the month`s highlights - The Wallace Business Forum

Transcription

1
the month’s highlights
Political
Economy
FUTURE DEVELOPMENTS
FUTURE DEVELOPMENTS
Prosecution, after blunders, wants rules eased
PH 16th largest economy by 2050?
House prosecutors were off to a shaky start with several blunders
in the 1st week of the impeachment trial of Chief Justice Renato
Corona, prompting them to urge the Senate to relax its rules and
to allow them to present their evidence even as they uncovered it.
(see story page on p13)
The Philippines will move up 27 places to become the 16th
largest economy in the world, according to the Hong Kong
Shanghai Banking Corp. (HSBC) Global Research report entitled
The World in 2050. (see story page on p19)
OWWA fund misuse added to Rep. Arroyo rap sheet
The Justice Department on Jan. 11 recommended the criminal
prosecution of former President and now detained Pampanga
Rep. Gloria Arroyo and 3 other people for their alleged misuse of
P550 million that was intended for the welfare of Filipino workers
abroad. Alongside this, the Sandiganbayan anti-graft court
issued a hold-departure order on Ms. Arroyo and 5 others over
the graft cases that stemmed from the botched NBN-ZTE deal.
Farmers assert rights over Hacienda Luisita
Farmers vowed to assert their rights over some 4,915 hectares
of agricultural land in Hacienda Luisita, including the portions
being claimed by Rizal Commercial Banking Corp. (RCBC).
Manila offers to host summit on Spratlys
The Philippines has urged the Association of Southeast Asian
Nations (Asean) to hold a summit of China and 5 other Asian
claimants to the Spratly Islands, to try to resolve the longsimmering territorial disputes in the South China Sea.
PAST DEVELOPMENTS
PH economy creeps at a lackluster 3.7% in 2011
The Philippine economy, as measured by the real gross domestic
product (GDP), slowed sharply to a growth of 3.7% in 2011,
lower than the average of 4.4% in the previous 2 years (2009:
1.1%; 2010: 7.6%). Gross national income (GNI), which includes
OFW remittances net of foreign interest payments, fared even
worse with an increase of just 2.6% last year.
PH sells $1.5Bn global bonds
The government raised $1.5 billion from the sale of dollardenominated bonds on Jan. 4, reflecting investor interest in
emerging market assets despite the debt crisis in Europe.
(see story page on p 19)
PH 8th friendliest country
The website of Forbes Magazine using data from the Expat
Explorer Survey 2011 of Hong Kong and Shanghai Banking Corp.
(HSBC) ranked the Philippines the 8th friendliest country in the
world. (see story page on p21)
Poverty numbers improved in 4Q11
PAST DEVELOPMENTS
Judge blocks presentation of new massacre witnesses
The Quezon City Regional Trial Court on Jan. 11 blocked the
presentation of 2 surprise witnesses against some members
of the Ampatuan clan who are accused of being behind the
murder of 58 people, including journalists, on Nov. 23, 2009.
An estimated 9.1 million (45%) households rated themselves
poor in 4Q11, better than the 10.4 million (52%) recorded in
3Q11, according to the quarterly survey conducted by the Social
Weather Stations (SWS). This brought the average number of
self-rated poor households to 9.9 million in 2011.
Business
Reward doubled for retired Gen. Palparan’s capture
The government on Jan. 5 raised to P1 million the cash reward
for the capture of retired general Jovito Palparan, who went
into hiding after he was charged with the 2006 abduction of 2
students of the University of the Philippines.
Philippine Alert
FUTURE DEVELOPMENTS
Tensions in MENA expected to raise PH oil pump prices
Oil firms have increased pump prices 3 times in January caused
by an evident fear of disruptions in the international oil supply.
January 2012
2
DTI starts consultations to craft new industry roadmaps
The Department of Trade and Industry (DTI) will hold a series
of consultations for the crafting of new industry roadmaps
following the recommendations from various business groups
to revive industrial planning activities. The government intends
to align its trade and investment programs with the country’s
competitiveness goals. (see story page on p37)
PAST DEVELOPMENTS
PH moves up in World Economic Freedom ranking
As reported in the 2012 Index of Economic Freedom, the
Philippines’ ranking on economic freedom rose from 115th to 107th
out of 179 countries rated. Among the 10 categories, business
freedom improved the most while scores for investment freedom
and freedom from corruption were unchanged.
IT Update
Anti-outsourcing bill in the U.S. is election campaign-related
Another bill seeking to restrict U.S. companies from outsourcing
their operations to other countries has been filed in the
U.S. Congress in early December 2011. Stakeholders in the
Philippine IT-BPO industry were initially concerned. After
further observation, though, they concluded that the filing of
the bill is election campaign-related, and anticipate that it will
meet strong opposition from U.S. companies should it progress
in Congress. (see story page on p40)
Manila, Cebu among the world’s top 10 outsourcing cities
in Tholons report
The 2012 Top 100 Outsourcing Destinations report by international
outsourcing think tank Tholons was released in early January
2012, and includes 5 cities from the Philippines – Manila (4th),
Cebu (9th), Davao (69th), Sta. Rosa, Laguna (86th), and Iloilo
(92nd). (see story page on p41)
Immigration revives job generation visa
The Bureau of Immigration resumed implementation of the
Special Visa for Employment Generation (SVEG), having recently
issued the revised implementing rules for this. SVEG, which grants
qualified foreign investors the privilege of staying indefinitely
in the Philippines, was introduced in 2009 but suspended in
2011 pending revision of the rules. The new rules shorten the
application process for the visa but impose stricter documentary
requirements. (see story page on p35)
Agri sector posts lower growth in 2011
Total agricultural production in constant prices grew by 2.34%
in 2011, lower than the projected 3.5% growth for the year.
The country suffered from a series of devastating typhoons
that left huge amount of damages last year. The Department of
Agriculture (DA) also attributed the low turnout to declining fish
stock caused by overfishing and other illegal fishing practices.
Mining, Oil and Gas
Courts may resolve open-pit bans
TVI Resources Development won a preliminary injunction from
the Regional Trial Court against an open-pit ban ordinance in
Zamboanga del Norte. Sagittarius Mines Inc. advised to resolve
the environmental ordinance banning open-pit mining in South
Cotabato to court. (see story page on p37)
Infrastructure
FUTURE DEVELOPMENTS
Gov’t lines up more PPP projects in 2012
The government has released the list of projects it expects to
roll-out for 2012. The government is expectedly optimistic that
things will go according to plan but investors are understandably
more cautious. (see story page on p50)
The Aquino administration’s 1st commercial RE project
The Aquino administration can finally list the Maibarara
Geothermal Plant among the committed power projects of the
country. Despite the urgent need for additional power plants,
the Philippines has been struggling to get firm commitments
on new investments in power generation (due to a number of
reasons). (see story page on p52)
Proposed solar FIT rate of P17.95 per kWh opposed
Feed-in tariffs (FIT) were devised to provide support to renewable
energy (RE) resource developers and encourage investors, but
consideration of its possible impact on consumers should not
be taken for granted. It is the government’s responsibility to
find the right balance that will give consumers cleaner energy
at an affordable price and allow developers a reasonable return
in investment. (see story page on p54)
OceanaGold to commission Didipio in 4Q2012
After surpassing numerous problems during project’s development
stage, OceanaGold now expects to commission the Didipio coppergold project by 4Q2012. (see story page on p38)
Vale International to ship iron ore from Subic
Brazil’s Vale International, one of the leading logistics and
mining companies in the world, is set to operate an ore
transshipment hub in Subic Bay Freeport while its local mining
unit, Vale Exploration Philippines, is developing mineral projects.
Philippine Alert
CongressWatch
House, Senate reveal measures to pass before March
adjournment
Both the House of Representatives and the Senate have released
their respective list of bills that they pledged to approve before
Congressional sessions adjourn on March 24.
January 2012
Pres. Aquino gives green light to Palace FOI bill; FOI measure
back in the hands of Congress
The Aquino administration transmitted its version of the Freedom
of Information (FOI) bill to the Lower House on February 3, after
the President directed the Palace study group on the measure to
“push ahead” with its proposed amendments to this. Among the
amendments are new exceptions to public access. This puts the
fate of the long-overdue FOI bill back in the hands of Congress,
where legislative action reportedly ground to a halt following
announcement of a Palace-backed FOI bill.
Senate transmits Geology Profession Act to House
The Senate has transmitted the Geology Profession Act (Senate
Bill 2941) to the House of Representatives for concurrence.
The bill was approved by the upper chamber in September last
year. The measure’s counterpart in the House is pending on 3rd
reading and is one of the bills that the lower chamber pledged
to approve before the Congress adjourns on March 24.
Philippine Alert
January 2012
3
4
WORD
FOR
WORD
“It’s the Economy, Student!”
The title of a paper by former President and now Pampanga Rep. Gloria Arroyo in which she criticizes the Aquino
administration for its alleged increasing vacuum of leadership, vision, energy and execution in running the affairs
of state. President Aquino was once an economics student of Ms. Arroyo at the Ateneo de Manila University.
“Win or lose, what’s important here is I get to define myself as a person who stood up. Let it not be said that I
did not defend my principles.”
Chief Justice Renato Corona on his upcoming impeachment trial at the Senate.
“Who does he think he is? He is not only a lawyer, he is a complainant. My God! Doesn’t he understand what he is
doing?”
Senate President Juan Ponce Enrile criticizing Iloilo Rep. Niel Tupas for publicly challenging impeached Supreme
Court Chief Justice Renato Corona to reveal his statement of assets, liabilities and net worth.
Philippine Alert
January 2012
5
COMMENTARY
T
he first month has gone, and there seems to be nothing to show for it – at least on the economic side.
Politically the President has taken some bold and risky steps by indicting the former President and impeaching
the Chief Justice. Moves that were necessary if the Philippines is truly to try and reform itself. As of early
February, both cases are up in the air, and could go either way. But Renato Corona, the Chief Justice, has now been
brought into much question that remaining in the position is untenable. Or should be. If he somehow hangs on, the
Supreme Court will lose all its legitimacy and be questioned throughout Pres. Aquino’s term. So we expect he will go.
Gloria’s case is a different matter. This will be much harder to prove, and take far longer. If the nit-picking legal
nonsense the defense keeps throwing up delays and disrupts a simple case of impeachment, you can just imagine
what will happen to the case of Gloria Arroyo. Even the massacre of 58 innocent people with abundantly clear
evidence of who did it (the Maguindanao massacre) has gotten absolutely nowhere in over 2 years.
So a controversial (and hard to prove conclusively) case against a powerful former country leader could last beyond
our lifetime. The only saving grace, she’s incarcerated even if in a hospital (later I’ve little doubt it will be at
home). This restriction is punishment already. And more cases are yet to come.
On the economic side, the news is nowhere near as good. No matter how the government tries to spin it, the economy
performed miserably in 2011. And did so, in great part, because of government inaction. It was not just the muchpublicized lack of infra spending – that took some 1.3 percentage points off the inadequate 3.7% GDP growth – but
also lack of productive investment. What these was went into condominium (of which there are now more than the
market wants), not factories. Foreign investment was just at US$800 million for January-July 2011. Support wasn’t
given to agriculture; the 3 most promising industries were not supported. The agency designed to assist the IT-BPO
industry was downgraded into an office under the Department of Science and Technology; the mining industry was
attacked from many quarters, with negligible response from government. The country’s biggest potential investment
ever in anything (the $5.9-billion Tampakan copper-gold project) is now at serious risk because the President won’t
put his foot down and the Environment secretary fearfully withholds its ECC. Tourism took a hiatus with the change
in Tourism secretaries changed, putting needed airport projects and air safety systems upgrade on hold. A number
of tourist-carrying foreign airlines have stopped flying in directly from their home countries.
Yet despite all this the Philippines managed to move up the ranking on economic freedom from 115th to 107 out
of 179 countries. The best improvement was in business freedom due to lower cost and faster time for processing
licenses. But that was not the case on corruption, where the score was unchanged. The report even said: “Government
anti-corruption efforts have been too inconsistent to eradicate bribery and graft effectively”. And it wasn’t the case
when it came to investment either. Here the report said: “Despite a strong desire to attract longer-term investment,
systemic inefficiency exacerbated by heavy bureaucracy discourages dynamic growth in investment.” That says it
all. When will the Philippine government, any Philippine government, ever get its act together? Not any time soon
it seems despite the presence of some good technocrats in the Cabinet. The system is too entrenched in its ways.
The government believes 2012 will be the year of infrastructure. Infrastructure will finally be built, and on a more
massive scale. We don’t agree for one simple, basic reason: Time.
The bureaucracy, and all the delays an excessively litigious society can bring to bear, will mean few of the planned
projects actually get physically started. The best that can be hoped for is that at least a modest proportion of
them get to final approvals and selection of contractors. It takes at least 6 to 8 months from award of contract to
beginning of construction. The first PPP project (classroom construction) to go on offer won’t be on offer ‘til April,
so that means the impact on the economy won’t be felt ‘til December at the earliest, with January or February
2013 more likely.
Philippine Alert
January 2012
6
COMMENTARY
COMM
COMMENTARY
CO
MMEN
ENTA
EN
TARY
TA
RY
B
y the way, don’t believe the nonsense published by HSBC. I wish I could be alive in 2050 to say “I told you so”.
But you can pass this Commentary on to your kids if you wish. The Philippines will NOT be the 16th largest
economy in the world. The growth rates needed to attain it must average at least 7%. To do that, there must be a
dramatic shift on how this society is structured along with fundamental reforms that I just do not see being attained.
The World Bank made a similar rosy prediction some 50 years ago when it said:
“… The Philippines has achieved a rapid rate of economic growth in the post-war period (since 1949). Production
has continued to grow at an annual rate of 7%, despite the disrupting effects of the HUK movement [domestic
insurgency], which hampered economic activity until 1952… By comparison with most underdeveloped countries,
the basic economic position of the Philippines is favorable. It has generous endowment of arable land, forest
resources, minerals and normal potential through a comparatively high level of expenditure on education, transport,
communications and industrial plant over the past 50 years.
“The Philippines has achieved a position in the Far East second only to Japan, both in respect to its level of
literacy, and to per capita production capacity…The prospects of the Philippine economy for sustained long-term
growth are good. Apart from generous endowment of material resources and high level of literacy, other favorable
factors are the growth of the labor force, the availability of managerial and technical skills, the high level of
savings and investment, rather good prospects for most of the Philippine exports, and considerable possibilities
for import substitution.”
Well it didn’t happen then; sadly it won’t happen now either.
Philippine Alert
January 2012
7
SPECIAL REPORT
INDEED THE ECONOMY, PROFESSOR!
I’m amazed that Gloria still lives in a fantasy world. I’d have thought hospital arrest might have brought her back to
reality. It appears not. If her title of a report she recently released (It’s The Economy, Student) was meant to imply
she was teaching us about economics, then we’d all fail. I’m not questioning that she made some good economic
decisions, she did. But not to the grandiose levels she claims. And the reported corruption of her regime negated
much of it.
Idestroyed her supposed accomplishments published in major dailies (in September last year and previously in
January 2010) in my analysis entitled FAIRYLAND and A FAIRYLAND – ALL OVER AGAIN. It seems I must do it again. I
find it more and more improbable she could ever have got a doctorate in economics. I didn’t, but I can certainly
analyze facts and figures more cogently than she seems able to.
I know I’ll anger the fewer and daily fewer adherents to her but they’ll eventually see the reality. Or at least I hope
they will (some are friends) as the reality becomes overwhelmingly evident.
Her second paragraph, the first is so obvious you can’t even imagine why it was said: a rise in incomes reduces
poverty. Duh? But her second fosters the myth of a 7.9% growth she created before she stepped down (2nd quarter
of 2010). She completely ignores that there was no growth (1.5%) a year ago, so the base was artificially low. The
2010 number was just recovery back to normal. If you average for 2Q ’09 and 2Q ’10 it’s 4.7% for each period, and
that’s what reality says it was. There wasn’t a sudden, sustainable growth in manufacturing, or agriculture, or
anything else. Just recovery to the historical growth pattern.
Then follows her boast that RP was “one of the few that managed positive growth”, but if you assume, as you should
that government has only marginal impact on international trade, but has, or can have considerable influence on
the domestic economy that boast collapses.
If we take exports and imports out of the GDP equation and just focus on the domestic factors look at what we
find (Note the negative GDP recorded in ’09 by 3 SEA countries as a result of the ’08-’09 global economic turmoil.
Not us because we weren’t sufficiently connected to the world. And not because of some miraculous management
by the president but because of the reverse, her inability to make the Philippines world-competitive, and do more
business with the world):
Vietnam’s domestic economy (C+G+I) grew at an impressive average of 9% over the ten years, 2001-2010. Singapore’s
grew 6.1%, Malaysia’s 5.9%, Indonesia’s 5.1%. And the Philippines was down there with Thailand, at 4.6% and 4.3%
respectively (see table 1).
Table 1. THE DOMESTIC ECONOMY (C+G+I)
COUNTRY
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
% AVE
Vietnam
6.5
9.0
9.2
8.3
8.6
9.5
16.2
8.1
3.8
10.3
9.0
Singapore
-
-
-
-
-
7.8
7.2
14.8
-6.8
7.2
6.1
Malaysia
0.5
6.2
5.3
8.7
5.5
7.7
9.4
5.8
-2.4
12.4
5.9
Indonesia
5.0
2.4
6.0
5.4
6.3
3.2
4.1
7.6
5.2
5.7
5.1
Thailand
3.6
5.1
7.8
7.9
7.5
1.2
2.4
4.3
-6.9
10.3
4.3
Philippines
7.0
6.4
4.0
3.8
3.9
0.9
4.0
6.6
1.1
8.3
4.6
Sources: ADB Key Indicators, NSCB
Philippine Alert
January 2012
SPECIAL REPORT
Even if we take into account international trade we get a similar picture – the Philippines down near the bottom
of the heap only Thailand (again) growing slower at 4.4% versus the Philippines at 4.5%. Thailand suffered more
(down -2.3% GDP in the world eco crisis of ’09 vs the Philippines at +1.1%).
Singapore, Malaysia and Thailand recorded GDP fell as a result of the ’08-’09 global economic turmoil. Not us
because we weren’t sufficiently connected to the world. And not because of some miraculous management by
the president but because of the reverse, her inability to make the Philippines world-competitive, and do more
business with the world.
Table 2. GDP GROWTH (FULL FORMULA)
COUNTRY
Vietnam
Singapore
‘01
‘02
‘03
‘04
‘05
6.9
7.1
7.3
7.8
8.4
8.2
8.5
6.3
5.3
6.8
7.3
-
-
-
-
-
8.7
8.8
1.5
-0.8
14.5
6.5
‘06
‘07
‘08
‘09
‘10
% AVE
Malaysia
0.5
5.4
5.8
6.8
5.3
5.8
6.5
4.8
-1.6
7.2
4.7
Indonesia
3.6
4.5
4.8
5.0
5.7
5.5
6.3
6.0
4.6
6.1
5.2
Thailand
2.2
5.3
7.1
6.3
4.6
5.1
5.0
2.5
-2.3
7.8
4.4
5.3
7.1
4.7*
3.8
1.1
7.6
4.7
4.5
Philippines
1.8
4.4
4.9
6.4
5.0
Sources: ADB Key Indicators, NSCB
*To reflect drop in imports which created a double negative that artificially inflated GDP growth
Let’s look at something else that might better reflect what’s happened to the economy if we smooth out the short
term fluctuations.
PHILIPPINE 3-YEAR AVERAGE GDP
CORY
CORY
RAMOS
RAMOS
12
ERAP
ERAP
GMA
GLORIA
9
6
3
5.6%
5.3%
4.7%
3.7%
4.0%
2.7%
0
2.0%
2.0%
-3
'0
7'0
9
'0
4'0
6
'0
1'0
3
'9
8'0
0
'9
5'9
7
'9
2'9
4
'8
9'9
1
-6
'8
6'8
8
8
Source: ADB Key Indicators
Philippine Alert
January 2012
9
SPECIAL REPORT
Let’s do the same for our comparative neighbors -
PHILIPPINES VS SELECTED ASEAN
GDP GROWTH – 5 YEAR MOVING AVERAGE
PRE-GMA
GMA
12
9
VIETNAM
6
INDONESIA
3
PHILIPPINES
0
SINGAPORE
MALAYSIA
-3
THAILAND
'8
6'8
8
'8
9'9
1
'9
2'9
4
'9
5'9
7
'9
8'0
0
'0
1'0
3
'0
4'0
6
'0
7'0
9
-6
Source: ADB Key Indicators
Now does that look like some sort of spectacular success to you?
As to roads and bridges... come on! Of course some were built. In 9½ years there had to be, but the expenditure
on it all was the lowest amongst the ASEAN group in terms of both total spend and as a percent of GDP, by a
significant factor. She spent less on infrastructure than any other leader in the region – in dollars and percents. And
she allotted less than that engineer, Ramos. It was an annual 3.5% of GDP under Ramos, a miserable, and totally
unacceptable, 2.3% under GMA.
And making the competitive comparison you know where the Philippines was. Not just at the bottom, but way down
at the bottom. I hate to bore you with numbers, but you’ve got to see it to get the clear message. Gloria spent an
annual average of US$2.6 billion during the 2000 to 2009 period, or 2.3% of GDP. Malaysia spent an average of US$7.6
billion/5.4% of GDP, Indonesia US$10.3 billion/3.4%, Vietnam US$ 4.9 billion/9%, Thailand US$10.8 billion/6%.
TABLE 3. INFRASTRUCTURE EXPENDITURE 2000-2009
COUNTRY
AVE. US$ BN*
% GDP
Malaysia
7.6
5.4
Indonesia
10.3
3.4
Vietnam
4.9
9.0
Thailand
10.8
6.0
Philippines
2.6
2.3
Sources: ADB, NSCB, Gov’t agency websites of selected ASEAN
*WBF estimates
Philippine Alert
January 2012
10
SPECIAL REPORT
That is the real face of “achievement” that occurred in her administration.
She bragged about the more than 7% growth recorded during her term. But wait, what kind of growth was it? Did
it help all, or just a few? It’s not easy to measure, but one number that gives some indication is the GINI number.
This shows how much discrepancy there is between the rich and poor. A figure closer to zero indicates a more equal
income distribution. You want to be approaching zero where everyone is more or less equally wealthy. By the way
the 2010 GDP of 7.6% was just recovery from a low base while the 7.1% posted in 2007 (the only year where there
was such a number) was because of a drop in imports which created a double negative that artificially inflated GDP
growth. Again, it wasn’t sustainable, real growth.
In our FAIRYLAND - ALL OVER AGAIN report, I mentioned that GMA succeeded in improving the country’s GINI
coefficient from 0.481 before her presidency to 0.448 in 2009. Still, that’s far worse than Vietnam’s 0.378,
Indonesia’s 0.394, and Thailand’s 0.425. Income distribution is more equal even in least developed Laos (0.326)
and Cambodia (0.407). The Philippines was at the bottom of the heap at the end of her term.
Education facilities? Arroyo claimed that 100,000 new classrooms were constructed under her term and improved
the classroom-student ratio to 1:39 for elementary and 1:55 for high school from: 1:45 and 1:65 in 2000. Again,
as we emphasized in our 1st FAIRYLAND report these are far from the recommended 1:25 classroom-student ratio
so that pupils can be properly educated. Also, the ratio goes as high as 1:79 for primary and 1:82 for secondary in
some schools in Metro Manila. Worse there needed to be two shifts in some areas to achieve those figures.
The absolute number of the unemployed rose during her term: 3.5 million in 2000 vs. 4.2 million in 2009 using the
same definition, not fudging it with a definition change as she did. And that doesn’t include (because no statistics)
the Filipinos who fled overseas because there were no jobs here. These are government, “her government”
numbers, so she can’t dispute them.
“Hundreds of thousands of families liberated from want during my decade at the helm of the nation” 19.8 million
were in government-defined poverty in 2003 (based on the recently-revised poverty figures), 23.1 million were at
the end of 2009. SWS’s self-rated figures were even worse, 43.8 million in 2000 vs. 45.2 million in 2009. So, yes
maybe hundreds of thousands were liberated, but millions were worse off. Does that sound like liberation to you?
I could go on, but it’s a waste of time. Her administration was a failure in all the measures that count. Both in
comparing the numbers at the start of her term against those at the end. And, more importantly, against our
competitors. The quality of life of a greater number of Filipinos was worse when she left than when she entered
(while our neighbors’ people were better off).
By the way, Gloria’s poor reputation didn’t appear out of thin air, it was built on event after event. There were
just too many questionable deals (20 on my list) for her to be innocent of all them. Maybe you can falsely accuse
someone of one or two events through Machiavellian machination, but 20? Maybe she’s innocent of some, but surely
not 20. And why none of them resolved. Innocent people rush to prove their innocence, the guilty try to delay. 20
were delayed.
I’m not denying she did some good for the economy, she did, but it was not at the distorted levels she claims, and
as it was less in most measures than our neighbors in a competitive world then the end conclusion must be that she
failed as a CEO. That would be the case in a corporation; it’s the case for a country too.
Sad, she had all the potential to be a great leader.
Philippine Alert
January 2012
11
SPECIAL REPORT
UPDATED LIST OF SCANDALS UNDER GMA
SCANDAL
IMPSA extor on
scandal
AMOUNT
INVOLVED
$2 M
BRIEF DESCRIPTION
RESOLVED?
Alleged pay-off received by ex-DOJ Sec. Perez in exchange for the 4 charges were filed but were all dismissed later on technicality
$470-M IMPSA deal approval
(No updates)
D. Macapagal
Blvd.
P600 M
Alleged overpricing of the P1.1 B, 5.1 km blvd. in Manila bay
reclama on area
SC upheld the 2004 Court of Appeals ruling calling for the dismissal
of 3 Public Estates officials charged with plunder
Jose Pidal
$200 M
Alleged bank accounts of the FG Arroyo where jueteng payolas were
deposited
Senate Blue Ribbon commi ee presently studying possibility of
reviving probe a er former first Gentleman Mike Arroyo was again
iden fied as Jose Pidal by a former PNP official.
Contract designa ng a U.S. law firm to lobby in the U.S. gov’t to
release funds to finance Cha-Cha bid in the Philippines
Scrapped but not se led
Use of funds earmarked for fer lizer but used instead to allegedly
finance GMA’s candidacy in ’04 polls
Former DA officials Lorenzo, Bolante, and Poliquit charged for
plunder; GMA facing plunder complaint, subject of fact-finding
inves ga on ordered by the Ombudsman
Venable contract
$1 M
Bolante fer lizer
scam
P728 M
2004 & 2007 Poll
Fraud
Philippine
democracy at
stake
Alleged massive chea ng in the 2004 presiden al and the 2007
senatorial elec ons in favor of GMA and her administra on’s
candidates
The joint DOJ-Comelec commi ee tasked to inves gate the
allega ons of chea ng in the 2004 and 2007 polls recommended
the filing of charges of electoral sabotage against former president
Arroyo; GMA currently under hospital arrest
Overpriced
Northrail project
$503M
Ques onable contract & bidding process between Northrail & a
Chinese company
China amenable to start discussions on the reconfigura on of the
project.
Overpriced
Southrail project
$70 M
Overpriced rail project to link Laguna to Bicol via high-speed train
service
No (No update, but project is being pursued by the Aquino
administra on)
Palace cash-gi
P120 M
NBN-ZTE deal
$329 M
Alleged pay-off to LGU officials ranging from P200,000–P500,000 each
No (No update)
reportedly to thwart the impeachment bid vs. GMA
The Ombudsman has filed gra charges against GMA, her husband
Overpriced deal entered into by the gov’t that allegedly involved P200 Jose Miguel Arroyo, former Comelec Chairman Benjamin Abalos
M grease money offered to Neri
Sr., and former Department of Transporta on and Communica on
Secretary Leandro Mendoza
Irriga on fund
scam
P3 B
Allega ons that the irriga on fund that should benefit farmers to
No (No update)
increase rice produc vity was channeled instead to GMA and her
poli cal allies
Swine scam
P5 B
According to COA report, the Dep’t of Agriculture & gov’t-owned
QUEDANCOR had been involved in “ghost deliveries” of swine to No (No update; opposi on s ll urging the president to look into
marginalized farmers in 2004 – could have benefited GMA’s ’04 the scam)
electoral bid
OWWA funds
misuse
P550 M
Alleged diversion and misuse of OWWA funds to bankroll ques onable
acquisi ons and to boost GMA’s 2004 presiden al bid, includes
Complaint filed April 26, pending with DOJ
transfer of OFW Medicare funds to PhilHealth in order to enhance
electoral campaign (distribu on of PhilHealth cards)
“Midnight pork
barrel” (PAGCOR
“pabaon”
to GMA)
P435 M
Transfer of the “inordinately large” sum to the Presiden al Social Fund
(aka president’s pork) by PAGCOR in just one day, a month before GMA Bared in early August by Bayan Muna Rep. Neri Colmenares
stepped down
PCSO Intel Funds
P325 M
GMA allegedly authorized the anomalous use of PCSO’s intelligence
fund
Senate Blue Ribbon Commi ee recommended filing of plunder
and technical malversa on charges against GMA and PCSO general
manager Rosario Uriarte. This will be the 4th plunder case against
GMA stemming from the PCSO intel funds. Three other have been
filed with the Ombudsman in December and July 2011, all pending
resolu on.
