Services touted as next big export for Manila

By Darwin G. Amojelar, Senior Reporter
Manila Times
http://www.manilatimes.net/business/services-touted-as-next-big-export-for-manila/

THE services sector is a viable option for the Philippines to diversify its export as trade in goods is no longer the only vehicle, according to a World Bank study.

In a draft study titled, “Exporting Services: A Developing Country
Perspective,” Sebasti?n S?ez, World Bank senior trade economist and one of the authors of the report said the experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening.

“Service sector performance critically depends on human capital, the quality of the telecommunications network, and the quality
of institutions,” S?ez said.

The report said services exports as a percent of total exports increased from 9 percent in 1999 to 21 percent in 2009 in the Philippines.

Its services exports rose by 3.6 percent on average per year during the period, higher than that of Asia as a group, which averaged 1.5 percent a year.

Unlike many developing countries, the Philippines has been a net exporter of services since 2006.

The Philippines is the third largest player in the global business process outsourcing (BPO) sector, accounting for 15 percent of the worldwide market, after India with 37 percent and Canada, 27 percent.

“That’s a tremendous achievement in just over a decade,” Bert Hofman, World Bank country director said.

Hofman said the liberalization of the Philippine telecommunications sector in the early 1990s improved the quality and efficiency of telecom infrastructure through greater competition.

“That’s a very important factor for the success of the industry. But the bigger story is really the rich human capital that the country possesses and which it has to continue to nurture,” Hofman said.

Fred Ayala, chairman of Business Process Association of the Philippines (BPAP) said the BPO sector employs close to 500,000 people and has generated about $9 billion worth of exports in 2010.

The industry, he said, has agreed to an aggressive goal of $25 billion in annual revenues by 2016 and a direct workforce of 1.3 million.

“There is an urgent need to develop supervisors, middle managers, and more skilled workers to respond to increasing market demand for a broadening array of knowledge-based, complex services,” Ayala said.

“Additional investments in human capital, strengthening of intellectual property rights through the passage of a comprehensive data protection law, and improvement of quality control may further promote the growth of high-value-added activities within the BPO industries not yet fully exploited in the Philippines and successfully tapped by other countries, such as India,” he added.

The World Bank report also highlights the importance of developing the tourism sector. Tourism accounts for about 6 percent to7 percent of the country’s gross domestic product (GDP) and directly employs about 3.5 million people. The report said that tourism could contribute more to help address poverty should reforms outlined in the National Tourism Development Plan (NTDP) be effectively implemented.

The study says major impediments to tourism competitiveness are largely associated with weak ground and air transport infrastructure—roads, railways, ground transport network, and airports. Weak physical infrastructure lowers accessibility to tourism destinations and discourages private sector investments in accommodation facilities.

Daniel Corpuz, Department of Tourism undersecretary, said the government has begun to put in place important reforms that will increase tourism arrivals in the country.

He cited the liberalized air policy in selected international airports outside Metro Manila.
“More reforms are underway to transform the Philippines into a ‘must experience destination in Asia,’” Corpuz said.

He said the NTDP seeks to improve market access and connectivity with the country’s major tourism markets, upgrade tourism transportation and infrastructure through public-private partnerships and improve institutional and human resource capacities.

Where is the economic-warning alert?

JOHN MANGUN
OUTSIDE THE BOX
Business Mirror
http://www.businessmirror.com.ph/home/opinion/12113-where-is-the-economic-warning-alert

The State of the Nation Address will be delivered to the people of the Philippines soon, and it will be interesting to see if there are any comments at all regarding government policy and specific plans in light of the continuing global economic crisis.

The motto of this current government might be “All politics, all the time.” That is not to say that any efforts to control, if not eradicate, official and bureaucratic corruption are wrong. However, it is important in understanding corruption in the Philippines that corruption and politics are intertwined and inseparable. Equally important to understand is that any inroads into solving the problem of government corruption is not the ultimate solution to furthering Philippine economic progress.

While corruption certainly dampens and hinders economic growth, economic policy will determine responses to and solutions for the worldwide economic problems that the Philippines must operate within.

Having said that, the economic “salvation” of the Philippines will not be found in the halls of the government. It will be found in the attitude and actions of the millions of Filipinos who have placed their hard-earned capital at risk to establish businesses, in the intelligence and expertise of the people who operate those businesses, and in the labor and skill of the tens of millions of employees who are the lifeblood of the private sector.

Therefore, while the government may prefer to ignore, at least publicly, the economic storm that is swirling around the country, you and I do so at our own jeopardy and danger.

But as I say, the Philippine government seems to want to ignore present-day realities, but you cannot afford to be ignorant of the situation.

