Rapes: IT BPO - Manila displaced New Delhi; Cebu displaced Dublin, Ireland in the 2012

Philippines is the World leader for Business English Index in 2012 over USA, Canada, United Kingdom and Australia. 

Software developer pushes for Philippine tech talent

SAN FRANCISCO – As the overall performance of the Philippines inches up higher, more businesses are considering the Philippines as the first-option for their software development outsourcing initiatives–and not just for call centers, reported the chief executive of a Philippines-based software development firm.

"Call centers are still our top money makers but we're not encouraging them," explained Exist Global, Inc. CEO Jerry Rapes at the recent "Tech Innovation" greet and meet at the Philippine Consulate here.

Exist Global, Inc., an outsourced software development company in the North American and European market, provides architecture and design consulting, application development, independent quality assurance, application maintenance and technical support services.

"The Philippines has plenty of technical talent," he continued. "English-proficient and amazingly collaborative individuals not just in Manila, but also in IT hubs such as Cebu, (former US Air Force Base) Clark, (former US Naval Base) Subic and Davao."

Other least known Philippine IT-BPO hubs include Sta. Rosa City, Laguna, Bacolod, Iloilo and emerging Baguio City.

Philippine Trade Commissioner Michael Alfred Ignacio echoed Rapes' sentiment. "The Philippines used to be known as the Dark Horse of Asia. Now, not to be in the Philippines is to make a competitive risk."

Rapes made the numbers talk: "According to (the globalization advisory firm) Tholon, Manila displaced New Delhi, and Cebu displaced Dublin, Ireland in the 2012 Top 100 Global Outsourcing Destinations."

"Software services outsourced to the Philippines were posted at $1.5 billion, a 50 percent growth last year. There was also a 10 percent increase in the employment of Philippine IT professionals of about 55,000. And the IT-BPO revenue was at an all-time high of $13 billion– an 18 per cent growth, employing more than 780,000 in the Philippines last year."

Top in business English

Rapes revealed that (cloud-based English literacy provider) Global English Corporation ranked the Philippines number one in the world for Business English proficiency. "Some countries turn to the Philippines to learn (Business) English. There are six direct flights from Korea to Cebu," he added.

When language is not a barrier, negotiation is always "sweet." Rapes declared, "Some (outsourcing provider) countries nickel and dime you. But in the Philippines, they just charge you one fee. No extras for bandwidth and other details."

The Philippines has an annual average of 500,000 graduates every year, Rapes reported, some 200,000 them in medical/health sciences ("for your tele-medicine and transcription needs"). An estimated 180,000 are in engineering/IT related courses ("the IT courses in the Philippines are a little different in that they are apps heavy"). Almost 120,000 are in business courses. This sets the Philippines apart for scalability. "You will find your niche and the technology you want in the Philippines," Rapes claimed.

One admitted problem is the high churn (turnover) rate, or staff retention. Rapes said the Philippines needed more middle managers to retain growth momentum. "The churn rate is almost 75 percent a year. It drives up hiring expenses. You are in a place where you could come back from lunch with a new hire. There's no at will employment in the Philippines, and it's very hard to lay-off people."

Still, Rapes said, "the Full Time Engineering (FTE) revenue or bill per year for engineers in the Philippines is from $8,000 to $9,000, compared with $40,000 in India."

Incentives to tech investors

Rapes was in the council that put together the US-Philippine Business Support and Delivery last year, to bring jobs and project to the Philippines.  Among the results of this are the added benefits that the Philippine Economic Trade Zone Authority (PEZA) provides to foreign technology investors.

Aside from cutting out the bureaucratic red tape, PEZA grants foreign investors exemption from corporate income tax for four to eight years. After that expires, a five percent gross income tax can be opted instead of taxes.

Also granted are exemptions from duties on imported capital equipment, raw materials, supplies and even spare parts. Exemptions also include wharf dues and export taxes. There's a 50 percent total cost reduction on manpower training. And permanent resident status is given to foreign investors and their immediate family members.

PEZA has reportedly 137 economic zones in the Philippines with a reputation for a four-day turn-around time for electronics. Also, it is a 24/7 "non-stop shop." Rapes said, "It is one of the few government agencies I know where zone Director General Lilia De Lima will sign documents in front of you." Rapes added that Subic, Clark and the Board of Investments all grant the same benefits as PEZA.

Rapes believes that the Philippines is seeing its growing share of techno-alphas for several reasons.

"Successful US-based Filipino entrepreneurs like Dado Banatao; (Exist Global, Inc. co-founder and CEO of the world's leading cloud provider, Morphlab) Winston Damarillo;  (Founder of the largest and fastest growing service provider to find care givers, Care.com) Sheila Marcelo and others have decided to come to the Philippines to share their experiences and mentor our young entrepreneurs. "

The Philippines' IT sector can learn from being exposed to Silicon Valley, Rapessaid. "Our returning entrepreneurs have started the initiative of sharing this innovation mind set. We just need to be focused and consistent because it's a long term initiative."

The collaboration among government, industry and academe has been enhanced in the Philippines, creating the right ecosystem, business model, infrastructure and supply of talent. "The Philippines is currently in a perfect position to grab international recognition due to its sound business environment and performance."

And don't forget the fun factor. Rapes said, "We always keep our relentlessly happy psyche no matter if bad weather hits us or if projects hit a snag. I know there are hard-working engineers everywhere, but Filipinos have the most cheerful spirits of them all."

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Does The Philippines Deserve Its Investment Grade?

Over the past decade the Philippines' sovereign credit rating oscillated between "negative" and "stable", reflecting concern about the ability of the government to collect sufficient tax revenue, manage its budget, and sustain a high rate of GDP growth. Three years ago, President Aquino embarked on a long overdue path to correct what had become endemic deficiencies in the Philippine economy. Over the past 10 weeks, the country has been rewarded for its efforts, with Fitch, the Japan Credit Rating Agency, and S&P all categorizing the Philippines as "investment" grade. Does it really deserve that designation?

