by Roderick T. dela Cruz
The Philippines’ gross international reserves, supported by strong inflows of remittances, business process outsourcing revenues, foreign portfolio investments and new loans, surged to a new record in end-August 2011, exceeding the newly-revised target of $75 billion for the whole year.
The Bangko Sentral on Wednesday said the GIR, which refers to the stock of foreign exchange and gold holdings, hit $75.559 billion at the end of August, up $3.675 billion or 5.1 percent from the end-July level of $71.884 billion.
The reserves climbed by $25.6 billion or 51.4 percent from the year-ago level of $49.905 billion. The country’s foreign exchange hoard has also easily eclipsed the country’s total foreign debt of $60.948 billion as of end-March this year.
Bangko Sentral Governor Amando Tetangco Jr. earlier said the central bank revised the GIR target for the year to $75 billion from the earlier estimate of just $70 billion, on inflows of dollars into the country.
“Substantial foreign exchange inflows arising from the foreign currency deposits by the national government of proceeds from a program loan from the World Bank, as well as the foreign exchange operations and income from foreign investments of the Bangko Sentral contributed to the build up in the preliminary GIR level as end-August 2011,” said Tetangco.
“Revaluation gains on the Bangko Sentral’s gold holdings following the continued rise in the price of gold further increased the reserves level,” he added.
The price of gold in the world market recently hit a new record of $1,900 an ounce, as investors sought the stability of the bullion market to escape the volatilities in the financial market.
However, the largest contributor to the increase in reserves was foreign investments. Data showed that Bangko Sentral’s foreign investments in US treasuries and other foreign assets rose to $65.983 billion in August from $62.178 billion in July and $41.3 billion a year ago.
Thursday, 8 September 2011
OUTSIDE THE BOX
THE World Economic Forum’s Center for Global Competitiveness has just released its Global Competitiveness Report 2011-2012.
From the report: “Up 10 places to 75th, the Philippines posts one of the largest improvements in this year’s rankings. The vast majority of individual indicators composing the GCI [Global Competiveness Indicator] improved, sometimes markedly.”
The administration’s press office is probably working overtime to insure that the proper people get the credit and congratulations for this GCI success. Or maybe not.
For a nation the size and complexity of the Philippines to have a substantial improvement in the rankings, as well as the actual GCI score, is an achievement to be proud of. However, the recognition and praise belongs to you, BusinessMirror readers, not to the government.
Quoting the report: “The quality of the country’s Public Institutions continues to be assessed as poor: the Philippines ranks beyond the 100 mark on each of the 16 related indicators. Issues of corruption and physical security appear particularly acute [127th and 117th, respectively]. The state of its infrastructure is improving marginally, but not nearly fast enough to meet the needs of the business sector. The country ranks a mediocre 113th for the overall state of its infrastructure. Finally, despite an enrollment rate of around 90 percent, primary education is characterized by low-quality standards [110th].”
When it comes to the crucial jobs that the Philippine government should be doing, it gets a failing grade not only for the quality of the “work” but for the lack of improvement.
However, the one area in which the government is doing a good job is with fiscal and monetary policy. “Against such weaknesses, the macroeconomic situation of the Philippines is more positive: the country is up 14 places to 54th in the macroeconomic environment pillar, thanks to slightly lower public deficit and debt, an improved country credit rating, and inflation that remains under control.” The government is getting better at managing public money; it just does not know how to spend that money wisely and efficiently. For “Diversion of Public Funds,” the government ranks 127 with a score of 2.3 out of 5. For “Public Trust of Politicians, the score is 1.8 and ranks 128.
What are the greatest problematic factors for doing business in the Philippines? Corruption, inefficient government bureaucracy and an inadequate supply of infrastructure. While President Aquino made reducing corruption the centerpiece of his administration, after one year, there are little, if any, tangible results regardless of press releases to the contrary. The battle against corruption is, at the worst, being lost, and at the best, going nowhere.
