become a manpower superpower. I believe that the Filipino people are prepared for the “bigtime”. We just need to be united and cohesive in our efforts. As a denizen of this country, I hope to be an inspiration to my fellow Filipinos through my scholarship foundation.”
-Ray Gapuz (president, R.A. Gapuz Review Center)
“I agree that perhaps using micro entrepreneurs is what we want for our country. Sariling sikap is another good description. Let us change the minds of Pinoys towards generation of wealth by going into business. Ask ‘Anong negosyo mo?’ instead of ‘Anong trabaho mo?’.”
-Cecilio Pedro (president and CEO, Lamoiyan Corp.)
“I’m dreaming and working hard to make Ever Bilena an international cosmetics brand, like Jolibee that is a truly Filipino brand. If every Filipino entrepreneur will push hard, we will be a Manny Paquiao in our line of businesses and our beloved Pilipinas will be an economic power for sure!”
-Dioceldo Sy (president, Ever Bilena)
“I dream of a Philippines where we are all proud and united Filipinos; where there are many celebrated achievements; where there are many who work hard to achieve; and where there are many who study to be able to contribute to the workforce.”
-Dennis Valdez (president, Philweb)
“My dream of a better Philippines will start with us - no blaming; being flexible and proactive rather than reactive; and being responsible businessmen. Our future lies critically on how we choose elective officials. After all, we deserve the government we choose. The Philippines is so beautiful and all we need is a beautiful mind and respect for our country.”
-Les Reyes (president, Reyes Haircutters)
“I dream of good health for me and my family through consumer awareness. I long to see that every consumer product such as burgers or French fries will have a nutrition labeling in their wrappers; and food manufacturers should educate the Filipino people in the understanding of nutrition table to have a safer and better Philippines.”
-Pinky Tobiano (founder and CEO, Qualibet Testing Services Corp.)
“I hope that the nation’s economy will continue to progress and that Filipino Entrepreneurs will once again be the expertise in the Global market. Let’s nourish and support the young entrepreneurs, they are the future of this country.”
-Richie Cuna (president, CEO of Fiorgelato)
“My dream is for the Philippines to become truly Christ-centered: where the Lord Jesus Christ is honored and worshipped; and where all Filipinos live with dignity and sufficiency in accordance with God’s plan for a just, humane and caring society. As for myself, my dream is to be a vessel of blessing to my country and fellowmen.”
-Ruth Callanta (president, Center for Community Transformation Group of Ministries)
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Donnabelle L. Gatdula
MANILA, Philippines – With the signing of the implementing rules and regulations (IRR) of the Renewable Energy Act, the Philippines would be able to generate up to $10 billion in fresh capital from renewable energy development projects over the next 10 years, said Energy Secretary Angelo Reyes.
He said there are already a number of interested investors that have lined up for pre-qualification at the Department of Energy (DOE).
“Our objective is to double the power being generated from renewable energy sources from 4,500 megawatts to 9,000 MW in 10 years,” he said.
Based on estimates, a renewable energy project may need a capital investment of $1 million to $2 million per megawatt.
Reyes said the Philippines has a capacity potential of 200,000 MW from renewable energy.
“Investors are aggressively coming in as they see the potential of RE development in the country,” he said.
He said the IRR for Republic Act 9513 will also usher in a better appreciation of renewable energy development prospects in the Philippines.
DOE director Mario Marasigan, on the other hand, said they are currently pre-qualifying 15 projects, most of which will be undertaken by local groups with foreign partners.
Marasigan said the local power firms have also been actively looking at potential investments in RE development.
Aside from the state-owned PNOC-Renewables Corp., which will take the lead in RE development, a lot of existing power generation companies have signified interest to engage in developing RE sources, he added.
Among these companies are First Gen Corp., Aboitiz Power Corp., Trans-Asia Power, Energy Development Corp., Suweco, Constellation Corp., Oriental Energy, Green Power Philippines, Deep Ocean Philippines, Norasian Corp. and Philcarbon.
“Many have submitted their letters of interest to deal with wind, hydro, biomass, solar and ocean projects,” he said.
RA 9513 aims to accelerate the development and use of the nation’s vast renewable energy resources through fiscal and non-fiscal incentives for investors. Among these incentives are seven-year income tax holidays for RE developers, exemption from VAT and duty-free importation of equipment and machinery, reduction of corporate income tax after the expiry of the income tax holiday to 10 percent of net income as well as a zero percent VAT rate for the sale of power from RE.
It also assures investors in wind, solar, ocean, run-of-river hydropower and biomass in electricity generated from these clean sources through feed-in tariffs. Other incentives include duty-free importation of equipment, tax credit on domestic capital equipment and services, special realty tax rates, income tax holidays, net operating loss carry-over, accelerated depreciation and exemption from the universal charge and wheeling charges. The law also exempts the proceeds from the sale of carbon credits from all taxes.
