Saturday, 8 October 2011

Treasury to offer P20B in retail bonds

Agency sets auction on Monday to determine pricing
By: Ronnel W. Domingo
Philippine Daily Inquirer

The Bureau of the Treasury is offering at least P20 billion in 10-year and 15-year retail treasury bonds through a price-setting auction on Oct. 10.
In a notice to eligible dealers of government securities, Deputy Treasurer Eduardo S. Mendiola said a minimum volume of P10 billion for each tenor would be offered.

Mendiola added that the RTBs, which are available in P5,000 denominations, would be offered to the public until Oct 17.

Monday’s launching offer is much smaller than the previously announced minimum total volume of P50 billion to P60 billion for both tenors.

Malacañang has authorized the Treasury to issue as much as P500 billion in RTBs, but National Treasurer Roberto B. Tan had said that the agency would not use up the maximum amount in one auction considering that the borrowing authority for such volume “is good until it is used up.”

Tan also said that the government would raise “only what we need and also what market demand can accommodate.”

In recent RTB issuances, the government was able to raise a total of at least P100 billion.

This is the second time this year that the Treasury is issuing RTBs. The first outing raised some P104 billion, including P33 billion in five-year paper and P71 billion in 10-year bonds.

The five-year RTBs carried a coupon of 6 percent while the 10-year bonds fetched 7.375 percent.

Buyers offered a total of P135 billion, or more than four times the minimum offered volume of P30 billion.

For the latest round of the RTB float, the Treasury has tapped as issue managers First Metro Investment Corp., Metropolitan Bank and Trust Co., BDO Capital, BPI Capital and Land Bank of the Philippines.

Likewise, Rizal Commercial Banking Corp., Development Bank of the Philippines, Philippine National Bank , China Banking Corp. and Deutsche Bank were named as arrangers.

September GIR Settles At $75.64B

Manila Bulletin

MANILA, Philippines — The country’s gross international reserves (GIR) as of end-September amounted to $75.64 billion, lower compared to August’s $75.94 billion, the Bangko Sentral ng Pilipinas (BSP) reported Friday.

The full-year GIR projection was $70 billion and, in an interview, BSP Governor Amando M. Tetangco Jr. said the forecast will be adjusted higher with the rising external accounts, boosted by capital inflows and remittances, and with the balance of payments now at $9 billion.

“GIR is climbing and our strategy in managing (external accounts) is diversification,” said Tetangco.

In a press statement, the BSP said foreign exchange operations and BSP’s income from investments abroad as well as revaluation gains on its gold holdings on account of the increase in gold prices in the international market contributed to the stable GIR levels.

The September reserves are sufficient to cover 11.1 months worth of imports of goods and payments of services and income. The current level is also equivalent to 10.6 times the country’s short-term external debt based on original maturity and 6.3 times based on residual maturity.

Of the total GIR, about $66.09 billion are BSP’s foreign investments and $7.45 billion are gold holdings, and both amounts are lower compared to previous data of $66.41 billion and $7.55 billion, respectively.

The Philippine foreign exchange reserves have provided an important buffer for the country, especially during the economic and financial crisis. The GIR and the BOP surplus reflected the country’s strong exports, remittances, sovereign bond issuance, and other capital inflows.

In the past weeks with the peso-dollar exchange displaying increased volatility, the BSP has been active in the foreign exchange (FX) market and has been unwinding FX swaps as an intervention.

Tetangco said the level of the central bank’s short and long positions in FX forwards and futures will likely decline further as they unwind more which as of August has reached $12.8 billion, lower than July’s $16 billion.

BSP could wind down FX swaps to return some of the liquidity into the system, which would ultimately impact on the levels of both peso and dollar liquidity, and the exchange rate.

Including FX swaps, the country’s FX reserves total $88 billion in the first eight months.

Economy Strong Amid Global Slowdown

Manila Bulletin

MANILA, Philippines — The slowdown in the US and Europe is affecting Philippine exports but the country’s strong macroeconomic fundamentals are cushioning the impact of the global economic turmoil on the local economy, according to the World Bank's Philippine quarterly update (PQU).

The report noted that the Philippines’ external position and macroeconomic fundamentals remain strong. The current account surplus increased by 20 percent in the second quarter, owing to higher remittances and net services receipts.

“Net foreign direct investments increased in the first half and foreign reserves have surged to record highs thanks to strong capital inflows as well as sustained growth of remittances and income from investments abroad,” says the WB report.

Attracted by relatively higher growth prospects and yield differentials, net foreign portfolio inflows soared through August, at US$3.1billion, more than triple last year’s amount, the report says.

“To better insulate the Philippine economy from external shocks, it is important to maintain strong macroeconomic fundamentals and improve its competitiveness through diversifying exports, strengthening domestic competition, and improving productivity of the services sector,” said World Bank Economist Soonwha Yi. The report says in view of the slower growth and weaker economic outlook in advanced economies, the Philippines is forecast to grow at 4.5 percent in 2011 and 5.0 percent in 2012, a revision from the previous forecasts of 5.0 percent and 5.4 percent, respectively, for both years.

“Private consumption is expected to grow steadily, buoyed by lower unemployment, higher government spending and sustained remittances,” said Ms. Yi. “With ample fiscal space, the government is expected to boost spending in the second half and catch up on delayed implementation of infrastructure projects.”

WB noted that government’s zero-based budgeting process has generated sufficient fiscal space to scale up spending on priority social and economic agenda.