ARMM Kickbacks
P200 M
(3 projects)
Accusa on by Zaldy Ampatuan that GMA received payoff for ARMM
farm-to-market road projects in 2008 and 2009
Affidavit on kickbacks to be used by Ampatuan in a P1.6 B plunder
case against him filed with the Office of the Ombudsman
PNP Chopper
Scandal
P105-M
On Sept. 2, PNP has filed with the Office of the Ombudsman plunder
Anomalous PNP purchase of 3 choppers, 2 of which said to be
charges against Mike Arroyo and 25 other respondents over the
overpriced second-hand helicopters refurbished to appear as brand
chopper scandal; also under senate inquiry, senate set to file a
new from alleged owner former First Gentleman Mike Arroyo
separate complaint
Sale of Iloilo
Airport
P72-M
Failure of GMA administra on to remit P72-M in capital gains tax from
the 2007 sale of the Mandurriao, Iloilo Airport to Megaworld valued Filed Aug. 16, pending with DOJ
at P1.2-B
ACEF Scandal
Farm-to-Pocket
Roads
Philippine Alert
P8.2-B
(P10Bn fund
– P1.8Bn
remaining
amount)
P7.5-M
Alleged misuse of the Agricultural Compe veness Enhancement
Fund (ACEF)-- a fund to help the agriculture sector improve their skills
and produc vity-- as a cash cow by former President Arroyo’s favored Program suspended in January to revise ACEF guidelines. Senate
officials and poli cians, for almost a decade. Irregulari es include Commi ee on Food and Agriculture set to probe into the scandal.
ques onable projects and officials demanding kickbacks in exchange
for loan approvals. ACEF also plagued by low repayment rate.
Uncovered by the Senate Oversight Commi ee on Public
Ques onable release of funds by the Department of Agriculture for
Expenditures in early September. Senate Resolu on 600 direc ng
farm-to-market roads without work programs and over a period of
the Food and Agriculture Commi ee to probe into the issue filed by
6 months (January to June 2010), a few months before former Pres.
Commi ee Chair Francis Pangilinan on Sept. 19. Sen. Drilon, Senate
Arroyo stepped down from office.
Finance Commi ee Chair, likewise called for probe.
January 2012
13
POLITICAL
Prosecution, after blunders, wants rules eased
House prosecutors were off to a shaky start with several blunders in the 1st week of the impeachment trial
of Chief Justice Renato Corona, prompting them to urge the Senate to relax its rules and to allow them
to present their evidence even as they uncovered it.
T
he 1st day of the presentation of evidence on Jan. 16 proved
to be a disaster for the prosecution panel after they failed to
present a “smoking gun” because they had no witnesses to
present and the trial had to be adjourned. The witnesses came
on the 2nd day of the trial and Mr. Corona’s statements of assets
and liabilities were turned over to the Senate impeachment court.
Week 2 of the trial that resumed on Jan. 24 found the
prosecution in a defensive position after Presiding Judge and
Senate President Juan Ponce Enrile, acting on a motion by
Senator-Judge Francis Escudero, made them explain why they
were presenting evidence of Mr. Corona’s alleged unexplained
wealth when Article 2 of the impeachment complaint made no
such allegation. Mr. Escudero said Article 2 claimed only Mr.
Corona’s non-disclosure of his statements of assets, liabilities
and net worth to the public, but prosecutors were adding new
charges such as the non-inclusion of certain pieces of property
in his statements, and his amassing of unexplained wealth.
Ideally, Mr. Escudero said, each article should only allege one
specific act or omission to be read and put to a vote by the
senator-judges. But the prosecution’s own evidence showed Mr.
Corona had complied with the filing of his statements of assets
and liabilities from 2002 to 2011, when those were submitted
to the Supreme Court’s clerk of court. Finally, the impeachment
court resolved to bar the prosecution from presenting evidence
on Mr. Corona’s alleged accumulation of ill-gotten wealth.
The prosecution also did a turn-around, saying it was now
Article 1—Mr. Corona’s alleged bias in favor of former President
Arroyo—that would pin him down. The prosecution issued a
statement quoting former University of the Philippines College
of Law dean Raul Pangalangan that among the 8 articles, he
considered Mr. Corona’s bias in favor of Ms. Arroyo the “most
serious.” “Of all the impeachable offenses charged, I consider this
[Article I] the heaviest because it goes to the heart of the work
of a judge, goes into the heart of the function of an independent
judiciary within our Constitution,” the prosecution quoted Mr.
Pangalangan. Article 1 accuses Mr. Corona of betrayal of public
trust as a result of his alleged partiality and subservience in the
cases involving Ms. Arroyo, who appointed him Supreme Court
associate justice in 2002 and chief justice in 2010. The prosecution
panel said a tabulation of Mr. Corona’s voting record showed
he had consistently sided with the Arroyo administration in 15
It’s not just the Chief Justice that is on trial here but the system of checks and
balances.
Philippine Alert
January 2012
14
POLITICAL
politically-significant cases involving its assaults on constitutional
rights, before his appointment and during his term as chief justice.
In other developments, the national organization of town
and city judges urged senators to remain faithful to their oath
to be impartial while sitting as judges in the impeachment trial
of Mr. Corona after some senator-judges drew flak for showing
their partiality. The judges’ association also said the senators
must disregard political affiliations and even public opinion
when they cast their votes on whether the chief justice is guilty
of the 8 articles of impeachment filed against him by the House of
Representatives. Mr. Enrile said both the defense and prosecution
panels were free to ask for the inhibition of any senator-judge
in the impeachment trial if he/she is perceived to be biased. He
stressed that a motion to inhibit could be filed by either party for
the inhibition of a particular senator-judge, but that the decision to
inhibit would fall on the senator-judge concerned. The Integrated
Bar of the Philippines made a similar appeal for impartiality
to the senators before the trial started, reminding them of their
“solemn oath to do impartial justice according to the Constitution
and the laws of the Philippines... based on facts and evidence
and not on personal sentiments or swings of public opinion.”
For only the 2nd time in the history of the republic, the Senate
convened on Jan. 16 as an impeachment court. President Aquino
has tried to distance himself from the impeachment, although he
has often said that Mr. Corona is a major hindrance to the credible
administration of justice in the country. But since Joseph Estrada
was impeached, tried and later ousted by people power in 2001,
and after several failed attempts to impeach Ms. Arroyo during her
presidency, the nation knows that the process is largely political
and dependent on numbers. But hopefully the public trial will
compel lawmakers, sitting as judges on the fate of the Chief Justice,
to base their actions and votes on more than partisan or personal
considerations. Whatever the outcome of Mr. Corona’s trial, it
must be able to withstand proper scrutiny. It’s not just the Chief
Justice that is on trial here but the system of checks and balances.
OWWA fund misuse added to Rep. Arroyo’s
rap sheet
The Justice Department on Jan. 11 recommended the
criminal prosecution of former President and now
detained Pampanga Rep. Gloria Arroyo and 3 other
people for their alleged misuse of P550 million that was
intended for the welfare of Filipino workers abroad.
Alongside this, the Sandiganbayan anti-graft court issued
a hold-departure order on Ms. Arroyo and 5 others over
the graft cases that stemmed from the botched NBN-ZTE
deal.
A 3-man panel also endorsed the filing of charges of improper
conduct against former Foreign Affairs Secretary Alberto Romulo,
former Overseas Workers Welfare Administration (OWWA) head
Virgilio Angelo, and former Health Secretary and now Civil
Service Commission Chairman Francisco Duque. The prosecutors
ruled that Ms. Arroyo and her co-accused conspired in “proposing,
requesting, approving, implementing and releasing (OWWA)
funds for purposes other than for which they were intended.” Other
former and incumbent members of OWWA Board of Trustees were
cleared of criminal liability, saying there was no evidence to prove
that Labor Secretary Rosalinda Baldoz, former Labor Secretary
Patricia Santo Tomas, former Labor Undersecretary Manuel
Imson, and board members Mina Figueroa, Caroline Rogge,
Victorino Balais, Gregorio Oca, and Virginia Pasal connived with
Ms. Arroyo and her co-accused in the misuse of OWWA funds.
Meanwhile, Ms. Arroyo, former First Gentleman Jose Miguel
Arroyo, and 2 former Cabinet officials are now barred from
leaving the country after the Sandiganbayan anti-graft court’s
4th division ordered this as a result of the graft cases filed against
them. The order is also in effect against resigned Elections
Commission Chairman Benjamin Abalos and former Transport
and Communications Secretary Leandro Mendoza. Malacañang
welcomed the Sandiganbayan’s decision. Presidential spokesman
Edwin Lacierda said the hold-departure order would ensure
that the 4 people subject to it would not be able to leave the
country. Pasay City Judge Jesus Mupas had earlier issued a
hold-departure order against Ms. Arroyo, who is under hospital
arrest at the Veterans Memorial Medical Center after she was
charged with electoral sabotage for her alleged involvement in
the rigging of the 2007 elections. The latest hold order against
Ms. Arroyo stemmed from the Ombudsman’s filing of 2 counts
of graft against her over the botched $329-million national
broadband deal with the telecommunications firm ZTE Corp.
of China. Mr. Arroyo, Mr. Abalos, and Mr. Mendoza each face
1 count of graft in connection with the same deal. The deal was
closed in April 2007, but Ms. Arroyo cancelled it 6 months
later due to allegations of kickbacks and illegal commissions.
Cases have been filed in court and the principal defendants
have been barred by the Sandiganbayan from leaving the country.
Several years after a congressional inquiry on the broadband
deal with ZTE Corp. was stalled by the invocation of executive
privilege, the prosecution of graft cases in connection with the
deal finally appears to be moving along. Apart from presenting
a strong case and ensuring that those who might have personally
benefited from the deal are held accountable, the government
must also put in place measures to prevent a repeat of similar
questionable transactions. Laws have since then been passed
to promote transparency in government procurement. The
administration of “daang matuwid” (straight path) should also
coordinate with the Commission on Audit in preventing a way
of going around procurement laws: by breaking apart big-ticket
procurement deals into smaller ones to skirt auditing requirements.
The administration should also take another look at the rules
governing projects financed with foreign assistance. The foreign
aid component of the ZTE broadband deal was used by the
Arroyo administration to invoke executive privilege when then
socio-economic planning secretary Romulo Neri was summoned
by the Senate to disclose more information about the deal. The
Ms. Arroyo and her husband are barred from leaving the country.
Philippine Alert
January 2012
POLITICAL
argument of the former administration was then upheld by the
Supreme Court. Foreign governments must also account to
their taxpayers for their disbursements for official development
assistance (ODA). It can be presumed that foreign governments
don’t want their ODA dragged into corruption scandals overseas,
and it can be presumed that they would appreciate clear and
transparent rules on aid utilization by the recipient country.
China, whose huge soft loan facility for the Philippines has
remained largely untapped as a result of the scandal over the ZTE
deal, has said that the incident has been a learning experience.
Chinese officials have said they are ready to play by fair Philippine
rules, but these must be laid out clearly by the Philippine
government. TheAquino administration should draw up these rules.
Judge blocks presentation of new massacre
witnesses
The Quezon City Regional Trial Court on Jan. 11 blocked the
presentation of 2 surprise witnesses against some members
of the Ampatuan clan who are accused of being behind the
murder of 58 people, including journalists, on Nov. 23, 2009.
Branch 221 Judge Jocelyn Reyes “partially” granted the appeal
of the defense to defer the presentation of 2 other witnesses of
the prosecution and reset another hearing. During the hearing,
Judge Reyes ordered a recess to decide on the urgent motion of
defense lawyer Philip Sigfrid Fortun to defer the presentation of
Ms. Gemma Oquendo, sister of the slain massacre victim lawyer
Cynthia Oquendo-Ayon, and a National Bureau of Investigation
forensics expert. Mr. Fortun said surprise witnesses have been
causing the delay of the court proceedings. Private prosecutors
Nena Santos and Harry Roque countered that the partial granting
of the defense’s urgent motion was the one contributing to the slow
pace of the case. Ms. Santos slammed the defense for supposedly
dictating on who the prosecution would present as witnesses.
Two opposition lawmakers earlier demanded that the Justice
Department focus on resolving the Maguindanao massacre.
Maguindanao Rep. Simeon Datumanong, a former Justice
secretary, said the victims of the Maguindanao massacre deserved
swift justice, but it had been 2 years since the carnage, and the
Justice Department has yet to resolve the case. House Deputy
Minority Leader and Zambales Rep. Milagros Magsaysay agreed,
saying if justice could be served at high speed in the case of
the Arroyos, then it should be the same pace for the victims
of the Maguindanao massacre. Nov. 23, 2011 marked the 2nd
anniversary of the brutal slaying of 58 people, including the 33
journalists covering the supposed submission of the certificate of
candidacy of then Vice Mayor Toto Mangudadatu who was to run
against the powerful Ampatuan clan for the gubernatorial seat.
Farmers assert rights over Hacienda Luisita
Farmers vowed to assert their rights over some 4,915 hectares of agricultural land in Hacienda Luisita, including
the portions being claimed by Rizal Commercial Banking
Corp. (RCBC).
Mr. Felix Nacpil, chairman of the Alyansa ng Manggagawang
Bukid sa Asyenda Luisita (Alliance of Farm Workers in Hacienda
Luisita), said his group of farmers will petition to revoke a
conversion order issued by the Agrarian Reform Department to
RCBC in 1995. The order involves some 300 hectares in Balete
village in Tarlac City, a piece of property within the Hacienda
Luisita that supposedly was sold by Luisita Industrial Park Corp.
to RCBC. On Nov. 22, 2011, the Supreme Court ruled in favor of
the farmers and ordered Hacienda Luisita, owned by the relatives
of President Aquino, to distribute the land to its farm workers as
mandated by the agrarian reform program. Mr. Nacpil’s move is
supported by the farmers’ group Alyansa ng mga Magbubukid
sa Gitnang Luson (Farmers’ Alliance in Central Luzon).
Relatives of Mr. Aquino have promised to abide by the latest
Supreme Court (SC) decision distributing the family’s sugar
estate in Tarlac to the tenant-farmers. The unanimous decision
amended the SC’s ruling last July, which allowed Hacienda
Luisita Inc. (HLI) to give its workers the option of choosing
between land and shares of stock in HLI. Mr. Aquino has tried
to distance himself from the dispute, pointing out that his shares
in the country’s largest sugar plantation were negligible and he
had no role in the management of HLI. Regardless, the President
has to live with the reality that despite the amount of his shares
in Luisita, Filipinos will always link him to the controversy.
This was also the case with his late mother, former President
Corazon Aquino, under whose watch the stock distribution option
was included in the Comprehensive Agrarian Reform Law that
was passed by the landlord-dominated post-EDSA Congress.
The introduction of the stock distribution option, which
allowed owners of large agricultural estates to avoid having
their lands parcelled out to tenants, was aggravated by the
inadequacy of support for making the redistributed land viable.
Many small farms under the Comprehensive Agrarian Reform
Program (CARP) suffered from the lack of farm-to-market
roads, marketing support, post-harvest facilities, and fertilizer
assistance. A number of frustrated CARP beneficiaries sold their
farms, with their plight bolstering the argument (including that
made by the Wallace Business Forum) that large agricultural
estates are more productive and efficient. Farmers, it is argued,
can be assisted in setting up cooperatives and putting together
their limited resources to make CARP lands viable. But, it
may be too late for this in areas where many of the farmerbeneficiaries have sold their lands. Although, there are ways of
increasing this program’s chances of success. This, however,
is hard as cooperatives rarely work well in the Philippines.
The victims deserved swift justice, but it had been 2 years since the carnage, and the
case has yet to be resolved.
Philippine Alert
January 2012
15
16
POLITICAL
With the court having opened the doors, through recent decisions, to endless
litigation, the farmers of Hacienda Luisita may still have a long wait ahead to own
land.
Mr. Aquino must show that he is exerting effort to make
agrarian reform work, with the case of Hacienda Luisita
particularly seen as a test of his political will. The case may
not yet be over; HLI may appeal the SC ruling. With the court
having opened the doors, through recent decisions, to endless
litigation, the farmers of Hacienda Luisita may still have a
long wait ahead to own land. What can be done immediately
is to intensify efforts to make agrarian reform work for
farmers who have already received land under the program.
to government forces. A year ago, video footage apparently taken
by mobile phone showed Manila policemen torturing a crime
suspect. Another footage showed soldiers also engaged in torture.
The best way to stop such abuses is to punish the perpetrators. The
Philippines continues to be ranked among the top 5 worst countries
in terms of impunity in rights abuses. Failure to bring human rights
violators to justice is the biggest factor in nurturing that impunity.
Reward doubled for retired Gen. Palparan’s
capture
The Philippines has urged the Association of Southeast
Asian Nations (Asean) to hold a summit of China and 5 other
Asian claimants to the Spratly Islands to try to resolve the
long-simmering territorial disputes in the South China Sea.
The government on Jan. 5 raised to P1 million the cash
reward for the capture of retired general Jovito Palparan,
who went into hiding after he was charged with the 2006
abduction of 2 students of the University of the Philippines.
Justice Secretary Leila de Lima said she and Interior
Secretary Jesse Robredo decided to double the reward as a
“complementary move” to the ongoing manhunt for Mr. Palparan,
a former head of the military’s Northern Luzon command based
in Bulacan. The decision to double the reward came amid
reports that Mr. Palparan had sent “surrender feelers” to the
National Bureau of Investigation. Ms. De Lima said she had
received death threats that could have come from the fugitive
general, whom leftist groups call “The Butcher” for allegedly
masterminding the killings of communist sympathizers.
Nearly 26 years after Filipinos ousted a dictator and restored
democracy, state security forces continue to be taken to task for
their human rights record. Mr. Palparan is on the run. Scores of
police and paramilitary personnel are still being hunted down in
connection with the Maguindanao massacre in 2009. In its World
Report 2012, Human Rights Watch said the Aquino administration
has made little progress in ending impunity in rights abuses. The
human rights watchdog counted at least 7 killings and 3 enforced
disappearances that could be attributed to state forces since
President Aquino assumed power. The group also prodded the
administration to dismantle the paramilitary “force multipliers”
whose continued deployment is supported by the Armed Forces
of the Philippines (AFP). AFP officials have assured the public
that they keep a tight rein on the militias, a number of whom
are utilized by political warlords as part of their private armies.
Systematic violations of human rights ended with the collapse
of the Marcos dictatorship, but the restoration of democracy did
not end murders, disappearances, and cases of torture attributed
Manila offers to host summit on Spratlys
Foreign Secretary Albert del Rosario said he asked his Asean
counterparts during an annual meeting in Cambodia held in early
January to back the Philippines’ call for the 10-member bloc to
organize such a summit “as soon as possible.” Manila was ready
to host the unprecedented meeting, he said. The Philippines and
fellow Asean members Brunei, Malaysia, and Vietnam have
overlapping territorial claims in the South China Sea’s Spratly
Islands, which are believed to have undersea deposits of oil and
gas. The islands, which are also claimed by China and Taiwan,
straddle busy sea lanes and rich fishing grounds. Many fear the
disputes could be Asia’s next flash point for armed conflict. The
Philippines last year proposed segregating non-disputed Spratly
territories from the disputed ones, which it said could be turned into
common areas where China and other claimants could undertake
joint activities such as search and rescue drills to build trust
while the disputes continued. A resolution of the conflicts should
be based on internationally-accepted rules such as the United
Nations Convention on the Law of the Sea, Mr. del Rosario said.
The Philippines earlier protested to China over 3 Chinese
vessels that allegedly intruded into its waters last December.
The Philippine government expressed its “serious concerns” to
the Chinese Embassy after the 3 vessels, including a Chinese
navy ship, were sighted near Sabina Shoal in the South China
Sea on Dec. 11 and 12. Regional military commander Lt. Gen.
Juancho Sabban said a Philippine Navy patrol ship and an Air
Force plane kept watch from a distance until the Chinese vessels
left the country’s territorial waters. The 3 vessels apparently
came from the Chinese-occupied Mischief Reef in the disputed
Spratly Islands, and then cruised into Philippine waters on their
way back to China as part of a regular shifting of forces, he said.
Flag-Officer-in-Command Vice Admiral Alexander Pama said
The Philippines continues to be ranked among the top 5 worst countries in terms of
impunity in rights abuses.
Philippine Alert
January 2012
POLITICAL
ASEAN wants to meet as a block, while China is insisting on bilateral negotiations.
the Navy will boost its equipment in the West Philippine Sea
(South China Sea) to protect Philippine territory. Meanwhile, Mr.
del Rosario said the Chinese intrusions violated a 2002 accord
between China and ASEAN that discourages claimant countries
to the South China Sea’s disputed Spratly Islands from taking
aggressive steps that could ignite tension or confrontations.
It inspires hope that ASEAN leaders have reaffirmed their
commitment to peace and cooperation, and are drawing up
measures to thwart threats to security and stability in the region.
The grouping has called for the peaceful resolution of territorial
disputes in the Spratlys within the context of international law.
The stand of turning the dispute into a multilateral issue goes
against the position of China, which is claiming the entire South
China Sea as part of its territory. ASEAN wants to meet as a
block, while China is insisting on bilateral negotiations with each
country. The dispute affects all countries in the region and covers
areas that are considered international waters. The international
sea lanes are used freely by commercial and naval vessels of all
nations and must remain as such. ASEAN should push through
with multilateral initiatives to settle overlapping territorial
claims in the region peacefully and within international laws.
Philippine Alert
January 2012
17
18
ECONOMY
ECONOMY
PH economy creeps at a lackluster 3.7% in 2011
The Philippine economy, as measured by the real gross domestic product (GDP), slowed sharply to a growth
of 3.7% in 2011, lower than the average of 4.4% in the previous 2 years (2009: 1.1%; 2010: 7.6%). Gross
national income (GNI), which includes OFW remittances net of foreign interest payments, fared even
worse with an increase of just 2.6% last year.
T
he Philippine economy faced numerous global adversities
– Euro area debt crisis, sluggish U.S. economic
performance, Middle East political turbulence, Japanese
and Thai natural disasters – that dragged exports down. The
volume of export of goods and services fell -3.8% (goods:
-5.3%) in 2011, a reversal from a rise of 21% in 2010.
But the slowdown would not have been as worse as it was
if the government kept its promise to spend more, especially
on infrastructure, and to implement priority public-private
participation (PPP) projects. Instead of increasing, infrastructure
spending (public construction) actually decreased by -29.4%,
while government operating and maintenance expenses flattened
out. If infrastructure spending was at the same level as the
previous year, GDP would have grown by at least 6% in 2011.
Consumer spending posted its strongest growth in 7
years at 6.1%, reflecting rising consumer confidence. This
was reinforced by the fact that overseas Filipino workers
(OFW) remittances remained resilient despite the weakening
of the affluent economies and the improved access to credit.
Investment in plant and equipment was also high at 8.7%, while
private construction activity held up at 6.3%, indicating that the
private sector also delivered. Some local businesses proceeded
with their expansion plans on optimism in the change in leadership.
Agriculture grew 2.6% in 2011 – it started strongly in
1H11, but the natural calamities in the 2nd half dragged overall
performance down. Nonetheless, rice (up 5.3%), corn (up 9.5%)
and sugar (up 59.7%) yielded very good results. The industrial
QUARTERLY GDP GROWTH RATES (%)
(at 2000 prices)
8
7
6
5
4
3
2
1
0
1Q003Q1Q013Q1Q023Q1Q033Q1Q043Q1Q053Q1Q063Q1Q073Q1Q083Q1Q093Q1Q103Q1Q113Q
Source: National Statistical Coordination Board (NSCB)
Philippine Alert
January 2012
ECONOMY
ECONOMY
The trend has become clear when the government’s stiumulatory, catch-up strategy
brought public construction up by 49.4% in the 4th quarter of 2011.
ECONOMIC RESULTS SUMMARY (% Real Growth Rate @ 2000 Prices)
ITEM
2011
2010
Gross domestic product (GDP)
3.7
7.6
Gross national income (GNI)
2.6
8.2
Consumer spending
6.1
3.4
Government final consumption exp.
-0.7
4.0
Fixed investment
2.7
19.1
8.7
25.5
-3.8
21.0
Goods
-5.3
24.7
Non-factor services
6.5
3.4
1.9
22.5
Goods
1.4
23.2
Non-factor services
4.2
18.9
Agriculture
2.6
-0.2
Industry
1.9
11.6
Services
5.0
7.2
Infrastructure development
Property development
Plant and equipment
Export of goods & services
Import of goods & services
Source: National Statistical and Coordination Board (NSCB)
sector weakened, growing by just 1.9%, although surprisingly
manufacturing registered an increase of 4.7% despite the
weakness of exports. Manufacturing drew its strength from
industrial products, notably chemicals, plastics, and non-metallic
minerals (cement, etc.). The service sector paced the economy
with a growth of 5%, lifted by tourist-related industries (hotels
and restaurants up 8%, recreation up 6.9%), and business
services (which includes business process outsourcing) at 7.2%.
The economy is expected to grow faster in 2012, with
infrastructure spending finally picking up and making
a big difference. The trend has become clear when the
government’s stimulatory, catch-up strategy brought public
construction up by 49.4% in the 4th quarter of 2011.
PH sells $1.5Bn global bonds
The government raised $1.5 billion from the sale of dollardenominated bonds on Jan. 4, reflecting investor interest
in emerging market assets despite the debt crisis in Europe.
The bonds have a 25-year tenor, maturing in January
2037, and carried an all-time low yield for a Philippine
sovereign issue of 5%, also lower than the pre-set ceiling
of 5.25%. This was, though, equivalent to a still substantial
196.2 basis points above the comparable U.S. Treasuries.
Nonetheless finance officials said its longer dated maturity
and record low pricing helped improve the country’s debt
maturity and servicing profile. Most of the borrowings of the
government during the past 2 years had shorter maturities
of only 15 years at best, except for the $1.25 billion
raised in January 2011, which were also 25-year bonds.
Philippine Alert
The issue was in fact oversubscribed, with offers to
purchase reaching $12.5 billion or eight times the amount
of the bonds being sold. Eventually, 35% of the bonds were
sold to U.S. investors, 25% to Philippine investors, 25% to
other Asians, and 15% to Europeans. Deutsche Bank and
Standard Chartered Bank were the joint global coordinators,
and were also joint book-runners with Citibank, Credit
Suisse, Goldman Sachs, HSBC, JP Morgan and UBS.
Proceeds of the bond sale will be used to partly finance the
projected budget deficit of P286 billion this year. The deficit is
higher than the P190 billion incurred last year, as the government
steps up infrastructure spending to spur economic growth
and avoid the drag resulting from Europe’s debt woes. The
government plans to spend P142 billion for infrastructure in 2012.
The Philippines has set a $4 billion foreign borrowing
program for this year. Of the amount, $2.25 billion will
be raised from commercial debt (global bonds) while
$1.75 billion will come from disbursements of official
development assistance (ODA) loans. With $1.5 billion
already secured in January, only $750 million remains to be
raised through global bond issues for the rest of the year.
PH 16th largest economy by 2050?
The Philippines will move up 27 places to become the 16th
largest economy in the world, according to the Hong Kong
Shanghai Banking Corp. (HSBC) Global Research report
entitled The World in 2050.
HSBC noted that the Philippines would become a “star
performer,” experiencing a “multi-decade run of strong
growth” that categorizes it among the “fast-growth countries”
that include China, India, Malaysia, Bangladesh, Uzbekistan,
Kazakhstan, Turkmenistan, Peru, Ecuador, Egypt and Jordan.
By 2050, the Philippines’ gross domestic product (GDP) will
reach $1.688 trillion, up markedly from $112 billion in 2010,
making it the largest economy in Southeast Asia. Indonesia,
the world’s 17th biggest economy by then, will have a GDP of
$1.502 trillion; Malaysia, $1.16 trillion; Thailand, $856 billion.
The Philippines will also outsize Australia, Saudi Arabia, the
Netherlands, Switzerland, Austria, Sweden, Belgium, Singapore
and Greece. Philippine per capita income will be $10,893 (2010:
$1,215) while its population will be 155 million (2010: 93 million).
China will become the largest economy with GDP of
$25.3 trillion, followed by the U.S. at $22.3 trillion. The
other major economies 40 years hence will be India ($8.1
trillion), Japan ($6.4 trillion), Germany ($3.7 trillion), United
Kingdom ($3.6 trillion), Brazil ($3 trillion), Mexico ($2.8
trillion), France ($2.8 trillion) and Canada ($2.3 trillion).
January 2012
19
20
ECONOMY
MAJOR ECONOMIES OF THE WORLD IN 2050 (at 2010 prices)
RANK
COUNTRY
GDP ($ TRILLION)
GDP/HEAD ($)
1
China
25.3
17,759
2
United States of America
22.3
55,134
3
India
8.1
5,060
4
Japan
6.4
63,244
5
Germany
3.7
52,683
6
United Kingdom
3.6
49,412
7
Brazil
3.0
13,547
8
Mexico
2.8
21,793
9
France
2.8
40,613
10
Canada
2.3
51,485
11
Italy
2.2
38,445
12
Turkey
2.1
22,063
13
South Korea
2.1
46,657
14
Spain
2.0
38,111
15
Russia
1.9
16,174
16
Philippines
1.7
10,893
17
Indonesia
1.5
5,215
18
Australia
1.5
51,523
19
Argentina
1.5
29,001
20
Egypt
1.2
8,996
Source: HSBC Global Research, The World in 2050
COMPARATIVE GDP GROWTH RATES (% per Annum)
2000-2010
Philippines
1990-2000
1980-1990
5.0
3.1
2.1
Singapore
5.9
7.5
8.0
South Korea
4.5
6.4
7.9
Hong Kong
4.3
4.0
7.0
Taiwan
4.1
6.5
7.6
Vietnam
7.1
7.5
5.0
Indonesia
5.3
4.9
6.5
Malaysia
5.0
7.5
6.1
Thailand
4.4
7.2
7.7
ASIAN NIE’S
Singapore
ASEAN
Sources: World Bank; United Nations; ERS/USDA
HSBC based its prediction on such factors as current
income per capita, rule of law, democracy, education levels
and demographic change. The report took particular notice
of the Philippines’ favorable macroeconomic fundamentals
and improving governance for its optimism in the country’s
long-term economic outlook. It added that the country’s
growing population – if properly educated and trained amid the
country’s rising educational standards – would get significant
income boost over the next decades. In fact, the Philippines’
low income today provides it with much room for growth,
with the favorable fundamentals helping maximize that room.