The law also seeks to institutionalize a Renewable Portfolio Standard requiring the country’s electric utilities to obtain a certain portion of their electricity from clean, homegrown renewable energy sources. This mechanism is intended to promote the swift development of renewable energy resources.
According to the DOE, the country’s renewable energy potential is vast – with 4,531 MW from geothermal; 13,097 MW from hydropower, 277 million barrels of fuel oil equivalent from biomass; 5.0-5.1 kwh/m2/day from solar; 76,600 MW from wind; and 170,000 MW from oceanic waves.
“We, in the renewable energy industry, are most appreciative of the extraordinary efforts that Secretary Reyes and his team exerted in completing the IRR. That it was completed a month ahead of schedule is indeed an admirable feat that was achieved through the strong leadership of Secretary Reyes,” Former Energy Secretary and Merritt Partners chairman Vincent S. Pérez said.
Perez, appointed recently by President Arroyo as special envoy for Renewable Energy Development, said the national consultations conducted were most comprehensive in national coverage and engaged various sectors to reflect the full intent of the law.
He said yesterday’s IRR signing is an indication of the DOE and the National Renewable Energy Board’s commitment in promoting renewable energy in the Philippines.
“We hope to build on the positive momentum from the IRR to implement the NREB’s mandate under RE Act,” he said.
The NREB, created under Section 27 of the RE Act, is a recommending advisory body on renewable energy policies that will monitor the implementation of action plans of the DOE.
Before the end of 2009, St. Luke’s Medical Center will open the P9-billion 600-bed St. Luke’s Medical Center hospital at the Bonifacio Global City in Taguig.
St. Luke’s Taguig is the sister hospital of St. Luke’s Quezon City, regarded as, probably—the best hospital in the Philippines today and one of the best in the world. St. Luke’s is better-equipped than 95 percent of hospitals in the United States.
The hospital will cater to two main markets—the booming Makati Central Business District and the international market or medical tourism.
In 2007 alone, some 750,000 Americans traveled abroad and spent $2.1 billion to seek medical care. By 2017, more than 15 million Americans will seek medical services in other countries and spend between $30 billion and $79 billion.
By next year, global medical tourism is projected to be worth $100 billion, up from $60 billion in 2007.
The Deloitte Center for Health Solutions defines medical tourism as the process of leaving home for treatments and care abroad. This phenomenon will show explosive growth, for two reasons:
One, the safety and quality of care in many offshore settings like the Philippines is no longer an issue.
Two, rising health care costs in home countries. The high cost of medical care is eating into corporate profits and household disposable income. Yet, the same medical care, in quality and expertise, is available—abroad—for half or even a fourth of the cost.
The Philippines is a natural for medical tourism. The country has among the world’s best doctors, nurses and health care providers. Filipinos, by nature, are warm, friendly, and caring. They speak English, the language of medicine and patients. And a number of Philippine hospitals are highly regarded abroad.
A strong medical tourism industry will create jobs, help alleviate poverty, and boost the Philippines as an excellent place for doing business and for retiring.
St. Luke’s is home to some of the best Filipino medical scientists, doctors and specialists. Many have undergone rigid training under world-renowned experts in hospitals and universities abroad.
St. Luke’s is the only Philippine hospital twice accredited by the Joint Commission International, or JCI—in 2003 and in 2006. It is the first to be accredited in the Philippines by JCI and the only one re-accredited. Accreditation validates St. Luke’s claim as one of the world’s best.
St.Luke’s at the Fort will be state-of-the-art—with 374 doctors’ clinics, parking for 1,265 cars; and ten institutes, one each for Heart, Cancer, Neurosciences, Digestive and Liver Diseases, Eye, Orthopedics and Sports Medicine, Pathology, Pulmonary Medicine, Radiology, and Pediatrics and Child Health.
Standing on a 1.6-hectare prime land, the new hospital has 18 operating rooms, five caesarian section and delivery rooms, imaging suites, critical care units, cardiac catheriterization lab, ob-gynecology, and post-anesthetic care unit.
Accordingly, St. Luke’s at the Fort has sought registration with the Philippine Economic Zone Authority as a medical tourism park. It is the second hospital to do so. The first was the St. Francis Cabrini in Batangas City, which bills itself as medical facility for cancer patients and for the Japanese market.
PEZA-registered medical tourism parks enjoy a host of incentives, including the payment of a special 5-percent tax on gross income, in lieu of all national and local taxes.
Additionally, they enjoy four years of income tax holiday on profits solely derived from servicing foreign patients. After the four-year ITH or income tax holiday, the medical tourism parks will just pay a 5-percent gross income tax on income solely derived from servicing foreign patients, in lieu of all national and local taxes.
As a PEZA firm, St. Luke’s can also import medical equipment, including spare parts and equipment supplies, duty-free. As a medical tourism center, it will be allowed to employ foreign nationals subject to existing laws.
MANILA (PNA) -- Tokyo has provided P2 billion ($42M) grant aid to Manila to finance the installation of weather monitoring system and the construction of bridges, the National Economic and Development Authority (NEDA) said.
