Indonesia, Philippines - in better economic position than Europeans

Indonesia and the Philippines, able to raise funds at a lower cost than Italy, may be poised to get the highest credit ratings since the 1997 Asian financial crisis as the nations step up efforts to boost investment.

Officials from Standard & Poor's, the only company to grade Indonesia's debt as junk, are visiting the largest economy in Southeast Asia this week after raising the nation's bonds to BB+ a year ago, according to the Finance Ministry. Philippine Finance Secretary Cesar Purisima said March 23 that he's confident about getting a rating upgrade after meeting with S&P last week.

"Asian economies, including the Philippines and Indonesia, have finally shaken the effects of the Asian financial crisis," said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. "This period thus marks the return to high rates of growth."

Emerging markets, with budget deficits at 1.7 percent of gross domestic product in Indonesia and 3.8 percent in the Philippines in 2009 compared with the Euro area's 6.4 percent, are winning rating boosts even as developed markets from Europe to the U.S. get downgrades. Borrowing costs for the two Southeast Asian nations have fallen 0.6 of a percentage point this year as plans to boost investment in roads and rail systems support growth prospects amid faltering global demand.

Yields Narrow

The extra yield investors demand to own Indonesia's dollar bonds instead of U.S. Treasuries has narrowed 61 basis points this year, or 0.61 percentage point, to 1.89 percentage points as of March 26, while that for the Philippines (JPSSEMPH) has fallen by 62 points to 1.76 percentage points, according to JPMorgan Chase & Co.'s EMBI+ Indexes. They compare with the additional yield of 3.16 percentage points to buy emerging-market dollar-denominated debt instead of U.S. securities.

Indonesia's dollar bonds due May 2021 are trading at 3.79 percent while Philippine dollar debt due January 2021 is trading at 3.44 percent, compared with 6.25 percent for Italy's dollar notes due September 2023 and 4.12 percent for Russia's dollar notes due April 2020, according to prices from Royal Bank of Scotland Group Plc. and compiled by Bloomberg. S&P rates Russia two steps above Indonesia and three levels higher than the Philippines.

Ratings upgrades could underscore confidence in the Southeast Asian economies' resilience as a slowdown in China's growth adds to the threat to Asian expansion, which has already been crimped by Europe's debt crisis.

Chinese Profits

Chinese industrial companies had their first January- February profit decline since 2009 as slowing exports and a government campaign to cool property prices damped earnings, a report showed today. Net income dropped 5.2 percent from a year earlier to 606 billion yuan ($96 billion), the National Bureau of Statistics said on its website.

In contrast, a report showed South Korean consumer confidence rose to the highest level in four months, buoyed by signs of improvement in the U.S. economy and progress in containing Europe's crisis. The sentiment index rose to 101 in March from February's 100, the Bank of Korea said.

The global economic outlook is improving, though "severe downside risks remain," International Monetary Fund Deputy Managing Director Naoyuki Shinohara said today in Bangkok, adding that emerging economies need to "stay vigilant for the spillover from advanced economies."

Asian economies will experience only a modest slowdown in growth as domestic demand remains resilient, supported by strong employment and high capacity utilization, he said. The Asian economy as a whole will expand by 5.9 percent this year, with growth accelerating to 6.4 percent in 2013, while the economy of the Association of Southeast Asian Nations will grow by 5 percent this year and 5.5 percent in 2013, he said.

French Confidence

Reports in Europe may show consumer confidence rose in March in Finland while holding steady in France, according to Bloomberg surveys. The Netherlands will report final GDP data for the fourth quarter after a preliminary estimate showed the economy contracted 0.7 percent from the previous three months. Turkey and Hungary may keep interest rates unchanged, Bloomberg surveys showed.

In the U.S., the Conference Board's release today may show its consumer confidence index was little changed at 70.1 this month after reaching a one-year high of 70.8 in February, a survey median showed.

Presidents Susilo Bambang Yudhoyono in Indonesia and Benigno Aquino in the Philippines have both won upgrades from Fitch Ratings and Moody's Investors Service in the past year as they pledged to contain their budget deficits, fight corruption and woo investment to spur economic growth. The two companies have brought Indonesia to investment grade, while the Philippines remains one step behind at Fitch and two steps below at Moody's.

Credit Default Swaps

Five-year credit-default swap contracts on Philippine debt traded at 141 basis points on March 26 and 161 for Indonesia, according to data provider CMA, which compiles prices quoted by dealers in the privately negotiated market. The contracts insure debt against non-payment, and traders use them to speculate on credit quality. That compares with 370 basis points for Italy and 422 points for Spain.

"I'm hopeful that S&P will raise Indonesia's rating within this year, which will bring in foreign investors again," Ezra Nazula, Jakarta-based head of fixed income who helps manage 24 trillion rupiah ($2.6 billion) at PT Manulife Asset Management, said in a March 20 interview. "It will be a plus point for Indonesia if the government can show that they are willing to increase the fuel prices and reduce the subsidies' burden on the budget."

