Pledges $300M to expand train system
By Paolo Luis G. Montecillo
Philippine Daily Inquirer
MANILA, Philippines—Local infrastructure giant Metro Pacific Investments Corp. (MPIC) has offered to buy the government’s stake in the Metro Rail Transit (MRT) 3 train line traversing Epifanio de los Santos Avenue for $1.1 billion.
The amount will be enough to settle the government’s outstanding debt to MRT Corp. bond holders, MPIC said.
The acquisition will give the group, chaired by businessman Manuel V. Pangilinan, 100-percent ownership of the company that holds the right to operate and manage the train line until 2025.
In a letter to Finance Secretary Cesar Purisima and Transportation Secretary Jose de Jesus, MPIC offered to buy shares in MRT Corp. currently held by state-owned lenders Land Bank of the Philippines and Development Bank of the Philippines.
MPIC was earlier given control over a 29-percent stake in MRT Corp. by the block’s owner, Fil-Estate Corp. of businessman Robert John Sobrepeña.
MPIC said it planned to spend $300 million to increase the MRT’s capacity to 700,000 passengers a day from the current 350,000 a day.
The capacity expansion would be completed in two to three years, according to the proposal letter, a copy of which was obtained by the Inquirer.
MPIC said it was willing to accept a lower rate of return on its investment if it would acquire the MRT stake from the government. It added that it would not seek any government guarantee for the project.
MPIC, however, urged the government to extend the build-operate-transfer contract by another 15 years to 2040 to make it financially viable.
The government stands to save $150 million in annual subsidies if it accepted the proposal, the letter said.
The proposal was offered as an alternative to the way the government wanted to privatize the MRT, which was to bundle it with the Light Rail Transit (LRT) line 1 that runs from Baclaran in Pasay City to Roosevelt, Quezon City.
The letter said any company that would be awarded the contract for the two train lines would have to assume responsibility of the lines’ debt obligations totaling about $2.6 billion.
Any company that wins the contract for both lines would have to spend a lot of money before even starting to improve the train line’s facilities. The letter said this expense would then be passed on to the riding public, raising train fares to as much as P100 a ticket.
In an interview, Transportation Undersecretary for rail transport Glicerio Sicat said the government was looking at two methods of privatizing the MRT line.
The first was for the government to take over the train system, improve its operations and facilities before finally bidding out a contract for the train’s operations to private parties.
“However, this method will take a long time and will be very expensive,” Sicat said.
The second method, Sicat said, was to look for a private company willing to acquire the government’s stake in MRT. The government would not have to spend a single peso and pass on the responsibility to the private investors.
MPIC controls Hong Kong-based First Pacific Co. Ltd.’s interest in the Philippines, including investments in telecommunications, infrastructure, healthcare and power generation and distribution.
Wednesday, 2 February 2011
Pledges $300M to expand train system
Tuesday, 1 February 2011
Cedelf P Tupas
MANILA—The Philippine Football Federation is seriously considering the P80-million, long term sponsorship deal proposed by Smart Communications and has authorized its president Mariano “Nonong” Araneta to decide on the deal.
Araneta yesterday said he welcomes the offer Smart presented during the PFF's board of governors meeting in Cebu last Saturday, although the telecommunications firm has yet to indicate what the federation needs to fulfill as part of the proposal.
“I'm still waiting for the MOA from their end,” said Araenta. “It's important that we talk about the mechanics. We want to know what's in it for them.”
The offer from Smart is the private sector's latest show of support to the PFF, which underwent a leadership change late last year, at about the same time the national team sparked renewed interest in the sport with a semifinal finish in the AFF Suzuki Cup.
Araneta also said that Mike Velarde of El Shaddai has offered a prime hectare property in Paranaque where the PFF can build an artificial pitch costing $500, 000 (about P22 million) under the International Football Federation (Fifa) Goal Project 4.
Araneta and Leyte Football Association president Dan Palami, who is also the national team's committee head, met Jan. 26 with the charismatic Catholic El Shaddai leader.
The terms of the deal, Araneta said, would be for a minimum 25-year lease of the area once the artificial pitch is installed.
“We have seen the property and it is ideal for our requirements,” Araneta said. “He (Velarde) wanted to formalize the agreement right there and then, but we expect it to be signed within the week.”
Araneta disclosed that part of the money from the proposed deal with Smart will go to the training of the national team while the rest will fund club tournaments.