The agency said the governments of Japan and the Philippines signed the grant on Wednesday through Socioeconomic Planning Secretary and NEDA Director General Ralph G. Recto and the Japan International Cooperation Agency (JICA), represented by JICA-Philippines Chief Representative Norio Matsuda.
The projects include the Improvement of the Meteorological Radar System in the Philippines worth P1.64 billion; P302 million worth bridge construction for expanded agrarian reform communities development and the P149 million grant aid for human resource development scholarship.
“We appreciate the Japanese government’s initiative to provide, among others, radar systems, dams and reconstruction of damaged infrastructure such as bridges in the country. These equipment and infrastructure support are very much aligned with one of the Philippine government’s priorities, that is, natural disaster prevention and mitigation,” Recto said.
The radar system project, with the Philippine Atmospheric, Geophysical and Astronomical Services (PAGASA) as proponent, involves the replacement of three existing meteorological radar systems in Aparri, Cagayan; Virac, Catanduanes; and Guian, Samar.
The radar system project aims to effectively prevent damages caused by tropical storms or typhoons by enhancing the capability of PAGASA in weather monitoring and weather information or warning dissemination.
The diplomatic exchange of notes for this project was signed last March 30.
Meanwhile, the Bazal bridge construction project involves the construction and replacement of existing wooden bridge that crosses Bazal river along the boundary between two barangays in Maria Aurora, Aurora province.
The grant agreement for the conduct of the detailed design study for this project was signed by Recto and Matsuda last April 20.
The JDS, another Japan grant-assisted project, aims to provide qualified Filipinos with the opportunity to obtain Master’s degree at Japanese universities to support the human resource development policy of Japan, and eventually to extend and strengthen the bilateral relationship between Japan and the Philippines
The JDS project funds 20 scholarship slots for young Filipino government employees who are expected to play leadership roles in the Philippines and those who will contribute to the socioeconomic development of the country in the following fields of study: Economics, Business Administration, Public Administration, Information and Communications Technology, and Industrial Development.
About 84 scholars out of 159 grantees had graduated and came back to use their skills and knowledge gained in Japan while 50 grantees have ongoing studies in Japan and 25 more successful candidates were selected under the seventh batch for July 2009 intake.
The exchange of notes for the eighth batch of JDS scholars was signed last May 19. (PNA)
VIEW TABLE HERE
Weighed down by the impact of the US financial meltdown and the global crisis, historic declines in manufacturing and trade sent the Philippine economy into hiccups, albeit afloat, with a GDP growth of 0.4 percent from 3.9 percent. The insipid growth in GDP drew on the positive contributions of Construction, Agriculture, Transportation, Communication and Storage, Mining and Quarrying, and Private Services. On the expenditure side, little growth drivers were Construction, Import of Non Factor Services, Personal Consumption Expenditure (PCE), Export of Non Factor Services, and Government Consumption Expenditure. Notwithstanding the difficulties faced by the global economy, the demand for the services of our OFWs continued to heighten as their increased deployment contributed to the hefty growth of Net Factor Income from Abroad (NFIA) of 40.8 percent from 36.2 percent last year, pushing GNP to grow by 4.4 percent from 6.4 percent the previous year.
A big challenge to the economic managers during the remaining month of the second quarter is the fact that the Philippine economy is now teetering into recession as seasonally adjusted GDP sank by 2.3 percent, the lowest for the past 20 years. The seasonally adjusted GNP likewise declined by 1.2 percent, marking the first time since the first quarter of 2001 when both GDP and GNP contracted quarter on quarter. In addition, the Leading Economic Indicators for the second quarter breached into negative territory confirming the all too real threat of a recession.
The seasonally adjusted Agriculture, Fishery and Forestry sector contracted by 1.0 percent in the first quarter after expanding by 0.9 in the last quarter with the declines of other crops, corn and sugarcane. Industry registered its lowest growth for the last twenty years as it sank by 6.6 percent from 0.1 percent gain in the last quarter. The substantial weakening of the manufacturing sector contributed immensely to the contraction of industry. Services sector posted no growth for the first quarter of 2009 compared to 0.2 percent recorded the previous quarter, as trade declined while other sub sectors slowed down. On a seasonally adjusted basis, the sector has grown less than one percent in each of the last five quarters.
With projected population reaching 91.56 million and the domestic economy barely growing, per capita GDP declined by 1.5 percent, the first since the third quarter of 2001. Per capita GNP still grew, however by 2.4 percent from 4.4 percent while per capita PCE declined by 1.1 percent from its year ago growth of 3.1 percent.
In the Net Factor Income from Abroad, Compensation inflow jumped by 26.9 percent from 6.1 percent in 2008. Property income however, plummeted to negative 50.2 percent from 19.3 percent while Property Expense likewise skidded by 30.4 percent from negative 26.6 percent. As a result, NFIA grew by 40.8 percent from 36.2 percent.
