Bloomberg: Philippines' Inflation Negative; Weak Peso Benefits Economy

Source: Bloomberg Business Week 

Negative Rate Signals Philippines Still Behind the Curve

The second rate increase  in two months isn’t going to help the beleaguered peso

The Philippines stands out as the only country with a negative inflation-adjusted benchmark rate among Asian peers that have raised borrowing costs this year. The second rate increase by its central bank in two months isn’t going to help the beleaguered peso much given the low real yields and current-account deficit, said Mitul Kotecha, a senior emerging markets strategist in Singapore at TD Securities. The monetary authority will likely have to raise interest rates in the months ahead with the next clue coming from the release of inflation data on July 5, he said.

Weak Peso Benefits Philippines Economy, Finance Chief Says

Philippine Finance Secretary Carlos Dominguez said a weak peso is benefiting the economy, and a widening in the trade deficit and faster inflation are signs of strong growth.

Carlos Dominguez in Tokyo on June 21.Photographer: Akio Kon/Bloomberg
The depreciation in the peso, Asia’s worst performing currency that’s lost more than 6 percent against the dollar this year, is boosting the repatriated income of about 10 million Filipinos working overseas as well as the earnings of exporters and call center operators in the $305 billion economy, Dominguez said in an interview with Bloomberg Television’s David Ingles in Tokyo. The trade gap is partly fueling a slump the currency, he said.

“The trade deficit is a sign of strength of our economy because we are importing not Birkin bags or luxury goods” but factory equipment and infrastructure materials, the finance chief said on Thursday. “Rather than look at the trade deficit as an albatross around our neck, we look at it as an opportunity. Inflation also is a sign of a growing and robust economy.”

A contraction in exports in April alongside a 22 percent jump in imports widened the trade deficit to $3.6 billion, prompting the central bank to expect a bigger shortfall in the current account this year of $3.1 billion. Foreign outflows and the perception by some analysts that the central bank was slow in raising interest rates despite inflation climbing to a five-year high pushed the peso to a 12-year low this month.

Philippine Finance Secretary Carlos Dominguez said a weak peso is benefiting the economy, and a widening in the trade deficit and faster inflation are signs of strong growth.

The depreciation in the peso, Asia’s worst performing currency that’s lost more than 6 percent against the dollar this year, is boosting the repatriated income of about 10 million Filipinos working overseas as well as the earnings of exporters and call center operators in the $305 billion economy, Dominguez said in an interview with Bloomberg Television’s David Ingles in Tokyo. The trade gap is partly fueling a slump the currency, he said.

“The trade deficit is a sign of strength of our economy because we are importing not Birkin bags or luxury goods” but factory equipment and infrastructure materials, the finance chief said on Thursday. “Rather than look at the trade deficit as an albatross around our neck, we look at it as an opportunity. Inflation also is a sign of a growing and robust economy.”

Philippine Finance Chief Says Inflation 'Absolutely' Under Control

Philippine Finance Secretary Carlos Dominguez talks about inflation and the local currency.

A contraction in exports in April alongside a 22 percent jump in imports widened the trade deficit to $3.6 billion, prompting the central bank to expect a bigger shortfall in the current account this year of $3.1 billion. Foreign outflows and the perception by some analysts that the central bank was slow in raising interest rates despite inflation climbing to a five-year high pushed the peso to a 12-year low this month.

Dominguez said an abrupt exchange rate movement is disadvantageous because it could fan inflation and encourage speculation.

“We are comfortable with what happened last year and we just don’t want people to get excited,” he said. “We are using our tools to make sure that any change is gradual and that the economy can actually handle it.”

The Philippines on Wednesday raised its key interest rate by 25 basis points to 3.5 percent, becoming the latest emerging market to tighten monetary policy. Governor Nestor Espenilla said the central bank is prepared to take more action if needed. The peso rose as much as 0.2 percent on Thursday before trading little changed at 53.48 per dollar at 2:36 p.m. in Manila.

Philippine Finance Secretary Carlos Dominguez said a weak peso is benefiting the economy, and a widening in the trade deficit and faster inflation are signs of strong growth.

Carlos Dominguez in Tokyo on June 21.Photographer: Akio Kon/Bloomberg
The depreciation in the peso, Asia’s worst performing currency that’s lost more than 6 percent against the dollar this year, is boosting the repatriated income of about 10 million Filipinos working overseas as well as the earnings of exporters and call center operators in the $305 billion economy, Dominguez said in an interview with Bloomberg Television’s David Ingles in Tokyo. The trade gap is partly fueling a slump the currency, he said.

“The trade deficit is a sign of strength of our economy because we are importing not Birkin bags or luxury goods” but factory equipment and infrastructure materials, the finance chief said on Thursday. “Rather than look at the trade deficit as an albatross around our neck, we look at it as an opportunity. Inflation also is a sign of a growing and robust economy.”

Philippine Finance Chief Says Inflation 'Absolutely' Under Control

Philippine Finance Secretary Carlos Dominguez talks about inflation and the local currency.

A contraction in exports in April alongside a 22 percent jump in imports widened the trade deficit to $3.6 billion, prompting the central bank to expect a bigger shortfall in the current account this year of $3.1 billion. Foreign outflows and the perception by some analysts that the central bank was slow in raising interest rates despite inflation climbing to a five-year high pushed the peso to a 12-year low this month.

Dominguez said an abrupt exchange rate movement is disadvantageous because it could fan inflation and encourage speculation.

“We are comfortable with what happened last year and we just don’t want people to get excited,” he said. “We are using our tools to make sure that any change is gradual and that the economy can actually handle it.”