Why do I say that you, readers who own, operate and are concerned about Philippine business, deserve the accolades for our GCI improvement?
One of the most critical factors that contribute to the overall macroeconomic environment (PHL ranked 54th) is “Business Sophistication.” Says the report: “Business sophistication concerns two elements that are intricately linked: the quality of a country’s overall business networks and the quality of individual firms’ operations and strategies.
“On a more positive note, the country ranks a good 57th in the business-sophistication category, thanks to a large quantity of local suppliers, the existence of numerous and well-developed clusters, and an increased presence of Filipino businesses in the higher segments of the value chain.” This is a job well done by Philippines business people and Filipino businesses are getting better at the business of doing business.
The report also shows one of the structural factors that I have been talking about for some time where we stand ahead of so many others; banking. The financial soundness of local banks is ranked 46 in the world, ahead of China and Taiwan and in the same league as Thailand and Austria.
We rank 44th in the case of companies’ ability to raise money through the stock market. In Corporate Governance, the Philippines is 52nd. However, when it comes to investor protection, a government function, the Philippines is 111th. It may not be easy operating a Filipino business as the intensity of local competition is high, 47th in the world. For Filipino business to thrive, they must make smarter decisions to beat the local competition. And it is very hard to start a business, thanks to the government, as the Philippines ranks 3rd from the bottom on the number of procedures needed to start a business. The Philippine government is not business-friendly.
The conclusion of the GCI report is obvious. The Philippine government does not provide the situation that is necessary for business and the economy to maximize its potential. And yet in spite of this hostile environment, Filipino business people are able to constantly improve.
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Wednesday, 7 September 2011
by Roderick T. dela Cruz
The Bangko Sentral now expects the country’s foreign exchange reserves to hit $75 billion by yearend, up from its earlier estimate of just $70 billion, on increased inflows of dollars into the country.
Bangko Sentral Governor Amando Tetangco Jr. said the gross international reserves, which refer to the country’s stock of foreign exchange as well as gold, may hit $74 billion to $75 billion by December 2011, after exceeding the previous target of $70 billion in July.
Tetangco said the GIR noted that as of end-July amounted to $71.88 billion, which was also revised upward from the previous figure of $70.9 billion, on account of higher gold prices and appreciation of other currencies against the peso.
“We expect better balance of payments surplus than earlier expected,” Tetangco told reporters Tuesday. “The BoP surplus in the first semester was substantially more than half of the target,” he added.
Latest data showed that the BoP surplus reached $6.286 billion in the first seven months of 2011, or 80.4 percent higher than $3.284 billion recorded a year ago. It is also nearing the full-year BoP surplus target of $6.7 billion.
Foreign exchange reserves rose as a result of the Bangko Sentral’s intervention in the currency market to temper the rapid rise of the peso against the US dollar.
Bangko Sentral Deputy Governor Diwa Guinigundo earlier said “barring any unforeseen event, we expect the BoP to continue to be resilient and the gross international reserves to continue to expand.”
“The reserve buildup is a consequence of favorable BoP development,” said Guinigundo.
Bangko Sentral set a foreign exchange assumption of 42 to 45 per dollar this year, which indicates it would be in the market if the foreign exchange exceeded the targeted range.
NEDA may revise target after poor Q2 showing
Joyce Pangco Pañares
THE National Economic and Development Authority will review the country’s target of 7 percent to 8 percent growth for the full year following the sharp decline in the gross domestic product in the second quarter, a Palace official said Tuesday.
“The Neda is reviewing the fighting target because of the second quarter growth, [but] the Department of Budget and Management used a 5 percent to 6 percent growth target for our assumptions this year,” Communications Secretary Ramon Carandang said.
“That is still a doable target.”
Carandang said the government started pump-priming the economy in July to boost growth.
Private economists have traced the slow economic growth in the first half to weak public spending.
The gross domestic product, or the total value of the goods and services produced, grew only 3.4 percent in the second quarter, down from 8.9 percent a year ago and lower than the government’s forecast of 4.5 percent to 5.5 percent.