HSBC projected Philippine GDP growth to average 7%
annually over the next 40 years: 8.4% per annum in 20102020; 7.3% p.a. in 2020-2030; 6.6% p.a. in 2030-2040; and
5.8% p.a. in 2040-2050. These are incredible numbers, with
the country able to sustain only close to 5% annually at best (in
2000-2010) during the past 3-4 decades. Most other countries
in Asia did much better and have left the Philippine behind.
Philippine Alert
An almost similar optimism was expressed by the
World Bank a little over 50 years ago, when it said:
“… The Philippines has achieved a rapid rate of economic
growth in the post-war period (since 1949). Production has
continued to grow at an annual rate of 7%, despite the disrupting
effects of the HUK movement [domestic insurgency], which
hampered economic activity until 1952… By comparison with
most underdeveloped countries, the basic economic position of
the Philippines is favorable. It has generous endowment of arable
land, forest resources, minerals and normal potential through a
comparatively high level of expenditure on education, transport,
communications and industrial plant over the past 50 years.
“The Philippines has achieved a position in the Far East second
only to Japan, both in respect to its level of literacy, and to per capita
production capacity…The prospects of the Philippine economy
for sustained long-term growth are good. Apart from generous
endowment of material resources and high level of literacy, other
favorable factors are the growth of the labor force, the availability
January 2012
ECONOMY
But it still remains to be seen if 7% or higher can be maintained over 4 decades.
of managerial and technical skills, the high level of savings and
investment, rather good prospects for most of the Philippine
exports, and considerable possibilities for import substitution.”
Three to four decades after this prediction was made,
the Philippines fell to near the bottom in the region.
Nonetheless, the HSBC report could have some basis.
Although some Asian economies that used to grow very
rapidly in the 70’s, 80’s and 90’s are slowing down, albeit still
enjoying relatively high rates of growth, Philippine economic
growth is gradually rising each decade since the 1980’s:
2.1% p.a. in 1980-1990; 3.1% p.a. in 1990-2000; 5% p.a.
in 2000-2010. In the 2000’s, Philippine growth has become
nearly comparable with ASEAN members (except Vietnam)
and the Newly Industrializing Economies (NIEs) of Asia.
It wouldn’t come as a surprise if the economy sustains 6%
p.a. growth under the Aquino administration; all Pres. Aquino
needs to do is to spend more, as money is available, and to
maintain his stance on good governance. But it still remains
to be seen if 7% or higher can be maintained over 4 decades.
PH 8th friendliest country
The website of Forbes Magazine using data from the Expat
Explorer Survey 2011 of Hong Kong and Shanghai Banking Corp. (HSBC) ranked the Philippines the 8th friendliest
country in the world.
The HSBC survey was conducted from May-July 2011
with 3,385 expatriates in 100 countries as respondents.
The report, however, covered only 31 countries as
there were less than 30 respondents in the rest of the
countries, rendering the results statistically insignificant.
At 8th place, the Philippines was the highest ranked
Asian country on the list, with Malaysia coming next at #10
and Singapore at #14. Forbes cited ex-pats saying that the
Philippines is “friendly on wallets” and noted that a high 47% of
respondents experienced “increase access to luxuries,” such as
domestic staff, swimming pools and owning properties. HSBC
Also quoted an ex-pat residing in the Philippines as saying,
“it is very hot in here but beautiful in its own way,” which it
thought was the general sentiment of expatriates in the country.
The Forbes ranking was actually based on 4 out of 28
categories describing ex-pats’ experience in the country – ability
to befriend locals, success in learning the local language, capacity
for integrating themselves into the community, and ease in which
they fit into the new culture. The Philippines placed 4th in making
local friends, 7th in integrating into the community and 9th in
fitting in the new culture. The country ranked 15th in learning
the local language, in the middle of all the countries listed.
The 10 friendliest countries, in order of Forbes’ ranking,
are as follows: New Zealand, Australia, South Africa, Canada,
United States, Turkey, Philippines, Spain and Malaysia.
The HSBC Expat Explorer Survey actually has a broader
ranking on Expat Experience, which consolidates the results
of all 28 categories. The Philippines placed even higher in
this set of categories at 4th (score: 0.58 out of 1.00). Its best
features included feeling welcome at work (#1), making
friends (#2), social life (#2) and work-life balance (#2). But
surprisingly, the top country is Thailand, which isn’t part of
the 15 friendliest countries. Thailand scored high in organizing
health care (#1), finding accommodation (#1) and working
environment (#2). Canada was 2nd, while South Africa was 3rd.
THE 15 FRIENDLIEST COUNTRIES IN THE WORLD (no. of countries rated: 31)
MAKING LOCAL FRIENDS
LEARNING THE LOCAL
LANGUAGE
INTEGRATING INTO THE
COMMUNITY
SCORE
SCORE
SCORE
RANK
RANK
FITTING IN THE NEW CULTURE
RANK
SCORE
RANK
1.
New Zealand
0.51
12
0.90
1
0.75
3
0.70
5
2.
Australia
0.52
11
0.66
3
0.77
2
0.72
3
3.
South Africa
0.51
14
0.56
6
0.79
1
0.70
6
4.
Canada
0.58
6
0.57
5
0.73
5
0.64
12
5.
United States
0.51
13
0.62
4
0.68
8
0.67
8
6.
Turkey
0.73
1
0.15
21
0.73
4
0.54
21
7.
United Kingdom
0.45
9
0.70
2
0.65
12
0.54
19
8.
Philippines
0.60
4
0.21
15
0.70
7
0.67
9
9.
Spain
0.62
3
0.24
13
0.67
9
0.65
11
10.
Malaysia
0.59
5
0.32
8
0.60
15
0.64
13
11.
Brazil
0.56
8
0.28
11
0.64
13
0.63
14
12.
Italy
0.47
16
0.24
14
0.72
6
0.68
7
13.
Mexico
0.56
7
0.30
9
0.66
11
0.56
18
14.
Singapore
0.45
18
0.47
7
0.55
18
0.74
2
15.
France
0.53
10
0.27
12
0.67
10
0.54
22
Sources: HSBC, Expat Explorer Survey 2011; Forbes Magazine
Philippine Alert
January 2012
21
22
ECONOMY
Forbes cited ex-pats saying that the Philippines is “friendly on wallets” and noted
that a high 47% of respondents experienced “increase access to luxuries,” such as
domestic staff, swimming pools and owning properties.
These results could help boost tourism, with the new
tourism secretary Ramon Jimenez boldly raising the target
on foreign visitor arrivals to 8 million in 2015 (10 million
in 2016) from 6 million previously. The Philippine tourism
industry was buffeted by a string of good news recently,
including the choice of the Puerto Princesa Underground River
as among the 7 New Wonders of Nature, and the successful
launch of the new slogan: “It’s more fun in the Philippines.”
Poverty numbers improved in 4Q11
An estimated 9.1 million (45%) households rated themselves
poor in 4Q11, better than the 10.4 million (52%) recorded
in 3Q11, according to the quarterly survey conducted by the
Social Weather Stations (SWS). This brought the average
number of self-rated poor households to 9.9 million in 2011.
This is slightly worse than the 48% in 2010, though, but
comparable to 49% in 2009 (but with higher absolute numbers
in 2011 due to population increase). SWS Pres. Mahar Mangahas
noted that there was no clear trend on annualized poverty rates
during the past 3 years but the rates were lower than the low
50’s of the previous 3 years, i.e., 2006-2008, which also had
no clear 3-year trend. In the early 2000’s, i.e., 2000-2003, self
rated poverty rates were near 60%, also with no clear trend.
Philippine Alert
Dr. Mangahas called this pattern “Terraces of Poverty,”
where downshifts were observed every 3-4 years, from about
60, to the low 50’s, to the high 40’s. Possibly, the rates would
come further down to the low 40’s in the next 3 years. But this
would still mean missing the Millennium Development Goal
(MDG) of having the poverty rate from 1990 to 2015. Selfrated poverty was 68% in 1990, so the target should be about
mid 30’s, not low 50’s suggested by the “Terraces of Poverty.”
At any rate, the December (4Q11) poverty result of 45%
was the lowest so far under Pres. Benigno Aquino III. Palace
officials attributed this to the implementation of anti-poverty
programs, especially the conditional cash transfer (CCT).
Poverty incidence eased significantly in Mindanao
(by 19%-points to 38% in 4Q11 from 57% in 3Q11)
and Balance or Rest of Luzon (8%-points to 45% from
53%). It was almost unchanged in the Visayas at 52%.
But it worsened in Metro Manila by 8%-points to 47%.
Self-rated poverty threshold, or the monthly income
respondents said they needed in order not to consider
themselves poor, was P10,000 in Metro Manila, and P6,000 in
the rest of the major geographic areas. This means households
continued to tighten their belts, as the thresholds were
unchanged (in fact fell in Metro Manila) despite inflation.
The SWS poll had 1,200 adult respondents
nationwide. It was conducted on Dec. 3-7, 2011. The
national results have sampling error margins of +3%.
January 2012
23
ECONOMIC INDICATORS
INFLATION RATE
(%), 2006 = 100
JANUARY INFLATION AT 3.9%
The annual headline inflation slowed down to 3.9% in January 2012 from 4.2% in
December 2011. This improvement is attributed to the continued to deceleration
in the annual uptick in food and nonalcoholic beverages index from 4.1% to 3.3%.
Furthermore, furnishing, household equipment, and routine maintenance of the house
index also slowed down to 2.4% from 2.5% and transport index improved to 5.3% from
6.0%. Meanwhile, inflation rate in the National Capital Region (NCR) increased to
3.5% from 3.0%. As for the Areas Outside the National Capital Region (AONCR), annual
inflation continued to move slower at 4.0% from 4.5%.
PRICE INDICES
by commodity
CPI
WHOLESALE
(2000 = 100)
2012
RETAIL
(1998 = 100)
2011
2011
(1978 = 100)
2010
2011
2010
Jan.
128.1
123.3
220.7
206.2
151.4
146.5
Feb.
-
124.7
225.4
206.1
152.2
146.1
March
-
125.0
228.2
206.7
152.1
145.9
April
-
125.6
232.1
207.5
153.7
146.3
May
-
125.9
229.0
206.1
152.4
146.4
June
-
126.5
227.9
205.5
152.4
146.8
July
-
126.6
226.5
204.3
152.6
146.8
Food and NonAlcoholic Beverages
2012
Jan.
2011
3.3
Alcoholic Beverages
and Tobacco
2012
4.9
5.6
2011
Clothing
and Footwear
2012
2.9
2011
3.9
3.0
Feb.
-
6.0
-
4.0
-
3.2
March
-
6.2
-
4.6
-
3.5
April
-
6.2
-
4.9
-
3.4
May
-
6.2
-
5.3
-
3.6
June
-
6.0
-
5.9
-
3.9
July
-
5.7
-
6.0
-
4.2
Aug.
-
5.1
-
6.3
-
3.8
Sept.
-
5.1
-
6.1
-
3.9
Oct.
-
5.7
-
6.2
-
3.9
Nov.
-
4.8
-
6.3
-
4.0
Dec.
-
4.1
-
6.0
-
3.7
INFLATION RATE
Housing, Water,
Electricity, Gas and
Other Fuels
Furnishing,
Household
Equipment and
Routine Maintenance
of the House
Health
Aug.
-
126.7
224.1
205.3
152.5
147.2
Sept.
-
126.8
225.7
204.5
152.9
147.5
Oct.
-
127.3
226.0
206.8
154.0
148.4
Nov.
-
127.8
230.1
212.2
154.0
149.8
Jan.
Dec.
-
127.6
-
215.1
153.8
150.2
Feb.
-
5.1
-
2.5
-
2.9
March
-
4.7
-
2.5
-
3.3
INFLATION RATE
Philippines
2012
Jan.
Metro Manila
2011
3.9
2012
4.1
Outside MM
2011
3.5
2012
3.9
4.0
2011
4.0
Feb.
-
4.8
-
4.6
-
4.7
March
-
4.8
-
3.9
-
5.1
April
-
4.7
-
3.3
-
5.1
May
-
5.1
-
4.4
-
5.2
June
-
5.2
-
4.7
-
5.4
July
-
5.1
-
4.0
-
5.3
Aug.
-
4.7
-
3.3
-
5.1
Sept.
-
4.8
-
4.2
-
5.0
Oct.
-
5.2
-
4.9
-
5.3
Nov.
-
4.8
-
3.5
-
5.1
Dec.
-
4.2
-
3.0
-
4.5
INFLATION RATE
Restaurants and
Miscellaneous Goods
and Services
2012
2011
5.0
2012
4.1
2011
3.6
2.1
Feb.
-
4.2
-
2.4
March
-
4.3
-
2.8
April
-
4.2
-
2.4
May
-
4.3
-
2.8
June
-
5.1
-
3.0
July
-
5.2
-
2.9
Aug.
-
5.1
-
3.2
Sept.
-
5.1
-
3.2
Oct.
-
5.1
-
3.1
Nov.
-
4.7
-
3.3
Dec.
-
4.7
-
3.2
Philippine Alert
2011
5.3
2012
5.0
2.4
2011
2012
2.2
2011
2.8
3.1
April
-
3.9
-
2.4
-
3.2
May
-
5.1
-
2.5
-
3.7
June
-
5.9
-
2.5
-
3.5
July
-
5.4
-
2.5
-
3.3
Aug.
-
5.1
-
2.6
-
3.3
Sept.
-
5.7
-
2.6
-
3.5
Oct.
-
6.5
-
2.5
-
3.4
Nov.
-
5.7
-
2.3
-
3.1
Dec.
-
5.1
-
2.5
-
3.0
INFLATION RATE
Transport
2012
Jan.
Education
Jan.
2012
5.3
Communication
2011
2012
2.5
-0.2
2011
Recreation
and Culture
2012
0.1
2011
2.5
1.1
Feb.
-
4.8
-
-0.1
-
0.9
March
-
5.3
-
-0.2
-
1.1
April
-
6.3
-
-0.2
-
1.0
May
-
6.6
-
-0.2
-
1.1
June
-
6.8
-
-0.3
-
1.6
July
-
6.8
-
-0.3
-
1.6
Aug.
-
6.9
-
-0.4
-
1.5
Sept.
-
7.1
-
-0.4
-
1.6
Oct.
-
6.7
-
-0.4
-
1.7
Nov.
-
6.6
-
-0.3
-
1.8
Dec.
-
6.0
-
-0.4
-
1.8
January 2012
24
ECONOMIC INDICATORS
Gross
International
Reserve
(US$B)
2011
Jan.
2010
Peso-Dollar
Exchange rate
Period Ave.
2012
2011
Treasury Bill Rate
91-day, WAIR in
percent (US$B)
2012
2011
63.54
45.59
43.62
44.17
1.55
0.70
Feb.
63.89
45.76
-
43.70
-
1.66
March
65.98
45.60
-
43.52
-
1.08
April
68.49
46.94
-
43.24
-
0.79
May
68.85
47.69
-
43.13
-
1.10
June
69.00
48.70
-
43.37
-
2.68
July
71.88
49.05
-
42.82
-
2.40
Aug.
75.94
49.91
-
42.42
-
1.53
Sept.
75.17
53.75
-
43.03
-
0.56
Oct.
75.83
56.61
-
43.45
-
Nov.
76.21
60.57
-
43.27
-
0.94
Dec.
75.14
62.37
-
43.65
-
1.56
PESO AVERAGES P43.62:$1 IN JANUARY
Peso stood slightly stronger against dollar as it averaged P43.62:$1 in January. The
highest close for the month was P44.25:$1. However, the month ended with the peso
market moving below the P43:$1 mask. Bangko Sentral ng Pilipinas (BSP) Deputy
Governor Diwa Guinigundo expects the peso to remain stable in 2012 despite the
slowing global economy crisis. He also reconfirmed that the BSP is maintaining its
assumption of a P42-P45: $1 exchange rate for the whole year.
Php: US$ EXCHANGE RATE
GROSS INT'L RESERVES
-
91-DAY T-BILL AVERAGE DOWN AT 1.55% AVE. IN JANUARY
The 91-day Treasury bill average slightly decreased to 1.55% in January from 1.56%
average in December. The highest average bid for the benchmark t-bill reached 1.67%
from the 2 auctions held for the month. On the other hand, the 182-day rate increased
to an average of 2.02% from 1.83% last month. Meanwhile, there were no bids accepted
for the 1-year tenor on the 2nd auction, posting an average of 2.08% for the month.
According to National Treasurer Roberto Tan, the auction panel decided to reject all
bids for the one year paper because offers were not ‘serious bids’. As of the moment,
he said that market investors are putting their funds on shorter-term papers ahead of
possible policy actions by the Bangko Sentral ng Pilipinas (BSP).
BSP REFERENCE RATES
Peso equivalent per unit of foreign currency
as of January 02, 2012
Australian dollar
Bahrain dinar
%
Change
44.89
44.83
0.1
116.50
115.74
0.7
(0.5)
Brunei dollar
33.74
33.91
Canadian dollar
43.09
42.81
0.7
E.M.U. euro
56.84
58.65
(3.1)
0.8
Hong Kong dollar
91-DAY T-BILL RATE
Month
ago
Ave.
Indonesian rupiah
5.66
5.61
0.0048
0.0048
-
0.57
0.56
1.5
Japanese yen
Kuwaiti dinar
unquoted
unquoted
unquoted
Saudi Arabian rial
11.71
11.63
0.7
Singaporean dollar
33.87
34.04
(0.5)
Swiss franc
46.84
47.77
(1.9)
1.39
1.41
(1.4)
Thai baht
UAE dirham
11.96
11.88
0.7
UK pound
68.25
68.48
(0.3)
US dollar
43.92
43.63
0.7
Others ( not convertible with BSP )
Argentinian austral
10.21
10.20
0.1
Brazilian real
23.58
24.18
(2.5)
Indian rupee
0.83
0.84
(1.0)
Korean won
0.04
0.04
(1.0)
Malaysian ringgit
13.86
13.73
0.9
Mexican new peso
3.15
3.20
(1.6)
New Zealand dollar
34.12
33.92
0.6
Norwegian kroner
7.35
7.56
(2.8)
Pakistani rupee
0.49
0.49
(0.6)
South African rand
5.45
5.38
1.2
Swedish kroner
6.38
6.45
(1.2)
(6.8)
Syrian pound
0.81
0.87
Taiwanese nt dollar
1.45
1.44
0.8
Venezuelan bolivar *
10.24
10.17
0.7
* Effective 01 Jan. 2008 Venezuela’s official exchanre rate was changed to 2.15
bolivars per dollar tyo 2,150 per dollar
Philippine Alert
January 2012
ECONOMIC INDICATORS
SELECTED INTEREST RATES
Average
2 Weeks Ago
Peso Deposit Rates (January 16-20, 2012 )
Saving Deposits
0.10
0.01
below 1 year
3.14
3.05
1 - 2 years
3.81
3.79
Over 2 years
1.56
1.48
Time Deposits
Dollar Deposit Rates ( January 16-20, 2012 )
Saving Deposits
0.31
0.31
60 days and below
0.84
0.83
61-90 Days
1.06
0.96
Time Deposits
91-180 Days
0.97
0.99
181 days and above
1.14
1.21
6.64
6.62
High
7.9
7.91
Low
5.72
5.77
91 days
1.674
1.428
182 days
2.222
1.824
364 days
N.I.
2.077
Bank Lending Rates ( January 16-20, 2012 )
All Maturities
Treasury Bill Primary Rates ( January 24, 2012 )
Money Market Rates ( January 16-20, 2012 )
Promissory Note
4.66
4.67
Commercial Papers w/o recourse
N.T.
N.T.
Manila Reference Rates ( January 16-20, 2012 )
MRR 60
3.69
3.75
MRR 90
6.56
6.63
MRR 180
6.69
6.69
GOVERNMENT FISCAL PERFORMANCE
JAN. TO SEPT. 2011
I. Revenues
BALANCE OF PAYMENTS
January - September 2011 (in US$ million)
2011
Current Account
Goods and Services
Export
Year-Ago
(in PM)
Growth rate
(%)
5,058
3,351
(8,096)
(4,401)
50.9
84.0
48,216
30,331
59.0
62.1
Import
56,312
34,732
Goods
(10,714)
(5,945)
80.2
Credit: Exports
36,584
23,330
56.8
Debit : Imports
47,298
29,275
61.6
2,618
1,544
69.6
Credit: Exports
11,632
7,001
66.1
Debit : Imports
9,014
5,457
65.2
363
(278)
-230.6
Services
Income
Credit: Receipts
5,148
2,903
77.3
Debit : Disbursments
4,785
3,181
50.4
Current Transfers
Credit: Receipts
CAPITAL AND FINANCIAL ACCOUNT
Capital Account
12,790
8,030
59.3
13,445
8,426
59.6
655
396
65.4
5,080
309
1544.0
107.8
106
51
167
86
94.2
61
35
74.3
4,974
258
1827.9
699
332
110.5
Debit: Assets, Residents Investment
abroad
(28)
337
-108.3
Credit : Liabilities, Non-residents
Investment in the Phil
671
669
0.3
Credit: Receipts
Financial Account
Direct Investment
Portfolio Investment
Data
(in PM)
Growth
rate (%)
2010
5,622
(662)
-949.2
abroad
(595)
1,974
-130.1
5,027
1,312
283.2
1,017,088
894,716
0.0%
Tax Revenues
891,360
807,788
10.3%
Non-Tax Revenues
125,728
86,928
44.6%
50
371
-86.5%
1,070,082
1,154,504
-7.3%
-52,994
-259,788
79.6%
9,728
309,507
-96.9%
NET UNCLASSIFIED ITEMS
(410)
(523)
-21.6
-50,622
206,331
124.5%
OVERALL BOP POSITION
9,721
3,137
209.9
Foreign Financing
60,350
103,176
-41.5%
V. Change-in-Cash
11,900
68,628
82.7%
Grants
II. Expenditures
III. Surplus/Deficit
IV. Financing
Domestic Financing
TOTAL EXTERNAL DEBT
JUNE 2011
By Type of Debt
Data
(in $M)
Year-Ago
(In $M)
60,048
54,268
53,753
1.0%
Short-Term
7,156
6,295
13.7%
By Borrower
61,424
60,048
2.3%
14.6%
Banking System
9,378
8,186
42,035
41,542
1.2%
Private Sector
10,011
10,320
-3.0%
61,424
60,048
2.3%
8,197
7,183
14.1%
Banks & Other Financial Institutions
Suppliers
Multilateral
IBRD
IMF
ADB
3,105
3,236
-4.0%
10,876
10,908
-0.3%
2,615
2,583
1.2%
0
0
5,785
5,879
-1.6%
Bilateral
15,702
15,888
-1.2%
Bondholders/Noteholders
22,683
21,861
3.8%
860
972
-11.5%
Others
Philippine Alert
654
-446.2
3,268
1,705
91.7
1,004
2,359
-57.4
2.3%
Public Sector
By Institutional Creditor
(2,264)
abroad
Growth
rate (%)
61,424
Medium and Long-term
Other Investment
BALANCE OF PAYMENTS
CURRENT ACCOUNT
January 2012
25
26
ECONOMIC INDICATORS
MERCHANDISE IMPORTS
January - November 2011 in US$ million
2011
JAN-NOVEMBER TOTAL TRADE STANDS AT $100Bn
CAPITAL GOODS
Total merchandise trade for the January to November 2011 reached $100.14 billion.
When compared to year-ago levels, imports grew by 11% while exports fell by -5.6%.
The trade deficit stood at $10.87 billion.
For the month of November, exports contracted by 19.4%. Top export Electronic products
registered a decrease by 34.5%, with the main product category Components/Devices
(Semiconductors) posting a -29.5% decline. Woodcrafts and Furniture registered a
29.5% increase while Articles of Apparel and Clothing Accessories decreased by 5.4%.
On the other hand, imports decreased by 0.7% from $5.02 billion. Electronic products
emerged as the leading import but its annual growth declined by 19.9%. The second
top import, Mineral Fuels, Lubricants and Related Materials, increased by 30.4% while
Transport Equipment decreased by 32%.
% Change
14,015
6,615
111.9
Telecom eqpmt & elec's eqpmt
7,076
3,477
103.5
Power generating & spec'd eqpmt
3,215
1,171
174.5
Office and EDP machine
1,692
1,116
51.6
534
621
(14.1)
122.4
Transport
Others
511
230
RAW MATERIALS & INTER. GOODS
22,820
7,825
191.6
Semi-processed raw materials
20,498
6,880
197.9
2,323
946
145.6
11,414
4,042
182.4
Unprocessed raw materials
MINERALS, FUELS & LUBRICANTS
FOREIGN TRADE
2010
Crude petroleum
7,195
2,270
216.9
Others
3,674
1,610
128.3
CONSUMER GOODS
6,487
3,313
95.8
Non-durable
3,504
2,212
58.4
Durable
2,984
1,101
171.0
770
332
131.8
55,507
22,128
150.8
SPECIAL TRANSACTION
TOTAL IMPORTS
MERCHANDISE EXPORTS
January - November 2011 in US$ million
2011
MERCHANDISE BALANCE OF TRADE
(in US$ million)
Exports
2011
Jan.
4,000
Imports
2010
3,579
2011
5,302
Surplus/(Deficit)
2010
4,287
2011
(1,302)
2010
2010
Growth rate %
Total Agro-Based Products
3,690
1,072
244.2
Coconut Products
1,660
566
193.1
Sugar and Products
338
34
895.3
Fruit and Vegetables
908
229
296.3
Fish, Fresh or Preserved of which:
shrimps and prawn
333
123
170.5
46
13
244.5
(708)
Forest Products
Mineral Products
2,462
660
273.0
1,095
280
291.1
607
127
378.6
118.0
Feb.
3,865
3,570
4,761
3,904
(896)
(334)
Copper Metal
March
4,353
4,182
5,549
4,556
(1,196)
(374)
Petroleum Products
April
4,302
3,595
5,497
4,568
(1,195)
(974)
Manufactures
36,320
16,658
May
4,108
4,241
4,888
4,812
(780)
(570)
Electronic Products
22,016
11,268
95.4
1,746
655
166.5
Textile Yarns / Fabrics
169
64
162.3
Furniture & Fixtures
152
61
148.9
Chemicals
1,720
610
181.9
Machinery & Transport Equipment
2,606
1,105
135.9
June
4,127
4,555
4,503
4,213
(376)
342
July
4,429
4,505
4,999
4,679
(570)
(174)
Aug.
4,123
4,759
4,925
4,452
(803)
307
Sept.
3,876
5,325
5,134
4,573
(1,258)
751
Garments
Oct.
-
4,776
-
4,890
-
(114)
Iron and Steel
Nov.
-
4,146
-
4,944
-
(798)
TOTAL EXPORTS
Dec.