Moody's retains its rating at a notch below investment grade, but will undoubtedly follow the others in due course, reflecting a rising chorus of voices in the investment community expressing confidence in the country's future. The external position of the Philippine economy -- its current account balance, external payments position, and foreign exchange reserves -- has been solid under President Aquino's fiscal management. The public deficit (2 percent of GDP) and debt-to-GDP ratio continue to fall, inflation remains at 3 percent, and the country's GDP in 2012 grew at 6.6 percent -- higher than Indonesia (6.2 percent) and Malaysia (6 percent), and not far behind Asia's perpetual economic leader, China (7.6 percent). Year to date, the Philippine peso and stock market (ranked fifth best globally) are among the best performers in the world.

Clearly, much of the credit must go to the president, and his willingness to tackle some long simmering issues. Since taking office in 2010, President Aquino managed to pass the 'sin tax' law covering such items as alcohol and cigarettes, increased tax collection rates, and successfully impeached the now former Supreme Court chief justice of former President Arroyo, on grounds of undeclared wealth. Because of Aquino's "straight path" platform, the Philippines ranked 105th (out of 174) in Transparency International's Corruptions Perceptions Index in 2012, on par with such countries as Algeria and Mexico. When he assumed power, the country was ranked 134th, on par with countries such as Nigeria and Zimbabwe. Clearly, the country is making good progress in that regard.

But what progress has been made in terms of simply doing business in the Philippines? Despite its newly minted investment grade credentials, the World Bank's 2013 'Doing Business' indicators continue to give the Philippines a low grade. Out of 185 countries in its index, the Philippines ranks just 138th, sandwiched between Ecuador and Ukraine. In six of the ten categories, the country ranks in the lowest third, and particularly poorly in terms of both starting a business and resolving insolvency (at 161st and 165th, respectively). Also, the Philippine rankings actually fell in seven of the 10 categories since last year. This stands in stark contrast to what is implied by its investment grade ranking.

Beyond the ease in doing business, regulatory risk remains a challenge, and the country's judiciary remains notoriously corrupt. While the political risk associated with attempted coups over the past several decades has notably diminished in recent years, election-related killings and violence remain a problem. And the country's rising level of net foreign direct investment remains a fraction of that of its neighbors, or other investment grade countries throughout the world. Given all this, what explains the relative haste with which the three ratings agencies upgraded the Philippines?

Apart from perhaps wanting to maintain a sense of consistency, given that Indonesia was also recently upgraded to investment grade by Fitch and Moody's -- even though its currency has not performed as well and it incurred its first current account deficit in 15 years last year -- one explanation might be a tendency to overemphasize a country's external profile while under-emphasizing development indices such as the inclusivity of economic growth, per capita development across social strata, the Gini coefficient, and absolute poverty.

Recently, the Philippine National Statistical Coordination Board reported that despite the series of consecutive credit rating upgrades made by various agencies over the past three years, poverty levels in the Philippines remain unchanged. As of 2012, about 22 percent of Filipino households were considered poor by absolute standards, compared to 23 percent in 2009. A 2008 Asian Development Bank study stated that the Philippines has the largest number of higher education institutions in Southeast Asia, and the number of examinees in professional licensure exams continues to rise, yet passing rates continue to drop. In addition, the Philippine underemployment rate increased from 19 percent in 2011 to 22.7 percent in 2012. In other words, some important, under-appreciated indicators are going in the wrong direction.

The Aquino administration has been quick to focus on how long the "trickle down" process can take, but it did not dispute the findings of the report. To date, President Aquino's technocrats are struggling to reconcile high credit scores, on one hand, and inclusive growth, on the other. So far, there has been no adequate reason cited -- other than Kuznet's inverted-U curve (circa the 1950s), where income inequality should eventually decrease, but only after sustained growth in the long term. On that basis, the Philippines must have high sustained growth for many decades to make a real difference in the absolute poverty rate.

So this appears to be a "Tale of Two Countries" -- one with significantly improving economic indicators and an activist president determined to smash through some of the unfortunate legacies of the Post-Marcos era, and the other -- an unbroken legacy of poverty, regulatory ineffectiveness, and judicial corruption. The ratings agencies appear to have focused primarily on the former, presumably under the assumption that it will take time to address the latter.

Much will depend on what happens after President Aquino leaves office in three years time. Will his reformist legacy continue, or will the country slide back into its old ways? At least three ratings agencies appear to be saying that there is a better chance that meaningful reform will continue in the longer-term. Clearly, the Philippines has a great deal of untapped potential. Nouriel Roubini, a perennial pessimist, forecasted that should the Philippines continue to defy the global recession, and if it were to consistently register GDP growth rates between 7 percent and 9 percent annually, as one HSBC study claimed, the Philippine economy may be among the largest economies by 2050. This assumes an uninterrupted path to nirvana, however, which is rather unlikely to occur, particularly given the vicissitudes of the global economy and the plethora of challenges facing the Philippines.

More likely is that the country will encounter its share of obstacles along the way, some of which will be externally derived, but many of which will undoubtedly be self-imposed. To truly deserve its investment grade rating, the Philippines needs to achieve much outside the realm of economic indicators. Being rated, as it is, one notch above junk status, it wouldn't take much for the country to fall back below an investment grade rating. Rather than beating its chest too much about what it has just achieved it, the government would be wise to focus on how best to avoid losing it.

Edsel Tupaz is owner of Tupaz and Associates and a professor of international and comparative law, based in Manila, Philippines. He is a graduate of Harvard Law School and Ateneo Law School. Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk management consulting firm based in Connecticut (USA), and author of the book "Managing Country Risk."