On the expenditure side, the continued rise in prices resulted in lower consumer spending at 0.8 percent from 5.1 percent a year ago.
With the disbursement of government funds for infrastructure projects, Government Consumption Expenditure (GCE) rebounded to 3.8 percent from negative 0.3 percent recorded last year.
Investments in Fixed Capital Formation in the first quarter of 2009 plunged to negative 5.7 percent from a growth of 3.0 percent in the same period last year. Investments in Durable Equipment plunged to negative 17.9 percent from a growth of 9.6 percent a year ago. The decline in the investments in durable equipment was the highest decline registered since the fourth quarter of 1998. Meanwhile, Private construction caused Construction to rebound from negative 4.1 percent the previous year to 9.9 percent while infrastructure investments by the government managed to improve Public Construction to a lower negative 4.4 percent from negative 10.9 percent.
Total Exports dived deeper to negative 18.2 percent from negative 7.7 percent last year as Merchandise Exports registered a higher double-digit negative growth in the first quarter of 2009. The lackluster performance of Merchandise Export was attributed to the slump in both Principal Merchandise Exports and Other Exports to negative 30.5 percent from negative 13.7 percent and negative 20.1 percent from 7.1 percent, respectively. Meanwhile, Exports of Non-Factor Services decelerated to 4.9 percent in the first quarter of 2009 from 5.9 percent.
Total imports further contracted to negative 19.2 percent from negative 2.6 percent in the previous year, largely attributed to the lackluster performance of merchandise imports. Total Merchandise Imports slipped further to negative 22.6 percent in the first quarter of 2009 from last year’s decline of negative 3.4 percent. All sub sectors of the sector dipped further to negative with Principal Merchandise Imports registering the biggest decline with negative 25.2 percent from negative 3.7 percent last year, Imports on Consignment, negative 36.5 percent from previous year’s negative 16.5 percent, and import commodities grouped under Others, negative 16.2 percent from negative 0.8 percent. Meanwhile, Imports of non-factor services grew by 18.9 percent in the first quarter of 2009 from 7.7 percent in 2008.
Total Imports valued at P530.9 billion pesos at current prices exceeded Total Exports valued at P528.6 billion pesos, resulting in a trade deficit of P2.3 billion pesos. In the same period last year, trade balance posted a bigger deficit of 28.3 billion pesos. The current trade deficit stood at 0.11 percent of GNP from last year’s 1.5 percent.
Terms of trade posted a Trade Index of 98.4 percent from 95.8 percent posted in 2008 while Trading losses for the quarter amounted to P1.9 billion pesos.
GNP Implicit Price Index (IPIN) stood at 517.8 percent from 494.8 percent in the previous year or a 4.6 percent inflation.
ROMULO A. VIROLA
THE COMMISSION on Elections (Comelec) yesterday began testing machines that may be used in the general elections.
Ferdinand T. Rafanan, chairman of the special bids and awards committee, said gadgets that can interrupt operations would not be allowed in the venue.
"Everyday gadgets like cellphones are okay but we just want to make sure that the machines are not sabotaged. We will just improve on the deficiencies when it is time for customization," said Mr. Rafanan in an interview on the sidelines of the demonstration.
The machines of single complying calculated bidder Total Information Management (TIM)/Smartmatic would be tested on the following: manual feeding of ballots, speed of scanning, device integration, scanning resolution, level of authorization and authentication, electronic display, accuracy and printing of ballots.
Despite reaching the machine testing stage, TIM/Smartmatic has not yet been declared lowest calculated bidder and would still have to undergo post-qualification proceedings.
Comelec Chairman Jose A. R. Melo told reporters yesterday there are other options in case of failure. "We can have a second bidding, and partial automation is another option." He added the winner should be known next week.
Mr. Rafanan said the chairmen of the congressional oversight committees for election automation have been invited to today’s demonstration.
Outside the Box
It will never be the same way again, ever. Now what do we do?
At the end of World War II in 1945, the United States was virtually the only country in the world that had its manufacturing base intact. Europe was destroyed. Asia was in pieces. And despite its having emerged from the war relatively unscathed, the USA did not have the capacity to produce goods for the world and the world did not have the money to buy those goods.
The USA spent the equivalent of billions in 2009 dollars rebuilding the economies of Europe and Japan. However, the size and strength of the US economy was so great in comparison that the USA would completely dominate and control the global economy for two decades.
In the 1960s, Japan realized that its prosperity could not depend on its own domestic consumption to grow that economy at a pace that would bring the Japanese standard of living to US levels. It began to concentrate on manufacturing goods that could compete in the US consumer market at a price advantage, if not a quality equal. Thus began the era of globalization, where one nation depended on another for its market and that second nation depended on the first for its goods and supplies.
As goods flowed into the USA from Japan, money and wealth flowed out of the USA to Japan. Other nations over the following years followed the Japanese model: South Korea, Taiwan, Western Europe, smaller Asian nations, and finally China.