-
4,201
-
4,949
-
(748)
Philippine Alert
184
76
140.8
44,635
19,167
132.9
January 2012
ECONOMIC INDICATORS
NATIONAL ACCOUNTS
4rt QUARTER 2012
Year-ago
Year-onlevel
year growth
Data
NATIONAL ACCOUNTS
In PB
In PB
10-11
PERCENTAGE DISTRIBUTION OF TOTAL FAMILY EXPENDITURE
By major expenditure group
EXPENDITURE GROUP
2009
Percent
GROSS NATIONAL INCOME
(at constant prices)
2,064.4
1,994.8
3.5%
(at current prices)
3,516.4
3,263.3
7.8%
GROSS DOMESTIC PRODUCT
2006
100.0
100.0
42.6
41.4
Alcoholic Beverages
0.7
0.7
0.8
0.9
Food
(at constant prices)
1,591.2
1,534.9
3.7%
Tobacco
(at current prices)
2,733.3
2,529.6
8.1%
Fuel, Light and Water
7.1
7.6
1,198.5
1,122.7
6.7%
Transportation & Communication
7.7
8.2
2.3
2.3
GNP (at constant prices) by Expenditure Shares
1. Household Final Consumption Expenditure
522.0
501.2
4.1%
Household Operation
b. Alcoholic beverages, Tobacco
18.2
16.8
7.9%
Personal Care and Effects
3.8
3.7
c. Clothing and Footwear
20.2
18.9
7.0%
Clothing Footwear & Other Wear
2.2
2.4
111.4
109.3
2.0%
Education
4.3
4.4
66.5
60.4
10.1%
Recreation
0.4
0.5
f. Health
23.7
21.4
10.5%
Medical Care
2.9
2.9
g. Transport
87.1
84.1
3.5%
Non-Durable Furnishing
0.2
0.2
a. Food and Non-alcoholic beverages
d. Housing, water, electricity, gas and
other fuels
e. Furnishing, household equipment and
routine household maintenance
h. Communication
60.5
58.8
2.9%
i. Recreation and Culture
30.9
27.4
12.8%
j. Education
41
37
k. Restaurants and Hotels
48
44
7.6%
169
143
18.1%
2. Government Final Consumption
Expenditure
124.3
117.4
5.8%
3. Capital Formation
389.0
406.5
-4.3%
4. Exports
572.1
605.2
-5.5%
l. Miscellaneous goods and services
5. Imports
708.4
11.8%
732.3
-3.3%
GNP (at constant prices) by Industrial Origin
1. Agriculture
195.9
201.0
2. Industry Sector
509.3
497.1
2.5%
14.0
15.0
-6.5%
367.1
359.3
2.2%
a. Mning & Quarrying
b. Manufacturing
-2.5%
c. Construction
83.4
75.0
11.2%
d. Electricity, Gas and Water
44.9
47.9
-6.2%
886.0
836.8
5.9%
117.1
114.0
2.7%
281.8
271.3
3.9%
103.8
97.1
6.8%
159.4
145.9
9.2%
3. Service Sector
a. Transport., Comm., Stor
b. Trade, Repair of Motor Vehicles,
Motorcycle & Household Goods
c. Financial Intermediation
d. Real Estate, Renting & Business
Activities
e. Public Administration & Defense:
Compulsory Social Security
f. Other Services
LABOR AND EMPLOYMENT
(New Definition)
60.5
57.0
6.2%
163.5
151.5
7.9%
Apr
July
Oct
Jan
Apr
Jul
Oct
38,933
39,270
39,196
39,661
39,901
41,215
Labor force participation (%)
63.6
63.9
64.2
63.7
64.2
64.3
66.3
Employment (%)
92.0
93.0
92.9
92.6
92.8
92.9
93.6
8.0
7.0
7.1
7.4
7.2
7.1
6.4
17.8
17.9
19.6
19.4
19.4
19.1
19.1
Unemployment (%)
Underemployment (%)
Philippine Alert
2.7
2.7
12.8
12.7
House Maintenance and Minor Repairs
0.6
0.6
Taxes Paid
2.0
1.6
Special Family Occasions
2.7
2.8
Gifts and Contributions to others
1.4
1.4
Other Expenditure
2.9
3.0
Other Expenditures
2.9
2.9
3,239
2,561
Rent/Rental Value of Dwelling Unit
TOTAL FAMILY EXPENDITURES
Source: Family Income & Expenditure Survey (FIES) Final Results 04 February 2009
UNEMPLOYMENT AND
UNDEREMPLOYMENT RATES
2011
2010
38,517
Total labor force
Durable Furniture and Equipment
OFW DEPLOYMENT
hires and rehires
January 2012
27
28
philippine regional update
philippine
regional update
NCR – NATIONAL CAPITAL REGION (METRO MANILA)
Pasig City township project launched
Property developer Ortigas & Co. recently launched a P25-billion mixed-use township project in Pasig City. Called Capitol
Commons, the project involves the development of 5 residential towers, a retail mall with 35,000 square meters of leasable
space, a hotel and an office space for knowledge process outsourcing (KPO) companies. It is located on a 10-hectare property,
with development expected to take 15 years. A high-end shopping mall called Estancia will be the first to rise, with the P2 billion
mall scheduled to open in 2013.
Relocation of riverside settlers starts in 2012
The government is spending P10 billion for the relocation of 20,000 informal settler families living along riverbanks from 2012
to 2016. Pres. Benigno Aquino III led the ground-breaking ceremonies of the Shelter Program in December. The amount is mostly
allocated to the construction of medium-rise buildings on lands owned by local government units (LGU’s) in Pasay, Quezon City
and Manila where the riverside settlers will be transferred.
Pres. Aquino approves budget for NAIA-1 rehabilitation
Pres. Aquino has approved a P1.16-billion budget for the rehabilitation of the Ninoy Aquino International Airport Terminal 1
(NAIA 1). The amount will be used “for urgent structural retrofitting and other rehabilitation work, as well as the construction
of a rapid exit taxiway.” Budget secretary Florencio Abad explained that the budget “addresses the structural integrity of the
terminal for the safety of travelers, and provides the foundation for further improvement work to ensure efficient, convenient
and comfortable travel.”
Region I – ILOCOS REGION
New toll road commences initial operations end-1Q12
The Tarlac-Carmen section of the P11.6-billion Tarlac-Pangasinan-La Union Expressway (TPLEX) will be completed in March 2012,
while the Carmen-Urdaneta section will be operational in April 2012, the Central Luzon Regional Development Council (RDC 3)
said. By October 2014, the Urdaneta-Rosario section will be opened to vehicle traffic. TPLEX is a 2-phase road development
project spanning 89 kilometers. Phase 1, which will be completed in 2014, involves the construction of 2 lanes. Phase 2 is the
expansion of the highway into 4 lanes when capacity reaches 25,000 vehicles per day.
Region II – CAGAYAN VALLEY
Cagayan Valley drilling set
Frontier Oil Corp. of Australia will drill an exploration well at the Nassiping-2 prospect in onshore Cagayan Valley, the Department
of Energy (DOE) reported. The drilling is estimated to cost $5 million. Nassiping-2 is part of the 96,000-hectare service contract
52, located in San Jose, northern Cagayan Valley, which was originally awarded to E. F. Durke and Assiociates. Frontier Oil now
holds 80% interest in SC 52. Nasiping-2 is an existing well containing a previously discovered but untested gas.
Region III – CENTRAL LUZON
Clark international passengers up
International passenger traffic at the Clark international airport reached 725,000 in 2011, a 19% increase from 608,000 the previous
year. In December alone, it rose 36% to 80,800. Clark authorities expect exponential growth in passenger volume over the next
5-7 years, especially since Air Asia Philippines starts operating this year. By 2012, passenger traffic is projected to reach 5 million.
Philippine Alert
January 2012
P1.7Bn flight training school to rise in Clark
Cebu Air Inc. (CAI) is establishing a world-class aviation training facility in partnership with Canadian Aviation Inc. (CAE) at a
cost of at least P1.7 billion. The pilots’ training center is located on a 9,150-hectare property at the Clark Freeport Zone. The
facility will serve the need for pilots of Cebu Pacific Air, the world’s fastest-growing carrier with a requirement of 300-400 more
pilots in the next 5 years, and other airlines in Asia. Over the next 20 years, CAI projects that the Asia-Pacific region will need
about 70,000 pilots.
Region IV – SOUTHERN TAGALOG
Region IV-A – CALABARZON
ALI to spend more for its Laguna project
Ayala Land, Inc. is investing another P12.5 billion for its mixed-use “eco city” project called Nuvali in Laguna within the next 5
years. ALI has spent P8.8 billion so far for the development of 45% of the property covering the towns of Sta. Rosa, Canlubang and
Calamba. The P8.8-billion development consisted of roads, commercial space and residential projects. ALI didn’t disclose how
the P12.5 billion will be spent, but said Nuvali is the company’s “cash cow” outside of its flagship Makati central business district.
Region IX – ZAMBOANGA PENINSULA (WESTERN MINDANAO)
Court grants TRO vs. ordinance banning open pit mining
The Dipolog Regional Trial Court ruled in favor of TVI Resource Development (Phils.) Inc. (TVIRD), issuing a temporary restraining
order (TRO) on the implementation of a provincial ordinance banning open pit mining in Zamboanga del Norte while the legality
of the ordinance is still being determined by the court. This would mean that TVIRD will continue to operate its mine in the
province without worrying about possible local government action against its operations.
Region XI – DAVAO REGION (SOUTHERN MINDANAO)
A new seaport in Davao
Anflo Investment and Management Corp. (Anflocor) announced the construction of a P2.7-billion seaport project in Panabo City.
The project will be implemented on an 8-hectare property that used to be the Tadeco Wharf starting early next year and is
expected to be completed in 1Q13. It will have modern handling facilities, with its container terminal able to accommodate a
total of 240,000 twenty-foot equivalent units (TEU’s) during its first quarter of operations.
Philippine Alert
January 2012
29
30
REGIONAL ECONOMY
REGION
GRDP
(PM at current prices)
2009
2008
REAL GRDP
Growth Rate
2009
POPULATION
('000)
2008
2009
2008
LAND
AREA
(sq km)
PERSONS/
sq km
2009
GRDP/CAPITA
(P)
2008
2009
2008
Philippines
7,678,917
7,409,371
1.1
3.7
92,226
90,458
300,000
307
302
83,262
81,910
Metro Manila
2,813,802
2,740,343
-0.4
4.7
11,403
11,253
636
17,929
17,693
246,760
243,521
Cordillera Administrative
149,450
145,790
2.0
1.7
1,660
1,626
18294
91
89
90,030
89,662
Ilocos Region
215,073
207,409
-1.0
2.0
5,073
4,974
12840
395
387
42,396
41,699
Cagayan Valley
138,872
131,905
1.9
1.7
3,307
3,250
26838
123
121
41,993
40,586
Central Luzon
576,550
571,165
-1.4
3.7
9,964
9,770
18231
547
536
57,863
58,461
Calabarzon
964,823
964,242
-1.6
1.9
11,653
11,403
16692
698
683
82,796
84,560
Mimaropa
802,837
801,842
0.8
3.0
2,941
2,866
29621
99
97
272,981
279,777
Bicol Region
161,986
162,400
8.2
4.1
5,605
5,497
17633
318
312
28,900
29,543
Western Visayas
213,099
189,139
5.9
4.3
7,432
7,290
20223
368
360
28,673
25,945
Central Visayas
543,140
501,234
0.8
3.3
6,891
6,754
14951
461
452
78,819
74,213
Eastern Visayas
518,329
507,397
1.8
3.4
4,359
4,273
21432
203
199
118,910
118,745
Zamboanga Peninsula
173,326
165,220
6.8
2.0
3,419
3,351
15997
214
209
50,695
49,305
Northern Mindanao
186,433
173,368
2.9
5.2
4,260
4,174
28328
150
147
43,764
41,535
Davao
389,624
362,106
5.4
3.7
4,292
4,223
31693
135
133
90,779
85,746
Socksacksargen
367,903
336,953
1.3
4.5
3,992
3,904
14571
274
268
92,160
86,310
Autonomous Region of
Muslim Mindanao
258,936
250,923
2.6
1.6
3,474
3,396
11410
304
298
74,535
73,888
CARAGA
103,822
99,806
2.7
2.7
2,501
2,454
18847
133
130
41,512
40,671
RATE OF INFLATION FOR ALL INCOME HOUSEHOLDS IN THE PHILIPPINES BY REGION (2000 = 100)
2010
REGIONS
2011
Dec.
Ave.
Jan.
feb.
Mar.
Apr.
May.
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Ave.
PHILIPPINES
3.6
2.14
4.1
4.8
4.8
4.7
5.1
5.2
5.1
4.7
4.8
5.2
4.8
4.2
4.77
METRO MANILA
4.0
2.16
3.9
4.6
3.9
3.3
4.4
4.7
4.0
3.3
4.2
4.9
3.5
3.0
4.16
AOMM
3.5
2.16
4.0
4.7
5.1
5.1
5.2
5.4
5.3
5.1
5.0
5.3
5.1
4.5
4.94
CAR
-
-
-
-
-
-
3.2
3.3
3.5
2.7
2.9
3.6
3.3
3.0
-
I Ilocos
-
-
-
-
-
-
4.6
3.9
4.3
3.8
3.8
4.4
3.9
4.1
-
II Cagayan Valley
-
-
-
-
-
-
4.8
4.7
4.5
4.1
3.9
5.5
3.3
2.4
-
III Central Luzon
-
-
-
-
-
-
4.8
5.4
5.4
5.3
5.6
6.4
6.1
5.0
-
IV-A Southern Tagalog
-
-
-
-
-
-
5.1
5.6
5.2
5.0
5.2
5.9
5.5
4.8
-
IV-B Southern Tagalog
-
-
-
-
-
-
6.0
6.0
5.3
5.0
4.7
4.5
4.0
3.6
-
V Bicol
-
-
-
-
-
-
4.5
4.9
4.8
4.8
4.9
4.9
5.3
4.2
-
VI Western Visayas
-
-
-
-
-
-
4.3
4.9
4.4
4.6
4.8
5.0
5.1
4.7
-
VII Central Visayas
-
-
-
-
-
-
5.6
5.1
5.0
4.7
3.5
3.0
3.0
2.8
-
VIII Eastern Visayas
-
-
-
-
-
-
5.1
5.2
5.1
5.0
4.8
4.8
4.5
4.0
-
IX Western Mindanao
-
-
-
-
-
-
6.2
6.3
6.5
6.6
6.1
6.5
6.5
6.3
-
X Northern Mindanao
-
-
-
-
-
-
5.3
5.2
5.5
5.5
5.1
5.5
5.8
6.0
-
XI Southern Mindanao
-
-
-
-
-
-
6.8
6.6
6.6
6.6
6.0
5.5
5.0
4.6
-
XII Central Mindanao
-
-
-
-
-
-
5.8
5.4
5.7
5.1
4.5
4.1
4.2
4.1
-
ARMM
-
-
-
-
-
-
6.3
6.9
6.4
6.7
6.3
6.0
6.1
5.8
-
CARAGA
-
-
-
-
-
-
6.9
7.6
8.2
7.6
6.8
6.8
6.7
6.9
-
Philippine Alert
January 2012
FLOOR AREA OF PRIVATE BUILDING CONSTRUCTION (IN '000 SQM)
2010
3Q
2011
4Q
TOTAL
GROWTH
RATE
1Q
2Q
3Q
TOTAL
GROWTH
RATE
Philippines
4,895,478
5,264,579
20,887,071
29.6
5,530,024
5,322,724
4,392,484
15,245,232
197.3
Metro Manila
2,011,289
2,149,026
8,451,567
81.5
2,023,736
1,507,032
1,041,115
4,571,883
145.4
Cordillera CAR
74,543
58,642
266,629
1.1
66,467
63,435
59,487
189,389
194.6
1-Ilocos Region
186,952
161,681
761,883
(3.2)
237,635
249,844
186,431
673,910
200.0
2-Cagayan Valley
78,137
54,077
293,133
13.9
73,026
89,888
68,164
231,078
231.7
3-Central Luzon
415,978
408,093
1,787,452
(10.8)
554,686
592,948
566,324
1,713,958
217.9
4A-Calabarzon
836,552
702,527
3,538,432
26.8
926,501
887,364
928,223
2,742,088
180.2
4B-Mimaropa
91,615
78,754
322,014
68.2
95,840
67,564
49,980
213,384
165.6
5-Bicol Region
67,573
86,044
352,842
0.7
96,082
152,681
110,580
359,343
185.4
6-Western Visayas
184,916
194,292
878,054
21.1
183,943
164,366
204,106
552,415
90.4
7-Central Visayas
338,594
465,696
1,463,847
(10.1)
485,016
914,596
430,732
1,830,344
526.6
8-Eastern Visayas
74,888
74,185
298,863
3.9
104,056
73,747
75,310
253,113
204.7
9-Zamboanga Penisula
29,912
43,242
126,137
(14.9)
45,333
51,542
52,426
149,301
487.7
10-Northern Mindanao
121,324
188,782
575,099
27.3
172,037
130,629
132,721
435,387
258.2
11-DAVAO
214,709
330,645
1,068,873
4.6
311,081
210,542
289,950
811,573
233.4
12- SOCCSKSARGEN
72,942
194,990
416,794
30.8
93,181
91,060
88,654
272,895
269.8
CARAGA
94,076
55,653
261,249
21.7
59,601
74,567
105,255
239,423
363.1
0
18,250
22,725
27.8
1,803
919
3,026
5,748
484.1
ARMM
VALUE OF PRIVATE BUILDING CONSTRUCTION (IN ‘000)
2010
3Q
2011
4Q
TOTAL
GROWTH
RATE
1Q
2Q
3Q
TOTAL
GROWTH
RATE
Philippines
46,278,769
47,799,354
190,466,918
37.5
52,771,758
55,668,779
41,652,765
150,093,302
217.3
Metro Manila
24,000,788
23,508,923
96,154,464
82.7
25,145,574
25,168,012
13,375,554
63,689,140
172.5
Cordillera CAR
616,487
504,367
2,564,348
17.2
572,289
591,104
597,500
1,760,893
206.4
1-Ilocos Region
1,507,734
1,173,470
5,767,950
(0.2)
1,803,366
1,807,622
1,552,313
5,163,301
202.2
2-Cagayan Valley
459,112
401,370
1,829,503
4.8
539,370
714,773
482,937
1,737,080
252.6
3-Central Luzon
3,496,313
2,835,813
13,470,702
(2.5)
4,257,161
4,548,155
4,059,670
12,864,986
246.9
4A-Calabarzon
6,347,580
5,373,908
27,608,655
30.0
7,226,370
7,704,940
9,398,426
24,329,736
211.7
4B-Mimaropa
641,237
453,857
2,077,799
55.4
667,922
1,210,366
307,623
2,185,911
339.6
5-Bicol Region
441,084
528,129
2,270,409
4.7
909,237
976,281
705,738
2,591,256
232.7
6-Western Visayas
1,679,809
1,810,761
7,139,886
5.6
2,604,344
1,553,300
2,055,263
6,212,907
226.5
7-Central Visayas
2,474,045
3,352,699
10,762,188
(16.0)
3,335,287
6,661,414
3,007,842
13,004,543
469.2
8-Eastern Visayas
543,017
580,846
2,162,231
11.4
1,005,071
691,264
699,421
2,395,756
353.4
234,691
390,383
894,875
(5.2)
224,760
235,247
265,801
725,808
381.9
831,376
1,185,066
4,039,907
47.1
1,275,285
1,093,487
1,012,840
3,381,612
181.7
11-DAVAO
1,909,641
3,274,545
8,594,891
(2.3)
2,266,339
1,693,821
2,799,017
6,759,177
335.3
12-SOCCSKSARGEN
461,689
2,080,635
3,493,479
57.9
621,078
554,880
637,619
1,813,577
318.5
CARAGA
623,320
306,837
1,564,074
22.5
308,242
459,797
659,371
1,427,410
363.3
0
37,745
60,711
(28.8)
10,063
4,316
35,830
50,209
681.3
ARMM
Philippine Alert
January 2012
31
32
EMPLOYMENT RATE BY REGION (IN%)
(New Definition)
2011
2010
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
PHILIPPINES
92.7
92.0
93.1
92.9
92.6
92.8
92.9
93.6
Metro Manila
89.2
88.2
89.1
87.4
88.0
88.4
89.1
89.6
Cordillera CAR
95.0
94.0
95.0
95.6
94.4
95.0
95.3
95.2
1-Ilocos Region
92.1
90.7
91.9
91.4
90.0
90.2
92.1
93.4
2-Cagayan Valley
97.0
94.9
96.1
97.4
96.9
96.7
97.6
97.2
3-Central Luzon
91.0
90.1
92.0
92.0
92.1
91.7
90.4
91.7
4A-Calabarzon
90.5
89.7
90.6
91.0
90.5
90.0
89.6
91.0
4B-Mimaropa
95.8
96.0
95.6
94.9
95.7
96.0
96.2
96.5
5-Bicol Region
94.9
93.4
94.0
94.2
92.9
93.4
94.6
94.7
6-Western Visayas
94.0
90.3
93.4
93.9
93.5
92.4
94.0
93.6
7-Central Visayas
91.9
91.4
94.0
92.3
91.7
93.8
93.7
93.9
8-Eastern Visayas
93.6
95.9
94.7
93.9
93.7
94.3
95.3
96.0
95.3
96.9
96.0
97.0
96.9
96.8
96.7
96.6
94.8
93.6
96.0
95.8
95.1
96.0
94.8
96.1
11-DAVAO
94.0
93.7
94.1
93.9
94.2
94.6
94.2
95.4
12-SOCCSKSARGEN
94.8
95.6
95.8
96.3
96.8
96.0
95.5
96.3
CARAGA
91.9
92.4
94.6
95.1
92.4
95.1
94.1
94.5
ARMM
96.0
95.9
96.0
96.8
96.1
96.3
96.3
97.7
UNEMPLOYMENT RATE BY REGION (IN %)
(New Definition)
2011
2010
JAN
Philippines
APR
JUL
OCT
JAN
APR
JUL
OCT
7.3
8.0
6.9
7.1
7.4
7.2
7.1
6.4
10.8
11.8
10.9
12.6
12.0
11.6
10.9
10.4
Cordillera CAR
5.0
6.0
5.0
4.4
5.6
5.0
4.7
4.8
Ilocos Region
7.9
9.3
8.1
8.6
10.0
9.8
7.9
6.6
Cagayan Valley
3.0
5.1
3.9
2.6
3.1
3.3
2.4
2.8
Central Luzon
9.0
9.9
8.0
8.0
7.9
8.3
9.6
8.3
Calabarzon
9.5
10.3
9.4
9.0
9.5
10.0
10.4
9.0
Mimaropa
4.2
4.0
4.4
5.1
4.3
4.0
3.8
3.5
Bicol Region
5.1
6.6
6.0
5.8
7.1
6.6
5.4
5.3
Western Visayas
6.0
9.7
6.6
6.1
6.5
7.6
6.0
6.4
Central Visayas
8.1
8.6
6.0
7.7
8.3
6.2
6.3
6.1
Eastern Visayas
6.4
4.1
5.3
6.1
6.3
5.7
4.7
4.0
Zamboanga Penisula
4.7
3.1
4.0
3.0
3.1
3.2
3.3
3.4
Northern Mindanao
5.2
6.4
4.0
4.2
4.9
4.0
5.2
3.9
DAVAO
6.0
6.3
5.9
6.1
5.8
5.4
5.8
4.6
SOCCSKSARGEN
5.2
4.4
4.2
3.7
3.2
4.0
4.5
3.7
CARAGA
8.1
7.6
5.4
4.9
7.6
4.9
5.9
5.5
ARMM
4.0
4.1
4.0
3.2
3.9
3.7
3.7
2.3
Metro Manila
Philippine Alert
January 2012
BUSINESS
BUSINESS
PH moves up in World Economic Freedom
ranking
As reported in the 2012 Index of Economic Freedom, the Philippines’ ranking on economic freedom rose
from 115th to 107th out of 179 countries rated. Among the 10 categories, business freedom improved the
most while scores for investment freedom and freedom from corruption were unchanged.
T
he Philippines’ overall ranking on economic freedom rose
by 8 notches to 107th, receiving its highest score of 57.1 in
the survey over the past 8 years (refer to figure below). Out
of 41 countries in the Asia-Pacific region, the Philippines placed
19th while it placed 5th among the 8 rated ASEAN countries. The
country’s score of 57.1 remained slightly below the world, regional,
and ASEAN average scores of 59.5, 57.5, and 59.7, respectively.
Out of the 10 categories considered for determining a
country’s level of economic freedom, the Philippines posted
the most improvement in business freedom. In particular, the
report cited that the country was able to reduce the time and
cost of licensing requirements for businesses. This is consistent
with the 2012 Doing Business report released in October 2011,
stating that the Philippines managed to decrease the amount of
time and procedures in starting a business. Deputy presidential
spokesperson Abigail Valte confirmed this, saying “Business
registration that will take anywhere between 24 to 48 hours
can now be done in 15 minutes.” The government is also
optimistic that the time and cost for licensing and other business
registry-related transactions will further decrease through the
Philippine Business Registry (PBR), a government online
portal launched to facilitate business registration transactions
for faster processing. At present, PBR is only serving sole
proprietors. There is no advice as yet as to when it will
open to serve businesses in all types of ownership.
Philippine Alert
INDEX OF ECONOMIC FREEDOM: PHILIPPINES (2000-2012)
January 2012
33
34
BUSINESS
2012 ECONOMIC FREEDOM INDEX: PHILIPPINES
CHANGE IN WORLD
RANK (2011-2012)
CHANGE IN ASEAN
RANK (2011-2012)
57.1
+8
--
0.9
54.3
+17
--
10.9
4
75.5
-7
-1
(2.3)
6
79.1
-1
--
0.3
19
4
89.7
-9
-1
(1.3)
Monetary Freedom
74
4
77.1
+2
+2
0.8
Investment Freedom
117
5
40
--
--
--
Financial Freedom
72
5
50
-2
--
--
Property Rights
97
6
30
+2
--
--
Freedom from Corruption
136
6
24
+5
--
--
Labor Freedom
124
7
51.7
+2
-1
1
CATEGORY
WORLD RANK
ASEAN RANK
SCORE
OVERALL
107
5
Business Freedom
135
7
Trade Freedom
93
Fiscal Freedom
85
Government Spending
CHANGE IN SCORE
(2011-2012)
The score for investment freedom has not changed in over 4 years.
The next highest increase in ranking among the categories is
freedom from corruption. However, the country’s unchanged score
is the most significant statistic. The report stated that, “government
anti-corruption efforts have been too inconsistent to eradicate
bribery and graft effectively” and that there was no improvement
in alleviating the influence of corruption in business procedures.
Another important category to look into is investment freedom.
Undersecretary and BOI Managing Head Adrian Cristobal Jr.
had said, “BOI is currently revisiting its policies and incentive
framework to ensure that the business environment will sustain
more domestic and foreign investments in the coming years.”
However, the score indicated that no improvement was made in
creating a level playing field that will attract foreign investments.
In fact, the score for investment freedom has not changed in over
4 years. The report said, “Despite a strong desire to attract longerterm foreign investment, systemic inefficiency exacerbated by
heavy bureaucracy discourages dynamic growth in investment.”
The government is claiming improvements in the Philippine
economic freedom but further analysis shows that it did little. The
government needs to be able to provide a more suitable environment
for businesses so they may succeed based on their own efforts.
Tensions in MENA expected to raise PH oil
pump prices
Oil firms have increased pump prices 3 times in January
caused by an evident fear of disruptions in the international
oil supply.
Pump prices in the Philippines have been adjusted 4 times
in January (3 increases and a rollback) adding an estimated
P2.1 per liter to gasoline and P1.6 per liter to diesel. According
to Department of Energy (DOE) Undersecretary Jose Layug
Jr., the oil companies initially planned to announce a one-time
upward adjustment of P2 per liter because of the supply issues
in the Middle East and North Africa (MENA) region, but “We
Philippine Alert
appealed to the companies to stagger the oil price hike and not to
implement the full amount in one day,” said Undersecretary Layug.
There are currently 2 major concerns affecting the world oil
industry. First is Iran’s threat to block the Strait of Hormuz, the
route majorly used to transport oil from the Middle East. The
threat is a retaliation to the European Union’s threat to impose
an embargo on Iranian oil exports if Iran does not stop its
nuclear weapons program. The tension in Iran will constrict the
Philippines’ oil supply since 85% of the Philippines’ oil supply is
imported and 72% of it comes from the Middle East. This would
also mean that the Philippines will have to source more of its oil
requirements from Russia, Malaysia, and Indonesia (see pie chart).
Another major concern is the Nigerian Oil Union’s move to
stop Nigeria’s oil production. The Nigerian Oil Union is protesting
against their government’s decision to remove fuel subsidies and
is threatening to shut down the country’s oil production. A cut-off
in its oil production would generally limit oil supply in the United
States and EU countries. However, this would also limit available
supply in the world market since those countries that source oil
from Nigeria would have to replace their loss by sourcing more
oil from the same countries (such as Russia) that the Philippines
depends on. This will cause pressure for world oil prices to rise.
As a result of these tensions in MENA, oil prices in the
Philippines are expected to further increase, incorporating the
higher costs of buying oil and the limited oil supply. However,
Secretary Ricky Carandang of the Presidential Communications
Development and Strategic Planning Office is assuring consumers
that “The supply-and-demand situation remains relatively
stable and if you look at the analysis, no one is expecting
a sustained spike in oil prices, given the state of the global
economy. In fact, if I’m not mistaken, there is some expectation
that oil prices can soften a bit or at least stay where they are.”
January 2012
BUSINESS
CHANGES IN OIL PRODUCT RETAIL PRICES
Products
January 11
January 13
January 17
January 21
Gasoline
P1.00/liter
P0.80/liter
P0.50/liter
-P0.20/liter
Diesel
P1.00/liter
P0.50/liter
P0.90/liter
-P0.80/liter
Note: Figures presented are estimates.
PHILIPPINES’ OIL PRODUCT RETAIL PRICES
Petroleum Product
As of January 4
As of January 13
Gasoline
P54.73
P56.53
Diesel
P45.19
P46.69
CRUDE IMPORTS BY SOURCE
Source: Department of Energy Oil Supply/Demand report 1H2011
Immigration revives job generation visa
The Bureau of Immigration resumed implementation of the
Special Visa for Employment Generation (SVEG), having
recently issued the revised implementing rules for this.
SVEG, which grants qualified foreign investors the privilege
of staying indefinitely in the Philippines, was introduced in
2009 but suspended in 2011 pending revision of the rules.
The new rules shorten the application process for the visa
but impose stricter documentary requirements.
The Special Visa for Employment Generation (SVEG), also
known as the job generation visa, is issued to non-immigrant
foreigners who employ at least 10 Filipinos for “managerial,
executive, professional, technical, skilled or unskilled
positions” (excluding household helpers) in any “lawful and
sustainable” business activity. SVEG holders are considered
non-immigrants with multiple entry privilege and conditional
extended stay, allowing them to enter and leave the country
without need for other entry and exit permits. This privilege
may also be extended to the qualified foreign investor’s
legal spouse and unmarried children below the age of 18.
SVEG was established through Executive Order (EO) 758
signed by then President Gloria Arroyo. It was introduced to
attract foreign investors to the country and generate employment
Philippine Alert
for Filipinos. SVEG grants foreign investors the privilege to stay
indefinitely in the Philippines in recognition of the public interest
they serve through the creation of jobs. The EO also created
the SVEG One Stop Shop Center to assist in the processing
of applications. SVEG was implemented in March 2009 but
was suspended in July 2011 as the BI undertook a review of its
guidelines. The BI issued the revised rules in December 2011,
and they were approved by the Justice Secretary in January 2012.