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The Grim Reality Behind the Philippines' Economic Growth

Skyrise buildings are seen amidst a residential district near Manila's Makati financial district on May 3, 2013. (Erik De Castro/Reuters)

The country is being heralded as the new Asian success story, but only an elite few reap the rewards.

In a neighborhood of so-called "Asian tigers," the Philippines has quietly emerged as the region's newest economic darling. At 6.6 percent, the Filipino economy's current GDP growth rate is the second highest in Asia, behind only China's. That growth is projected to continue over the next few years, in part because Filipinos are in a "sweet spot" demographically: the Philippines has the youngest population in East Asia, which translates into lower costs to support a younger workforce and less economic drag from retirees. Last month, Fitch Ratings (one of the world's three major credit rating firms) upgraded the Philippines to a "BBB-" with a stable outlook -- the first time the Philippines has ever received investment-grade status and a huge vote of confidence in the Filipino economy. And last year, the World Economic Forum moved the Philippines up ten points to the top half of its global competitiveness ranking for the first time in its history. These economic improvements are in part due to President Benigno Aquino, whose steps to increase transparency and address corruption sparked renewed international confidence in the Filipino economy even during the global slowdown.

"The Philippines is no longer the sick man of East Asia, but the rising tiger," announced World Bank Country Director Motoo Konishi during the Philippines Development Forum in Davao City in February.

But that economic growth only looks great on paper. The slums of Manila and Cebu are as bleak as they always were, and on the ground, average Filipinos aren't feeling so optimistic. The economic boom appears to have only benefited a tiny minority of elite families; meanwhile, a huge segment of citizens remain vulnerable to poverty, malnutrition, and other grim development indicators that belie the country's apparent growth. Despite the stated goal of President Aquino's Philippine Development Plan to oversee a period of "inclusive growth," income inequality in the Philippines continues to stand out.

In 2012, Forbes Asia announced that the collective wealth of the 40 richest Filipino families grew $13 billion during the 2010-2011 year, to $47.4 billion--an increase of 37.9 percent. Filipino economist Cielito Habito calculated that the increased wealth of those families was equivalent in value to a staggering 76.5 percent of the country's overall increase in GDP at the time. This income disparity was far and away the highest in Asia: Habito found that the income of Thailand's 40 richest families increased by only 25 percent of the national income growth during that period, while that ratio was even lower in Malaysia and Japan, at 3.7 percent and 2.8 percent, respectively. (And although critics have pointed out that the remarkable wealth increase of the Philippines' so-called ".01 percent" is partially due to the performance of the Filipino stock market, the growth of the Philippine Composite Index during that period would not account for such a dramatic disparity from neighboring countries.) Even relative to its regional neighbors, the Philippines' income inequality and unbalanced concentrations of wealth are extreme.

Meanwhile, overall national poverty statistics remain bleak: 32 percent of children under age five suffer from moderate to severe stunting due to malnutrition, according to UNICEF, and roughly 60 percent of Filipinos die without ever having seen a healthcare professional. In 2009, annual reports found that 26.5 percent of Filipinos lived on less than $1 a day -- a poverty rate that was roughly the same level as Haiti's. And a new report from the National Statistical Coordination Board for the first half of 2012 found no statistical improvement in national poverty levels since 2006. Even as construction cranes top Manila skyscrapers and the emerging beach town of El Nido unveils plans for its newest five-star resort, tens of millions of Filipinos continue to live in poverty. And according to Louie Montemar, a political science professor at Manila's De La Salle University, little is being done to destabilize the Philippines' oligarchical dominance of the elite.

"There's some sense to the argument that we've never had a real democracy because only a few have controlled economic power," he said in an interview with Agence France-Presse. "The country dances to the tune of the tiny elite."

Many observers blame the inequality on widespread corruption in local government, which makes it difficult or impossible for many Filipinos to launch small businesses. (In 2012, Transparency International, a non-governmental organization that monitors and reports a comparative listing of corruption worldwide, gave the Philippines a rank of 105 out of 176, tied with Mali and Algeria, among others.) Low levels of investment also suppress business growth: the Philippines' investment-to-GDP ratio currently stands at 19.7 percent. By comparison, the investment rate is 33 percent in Indonesia, 27 percent in Thailand, and 24 percent in Malaysia.

For the select few Filipinos who live in beach towns and other popular tourism areas, however, the recent influx of foreign tourists to the previously overlooked country has meant new business opportunities. Celso Serran, 38, a rickshaw driver in the growing tourist town of El Nido, said that the economic impact of tourism has had a significant impact on his income. "Today, a driver can reasonably expect to make 500 Philippine Pesos ($12.16) per day," said Serran. "Before the tourists started coming, he might make 200 PHP ($4.86) on a good day."

For some, the tourism industry is so clearly the only option that it even pulls them away from their hometowns towards more tourist-friendly cities. Dorina Genturo, 20, moved from Puerto Princesa, the capital of Palawan, to El Nido for the better job opportunities there. "There are definitely a lot more jobs in tourism, in hotels and tour companies," she said. "But it's not like this in other towns."

Meanwhile, other huge sectors of Filipino industry (such as banking, telecommunications, and property development) are almost entirely monopolized by a few elite political families, most of whom have been in power since the Spanish colonial era. And despite wide-reaching government reforms from the 1980s, those industries remain effective oligarchies or cartels that vastly outperform small businesses. According to a paper released by the Philippine Institute for Development Studies, small and medium enterprises (SMEs) account for roughly 99 percent of Filipino firms. However, those SMEs only account for 35 percent of national output--a sharp contrast with Japan and Korea, where the same ratio of SMEs accounts for roughly half of total output. This translates into far fewer high-paying jobs on the local level for Filipino employees and exacerbates the huge income disparity across the country.

"Is the economy growing here?" said Josefa Ramirez, 31, who earns roughly 123 pesos ($3) a day selling bottles of water and soda from a cart in Manila. "I didn't know that. For me, things feel the same as they always did."