Raising Prices

Indonesia's plan to raise diesel and petrol prices to 6,000 rupiah per liter from 4,500 rupiah is subject to approval by lawmakers. The country must raise fuel prices to curb a subsidy bill that threatens to sap funds from pivotal health, education and road and port building programs, National Economic Committee Vice Chairman M. Chatib Basri said in an interview with Bloomberg Television in Hong Kong on March 23.

Ratings changes aren't necessarily accompanied by corresponding moves in bond prices. Instead of falling in value after S&P stripped the U.S. of the top AAA sovereign rating, Treasuries rallied and the government's borrowing costs fell to record lows. While stocks fell, wiping $2.5 trillion from the market value of global equities on the first trading day after S&P on Aug. 5 cut the U.S. by one level to AA+, the gain in benchmark 10-year government notes sent yields down almost a quarter percentage point, to 2.32 percent.

Asian Crisis

Still, a rating upgrade would endorse Indonesia's efforts to move its economy out of the shadows of the 1997-98 Asian financial crisis, when it needed a bailout from the IMF.

The nation's parliament approved a land-acquisition bill in December that will allow Yudhoyono's administration to accelerate road, port and airport projects. The government is also setting up a new financial market regulator that is due to start operating in January 2013, supervising capital markets, insurers, pension funds and other non-bank institutions.

In the Philippines, Aquino is seeking $16 billion of investments in projects including roads in the capital and airports in the provinces to upgrade the nation's infrastructure.

Indonesia's $707 billion economy has expanded more than 6 percent for five straight quarters, weathering a decline in global demand that has hurt growth across Asia. The Philippine economy grew 3.7 percent last quarter from a year earlier.

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56,000 OFW in South Korea is ready to evacuate – North Korea Missile Launching

The Philippines on Monday (March 26, 2012) said it was ready with a contingency plan to protect the safety of more than 50,000 overseas Filipino workers (OFWs) in South Korea if tensions with North Korea over its plan to launch a new rocket escalated into a full-blown crisis.

If crisis will arise, this is more complicated as nuclear weapon is link to this and unlike Middle Eastern crisis which evacuation is tolerable but for nuclear issue; no place to hide and no time to move.

Locals or Korean national are aware of this without any panic that they will survive if there is a way to survive or otherwise, just accept the destiny.

Vice President Jejomar Binay, who is in Seoul attending a nuclear security summit with other world leaders, also said the government would direct local governments with migrant workers in South Korea to be prepared for any eventuality.

"Our embassy (in Seoul) is ready for a worst-case scenario," Binay said in a statement released by his office.

Pyongyang has said it plans to launch a satellite into space aboard a new rocket between April 12 and 16, triggering warnings from the United States and its allies that the launch was intended to test a missile capable eventually of delivering an atomic warhead.

North Korea has said the first stage of the rocket is expected to fall in international waters about 140 kilometers off the South Korean west coast. The second stage is projected to splash down some 190 km off the northeast coast of the Philippines.

"This is an unfortunate situation because there are existing United Nations resolutions and North Korea has said it will comply with the resolutions," Binay said. "We hope it does not happen and North Korea complies with the UN resolutions."

A UN Security Council resolution passed after North Korea staged missile and nuclear tests in 2009 bans a ballistic missile launch for any purpose.

April 2012 ASEAN summit

The North Korean issue will be discussed by President Benigno Aquino III and other leaders of the Association of Southeast Asian Nations (ASEAN) during the April 3-4 ASEAN summit in Phnom Penh, Cambodia, presidential spokesperson Edwin Lacierda said in Malacañang.

The 10-nation ASEAN includes the Philippines, Indonesia, Malaysia, Thailand, Singapore, Vietnam, Cambodia, Brunei Darussalam, Laos and Burma (Myanmar).

"I think there will be a topic on DPRK (Democratic People's Republic of Korea)," Lacierda said, adding the Department of Foreign Affairs (DFA) was "on top of the situation" insofar as contingency plans for OFWS were concerned.

He said there were around 56,000 Filipinos in South Korea and seven to nine Filipinos in North Korea working with UN-related agencies.

4 alert levels

Told that North Korea had already moved the rocket to its launch site and asked whether the Philippines would join the US call for China to rein in its North Korean ally, Lacierda said "the most effective means of addressing the North Korean issue has always been the six-party talks."

He was referring to the dialogue on ending North Korea's nuclear program that began in 2003 and involves the United States, China, Japan, Russia and the two Koreas.

Foreign Secretary Albert del Rosario has told the Philippine Daily Inquirer that the Philippines will press Pyongyang to abandon its rocket launch plan.

The Philippine Embassy has posted on its website a 10-page advisory on the contingency plan for Filipino workers in South Korea.

Written in Filipino, the advisory directs the workers to familiarize themselves with four alert levels.