The Philippines on Wednesday raised its key interest rate by 25 basis points to 3.5 percent, becoming the latest emerging market to tighten monetary policy. Governor Nestor Espenilla said the central bank is prepared to take more action if needed. The peso rose as much as 0.2 percent on Thursday before trading little changed at 53.48 per dollar at 2:36 p.m. in Manila.

Read: Philippines Raises Key Rate for a Second Month Amid Peso Rout

Dominguez also made the following comments on Thursday

On inflation that he said is stabilizing: “A large portion of that inflation was due to unexpected increase in price of fuel worldwide, which has apparently started moderating and is now mid- to low-$60s per barrel” and the other factor is peso weakness

On government debt sales: “The fact that our revenues are up 20 percent that means to say that we’re not desperate for debt. And we are the only country in this region that actually passed a tax reform law to increase our revenue and to be able to fund our Build, Build, Build. Of course, we can’t fund it all ourselves, so we’re going to the debt market.”

On trade war: “In the short run, we will actually gain from a trade war. We are building a lot of infrastructure, and that’s a lot of steel. But that’s very short-term thinking. We’re concerned that our two biggest trading partners, China and Japan, might be vulnerable, by the way, so is the U.S. So we’re watching it very very carefully.”

— With reports from Lilian Karunungan, Cecilia Yap, and Andreo Calonzo

Read more in Bloomberg Business Week  / BloomBerg

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Philippine Economy is the Strongest in the World - Findings of Washington USA Think Tank

Philippines has most resilient economy – study

(CNN Philippines) — Should an economic crisis akin to last decade's Great Recession happen again, the Philippines would be the most "resilient" country and be able withstand it, despite its status as an emerging-market economy.

That's the assessment of Center for Global Development (CGD), a think tank based in Washington, D.C.

It's not that hard to imagine another financial crisis happening: Growth in China — the world's second largest economy — has slowed, the United States' bull market hasn't had a correction since 2011, and in the Eurozone, debt-ridden Greece has yet to strike a deal with its creditors.

Economist Liliana Rojas-Suarez of the CGD recently created a "resilience indicator" that measures the vulnerability of an economy to future financial shocks.

Her metric looks into several economic indicators that fall under two categories:

• a country's ability to withstand external shocks 
• government's ability to "rapidly" implement policies that counteract the effects of such shocks 

"I compare the values of the identified variables in 2007 (the preglobal financial crisis year) with the respective values at the end of 2014," she said.

Rojas-Suarez explained: "A country is said to be highly resilient to adverse external shocks if the event does not result in a sharp contractions of economic growth, a severe decline in the rate of growth of real credit and/or the emergence of deep instabilities in the financial sector."

Of the 21 countries she studied, Rojas-Suarez ranked the Philippines as the most resilient economy, ahead of South Korea and China, which fall at second and third, respectively.

Rojas-Suarez found that the Philippines posted a strong improvement in its indebtedness. The debt indicators had substantial influence over the country's ranking.

For example, she points out that the country cut in half its external debt to GDP ratio "from around 40 percent in 2007 to around 20 percent in 2014." This figure stands in stark contrast with most whose ratios are "without significant changes" within that same time period.

She also cites the country's lower government debt to GDP ratio which stood above 40% in 2007, and subsequently shrank to below that figure in 2014.

Likewise, the country also stood out because of its improved inflation performance in 2014 relative to 2007. Rojas-Suarez pointed out that inflation rates have been within the government's targets.

Latin American countries did not do well in the study: "Four of the six Latin American countries in the sample have deteriorated their positions in the ranking. This includes Argentina, which now holds the last position. "

Apart from "bad luck in terms of unfavorable trade," Rojas-Suarez explained that such countries ranked lower because of "the squandering of opportunity to implement needed reforms in the good post-crisis years."

Her study ultimately affirms a long-running cliché: An ounce of prevention is better than a pound of cure.

"Policy decisions taken in the precrisis period played a major role in explaining a country's macroeconomic performance during the global economic crisis (of last decade)," explained Rojas-Suarez.

"[I]nitial conditions at the onset of a severe adverse external shock matter a lot. The good news is that, besides the commodity price shock, the most feared external shock: a sudden rise in interest rates in the US has not (yet) materialized. Time is still on the side of emerging markets’ authorities." - CNN

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Philippines to attain 7 to 8% economic growth in 2015: central bank

MANILA, Philippines (Xinhua) - Governor of central bank Amando M. Tetangco, Jr. said today that the government's 7 to 8 percent economic growth target in 2015 is attainable.

This is because "domestic demand remains firm and supported by brewing production efficiency and robust labor market dynamics," Tetangco said during the Euromoney Philippines Investment Forum.

He said the central bank is confident that the country will be able to attain the goal of an upward economic growth trajectory in an environment of price and financial stability because the bank will remain proactive in policy dialogue with stakeholders, preemptive in putting in place forward-looking policies, and prudent in adopting reforms.

The Philippine economy expanded by 6.1 percent last year, short of the government's 6.5 to 7.5 percent target and also slower than the 7.2 percent growth in 2013. However, this is the second fastest growth rate seen in Asia during the period.

Tetangco added that inflation should remain within 2 to 4 percent target for this year and the next, while liquidity is also expected to remain sufficient.

Despite the favorable prospects of the economy, he said the central bank continues to monitor risks to growth such as the uneven global output, uncertainty in oil prices, and the divergence in monetary policy settings across countries.