The report says that domestic investment is projected to expand to 21.8 percent of GDP for 2011 from 20.5 percent in 2010, and to improve further to 23.1 percent in 2012, as the government accelerates the pace of its capital outlays and as business sentiment turns more positive. (EHL)

MIAA to expand to Nayong Pilipino

Manila Bulletin

MANILA, Philippines — President Benigno S. Aquino III has authorized the transfer of the huge Nayong Pilipino property in Pasay City to the Manila International Airport Authority (MIAA) for the planned expansion of airport and cargo facilities.

In Executive Order No. 58, the President said the 22.3-hectare land of the Nayong Pilipino Foundation Inc. (NPF) will be used for the expansion of the Ninoy Aquino International Airport (NAIA) Terminal 2. This expansion to the north will include the development of the New International Cargo Terminal Facility to support the operation of NAIA Terminal 3 and “accommodate growth in the passenger and aircraft movement.”

“I, Benigno S. Aquino III, President of the Philippines, by virtue of the powers vested in me by law, do hereby order the Nayong Pilipino Foundation, Inc. to transfer its remaining land with an area of 22.3 hectares in Pasay City to the Manila International Airport Authority,” the order read.

“It is the declared policy of the State to promote and maintain a viable, efficient, dependable and safe air transportation system as an effective instrument for national recovery and economic progress,” the order stated further.

In 1972, the NPF was given a 45.9-has property in Pasay City on a portion of which the Nayong Pilipino Cultural Park (NPFPark) was built.

In 2002, then President Arroyo allowed the transfer of 8.6 hectares of the NPF property to the MIAA and the closure of the NPF Park pending its redevelopment.

Five years later, the old NPF Park was moved to the 15-has property of the Philippine Reclamation Authority (PRA) in Parañaque City and the transfer of 15 hectares of NPF’s Pasay property to the PRA.

Presidential Decree No. 37 issued in 1972 provides that the parcel of land given to the NPF shall revert to the National Government if the NPF is dissolved or ceases.

The same decree states that the land occupied by the NPF shall not be transferred to another person or entity without previous authorization by the President of the Philippines.

EO 58, signed last September 29, takes effect upon publication in a national newspaper.

Friday, 7 October 2011

Turning negatives to positives

Business Mirror

AS we enter into the last quarter of 2011, it becomes more obvious every day that the confidence of January has turned into the confusion of October.

Simply put, the national economic and social strategy of the administration is not working.

It is not at all strange that while the President enjoys very high ratings in “trust,” there is no doubt that it is the reverse in “confidence.” People vote on “trust” with their hearts; they vote on “confidence” with their money.

Growth forecasts continuing to be lowered

Every new gross domestic product growth forecast is lower than the one before. Sure it is a hostile global environment. So what? These forecasts always make a point to say the Philippines is better able to withstand global shocks. Remittances are up. BPO income is up. The Philippines has record-high international reserves. Consumer spending is strong.

So what is the problem? The government is doing very little, if anything, for the economy. It seems to be all show. While the government is so proud that the Philippines’s credit rating might go higher, it means nothing to the economy. The only reason for a better credit rating is to reduce government borrowing costs to be able to spend more on those areas that will help grow the economy and that is not being done at all. This credit-rating thing is nothing but political image unless it is translated into concrete government spending and investment. I see no indication that policy is going to change significantly in the medium term.

Consumers are spending and saving, not investing

Dr. Bernardo M. Villegas wrote a column yesterday in the Inquirer and said this: “The Philippines, although awash with domestic savings today, direly needs long-term capital for the vast requirements of…very capital-intensive investments.”

If you couple Dr. Villegas’s statement about high savings with the fact that Filipino consumer spending is growing at a healthy rate, that is a bad sign for the economy. Studies are showing that even remittance money is being put into the banks, not being used for personal wealth creation.

Saving money is a good idea. Saving too much money versus investing is a bad idea that shows a caution and hesitation about the future. While the administration tells the people that the Philippines is able to handle external shocks, the public is not acting like it is true. They are cautious. It may be because they are not confident in the ability or the desire of government to act. If the Philippines is in such good shape (which I firmly believe it is) relative to other countries, why is not the government out there building, spending, and building?

Showcase govt-spending program an illusion

After 18 months of this administration, public-private partnership is a stillborn program. From Bloomberg: “The Philippines said it may offer at least two projects to investors under the so-called public-private partnership starting this quarter, scaling down from an earlier plan for 10 proposals this year. There are four projects worth P34 billion in advanced stages of preparation.” That amount is absolutely nothing. It is less than 2 percent of the total national budget. That is like you spending P100,000 and then worrying for a year how to spend P2,000. San Miguel Corp. will have profits of about P34 billion in 2011.

A fiscally sound government like the Philippines’s is expected to use the people’s money on projects for the people’s economy. It is not happening. There can be only one of two conclusions. The government is afraid of the future and does not want to act. The government is not competent and does not know how to act.

Foreign investment just isn’t there

Presidential press releases notwithstanding, there is an important old saying. “The deal isn’t done until the money is in the bank.” And the foreign-investment money is not in the bank. One word describes the investment climate in the Philippines: uncertainty. Mining permits are not being issued. Foreign-ownership rules such as with Philippine Long Distance Telephone Co. are completely unresolved. The government keeps talking about raising taxes while saying government finances are sound. The Autonomous Region in Muslim Mindanao is in chaos. The New People’s Army operates at its own will. Peace negotiations are in a coma, if not dead.

Now the good news: Not one of these conditions is permanent. With true economic leadership, all the above negatives could very quickly become the positive that drives the economy upward.

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