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Along with Fitch and S&P, Philippines gets 3rd investment grade from Japan's JCRA

Japan's official debt watcher has upgraded the country to investment grade, a statement said on Tuesday (May 7, 2013).

Japan Credit Rating Agency Ltd. revised its credit rating for the Philippines to BBB- from BB+, up one notch. The rating has a stable outlook.

The upgrade followed similar actions from major credit raters, Fitch Ratings and Standard & Poor's Ratings Services (S&P). Fitch raised the country's sovereign rating last March, while S&P did it last week.

In its statement, JCRA noted of the country's "robust economic growth" achieved against the backdrop of "sound fiscal management."

In particular, the Philippines is projected to grow "around six percent in the years to come" buoyed mainly by large remittances from overseas Filipino workers (OFW), which are driving domestic demand.

"Its current account remains in surplus backed by OFW remittances and business process outsourcing revenues," the agency said.

This, in effect, will further strengthen the country's external position through accumulation of foreign reserves that will "enhance our resilience to external shocks."

The balance of payments- which summarizes all inflows and outflows in a particular economy- hit a surplus of $1.535 billion as of the first quarter, central bank data show.

It is expected to widen to $3 billion by year-end, driven by remittances projected to grow by an average of five percent this year.

As of February, cash remittances are already up seven percent to $3.363 billion, figures showed.

"The country's financial system remained sound," JCRA said.

"Philippine banks remained well capitalized with their average capital adequacy ratio kept high at 19 percent as of end-September 2012 as against the 10-percent regulatory standard set by the Bangko Sentral ng Pilipinas (BSP)," it added.

In addition, the government's balance sheet has remained in check, with the budget deficit at just 2.3 percent of economic output last year, lower than the 2.6-percent target.

Debts have also been managed well, JCRA said, pointing to successful efforts of lengthening debt payment terms and focus on borrowing in pesos to reduce foreign exchange exposure.

"The increase in the excise tax in tobacco and alcohol in 2013 may help expand revenues in the years ahead," it explained.

Moving forward, the Aquino administration should set its sights in improving the country's infrastructure by further "strengthening its tax base" to fund investment projects.

The BSP, for its part, should encourage further "deepening and diversification" of the financial markets to better utilize capital flows, JCRA explained.

"As the uncertainty persists over the prospects of the global economy, especially the European economy, JCRA will closely monitor its future developments and their possible impact to the Philippine economy," the agency said.

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Philippines vs Indonesia: Which is 'better' in Economic and Investment Aspects?

Which is winning the battle between the two rising economic stars?

It's been a close battle between Asia's two rising economic stars -- Philippines and Indonesia.

At first, Indonesia was edging ahead with its two investment grade status from Fitch Ratings in December 2011 and Moody's in January 2012.

But slowly and surely, the Philippines has crept up from behind, achieving its first investment grade rating from Fitch Ratings on March 27, and now its second from Standard and Poor's on May 2.

Philippines and Indonesia both have two investment grades from different credit rating agencies. Graphic by Matthew Hebrona/Rappler

Both countries, which are considered Asia's new tigers have been demonstrating strong economic growth against a sluggish global economy, almost catching up with Asia's other economic powerhouses, China and India.

So the tallies are even, but which one is really winning?

GDP growth

In terms of GDP growth, the Philippines has emerged a winner with a 2012 GDP faster rate of 6.6%.

Indonesia, on the other hand, saw its economy slow down after the government failed to reduce subsidies, which drained the government's finances, hurting the rupiah, resulting in lower foreign investor confidence. Indonesia grew at 6.23%.

On Monday May 6, Indonesia reported a first quarter 2013 growth of 6.02%, the slowest pace in more than two years. The Philippines is due to announce their first quarter results on May 30.

In the 3rd quarter of 2012, the Philippines recorded a growth of 7.1%, replacing Indonesia as the second-fastest in Asia next to China's 7.7% and the fastest in Southeast Asia. Indonesia, which dropped down to 3rd position, registered a growth of 6.2%.

The year 2012 saw a turning of tables for the Philippines. In 2011, the Philippines expansion of 3.9% was well below Indonesia's growth rate of 6.5% in 2011.

Aquino vs Bambang Yudhoyono

The promises of Presidents Susilo Bambang Yudhoyono in Indonesia and Benigno Aquino III in the Philippines to fight corruption, lower budget deficits, and bring in investment has won them both upgrades from Fitch Ratings and Moody's Investors Service in the past year.

Philippine President Aquino, who is halfway through a 6-year term, has been successful in increasing state spending and managing the budget deficit, while seeking more than $17 billion of infrastructure investments to spur growths.

The country's budget deficit has been brought down to 2% of gross domestic product (GDP) by 2012 from 3.9% when he took office in 2010. Aquino has also increased tax collections, passed the controversial sin tax law amendments, and ousted former Chief Justice Renato Corona in 2012 for illegally concealing his wealth.

Indonesian President Bambang Yudhoyono, who is in his final year in office, failed in 2012 to cut fuel subsidies, which have drained the government finances. This means the government has to find more funds to allocate to infrastructure spending.

According to the World Bank, the President Yudhoyono has said that his government is weighing the pros and cons of raising fuel prices or choosing another method that would more effectively target the subsidies at poorer consumers in a nation where almost one in 5 people lives on less than $1.25 a day.

Foreign investments

In this arena, Indonesia has the lead. The country has been attracting the second biggest chunk of foreign direct investments - $19.2 billion in 2012 - flowing into Southeast Asia, next to Singapore's $54 billion.

The Philippines on the other hand has remained a laggard, capturing only $1.5 billion in 2012.

Corruption Perceptions

The Philippines has the lead and is now seen as less corrupt than Indonesia. The Transparency International's Corruption Perceptions Index has boosted the Philippines' ranking to 105th place in 2012 from 139th in 2009, a year before Aquino became president.