"Given the positive alignment between inflation growth and augmented government resources as a result of fiscal consolidation, both monetary and fiscal sectors have sufficient room to make policy adjustments as warranted," Tetangco said.   - philSTAR

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The fuel for the Philippines as the Shining pearl to global investors

Taking a look of the millions of Filipino Professionals who are not hesitant to accept jobs lower from their level of educational attainment, or other Filipinos who landed the match job of their profession makes the Philippines as a funnel from hard working people overseas to build the Economy. They are the legion of  Philippine Economy Army; the Overseas Filipino Workers (OFW)

Eileen Alcala, cashier in the Upper Crust sandwich shop in Singapore, is a member of the legion of Philippine Economy Army and one reason the Philippines is suddenly looking like a rare investment bright spot after years as one of Asia's persistent laggards.

Put off by tough competition for jobs in Manila, the 24-year-old graduate in hotel and restaurant management left the Philippine capital for Singapore two months ago and now sends over half her monthly pay – about S$500 ($394) – back home.

Taking a look at a professional who landed a job abroad match to his educational discipline; Denis Somoso, an International Taxation Specialist and Accountant of a World Leading Design and Engineering & Construction Firm in South Korea, 32 year old bachelor graduate of Bachelor of Science in Accountancy in MTIM Iligan City left the Philippines for South Korea, given a good benefits form the company rented studio type apartment, free transportation,  food and cost of living allowance,  two and a half year ago and for the past 2 years sending 95% of his monthly pay – about Krw 2,550,000 ($ 2,200.00 USD) – back home.

Numbers like these highlight steady growth in remittances from the Philippine diaspora – and help explain why the, Standard & Poor's became the latest rating agency to upgrade the Philippines, to BB+. That is the country's highest grade for nine years and one notch below investment grade.

The move reflected the Philippines' strengthening external position, with OFW remittances and an expanding service export sector continuing to drive current account surpluses", S&P said.

Foreign reserves of $76 Billion as of May exceed the country's external debt of $63 Billion. Inflation is below 3.5 per cent and gross domestic product growth, driven by robust electronic exports, is forecast by the government at 5-6 per cent this year.

At a time when many economies are struggling, the Philippines is among only 10 sovereigns in the world with positive outlooks, notes Barclays.

Investors are taking note. Philippine share prices are up a quarter since the start of the year, making Manila the world's fourth-best performing equities market on expectations that the country will win investment-grade credit status by next year.

Indeed, since January 2012 foreign investors have pumped $1.8 Billion into the market, according to Bloomberg, a 265 per cent increase on the same month a year ago.

A "public-private partnership program" (PPP) launched six months ago to overcome infrastructure bottlenecks has not only attracted foreign interest but is boosting the shares of companies seen likely to benefit from government contracts, such as Ayala and Metro Pacific Investment.

"The government is much focused on accelerating the PPP program," said Prakriti Sofat, regional economist at Barclays in Singapore.

Laggards on the exchange have been companies with broader exposure to the economy, such as Philippine Airlines and Manila Electric. Still, constituents in the stock market index are trading on an average price/earnings multiple of 18 times. That compares with 20 times for the Jakarta index and 15.6 times for the Kuala Lumpur index.

The yield on the country's benchmark 10-year government bond, meanwhile, is at 5.8 per cent, down from 6.5 per cent this time a year ago. That compares with a yield on comparable Indonesian debt of 6.1 per cent, against 7.3 per cent a year ago.

Hans Sicat, chief executive of the Philippine Stock Exchange, predicts funds raised through company listings and secondary activity will hit ₱107 Billion Pesos ($2.6 Billion US Dollars) this year.

Yet investors may be glossing over the risk that the two-year-old administration of President Benigno "Noynoy" Aquino may take time to deliver.

"Investors are so bullish, they are forgiving many of the country's structural sins," says Luz Lorenzo, economist at Maybank ATR Kim Eng group.

The Aquino administration's gains in lowering the budget deficit were achieved mainly through lower government spending, which fell as a proportion of GDP to 16 per cent last year, from 17.7 per cent in 2009.

A clampdown on tax evasion has resulted in the filing of scores of complaints against suspected tax evaders. Yet, actual tax collection as a proportion of GDP has barely moved, up from 12.1 per cent in 2010 to 12.3 per cent last year, according to the central bank.

The government's tax take is being eroded by a series of exemptions approved by the former president but Mr. Aquino does get credit for a planned new tax on cigarettes and liquor – so-called "sin taxes". Rogier van den Brink, a World Bank economist, says: "They are closing the net on tax collection."

Poor implementation has plagued previous reform efforts, and analysts warn this is still an issue. "I remind [clients] how it went with power privatization. The law was passed in 2001 but the first assets were sold in 2004, and it was only in 2007 that the process really took off," Ms Lorenzo said.

Still, investing has become easier after exchange trading hours were extended in January from a previous lunchtime close to 3.30pm.

A rule forcing listed companies to have a minimum 10 per cent float by the end of this year has prompted a flurry of secondary market activity. That has spurred foreign participation, which accounts for 38 per cent of the market, says Mr. Sicat. "What we're seeing is a very strong local bid, which is helping improve confidence for anyone who is coming in from the outside."

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Malaysia Shocked Philippines Pledge $1 Billion Dollars to IMF to help European Crisis

In the opinion posted by the NewStraitsTimes a Malaysian online news website, it really surprised that the Philippines is now afford to pledge $1 Billion USD Dollar to the IMF to help the European crisis.

AT the recent G20 Leaders' Summit in Los Cabos, Mexico, 12 countries committed US$456 billion (RM1.4 trillion) funds to beef up the International Monetary Fund's facility to address the financial crises, notably the sovereign debt and banking debacles in Europe.

Three of the 12 contributors were ASEAN member countries at US$1 billion each, namely Malaysia, Thailand and the Philippines. Philippines pledge right then and ahead of Malaysia and Thailand.

Somewhat challenging to Malaysia as the Philippines without any doubts pledged for $1 Billion dollars and later 2 countries followed namely; Malaysia and Thailand

What? The Philippines? 