The last couple of weeks have seen reports from the Western economies that are as economically earth-shattering as Japan’s earthquake/tsunami. Then, the Philippine government sent out a warning to take shelter; this time, there is no warning.

Do not think that the Philippine government is different by keeping the true condition of the global economy from the people. Those nations most affected are the worst.

The simple way to describe the fluctuations of economic data over the last several months, even back into 2010, is “bottom bouncing.” This is a state of affairs when economic activity goes to a very low level, and then we see short-term blips to the upside. As in the price action of stock-market issues, these can truly be a bottom if external conditions changed for the better. However, if general conditions stayed the same, this bottom bouncing is only a pause before things get worse.

There was a small rise in economic activity in the US during April. Note these numbers. On May 3 gold traded at $1540 per ounce and the US dollar index was priced at 73. Gold fell to $1478 on May 17 and the dollar index rose to 76.36 on May 24. Yesterday gold traded at $1546 and the dollar was trading at 73.8. The euro made the round trip from 1.49 to 1.397 back to 1.463 currently.

Whatever the blip in April, May economic numbers are terrible. From being “bailed out,” now Greece is closer to default and Spain has come into the default game.

One way of measuring the severity of the government debt crisis is to look at Credit Default Swaps (CDS). This is basically an insurance policy against loan default for lenders to governments. The CDS price is constantly changing as risk increases. The year 2011 was supposed to be the time of recovery of sovereign debt. That’s what all the Western government economic experts said would happen. Except, since January 2010, the cost of the CDS insurance is way up in percentage terms; Greece 40, Portugal 33, US 19, Malaysia 9.5, China 8, Peru 12, Japan 18 and Thailand 22 percent. The Philippines’ CDS has increased 6.8 percent.

Global inflation is going through the roof even in unexpected places. While the government is rightly concerned about the Philippines’ 5+-percent inflation rate, look at other countries; Vietnam is -19.8, Turkey is -7, Pakistan -13, India -9.4, Indonesia -6, France at 3.7 is the highest there in 12 years, and the UK is at 4.5.

As another indication of how fortunate we are in the Philippines, most of all these governments, including the US, subsidize the price of certain basic commodities, and yet they still cannot keep prices down. Our economic system is much sounder and stronger.

But the official numbers do not give a true picture for the consumer. Look at this empirical evidence of price increases in the US. Lettuce has skyrocketed 28 percent since last year, while an ear of corn up 50 percent from last year. Tomatoes are up a staggering 86 percent. Ground beef is up 12 percent. Ice cream is up 5 percent, beer up 2.4 percent and coffee has increased by 14 percent nationwide. Over the past year the cost of gas has increased by 34 percent.”

On the deflation side, the average cost of a home in the US is down 33 percent from the 2007 peak. The most housing prices fell during the Great Depression was 31 percent, and there is still no end in sight.

On the consumption side, the numbers are terrible. Crude-oil fuel products run an economy. In the US, total commercial petroleum inventories increased by 7.2 million barrels last week. Total products supplied over the last four-week period has averaged nearly 18.7 million barrels per day, down by 5 percent, compared with the same period last year. There is no economic recovery. It is only getting worse.

Does government influence our daily economic lives? Most certainly. A US congressional joint economic committee report confirms that the Obama administration’s monetary policies have added approximately 56.5 US cents to the price of every gallon of gasoline.

Likewise, smart policy can have a beneficial effect.

The government needs to speak directly to the global economic crisis and its related economic policy and plans as things get worse. The Philippines cannot wait for the storm before sending out the danger alert regardless of the politics.



E-mail comments to mangun@gmail.com. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.

New Numbers, Same Old Song

by Steven W. Mosher
Population Research Institute
http://pop.org/content/new-numbers-same-old-song


What are the population controllers to do when birth rates keep falling? Why, put pressure on the demographers in their employ to fudge the numbers, of course.

You will be glad to learn that we all have official permission from the UN people-counters to panic about about “overpopulation” — yet again.

The U.N. Population Division apparently decided that its earlier predictions about world population growth were too restrained. So it upped the ante in its 2010 report, revising almost all of its numbers upwards. According to the new numbers, the world's population will reach 9.3 billion by the time 2050 rolls around — or several hundred million higher than earlier predictions. Not only that, instead of beginning to fall at that point, the UN now claims that the numbers will continue to grow until the end of the century, reaching 10.1 billion in 2100.

But these new predictions fly in the face of all we know about human fertility. It turns out that every last one of the factors affecting fertility — with the sole exception of advances in reproductive technology — are moving in an anti-natal direction. Factors like age at marriage, age at first child-bearing, educational levels, etc., are all tending to lower fertility. Birthrates are falling everywhere, farther and faster than anyone thought possible several decades ago.