Araneta said Smart has already agreed to sponsor a national club championship, which will feature eight teams—two each from Mindanao, Visayas, Luzon and National Capitol Region—this year. The regional eliminations starts in March with the eight-team national finals set in June.
Q4 2010 GDP grew by 7.1 percent
National Statistical Coordination Board
Posted 31 January 2011
Despite the El Niño and the diminished government spending during the second semester, the domestic economy sizzled to its highest annual GDP growth in the post Marcos era of 7.3 percent in 2010 from 1.1 percent in 2009. The global economic recovery which resulted in record growth rates of foreign trade and election related stimuli that combined for a record first semester growth, followed by the peaceful conduct of the national elections and the renewed trust in government contributed to an economic performance in 2010 that well surpassed the government’s target of 5.0 percent to 6.0 percent. Industry and services sectors expanded strongly in the last quarter of 2010 while Agriculture recovered after four consecutive quarters of decline due to El Niño, pushing GDP to grow by 7.1 percent in Q4.
With the prevailing sanguine outlook of both business and consumers, the economic prospects for 2011 are indeed exciting.
On the demand side, increased consumer spending for the whole year buttressed by increased investments in Fixed Capital Formation posting its highest growth rate since 2000, particularly in Durable Equipment and sustained by the double digit growth in international trade contributed to the record GDP growth in 2010.
Likewise, annual GNP accelerated by 7.2 percent from 4.0 percent last year in spite of the weakened growth in NFIA from 28.0 percent in 2009 to 6.0 percent. For the fourth quarter, the continuing, though much decelerated demand for the services of our OFW’s caused NFIA to grow by 3.8 percent from 19.5 percent last year, pushing GNP growth to 6.7 percent from last year’s 4.1 percent.
The seasonally adjusted estimates show a surging Philippine economy as GDP jumped by 3.0 percent from a decline of 0.8 percent in the previous quarter while the seasonally adjusted GNP accelerated to 2.9 percent from 0.2 percent growth in the third quarter.
With the record pace of economic growth in 2010, per capita GDP rose by 5.3 percent from a decline of 0.9 percent in 2009. Per capita GNP and per capita PCE likewise posted huge growths of 5.1 percent and 3.3 percent from 2.0 percent and 2.1 percent, respectively.
Growth of Major Economic Sectors
In 2010, Industry once again took the driver seat in boosting the economy with its huge 12.1 percent growth from a decline of 0.9 percent the previous year. Services provided more than able support as it grew by 7.1 percent from 2.8 percent. However, Agriculture, hounded by El Niño, posted a negative 0.5 percent from zero growth in 2009.
For the 4th quarter of 2010, Industry accelerated to 8.3 percent from 3.8 percent, almost sustaining its third quarter growth. Services likewise accelerated, growing by 6.9 percent from 3.1 percent. And AFF, after being battered for four consecutive quarters by abnormal weather conditions, rebounded by 5.4 percent from a decline of 2.9 percent.
Of the 7.3 percent growth in GDP for the whole year of 2010, 3.9 percentage points came from Industry and 3.5 percentage points came from Services while AFF pulled down the growth with negative 0.1 percentage point.
In the fourth quarter, the 7.1 percent growth in GDP came from Services, with 3.3 percentage points; Industry, 2.7 percentage point and AFF, 1.0 percentage point.
The seasonally adjusted AFF sector grew by 4.2 percent from a 1.0 percent growth in the previous quarter largely due to the growth in Palay and corn. On the other hand, Industry rebounded to a 6.7 percent growth from a 5.9 percent decline in the previous quarter due to the expansion of Manufacturing and Mining & Quarrying. Services sector, however, decelerated to 0.3 percent from 2.0 percent caused partly by two consecutive quarters of decline in Government Services.
On the demand side, all expenditure items registered accelerated growths in 2010 with Total Exports, Total Imports and Capital Formation rebounding to 25.6 percent, 20.7 percent and 17.0 percent from a decline of 13.4 percent, 1.9 percent and 5.7 percent, respectively. Likewise, consumer spending accelerated to 5.3 percent from4.1 percent. However, government spending decelerated to 2.7 percent from 10.9 percent.