(It is like saying oh? this beggar could afford now to pledge that much $1 Billies USD Dollars? how comes?)

"It is our obligation to assist those nations who require funding from the IMF. This would also help in stabilising the crisis that is going on in Europe," a spokesman of Philippine President Benigno S. Aquino III affirmed.

These developments surprised many, as the country used to be a net borrower as far as its membership was concerned. In 2006, however, the country prepaid all its outstanding debts with the IMF, given its much-improved external liquidity position. It then achieved its new status by participating in the Financial Transaction Plan as a creditor country in 2010.

The country can afford to lend as it has some US$76 billion in gross international reserves (GIR) at present, thanks in no small measure to the Aquino administration's no-nonsense good governance thrust that attracted foreign investors back to the Philippines.

With strong gross domestic product (GDP) growth sustained through the years -- and a surprising 6.4 per cent growth for the first three months of the year -- global financial institutions have certainly noticed. Morgan Stanley recently listed the Philippines as one of the "breakout nations", and Goldman Sachs' proclaimed it among the "Next 11" countries. In a May 3 article aptly titled "The Philippines astounds the skeptics", Bloomberg Businessweek cited the great strides that resulted from governance reforms and infrastructure developments. For those who can wait it out, there is the HSBC's forecast that the Philippines will be the 16th biggest economy in 2050. But that's getting too far ahead of our story.

In my and others' views, a realistic barometer of the vigour of the economy is that there are less young Filipinos looking for jobs overseas because of available good ones at home, notably in the business process outsourcing (BPO) and related sectors. These companies, which handle customer support, technical problems and other tasks for overseas clients, now provide employment to some 638,000 people and took in US$11 billion last year, about five per cent of the country's GDP. This makes the Philippine BPO voice-related services, in particular, the biggest in the world, even ahead of India.

Our region is looking forward to the establishment of an Asean Community by 2015, with deeper integration of national economies at its core. It would do well to have more business companies within the region collaborating for mutual benefit.

There has been a substantial Malaysian business presence in the Philippines since the 90s, with the likes of Maybank, Berjaya and other companies.

In fact, there has been a surge recently in two-way investments. AlloyMTD Group, which rehabilitated the South Luzon Expressway, is constructing nine mini-hydroelectric dams in northern Luzon and a government offices complex in Laguna province. CIMB Bank bought into the Philippine Bank of Commerce, with investments reaching some RM1 billion.  After profitably operating the Resorts World Manila hotel-casino across Manila's international airport, Genting is investing in a second casino complex by the famed Manila Bay to be completed in 2016, in the new "Entertainment City", which aims to rival Macau.

Investment flows being by nature two-way, Petron Corporation recently completed its purchase of the retail services business of Esso Malaysia Bhd, with investments worth at least US$610 million.

Business opportunities in the two countries were the focus of an investment forum in Kuala Lumpur last May, which was attended by some 300 businessmen and women. Present were Philippine Vice-President Jejomar Binay, who led a delegation of 24 leading Filipino businessmen and officials from the Philippine Chamber of Commerce and Industry.

Right after meeting Binay, Prime Minister Datuk Seri Najib Razak tweeted: "Fruitful discussions that will hopefully strengthen socio-economic ties." This is a sign that Philippines-Malaysia relations have nowhere to go but up.

Sectors for productive collaboration were highlighted by both the Philippine Department of Trade and Industry and the Malaysian External Trade Development Corporation (Matrade), notably tourism infrastructure, agro-business, mass housing, energy/electricity, logistics, Islamic finance, halal food and investments opportunities in the Autonomous Region of Muslim Mindanao.

What impressed those at the forum were the two messages delivered by Malaysian investors already doing business in the Philippines.

First, the Philippine has a large consumer market of 94 million people, the largest in Southeast Asia after Indonesia, which cannot be taken for granted.

"The Philippine has all the ingredients for success. We want to invest in a country with the right population so that there is a big consumer base. The Philippines is a big customer base," said Berjaya Corporation founder Tan Sri Vincent Tan.

Second, despite its occasional noisy internal politics, business has remained profitable through the years, AlloyMTD Group CEO and Malaysia-Philippine Business Council pro-tempore chair Datuk Azmil Khalil stated. (Well, it isn't the Philippines if the politics is any less exciting). It also helps to consider the other factors that make the country a preferred investment destination with the following points as the Philippines in the NOW:

1. THE best global BPO destination;
2. A TOP global electronics assembly hub;
3. THE world's fourth largest shipbuilder;
4. THE world's next mining power;
5. ASIA'S trusted logistics support center;
6. ABUNDANT managerial talents,
7. HIGHLY skilled, reliable, English-speaking workforce
8. LIBERALIZED investment and incentives policies, and,
9. IT is home to Boracay, Palawan, and some of the best beaches and diving spots in the world, for those serious at both work and play.

The Philippines has its fiscal house in order and is now a lender nation. It is vigorously reaching out to its neighbors and strengthening relations with them. Truly, exciting times are ahead; it added.

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S&P Raises Philippines’ Credit Rating “BB+” to 9-Year High

July 5, 2012: The Philippines' debt rating was raised to the highest level since 2003 by Standard & Poor's, taking President Benigno Aquino nearer his goal of attaining investment grade.

The nation's long-term foreign currency-denominated debt was raised one level to BB+ from BB, S&P said in a statement Wednesday (July 4, 2012). That's one step below investment grade and on a par with neighboring Indonesia. The outlook on the rating is stable.

"The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability," Agost Benard, a Singapore-based analyst at Standard & Poor's, said in the statement. "The rating action also reflects the country's strengthening external position, with remittances and an expanding service export sector continuing to drive current- account surpluses."