The UNDP itself admits that 79 countries, including several dozen in the less developed world, now have fertility rates that are below the level needed to ensure the long-term survival of the population. Most of the rest, everybody except the UN now seems to know, are likely to cross this demographic fault line over the next few decades.

Whistling in this looming demographic darkness, the UNDP blithely predicts that people in low fertility countries will suddenly become enamored of babies again. You got that right. They predict, without providing a shred of evidence, that birthrates will somehow gravitate to the replacement levels again.

What planet are they living on?

Many of today's young adults in Europe, Latin America, Asia and elsewhere are too enamored of sex, the city, and the single life to think about marriage, much less about replacing themselves. A single Swedish woman may eventually bear one child as her biological clock approaches midnight, of course, but she is unlikely to bear a second. What was supposed to be the perfect family — a boy for you and a girl for me and heaven help us if we have three — has been scorned by moderns on their way to extinction. The declining number of traditional families has been unable to fill the fertility gap thus created.

The UNDP is supposed to be objective in its predictions, but its latest batch of junk science suggests that it has become anything but. In fact, after the retirement of Director Joseph Chamie, its prognostications seem more and more driven by politics. At the very least, it has produced numbers that tend to show population growth as far more exuberant than it really is.

The reason for this, I fear, is that the UN Population Fund provides part of the UNDP budget — and the UNFPA is first, last, and always a population control group. The UNFPA seems to be using its funding to “leverage” the UNPD into producing numbers that the UNFPA can in turn use to justify the continuation and expansion of population control and abortion.

There is a real population crisis, of course. I am speaking of the crisis of aging and dying populations, for which there seems to be no easy solution. It is a crisis that, by reducing the amount of human capital available, will have a dramatic and neative impact on every aspect of life. Peter Drucker, the late management guru, wrote way back in 1997 that “The dominant factor for business in the next two decades — absent war, pestilence, or collision with a comet — is not going to be economics or technology. It will be demographics.”

Drucker was particularly concerned with the “increasing underpopulation of the developed countries,” but a decade later this reproductive malaise has spread even to the less developed world, and is a truly global phenomenon.

The UN needs to stop spending time, money and resources trying to solve a problem that we've never had. Science shows that the world's population is due to fall dramatically, not rise uncontrollably. To recklessly seek to curb procreation in countries that are, or soon will be, dying will only compound the tragedy.

People are our greatest resource. Everyone, rich or poor, is a unique creation with something priceless to offer to the rest of us.


Steven W. Mosher is the President of the Population Research Institute.

Honoring our contracts

Manila Standard Editorial
http://www.manilastandardtoday.com/sectionOpinion.htm?f=2011/june/1/editorial.isx&d=2011/june/1

GIVEN the President’s campaign promise of change, the Aquino administration seems hellbent on obliterating all vestiges of the previous leadership. It is one thing, however, to lead a lynch mob to hound a constitutional officer from her post before her term is over, and something else completely to disregard legal contracts that were signed by the previous administration.

The first is a political act with a limited economic impact; the second is sheer folly that could sap investor confidence in this country.

Last month, the managing director of Hong Kong-based First Pacific complained that the state-run Bases Conversion and Development Authority had written its tollway arm, Metro Pacific Tollways Corp., to inform them that a contract they signed in November to build and operate the Subic-Clark-Tarlac Expressway had been invalidated.

“Contracts are sacrosanct especially if the fulcrum of your economic program is public-private sector partnership,” said First Pacific managing director Manuel Pangilinan. “The government has to honor contracts that are perfected.”

Pangilinan said his company was willing to renegotiate with the new managers of the Bases Authority, but insisted that the contract signed earlier had been above-board and transparent.

He also warned that the administration’s efforts to develop major infrastructure projects with the help of private companies would likely suffer if a bellwether investor such as First Pacific walked away from the expressway project.

Unfortunately, Pangilinan’s warning seems to have fallen on deaf ears.

Just this week, a French company that the Arroyo administration had contracted to build 72 ports for roll-on, roll-off ships, said it would seek international arbitration in case the government canceled its P11.8-billion contract.

“We want the Philippine government to immediately act ... We want them to honor the contract they signed with us,” a senior company adviser said.

Under the new administration, the Philippine Ports Authority now says the country needs only two ports to serve current demand, not 72. And it says it can build a port for much less than the consortium can.

In both cases, unless the government can prove there were serious defects in the contracts, it has a legal obligation to honor agreements, even if they were signed by the previous administration.

When Mr. Aquino’s mother, the late President Corazon Aquino, decided not to operate the Bataan nuclear power plant in 1986, the government sued the contractor Westinghouse for overpricing and bribery, an expensive and ultimately fruitless action. Since then, and until the debt was finally extinguished in 2007, it was the country’s biggest single obligation that we honored.

