Thursday, 1 December 2011

President Aquino needs to focus on creating jobs


Manila Times
Editorial
http://www.manilatimes.net/index.php/opinion/110-editorials/12320-president-aquino-needs-to-focus-on-creating-jobs

Many believed President Benigno “Noynoy” Aquino 3rd when he said that there would be no poverty if there were no corruption. The Filipino translation of that campaign slogan propelled the President to Malacañang. But after nearly a year and a half in office, what seems to be happening is a worsening of poverty and of the economy, even as the government tightens a “noose” around its prime target in the anti-graft campaign—former President Gloria Arroyo. Now that her case has started, we hope that the government will divert more of its attention to the economy, particularly on creating more jobs.

Palace officials seemed euphoric about Mrs. Arroyo’s arrest and trial, but the national attention was jolted back to reality by recent reports about the economy. GDP growth, a key indicator, fell to 3.6 percent, suggesting that the government will not reach its economic growth target this year. Worse, the Organization for Economic Cooperation and Development (OECD) predicted that growth in Southeast Asia would remain low until 2016, the year President Aquino finishes his term.

The dismal economic data reports were preceded by other troubling news. The number of self-rated poverty and self-rated hunger grew, plus exports fell at its fastest pace. President Aquino and others in government pin the blame on external factors. True, there are serious global problems abroad, such as the economic turmoil in Europe, the weak US economy and surging oil prices. But, as many have also pointed out, our government is partly to blame.

Repeatedly, the authorities have been criticized for underspending. One of the most vocal critics is Dr. Benjamin Diokno, an economist from the University of the Philippines. He predicted that about P100 billion allocated for infrastructure and capital outlays that would have perked up the economy would not be spent this year. But he also saw the unspent funds being carried over to 2012 and added to the P265 billion budgeted for public spending, which would be a tremendous economic boost.

President Aquino, however, needs to move more quickly, work more effectively than he has. The dry season is ideal for construction projects, but it lasts only six months in the Philippines. The President and his team would need to hit the ground running, so to speak, in 2012.

New Year’s resolutions
We hope the President changes some of his economic beliefs and working attitudes next year. For one, he and his team need to lose the penchant for doling out money to reduce poverty and invigorate the economy. Congress has already given what President Aquino wants when it approved the P1.8-trillion national budget, which includes a hefty increase in the Conditional Cash Transfer (CCT) program.

Instead of even more dole outs, creating employment should be Job No. 1 in 2012. Having more jobs addresses so many problems, not the least of which is poverty and the slow economy in general. President Aquino and his team could give the country an economic boost by simply spending the funds that he had requested from Congress.

Besides working harder and having plans with clear objectives and timetables, President Aquino needs to provide better leadership to his economic managers and others in his team. In 2012, for example, he should convene more Cabinet meetings to impress on his officials a greater sense of urgency in economic matters. President Aquino and his team not only needs to work longer and harder, but also smarter and with more determination to achieve objectives.

In defense of the President, his communications team had argued that Cabinet meetings were a waste of executive time. Besides, the team added, the President calls Cabinet clusters meetings regularly. The downward economic trends and low productive output of Malacañang and the Cabinet suggest that the laidback management style is not working. In management, the ability to get things done separates the good executives from the mediocre.

Last year, we wrote in this space that we want President Aquino to succeed. We still do, because his failures will be ours to bear. Conversely, his successes will be ours to enjoy. While many seem to be happy enough seeing the government chase after the Arroyos, we think that Filipinos would be more grateful if our leaders also focused on our other important needs—like job creation.

Contact Center Industry Accelerating Growth


Manila Bulletin
http://www.mb.com.ph/articles/343203/contact-center-industry-accelerating-growth

MANILA, Philippines — The country’s call center industry expects to grow at a faster rate of 20 to 25 percent annually in the next five years as the economic crisis in the US and Europe would put pressures on the cost of companies making outsourcing and offshoring a very attractive option for companies.

Benedict Hernandez, president of the Contact Center Association of the Philippines (CCAP), told reporters that grow would be faster than their earlier projection of 15 to 20 percent growth until 2016.

“We earlier though growth rate would be closer to 15 percent until 2016, but now it’s in the 20 to 25 percent range,” said Hernandez. This augurs well for a sustained growth over the next five years.

Hernandez said the crises in the U.S. and Europe are cost pressures on companies to cut their expenses. With the crisis, more companies are now looking at offshoring and outsourcing their non-core functions.

“The crisis puts a lot of cost pressures on these companies which may now begin to accelerate their offshoring activities

“Despite the volume of activities already, there are still a lot of these companies which have yet to outsource, both US and non-US,” he said.

This means that growth in the next five years would be a combination of expansion and new investments in the offshoring and outsourcing business.

“There is still a lot of opportunities. Companies that have not yet outrsourced would start to look at this option,” he added.

Officially, however, the CCAP is going to stick to its forecast of 15 to 20 percent growth in revenues and a net growth of 400,000 employes by end of 2011.