Emerging nations from Brazil to Indonesia have won credit- rating upgrades in the past year as governments contained budget deficits. A higher assessment for the Philippines will help Aquino as he moves to boost spending to a record this year and seeks $16 billion of investment in roads, bridges and airports to shield the economy from Europe's sovereign-debt crisis.

The Philippine peso (₱) is up 4.8 percent against the dollar in 2012, the best performer in a basket of 11 major Asian currencies tracked by Bloomberg. The Philippine Stock Exchange Index climbed to a record this week. The benchmark seven-year bond yield fell to the lowest in at least two months yesterday.

'Very Positive'

S&P's recognition for the Philippines' strong external position, growth prospects and improving fiscal sector adds fundamental support to the market, Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday after the ratings action.

Moody's Investors Service boosted its outlook on the Philippines to positive in May 2012, citing improving debt levels. Fitch Ratings raised the country's debt to one step below investment grade in June 2011.

S&P's move is "very positive because it promotes the country's macroeconomic and fiscal context," said Fitz Aclan, who helps manage ₱850 billion pesos ($20.4 billion) at Manila- based BDO Unibank Inc. "There could be some upward movement for our sovereign bonds, even our local bonds. This will also be positive for equities."

Aquino plans to narrow the budget shortfall to 2 percent of gross domestic product by 2013 from a target of 2.6 percent this year. The government has stepped up efforts to catch tax evaders and smugglers, and has drawn up bills aimed at increasing revenue to narrow the fiscal deficit.

"We expect further rating improvements will likely be driven by either our appraisal of improving political and institutional factors or by evidence of a sustainable structural revenue improvement," S&P said. "Conversely, we may lower the ratings if the government's commitment to fiscal consolidation weakens, resulting in rising debt, or if the external liquidity position deteriorates significantly."

The $200 billion economy grew 6.4 percent in the first quarter, the fastest pace since 2010. Aquino is aiming for an expansion of as much as 8 percent annually to cut poverty.

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Charoen Pok-phand Group will Invest ₱1.45 billion in the Phl

Investment: Thai agriculture firm Charoen Pok-phand (CP) Group will be investing ₱1.45 billion in the Philippines and will hire 1,800 more employees while the Siam Cement Group (SCG) said they will infuse an additional P1 billion to expand its operations in the country, the Department of Trade and Industry (DTI) announced yesterday.

CP Group and SCG are just two of the large conglomerates which committed to invest in the Philippines when President Aquino together with some of his cabinet members including Trade Secretary Gregory L. Domingo visited Thailand last month.

CP Foods PLC president and CEO Adirek Sripratak expressed their commitment to further invest and introduce technology to aid the Filipino farmers. The CP Group intends to pour in P 1.45 billion worth of investment in the agribusiness and food industry. CP will go into shrimp and fish farming, shrimp and fish hatchery operations, feed milling, poultry and hog raising. The Group will also increase its Filipino workforce from 200 to 2,000 by 2012.

The other firm that met with the Philippine contingent was PTT Public Co, Ltd. (PCL). With the aim of promoting medical tourism in the country, the President and his economic team also met with the executives of Bumrungrad Hospital, Asia's biggest private hospital group and leader in medical tourism.

Similarly, the meeting with the SCG centered on their expansion plans in the Philippines. SCG President and CEO Kan Trakulhoon mentioned that they could bring in the "dry cement manufacturing technology" which is more efficient and environmentally friendly. Kan also pointed out that SCG is currently focusing on value added products and the expansion of its operations in ASEAN countries as part of their company's strategy. The SCG is one of the biggest foreign investors in the Philippines with more than $200 million investments, according to Kan.

Kan also said that they own several companies in the Philippines engaged in manufacturing activities such as kraft paper (United Pulp and Paper Co.), concrete roof tiles (CPAC Mornier Philippines), ceramic tiles and bathroom fixtures (Mariwasa Manufacturing Inc.).

"Mariwasa in the Philippines is already running on full capacity and there are plans to expand the facilities of Mariwasa," Kan said. The company also plans to put up a P1-billion box plant to support their kraft paper manufacturing business in the Philippines.

 

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Philippine Export growth rises to 19% $4.3 Billion in April 2011

Business & Economy: Philippines - Merchandise exports rose by an annual 19.1 percent in April 2011, their fastest growth rate this year, as shipments to Japan remained strong despite the natural and nuclear disasters there,  as announced by the Govt last Thursday June 9, 2011.

The Philippines’ export bill rose to $4.3 Billion Dollars in April from $3.611 billion a year ago, after the 4.1 percent annual rise in March, data from the National Statistics Office showed.

Month on month, however, April exports were down 1.2 percent from March’s $4.353 billion.

Electronics shipments, which dominate exports, fell 2.1 percent from last year, the third successive monthly decline. Electronics made up 49.9 percent of April revenues.

Exports to Japan, the country’s top market during the month, rose 20.2 percent in April to $741.88 million. Exports to the United States, the second-biggest export destination, were down 1.3 percent from a year earlier.

Analysts said the crisis in Japan had affected trade, but the impact was limited so far, and strong growth levels are expected later this year.

“While the electronics sector suffered from the supply chain disruption following the

Japan’s earthquake... non-electronic exports have seen strong performance,” said Vincent Tsui, Standard Chartered Bank economist.

“This reflects the impact of Japan’s earthquake on headline economic growth to be much moderate, with limited impact on net exports, and trade performance set to rebound in the upcoming months as Japan’s manufacturers gradually report restoration of production facilities, this should support revival of processing trade in electronic products going forward.”

“Surprisingly, exports to Japan climbed 20.2 percent year-on-year, though slipped on the month, and we expect the slowdown in purchases from the key export destination to reflect in the rest of the quarter,” added Radhika Rao, economist at Forecast Pte, Singapore.