Convergence points

Under Alert Level 1, the OFWs are required to observe heightened alertness. Alert Level 2 calls for restriction of movements, while Alert Levels 3 and 4 call for relocation and actual evacuation, respectively.

Three "convergence areas" for evacuees have been marked: Seoul, Daejeon and Busan (or Pusan), which is some 330 km southwest of Seoul. If the Gimpo and Incheon international airports are already closed, Busan will be the main convergence point.

From Busan, the embassy plans to evacuate Filipinos, using both the city's major port and Gimbae International Airport.

For OFW in Korea; it is also advice that the Subway Line Number 5 or purple line is built for safe from hazard and any possible attack so traveling or evacuating using Subway line number 5 is safer.

Relocating to Busan is also unsafe using air transport so OFW must not be panic if alert level 3 is issued. Traveling via land is more safer but traffic is expected and almost 6 hour travel time from Seoul to busan.

OFW is encourage to carry and study the map how to find safer place and how to manage self evacuation to the southern part of South korea.

Monitoring Crisis for North Korean Missile Launching

All 90 Philippine embassies and consulates worldwide have a contingency plan for Filipinos, the DFA said.

Raul Hernandez, the DFA spokesperson, said "that could include the mobilization of a network of Filipino community leaders, logistical movements of Filipinos to safer areas and possible evacuation of nationals to the Philippines."

"This plan is amended or revised as needed depending on the actual situation on the ground," Hernandez said.

However, "no crisis alert level [for Filipinos] in the two Koreas has been declared" by the DFA, he said.

'Helpless observer'

The Senate defense committee chairman, Panfilo Lacson, said in a text message that North Korea's launch plan should be a cause for concern "because it automatically threatens the peace and security in the Asia-Pacific region."

Lacson said the situation was not helped by North Korea being a "secretive" country.

He added: "Unfortunately, [the situation] is further aggravated by some tough talk from [US President Barack] Obama and warnings from the West. How China reacts to the situation will surely affect the stability in the area."

Lacson also said: "The Philippines, being a helpless observer, may be better off staying that way. Our efforts are limited to using our diplomatic channels with our neighboring countries, to speak as one voice with them."

The Senate defense committee vice chairman, Gregorio Honasan, said: "I'm sure this is more about saber rattling, threat and counterthreat. Even North Korea understands the global implications of what it plans to do. So this is not a doomsday scenario, I'm sure diplomacy would come into play."

Honasan said there was no cause for panic. "For concern and worry, yes. But let's not be paranoid … Realistically, our best bet is our regional and global alliances," he stressed.

Senator Antonio Trillanes IV warned "conflict may arise" in the Asia-Pacific if countries displeased with North Korea's plan took stronger measures.

But Trillanes added: "The public isn't alarmed too much because people are more concerned about the more evident gut issues like the rising oil and power prices, fare hike, and later on, the increase in the prices of commodities." With reports from Christine O. Avendaño and Cathy Yamsuan

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DOH Failure: OFWs, recruiters to protest medical exams procedure

Overseas workers and recruitment agency officials will mount a protest against the Department of Health (DOH) for its failure to protect the welfare of overseas workers by not stopping the decking practices of a group of medical clinics.

In a statement, the Federated Associations of Manpower Exporters (FEDAMANEX) said it will lead a rally to protest the DOH's failure to stop the Gulf Cooperation Council Approved Medical Centers Association (GAMCA) from "decking" overseas workers.

The practice of decking involves requiring overseas workers to file their requests for health examination online through the GAMCA website. The group then assigns and fans them out to the 17 clinics that are members of the association.

FEDAMANEX president Alfredo Palmiery notes that Republic Act 10022 guarantees overseas workers the freedom to choose the medical clinic for their health examinations.

"Pursuant to the law, the Department of Health issued an administrative order to stop the practice of decking by GAMCA," Palmiery said.

"But strangely, despite said issuance and admonition fro the Congressional Committee on Overseas Workers Affairs, the DOH has refused to impose appropriate sanctions against the violators by the simple acts of suspending and canceling the accreditation of the medical clinics under GAMCA," he added.

Palmiery said they have already written to Health Secretary Enrique Ona and asked him to penalize the medical clinics under GAMCA.

"Unfortunately, our appeal remains unheeded," he said.

Thousands of overseas workers who were principal victims of the decking system are expected to take part in the rally on Monday morning in front of the DOH building.

"For years, the overseas workers have endured the hardships brought about by decking," Palmiery said.

Palmiery said overseas workers, especially those from the provinces, were "farmed out to medical clinics" that were far from their residences, and were required to undergo 2nd X-ray examinations even if they have already passed their first tests.

Overseas workers were also referred to other GAMCA medical clinics even for a "simple ailment as skin rash," and were provided with sub-standard medical facilities and poor services, Palmiery said.

FEDAMANEX is an umbrella group of 12 associations of licensed recruitment agencies, with a total membership of 600 companies.

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