At first, the outflow of wealth from the USA was offset by selling its agricultural products and other raw materials as well as its high-technology goods. But by the end of the 1960s, an irreversible economic trend started. The USA was now buying more from the world than the world was buying from the USA. As the followers of Japan came into the economic picture, the US trade deficit accelerated and grew, with 1985 being the year that China came onboard the globalization train and the US trade deficit began its climb to the sky.
By the early 1990s, the trade deficit was so large and out of control that the only way that the USA could afford to buy its imported goods, which now included essential and strategic items like autos, steel and clothes, was to borrow the money. US consumers and, therefore, the government added trillions of dollars of debt to buy the goods from overseas.
The Chinese, because of their massive exports to the USA, had in its treasury most of the dollars that they had earned from doing business with the USA. They began loaning money to the USA in order that the USA would continue to buy Chinese exports. Japan too was a large lender to the USA.
But in 2008, the cycle came to an end. The amount of debt carried by the USA and paying off that debt began dragging on the growth of the US economy. The final nail in the coffin was the rapid rise in oil prices, not the spike in 2009 to $150, but the first jump to the historic $100 level.
Until then, the USA was the center of the world’s economic growth model, the globalization model.
Trade globalization and financial globalization are the two sides of the same coin and inseparable. The economic globalization model that the world has lived in for the last 50 years is over, never to return in the same form. What do we do now?
The Philippines will continue in its own unique way through outsourcing and exporting labor (both on the edge of the globalization model) for perhaps another decade. But those, too, will fade away.
The exporting nations that depended on the USA are scrambling and rushing to quickly develop their domestic consumption to offset the economic losses from reduced exports to the USA. This will take several years. But in the long run, this will be better for the individual countries and for the global economy.
The next president of the Philippines will supervise and preside over the most fundamental economic changes in a generation. It will take a person of unusual foresight and understanding to position the Philippines for the changes that are coming. At this point, no potential candidate has yet shown any inclination or wisdom above “business as usual.” The way most sound as they position themselves for 2010 is that they are still preparing the Philippines for 1998.
Our “captains of industry” sound little better. Most look to China as the growth engine for their companies. Forget it. With few exceptions, nations will keep their wealth at home to develop their domestic industries to supply their domestic markets. The exceptions will be like China buying raw-material, primarily mineral, assets around the world for use in its domestic economy.
In many ways, the Philippines, as I have said so many times before, is positioned differently than most nations. But unless our political and business leaders start thinking about a changed and different world that we will face in the very near future, we will be engulfed by an economic tsunami, the likes of which the world has not experienced for many decades.
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Wednesday, 27 May 2009
DOLLARS sent home by sailors continue to buoy the overall remittances from overseas Filipino workers (OFWs), the Trade Union Congress of the Philippines (TUCP) said on Tuesday.
“The rate of increase in remittances from sea-based Filipino workers abroad continues to outpace considerably the growth [rate] in money transfers from land-based laborers,” Ernesto Herrera, TUCP secretary-general and former senator, said.
He said remittances from Filipino sailors increased by 5.52 percent ($41.851 million) to $800.535 million in the first quarter of the year versus $758.684 million in the same period in 2008.
In contrast, Herrera said the cash wired home by land-based OFWs grew by only 2.03 percent ($64.697 million) to $3.256 billion in the first quarter compared to $3.191 billion in the same period in 2008.
He attributed the continued growth in remittances from sea-based Filipino workers increased deployment on account of global demographics.
“Despite the severe global recession, compared to a decade ago the world’s economy and population today are much larger, thus, requiring more ships to move all sorts of commodities faster across continents,” Herrera pointed out. He also said a growing number of American, European and Japanese sailors are fast approaching retirement age, and are being replaced wholesale by younger Filipinos.
“Western and Japanese sailors are also increasingly shunning jobs onboard ships, preferring shipping desk or port-related jobs instead,” he added.
Remittances from sea-based workers are also partly being propped up by Filipino hospitality workers on cruise ships, according to Herrera, former chairman of the Senate committee on labor, employment and human resources development.
Barring a catastrophic global economic depression, he said the more than 350,000 Filipino sailors on foreign vessels at any given time could easily rise to 500,000 in five years.
In the first quarter, the top 10 sources of remittances from Filipino sailors were the United States ($399.912 million); Japan ($75.057 million); Norway ($70.351 million); Great Britain ($56.323 million); Germany ($50.82 million); Singapore ($32.178 million); Greece ($29.342 million); Cyprus ($15.773 million); the Netherlands ($12.233 million); and Denmark ($11.054 million).
The Bangko Sentral ng Pilipinas earlier reported that total remittances from OFWs (both land and sea based) expanded by 2.7 percent ($106.548 million) to $4.057 billion in the first quarter versus $3.950 billion in the same period in 2008.
Of the $106.548 million year-on-year net increase in remittances, 40 percent was from sea-based workers, while 60 percent was from those based on land.