Exports are estimated to climb between nine percent to ten percent this year, and 12 percent next year. Imports are expected to rise 17 percent to 18 percent in 2011, and 18 percent in 2012. Exports grew 34 percent and imports 27 percent in 2010.

The Semiconductor and Electronics Industries in the Philippines is still hopeful of hitting at least the lower end of its export growth target of eight percent to 12 percent this year, but the head of the industry group has said it would be difficult to achieve.

The Philippines provides about 10 percent of the world’s semiconductor manufacturing services, including for mobile phone chips and micro processors.

Other top Philippine exports include garments and accessories, wood furniture, vehicle parts, coconut oil, and tropical fruits.

Exports account for about two-fifths of the country’s gross domestic product (GDP), based on expenditure terms.

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Net FDI Investment in the Philippines Inflows surge 142% in Q1 - BSP

The Banco Central Sa Pilipinas / Bangko Sentral ng Pilipinas (BSP) reported  June 9, 2011 that net foreign direct investment (FDI) inflows surged 142 percent in March as equity infusion more than doubled while withdrawals declined.

BSP Governor Amando Tetangco Jr. said that net FDI inflows amounted to $167 million Dollar in March or $98 million lower than the $69 million inflows booked in the same month last year.

"All FDI components yielded positive balances during the month," Tetangco stressed.

Data showed that equity placements jumped 113 percent to $64 million Dollar in March from $30 million in the same month last year while withdrawals slowed down by 47 percent to $18 million from $34 million.

The net inflow of other capital account consisting largely of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines jumped 146.2 percent to $96 million in March from $39 million in the same period last year while reinvested earnings fell 26.5 percent to $25 million from $34 million.

In all, Tetangco said net FDI inflows retreated by 16.6 percent to $471 million in the first quarter of the year from $565 million in the same period last year due to the tensions in Middle East and North African (MENA) states, the debt crisis in Europe, and the disasters in Japan.

"Investors remained cautious on account of the uncertainties brought about by the ongoing sovereign debt problems in Europe, the political unrest in the MENA region as well as the disasters that struck Japan," the BSP chief stressed.

Equity placements retreated by 7.6 percent to $121 million from January to March compared to $131 million in the same period last year while withdrawals plunged 53.5 percent to $40 million from $86 million.

Data showed that reinvested earnings plummeted 38.3 percent to $113 million from $183 million while other capital fell 17.8 percent to $277 million from $337 million.

FDI inflows retreated by 12.7 percent to $1.71 billion last year from $1.96 billion in 2009 as equity placements plunged 42.5 percent to $1.15 billion while equity withdrawals increased by 10.8 percent to $307 million.

The drop was attributed to the decline in equity capital investments in new and existing projects as investor sentiment was generally marked by cautiousness and uncertainties surrounding the sovereign debt crisis in some parts of Europe, geopolitical tensions in Korea, asset price bubble and overheating concerns in fast growing emerging markets.

Likewise, the BSP explained that large-scale investments arising from the privatization of a local power corporation and the acquisition of shares of a local beverage manufacturing firm were recorded in 2009.

These included the investment made by China's largest electricity provider State Grid Corp. and Monte Oro Grid Resources Corp. in state-owned National Transmission Corp. (Transco) that bagged a $3.95 billion concession contract as well as the decision of Japanese brewer Kirin Holdings to acquire a stake in Manila-based San Miguel Brewery of diversified conglomerate San Miguel Corp. worth ₱ 65.8 billion.

Monetary authorities are confident that FDIs would continue to pour into the Philippines to fund projects under the Aquino administration's public private partnership (PPP) scheme.

 

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Bank loans in the Philippines up 14.2% to P 2.42 Trilion as of April 2011

Economy: The Bangko Sentral ng Pilipinas (BSP) reported yesterday that bank lending continued to post double-digit growth in April despite the economic slowdown experienced in the first quarter of the year.

BSP Governor Amando M. Tetangco Jr. said in a statement that bank loans grew 14.2 percent to P2.423 trillion as of end-April from P2.121 trillion as of end-April last year.

“The steady growth in bank lending reflects the prevailing pace of domestic economic activity,” Tetangco stressed.

This was the fourth straight month that bank lending posted a double digit growth after expanding by 11 percent in January, 12.3 percent in February, 14.1 percent in March, and 14.2 percent in April.

Economic managers through the Cabinet level Development Budget Coordination Committee (DBCC) see the country’s domestic output as measured by the gross domestic product (GDP) growing between seven percent and eight percent this year and next year.

The country’s GDP posted a surprising growth of 7.6 percent last year after slackening to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

As expected, the country’s GDP growth slowed down to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same quarter last year due to government underspending as well as the weak global trade.

Despite the economic slowdown, loans extended to productive activities grew 15.7 percent to P2.187 trillion as of end-April from P1.899 trillion in the same period last year as corporate borrowers sourced more loans from banks to bankroll their expansion programs.

In terms of growth, data showed that loans to the mining and quarrying sector posted the biggest growth of 74.2 percent followed by the electricity, gas, and water with 47.3 percent, and the manufacturing sector with 19.5 percent.

In terms of amount, the manufacturing sector got the biggest share with P406.18 billion followed by the real estate, lending and business services with P385.9 billion; the agriculture, hunting, and fisheries sector with P344.38 billion; wholesale and retail trade sector with P269.1 billion; and the electricity, gas, and water sector with P215.3 billion.

Tetangco also reported that the growth in the loans extended for household consumption was steady at 12.9 percent to P199.41 billion in end-April from P176.59 billion in the same month last year.