The latest growth data brought the expansion in the first half to 4 percent compared with the 8.7-percent growth a year ago.
Economist Benjamin Diokno said the government had been a drag to the economy instead of being a source of growth.
“Public construction continues to plunge: from negative 24 percent in the third quarter of 2010 to negative 37.3 in the first quarter of 2011, and now to an unprecedented negative 51.2 percent in the second quarter of 2011,” he said.
“The message for the government is clear: It has to act more decisively and move government programs and projects faster.”
DENNIS D. ESTOPACE
THE good news is that scientific findings point to the Philippines as the world’s hub of marine biodiversity valued at $67.4 billion.
The bad news: the destruction of this source of pride is likened to the scale of the devastation of the Amazon rain forest, biological science professor Kent Carpenter said.
“A crisis [of that proportion] exists in the Philippines,” Carpenter of the Norfolk, Virginia-based Old Dominion University said during the presentation of findings by several field researches that debunked East Indonesia as having the most number of diverse species.
These studies also vindicated Carpenter for having cited the Philippines in his 2004 research that showed the country having the highest concentration of marine species among the island-nations in the Coral Triangle.
“The Coral Triangle is well recognized as the global apogee of marine biodiversity, with species richness incrementally decreasing from this region eastward across the Pacific Ocean and westward across the Indian Ocean,” read an abstract of a paper in the Journal of Marine Biology.
This center, according to the paper co-authored by Jonnell Sanciangco of the University of the Philippines Marine Science Institute, “encompasses much of Indonesia, Malaysia, the Philippines, Brunei, Timor Leste, Papua New Guinea and the Solomon Islands, and is also variously referred to as the East Indies Triangle, the Indonesian and Philippine region, the Indo-Malay-Philippine archipelago, among other names.
Further studies, even by reef fish migration expert Gerry Allen in 2007, confirmed rather than debunked the Philippines’ place as the fulcrum of marine civilization, according to Carpenter.
He also cited a study that Sanciangco finished just last week to support such findings.
Sanciangco’s research of shore fishes showed that majority of these are in Mindanao up to Luzon, along with some 10,446 invertebrates like coconut crabs, sea stars and prawns.
The studies Carpenter cited proves their hypotheses that the Philippines is an area of refuge for these species and that most of marine life as we know it have genetic sources to these species in the country.
“Species in the Philippines are evolving as we speak.”
Carpenter said the country is also blessed with having the most concentrated tropical coastline on Earth, thus, giving it the “latitudinal diversity.”
He pointed to a species of sardine fish that was previously known coming only from Taiwan but was recently discovered as also abundant in the Philippines.
Carpenter said that these findings only prompted additional hypotheses “so I plan to be here many more years.”
He emphasized that this unique natural heritage of the Philippines, however, also “underscores the urgent need for conservation.”
“The bad news, we’ve seen a little bit of that lately: blast fishing, muro ami, cyanide fishing, pollution, aquarium trade and mining.”
He noted that there are “evidences that overfishing decreases the marine biodiversity.”
“The fewest species are typically found in markets. Hence, overconsumption is also a concern.”
Carpenter said the survival of the world’s marine biodiversity hangs in the balance.
“And Filipinos have the option to tilt that balance in favor of its wealthy marine heritage.”
MANILA, Philippines — Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. is one of the world’s top six central bankers in 2011, according to the annual survey on the performance of central bank heads conducted by New York-based Global Finance.
This is the third time in six years that Governor Tetangco was cited among the world’s best central bank heads. Governor Tetangco received an ‘A’ rating along with five other central bank heads from Australia, Israel, Lebanon, Malaysia and Taiwan.
The ‘Central Banker Report Card’ feature, published annually by Global Finance since 1994, grades Central Bank Governors of 36 key countries (and the ECB) on an ‘A’ to ‘F’ scale for success in areas such as inflation control, economic growth goals, currency stability and interest rate management. ‘A’ represents an excellent performance down through ‘F’ for outright failure.