Companies that invest in government projects can only do so with confidence if they know without a doubt that the agreements they sign with one administration will be honored by the next. To inject so much uncertainty at a time when the country is seeking new private investments defies reason and good sense.

Reversing government failure

JOHN MANGUN
OUTSIDE THE BOX
Business Mirror
http://www.businessmirror.com.ph/home/opinion/11903-reversing-government-failure

Sometimes it is fun and enlightening to look back at what we were saying in the past. A year ago, this column was entitled “The underground economy,” where I discussed how difficult it was for the government and the private-sector watchers to understand what the economy was doing based on the information that is used to compile the “official” numbers.

I wrote then: “Read this from the first week of March 2010: ‘The domestic economy is projected to grow below 3 percent in the first quarter of 2010 with a 2-percent to 3-percent decline in agriculture output due to El Niño and a strong peso that would limit the stimulative effect of overseas Filipino workers.” This is from the “experts” at Metro Bank and the University of Asia and the Pacific Capital Markets Research and, honestly, those groups are not foolish or unintelligent. They just never asked one of the sari-sari storeowners who sell 85 percent of the beer in the Philippines how their businesses were doing.

As we all know, the economy grew by over 7 percent in the first quarter of 2010.

The government has a difficult time making accurate projections and often the data that are eventually released are suspect as being too rosy, tilted for political purposes. Honestly, I am inclined to believe that here in the Philippines, economic data and information gathering are inherently difficult and, therefore, usually a “best guess.”

The question that might be asked then is: Is it better for the government to do the best it can and not reach a high level of competence? Or is it better for the government to stand aside and let someone else do it? I wonder if the companies that count and measure data and numbers as a business would do a better job than the government? Would a company that measures television viewership be able to count economic activity equally, as well?

The reason I bring this issue up is that there is a storm of criticism over the President’s Public-Private Partnership (PPP) Program. I would think that it is difficult to criticize something that has yet to happen and is just an idea. However, in the weeks after this scheme was announced, there was detailed analysis on why it could not work because the government did not have the available funds, why there would be the opportunity for corruption, and a host of other objections.

I suppose the critics should be happy that their worst fears have not been realized as PPP is still at the idea stage since there have not been any PPP projects.

Every administration comes to office starry-eyed, with grand plans about what the government is going to do for the country. Yet, the grandiose plans put forward in the first few months never seem to happen, whether it’s nation-wide wireless Internet, massive new housing developments, or food self-sufficiency.

One member of the Philippine legislature was recently commended as hard-working because that person had written literally hundreds of pieces of legislation. I wonder how much wealth creation occurred because of all that “hard work.” It would be refreshing to hear from an important national leader a thought-provoking discussion on what the role of the government should really be rather than simply what the government thinks it can accomplish.

My personal feeling is that the government should confine its efforts to areas and projects where the private sector cannot do as good a job.

We complain that public transportation in Manila. Metro Manila is one of the minority metropolises where buses are not government- owned and -operated. And yet, Manila has some of the cheapest public-transportation costs and highest penetration of service around.

We look at what happened when the government monopoly of air transportation was eliminated and how fares and service improved dramatically when the government got out of the airline business. Yet, it keeps its hold on the Philippine National Railway when rail transportation in Luzon and beyond could be a huge boon to the country.

The National Food Authority (NFA) is ineffective and costly. And here again, the government keeps its hold on the NFA like a mother clinging to her child. Instead of selling National Power Corp. (Napocor), absorbing the loans like it did for the Bataan Nuclear-Power Plant, letting the private sector take over and moving on, succeeding administrations hold on, refusing to admit Napocor is a huge failure. Meanwhile, whenever the government allows it, the private sector is building power-generation facilities to keep the country from going dark, which is what the government allowed to happen in the first Aquino administration and is moving toward today.

Many other countries have privatized their prisons systems. What country would be better to do that than the Philippines, where the government cannot afford to properly feed and house the prison population or even, sometimes, keep them inside the cells? The government worries so much about how to raise the money to do all the things that it thinks it can do better than the private sector, but does not. Wouldn’t it make more sense to let the private sector do the job and provide the services that the government has failed at doing?

Government successes are so rare that when they do happen, it is front-page news. Private-sector successes are just ordinary, business-as-usual day-to-day occurrences.

On a personal note, once again as we prepare for the launching of our web site in a few weeks, mangunonmarkets.com, a Twitter account has been set up. If you would like to follow mangunonmarkets on Twitter, please join. Once the web site is launched, the Twitter updates will only be available to subscribers of the Premium Area.



E-mail comments to mangun@gmail.com. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.