Data showed that credit card loans went up by 7.6 percent to P120.5 billion from P111.95 billion while auto loans jumped 27.3 percent to P62.2 billion from P48.86 billion.

The BSP chief pointed out that authorities would ensure appropriate monetary and financial conditions for continued credit expansion while promoting the BSP’s primary mandate of maintaining price stability.

“Going forward, the BSP will contiue to provide the appropriate credit conditions to support its primary mandates of maintaining monetarya and financial stability ,” Tetangco added.

A BSP survey showed companies are still planning to expand their operations and hire more workers in the Philippines this year despite the projected easing in economic growth this year.

BSP director for Department of Economic Statistics Rosabel Guerrero said one of every four respondents of the Business Expectations Survey (BES) for the second quarter 2011 indicated plans to expand their operations.

“About one for every four respondents in the industry sector ir 24.7 percent indicated expansion plans for the third quarter,” Guerrero stressed.

However, she explained that the percentage of respondents that signified their intention to expand their operations went down to 24.7 percent in the second quarter of the year from 33.9 percent in the first quarter.

In terms of Employment Outlook Index of the survey, Guerrero said the number of respondents who expected to continue hiring in the third quarter declined to 14.5 percent in the second quarter from 23 percent in the first quarter

 

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New Philippines digital plan to highlight National Information & Communications Technology ICT Month

The celebration of National ICT Month is mandated under Presidential Proclamation No. 1521 (Series of 2008), declaring every month of June as National ICT Month.

The month-long celebration features events and activities organized by government and the private sector.

For its part, the CICT, together with various industry associations, will be holding the National ICT Summit, which will feature the official launch of the Philippine Digital Strategy (PDS) 2011-2016 and the launch of a limited edition Commemorative Stamp marking National ICT Month 2011.

Another major event is the celebration of the 40th Anniversary of the establishment of the National Computer Center (NCC), a component agency of the CICT.

Several milestones have been achieved for the ICT sector, many of these bringing prestige to the country. According to “the Global Location Trends 2010 Report” of IBM Global Business Services, the Philippines is now the world leader in terms of jobs for shared services and business process and outsourcing (BPO) services.

The IT-BPO industry, through the Business Processing Association of the Philippines, has provided more than 525,000 jobs as of December 2010, about 79,000 new jobs created representing an increase of about 24 percent from the previous year.

The increase in employment for this industry can also be attributed to the success of the Next Wave Cities initiative, a program which develops cities as alternative destinations for BPO investments.

Cities such as Davao, Iloilo, Bacolod and Sta. Rosa, Laguna are now in the roster of preferred IT-BPO locations, due to the success of this program.

A significant activity this June is the launch of the Philippine Digital Strategy on the theme “Transformation 2.0: A Digitally Empowered Nation.”

The Philippine Digital Strategy 2011-2016 aims to contribute to the Aquino administration’s “Social Contract with the Filipino People”, mainly by leveraging the use of ICT for national development.

The PDS identifies four strategic thrusts, namely: 1) transparent government and efficient services delivery, 2) Internet opportunities for all, 3) investing in people: digital literacy for all, and 4) ICT industry and business innovation for national development.

The strategy presents a renewed vision for ICT and its importance in transforming Philippine society into a competitive force in the global digital economy by the year 2016.

The PDS is also aligned with the principles and thrusts of the ASEAN Information and Communications Technology Masterplan (AIM) 2015, which was adopted in January 2011. AIM 2015 was developed to serve as a guiding document to advance ASEAN regional ICT cooperation.

 

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Chinese firms urged to locate BPO functions in Philippines

The Board of Investments is urging Chinese companies to put up business process outsourcing facilities in the Philippines, so that they can take advantage of the support that highly skilled English-speaking BPO personnel can provide for their businesses.

Coming from a recent investment promotion trip to China, BoI managing head Cristino Panlilio said Chinese companies would benefit from offshoring some company functions to the Philippines, especially those that China still had to improve.

“China is starting to bone up on its service exports, so we’re giving them tips and strategic recommendations on how to make their service export industry more competitive,” he said.

Certain banking and financial functions, for example, could be done out of the Philippines for China’s overseas clients, he related.

“The Chinese market is big, and it needs strong support from English-speaking countries like the Philippines to serve its clients in the West. What they can do is move some business functions here, then just move these back to China when they’ve already built their capabilities,” Panlilio said.

“Like in banking, for example. China’s banking capabilities are still not on par with the world’s best. The Philippines can help in that area. We can also do animation and just about any service. A lot of companies in China need BPO services,” he added.

Should Chinese firms decide to bring their BPO business into the country, he said as much as a third of local BPO operations could be servicing Chinese companies.

In an earlier interview, Business Processing Association of the Philippines executive director for information and research Gillian Joyce Virata said the local BPO industry was keen on entering new markets.

Not wanting to rely almost solely on the United States for its business, she related that the BPO sector was pushing to enter new markets such as the United Kingdom and Asia-Pacific.

“Because of the growth of the Asia-Pacific region, there’s now also a big demand (for BPO services). We’re trying to capitalize on our language capabilities. The biggest demand is for Mandarin, Japanese, Thai, Bahasa, and Korean,” she said.

 

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WORLD Bank ranked the Philippines among world's top service exporters

The World Bank has ranked the Philippines among the best performers in the services exports, particularly in the business process outsourcing (BPO) sector, but urged further reforms in the travel and tourism sector if the country intends to sustain growth moving forward.

World Bank senior trade economist Sebastian Saez said in a report that the services sector depends on human capital, the quality of the telecommunications network, and the quality of institutions.

“The experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening,” Saez added.

The Philippine experience shows that services are a viable option for export diversification, he said, adding that trade in goods is no longer the only vehicle to diversify exports for developing countries.