Indonesia on the other hand was ranked 118th last year, slipping from 111th three years earlier.

As both rising stars diverge in their economic growth, it remains to be seen who will emerge the clear winner.

Investment destinations

To fund managers, however, both investment destinations remain attractive, and some don't even have to choose between the two.

Amid the economic woes, belt-tightening measures, gloomy outlook and credit rating downgrades in the west, most investment funds on the lookout for solid growth are eastward-bound.

A global fund manager told Rappler that the competition for investors' attention is not between Indonesia and the Philippines, but against other emerging economies in other regions, like Eastern Europe and South America. - with research from Ramon Calzado and Lean Santos

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Philippines Now Major Source of Skilled Migrates to New Zealand

Six of the seven Filipinos who work on Greg and Kelly Kirkwood's North Otago dairy farm are (from left) Neil Molina, Reis Pe, Eric George, Saldy Barroga, Roel Gonzales and Jeorge Barroga.Photo by Gerard O'Brien. Photo: Otago Daily Times

Filipinos have been migrating to New Zealand for the last 15 years and many New Zealand employers have become aware of their work ethics and skills. Many other countries around the world have been recruiting Filipinos for years because of their skills and their willingness to work in jobs that their local population has been unwilling to undertake. There is an increasing interest from New Zealand employers recently in hiring skilled migrant workers from the Philippines to fill the skills shortage in the local market.

For some years many hundreds of dairy farm workers have been employed by New Zealand farmers if they have been unable to find suitable staff locally. Today the NZ dairy farming industry has become dependent on Filipino workers to provide the labor force to meet their requirements of this rapidly growing industry. Many of the Filipinos coming to NZ have previously been working on commercial dairy farms in the Middle East or Japan, and have settled as residents with their families.

Over 11 million Filipinos work outside the Philippines. They can be found working around the world. Many Middle Eastern countries are dependent on their Filipino guest workers to keep their economies growing, where they work under contract for a certain number of years. Employers have recognized their willingness to work, their cheerful dispositions, and their ability to pick up language and new skills.

Before Filipinos can leave their country to work abroad they must obtain an Overseas Employment Certificate from the Philippines Overseas Employment Agency (POEA). Without this they cannot depart though many thousands do illegally out of desperation to find jobs abroad. The reason why the POEA requires this process is to ensure that workers going abroad have a genuine job offer and not subject to scams. The process requires employers to have their employment contracts examined and approved by the POEA, along with other under-takings before the workers they wish to hire will be issues their OECs.

Why have so many Filipinos forced to work abroad, rather than in their own country? The main reason is the lack of job opportunities for Filipinos in the Philippines. Unlike most of the rest of Asia, the Philippines have been unable to attract overseas investment to finance the growth in manufacturing and jobs as elsewhere in Asia. Yet the Philippines are one of the richest countries in Asia, with many natural resources and a talented English-speaking work-force.

Overseas investors have preferred other Asian countries for investment as a result of poor government policies, and less flexible labor laws, a weak and corrupt legal system, poor infrastructure and high electricity costs. (As recently pointed out in an IMF report). Yet in recent years the country has benefited enormously from the remittances from their overseas workers (OFWS) – over $US20 billion is sent back into the country annually providing an inflow of capital to fiancé domestic growth. The No 1 earner of overseas currency is the remittances from OFWs.

In spite of this, nearly a third of the population lives in poverty and wages in the Philippines remain low. While the economy is expected to grow 7% this year driven by a boom in property construction, the population is growing faster than new jobs are being created. As in the nineteenth century, when many migrated from the UK and Ireland to settle around the world, today Filipinos are likewise migrating around the world to seek better opportunities than can be obtained at home. Migration of Filipinos is likely to continue until structural changes are made to the Philippines economy to become competitive to investors with other Asian economies.

As the only New Zealand Company based in the Philippines (for the last five years) supplying skilled migrants to meet the skills shortage in New Zealand, Immigration Placement Services Ltd has helped settle many hundreds of Filipinos successfully in the country. Many of these have now bought their families to New Zealand and have since become permanent residents, contributing to our society. New Zealand is a preferred destination for Filipinos as Immigration policies allow for approved skilled migrants on a work visa to bring their partners and children, something that is not possible for many Filipinos working in many other countries. Many Filipino children grew up not knowing their parents as one or both need to work abroad to provide for their children's education and necessities in live.

Filipinos have integrated into NZ society well. As English is widely spoken throughout the Philippines they have fitted into NZ society much better than other Asian ethic groups, and can now be found from one end of NZ to the other.

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Philippines receives S&P Investment Grade Rating; Beats queuing Indonesia

Standard and Poor Upgraded the Philippine Credit Rating to Investment Grade May 2, 2013

The Philippines overtook Indonesia to win an investment grade today from Standard & Poor's, as President Benigno Aquino outshines Susilo Bambang Yudhoyono in improving government finances and spurring growth.

The rating on the Philippines' long-term foreign-currency- denominated debt was raised one level to BBB- from BB+, with a stable outlook, S&P said in a statement today. In contrast, the assessor revised its outlook on Indonesia's BB+ rating to stable from positive.

"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government's declining reliance on foreign currency debt," S&P said. "In our assessment, the stalling of the reform momentum in Indonesia and a weaker external profile have diminished the potential for an upgrade over the next 12 months," it said separately.

Aquino's drive to transform the nation into one of the region's fastest-growing economies is gaining strength, with the government forecasting record investment pledges this year as companies including Murata Manufacturing Co. expand. In Indonesia, President Yudhoyono has delayed cutting fuel subsidies that have drained government finances even as he tries to allocate more funds to infrastructure spending.

"For the Philippines, this is yet another confirmation that Aquino's reforms have borne fruit which would help in attracting not just short-term flows, but long term direct investments," said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG. "The rating momentum for Indonesia is moving in the wrong direction."