Subjective criteria also apply. Global Finance Publisher Joseph Giarraputo said: “During one of the toughest years on record, the world’s central bankers were tested as never before. Every year, we assess the determination of central bankers to stand up to political interference, and their efforts at influencing their governments on such issues as spending and economic openness to foreign investment and financial services.”
Tuesday, 6 September 2011
OUTSIDE THE BOX
THESE words are hitting the page about 18 hours before you will see them, which means they are already obsolete in this age of instant information. Fortunately time slows down to a reasonable speed with a glass of wine sitting next to the keyboard.
The Philippine Stock Exchange (PSE) just had a wonderful trading, regardless of what you might be hearing and reading. The PHISIX blue-chip index closed above the important 4,375 area. The All-Share broad-market index was actually higher. Total volume was down to only P3.5 billion, which is actually good. We want down days to have less volume and up days to have more. The volume of the rising issues was about seven times higher than the volume of losing stocks and that’s good, too.
However, Asian stock markets took a formidable hit yesterday, down 2 percent to 3 percent and the opening in Europe looks to be the same. It is likely that the US stock markets will carry through with more equity destruction.
The US dollar is very strong right now, having broken back above 75 on the dollar index of a basket of weighted currencies. And while we heard the “experts” say that the gold-price bubble had burst a couple of weeks ago when the price hit $1,900 and fell, gold is trading at $1,890, up from the recent $1,750 low.
In my PSE Strategy Guide, released every Sunday, I wrote, “We are looking at the potential of a very strong and very broad market advance. Or we are looking at a failure of prices that is going to be revolting and very damaging.
In my humble opinion, the Philippine Stock Exchange is about to enter the final game of the championship to determine if the next few months are going be a period of winning or losing.”
I believe that before the end of this year, we are going to see changes on a global scale that no one expected.
Germany will decide this week whether to spend more German taxpayer money to bail out debt-dead Greece. The US will hear from its President Zero on how to create employment. The latest US numbers show that in August, no net jobs were created in both the public and private sectors, the first time since February 1945.
Australian Prime Minister Gillard is pushing Australia to adopt a system of carbon trading that has proven to be not only useless but also fraudulent. British Prime Minster Cameron was absolutely helpless when thieves and hooligans took to the streets a few weeks ago across the country in riots and property destruction. And Britain will host the 2012 Olympics. Good luck with that venture.
Japan has a new prime minister, the sixth in the last five years, as they continue to stumble to find a way out of a decades-long economic darkness.
The US elected a man proclaimed to be a bringer of hope and change who has delivered nothing but helplessness and damage. The US recession that ended in 2009 is back, if not officially yet, and will bring even more pain to the people.
The old wisdom is that adversity creates men and women of substance and character. We find our national heroes as the ones who rose out of the fires of turmoil, bringing something better with their actions.
But may it not be true also that weak leaders, or leaders without leadership qualities, are the cause of the adversity?
It has been such a long time since the world stage was populated with people like Winston Churchill, Golda Meir, Dwight Eisenhower, Japan’s Yoshida Shigeru, Ramon Magsaysay, Margaret Thatcher, China’s Deng Xiaoping, and Konrad Adenauer of Germany.
Each of these leaders had a profound and positive lasting effect on their respective countries. They were strong leaders and strong people. Perhaps the only true “big dog” in the world today is Vladimir Putin of Russia, an ex-KGB officer who ended his career keeping watch on the politics of Soviet university students.
American President John Quincy Adams wrote, “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” And management theory guru Peter Drucker said, “Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.”
Where are the national and international leaders that are inspiring? Where are the national and international leaders whose actions speak louder than their words?
The next 12 to 18 months are going to shape the Philippines and the world in a way that has not been seen since World War II. And as the decisions at the time reached for generations, so, too, will the decisions made now reach to the future.
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