Herrera, meanwhile, urged the government to step up pressure on shipping firms and their staffing agencies to secure the release of the last 44 Filipino sailors still being held captives at sea by African pirates onboard four vessels.
Tuesday, 26 May 2009
PGMA witnesses award of Tiwi-Makban geothermal plants to Aboitiz in Makati
President Gloria Macapagal Arroyo today (May 25) led national government officials in witnessing the turnover of the Tiwi- Makban geothermal plants by the Department of Energy (DOE) to the Aboitiz Power Renewables Inc. held at the office of the Power Sector Assets and Liabilities Management Corp. (PSALM) in Makati City.
Also present during the awarding ceremony was Finance Secretary Margarito Teves and Energy Secretary Angelo Reyes and Jose Ibazeta, CEO of PSALM, the privatization agency for assets and liabilities of the National Power Corp (NPC).
The Tiwi Geothermal Power Plant in Tiwi, Albay (Bicol region) is situated approximately 559 kilometers southeast of Manila and north of the Mayon Volcano.
The MakBan (which stands for Makiling and Banahaw) plant is located 70 kilometers southeast of Manila in the provinces of Laguna and Batangas and is situated in two non-active volcanoes—Mt. Makiling and Mt. Banahaw.
The plant was bought by Aboitiz, who was represented by Luis Miguel Aboitiz during the turnover, for $446.9 million, with 40 percent down payment, or P8.2 billion.
Aboitiz will also pay in full the lease rentals on the property of P492 million, Reyes said.
He added that the Tiwi MakBan plant is the first geothermal plant that had been sold by PSALM.
Relying more on renewable energy sources will help the country reduce its dependence on imported fuel and save foreign exchange, in addition to leading the way to cleaner energy.
The Aboitizes bought the plants.
Gulf states should rethink dollar peg — Krugman
ABU DHABI — Gulf Arab states would be better off if they dropped their currency pegs to the US dollar, Nobel Prize-winning economist Paul Krugman said yesterday.
Countries in the Gulf Cooperation Council (GCC) have wrestled with the issue in recent years when a weak dollar was stoking inflation in the region.
Kuwait is the only Gulf Arab state to have dropped its peg to link its dinar to a basket of currencies in May 2007.
"I think it’s not (wise), just on general principles," Krugman said of the region’s use of the dollar peg.
"You have a region that does as much trade with the euro zone as it does with the United States ... Having a dollar peg exposes yourself to a lot of gratuitous fluctuation," he told reporters on the sidelines of a seminar in Abu Dhabi, the United Arab Emirates capital.
Inflation has since fallen as the dollar revived, oil prices fell and the global economy declined, taking some of the heat out of the issue for now.
Kuwait is committed to a GCC currency union. The UAE said last week it would not join the common currency, citing disagreement with a GCC decision to locate a central bank in the Saudi capital Riyadh.
But Mr. Krugman said the basket of currencies that Kuwait has moved to made more sense for Gulf countries.
"If you feel you must have a currency peg then the economics suggest to a basket that more or less reflects trade weights," Mr. Krugman said, adding inflationary pressure would come round again should the dollar fall to previous lows.
Mr. Krugman said the GCC, which includes Qatar, Bahrain and Oman, had become a powerful economic bloc and would remain so because world demand for oil would not flag. He saw oil prices, now around $60 a barrel, gradually rising. — Reuters
PLGM with a report from Reuters
THE ECONOMY may have surged in the first three months of the year, bucking a global recession and even the government’s expectations, economists yesterday said, citing how remittances by overseas Filipinos and government spending likely buoyed growth.
Other economists, however, argued that a lack of government disbursements would have dampened expansion for the period.
"I think those who are projecting lower growth are in for a surprise," said Marcelo E. Ayes, Rizal Commercial Banking Corp. senior vice-president for financial markets, in an interview.
He said the economy likely grew by over 3% in the first quarter, on the back of overseas Filipino workers’ remittances and the government’s stimulus program, whose implementation began in the latter part of March.
The National Statistical Coordination Board is scheduled to release the country’s growth data for the first quarter on Thursday, the same day market players expect the Bangko Sentral ng Pilipinas (BSP) to cut its key interest rates by another 25 basis points.
Socioeconomic Planning Secretary Ralph G. Recto last week said gross domestic product (GDP), the total value of goods and services produced within a given period and an often-cited measure of the size of an economy, likely grew between 1.8% and 2.8% in the first quarter.
Remittances grew by 2.7% to over $4 billion in the first quarter over the same period last year. The expansion was better than the zero growth forecast for remittances by the central bank and negative projections by the World Bank (-4%) and the International Monetary Fund (-7.5%) for this year.
Remittances grew by 13.7% to a record high of $16.4 billion last year.
"All these negative forecasts are coming from people who don’t know the strength of remittances," Mr. Ayes said.
University of Asia and the Pacific economist Victor A. Abola, meanwhile, said the country’s GDP may have grown between 3.8% and 4.1% in the first quarter.