For this year, CCAP projects to grow its revenues by 18 percent to $ 7.1 billion employing about 406,000 compared to last year’s $6.2 billion revenues and 344,000 workforce.

He recalled that at the height of the 2008 and 2009 global financial crisis, the industry grew “significantly." (BCM)

GDP: Terrible, why?


JOHN MANGUN
OUTSIDE THE BOX
Business Mirror
http://www.businessmirror.com.ph/home/opinion/20042-gdp-terrible-why
  
ONE week ago, the title of this column was “2011: A Wasted Year.” There was some surprise in opening the e-mail Inbox and finding responses such as, “Noticed you haven’t been your usual positive self” and, “You really took a different route. No it’s not pessimistic; nonetheless you really painted a gloomy picture of 2011. So I thought I guess it was that bad for a positive person like you to write about it.”

That column was written before the third-quarter economic-activity numbers were released. There is one word to describe the Philippines’s economic performance: terrible.

The Philippines needs 4-percent gross domestic product (GDP) growth just to stay even. To register a 3.2- percent growth is to say the country is slipping. Further, the economy has been going in reverse for all of 2011 and it is not going to get any better, according to Trade Secretary Gregory L. Domingo. He believes the annual results for 2011 will be somewhere between 3.5 percent and 4 percent. Terrible.

And it gets worse.

While the GDP number was bad enough, the GNI (gross national income) growth was about five steps down from “terrible.”

GNI in the third quarter grew at 1.6 percent. In 2010, that growth was 6.9 percent. GNI measures all income, including from outside the country, from Shoemart malls in Guam to San Miguel beer operations in China.

But the secretary said he is confident the worse is over in terms of GDP growth. Ok, now I have moved in to the House of Pessimism.

In explaining the poor economic performance of the nation, Romulo A. Virola, secretary-general, NSCB, had this to say: “The so-called death spiral of debt that hounds our trading partners, the uninvigorating, albeit already expanded government spending, and the decline in fishing due to unfavorable weather and the high cost of fuel contributed to this relatively lethargic growth.”

Let me tell you about that “death spiral of debt”; it is getting worse and will continue to get worse. The European financial system is about a month or less from complete collapse. Multinational companies are drawing up contingency plans for the demise of the euro currency. The UK is making plans for potential riots and devastating social unrest. Germany cannot sell its bonds at an acceptable interest rate and Italy was forced to pay an interest rate 60-percent higher than last month. Now Europe is depending on the International Monetary Fund (IMF) for money to bail the continent out of its problems. Depending on the IMF means depending on the US. If the US is going to be the financial savior of the world, I will move to “gloom-and-doom.” I think Secretary Domingo is a little too optimistic that the worst is over for the Philippine economy.

But that optimism is not what bothers me.

The debt death spiral has been a fact for three years. The situation has been progressing from the ICU to now, perhaps, the morgue. The administration has been in charge for 18 months. Surely someone must have known that the global situation was getting progressively worse, not better. What is to be done with the Philippines’s euro holdings as the currency falls in value? Where is the presidential folder containing the government’s contingency plan against more global meltdown? I bet Ramon Ang has one on his desk for the San Miguel group.

Sec-Gen Virola was being kind in calling government spending “uninvigorating.” When government spending falls 12 percent year-on-year, uninvigorating is an understatement. A decision was made by the government last year to reduce spending to make stronger the financial condition of the government. There is nothing wrong with that idea. However, when that decision was made, did anyone look at the potential negative consequences to the economy? That is what economic planners are supposed to do. And government policy-makers are supposed to balance benefits with disadvantages.

The government experts forecast that GDP growth for 2011 would be 4.5 percent. To date it is only 3.6 percent for nine months. The government blames the global debt, the weather, and the price of crude oil for missing that prediction by so much.

All of those factors are beyond direct control. However, they always have and always will be beyond control. So what exactly is the purpose of government economic planners?

In the US, New Jersey Gov. Chris Christie said this about the failure of the Obama administration to reduce the budget deficit. “I was angry this weekend listening to the spin coming out of the administration. The President knew it was doomed for failure, so he didn’t get involved. Well then what the hell are we paying you for? What have you been doing, exactly?”




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

Tuesday, 29 November 2011

Hot money flows surge to $3.59b



by Roderick T. dela Cruz
Manila Standard
http://www.manilastandardtoday.com/insideBusiness.htm?f=2011/november/28/business3.isx&d=2011/november/28

Global funds continued to flow to emerging markets such as the Philippines, with offshore investors infusing and retaining $3.59 billion of their capital as of Nov. 5.

Bangko Sentral data showed that despite the global uncertainties stemming from the European debt problems, foreign portfolio investments, or hot money, yielded a net inflow of $145 million in the first trading week in November.

A net inflow means foreign fund managers chose to retain a part of their gross investments in local stocks, government securities, peso time deposits and other money market instruments, instead of pulling them out of the local market.