Capital Inflows

The peso climbed to a three-week high of 41.055 per dollar, reversing earlier losses. It is the biggest gainer in the past 12 months after the Thai baht among 11 Asian currencies tracked by Bloomberg. The Philippine Stock Exchange Index (PCOMP) advanced 0.3 percent before the announcement after surging to a record in April. The Jakarta Composite Index fell 1 percent.

Higher ratings may boost capital inflows into the Philippines and prompt the central bank to add to measures to curb asset-bubble risks. Bangko Sentral ng Pilipinas last month cut the rate it pays on special deposit accounts for a third time this year, while keeping the rate it pays lenders for overnight deposits at a record-low 3.5 percent.

BSP will remain vigilant against risks associated with greater inflows, Governor Amando Tetangco said today.

Corruption Fight

Aquino has increased state spending and narrowed the budget deficit while seeking more than $17 billion of infrastructure investments to spur growth to as much as 7 percent this year. The Philippine economy, which was more than twice the size of Malaysia and 10 times bigger than Singapore's in 1960, expanded 6.8 percent in the fourth quarter.

Aquino has taken on the Catholic Church with a bill to provide free contraceptives to the poor, arrested his predecessor on graft charges, and ousted the country's top judge for illegally concealing his wealth. Transparency International raised the country's ranking on its annual corruption index last year to 105, higher than Indonesia at 118.

"The investment grade rating is another resounding vote of confidence," Finance Secretary Cesar Purisima said. "The government will continue to focus on infrastructure development, on creating a larger fiscal space to support social investments, and on further opening up the economy."

Fitch Ratings was the first to upgrade the Philippines to investment grade in March. Moody's Investors Service rates the nation one step below.

Ratings changes aren't always followed by investors. French bonds and U.S. Treasuries both made gains after the countries were stripped of their AAA credit ratings, in a signal that downgrades may have little bearing on borrowing costs.

Little Bearing

Almost half the time, government bond yields fall when an action suggests they should climb, or they increase even as a change signals a decline, according to 38 years of data compiled by Bloomberg.

Yudhoyono said this week he will only increase fuel prices after Parliament approves compensation programs for the poor, a move that could delay efforts to contain a budget deficit that may be more than twice as much as estimated without subsidy cuts. Failure to reduce subsidies last year drained government finances and led to a record current-account shortfall, hurting the rupiah as foreign investors lost confidence.

S&P said it may raise the country's rating if the fuel reforms are finalized, the state budget is improved, or if structural reforms boost economic growth. The assessment may be lowered if renewed fiscal or external pressures are not met with "timely and adequate policy responses," S&P said.

Bloomberg News

To contact the reporter on this story: Karl Lester M. Yap at kyap5@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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Thai Univanich Palm Oil expands into Mindanao Philippines

Mill in Mindanao to be first of its kind in North Cotabato

Univanich Palm Oil, one of the country's leading palm-oil producers and its largest exporter of crude palm oil, is expanding into Asean with its first investment in the Philippines.

Univanich will build an oil-palm mill in Carmen, a town in North Cotabato, Mindanao. The US$10-million (Bt290-million) plant will be the first of its kind in the southern province.

"Through this investment, we are delighted, and excited, to bring our more than 40 years of palm-oil-producing expertise to a new, and very promising, Asean market," chairman Apirag Vanich said yesterday.

"Like many other Thai companies we are excited by the Asean opportunity and the approaching single market under the AEC that offers great growth prospects and business benefits," he said, referring to the Asean Economic Community that officially starts in 2015.

As oil palms are a relatively new crop in the southern Philippines, the mill will potentially open opportunities for thousands of farmers and their families in the region.

"Based on our research and dialogue with local partners, we are confident our oil-palm success story in southern Thailand - where we have helped many rural communities grow and prosper - will be replicated in the southern Philippines," he said.

Peace talks

Besides good growing conditions, peace and stability discussions between the Philippine government and insurgent leaders in Mindanao have made the region increasingly attractive for oil-palm investment.

Managing director John Clendon said oil palm was an ideal crop for small-farmer cultivation and the company was joining with Carmen Palm Oil Mill & Development Corp to build this factory. Univanich also hopes to create its own network of oil-palm plantations in the Mindanao region.

"We are very optimistic about our prospects in Mindanao, and since the designation of the factory site, many farmers have asked for more information about how they can convert their farms to grow oil palms," he said.

"To meet this demand, the Univanich Oil Palm Research Centre in Krabi has already exported more than a million high-yielding hybrid oil-palm seeds to Philippine growers in recent years."

The factory is scheduled to be completed by the second quarter of next year. Besides local engineering firms, engineers from Univanich Thailand will assist during the build.

When the mill is up and running, the initial processing target is 30 tonnes of fresh fruit bunches per hour. As the industry develops, this is expected to reach 60 tonnes per hour.

The bulk of the output will be shipped to Asean and European markets from the major southern ports of Davao or General Santos.

The Nation

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China – Philippines slamming Anew over Chinese devil tongue strayed in ASEAN Shores

China's devil tongue extending to the ASEAN shores

China slams Philippine bid to "legalize" occupation of islands

(Reuters) - China accused the Philippines on last week (April 26, 2013) of trying to legalize its occupation of islands in Kalayaan  in the disputed West Philippines Sea and South China Sea, repeating that Beijing would never agree to international arbitration.

Frustrated with the slow pace of regional diplomacy, the Philippines in January angered China by asking a U.N. tribunal to order a halt to Beijing's activities that it said violated Philippine sovereignty over the islands, surrounded by potentially energy-rich waters 200 Nautical Miles Exclusive Economic Zone granted by UNCLOS..

Claims by an increasingly powerful China over most of the West Philippines Sea and South China Sea have set it directly against U.S. allies Vietnam and the Philippines. Brunei, Taiwan and Malaysia also claim parts of the waters and China has a separate dispute with Japan in the East China Sea.