Services exports as a percentage of total exports increased from nine percent in 1999 to 21 percent in 2009 in the Philippines. Its services exports rose 3.6 percent on average per year during the period, higher than that of Asia as a group, which averaged 1.5 percent per year. Unlike many developing countries, the Philippines had been a net exporter of services since 2006.

The Philippines is currently the third largest player in BPO in the world, accounting for 15 percent of the global BPO market, after India (37%) and Canada (27%).

Business Processing Association Philippines (BPAP) chairman Fred Ayala said that the BPO sector currently employs close to 500,000 people and generated about $9 billion worth of exports in 2010.

The industry’s target in terms of annual revenue is $25 billion by 2016 and a direct workforce of 1.3 million.

“There is an urgent need to develop supervisors, middle managers, and more skilled workers to respond to increasing market demand for a broadening array of knowledge-based, complex services,” Ayala said.

The World Bank report also highlights the importance of developing the tourism sector.

Tourism accounts for about nearly seven percent of the country’s gross domestic product (GDP), and directly employs about 3.5 million people. But the report said that tourism could contribute more to help address poverty should reforms outlined in the National Tourism Development Plan (NTDP) are effectively implemented.

The study said major impediments to tourism competitiveness are largely associated with weak ground and air transport infrastructure - roads, railways, ground transport network, and airports. Weak physical infrastructure, it says, lowers accessibility to tourism destinations and discourages private sector investments in accommodation facilities.

Tourism Undersecretary Daniel Corpuz said the government has already started to put in place important reforms that will increase tourism arrivals in the country. The Philippines implemented a liberalized air policy in selected international airports outside Metro Manila to promote greater tourism flows to the country.

“More reforms are underway to transform the Philippines into a ‘must experience destination in Asia,’” Corpuz added.

 

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Standard Chartered revised up 2011 economic growth forecast for the Philippines to 5.7 percent

Economy: British-owned Standard Chartered Bank revised upwards its 2011 economic growth forecast for the Philippines to 5.7 percent from the original 5.4 percent.

In a research note, Standard Chartered economist Vincent Tsui said the investment bank raised the country’s GDP growth forecast to 5.7 percent instead of 5.4 percent this year due to the projected strong investment inflows in the second half.

“In anticipation of more broad-based and sustainable growth dynamics ahead, we raise our 2011 GDP forecast to 5.7 percent from 5.4 percent previously. We expect growth momentum to pick up in the second half,” he stressed.

Tsui said the investment bank raised its GDP growth forecast for the third quarter of the year to 6.4 percent instead of six percent but lowered its growth forecast in the fourth quarter to 6.8 percent instead of seven percent.

“We expect the strong investment pipeline to remain a key growth driver in the coming quarters. While we expect headline GDP growth to slow further in the second quarter due to the high base effect and temporary disruptions to electronics manufacturing from the Japan earthquake, the underlying  fundamentals of the economy remain solid. We believe headline GDP growth is set for a strong rebound in second half,” Tsui added.

He pointed out that the growth in the second half would be fuelled by investments instead of consumer spending.

“Near-term weakness aside, we believe the shift from consumer spending to business investment as the Philippines’ key growth driver deserves more market attention,” Tsui added.

The National Statistical Coordination Board (NSCB) reported late last month that the country’s GDP growth slowed down to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same period last year due to weaker government spending and slow global trade. The National Economic and Development Authority (NEDA) was expecting a growth of between 4.8 percent and 5.8 percent for the first quarter.

“Even so, we believe the weaker headline numbers mask underlying strength in an economy that is now driven by more sustainable and balanced growth dynamics,” the economist said.

The sharp drop in government spending in the first quarter of the year helped the Aquino administration post a budget surplus of P61 billion in the first four months of the year, a complete reversal of the P131.6 billion budget deficit booked in the first four months of last year.

“This is in line with our expectation that this year’s budget deficit will narrow to P256 billion due to fiscal prudence and stronger tax collection on the back of buoyant domestic demand,” Tsui said.

The Aquino administration hopes to trim the budget deficit to P300 billion or 3.2 percent of GDP this year from a record level of P314.5 billion or 3.7 percent of GDP last year. It has committed to trim the deficit to two percent of GDP starting 2013 until the end of the term of President Aquino on 2016.

Standard Chartered reported that inventory restocking particularly of durable equipment resulted to a sharp 37 percent rise in gross capital formation in the first quarter of the year reflecting the booming investment activity in the country.

It added that remittances from overseas Filipino workers (OFWs) remained strong despite the tensions in the Middle East and North African (MENA) states as well as the disaster in Japan while foreign direct investments (FDIs) would pick up later this year in light of the public private partnership (PPP) scheme of the Aquino government.

“The launch of 10 infrastructure projects this year as part of the government’s PPP initiative is also expected to attract $1 billion of FDI inflows and support construction-related sectors,” Tsui explained.

Tsui said the investment bank sees the country’s GDP expanding by six percent in 2012 and 2013.

The Philippines posted its strongest growth in 34 years after its GDP expanded by 7.6 percent last year exceeding the revised growth forecast of five percent to six percent set by economic managers. It was on the verge of a recession when its GDP growth slowed down to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

The Cabinet-level Development Budget Coordination Committee (DBCC) has set a GDP growth target of between seven percent and eight percent this year and next year.

Bangko Sentral Governor Amando Tetangco Jr. said the country’s GDP would grow slower than expected this year as the economic growth targets were set by the DBCC prior to the tensions in the MENA region and the disasters in Japan.

“We think the economy will continue to grow this year. The government is projecting seven percent to eight percent although that projection was arrived at prior to the events at the MENA region as well as the earthquake, the tsunami and the nuclear disaster in Japan,” Tetangco said earlier.

 

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