Bangko Sentral deputy governor Diwa Guinigundo said the Philippines had become a net capital drawer since the start of the year, despite uncertainties in August and September after the credit rating of the United States was downgraded from its top-notch status.

“There was no month in 2011 when foreign portfolio investments registered a negative figure or net outflow,” said Guinigundo.

Gross investments of foreign capital funds actually rose 55 percent to $14.3 billion as of November 5 from $9.3 billion during the same period last year while withdrawals of these funds also surged 63 percent to $10.8 billion from $6.6 billion.

As a result, net inflows climbed 35 percent to $3.59 billion from $2.67 billion during the same period.

Guinigundo noted that businesses remained optimistic about the prospects in the Philippine economy, where output is expected to increase despite external challenges.

Emerging markets such as the Philippines became a magnet for global funds which are searching for higher-yielding investment instruments outside the United States, Europe and Japan. These markets continued to expand in terms of output and demand.

Guinigundo said six out of nine economic indicators in the Philippines continued to show an improvement, which is a sign that economic activities will be better in the fourth quarter.

The country’s gross domestic product grew 4 percent in the first half of 2011.

Helping an expert understand PHL


JOHN MANGUN
OUTSIDE THE BOX  
Business Mirror
http://www.businessmirror.com.ph/home/opinion/19929-helping-an-expert-understand-phl

ANOTHER expert has stepped up to tell the Philippines, to give the magic formula for the Philippines on its economy.

A doctor in economics from the Asian Development Bank pretty well trashed the Philippines in a speech before the 1st Manufacturers and Producers Summit last week. I was invited to be there, not as an expert, of course, but had a previous engagement.

That was probably a good thing for my blood pressure and the good doctor’s nose.

All these discussions start out the same. In this case it was the phrase a “diversified manufacturing sector.” Like I said, I have heard this all before.

Forget about the last 30 years when the Philippines could have, should have, would have. Let’s just talk about 2011.

Thailand is a great country. Nice elephants and cool rivers. The Philippines is always being compared to Thailand.

I did business there for three years in the mid-1980s, but the “experts” have all their statistics neatly lined up on a spreadsheet.

But the problem is that countries are different and the numbers mean and come from different experiences. That is what you would know if you were a “feet-on-the-ground” business person instead of an “expert.”

Thailand created the world’s highest economic growth rate from 1985 to 1996. Thailand has a lot of manufacturing. Therefore, so should the Philippines.

Now let’s do a reality check. You can get into a large truck carrying shipping containers and drive to each of Thailand’s five largest cities in about 24 hours. You can go to each of the Philippines five largest cities in 24 hours on an airplane. And you can drive that same truck in Thailand filled with manufactured goods for export directly to one of the largest seaports in the world, Singapore.

You think that fact might have some effect on the economic development of the two countries? The doctor-expert ignores that difference.

Thailand is the world’s biggest exporter of rice. The Philippines has been the world’s largest importer of rice. But Thailand has this “fact” on its border known as the Mekong River. Because Thailand sits in the Mekong River subregion, they do not have to bother much with irrigation like we do to grow rice. They also have the Chao Phraya, Mae Klong, Bang Pakong and Tapi rivers. We have the Cagayan River and the Davao River,which are actually better for rafting than for irrigation, although local farmers use them.

Maybe being in a river valley might contribute just a little to Thailand’s large rice crop.

Did you hear about the massive flooding that just happened in Thailand? It was a big news story. You know why? Because Thailand’s rice fields do not get wiped out by typhoons every year like in the Philippines.

Needless to say, tourism is big in Thailand and we need to do more. This is how Thailand does it.

According to research by Chulalongkorn University on the Thai illegal economy, prostitution in Thailand in the period between 1993 and 1995 made up around 2.7 percent of the GDP. A newer study says business is booming. One estimate published in 2003 placed the trade at $4.3 billion per year or now more than 3 percent of the Thai economy. I hope the US ambassador to Manila is reading this. It is believed that at least 10 percent of tourist dollars are spent on the sex trade. In other words, visitors to Thailand spend almost as much on sex as tourists to the Philippine spend on everything else.

Another thing the doctor said is that the Philippines cannot rely on call centers for economic growth. From the Philippine Star: “The booming BPOs provide short-term growth.” Obviously, he never talked to the people in the industry that have worked there for a decade and more.

“The industry only accepts college graduates. There are no job opportunities for those who don’t finish high- school or are only high-school graduates.” For the high school graduates, tens of thousands of BPO jobs have been created for guards, drivers, messengers, kitchen staff and janitors.

He is right. After having worked in the industry several years, I never met a summa cum laude from a five-star university working as an agent.

What I did see was thousands from the “Bundok State College” with a two-year degree making P15,000 a month with medical care and bonuses. And I have seen De La Salle graduates in economics working as tellers in a bank making P10,000 a month.

What do you think a call center is? A manufacturing plant, a factory that provides a service rather than goods? And we do not have to drive to Singapore to export it.

 ***

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