Salient among the changes introduced to the SVEG guidelines
(see table) is the revocation of the 1-year probationary visa. Under
the old rules, foreign applicants for SVEG are not immediately
granted a special visa for indefinite stay. Instead, they are first
issued a 1-year probationary visa, upon the expiration of which
they must again file a request for the SVEG for indefinite stay.
With the new rules, the BI has authorized the outright issuance
of SVEG for indefinite stay to foreign applicants, in effect
shortening the application period. BI has, however, emphasized
that the shorter process is accompanied by stricter requirements.
Applicants for the SVEG must show proof that he/she
has substantial investment in a business activity sufficient
to maintain a minimum of 10 full-time Filipino workers
on a regular basis. BI has pegged the cost of a single
job creation at P5 million, inclusive of other investment
requirements such as an office set-up. Thus, minimum total
investment for SVEG compliance would be P50 million.
As proof of compliance, BI is requiring SVEG applicants
to present new documents, among these are individual
contracts of employment, Social Security System ID cards,
and PhilHealth membership cards of every Filipino employed,
on top of the documents already required under the old rules.
This is in contrast to the earlier provision that only required a
certification from the Labor Department stating that the applicant
is employing the minimum number of Filipino workers required.
SVEG allows foreign businessmen to conduct business
in the Philippines without the added burden of processing
the entry and exit documents. Moreover, SVEG ensures
the sustainability of the foreign investments as the rules
provide that the special visas remain effective only for as
long as the investments subsist. Withdrawal of investment
or termination of business operation is a ground for SVEG
revocation, along with non-compliance with the guidelines.
January 2012
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BUSINESS
SVEG grants foreign investors the privilege to stay indefinitely in the Philippines in
recognition of the public interest they serve through the creation of jobs.
In the 1st year of implementation of SVEG, BI issued
about 485 job generation visas for both principal applicants
and their dependents. Of this, 415 special visas were issued
to principal applicants. This generated over 30,000 jobs, for
an estimated total investment of P165 billion. Among the
companies that have availed of the SVEG are the National Grid
Corp. of the Philippines, SamSung Multi-English Company,
Ilocos Norte Mining Co., and Cathay Builders Center Inc.
It is expected that the revival of the SVEG will ease the problem
of unemployment in the country, where 2.8 million Filipinos are
without a job. BI Commissioner Ricardo David Jr. appealed to foreign
investors to employ more Filipinos in their enterprises, so they
could avail of the privilege provided under the job generation visa.
Agri sector posts lower growth in 2011
Total agricultural production in constant prices grew by
2.34% in 2011, lower than the projected 3.5% growth for
the year. The country suffered from a series of devastating
typhoons that left huge damages to crops last year. The
Department of Agriculture (DA) also attributed the low
turnout to declining fish stock caused by overfishing and
other illegal fishing practices.
At current prices, agriculture sector’s gross earnings grew
by 11.52% to P1.4 trillion. Crops subsector grossed P804
billion, representing a 19.45% increase year-on-year. Palay
posted a 10.72% increment due to higher production and prices.
Similarly, gross earnings from corn rose by 25.63%. Other crops
posting higher growth were garlic, tomato, eggplant, onion,
calamansi and cabbage with increases in gross output values,
however, the growth was mainly due to higher farmgate prices.
Gross value of production of livestock subsector amounted to
P212.9 billion, a 1.14% increase from the previous year’s record.
All components under livestock indicated growth in gross receipts.
The poultry subsector registered a 4.83% growth yearon-year with total earnings reaching P158.8 billion. Chicken
production expanded by 5.1% while that of chicken egg
increases by 4.66%. Although duck production dropped by
2.26%, gross value of duck egg production still grew by 2.21%.
Fisheries production posted a measly 1.85% growth to
P158.8 billion at current prices. Aquaculture and municipal
fisheries increased by 3.79% and 3.06%, respectively. On
the other hand, commercial fisheries dropped by 2.36%.
All 4 subsectors – crops, livestock, poultry and fisheries –
indicated output expansion but this is mainly due to higher prices.
Their gross value of production at constant prices will actually
show no substantial increase or even a decline in the majority
of the agricultural commodities particularly under the fisheries
subsector. At constant prices, fisheries dropped by 4.07% after
being pulled down by commercial fisheries plunging by 16.29%.
Aside from typhoons, fishkills also hit various provinces in the
country further causing damages to the fisheries subsector. The
DA is allotting P1.9 billion this year for a fisheries program that
will aid in producing adequate supply of fishery and aquaculture
products. The program, which will be spearheaded by the Bureau
of Fisheries and Aquatic Resources (BFAR), intends to educate and
help fisherfolk families become self-sufficient through livelihood
training and other income opportunities. The government said
that this initiative to support the fisheries sector shall also
improve the quality of the country’s aquaculture products.
The DA is also spending a huge part of its P61.7 billion budget
this year to the government’s Food Staples Sufficiency Program
(FSSP), which will pursue the goal of attaining sufficiency in
major staples such as rice, white corn, and cassava. A total of
P11.35 billion, which includes the P1.9 billion for fisheries,
from DA’s budget will be broken down to major commodity
programs – P6.2 billion for rice, P951 million for corn, P1.3
billion for high-value crops, and P1 billion for livestock.
The FSSP will include construction of infrastructure like
irrigation, farm-to-market roads, and postharvest facilities. In
partnership with local government units, DA will construct and
rehabilitate more than P5 billion worth of farm-to-market roads
(FMRs) or about 1,284 kilometers, under foreign-assisted and
locally-funded projects. The DA will also build major agrifishery trading centers such in La Trinidad, Benguet; Urdaneta,
Pangasinan; San Jose, Camarines Sur; and in Argao, Cebu.
It is expected that the initiatives of the government for
2012 will allow the agriculture sector to recover from the low
turnout last year. Agriculture remains to have high potential
as driver for rural development. The government has already
recognized the primacy in investments in infrastructure and
market-enabling strategies in agriculture. The challenge now is
to ensure that the programs in place are implemented efficiently.
Higher gross value of production was mainly due to higher farmgate prices.
Philippine Alert
January 2012
BUSINESS
GROWTH IN GROSS VALUE OF PRODUCTION, 2010-2011 (IN %)
SUBSECTORS
IN CURRENT PRICES
IN CONSTANT PRICES
Crops
19.45
4.82
Livestock
1.14
1.99
Poultry
4.83
4.34
Fisheries
1.85
-4.07
Commercial
-2.36
-16.29
Municipal
3.06
-2.85
Aquaculture
3.79
2.44
DTI starts consultations to craft new industry
roadmaps
The Department of Trade and Industry (DTI) will hold
a series of consultations for the crafting of new industry
roadmaps following the recommendations from various
business groups to revive industrial planning activities.
The government intends to align its trade and investment
programs with the country’s competitiveness goals.
The 2012 Strategic Industry Development Forum:
Partnerships for Inclusive Growth served as the first leg of
consultations with the private sector spearheaded by the DTI.
The forum was attended by various industry and business
groups. The initiative will be a collaboration with the National
Competitiveness Council (NCC) since competitiveness
goals must be integrated in the industry roadmaps. During
the kick-off forum, the NCC presented a template for the
scheme. The details of the template specifically stated that
the roadmaps are proposed to be divided into “short (20122016), medium (2013-2022), and long (2023-2030) term
goals and strategies identified with milestones to coincide
with the terms of the Philippine Development Plans (PDP).”
During the administration of the late President Ferdinand
Marcos, at least 10 industries were identified as priority but
were not sustained. According to DTI Undersecretary Cristino
Panlilio, the idea is allow the respective industries to be at the
forefront of the roadmaps starting from the planning stage.
“The main difference is that this one is led by the industries
themselves and the DTI will champion these roadmaps. Before
it was the government that crafted the industry policies,
it was too centralized,” Mr. Panlilio said in a statement.
Industries are advised to include 7 uniforms chapters in
their respective roadmaps:
 Context in which the road map was developed and the
methodology used to formulate its contents
Vision, goals, and targets of the industry for the three
phases of the road map
Strategies and plans of action to achieve the objectives
listed in the previous chapter
Status quo and historical performance of the industry to help
the government determine the former’s size, contribution,
and economic potential
Support programs the industry has received from both the
government and private sector. These support mechanisms
can include incentives, marketing schemes, research and
development, and financing.
Summary of the industry using a SWOT (strengths,
weaknesses, opportunities, and threats) analysis
Recommendations to the government on policies,
prioritization of strategies, activities, and implementation
Aside from pushing for industry roadmaps, DTI is also eyeing
the revival of the Investment Ombudsman to further strengthen the
business climate in the country. The Aquino administration is facing
a tough challenge of improving investor confidence in the country.
The Investment Ombudsman shall help protect businessmen or
investors specifically from harassment cases, and conflicting local
and national laws. It will be attractive for investors to know that
the Philippines values their interests and businesses, and is making
the necessary steps to build a more business-friendly environment.
MINING , OIL, & GAS
Courts may resolve open-pit bans
TVI Resources Development won a preliminary injunction from the Regional Trial Court against an open-pit ban
ordinance in Zamboanga del Norte. Sagittarius Mines Inc.
advised to resolve the environmental ordinance banning
open-pit mining in South Cotabato to court.
The Regional Trial Court (RTC) in Dipolog city granted the
request of TVI Resources Development for a preliminary injunction
against the Provincial Ordinance ZN-11-128 of Zamboanga del
Norte that bans open-pit mining. The request for preliminary
injunction, filed by TVI in November 8, 2011, was ordered by
Judge Rogelio Laquihon of RTC Branch 6 in January 4, 2012.
Judge Rogelio Laquihon ordered the preliminary injunction due
to the following reasons - TVI would suffer grave and irreparable
The Investment Ombudsman shall help protect businessmen or investors specifically
from harassment cases, and conflicting local and national laws.
Philippine Alert
January 2012
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38
BUSINESS
The president, quite simply, needs to step in and resolve the issue.
damage and injury if the ordinance will be implemented and TVI
has initially established a strong case of the unconstitutionality
of the local ordinance. The injunction effectively stops the
implementation of the local ordinance that seeks to end the openpit mining operations of TVI’s Canatuan copper-gold project a
year after its implementation last November 6, 2011. It also
shields TVI’s mining operations from any new local policies
while the legality of the ordinance is being tried in court. With the
preliminary injunction, however, TVI is ordered to post a P2 billion
bond to answer for any damages sustained by respondents, who
are the provincial officials of Zamboanga del Norte, once the court
finally decide that the petitioner is not entitled to the injunction.
The ruling of the RTC against the open-pit ban has renewed
hope for the mining industry but created further problem for
others. Atty. Jess Dureza, former presidential adviser on Mindanao
affairs stated that, “The Dipolog RTC in ruling against a ban
on open-pit mining has set a judicial trend or what we call a
case of first impression.” The Chamber of Mines, the largest
association of mining companies in the country, added that the
ruling might help align local mining regulations to national laws,
such as the issue on another open-pit ban in South Cotabato.
The open-pit ban in South Cotabato, which was implemented
in July 2010, blocks the development of the $5.9 billion
Tampakan copper-gold project of Sagittarius Mines Inc. (SMI),
the country’s biggest (intended) mining investment so far. SMI
submitted its application for an Environmental Compliance
Certificate (ECC) last October 18, 2011 but this was declined
by DENR Secretary Ramon Paje on January 3, 2012 due to the
prevailing open-pit ban. With TVI’s initial success, Sec. Paje
advised SMI to resolve the open-pit ban in court, specifically
the Supreme Court (SC). The officials of SMI, however,
prefer to negotiate with provincial officials to resolve the ban.
SMI rejected Sec. Paje’s advice due to the current state of the
country’s judicial department. The SC has 8,400 cases before it
as of December 2011 while the impeachment trial of its chief
justice is ongoing. Fortunately, TVI’s request for preliminary
injunction was granted swiftly despite the large volume of cases
being faced by RTCs. But, this can’t always be the case. Some
of the filed cases have been non-moving for 10 years (average
cases) and some have been dormant for 24 years (extreme cases).
Leaving the resolution of open-pit ban ordinances to courts will
delay mineral projects for years, which could have generated
much wealth, substantial foreign direct investment, considerable
revenues, and thousands of much-needed jobs. SMI does not
need to go to court; what SMI needs is a firm implementation
of a clear cut policy on mining from the government. The
President, quite simply, needs to step in and resolve the issue.
Philippine Alert
OceanaGold to commission Didipio in 4Q2012
After surpassing numerous problems during project’s development stage, OceanaGold now expects to commission
the Didipio copper-gold project by 4Q2012.
OceanaGold Corporation is one of the biggest Asia-Pacific
gold producers in the world. A listed mining company in Australia,
OceanaGold has mining concessions equivalent to 3.83 million
ounces of gold and 229,000 tons of copper in New Zealand and
the Philippines. Its mineral properties in New Zealand include
the Macraes and Reefton gold fields, while Didipio copper-gold
project is its main asset in the Philippines. The Didipio coppergold project is managed by OceanaGold’s local unit, OceanaGold
Philippines Inc. (OGPI). The Didipio site comprises 14,187
hectares in Kasibu, Neuva Vizcaya and contains an estimated 1.68
million ounces of gold and 229,000 tons of copper. OGPI plans to
produce an average of 100,000 ounces of gold and 14,000 tons of
copper per year during Didipio’s mine life (16 years) but critical
problems early on in the project made this goal seem unattainable.
One of the critical problems faced by the project pertains to
Didipio’s status as a foreign-owned mine. The Didipio coppergold project was the first mineral project entered into by the
Philippine government under the Financial Technical Assistance
Agreement (FTAA) that allowed 100% foreign ownership. Antimining groups have regarded the FTAA as in direct conflict with
the Philippine constitution, which only allows 40% ownership
by foreign investors. The widespread opposition to the Didipio
copper-gold project also adversely affected public perception
in Climax Mining (Didipio’s original contractor) affecting the
company’s reputation and hindering progress in the project. In
February 1, 2005, Didipio’s ownership status was cleared when
the Supreme Court upheld the constitutionality of the FTAA but
opposition to its foreign contractor, which is now OGPI, remained.
From 2007 to 2008, 2 more issues emerged. The mine was
placed under care and maintenance due to the global economic
crisis. Then, OGPI was accused of demolition of 29 houses in
Didipio village without a court order and just compensation or
relocation site for the affected residents. This accusation led to
the proposal of the Commission on Human Rights Chairwoman
Loretta Rosales to revoke the FTAA agreement with OGPI. OGPI
refuted the accusation and in 2011, finally resolved the issue.
Despite the problems experienced, OGPI remained
focused and worked diligently at Didipio’s mine site.
Construction of operational structures started in June 2011
and is currently ongoing. Construction work at Didipio have
amounted to $30.9 million, which is almost 50% of the
total construction expenditure of OceanaGold Corporation
as of 4Q2011. OGPI expects to start mining activities
by 1Q2012 and commission its gold facility in 4Q2012.
January 2012
BUSINESS
Construction works at Didipio amounted to $30.9 million.
DIDIPIO COPPER-GOLD PROJECT TIMELINE
June 20, 1994: FTAA was approved but its constitutionality was challenged by anti-mining groups;
February 1, 2005: The Supreme Court upheld the constitutionality of the FTAA;
2006: OGPI was formed after the merge with Climax Mining and acquired the Didipio copper-gold project;
2007: OceanaGold was accused of illegal demolition and violation of human rights;
2008: Didipio site placed under care and maintenance due to the global financial crisis;
2009: Amended Mining Feasibility Study;
2010: Pre-construction activities commenced; OGPI allotted $140 million for construction works;
2011: Resolved the human rights issue; Didipio Technical Report submitted to OceanaGold Corp.; resumed civil and construction works;
1Q2012: Start of mining operations
4Q2012: Commissioning of gold facility;
Vale International to ship iron ore from Subic
Brazil’s Vale International, one of the leading logistics and
mining companies in the world, is set to operate an ore
transshipment hub in Subic Bay Freeport while its local
mining unit, Vale Exploration Philippines, is developing
mineral projects.
Vale International, Brazil’s largest iron ore carrier and
mining company, has entered into a memorandum of agreement
(MOA) with the Subic Bay Metropolitan Authority (SBMA)
to operate a transshipment hub for iron ore distribution in Asia
at the Subic Bay Freeport Area. The transshipment hub will
receive Valemax ships, the world’s largest dry bulk carriers,
which have a gross register tonnage (GRT) of 400,000. The
Valesmax ships will carry iron ore shipment from Brazil that
will be transferred to smaller daughter vessels or feeders (either
Panamax or Capesize types), which in turn will distribute the
shipments to other Asian countries, especially China. The first
Valemax ship is expected to arrive on February 11, 2012. SBMA
authorities expect to earn P100 million annually from this
operation. Vale is also studying the possibility of constructing
an onshore facility, where they can store other minerals.
Prior to the MOA with SBMA, Vale International’s local
unit, Vale Exploration Philippines, entered into mineral options
agreements with Geograce Resources Philippines and Royalco
Resources Limited, among others. In 2008, Vale Exploration
signed a $6 million-Option Agreement with Geograce Resources
Philippines to explore 7 mineral claims. The 7 mineral claims
are all located in Masbate Island, which comprise 84,046
hectares. The Option Agreement, which directs Geograce to
secure exploration permits and maintain the Masbate claims,
authorizes Vale Exploration to acquire 51% interest in the Masbate
claims after conducting initial evaluation and exploration. The
initial evaluation and exploration, initially set for 3 years, was
extended in May 2011. Vale Exploration conducted geochemical
and geophysical activities at the mineral claims and is
currently seeking permits to undertake an aeromagnetic survey.
Vale Exploration had also inked a $5-million Option
Agreement with Royalco Philippines Inc., the local subsidiary of
Australia’s Royalco Resources Limited, to explore the Gambang
Tenement last February 26, 2010. The exploration program of
the Gambang Tenement, which is situated within the Central
Cordillera of North Luzon, consists of 3 phases. Phase 1 included
infill grid soil sampling, among others, while Phase 2 consisted of
drilling activities, which started in November 10, 2011. Drilling
as well as other exploration activities is expected to continue in
Phase 3, which is projected to commence shortly. The Gambang
Tenement is bordered by the Far South East copper-gold project
of Lepanto Consolidated and Goldfields Limited in the North, one
of the priority mineral development projects of the government.
The growing business interest of Vale International in
the Philippines is a direct impact of China’s expected high
demand for minerals. China has been a significant driver of
global growth in the past decade. Its robust economic growth,
which averaged 10% per year, has produced the world’s
largest steel market. China’s steel consumption (iron ore and
coal is expected to rise by 750 million metric tons in 2015.
SBMA authorities expect to earn P100 million annually from
Vale International’s transshipment hub for iron ore distribution.
Philippine Alert
January 2012
39
40
BUSINESS
I.T. UPDATE
Manila, Cebu among the world’s top 10
outsourcing cities in Tholons report
Anti-outsourcing bill in the U.S. is election
campaign-related
The 2012 Top 100 Outsourcing Destinations report by international outsourcing think tank Tholons was released in
early January 2012, and includes 5 cities from the Philippines – Manila (4th), Cebu (9th), Davao (69th), Sta. Rosa,
Laguna (86th), and Iloilo (92nd).
Another bill seeking to restrict U.S. companies from outsourcing their operations to other countries has been filed
in the U.S. Congress in early December 2011. Stakeholders
in the Philippine IT-BPO industry were initially concerned.
After further observation, though, they concluded that the
filing of the bill is election campaign-related, and anticipate
that it will meet strong opposition from U.S. companies
should it progress in Congress.
The Call Center and Consumers Protection bill or U.S. House
bill 3596 proposes to make American call centers operating
overseas ineligible for federal grants and loans for a period of 5
years. It also proposes a hefty penalty for a company’s failure to
report the offshore relocation of operations to the Labor department,
among others. During the 2004 and 2008 U.S. elections, several
groups similarly called for a stop to the “outsourcing of jobs” by
U.S. companies, aggravated by the unemployment situation in the
country. Back then, such moves were opposed by the business
community, and would again be opposed this election year.
When the U.S. economy began experiencing a decline some
years ago, some feared that this would affect the growth of the
Philippine IT-BPO industry. But the local outsourcing industry – also
the largest call center industry in the world – continued to expand,
proving that outsourcing practices help businesses keep afloat.
“Based on our experience, we believe outsourcing actually
makes U.S. businesses competitive. It, in fact, allows them to
increase the employment in their areas of core competence,”
BPA/P chairman Alfredo Ayala said in reaction to U.S. House
bill 3596 – which President Obama announced he supported
during his State of the Nation Address in late January this year.
House bill 3596 seeks to require call center operators,
on answering calls, to identify their location in order to give
American callers the option to choose a local operator. A
$10,000 dollar-a-day penalty is also proposed for call centers
that fail to report its relocation to an offshore location within 60
days to the Labor department. The bill appears to be a revival
of a 2004 bill filed by California State Senator Liz Figueroa.
Valued at over $6 billion, the Philippines currently has the
largest call center industry in the world, after overtaking India,
whose call center industry is valued at close to $6 billion, for
the top spot. Over 70% of Philippine outsourcing contracts
serve U.S. clients; Japan roughly accounts for 16%, Europe
takes up 9%, and the rest are clients in the Asia-Pacific region.
In the effort to create a more diversified portfolio of clients, the
Business Process Association of the Philippines (BPA/P) had been
focusing marketing initiatives to the U.K. and Australia markets.
India has 13 cities on the list, including Bangalore (1st),
Mumbai (2nd), and Delhi (3rd). China has 8, including Shanghai
(10th) and Beijing (12th). Most of the biggest gainers on the
top 100 list are from the Latin American region, reinforcing the
observation that U.S. businesses have also been increasing their
“nearshoring” practices as part of their overall outsourcing strategy.
Despite this trend, India remains to be the leader in IT
and knowledge process outsourcing (KPO); China is a strong
ITO player; and the Philippines is still the primary call center
destination. The Business Process Association of the Philippines
(BPA/P) is confident that the industry’s 2011 revenues will be
somewhere near its target of $11 billion, with employment figuring
at more than 600,000. Apart from the call center business, the
industry association is targeting the following service niches: 1)
Healthcare Information Management; 2) Finance and Accounting;
3) Human Resources; and 4) Animation and Game Development.
Egypt’s Cairo (49th) and Alexandria (73rd) experienced the
worst drop in the Top 100 list, falling 35 places and 16 places,
respectively, as the country went through a violent political
revolution last year. Thailand’s Bangkok, which suffered
from massive flooding in October 2011, dropped 10 places to
87th. These developments illustrate the risk of concentrating
outsourced operations to a particular area, making the case
for having outsourced operations in more than one region,
and strengthening the prospect of nearshore locations. Thus,
a third of the Top 100 cities are located in either Eastern
Europe or South America, which are “nearshore” locations
for the top outsourcing clients from Europe and the U.S.
Meanwhile, 12 cities from the Southeast Asian region
are on the list (see table). Next to Manila and Cebu, the
next top ranked cities are Vietnam’s Ho Chi Minh (17th)
WORLD’S TOP 10 OUTSOURCING CITIES
1
India
Bangalore
2
India
Mumbai
3
India
Delhi
4
Philippines
Manila
5
India
Chennai
6
India
Hyderabad
7
India
Pune
8
Ireland
Dublin
9
Philippines
Cebu City
10
China
Shanghai
Outsourcing practices help businesses keep afloat.
Philippine Alert
January 2012
BUSINESS
TOP GAINERS: OUTSOURCING TOP 100 LIST
COUNTRY
CITY
GAINS IN THEIR RANKING
South America
Colombia
Bogotá (55th)
9
South America
Colombia
Medellin(60th)
8
South America
Chile
Valparaíso(82nd)
7
Central America
Costa Rica
San José(18th)
7
South America
Uruguay
Montevideo(43rd)
7
Central America
Puerto Rico
San Juan(59th)
6
Eastern Europe
Poland
Wroclaw(78th)
6
North America
U.S.A.
Birmingham, Alabama(80th)
6
North America
U.S.A.
St. Louis, Missouri(81st)
6
South America
Brazil
Campinas(90th)
6
Southeast Asia
Philippines
Iloilo City(92nd)
6
South Asia
India
Bhubaneswar(53rd)
5
SOUTHEAST ASIAN CITIES: OUTSOURCING TOP 100 LIST
RANK
COUNTRY
CITY
4
Philippines
Manila (NCR)
9
Philippines
Cebu City
17
Vietnam
Ho Chi Minh City
21
Vietnam
Hanoi
28
Malaysia
Kuala Lumpur
35
Singapore
Singapore
62
Indonesia
Jakarta
69
Philippines
Davao City
77
Malaysia
Penang
86
Philippines
Santa Rosa, Laguna (or Metro Laguna)
87
Thailand
Bangkok
92
Philippines
Iloilo City
* Vietnam & Indonesia carving a niche in ITO; Singapore and Malaysia making a niche in BPO services, specifically finance & accounting.
NUMBER OF TOP OUTSOURCING CITIES BY REGION
* Russia (Eastern Europe) – 4 cities; Brazil (S. America) – 6; Colombia (S. America)
– 4; India (S. Asia) – 13; Philippines (SE Asia) – 5; China (E. Asia) – 8.
Philippine Alert
and Hanoi (21st), which both provide ITO services.
Iloilo city was one of the top gainers in the list, rising 6
places. City major Jed Mabilog attributed the rise in ranking to
the completion of the coal-fired plant in the La Paz district that
stabilized the city’s power supply. The city has also attracted
more real estate development projects and houses several IT
parks. The presence of the Iloilo Federation for IT (IFIT) also
strengthens the city’s outsourcing profile. IFIT institutionalizes
cooperation among the local government, the private sector,
and the academe for the development of IT-BPO activities in
the area. Call center fundamentals have also been incorporated
in the courses offered by some Iloilo universities; 4 institutions
in the city offer finishing courses for call center agents and
medical transcriptionists with full scholarships from TESDA
(Technical Education and Skills Development Authority).
January 2012
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BUSINESS
PROJECTS APPROVED BY CLARK DEVELOPMENT CORPORATION
NOVEMBER TO DECEMBER 2011
PROJECT COST
(IN PHP MILLION)
EQUITY
LOCAL/FOREIGN
Manufacture of pharmaceutical products
137
47% Australian
53% Filipino
Restoration of antique furniture and manufacture
50
100% Australian
25
60% Filipino
40% Korean
INDUSTRY
ACTIVITY
CHEMICAL AND CHEMICAL PRODUCTS
DHLI DENTAL HEALTH LABORATORIES,
INC. (DHLI)
FURNITURE AND FIXTURES
BESPOKE FURNITURE MANUFACTURING &
RESTORATION, INC.
HOTEL, RESTAURANT AND LEISURE SERVICES
MUGUNGHWA-CLARK INC.
Operation of restaurant, café, convenience store, souvenir shop, golf cart rental,
golf tours and massage spa or wellness center
RIZHANE FOODS
Canteen operations
CLARK NATURE PARK, INC.,
Operate and develop the existing picnic ground into a nature park with sports,
recreational and commercial facilities
50
GNGN EIKAIWA PHILS.,INC.
English language tutorial services
17
100% Japanese
MONTPAC GLOBAL SOLUTIONS, INC.
Business process outsourcing
1
100% American
INVENTASIA PHILIPPINES INC.
Business process outsourcing
1
100% Hong Kong
100% Korean
0.06
100% Filipino
OFFSHORING AND OUTSOURCING
OTHER BUSINESS SERVICES
W MIN JUN CORPORATION
Office space operations
3.5
MICAH BAZAAR
Retail of commercial items such as clothes, apparel, health and beauty products,
accessories, food items etc.
0.5
WAREHOUSING, STORAGE AND LOGISTICS SERVICES
AVIVA GLOBAL FOODS INCORPORATED
Warehousing, storage, vendor inventory management and repacking of locally
produced consumer goods
TOTAL
Philippine Alert
6
100% Filipino
291.06
January 2012
BUSINESS
BOI INVESTMENTS
DECEMBER 2011
PROJECT COST
(IN PHP MILLION)
Equity
Local/Foreign
Producer of Motorcycle
2500
99.61% Japanese
Renewable Energy Developer of 90MW Pililla Wind Energy Resources
12000
100% Filipino
Producer of Ice Pops, Juice Drinks and Jellies
16
100% Filipino
EASTWIND GROUP MANAGEMENT SYSTEMS INC.
IT Service Provider
5
60% Filipino;
40% Australian
HP OUTSOURCING PHILS., INC.
IT Service Provider in the Field of Software Development, Business/Knowledge
Process Outsourcing and Other IT Related Services
9
100% Filipino
8994
100% Dutch
Producer of Granulated Rock Phosphate
45
60% Filipino;
40% Japanese
HOUSEHOLD DEVELOPMENT CORPORATION
Developer of Low-Cost Mass Housing Project (Camella Sueño - Horizontal)
77
100% Filipino
IPADS DEVELOPERS, INC.
Developer of Low-Cost Mass Housing Project (Dian Place - Makati - Vertical)
59
100% Filipino
AVIDA LAND CORPORATION
Developer of Low-Cost Mass Housing Project (Avida Towers Cebu - Vertical)
445
100% Filipino
Developer of Low-Cost Mass Housing Project (Avida Towers San Lazaro 5 Vertical)
245
100% Filipino
Developer of Low-Cost Mass Housing Project (Avida Towers Cebu Tower 2 Vertical)
196
100% Filipino
Developer of Low-Cost Mass Housing Project (Avida Towers Sucat Tower 7 Vertical)
153
100% Filipino
INDUSTRY
ACTIVITY
AUTOMOTIVE
HONDA PHILIPPINES, INC.