Manila said on Thursday that a U.N. arbitration court had set up the tribunal which would hear Manila's complaint, but China said this was an attempt to steal Chinese territory.

"The Philippine side is trying to use this to negate China's territorial sovereignty and attach a veneer of 'legality' to its illegal occupation of Chinese islands and reefs," the Foreign Ministry said in a statement on its website (www.mfa.gov.cn).

The Philippines must immediately withdraw personnel and facilities from the islands, the ministry added, listing those which it said Manila was occupying.

Manila asked the tribunal of the U.N. Convention on the Law of the Sea (UNCLOS) to order a halt to China's activities.

But the convention did not apply in this case as what the Philippines was actually asking for was a decision on sovereignty, the Chinese ministry said.

"China's refusal to accept the Philippines' request for arbitration has full grounding in international law," it said.

China had always believed that the two countries should resolve their dispute through direct talks, the ministry added.

The worry of the Philippines is china's inability to honor its word for bilateral talks as proven anew when both agreed to de-escalate the stand-off in Scarborough Shoal.

China and the Philippines agreed to remove their ships in the island which is within 200 Nautical Miles Exclusive Economic Zone of the Philippines to end the standoff but after Philippine Ship removal, china did not leave the island and in fact block all the passage of the Philippines and ram with Filipino fishermen killing 1.

The Philippines lost its confidence and trust to china anew after the incidents. The Scarborough Shoal now is virtually controlled by China with thousand of kilometers from its closest shore and around 2 hundred Kilometers from Luzon Island' biggest island in the Philippines.

Southeast Asian nations stepped up efforts on Thursday to engage China in talks to resolve maritime tensions, agreeing to meet to try to reach common ground on disputed waters ahead of planned discussions in Beijing later this year.

Efforts by the Association of Southeast Asian Nations (ASEAN) to craft a code of conduct to manage South China Sea tensions all but collapsed last year at a summit chaired by Cambodia, a close economic ally of China, when the group failed to issue a closing statement for the first time. (Reporting by Ben Blanchard; Editing by Nick Macfie)

Philippine Navy chief slams Chinese maneuvers in disputed sea

Philippine Navy chief Vice Admiral Jose Luis Alano said Chinese naval maneuvers in the West Philippine Sea (South China Sea) and use of non-military maritime vessels way beyond its coastlines to advance sovereignty claims to most of the sea were both "aggressive and excessive."

Alano, who was appointed Flag Officer in Command of the Philippine Navy last December, met with Admiral Jonathan Greenert, chief of US Naval Operations, at the Pentagon on Thursday to discuss the security situation in the South China Sea and navy-to-navy issues.

News reports from China said the PLA Navy dispatched a large contingent of ships to circumnavigate the West Philippine Sea and South China Sea last month, a maneuver likened to marking Chinese territory.

Beijing's claim to the West Philippine Sea and South China Sea is based on its so-called nine-dash map which shows a U-shaped area encompassing most of the sea, including territories claimed by the Philippines, Vietnam, Brunei, Malaysia and Taiwan which other known as "Devil's tongue strayed in the ASEAN Shore)

Alano will travel on Friday to North Charleston, South Carolina to inspect the second of two Coast Guard cutters that the Philippines has acquired from the US.

The 378-foot Hamilton-class vessel Dallas, rechristened BRP Ramon Alcaraz, is in the final stages of refurbishing and refitting and will soon join the BRP Gregorio del Pilar, the first US Coast Guard cutter acquired by Manila in 2011 for duty in the West Philippine Sea.

Alcaraz was officially handed over to the Philippines in May 2012 and should have been operating in Philippine waters by now.

But unexpected technical problems and upgrades on the ship have caused some delays and Alano said he expected the Alcaraz to set sail for the Philippines around the third week of June.

He said Alcaraz has been fitted with two new secondary guns – fully automated Mk 38 25mm bushmaster cannons – and a modern radar system. The Gregorio del Pilar will be fitted with similar new cannons.

A complement of 88 Filipino officers and crew under the command of Capt. Ernesto Baldovino have been living aboard the Alcaraz while it has been undergoing repairs to familiarize themselves with all the technical, mechanical and computerized aspects of the ship.

They will be joined by a six-member technical working group including training evaluation experts scheduled to arrive from Manila next month to give the vessel and crew the final go ahead to cross the Pacific to its new home in the Philippines.

In an interview with The STAR on his arrival in Washington on Wednesday, Alano said the prestige of the Philippine Navy was on the rise because of the acquisition of new firepower and the due recognition it was receiving from the government and the public.

Morale was high, more graduates of the Philippine Military Academy were opting for naval careers and the service was attracting more interest from recruits with technical and computer skills, he said.  

The Philippines last year expressed an interest in acquiring a third Hamilton class Coast Guard ship but is not now actively pursuing it.

Alano said given the current exigencies to create a credible maritime defense force, interest has shifted to purchasing new vessels and helicopters to extend the range of these vessels.

He said the Philippines was looking at proposals from several countries for two new 2,000-ton frigates with full surface and anti-air and anti-submarine capabilities.

It was also interested in acquiring strategic sealift vessels to give the Navy the capability to transport heavy cargo and large numbers of troops.

The Philippines was also in negotiations for the acquisition of three AW109 lightweight helicopters built by the Anglo-Italian manufacturer AgustaWestland which can be used for medevac (medical evacuation), search-and-rescue and military roles.

"We should receive them by next year," Alano said.

Additionally, he said the Navy has received six Philippine-made multi-purpose attack craft and more are being programmed for acquisition.

With reports from Reuters and philSTAR

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Why Extremely Poor in the Philippines keeps rising in spite of Fastest Economic Growth in Asia?

Analysts and even the Philippine government said "The effect of this Economic growth could not be experience by the poor" in an overnight which means maybe tomorrow everyone will enjoy a better life but could it be possible, when could it happen?