He said government spending for infrastructure grew by a fifth in the first quarter.
Likewise, expenses for infrastructure, which Mr. Abola said helps address unemployment, also grew by three-quarters over last year.
"However, I think the growth will be slower in the second and third quarter — which are also the periods when the government expects faster growth," Mr. Abola said.
"I think domestic demand was strong because of declining inflation and growth in investments," said Luz L. Lorenzo, and economist at ATR KimEng Securities, Inc.
Ms. Lorenzo, who said the economy may have grown by 4.6% in the first quarter, said remittances were playing a big part in the country’s resilience against the global economic slowdown.
University of the Philippines economist and former Socioeconomic Planning Secretary Solita Collas-Monsod, however, said growth may be on the low end due to the lack of real government action.
"Our monetary policies are good, but I don’t know where our fiscal response is," she said in an interview.
She refused to give a definitive projection, but said the growth may be on the "low side."
As this developed, 11 economists polled by Reuters saw first quarter economic growth at 2.5%, the slowest annual rate of expansion since the fourth quarter of 2001.
Six of them also forecast on average that the economy contracted by a seasonally adjusted 1.8% in January-March. That would be the first seasonally adjusted contraction since the first quarter of 2001 and the steepest fall in at least 14 years, based on available government data since 1995.
Citigroup local analyst Jun Trinidad, meanwhile, said the economy may have grown by 2% in the first quarter, near the low end of the government’s growth forecast for the period.
"We expect a GDP growth of 2% [year on year] in [the first quarter] with succeeding quarters posing incremental GDP gains on resilient remittances, increased fiscal spending, improving consumer sentiment likely to shed the negative wealth effects and BPO proceeds," he said in a commentary late last week.
Mr. Trinidad added the government was likely to breach its budget deficit ceiling of 2.5% of GDP, or P199.2 billion, this year.
He also noted the likelihood the BSP may shift to a neutral policy stance after cutting its rates by 25 basis points on Thursday, to avoid overdoing its easing stance, which could stoke inflation.
The central bank has cut its policy rates by a total of 150 basis points since December, bringing the overnight borrowing rate to a 17-year low of 4.5%.
But BSP Deputy Governor Diwa C. Guinigundo downplayed the importance of the economy’s growth results for the first quarter, saying monetary policies are crafted looking 15 to 21 months into the future.
"GDP for the first quarter will just be an important footnote to monetary policy making," Mr. Guinigundo said.
"It will either validate or invalidate some of the assumptions you used in formulating monetary policy in the past," he added.
Philippines Seen To Have Registered Modest First-Quarter Growth
By Darwin G. Amojelar, Senior Reporter
With Lailany P. Gomez
THE Philippine economy is likely to have grown at a modest pace in the first quarter of the year, due to Remittances from overseas Filipino workers (OFW) and government pump priming activities, economists polled by The Manila Times said.
The median average of the three economists polled point to the economy, as measured by the country’s gross domestic product (GDP), expanding by 4.20 percent in the January to March period.
A proxy for economic output, GDP is the amount of goods and services produced in a country.
This was way above the National Economic and Development Authority’s (NEDA) forecast of between 1.8 percent and 2.8 percent in the first quarter of the year.
The economy grew 4.7 percent in the first quarter of 2007.
The National Statistical Coordination Board will announce the official GDP figures on May 28.
David Cohen, chief economist at Action Economics in Singapore, projected GDP to grow 4.5 percent year-on-year and 0.3 percent quarter on quarter.
“The primary drag will be the slowdown in exports, as the Philippines was not immune to the collapse in global demand felt by economies across the region,” Cohen said.
He said Philippine exports carry less weight than for some of its neighbors, and domestic demand should help sustain positive growth, both in first quarter and for the whole year.
“We expect annual growth near the bottom end of the government’s 3.1 percent to 4.1 percent target range. Consumption is supported by remittances from overseas workers, and although growth has slowed, it has not showed the sharp fall-off that some had feared,” Cohen said.
In the first three months, remittances rose 2.98 percent to $4.06 billion from $3.95 billion last year, as sea- and land-based workers sent more cash home.
Jonathan Ravelas, market strategist at Banco de Oro Unibank Inc. expects GDP to have expanded by 4.20 percent in the first quarter.
Victor Abola, economist at the University of Asia and the Pacific said the economy may have grown 4.1 percent, or “way above the [forecast of] NEDA aand other economists.”
Net exports effect not that much
“I think we are stressing too much on the large exports decline in the first quarter. But we should consider that imports also declined closely in line with exports. So the net exports effect would not be that much, especially when we consider that electronics exports rely on imports for around 65 percent to 70 percent of exports value,” Abola said.
He said the positive factors may be found in infrastructure and private construction spending, as well as OFW remittance gains.
Abola said the Department of Finance reported that infrastructure spending was 75 percent higher in first quarter of the year from last year, while residential construction and finishing commercial buildings were still up.