ELECTRICITY, WATER, AND GAS
ALTERNERGY WIND ONE CORPORATION
FOOD AND BEVERAGES
SWEET HEAVEN INDUSTRIES CORP.
IT- ENABLED SERVICES
METAL INDUSTRIES
OCEANAGOLD (PHILIPPINES), INC.
Producer of Dore Bars and Copper Concentrate
MINING
KOLINSKI PHOSPHATE MINING CO., INC.
REAL ESTATE AND PROPERTY DEVELOPMENT
FILINVEST LAND, INCORPORATED
Developer of Low-Cost Mass Housing Project (Somerset Lane - Horizontal)
65
71.5% Filipino;
28.5% Foreign
(various)
TWENTY TWO FORTY ONE PROPERTIES, INC.
(FORMERLY: SM DEVELOPMENT CORPORATION)
Developer of Low-Cost Mass Housing Project (Green Residences - Vertical)
3472
98% Filipino; 2%
Foreign (various)
DO-WELL REALTY DEVELOPMENT CORPORATION Developer of Low-Cost Mass Housing Project (City Residences - Vertical)
283
80% Filipino; 20%
Chinese
FILINVEST LAND INCORPORATED
Developer of Mass Housing Project (Aldea del Sol - Phase 5 & 6 - Horizontal)
87
71.5% Filipino;
28.5% Foreign
(various)
SM DEVELOPMENT CORPORATION
Developer of Low-Cost Mass Housing Project (Wind Residences Tower 3 Vertical)
428
98% Filipino; 2%
Foreign (various)
Developer of Low-Cost Mass Housing Project (Mplace @ Ortigas - Vertical)
1377
98% Filipino; 2%
Foreign (various)
PROHOMES DEVELOPMENT, INC.
Developer of Low-Cost Mass Housing Project (Fleur de Ville Subdivision Horizontal)
250
100% Filipino
PROHOMES DEVELOPMENT, INC.
Developer of Low-Cost Mass Housing Project (Haniyyah Homes Subdivision Horizontal)
447
100% Filipino
COMMUNITIES DAVAO, INC.
Developer of Low-Cost Mass Housing Project (Camella Northpoint - Nottingham
Bldg. - Vertical)
242
100% Filipino
Developer of Low-Cost Mass Housing Project (Lessandra Bacoor 4 - Horizontal)
78
100% Filipino
Developer of Low-Cost Mass Housing Project (Camella La Vecina at Dos Rios Horizontal)
411
100% Filipino
Developer of Low-Cost Mass Housing Project (Shell Residences Buildings
A,B,C,D - Vertical)
3408
98% Filipino; 2%
Foreign (various)
FORTE REALTY CORPORATION
Developer of Low-Cost Mass Housing Project (Villa Alicia III - Vertical)
92
100% Filipino
PREMIERE FIESTALAND, INC.
Developer of Low-Cost Mass Housing Project (The Venetto Heights - Horizontal)
114
100% Filipino
399
100% Filipino
14000
100% Filipino
STORAGE, WAREHOUSING AND LOGISTICS SERVICES
ARGO INTERNATIONAL FORWARDERS, INC.
Operator of a Cold Storage Warehouse Facility
MANILA NORTH HARBOUR PORT, INC.
Operator of Port
GREENHAVEN PROPERTY VENTURES, INC.
Operator of Tourist Accommodation Establishment (Holiday Inn and Suites)
TOTAL
Philippine Alert
1966
100% Filipino
51,863
January 2012
43
44
BUSINESS
BUSINESS CLIMATE INDEX
FOREIGN DIRECT INVESTMENT
Balance of Payments Concept; JAN-APR 2011
Source
LEVEL (US$ million)
YEAR-ON-YEAR
% CHANGE
CURRENT
YEAR AGO
TOTAL FDI
729
968
-24.7%
of which: equity capital
93
203
-54.2%
reivested earnings
378
275
37.5%
* includes outflow of $181 Mn as other capital account.
INDUSTRIAL PERFORMANCE
OCTOBER 2011 (2000=100)
Volume of Production Index (VoPI)
Data
(index)
Year-on-year Year-to-date
growth
growth
94.2
-6.4
a. Food
115.4
-27.3
-3.0
b. Beverage
104.2
26.8
21.7
c. Tobacco
7.4
12.1
-32.5
d. Textile
47.8
-1.0
-5.7
e. Footwear and Wearing Apparel
20.6
-18.3
6.6
f. Wood and Wood Products
56.1
-5.1
-21.1
303.3
144.2
90.8
h. Basic Metals
73.3
-36.6
-10.0
i. Iron and Steel
67.7
-26.2
-17.9
j. Non-ferrous Metals
97.7
-45.8
6.1
219.0
-8.5
13.0
l. Machinery Excluding Electrical
22.5
-28.3
-34.6
m. Electrical Machinery
62.8
-21.8
2.4
n. Transport Equipment
157.3
17.2
6.4
o. Other Mfg Industries
434.0
66.3
66.7
p. Paper & Paper Products
77.4
-2.5
17.8
q. Publishing & Printing
50.6
1.8
-8.1
r. Leather Products
12.9
416.0
43.3
s. Rubber Products
242.7
12.9
10.9
t. Chemical Products
111.0
15.5
19.0
u. Petroleum Products
63.7
8.0
4.5
v. Non-Metallic Mineral Products
136.3
13.6
7.7
w. Glass & Glass Products
124.5
-1.8
7.0
x. Cement
165.1
19.1
5.4
92.5
6.1
15.4
g. Furniture & Fixtures
k. Fabricated Metal Products
y. Misc. Non-Metalic Mineral
Products
VALUE OF PRODUCTION INDEX (VAPI)
AVERAGE CAPACITY UTILIZATION
Philippine Alert
FDI:BOP CONCEPT
US$ million
8.8
152.6
1.9
8.1
83.1
0.1
83.1
2500
2000
1500
1000
500
0
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
MOTOR VEHICLE SALES
JUNE 2011
Data
Year-Ago
level
Growth rate
(%)
Motor Vehicle Sales
93,108
97,122
-4.1%
Passenger Car Sales
31,290
32,328
-3.2%
Commercial Vehicle Sales
61,818
64,794
-4.6%
UNIVERSAL AND COMMERCIAL BANK’S
LOANS OUTSTANDING TO THE REAL ESTATE SECTOR (P Bn)
Jun-11
% to Total
RE loan
Jun-10
% to Total
RE loan
Residential
110.54
31.1
87.03
29.7
Commercial
244.98
68.9
205.77
70.3
January 2012
BUSINESS
BUSINESS CLIMATE INDEX
TWO STRIKES FOR 2011
There were only 2 strikes recorded for 2011, an improvement from the 8 strikes
registered for 2010. The 2 strikes took place during the months of January and
September. The strikes involved 3,828 workers, higher than the 3,034 workers
involved in the strikes in 2010. Total man-days lost for 2011, however, fell to 3,828
days from 34,171 days.
LABOR STRIKES
Strikes declared
Workers involved
2011
2011
JAN
VISITOR ARRIVALS CLIMB 12.66% FOR JAN-NOV 2011
2010
1
-
128
2010
2011
-
128
2010
-
FEB
-
MAR
-
APR
MAY
69.21% HOTEL OCCUPANCY FOR JAN-NOV 2011
JUN
-
-
-
-
-
-
Average occupancy rate of hotels climbed to 69.21% in the first 11 months of 2011
from 67.57% in the same period in 2010. De Luxe hotels retained its post as the
category with the highest occupancy rate at an average of 72.50%, registering an
improvement from 70.56% posted in 2010. Standard hotels registered the 2nd highest
occupancy rate with an average of 66.76%, a slight increase from the previous year’s
65.58%. First-class hotels came in 3rd with an average occupancy of 61.88%, slipping
from the 2010 rate of 62.21%. And falling behind are Economy hotels with an average
occupancy of 59.90% from last year’s 58.57%.
JUL
-
-
-
-
-
-
AUG
-
Visitor arrivals for the period of January to November 2011 increased by 12.66% from
3,126,886 in 2010 to 3,522,887 in 2011. Korea retained its position as the largest
source market, still followed by the US and Japan. Arrivals from Korea jumped 27.25%,
while that of the US inched up by 3.74%, and Japan by 4.61%.
-
-
-
1
-
1,800
-
23,400
-
2
-
217
-
1,068
-
1
-
170
-
1,740
SEP
-
Man-days
lost (000)
1
1.00
-
-
47
-
3,700
94
3,700
-
NOV
-
-
-
-
-
-
DEC
-
-
-
-
-
-
3,828
3,034
3,828
2
8
-
800
-
-
OCT
TOTAL
3
-
7,869
34,171
STRIKES DECLARED
5.500
4.375
3.250
2.125
TOURISM ARRIVALS
1.000
J06 A
4.0
J S NJ07O A S O NJ08F M J AF09M JM10A M
3.5
3.0
2.5
MAN-DAYS LOST
2.0
1.5
25000
1.0
20000
0.5
0.0
15000
97' 98' 99' 00' 01' 02' 03' 04' 05' 06' 07' 08' 09' 10'
10000
5000
0
J07F M A S O N DJ08M A J A S O N DF09M J A S OM10A M
VISITOR ARRIVALS
JANUARY - NOVEMBER 2011
Country
2011
2010
% Change
Rank
Survey on the Monthly Occupancy Rates & Length of Stay
2011
KOREA
756,863
592,004
27.85
1
USA
512,436
493,861
3.76
2
JAPAN
311,402
300,537
3.62
3
De Luxe Hotels
JAN-NOV
CHINA
195,982
155,579
25.97
4
Occupancy Rates
TAIWAN
153,575
121,679
26.21
5
Length of Stay
AUSTRALIA
133,501
111,817
19.39
6
First Class Hotels
90,634
80,500
12.59
7
Occupancy Rates
SINGAPORE
111,200
96,512
15.22
8
Length of Stay
HONGKONG
93,567
114,166
-18.04
9
Standard Hotels
UNITED KINGDOM
83,608
76,911
8.71
10
Occupancy Rates
MALAYSIA
74,826
64,024
16.87
11
Length of Stay
GERMANY
48,522
46,676
3.95
12
Economy Hotels
OVERSEAS FILIPINO
164,499
184,513
-10.85
OTHERS
455,251
406,794
11.91
3,187,877
2,847,583
11.95
CANADA
TOTAL
Philippine Alert
Occupancy Rates
Length of Stay
2010
‘11 / ‘10
JAN-NOV
GROWTH RATE
72.08
70.53
2.20
3.03
2.74
10.54
60.18
63.48
-5.20
2.46
2.35
4.57
65.68
66.89
-1.81
2.35
2.39
-1.67
59.17
61.42
-3.66
1.93
2.04
-5.45
January 2012
45
46
CORPORATE BRIEFS
AGRICULTURE
Roxas and Co., Inc. booked P783Mn loss
Roxas and Co., Inc., a sugar milling company, registered a P782.7-million loss in 2011. Its revenues increased by 26.86% to P8
billion. However, the cost of sales increased by 44% to P7.7 billion. The company stated that this loss can be attributed to the
soaring prices of raw sugar and the increase in the cost of energy and hauling. Furthermore, its 3rd quarter performance was
marked with heavy expenses posting a P778million loss. The company said that 3rd quarter is the normal repair season for
sugar companies, therefore heavy expenses were expected. Nevertheless, the company did not manage to gain more than its
loss as it booked a revenue of P1.426 billion for the same period.
AUTOMOTIVE
Suzuki targets 25% market share
Suzuki Philippines Inc. (SPH) is eyeing 25% market share, equivalent to 200,000 units, in the Philippine’s motorcycle market by
2015. It targets a sale of 120,000 units for 2012 for a 16% market share. To support this goal, the company is focusing on mass
commuter models because it accounts for over 50% of the motorcycle market and the industry is currently unable to respond to
the growing demand on motorcycles. The company has already launched its new GD110 model costing only P47, 900 per unit,
the cheapest among Japanese motor brands.
ELECTRICITY, WATER, AND GAS
Aboitiz Power signs 20-year supply contract with steel firm
Therma Luzon Inc., a subsidiary of Aboitiz Power Corp., has secured a 20-year power supply contract with steel smelting firm
Melters Steel Corp. The supply contract commenced on December 26 and involves Therma Luzon providing Melters’ smelting plant in San Simon, Pampanga with 40 megawatts of power. Melters produces steel billets from recycled materials, while
Therma Luzon holds the independent power producer administrator contract for the 400-megawatt Pagbilao coal-fired power
plant in the province of Quezon. While the rate to be charged was not disclosed, Melters is confident that the supply contract
with Therma Luzon will give their firm better leverage in competing in the steel manufacturing industry.
Beacon acquires additional stake in Meralco
Beacon Electric Assets Holdings, Inc., power subsidiary of Metro Pacific Investments Corporation, is set to acquire another
2.66% of power distributor Manila Electric Co. (Meralco) after Lopez-led First Philippine Holdings Corp. (FPHC) moved to divest
of a portion of its shares in the company. FPHC has agreed to transfer 30 million of its common shares in Meralco to Beacon
for P295 apiece, or a total of P8.85 billion. To be completed on February 1, the transfer of shares would reduce FPHC’s stake
in the power firm to 3.9%, while increasing the share of Beacon to 48.02%. FPHC’s decision to sell its shares reportedly came
after being offered an “attractive price” as well as being allowed to retain its seat on the board of Meralco. FPHC has decided
to keep its remaining stake in the power firm.
PNOC-EC to bid for 9 oil and coal blocks
PNOC Exploration Corp. (PNOC-EC), the upstream oil and coal arm of state-run Philippine National Oil Company, is planning
to bid for 9 exploration and development contracts for oil and coal blocks offered in the Philippine Energy Contracting Round
4 (PERC 4). In total, PERC 4 is offering 15 contracts for exploration, development, and production of oil and gas sites and 30
contracts for coal which are estimated to generate investments worth $500 million and P80 million, respectively, for each block.
In particular, PNOC-EC is planning to bid for 4 coal and 5 oil and gas blocks in Palawan and Mindanao area near its existing service contracts. At present, PNOC-EC is holding service contracts (SC) for the Malampaya gas-to-power project, SC 43 in Ragay
Gulf, SC 47 in offshore Mindoro, SC 58 in West Calamian, SC 59 in West Balabac, SC 63 in East Sabina, and SC 37 in Cagayan.
ELECTRONICS
Canon to open laser printer factory in PH
Digital imaging giant Canon Inc. announced that it will set up a new laser printer factory in the country. Canon’s new 83,000-square
meter facility, named Canon Business Machines (Philippines), Inc., will be located in the First Philippine Industrial Park in
Batangas. Construction is expected to start in April 2012, with start of operations slated for April 2013. According to Canon,
the expected growth in global demand for competitively-priced laser printers made it imperative for the company to secure
the necessary production capacity. The selection of the Philippines as the location was due to the availability of an alreadyestablished infrastructure for the facility, as well as the country’s ready labor supply and workers’ English proficiency. Canon’s
total investment for the Batangas laser printer manufacturing plant is pegged at ¥18 billion (approximately P9.78 billion).
Existing subsidiaries of Canon in the Philippines are Canon Information Technologies and Canon Marketing.
Philippine Alert
January 2012
CORPORATE BRIEFS
FINANCIAL INTERMEDIATION
Security Bank to operate 224 banks by 2014
Security Bank Corp. (SBC) is set to operate 224 banks by 2014 after it recently secured the approval of the Bangko Sentral ng
Pilipinas (BSP, Central Bank of the Philippines) to establish 50 new branches within Metro Manila. BSP issued 50 new bankbranch licenses to SBC to be utilized by 2014. The new branches to be established would be added to SBC’s current network
of 136 branches nationwide, and the 38 branches it would soon take over from Premiere Development Bank, a thrift bank
it acquired in June 2011. Aside from the newly-approved branches to be located in Metro Manila, BSP earlier approved the
relocation of 10 branches of Premiere from non-restricted banking areas to restricted, overbanked areas in Metro Manila.
Even with this latest issuance of licenses, SBC said that it will still apply for new licenses from the BSP, this time for nonrestricted, provincial areas.
BDO merges 5 subsidiaries
Banco de Oro Unibank, Inc. (BDO) has obtained the approval of Securities and Exchange Commission (SEC) on the consolidation
of its 5 wholly-owned subsidiaries to enhance its operating efficiency. BDO disclosed that Equitable Card Network Inc., EBC
Strategic Holdings Corp., BDO Technology Center Inc., and Strategic Property Holdings Inc. will be merged with BDO Strategic
Holdings Inc. (BDOSHI). For this reason, BDO’s investments did not increase where gross non-performing loan (NPL) ratio has
dipped to 3.9% from 4.7% as of year-end.
BPI targets 13-15% expansion in loan portfolio
Bank of the Philippine Islands (BPI) is targeting a 13-15% growth in its lending for 2012 as 13.4% growth was registered on its
net income in 2011. This growth in net income is attributed to the growth of the bank’s net loan portfolio by 20% reaching
P453 billion. BPI has exceeded the 5-million customer base goal, improved their return on assets (1.6%), and maintained their
return on equity above 15%. The bank’s average asset base increased to P48 billion while total intermediate funds increased
to P1.35 trillion. However, operating expenses registered an increase by 12% mainly due to manpower costs. Furthermore, its
total resources was slightly lower by 4% to P843 billion and total deposits decreased by 5% to P681 billion.
FOOD AND BEVERAGE
Universal Robina Corp.’s net income slid to P5Bn
Universal Robina Corp., the food and beverage arm of the JG Summit Holdings, Inc., registered a net income of P5 billion at
the end of its fiscal year in September 2011, 38% lower than its net income in the same period last year. Its sales of goods and
services increased by 16.37% to P67.2 billion, which can be attributed to the 6.8% growth in domestic sales and 31.4% growth
in its international operations. This increase in sales, however, was not enough to surpass the surge in the company’s cost of
sales by 25% due to high prices of raw materials.
Splash allots P143Mn for food subsidiary
Splash Corp. is allotting P294.8 million to spend for 2012 where P152.2 million will be used by Splash Corp. while P142.6 million will be used by Splash Food Corp., its newly established food subsidiary. Last year, Splash entered into the food business
by acquiring 80% of Barrio Fiesta Manufacturing Corp worth P472 million. The allotted amount for Splash Food Corp. spending
will be focused on the expansion of the Barrio Fiesta Manufacturing’s distribution network.
HOTEL, RESTAURANT, AND LEISURE SERVICES
Raffles and Fairmont joint development project to rise in Makati by 2H2012
Fairmont Makati and Raffles Suites, the joint high-end development of international luxury hotel and resorts brands Raffles and
Fairmont, will be completed in the 2nd half of the year, according to Mr. Randy Zupanski, managing director of Raffles Makati.
Construction for the joint development, which was undertaken by Saudi Arabia-based Kingdom Hotel Investments and local
developer Ayala Land Inc., began in 2008. It is reportedly on-track for completion and turnover by September 2012. Fairmont
Makati and Raffles Suites is envisioned as a 30-storey complex with 3 sections, these are 1) 237-unit Raffles Residences, 2)
32-suite Raffles Hotel, and 3) 280-room Fairmont Hotel. The complex will have amenities, such as a 900-square meter ballroom,
to be shared by the 2 brands. The joint development is intended to cater to the luxury market comprised of businessmen, as
Philippine Alert
January 2012
47
48
CORPORATE BRIEFS
well as to the growing number of tourists.
MINING AND QUARRYING
SMI plans own power plant for Tampakan project
Sagittarius Mines Inc. (SMI) is eyeing to put up its own power plant within the Tampakan Copper-Gold project in South Cotabato.
SMI is planning the construction of a coal-fired power plant with a targeted capacity of 250 megawatts to service the mine’s
power requirements. In case of excess power, this will be exported to the Mindanao grid. The power plant is included in the
National Grid Corp. of the Philippines’ 10-year Transmission Development Plan. It is expected to be operational on 2014. SMI
is the developer of the Tampakan project, which has a projected production capacity of 375,000 tons of copper and 360,000
ounces of gold per year for the initial mine-life of 17 years.
SMC still in talks to revive Nonoc mine
San Miguel Corp. (SMC) disclosed that it is eyeing an investment in the shelved Nonoc nickel mine project in Nonoc Island,
Surigao del Norte. Talks for a possible investment to revive the project are reportedly ongoing between SMC and Philnico Mining & Industrial Corp., which holds the rights for the mine. SMC’s disclosure sought to clarify an earlier report stating that
they committed to rehabilitate Philnico’s 106-hectare nickel refinery in Nonoc Island. SMC said they are still “evaluating the
viability” of the mine, but assured that a disclosure will be made in the event that the investment is concluded. Nonoc mine
is believed to hold one of the biggest nickel resource in the country; from the start of commercial production in 1974 until it
was shut down in 1986, 22.7 million tons of ore were mined and processed from the area. Its potential was recognized as early
as the 1950s, but operations ceased in 1986 due to financial problems encountered by Philnico.
Belle sets aside P1Bn to develop high-end green community
Luxury property developer Belle Corp. set aside P1 billion to develop Sycamore Heights, its leisure “green community” project
in Tagaytay Midlands. Marketed as an upscale development that offers environmental benefits, Sycamore Heights will incorporate energy efficient solutions in its housing units. Model units are described to have been built with natural materials and
to contain energy-saving features such as the integration of passive cooling and heating principles that optimize the natural
sunlight and ventilation. According to Belle executive Joselito Consunji, Sycamore Heights embodies Belle’s commitment to
preserve nature by offering an environmentally-sound leisure community. Sycamore Heights was launched in April 2011, and
has 123,662 square meters of sellable area and 331 residential lots. Construction is slated for the 2nd quarter of 2012, with
turnover expected by the 2nd half of 2014. Belle is also the developer of the various luxury housing options under the Highlands
Homes brand, also in Tagaytay.
Vista Land allots P400Mn for a 10-storey condominium
Vista Land and Lifescapes Inc. is allotting P400 million to build a mid-rise 10-storey condominium in Pasig City under Camella
Homes. The lot is 1,271-square meter located along Mercedes Avenue. The project would offer 171 studio and 2-bedroom units
with balcony with a floor area of 21 sq m and 42 sq m, respectively. Studio units will be sold at P1.4 million while 2-bedroom
units at P3.5 million. Vista Land said it is expecting to gain advantage of the site’s proximity to business districts, commercial
centers, and schools in selling the units.
TELECOMMUNICATIONS
Smart eyes completion of 4G upgrade by mid-2012
Smart Communications Inc. is expecting to complete the upgrading of its entire network to 4th generation (4G) technology by
mid-2012, after the company accelerated its P67.1-billion modernization program. Smart is upgrading its base stations to be
ready for the activation of Long Term Evolution (LTE) wireless technology, the most advanced wireless 4G technology capable
of data transfer speeds of 100 megabits per second (mbps) and above. Once upgraded, base stations will also be ready for the
high-speed access plus (HSPA+), capable of delivering 80 mbps. Smart has already begun the upgrading of its base stations in
2011, and as of year-end 5,000 of its 13,000 base stations were already deemed 4G-ready. According to Smart, the acceleration
of its joint modernization program with PLDT is due to the rapid growth of demand for mobile broadband service. The upgrading
will allow Smart to deliver faster data speeds to its 47 million subscribers nationwide.
Philippine Alert
January 2012
CORPORATE BRIEFS
TRANSPORT SERVICES
SEAir expands its operations
Southeast Asian Airlines (SEAir) is expanding its fleet of jets to escalate its domestic and international flights. Singapore’s Tiger
Airways is supporting this expansion by leasing their planes for the expansion on SEAir’s operations to budget carrier business.
The Civil Aeronautics Board has already approved this plan where the new planes will be used for flights to China, Japan, South
Korea, and Malaysia. Currently, the company’s main operations are leisure flights using small planes to tourist destinations such
as Caticlan, and Batanes group of islands while it operates 2 Airbus A320 for flights to Singapore, Hong Kong, and Macau.
PAL acquires a $15Mn simulator
Flag carrier Philippine Airlines (PAL) has acquired a brand-new $15-million Airbus A320 full simulator to train its new and existing pilots. The simulator was bought from the CAE, a Canadian company that owns pilot training facilities in 20 countries, and
manufactures simulators and training devices sold to more than 100 airlines. Currently, PAL has more than 200 pilots trained in
its own training facilities, namely: PAL Aviation School, the PAL Technical Center, and the PAL Learning Center.
Philippine Alert
January 2012
49
50
INFRASTRUCTURE
Gov’t lines up more PPP projects in 2012
The government has released the list of projects it expects to roll-out for 2012. The government is expectedly
optimistic that things will go according to plan but investors are understandably more cautious.
F
ollowing the successful bidding and award of the
P1.9-billion Daang Hari (King’s Road) –South Luzon
Expressway (SLEX) road project, the government has
announced that it has lined up 3 social infrastructure projects
for public-private partnership (PPP) bidding in 1H2012:
 The P10.4-billion construction of 9,623 classrooms project
(Invitation to bid has already been published last January
8, see box for the project details);
 The 900-million Vaccine Self-Sufficiency Program of the
Department of Health; and
 The P5-billion modernization of the Philippine Orthopedic
Center.
So far, there has been lukewarm interest in the social
infrastructure projects on offer. The property developers,
Megaworld and Philippine Investment Management Inc. (Phinma)
group are reportedly studying the bid documents of the P10.4billion classroom project of the Department of Education (DepEd)
but have not given any firm commitment and no announcement
from other investors of their interest to participate have been made
public. The reception to the social infrastructure projects has a
lot to do with the lack understanding on how the private sector
are expected to recoup their investments in these type of projects.
Application of the PPP scheme in the delivery of social services is
a relatively new concept in the Philippines (as in other countries).
Most of the investors are waiting for the big-ticket projects in
the PPP line-up. The construction of new expressways, airports,
railways and water supply projects are considered more lucrative.
The tried and tested application of PPP scheme in these types
of projects also makes it easier for firms to reasonably predict
their future sources of revenues (and consequently, sourcing
the funds for the project is easier and cheaper). However,
these big-ticket infrastructure projects will likely be bidded
out in 2H2012 (see table). And of the 13 listed, 4 projects had
progressed sufficiently enough in the pre-bid process to have
Impact of the program will not be felt until 2013.
Philippine Alert
Janury 2012
INFRASTRUCTURE
PPP FOR SCHOOL INFRASTRUCTURE PROJECT
Implementing Agency: Department of Education
Estimated Project Cost: P10.4-billion
Contractual Scheme: built-lease-transfer under PPP scheme
Status: Invitation to pre-qualify and bid published last January 08,2012
Project Details: This project involves the construction of 9,623 classrooms in various school sites in Regions I, III and IV-A using a range of acceptable school-building
technologies. The design, financing, construction and maintenance of 1-storey and 2-storey school buildings under the following Contract Packages:
CONTRACT PACKAGE
EXPECTED NUMBER OF
SCHOOL SITES
REGION (LOCATION)
EXPECTED NUMBER OF
SCHOOL BUILDINGS
EXPECTED NUMBER OF
CLASSROOMS
Contract Package A
Region I
660
686
2,050
Contract Package B
Region III
656
746
3,003
945
1,096
4,279
2,261
2,528
9,332
Contract Package C
Region IV-A
TOTAL
Each school building will consist of the following project components:
Component I – classroom buildings
Component II – toilets
Component III – classroom furniture
Each contract package will be bid out separately.
BIG-TICKET INFRA PROJECTS FOR 2H2012 BIDDING
PROJECT TITLE
PROJECT COST
IMPLEMENTING AGENCY
PROJECT DETAILS/ STATUS
Common Fare Collection
System
P1.8-billion
Department of Transportation and
Communication (DOTC)
The project involves the decommissioning of the old magnetic-based
ticketing system and replacing the same with contactless-based smart
card technology on LRT Lines 1 and 2 and MRT 3, with the introduction
of a centralized back office that will perform apportionment of revenues
(clearing house).
Laguindingan Airport O&M
Contract
P7.8-billion
DOTC
The airport is 92.6% complete as of January 2012.Completion date moved
to June 2012. Bidding of O&M by 4Q2012.
New Bohol Airport
P8-billion
DOTC
Still under feasibility study (FS) stage. Government considering
construction under Official Development Assistance (ODA).
Mactan Terminal 2 Airport
Development
P10.15-billion
DOTC
The project involves the construction of a new world-class passenger
terminal building in Mactan Cebu International Airport. Still under the FS
stage.
New Water Supply Project
P25-billion
Metropolitan Waterworks and Sewerage
System (MWSS)
Involves the construction of a dam, water treatment plant, and associated
main pipeline to deliver water to Metro Manila. Still under the FS stage.
Agus hydroelectric power
turbines 4&5, and the Macau
hydro power plant (O&M)
P1.5-billion
MWSS
Involves the private sector participation in the rehabilitation of the
existing auxiliary turbines owned by the MWSS, and in its operations and
maintenance for a definite period. Still under the FS stage.
Cold Chain Systems
P5.3-billion
Department of Agriculture (DA)
Establishment of Cold Chain Centers in major production and consolidation
areas of agri-fishery products equipped with the required facilities and
machineries for minimal processing of livestock, fisheries and high value
crop.
Puerto Princesa Airport (O&M)
P4.2-billion
DOTC
Construction of the airport will be undertaken under the ODA financing
of the Korean Economic Development Cooperation Fund (EDCF). O&M
contract for PPP bidding submitted to NEDA Board for approval.