For the fourth quarter, all expenditure items likewise registered positive growths, except Government Consumption Expenditure which declined by 7.6 percent. Personal Consumption Expenditure accelerated to 7.0 percent, the highest since the 8.4 percent growth recorded in the third quarter of 1988, from 5.0 percent in the same period last year. Investments in Fixed Capital Formation grew robustly with 22.8 percent, the highest since the 27.3 percent of the fourth quarter 2000, from last year’s growth of 5.8 percent as a result of accelerated investments in Durable Equipment. Total Exports expanded by 21.1 percent from a decline of 6.7 percent as both Merchandise Exports and Non Merchandise Exports posted robust growths. And, Total imports accelerated to 21.8 percent from 6.8 percent in the previous year as both Merchandise Imports and Non Merchandise imports recorded double-digit growths.
ROMULO A. VIROLA
Secretary General, NSCB
OUTSIDE THE BOX
The global press and media would like you to believe that the continuing unrest in countries like Tunisia, Egypt and Jordon is about freedom, democracy and good government. Nothing could be farther from the truth. As the 1992 presidential campaign of Bill Clinton phrased it so well, “It’s the economy, stupid.”
From the Magna Carta in 1215 through the American revolution to the Philippines’ own Edsa revolt and now in the Middle East, all have been and are about the money not the “politics.”
A global survey some years ago, covering all levels of the socioeconomic spectrum, asked what would make you happiest. The No. 1 answer by a wide margin was, “A 20-percent increase in income/salary.” We talk of “world peace” and “freedom,” but what all people want is more money. What is the problem with a bad government led by corrupt politicians? Nothing, so long as that government does not keep the people from becoming wealthier. Perhaps, a good example is Russia.
Russia in 2011 is not very different from the Soviet Union in 1980. Political dissent is oppressed. The rule of law can be applied arbitrarily. A small inner circle headed by Vladimir Putin has iron-fisted control over the political process. But the per-capita gross domestic product (GDP) has more than doubled, the middle class grew from 8 million to 55 million, and industrial production rose 75 percent under Putin. It’s the economy.
The ongoing unrest in the Middle East is also about money. The political conditions in each of the particular nations, Tunisia, Egypt, Jordan, are no different than they were a decade ago. Tunisian President Zine El Abidine Ben Ali has been in power for more than two decades and Egypt’s Mubarak first took office in 1981. Jordan is a hereditary constitutional monarchy, and is yet considered a country of “high human development” by the United Nations and is No. 38 on the global Index of Economic Freedom, with Egypt at 96 and Tunisia at 100 (the Philippines is No. 115).
So then the question might be asked, why now in these countries and even, why not now in the Philippines? It’s the economy.
The fact that the US President is an incompetent fool and his economic team is even more useless has not penetrated the minds of some local pundits. Why is this important? Because the United States, as a result of its economic policies, is exporting economic hardship that is directly causing conditions leading to unrest. The Middle East may only be the first stop on the global tour of national turmoil.
The following article sums up the situation clearly. From the US newspaper, The Brazil (Indiana) Times: “In the past couple of months, there have been riots in Chile, Albania, Greece, Italy, France, Spain, Portugal, England, Ivory Coast, Morocco, Libya, Algeria, Tunisia, Egypt, Jordan and Yemen. What do all of these riots have in common? They all have governments with socialist economic systems and rising food and energy prices. As those who follow investment markets, particularly commodities, know well that the US and the European Union have been inflating their currencies like there is no tomorrow.
“As the dollar and the euro are inflated, the prices of commodities rise. This is felt worldwide in energy prices. As electricity, natural gas and petroleum prices rise, the price of all goods rise. Food production is highly energy-intensive. However, food has additional pressures. Grain is an international commodity traded like oil on the international market denominated in dollars. As the dollar inflates, the price of food on the international exchanges rises further.”
The problem is not political. From MSNBC: “One protester in Cairo waved a hand-drawn copy of his university diploma amid clouds of tear gas and shouted what may best sum up the complexities of the domino-style unrest in a single word: Jobs.”
From Jordan: “King Abdullah II also has tried to dampen the fury by promising reforms, and the prime minister announced a $550-million package of new subsidies for fuel and staple products like rice, sugar, livestock and liquefied gas used for heating and cooking.”
And in Tunisia, “Just days before fleeing Tunisia, the embattled leader went on national television to promise 300,000 new jobs over two years.”
From The Australian, speaking about riots and unrest in Yemen: “Since the Tunisian turmoil, [President] Saleh has halved income tax and imposed price controls.
“This is not pent-up displeasure with these governments suddenly exploding; this is a reaction to current conditions. It’s the economy.