“OFW remittances have risen by more than 21 percent in peso terms, and this contributes not only to keep consumer spending at around 4 percent, and supported the construction spending. Every peso of OFW remittance generates P2.50 of income in the economy,” he said.
In a separate report, Citigroup said it expects the country’s GDP to have grown 2 percent in the first quarter on the resilience of remittances, increased fiscal spending and improving consumer sentiment.
The US financial giant, however, warned that the Bangko Sentral ng Pilipinas (BSP) may shift to a neutral policy rate stance after lowering the overnight rates to 4.25 percent on May 28.
“[The] BSP may wait for the cumulative 175 basis points easing to feed-through to lower average bank loan rate,” Jun Trinidad, Citigroup economist, said.
Potential overshooting of fiscal deficit Citigroup also warned against the potential overshooting of the fiscal deficit target of 2.5 percent of GDP.
The bank said the government’s tax effort or tax-to-GDP ratio would reach 11 percent compared with the previous year’s 14 percent owing to disinflation and lackluster business activity.
“Declining corporate incomes, business closures particularly in the SME [sector], negative wealth effects from financial markets, and rising jobless condition may have conspired to lower taxes and tax compliance by more than what decelerating GDP estimates may provide,” Trinidad said.
“We estimate fiscal revenue to be at P90.7 billion [1.1 percent of GDP] less than our fiscal year 2009 tax collection projection of P1.1 trillion [14 percent of GDP]. We calculated this by extending the implied tax volume estimates for the rest of the year coupled with our non-food inflation estimates that should track headline [consumer price index] forecasts,” Trinidad said.
If the dismal tax scenario materializes, Citigroup expects the government to freeze its budget expenditures to deter overshooting the fiscal deficit target this year.
“If government accommodates the revenue slippage, the fiscal gap may shoot up to 3.6 percent of GDP,” Trinidad said.
The government must combine the budget freeze with the privatization of its San Miguel Corp. shares and other assets to live within its fiscal target, he said.
The New York Times
California, it has long been claimed, is where the future happens first. But is that still true? If it is, God help America.
The recession has hit the Golden State hard. The housing bubble was bigger there than almost anywhere else, and the bust has been bigger too. California’s unemployment rate, at 11 percent, is the fifth-highest in the nation. And the state’s revenues have suffered accordingly.
What’s really alarming about California, however, is the political system’s inability to rise to the occasion.
Despite the economic slump, despite irresponsible policies that have doubled the state’s debt burden since Arnold Schwarzenegger became governor, California has immense human and financial resources. It should not be in fiscal crisis; it should not be on the verge of cutting essential public services and denying health coverage to almost a million children. But it is — and you have to wonder if California’s political paralysis foreshadows the future of the nation as a whole.
The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.
The result was a tax system that is both inequitable and unstable. It’s inequitable because older homeowners often pay far less property tax than their younger neighbors. It’s unstable because limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions.
Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.
For California, where the Republicans began their transformation from the party of Eisenhower to the party of Reagan, is also the place where they began their next transformation, into the party of Rush Limbaugh. As the political tide has turned against California Republicans, the party’s remaining members have become ever more extreme, ever less interested in the actual business of governing.
And while the party’s growing extremism condemns it to seemingly permanent minority status — Mr. Schwarzenegger was and is sui generis — the Republican rump retains enough seats in the Legislature to block any responsible action in the face of the fiscal crisis.
Will the same thing happen to the nation as a whole?
Last week Bill Gross of Pimco, the giant bond fund, warned that the U.S. government may lose its AAA debt rating in a few years, thanks to the trillions it’s spending to rescue the economy and the banks. Is that a real possibility?
Well, in a rational world Mr. Gross’s warning would make no sense. America’s projected deficits may sound large, yet it would take only a modest tax increase to cover the expected rise in interest payments — and right now American taxes are well below those in most other wealthy countries. The fiscal consequences of the current crisis, in other words, should be manageable.
But that presumes that we’ll be able, as a political matter, to act responsibly. The example of California shows that this is by no means guaranteed. And the political problems that have plagued California for years are now increasingly apparent at a national level.
To be blunt: recent events suggest that the Republican Party has been driven mad by lack of power. The few remaining moderates have been defeated, have fled, or are being driven out. What’s left is a party whose national committee has just passed a resolution solemnly declaring that Democrats are “dedicated to restructuring American society along socialist ideals,” and released a video comparing Speaker of the House Nancy Pelosi to Pussy Galore.
And that party still has 40 senators.
So will America follow California into ungovernability? Well, California has some special weaknesses that aren’t shared by the federal government. In particular, tax increases at the federal level don’t require a two-thirds majority, and can in some cases bypass the filibuster. So acting responsibly should be easier in Washington than in Sacramento.
But the California precedent still has me rattled. Who would have thought that America’s largest state, a state whose economy is larger than that of all but a few nations, could so easily become a banana republic?
On the other hand, the problems that plague California politics apply at the national level too.