The Philippine government since the Arroyo administration introduced the easy "Band Aid" solution for the poor through a "direct cash transfer programme" which is known as "Pantawid Program". The same system is followed by the Aquino Administration but how effective is the Pantawid program?

There is a sayings "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."

The pantawid program is good but it is not a long and lasting solution to end the poverty in the Philippines.

While other neighbors are enjoying thousands of dollars remittance from the "OFW" abroad, other neighbors on the other hand are continuously suffering hunger and living below the standards which we could consider as "extremely poor".

Do you think that it is right that Tax payers are paying their taxes to the government and would just be distributed to the poor families for their basic needs for one day then tomorrow the same problem again?  

There seems to be a paradox in the present Philippine situation with a large number of Filipinos still mired in extreme poverty amidst an economic growth that is among the fastest in the region.

On Tuesday, the National Statistical Coordination Board (NSCB), a government agency, announced that the poverty incidence in the Philippines stood at 27.9 percent in the first semester of 2012, practically unchanged from the same period in 2009, which was 28.6 percent, and in 2006 which was 28.8 percent.

The NSCB data show that 10 percent of the country's population of about 97 million is still living below the poverty level.

In a briefing, NSCB Secretary General Jose Ramon Albert said that during the first semester of 2012, a Filipino family of five needed 5,458 Philippine pesos (136 U.S. dollars) monthly to meet basic food needs.

"Families earning that amount were considered to be living in extreme poverty," Albert said.

After the bad news, that was bannered by leading Manila newspapers, came the good news on Wednesday when Moody's Analytics described the Philippines as a "rising star" poised to record one of the fastest growth rates in the world.

Moody's Analytics said that the Philippines is likely to grow between 6.5 and 7 percent this year and within the same range next year, "outperforming not only the anemic advanced economies but also many robustly growing emerging markets."

It also said that if favorable economic trends continue, the growth rate for the Philippines could be close to 8 percent by 2016.

Earlier, the Asian Development Bank (ADB) and the World Bank also upped their growth forecast for the Philippines this year to 6 percent.

Moody's Analytics, a sister company of credit rating watchdog Moody's Investor Service, said the country's 6.6 percent growth in 2012 was achieved despite weak growth in the United States, a crisis in the eurozone and a slowdown in China.

On March 27, the Philippines also obtained its first-ever investment-grade rating from Fitch Ratings.

On a similar vein, international credit rating firm Standard & Poor's has raised its growth forecast for the Philippines for this year from 5.9 to 6.5 percent. At the same time, it said the economy was expected to post another robust growth of 6.3 percent in 2014.

"The ASEAN 5 - Indonesia, Malaysia, Philippines, Thailand and Vietnam - are more domestically driven and, therefore, continue to enjoy relatively high and stable growth rates. This is not the case elsewhere," S&P said.

The paradox of continuing poverty amidst strong growth has been explained by analysts here.

Norio Usui, ADB senior country economist, said that the government must solve the problem of jobless growth if it hoped to reduce poverty.

"I am not surprised at all. The benefits of strong economic growth have not spilled over to the people because they still cannot find a job," Usui was quoted as saying in a report.

In January 2013 jobless rate stood at 7.1 percent, with a further 20.9 percent underemployed or those working fewer than 40 hours a week. About 41.8 percent of the underemployed are in the farming sector.

Professor Benjamin Diokno of the University of the Philippines School of Economics said that the strong economic growth in 2010 and 2012 "were not enough to extricate a lot of people from the poverty trap."

Sen. Ralph Recto, chairman of the ways and means committee of the Philippine Senate, said that only the rich and the educated have benefited from the infrastructure projects of the government and not the poor and uneducated.

"This led to income inequality with the rich getting richer and the poor poorer," Recto said.

Presidential Spokesman Edwin Lacierda said the challenge now is to spur growth in agriculture to create more jobs, increase production and ensure that the production translates to a greater income for farmers since the bulk of the population was still in the agricultural sector.

Lacierda noted that private investments had increased, and that public infrastructure spending in 2012 was around 250 billion pesos (6.25 billion U.S. dollars).

The National Economic and Development Authority (NEDA) said it hoped to see improved results given new investments in infrastructure, agriculture and manufacturing.

"Although this first semester result on poverty incidence is not the dramatic result we wanted, we remain hopeful that, with the timely measures we are now implementing, the next rounds of poverty statistics will give much better results," NEDA Director General and Economic Planning Secretary Arsenio M. Balisacan said at a briefing.

With reports from Wall Street Journal, Inquirer, Malaya and philSTAR

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Bangko Sentral sa Pilipinas named ‘Best Regulator’ in Asia Pacific Region

The Bangko Sentral ng Pilipinas (BSP) has been chosen as the 2013 Best Macroeconomic Regulator in the Asia Pacific Region by The Asian Banker, one of Asia's leading financial services consultancies.

The award was given during The Asian Banker Leadership Achievement Awards in Jakarta, Indonesia, last Tuesday April 23, 2013.

BSP Assistant Governor Ma. Cyd Tuaño-Amador attended The Asian Banker Leadership Achievement Awards and received the accolade in behalf of the BSP.

The Asian Banker Leadership Achievement Awards are widely acknowledged by the financial services industry as the highest possible recognition available to industry professionals in the Asia Pacific region.

Established in 2001, the awards are among the most difficult and most exclusive accolades to win because of the stringent evaluation process involved.

The Asian Banker said: "The selection process is a rigorous one, completed over several months and involving feedback and interviews with all constituents who are in a position to comment on the candidates. All of these make this a world-class evaluation programme, and the insights gained from the programme are published in an annual report."

The awards ceremony—which was a gathering of international and domestic institutions that have excelled in transaction banking, risk management and technology—was held in conjunction with The Asian Banker Summit.

MALAYA Business Insight

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