“Prior to the infusion of nearly 4 trillion newly printed dollars into the global economic system in 2009, the US Dollar Index was at 90 and oil was priced at $70 per barrel. Now the dollar is at 78 [a fall of 13 percent] and oil is at $99 [an increase of 40 percent]. There is nothing in regard to supply or demand to justify a 40-percent increase in price. It is the US dollar. Currency cost pushes inflation.” Thanks, Obama.
And the Philippines? Not to worry.
Because of good fortune and some good sense, the Philippine economy is sheltered from the storm of US- exported inflation. Our economy is well diversified. For example, outsourcing now contributes 12 percent to GDP from zero less than a decade ago. We are sitting on a relative mountain of foreign reserves, giving the Bangko Sentral the ability to move the peso to dampen the effects of high oil prices. Interest rates are high enough to allow great flexibility up or down without damaging lending. Banks are very strong and profit margins of local companies are high, hereto allowing flexibility in consumer pricing.
Have I forgotten to say this is a while? Buy the peso. Buy the PSE. Buy the Philippines.
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THE official report on Monday that the Philippine economy grew 7.3 percent in 2010—within the National Economic and Development Authority (Neda) forecast of 7.0 percent to 7.4 percent—indicates quite strongly, the Neda says, that “the economy is on a path of strong recovery.”
In his statement accompanying the release of the full-year 2010 National Income Accounts, Neda Director General Cayetano Paderanga Jr. cited “significant economic developments both from the supply and demand sides” that he said “characterized output expansion in 2010.” Here he singled out the key role of industry in boosting last year’s growth—notably brisk manufacturing in electrical machinery, petroleum, coal products and food—and added this is consistent with “strong pickup in domestic demand and the rebound in external trade.”
Yet while domestic demand was a growth engine for the economy in 2010, investments provided “a strong support to growth,” according to Paderanga, who is concurrent Socioeconomic Planning secretary. Here he zeroed in on private-sector investment in construction and in machinery and equipment, attributing to this the “robust 17-percent growth in gross domestic capital formation.”
Mercifully, agriculture’s growth was “subdued” but not totally wiped out, despite the continuing risks from extreme, unpredictable climate.
Mr. Paderanga says it makes sense to anchor the growth outlook in the next few years on steady increases in investments in infrastructure, among other productive sectors. He makes a pitch, in this wise, for promoting public-private partnerships (PPPs), the centerpiece of the Aquino administration’s programs, and promises to ensure the Medium-Term Philippine Development Plan currently being crafted under the Neda’s leadership will reflect such priorities—along with, of course, its thrust to pour in huge resources into social services through the controversial conditional cash transfers, where the state puts in money direct into the hands of families on condition they keep their children in school and in good health, among other things.
Sorry to rain on the Neda chief’s parade, but the continued inflow of investments in the remaining five-and-a-half years of this administration will rely not so much on government pronouncements of its policy bias but on actual developments on the ground. It must prove it is serious about transparency and ensuring fair terms in treating investors, that rules won’t be changed midstream, that contracts will be honored. It’s not so much a matter of the state guaranteeing ROI of investors and making vague promises of reimbursing them should the courts later rule that their contract terms were onerous and against public policy. The important point is that, in the first place, all bidding and related processes for those big-ticket PPPs on parade are done in a fully transparent, timely and efficient manner; that their results are honored and that both the investor and intended beneficiaries will gain something from them.
At this point, one glaring example of how shabbily the government can treat certain investors is still there, sticking out like a sore thumb: the P18-billion project to dredge and rehabilitate Laguna de Bay, won by a Belgian contractor, only to lose it in the most disgusting manner possible. By some sleight of hand, the Belgian contractor awoke to find out it had lost the government’s go-ahead for the project. Various excuses were floated to justify that shabby handling, none of which made sense. And now, the latest word is that some “agents” are luring the administration into entertaining a much more expensive, similar project, pitched by certain Chinese contractors, according to one of this paper’s columnists.
Will wonders never cease in the land of NBN-ZTE, the Naia 3-Piatco fiasco and the handsome “sendoff” gifts for generals as foot soldiers die or get beheaded in Mindanao?
This isn’t meant to take anything away from the growth record of 2010, nor to belittle the thrusts for the next few years. It makes eminent sense to pin one’s hopes of growth on investments in strategic industries and sectors, especially the ones that could be quite impervious to the continuing climate-related risks, as well as those beamed to emerging economies where the market outlook is stable. But first the government must clean up its act and decide firmly that if it wants to anchor growth on more investments, it cannot keep tearing to shreds its commitments of fair play and transparency.