NLEX-SLEX Connector Road
Project
P20.28-billion
A review of technical proposal is currently under-way. CITRA, owner of
Department of Public Works and Highways
Skyway, contesting Metro Pacific’s project ownership. Swiss challenge
(DPWH)
tentatively scheduled in 2H2012.
Cavite-Laguna (CALA)
Expressway
LRT-2 East Extension (O&M)
Corn Bulk Handling and
Transshipment System Project
Balara Water Hub
Philippine Alert
P19.69-billion
P11.3-billion
P1.25-billion
P20-billion
DPWH
Cavite Side – Construction of a 27.5km, 4-lane highway from the terminus
of R-1 Expressway in Kawit, Cavite to Aguinaldo Highway at Silang, Cavite
and Laguna; Laguna Side – Construction of a 14.3 km, 4-lane highway
which is a continuation of CALA-Expressway-Cavite side section and to
be connected with SLEX and Sta. Rosa, Laguna Province. It is an at-grade
expressway.
DOTC
Project will extend elevated tracks of LRT-2 by 4 km from Santolan, Pasig
to Masinag, Antipolo. The existing LRT Line 2 runs 13.8 km from the Rector
Station in Manila to the Santolan Station in Pasig, along Recto Avenue,
Magsaysay Boulevard and Marcos Highway. The line has 10 elevated
stations and 1 underground station.
DA
Establishment of corn grains bulk handling systems with corn grains
processing centers and transshipment stations in major corn producing
areas and selected sea ports by upgrading, expansion and enhancement of
existing operations in at least fifteen (15) corn postharvest processing and
trading centers through the introduction of bulk handling systems.
MWSS
The proposed project will be located in the MWSS Balara Compound
which covers an area of approximately 75 hectares, and is situated along
Katipunan Avenue opposite UP Diliman Campus. It is envisioned to be
an international center for water excellence – a modern-water themed
destination for education, sports entertainment, business and leisure.
To sustain its operation, it shall also include water-themed recreational
and entertainment facilities, open entertainment area for large/special
events, convention center, commercial development (i.e. hotels, retail
shops, restaurants) and residential condominium units.
January 2012
51
52
INFRASTRUCTURE
the best chance of being bidded out in 2012: The P7.8-billion
operations and maintenance (O&M) contract for the Laguindingan
Airport; the P4.2-billion O&M contract for the Puerto Princesa
Airport; the P20.28-billion North Luzon Expressway – South
Luzon Expressway (NLEX-SLEX) Connector Project; and
the P19.69-billion Cavite-Laguna (CALA) Expressway.
It is also important to note that the economic and social
benefits of these PPP projects will only be felt once construction
takes place. Historically, civil works begins 6 to 8 months
after the award of the PPP contract. In the case of the P10.4billion classroom construction project, the first PPP project
on offer in 2012, even if it is awarded as scheduled in April,
construction will take place in late December 2012 or January
2013. Thus, the impact of the PPP program will not be felt
until 2013. That is, assuming that at least 3 to 4 projects
are successfully awarded to the private sector as planned.
The Aquino administration’s 1st commercial
RE project
The Aquino administration can finally list the Maibarara
Geothermal Plant among the committed power projects of
the country. Despite the urgent need for additional power
plants, the Philippines has been struggling to get firm commitments on new investments in power generation (due to
a number of reasons).
first new geothermal facility under the Aquino administration. It
took more than 1 year for the project to get to this point, and it will
take another year for civil works to be completed and the power
plant synchronized to the Luzon-Visayas grid. The project owner,
Maibarara Geothermal, Inc. (MGI), estimates that the l plant will
be completed and ready for commercial operations by 2013.
In November 2011, a feasibility study on the Maibarara
Geothermal field showed that the reserves in Mt. Makiling
could support operations of a 20MW to 28MW geothermal
facility over the next 25 years. The validation of the amount
of geothermal reserves plus the signed 20-year electricity sales
agreement with Trans-Asia Oil were the 2 components that
convinced Department of Energy (DOE) that the project was
commercially viable and should be granted permission to start
construction. The Maibarara geothermal facility has been added to
the committed power projects list of the DOE bringing expected
new capacity to 704 MW between 2012 to 2015. Required
additional capacity for the period has been estimated at 1,700MW.
Geothermal energy development is the only RE project
not covered by the feed-in-tariff (FIT) mechanism. And this
exemption has helped rather than hindered geothermal energy
investors. Many of the RE projects that had earlier been
proposed are currently stalled due to the unresolved issues
regarding the RE FIT. RE investors have adopted a “wait and
see” attitude, which is unfortunate given that the Philippines
is in dire need of new investments in power generation.
The 20 megawatts (MW),P3.22-billion Maibarara Geothermal
Project is considered a landmark project because of 2 reasons - it
is the first energy project entirely initiated and implemented under
the 2008 Renewable Energy (RE) Law framework and it is the
PROJECT TIMELINE: MAIBARARA GEOTHERMAL POWER FACILITY
October 2009: Competitive bidding was conducted for the service contract of Maibarara.
01 February 2010: Department of Energy (DOE) awards the service contract for the Maibarara Geothermal Project
to Petro Energy Resources Corporation (PERC).
31 March 2010: Securities and Exchange Commission (SEC) approves the incorporation of Petro Green Energy Corporation (PetroGreen), a wholly-owned subsidiary
that shall carry-out the renewable energy projects of PERC.
19 May 2010: PetroGreen signs Joint Venture Agreement with Trans-Asia Oil and Energy Development Corporation (Trans-Asia) and PNOC Renewables Corporation
(PNOC-RC) to pool their resources together and enter into a joint venture to develop and operate the Maibarara Geothermal Field through the formation of a joint
venture corporation called Maibarara Geothermal Inc.
08 July 2010: Department of Environment and Natural Resources (DENR) issued an Environmental Compliance Certificate for the development of the Maibarara
Geothermal Project.
30 September 2010: Maibarara Geothermal Inc. (MGI) asked the Department of Energy to allow PetroEnergy Resources Corp. to transfer its geothermal service contract
to MGI via the execution of a deed of assignment and d assumption (DOAA).
November 2011: MGI signed a 20-year electricity sales agreement with Trans-Asia Oil for the entire output of the facility.
11 November 2011: Energy Secretary Jose Rene Almendras signed the confirmation that would serve as a basis for the project to enter the development and commercial stage of the service contract.
2H2013: Expected commission of the first unit of the power plant.
Expected new capacity is at 704 MW but required addtional capacity is 1,700 MW.
Philippine Alert
January 2012
INFRASTRUCTURE
PROJECT DETAILS: MAIBARARA GEOTHERMAL PLANT
PROPONENT: PetroGreen Energy Corp(65% owned by PetroEnergy Resources Corp, 25% Trans-Asia and, 10% PNOC-Renewables Corp.)
PROJECT COST: P3.22-billion
FUNDING SOURCE: Equity financing and P2.4 loan facility from Bank of the Philippine Islands and Rizal Commercial Banking Corp.
OUTPUT OFF-TAKER: 20-year sales agreement with Trans-Asia Oil.
ENGINEERING, PROCURMENT AND CONSTRUCTION (EPC): EEI Corp.
OPERATIONS AND MANAGEMENT AGREEMENT: Fuji Electric
DETAILS and LOCATION
Maibarara’s steam field is located west of Mt. Makiling straddling the provinces of Laguna and Batangas. The Maibarara geothermal field is a 25km geothermal
resource block that has the potential to generate up to 51MW of power. The total installed capacity of the project is 20MW (2x20MW). The project will utilize
single-flash steam technology. The average projected electricity production is about 292 GwH per year.
FINANCIAL and TECHNICAL DETAILS
COMPONENT
VALUE
STEAMFIELD DEVELOPMENT
Pre-Development Cost
Well Drilling Cost (per well)
Well Workover Cost (per well)
Well Testing Cost (per well)
O&M Cost (MWh/yr)
P 91.98 million
P130.94 million
P 33.51 million
P5.75 million
P456.58 million
POWER PLANT
Gross output (MW)
Capacity Factor
Parasitic Load (MW)
Government Share of Gross Income
40 MW (2 X 20MW)
90%
1.20
1.50%
PROJECT LOCATION MAP
Philippine Alert
January 2012
53
54
INFRASTRUCTURE
Proposed solar FIT rate of P17.95 per kWh
opposed
Feed-in tariffs (FIT) were devised to provide support to
renewable energy (RE) resource developers and encourage investors, but consideration of its possible impact on
consumers should not be taken for granted. It is the government’s responsibility to find the right balance that will give
consumers cleaner energy at an affordable price and allow
developers a reasonable return in investment.
The current solar feed-in tariff (FIT) rate stands at P17.95
per kilowatt hour (kWh) versus Meralco’s charge for power
of P5.46/kWh. This is the petition submitted by the National
Renewable Energy Board (NREB) to the Energy Regulatory
Commission (ERC) last June 2011 despite the opposition of
various groups, such as the Federation of Philippine Industries
(FPI); Foundation for Economic Freedom (FEF); and the
Joint Congressional Power Commission (JCPC), which claim
that the solar FIT rate is too high and does not take into
consideration the declining cost of producing solar power.
These opposition groups are not against developing
renewable energy resources in the country. Their main concern
is the estimated P8-billion additional payment that will be
shouldered by consumers through the FIT-allowance (FIT-All).
Those that are against the current level of solar FIT argue
that the rate should be lower in consideration of the decreasing
price of solar panels worldwide. From $2 per watt in 2009, the
price of solar panels has declined to $1.50 per watt in 2011,
leading to a decline in the initial capital cost. Based on this,
opposition groups estimate that solar FIT rate should be P10
to P12 per kWh rather than the proposed P17.95 per kWh (this
stand is supported by the Department of Energy). While others
have argued, that perhaps it is better to defer solar projects until
such time that the cost of manufacturing solar panels becomes
absolutely cheap (a scenario that may happen in 3 or 4 years time).
Supporters of the proposed solar FIT rate, however, argue
that it is better to have high solar FIT now to encourage more
investors to develop the renewable energy (RE) resource faster
and eventually lower electricity rates for consumers. Furthermore,
the group argue that the cost carried by consumers would decrease
rapidly over the years because of the high degression rate imposed
on solar power which stands at 6% after a year from the day FIT
rates become effective (see table below). The degression rate on
RE resource represents the speed of decline of the FIT rate (thus
after the first year of application, the P17.95 proposed rate would
decline by 6% annually until the FIT rates on all RE sources
are readjusted on the 3rd year of implementation). According
to supporters of the current solar FIT, the high degression rate
on solar, the highest among the renewable energy resources,
meant that there is no need to change the proposed solar FIT
to P10-P12 per kWh as argued by the opposition groups.
The Philippines already has the highest price of electricity in
Asia and setting a high FIT rate will only serve to make electricity
even more expensive for everyone (businesses and consumers
alike). FIT rates, are meant to minimize the cost of doing business
for RE investors and developers, but proper consideration should
also be made on how this will affect the cost of doing business
in other industries that are heavily dependent on electricity (e.g.
manufacturing, mining, construction, BPO/KPO, etc.). To this
end, there should be extreme caution in approving a high solar FIT
rate to avoid possible slowdown in investments in other industries.
For now, solar energy is a luxury for Filipino consumers.
VARIOUS STAKEHOLDERS AND THEIR OPPOSING STAND ON SOLAR FIT
OPPOSING GROUPS
MAIN ARGUMENT
Philippine Solar Power Alliance
Solar installation target must be set higher because the process of developing
solar resources is the fastest among other RE resources, 10MW in 6 months.
Foundation for Economic Freedom
Solar should be developed only when the cost is cheap. There should be more
focus on developing hydro and geothermal resources.
Federation of Philippine Industries
Issuance of FIT rate for Wind and Solar must be deferred because it would raise
electricity rates.
Joint Congressional Power Commission
Solar FIT rate must be set at least P10-P12 per kWh but preferably P9 per
kWh. The proposed solar FIT rate would pose higher rates in electricity and an
‘unnecessary burden’ to consumers.
RESOURCES
PROPOSED FIT RATE (PESOS INSTALLATION TARGET
DEGRESSION RATE
PER KWH)
(MW)
Solar (ground-mounted)
17.95
50
6% after year 1 from effectivity of FIT
Ocean Thermal
17.65
10
Zero degression rate
Wind
10.37
200
0.5% after year 2 from effectivity of FIT
Biomass
7
250
Run-of-River Hydro
6.15
250
Philippine Alert
January 2012
INFRASTRUCTURE
STATUS OF BIG TICKET INFRASTRUCTURE PROJECTS
AS OF JANUARY 2012
PROJECT TITLE
IMPLEMENTING
AGENCY
FUNDING
SOURCE
CIVIL WORKS
TIMEFRAME
PROJECT COST
STATUS / ISSUES
NLEX-SLEX Connector Road Project
DPWH
PPP
2014-2016
P19.98 billion
ROW confirmation from DOTC expected by March 2012 at the
earliest. Negotiations ongoing between original proponent
MPTDC and DPWH, and will continue after ROW confirmation.
Tentative issuance of notice for postponed Swiss challenge is
Feb 2013.
CALA Expressway
DPWH
PPP
2014-2016
P19.69 billion
Project is expected to be bid out on the latter part of 2012,
and awarding of contract by February 2013. Completion of
technical feasibility slated for February 2012.
Laguindingan Airport Development
DOTC
ODA/NG
2008-2012
P7.85 billion
Civil works nearing completion, but air navigation facilities
have yet to be started. No date eyed for start of operations in
the absence of air navigation facilities.
Clark Airport Budget Terminal
CIAC
PPP
3 years
P12 billion
Project proposal yet to be presented to DOTC Sec. Roxas.
$2 billion
Renegotiations with the Chinese government are ongoing for
the unwinding of the existing contract with Sinomach. Once
the unwinding is completed, the project will be auctioned.
No date was specified for the tender offer. As of July 2011,
only 22.94% of Phase 1 under the original project design has
been completed.
Northrail
DOTC
ODA
5 years
MRT-3 Privatization
DOTC
PPP
--
P6.3 million
Of the initial O&M auction announcement, only the
maintenance contract will be bid out. Bidding has been slated
within the year, but no exact date was given. MPIC meanwhile
asserted its legal rights overt MRT 3, conferred to it by a buildlease-transfer agreement secured by MRTC, of which MPIC is a
majority shareholder with 64.07% stake.
NAIA Expressway Phase II
DPWH
PPP
2012-2015
P13.58 billion
Securing of NEDA approval postponed as the scope of work
was revised. Project will again undergo evaluation by NEDA
technical board, but bidding is still expected in 2012.
Puerto Princesa Airport
Development
DOTC
ODA
2012-2014
P4.5 billion
Pres. Aquino has approved the project on Dec 2011, but
invitation to bid has yet to be issued. Project will be financed
by the Korean government. The ODA financing has a life span
of 40 years with a 10-year grace period. Start of construction
is eyed for the latter part of 2012.
Bohol (Panglao) Airport
Development
DOTC
PPP
2012-2015
P8 billion
Bicol Airport Development
DOTC
PPP
2012-2015
Mactan Airport Development
P3.2 billon
Tentative schedule for bidding is in the 2nd half of 2012.
Under DOTC review as of November 2011.
Passenger terminal
building: $180.7
PPP bidding will be completed by 1st quarter of 2012. Contract
million;
award will be given by 4th quarter of 2012.
New Cargo
terminal: --
DOTC/MCIAA
PPP
2012-2015
NLEX-SCTEX expressway
integration
BCDA
PPP
9 months
P360-400 million
MNTC has already signed the contract. Once the turn-over of
SCTEx to MNTC is completed, construction of the project will
start immediately.
Harbor Link Road Project
DPWH
PPP
--
P10 billion
Before finalizing plans for the project, a traffic study will be
conducted by Asia Halcrow Inc. which will determine traffic
demand and revenue projections for the project. This study is
expected to be completed in 3 and a half months.
Skybridge Project
MMDA
--
2 years
P10 billion
DPWH has already approved the design for the project. MMDA
is currently waiting for NEDA’s decision on the project’s
source of funding. Once determined, MMDA will proceed to a
feasibility study on the project.
MRT-7
DOTC
PPP
3.5 years
$1.2 billion
The project will be returned to NEDA-ICC for approval. Once
it is signed, the project will begin construction. Any changes
that may be proposed to the original design plan will be
minimal. DOTC is hoping to have it signed by the end of 2012.
TPLEX (Tarlac-Pangasinan-LaUnion
Expressway)
DPWH
PPP
2009-2012
P14 billion
Accomplished 51.65% of the project. Scheduled completion is
in August 2012.
Leyte-Mindanao Interconnection
Transmission Project
DOE
PPP
--
P24 billion
As soon as ERC approves NGCP’s petition, feasibility and
technical study on the project will be implemented that will
take 6 months to 1 year to complete.
Sual International Seaport
PPA
LGU
2011-2015
P500 million
First phase of the project is now 32% complete. It is expected
to finish by the end of 2012.
DOTC
ODA
--
$155 million (WB);
P4 million (DOTC)
NIA
ODA
--
P7.05 billion
Cebu Bus Transit
Casecnan Multi-Purpose Irrigation
Philippine Alert
The feasibility study funded by World Bank is ongoing.
Meanwhile, the environment impact assessment and social
impact assessment of the project funded by DOTC are still for
procurement of consultants.
NEDA-ICC Cabinet Committee has recently approved the
budget for Phase II of the project.
January 2012
55
56
CONGRESSWATCH
House, Senate reveal measures to pass before
March adjournment
Both the House of Representatives and the Senate have released their respective list of bills that they
pledged to approve before Congressional sessions adjourn on March 24.
U
p for approval on 2nd reading in the Lower Chamber
are the Anti-Trust Act; Witness Protection, Security and
Benefit; Whistleblowers’Act; Delineation of Specific Forest
Limits Act; Stiffer Penalties for Stealing/ Tampering with Risk
Reduction Equipment; Anti-Cybercrime Act; and Eliminating
Gender Bias on Adultery/ Concubinage (see box for the list
of measures targeted for Committee [1st reading] approval).
Of the House Bills set for approval on 1st and 2nd reading, 13
are among the 33 priority measures of President Aquino (see box ).
Only 1 bill is expected to be approved by the House on
3rd reading before the March 24 break, this is the Regulation
of the Practice of Geology Act. The measure provides the
creation of a regulatory body that will be tasked to supervise,
control and regulate the practice of geology in the country
(see related article). Its counterpart in the Senate was passed
in September last year. This is the sole measure likely to
be approved before the Congress goes on Lenten break.
Glaring omissions from the House of Representatives’
list are key measures such as the Reproductive
Health and Freedom of Information Act, which have
languishing in Congress for 13 and 20 years, respectively.
Other key measures that the House excluded in its priority
list are the following:
Mining Act Amendments
Amendments to the Build-Operate-Transfer (BOT) Law
Anti-Corruption Amendments
BSP (Central Bank) Charter Amendments
Amendments to certain (economic) provisions of the
Constitution
Public Utilities Act Amendments
Only 1 bill (Regulation of the Practice of Geology Act) is likely to be approved before
the Congress goes on Lenten break.
Philippine Alert
January 2011
CONGRESSWATCH
BILLS AT “NEAR-ENACTMENT” STAGE (15TH CONGRESS)
BILL
HOUSE STATUS
SENATE STATUS
Pending on 2
reading
HOUSE
PRIORITY?*
SENATE
PRIORITY?*
Yes
No
Approval on 2nd reading before March 24 possible
PROGNOSIS
Data Privacy
Approved on 3
reading
Intellectual Property Rights Act
Amendments
Approved on 3rd
reading
Pending on 2nd
reading
Yes
No
Not among Senate’s priorities; Unlikely to be approved
before the Lenten break
Pending on 1st
reading
Approved on 3rd
reading
Yes
Yes
Certified as urgent by the House; Approval before March
24 adjournment possible
Department of ICT
Approved on 3rd
reading
Pending on 2nd
reading
No
No
Unlikely to pass before the break unless Senate acts on
the counterpart bill
Fiscal Incentives Rationalization
Approved in 3rd
reading
Pending on 1st
reading
Yes
No
Needs Senate Concurrence; Not likely to be approved
before recess
Approved on 3rd
reading
No bill filed yet
Yes
No
House’s approval on 3rd reading futile without Senate
concurrence ; Unlikely to pass before Lenten break
Direct remittance to the Host LGU of
its 40% share of the gross collection
derived by the national wealth taxes
Approved on 3rd
reading
Pending on 1st
reading
Yes
No
Regulation of the Practice of Geology
Act
Approved on 3rd
reading
For approval on
3rd reading
Yes
Yes
Anti-Cybercrime
Customs Modernization and Tariffs
Act
rd
nd
No progress in the Senate since its referral to the
Committees on Local Government and Finance on
September 1, 2010; Unlikely to be approved
Sole measure likely to be enacted before the Congress
goes on Lenten break on March24
*Refers to bills that are either 1) targeted for approval before March 24 or 2) have already been approved
HOUSE BILLS FOR COMMITTEE (1ST READING) APPROVAL BEFORE MARCH 24
PENDING WITH THE HOUSE COMMITTEE ON APPROPRIATIONS:
1.
Mandatory healthcare coverage
2.
Expanding the coverage of the Science and Technology
scholarship program
3.
Strengthening/Extending the AFP Modernization Program
4.
Instituting a Land Administration Reform Act
5.
Reorganizing the Philippine statistical system
6.
Human Rights Victims’ Compensation Act
7.
Modernization of PAGASA
8.
Filipino volunteerism in Nation-Building Act
9.
Agricultural and Fisheries Mechanization in the Country
10.
Establishment of a special education center for each school
division
11.
Mindanao Railways System
12.
Resource development and crisis assistance for women and
children
13.
Creation of a National Agrarian Reform Adjudication
Commission
14.
Creating the Code Commission
15.
Strengthening the probation system
16.
Providing additional support and compensation for educators in
basic education
17.
Strengthening the National Bureau of Investigation
18.
Establishment of an open high school for out of school youths
and adults
19.
Amending the Anti-Trafficking in Persons Act
20.
Revitalizing the Coconut Industry
21.
Anti-Summary Killing Law
22.
People’s Survival Fund
PENDING WITH THE APPROPRIATE HOUSE PANELS :
1.
Excise tax on alcohol and tobacco
2.
Department of Housing and Urban Development
3.
Strengthening anti-smuggling provisions in the Customs and
Tariff Code
4.
Amending Article 73 of the Family Code
5.
Amending Article 26 of the Family Code
Senate President Enrile, meanwhile, announced that the
upper chamber will prioritize this year the approval of the
following bills: Anti-Trust; Cyber Crime; Expansion of the
Basic Education Curriculum (Institutionalization of the K+12
program); and Reproductive Health. Amendments to economic
provisions of the Constitution will also be tackled this year.
The Anti-Cybercrime Act was approved on 3rd reading
last January 30. It has been transmitted to the House
of Representative for concurrence (see related article).
Given the current status of the other Senate priority bills,
it’s unlikely that they will be passed before the Congress
adjourns on March 24. Also, the ongoing impeachment trial
has been taking up much of the Senate’s time, with only
around 4 hours a week devoted to legislation and about
16 hours allotted for the impeachment proceedings. Sen.
Vicente Sotto lll, chair of the Committee on Rules, noted that
despite the impeachment trial, the chamber was able to pass
3 bills (including the Anti-Cyber Crime Act) and discuss 6
committee reports since it resumed session last January 16.
Pres. Aquino gives green light to Palace
FOI bill; FOI measure back in the hands of
Congress
The Aquino administration transmitted its version of the
Freedom of Information (FOI) bill to the Lower House on
February 3, after the President directed the Palace study
group on the measure to “push ahead” with its proposed
amendments to this. Among the amendments are new
exceptions to public access. This puts the fate of the longoverdue FOI bill back in the hands of Congress, where
legislative action reportedly ground to a halt following
announcement of a Palace-backed FOI bill.
Source: House of Representatives
The ongoing impeachment trial has been taking up much of the Senate’s time, with
only around 4 hours a week devoted to legislation and about 16 hours allotted for
the impeachment proceedings.
Philippine Alert
January 2012
5
57
58
CONGRESSWATCH
While lauding the principle behind FOI, the President has withheld endorsement of
the measure as priority legislation.
PALACE AMENDMENTS TO THE FREEDOM OF INFORMATION BILL
HOUSE BILL NO. 53
Exceptions. –… access to information may be denied
when… The information directly relates to national
defense and its revelation will cause grave damage to
the internal and external defense of the State
--
PALACE AMENDMENT
Exceptions. – Access to information shall be granted
unless… The information directly relates to national
security or defense and its revelation will cause grave
damage to the national security or internal and
external defense of the State
(NEW) Exceptions. Access to information shall be
granted unless…The records of minutes and advice
given and opinions expressed during decision-making
or policy formulation, invoked by the Chief Executive
to be privileged by reason of the sensitivity of the
subject matter or of the impairment of the Chief
Executive’s deliberative process that would result from
the disclosure thereof. Once policy has been formulated
and decisions made, minutes and research data may
be available for disclosure unless they were made in
executive session.
CRITICISM OF PALACE AMENDMENT
There is a general tendency on the part of governments
to assign an “overbroad scope and meaning” to the
term national security, in effect running the risk of
prohibiting public access to a broad category of
information.
The amendment fails to recognize the role of the public
in decision-making, especially in light of the following
Constitutional guarantees that open up the deliberative
process to the public:
1) The right of the public to gain access to information
on the government’s decision-making process (Bill of
Rights, Art. III, Sec. 7); and
2) The state policy on full public disclosure of all
transactions involving public interest (Declaration of
Principles and State Policies, Art. II, Sec. 28)
Sources: House Bill No. 53, Proposed substitute FOI Bill from the Presidential Communications Development and Strategic Planning Office, Summary of Comments on Malacañang Amendments to the Tañada Bill
dated May 2011 from the Institute for Freedom of Information, and 1987 Philippine Constitution
The FOI bill, which seeks to promote transparency by ensuring
public access to government records, is a much-awaited measure
that dates back to 1992. In the 14th Congress, the FOI bill was
almost passed into law, with the Senate ratifying the bicameral
committee report (bicam) for the bill, but the Lower House failing
to do so. In the 15th Congress, the bicam version was re-filed by
Rep. Lorenzo Tañada III as House Bill No. (HB) 53. HB 53 adopts
in full the bicam version of the FOI bill, which had undergone full
legislative process in the previous Congress. HB 53 and 7 other
FOI bills are all pending at the committee level in the Lower House.
There were high hopes for the enactment of the bill under
the leadership of Pres. Aquino, who during the presidential
campaign committed to prioritize passage of the FOI bill into
law. However, FOI advocates have since then begun to doubt the
sincerity of Mr. Aquino .While lauding the principle behind FOI,
the President has withheld endorsement of the measure as priority
legislation citing the need to first address other concerns. In both
chambers of Congress, discussions were held on the different
versions of the bill, but these stalled when the administration
announced that it is drafting its own version of the FOI.
Finally, on January 4, Pres.Aquino directed the administration’s
study group on the FOI bill, led by Communications
Undersecretary Manuel Quezon III, to finalize its amendments
to the bill for transmittal to Congress. On February 3, the Palace
submitted its version of the bill to the House of Representatives as
a substitute measure to the versions pending before the Committee
of Public Information. The Palace version of the FOI bill used as
basis and framework HB 53 or the bill sponsored by Rep. Tañada.
Among the study group’s amendments are the new exceptions
to public access to government records; these cover information
related to presidential deliberative process and national security
(see box). By adding national security to the list of exceptions,
the Palace is expanding the original restriction contained in the
Tañada bill which only covered information related to national
defense. Meanwhile, by including presidential deliberative
process in the list, a new restriction is imposed on information
relating to discussions within the official family. This is meant
to safeguard the nature of the discussions, especially if the topic
Philippine Alert
is of a sensitive nature. An earlier draft of these amendments has
drawn criticism from various groups, but a recent statement from
Usec. Quezon sought to assure that the proposal underwent public
consultation and that the new exceptions are recognized by law.
Usec. Quezon also announced that the President called
for the removal of an earlier proposal from the study group
to create an Information Commission (IC). The IC would
have acted as an arbiter on complaints, but Mr. Aquino
rejected the proposal saying this would only add another
layer of bureaucracy. Instead, functions designated to the
IC will be exercised by the Office of the Ombudsman or the
Justice Department as originally provided in the Tañada bill.
Lawmakers welcomed the President’s directive and expressed
hope that this will break the impasse on FOI, as well as hasten
approval of the long-awaited measure. House public information
committee chair, Rep. Ben Evardone, has given assurance that the
Palace amendments won’t be accepted at face value and would still
undergo congressional review to ensure that the bill has not been
diluted and that the provisions are clear. For his part, HB 53 sponsor
Rep. Tañada committed to organize discussions for the drafting of
a timeline to ensure the bill’s passage within a definite schedule.
At the Senate, where there are 11 FOI bills pending at
committee level, public information committee chair, Sen.
Gregorio Honasan, also welcomed the move from the Palace
and expressed hope that the bill would be able to hurdle
legislative deliberations within the 1st quarter of the year,
notwithstanding the ongoing impeachment trial of Chief Justice
Renato Corona. And like his counterpart in the Lower House,
Sen. Honasan also pledged to act independently on the measure.
Senate transmits Geology Profession Act to
House
The Senate has transmitted the Geology Profession Act
(Senate Bill 2941) to the House of Representatives for
concurrence. The bill was approved by the upper chamber
in September last year. The measure’s counterpart in the
January 2012
CONGRESSWATCH
To meet global standards, the bill mandates the continuation of professional
education in geology.
House is pending on 3rd reading and is one of the bills that
the lower chamber pledged to approve before the Congress
adjourns on March 24.
The proposed measure seeks the creation of a regulatory
body that will supervise, control and regulate the practice
of geology. SB 2941 also seeks to develop the professional
competence of geologists through continuing professional
education (CPE) and integrate the geology profession.
“Geology encompasses a lot of fields, such as surveying or
mapping of energy resources such as petroleum, exploring for
metallic and non-metallic minerals, study of geohazards due to
groundwater pollution, faulting and erosion, among others. Having
a regulatory body will ensure that those practicing geology are
duly licensed and qualified to practice in their highly specialized
fields,” said Sen. Trillanes lV, principal author of the bill.
The Board of Geology proposed under the bill will have
the following functions:
Prescribe the subjects in licensure examinations and issue
certificates of registration, professional identification
cards and certificates of specialization of profession to
applicants who have passed the licensure examinations for
professional geologists
Issue permits to foreign geologists wanting to practice
in the country (This is covered by the bill’s foreign
reciprocity clause which prohibits foreigners from
practicing geology in the Philippines unless Filipinos are
allowed to practice the same profession in their country) ;
and
Inspect establishments where geologists practice their
professions such as mines, plants and offices; enforce
strict compliance of safety standards, and institute
criminal action against those who refuse to adhere to the
Geology Board’s standards
The Board will be composed of a chairman and 2
members to be appointed by the President. SB 2941 mandates
that the Board must be constituted not later than 6 months
from the effectivity of this measure. The officials may be
removed or suspended on any of the following grounds:
(a) Gross neglect, incompetence or dishonesty in the
discharge of their duty;
(b) Violation of any of the causes/grounds stipulated in
the Revised Penal Code, the Anti-Graft and Corruption
Practices, and other laws; or
(c) Manipulation or rigging of the results of the geology
licensure examination, and disclosure of secret and
confidential information on the examination questions
To meet global standards, the bill mandates the continuation
of professional education in geology. According to Sen. Trillanes,
the practice of geology has expanded to various fields, from
studying the physical and geomechanical characteristics of
rock and soil, to environmental assessment and management,
including conservation and biodiversity projects. This
shows the need to calibrate the scope of the profession.
The House of Representatives has committed to pass
its counterpart measure before the lawmakers go on Lenten
break on March 24. To reconcile differences in the Senate and
House versions of the Geology Profession Act, a bicameral
conference committee will be formed. But with the House of
Representatives committing to act on close to 30 bills before
SCOPE OF THE LICENSURE EXAMINATION FOR GEOLOGISTS:
General Geology
Petrology and Mineralogy
Applied Geology
The bill provides that the Geology Board, subject to approval by the Professional Regulation Commission, may revise or exclude any of the subjects and their syllabi,
and add new ones as the need arises to conform to technological changes brought about by continuing trends in the profession.
To pass the licensure examination for geology, a candidate must obtain a general weighted average of no less than 70% and a rating of no less than 50% in any
examination subject.
The bills mandates the Board of Geology to complete the correction of examination papers within 3 days from the last day of examinations. The rating of examinees
must be released not more than 10 days after the Board has completed the correction of examination papers.
Source: Senate of the Philippines
Philippine Alert
January 2012
5
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CONGRESSWATCH
PRIORITY BILLS FOR THE 15TH CONGRESS: AN UPDATE
AS OF 02 FEBRUARY 2012
BILL NO.
TITLE
SALIENT FEATURES
STATUS
HOUSE
SENATE
AGRICULTURE, ENVIRONMENT AND NATURAL RESOURCES
HB 1726
SB 883
CARP Reform
Seeks to amend certain sections of the Comprehensive Agrarian
Reform Law, such as expanding the definition of agricultural
lands
Pending in
Committee on
Agrarian Reform
Pending in
Committee on
Agrarian Reform
HB 1429
SB 2909
Clean Air Act Amendment
Seeks to strengthen the Clean Air Act and its implementation
Pending in
Committee on
Ecology
Pending in
Committee on
Environment and
Natural Resources
HB 8
SB 1362
Environmental Impact Assessment
Amendment
Seeks to consolidate and strengthen the procedure for filing and
implementing Environmental Impact Assessment and issuance of
Environmental Compliance Certificate
Pending in
Committee on
Ecology
Pending in
Committee on
Environment and
Natural Resources
HB 4
SB 2114
Land Administration Reform Act
Creates the Land Administration Authority and institutes reforms
in land administration system
Pending in
Committee on
Government
Reorganization
Pending in
Committee on
Environment and
Natural Resources
HB 2717
SB 1365
Mining Act Amendments
Seeks to amend various provisions of the Mining Act
Pending in
Committee on
Natural Resources
Pending in
Committee on
Environment and
Natural Resources
HB 4840
SB 1543
Plastic Bag Reduction Act
Seeks to discourage and phase out the use of plastic bags in the
retail industry
Transmitted to the
Senate
Pending in
Committee on Trade
and Commerce
FINANCE AND CORPORATE GOVERNANCE
HB 292
SB 809
BIR/BOC exemption from Salary
Standardization
Seeks to exempt employees of the Bureau of Internal Revenue
and Bureau of Customs from the salary standardization to
promote the hiring and keeping of professionals within these
offices
Pending in
Committee on Ways
and Means
Pending in
Committee on
Finance
HB 5394
SB 708
BSP Charter amendment
Seeks to expand the authority of the BSP to supervise and
regulate the operations not just of banks but also quasi-banks
and other financial institutions that perform quasi-banking
functions; grants the BSP 'tax-exempt' status
Pending in
Committee on
Banks and Financial
Intermediaries
Pending in
Committee on Banks,
Financial Institutions
and Currencies
HB 3224
Customs and Tariffs Modernization Seeks to prescribe the guide for customs and tariff
Act
modernization
Approved on 3rd
reading
None
Pending in
Committee on
Appropriations
Pending in
Committee on
Finance
Fiscal Responsibility Act
Seeks to establish a Medium Term Fiscal Accord (MTFA), set caps
on national debt and personnel services, ensure funding for
enacted laws, and strengthen transparency and accountability in
government transactions.
HB 1502
SB 2500
Insurance Code amendment
Pending in
Seeks to enable the insurance industry to adequately address the
Committee on
various issues and challenges in both local and foreign insurance
Banks and Financial
markets
Intermediaries
Pending in
Committee on Banks,
and Currencies
HB 4935
SB 2142
Rationalization of Fiscal
Incentives
Seeks to rationalize the grant and administration of fiscal and
non-fiscal incentives
Transmitted to the
Senate
Pending in
Committee on Ways
and Means
SB 380
Simplified Net Income Taxation
Act
Seeks to provide an uniform and equitable taxation by limiting
the allowable deductions for self-employed individuals or
professionals and to grant self-employed individuals and
professionals an optional standard deduction of 40% of gross
income
None
Pending in
Committee on Ways
and Means
SB 2009
Stock Market Competitiveness Act
Seeks to enhance regulatory environment that will allow the
Philippine stock market to grow by taking out unnecessary tax
impediments
None
Pending in
Committee on Banks,
and Currencies
HB 1164
SB 2360
Valuation Reform Act
Seeks to adopt a just, equitable, impartial and nationally
consistent valuation based on internationally accepted
standards, concepts, principles and practices
Pending in
Committee on
Government
Reorganization
Pending in
Committee on Ways
and Means
SB 2177
HB 2263
HUMAN CAPITAL DEVELOPMENT AND HEALTH
HB 479
SB 89
Asbestos Ban
Seeks to ban asbestos in all forms of construction materials to
ensure the safety and health of Filipinos
Pending in
Committee on
Ecology
Pending in
Committee on Trade
and Commerce
SB 1064
Creative Industries Development
Council
Seeks the creation of the Creative Industries Development
Council
None
Pending in
Committee on Trade
and Commerce
HB 88
SB 2035
GASTPE Act amendment
Amends the Expanded Government Assistance To Students and
Teachers In Private Education Act; Provides for an expanded
voucher or coupon system in secondary and tertiary education
Pending in
Committee on Basic
Education and
Culture
Pending in
Committee on
Education, Arts and
Culture
Philippine Alert
January 2012
CONGRESSWATCH
Pending in
Committee on Labor,
Employment and
Human Resources
Development
HB 3321
SB 868
Omnibus reform for the Labor
Code
Seeks to reinforce the role of labor in Philippine economy by
amending various provisions of the labor code; calls for partial
amendment to Book V relating to labor cases at the NLRC, rights
of workers to bargain effectively, and the right to strike
HB 4276
SB 2701
Night Work Prohibition of Women
Employees
Lifts the ban on night work for women
HB 4244
SB 2865
Reproductive Health and
Populace Development
Seeks to strengthen the people's right to information on the
various methods of family planning
Pending on 2nd
reading
Pending on 2nd
reading
Convergence: Telecom Policy
amendment
Seeks to bring Philippine telecommunications, broadcast
communication, cable television and broadband industry at par
with global trends and standards through technology transfer,
and to prescribe the entry capital for both foreign and local
companies
None
Pending in
Committee on Public
Services
HB 85
SB 2796
Anti-Cybercrime Act
Seeks to define and penalize cybercrimes and computerfacilitated crimes, which include data theft, online fraud,
hacking, online pornography, introduction of viruses, and
computer sabotage.
Approved by the
Committee on
Information and
Communications
Technology
Approved on 3rd
reading
HB 4115
SB 2965
Data Privacy Act
Seeks to protect consumers, promote trust and user confidence
in electronic commerce, and enhance the competitiveness of
the country as a hub for the BPO industry
Transmitted to the
Senate
Pending on 2nd
reading
HB 4667
SB 50
Creation of Department of
Information and Communications
Technology (DICT)
Upgrades the Commission on Information and Communications
Technology (CICT) and seeks to raise public sector focus and
usage of e-governance ; The DICT will be tasked to formulate
national communication policies, standards, and specifications
for telecommunications, automated data processing and
management information systems
Approved on 3rd
reading
Pending on 2nd
reading
SB 2027
Energy Efficiency Act
Seeks to achieve a more self-sufficient energy mix, reduce
consumption of oil and coal, and ensure long-term sustainability
None
Pending in
Committee on
Energy
HB 1291
SB 1642
Nuclear Power Resolution
Seeks to re-commission the Bataan Nuclear Powerplant to allow
its commercial operation
Pending in
Committee on
Energy
Pending in
Committee on
Energy
HB 2848
SB 1067
VOIP Act
Seeks to regulate the use of voice over internet protocol (VOIP)
to avoid abuse and misuse
Pending in
Committee on
Information and
Communications
Technology
Pending in
Committee on Public
Services
HB 1156
Maritime Law
Seeks to consolidate maritime and admiralty laws and to
modernize the maritime industry
Pending in
Committee on
Transportation
None
BOT Law Amendments
Among the proposed amendmentsare the following: addition
of new PPP variants or contractual arrangements, such as joint
ventures, concessions, and management contracts; restructuring
and tightening of eligibility requirement for unsolicited
proposals; and the composition of the approving body at the
national and local levels.
Technical Working
Group (TWG)
drafting bill
None
Seeks to expand the definition of money laundering and include
other crimes in the list of predicate crimes for the purposes of
money laundering
Approved on 2nd
reading
Pending on 2nd
reading
Pending in
Committee on
Constitutional
Amendments,
Revision of Codes
and Laws
Pending in
Committee on Labor
and Employment
Signed into law
Republic Act 10151
INFRASTRUCTURE AND INFORMATION TECHNOLOGY
SB 229
HB 4151
PUBLIC SECTOR GOVERNANCE
HB 4275
SB 2484
AMLA amendments
HB 588
SB 472
Anti-corruption amendments
Seeks to extend the prescriptive period in graft and corruption
cases
Pending in
Committee on
Revision of Laws
HB 2111
SB 238
Anti-private Armies Act
Seeks to define private armies, provide the executive with the
power to dismantle them and penalize leaders, protectors,
financiers, suppliers and members of such groups
Pending in
Committee on
Justice
Pending in
Committee in Public
Order and Illegal
Drugs
HB 46
SB 2408
Anti-Smuggling Act
Seeks to strengthen the drive against anti-smuggling by
increasing the penalty and empowering the Commission on Audit
to perform post-entry audits.
Pending in
Committee on Ways
and Means
Pending in
Committee on Ways
and Means
HB 3534
SB 1838
Anti-Trust Act
Intends to promote a level playing field in trade, industry and all
commercial economic activities, and rid the country of abusive
monopolies, cartels, and anti-competitive behavior. Promotes
easier and more effective entry of new players in the market.
Approved on 2nd
reading
Pending in
Committee on Trade
and Commerce
HB 2947
SB 2671
Career Executive Systems Act
Seeks to systematize appointments and promotions in the
government by providing for a systematized career rank
progression in the bureaucracy
Pending in
Committee on
Civil Service
and Professional
Regulation
Transmitted to
the House of
Representatives
HB 1033
SB 2283
Freedom of Access to Information
Act
Seeks to ensure public access to official records, documents
and any other information of public concern and compel all
government offices to comply with requests for information on
matters of public concern
Pending in
Pending in
Committee on Public
Committee on Public
Information and Mass
Information
Media
Philippine Alert
January 2012
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CONGRESSWATCH
HB 1027
Government Classification and
Compensation Act
Seeks to reclassify positions and compensation of government
employees by providing step increments
Pending in
Committee on
Civil Service
and Professional
Regulation
None
HB 47
SB 2842
Intellectual Property Rights Act
amendments
Seeks to amend the Intellectual Property Code through the
integration of comprehensive, swift, efficient and adequate
strategies designed to respond to the criminal onslaught of
internet piracy.
Transmitted to the
Senate
Pending on 2nd
reading
HB 3248
SB 2548
Jueteng Act
Seeks to legalize jueteng
Pending in
Committee
on Games and
Amusements
Pending in
Committee on
Games, Amusements
and Sports
HB 4841
SB 1310
Lemon Law
Seeks to protect consumers in the sale of motor vehicles against
sales and trade practices which are defective, unfair and
inimical to the interests of the consumers and public
Transmitted to the
Senate
Pending in
Committee on Trade
and Commerce
HB 846
SB 1447
Ombudsman Act Amendment
Seeks to strengthen the powers of the Office of the Ombudsman
Pending in
Committee on
Justice
Pending in
Committee on
Justice and Human
Rights
HB 299
SB 970
Philippine Transportation Security
Authority
Seeks the creation of the Philippine Transportation Security
Authority which will consolidate civil aviation, maritime, land
and rail security programs
Pending in
Committee on
Government
Reorganization
Pending in
Committee on Public
Services
HB 132
SB 2860
Whistleblowers Protection Act
Seeks to set up a system of rewards and protection for
whistleblowers and their families.
Pending in
Committee on
Justice
Pending on 2nd
reading
HB 4067
SB 2640
GOCC Governance Act of 2011
Seeks to promote financial viability and fiscal discipline in
government-owned or controlled corporations and to strengthen
the role of the state in its governance and management to make
the GOCCs more responsive to the needs of the public
Signed into law
Republic Act 10149
HB 5023
General Appropriations Act for
FY 2012
Appropriates funds for the operation of the government of the
Republic of the Philippines from January 1 to December 31, 2012
and for other purposes
Signed into law
Republic Act 10155
General Appropriations Act of 2012
Philippine Alert
January 2012
Regional Update
Asia Pacific Executive Brief
January 2012
Editor: Richard Martin ([email protected])
Regional economist: Andrew Hordern ([email protected])
Consulting economist: Kostas Panagiotou ([email protected])
CONTENTS
Overviews
Global Outlook
Regional Outlook
North Asia
Japan
China
Hong Kong
Taiwan
South Korea
Southeast Asia
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
South Asia
India
Australasia
Australia
New Zealand
63
Regional Update
Global outlook
What to expect
from the IMF’s
January update
… a Euro area
recession but no
global financial
contagion
… a weak US
upturn
… while growth
eases to 6-7% in
developing Asia
The big global
risks for 2012
… no easing in
the Euro crisis
… but China risk
is easing
On January 25 the IMF is expected to release an interim update of its semi-annual World
Economic Outlook, which in its October release forecast global growth of 4% this year (in
line with estimated 2011) lifting to 4.5% in 2013. We expect the 2011 estimate to be cut to
around 3.5%, the 2012 forecast to drop to 3% and the lift in growth in 2013 to be reduced to
3.5%. Global growth drops into a 2-3% band about once a decade, usually due to a crisis
such as the 2001 tech wreck (2.3%) or the Asia Financial Crisis (2.6% in 1998). The 2012
dip, like these earlier ones, is still expected to be much shallower than the 0.7% contraction
of 2009 when the downturn became a global financial crisis (GFC). The IMF is likely to cut
its 1.1% growth forecast for the Euro area to a slight recession for 2012 but balanced
against this it is likely to stay close to its October forecast of 1.8% growth for the US while
developing Asia is cut from 8% to a 6-7% range. The 2013 forecast will also come into
focus for the first time. The key here will be underscoring that the upturn is likely to be
weak as none of the major countries has scope for a significant stimulus, which leaves
household and financial sectors deleveraging and public sector fiscal austerity in the driving
seat. MNCs with strong balance sheets, particularly many manufacturers, may find this a
frustrating environment in which to find growth opportunities.
The first half of 2012 is likely to be characterised by rising global risk, mostly driven by the
Euro crisis, and a slump in global growth, mostly due to a recession in the Euro area. The
key questions are whether either of these developments derails a mild US recovery and
whether China can pull off a soft landing for its economy. Following this month’s survey
we’ve made one change to our two sets of scenarios for 2012 (see the December and
November Asia Briefs). We’ve lifted the probability of a soft landing in China (growth of 8%
and inflation of 2-4% in 2012) to 60% from 50% while a hard landing (sub 5% growth) drops
to 30% and a China financial crisis remains at 10%. The change reflects China’s steady
progress in defining big risks in property, local government debt, and non-performing loans
and progress on reducing risks in each area. By contrast, our Euro area scenarios remain
unchanged with Muddle Through (on 50%) just ahead of a European financial crisis (GFC2
on 40%), and the possibility of a better outcome stuck at 10%. It’s unlikely that any positive
change to the Euro area scenarios can be made before mid-2012 and the crisis could well
drag on through much of 2012.
Inflation drops
despite QE by
central banks
The views of most of the world’s investors, bankers, and CFOs are little different from ours
so most are piling into cash (US assets or German bunds) while Mrs Watanabe (the
Japanese housewife investor) is bringing money home, which drives the Yen up. Central
banks also face the perplexing situation of no matter how much money they stuff into the
market, inflation continues to drop.
Good growth for
Germany
Germany enters 2012 with good prospects following estimated growth of 3% in 2011. Its
AAA sovereign rating is solid, the 10-year Bund is close to 1.75%, its budget deficit is 1% of
GDP, and its exporters are benefiting from the weak Euro. Growth slowed in 2H’11 and will
likely drop to 1%yoy through 1H’12 before lifting towards a 2% trend into 2013. Low
unemployment and steady consumer demand should help growth in 2012. The US is in a
weaker position with unemployment of 8.5% versus Germany’s 6.8%. Yet interest rates are
near record lows and there are signs of an industrial revival, which should gain on good
exports to emerging markets in 2012 and stock rebuilding in 1H’12.
… & a weak lift
in the US
IMA Asia’s forecasts
World – Real GDP growth, %
- US
- Euro area
- Asia/Pacific (14)
- NICs (4)
- Developing Asia (7)
- ASEAN (5)
World goods & services trade volume, % growth
Interest rates, US Fed target rate, year end, %
Inflation, CPI, US, year avg., %
Inflation, CPI, Euro area, %
Crude oil, avg of 3 spot crudes, US$
US$ / Euro 1, year average rate
Yen / US$1, year average rate
2009
2010
2011
2012
2013
-0.7
-2.6
-4.3
1.0
-0.7
7.4
1.5
5.1
2.9
1.8
7.1
8.1
9.7
6.9
3.5
1.6
1.0
4.0
4.1
7.9
4.1
3.0
1.8
-0.5
3.9
2.9
7.3
4.8
3.5
2.4
1.0
5.2
4.0
7.8
5.6
-10.9
0.25
-0.3
0.3
62
1.39
94
12.8
0.10
1.6
1.6
79
1.33
88
6.5
0.10
3.0
1.5
94
1.38
80
3.5
0.10
1.6
0.8
97
1.27
75
4.0
0.50
1.5
1.8
100
1.21
73
The Asia/Pacific 14 = the countries on the forecast summary page. NICs are the newly industrialised countries = Korea, Taiwan, HK, Singapore.
The ASEAN 5 = Indonesia, Thailand, Malaysia, Philippines and Vietnam. Developing Asia = Asean 5 + China and India. IMA Asia forecasts.
Richard Martin, IMA Asia ♦ Email: [email protected]
64
Regional Update
Regional outlook
Summary of forecasts in this month’s Asia Brief
2009
2010
2011
2012
2013
Japan
China
Hong Kong
-5.5
9.2
-2.7
4.4
10.4
7.0
-1.1
9.0
4.9
-0.8
8.2
2.6
1.4
8.6
3.8
Taiwan
South Korea
Indonesia
-1.9
0.3
4.6
10.9
6.2
6.1
4.6
3.5
6.5
2.8
3.0
6.5
3.8
4.0
6.8
Malaysia
Philippines
Singapore
-1.6
1.1
-0.8
7.2
7.6
14.5
4.6
1.5
4.8
3.8
3.8
2.5
4.4
4.3
4.5
Thailand
Vietnam
India (CY)
-2.3
5.3
6.8
7.8
6.8
9.9
0.0
5.9
7.2
2.8
5.0
6.3
4.4
6.4
7.0
Australia
New Zealand
1.4
-0.1
2.6
2.4
2.0
1.3
2.8
2.0
4.2
3.2
2009
2010
2011
2012
2013
Japan
China
Hong Kong (composite CPI)
-1.4
-0.7
0.6
-0.7
3.3
2.4
-0.3
5.4
5.8
-0.5
3.0
4.0
-0.5
3.0
3.5
Taiwan
South Korea
Indonesia
-0.9
2.8
4.8
1.0
2.9
5.1
1.4
4.0
5.4
1.0
3.5
4.7
1.8
3.0
5.2
0.6
3.3
0.6
1.7
3.8
2.8
3.2
4.4
5.1
2.8
3.9
2.5
2.5
4.5
2.5
-0.9
6.7
10.9
3.3
9.2
12.0
3.8
18.7
9.0
3.9
14.0
6.0
4.2
9.0
6.5
1.8
2.1
2.8
2.3
3.3
4.3
2.8
3.6
2.8
3.8
Exchange rate to US$1, year avg.
2009
2010
2011
2012
2013
Japan
China
Hong Kong
94
6.83
7.75
88
6.77
7.77
80
6.46
7.78
75
6.33
7.78
73
6.15
7.78
33.1
1,277
10,356
31.6
1,159
9,086
29.4
1,107
8,776
30.0
1,154
8,358
29.1
1,142
8,037
3.52
47.6
1.45
3.22
45.1
1.36
3.08
43.4
1.27
3.14
43.4
1.30
3.07
42.5
1.27
34.3
17,860
48.3
31.7
19,151
45.8
30.5
20,659
46.6
31.1
21,861
51.2
31.7
22,772
49.7
1.27
1.60
1.09
1.39
1.01
1.26
0.99
1.30
0.96
1.27
GDP (Expenditure), real growth, %
Inflation, CPI year average, %
Malaysia
Philippines
Singapore
Thailand
Vietnam
India (CY CPI urban non-manual workers)
Australia
New Zealand
Taiwan
South Korea
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
India (FY)
Australia
New Zealand
Sources: CEIC, central banks, and national statistics offices. Forecasts are by country directors and IMA Asia.
65
Regional Update
Regional outlook
Political & policy issues to watch
Key elections &
transitions
+ China / HK
+ Korea
+ Japan
+ Malaysia
Asia’s most important political transition is due in autumn and all signs point to a stable and
predictable leadership change in China. HK’s next chief executive will be selected in March
(a safe pro-Beijing candidate) and Korea is in full election mode for legislative polls in April
and a presidential contest in December. The friction in this contest might mess up the
recently concluded free trade agreement with the US to everyone’s detriment. Prime
Ministers Noda in Japan and Najib in Malaysia may call early polls by mid-2012. The contest
in Japan will be fought over plans to lift the sales tax from 5% to 15% by the middle of the
decade. In Malaysia the contest will be over which multi-party coalition can best match the
electorate’s evident desire for change. This contest has pushed reform to the top of the
agenda, which should be beneficial for growth and deregulation.
A good outcome
in Taiwan
Taiwan’s elections in early January gave President Ma a second term with a mandate to
build economic ties with China while giving the KMT, his party, a sufficient majority in the
legislature to support his policies. The outcome is a plus for Taiwan and regional stability.
Thaksin’s risky
plan for Thailand
Dr Thaksin’s hold on the Thai government from outside the country will grow through a
cabinet reshuffle at the end of January. His plans to hand public debt equal to some 10% of
GDP to the central bank so that the government can borrow more to fund a string of big
projects is sufficiently risky that it may not get off the ground.
Myanmar may
be worth a look
An easing of political repression and the restoration of diplomatic ties with the US could open
up commercial opportunities in Myanmar. Of interest to Western firms is Myanmar’s
apparent desire to reduce the dominant position of PRC firms in its economy. The
leadership change in North Korea is less promising. The 232 members of Kim Jong-il’s
funeral committee represented North Korea’s collective leadership. It is unclear whether Kim
Jong-un, a son of Kim Jong-il and head of this committee, has much power. Kim Jong-il
never got the better of his father’s funeral committee, and remained limited in his power
throughout his 17 years at the helm. Kim Jong-un, no older than 30, will be even more a
prisoner of his father’s funeral committee. So in principle nothing changes.
… but no
change in North
Korea
Outlook for the market
Trade hit a wall
in Q4
… cutting
growth in 1H’12
Across Asia export growth fell by 50-75% in Q4’11 from the pace set in the first three
quarters of 2011 (i.e. growth dropped from around 20%ytd for the first three quarters to 510%yoy for Q4’11). In some countries imports fell as fast as factories slashed purchases to
avoid inventory build-up. The reduction in export growth, some narrowing of the trade
surplus, and slower industrial activity will weaken GDP growth from Q4’11 through to Q2’12
for most of East Asia. The downturn will not be as bad as 2009 when exports for the 14
countries in the Brief plunged 27%yoy in 1H’09. Demand within Asia for imports (from China
and ASEAN), a mild US recovery, and good emerging market demand will make this a
shallow downturn with a mild recovery in 2H’12.
Support from
local demand
will help in 2012
Domestic demand is expected to remain resilient in Asia through the export downturn. This
month’s Asia Brief finds most of East Asia is capable of a mild stimulus from extra public
spending and monetary easing. Housing downturns are underway in China, Korea, Taiwan,
HK, and Singapore but none look like triggering a consumer contraction although such
downturns always bear close watching (and we will). In 2009, China’s big stimulus did much
to lift the rest of Asia. That won’t be repeated in 2012 but we still export China’s imports to
grow some 12% this year, which will support export growth in the rest of Asia.
China’s wage &
forex plans
Asia has become finely tuned to shifts in China’s policy settings as they have major
ramifications for global markets. After two years of a 20%+ annual wage hike China is
pulling back to 10% in 2012. We expect the rest of Asia to aim for manufacturing wage
growth down to 0-5% (bar India and Vietnam at 10-15%). China is also expected to slow
Yuan appreciation to around 2% this year to cushion the impact of weaker global demand on
its export sector. The rest of Asia will likely aim to halt appreciation.
Watch for capital
inflows from
2H’12
Once global risk concerns ease, which we expect in 2H’12, Asia is expected to see a lift in
capital inflows as investors seek out growth opportunities with acceptable risk. This could
accelerate the upturn in growth in 2013 and put appreciation pressure on regional
currencies.
Richard Martin, IMA Asia ♦ Email: [email protected]
66
Regional Update
Japan
Watch for an
early election
… as PM Noda
struggles to
pass key bills
Japan is likely to face an early election in 2012, although the current parliament’s four year
term runs to August 2013. The key question is whether PM Noda choses the date or is
forced into an early contest. Before calling a poll Noda wants to win passage of key
legislation, including a hike in the sales tax rate from 5% to 10% by FY2015, a fourth
supplementary budget for the current fiscal year, and the budget bills for FY2012, which
starts on April 1. The opposition LDP, which controls the upper house, will aim to delay all
these bills with the goal of forcing an early poll. The DPJ government has already started
to fragment with nine MPs deserting the party in December to form a new party over the
consumption tax hike and internal party tensions. PM Noda will reshuffle his cabinet in
mid-January before opening negotiations with the LDP on the tax and budget bills.
Taxes will
continue to rise
for a decade
Japan’s consumption tax needs to be increased to pay for increased social security costs.
Noda’s plan aims to lift the rate from 5% to 8% in October 2013 and to 10% in April 2015.
Even then it will still be well short of funding a return to a balanced budget by 2020 and a
further rate increase to 17% will likely be required.
Small steps to
rekindle growth
Government plans to boost rebuilding following the March 2011 tsunami should start to
have an economic impact from Q2’12. The government has also reinstituted a subsidy for
eco-friendly cars from January with the hope of boosting car sales. As yet there is no
decision on how to restart nuclear power plants and all 54 are likely to be shut down by
spring, which has triggered a surge in oil and gas imports for thermal power plants.
Risk is rising
Japan’s risk outlook is deteriorating with Standard & Poor’s indicating it may cut its AArating if there is no progress on lowering the budget deficit. In March, the IMF will start a
stress-test of Japanese banks focused on their holding of Japanese government bonds to
evaluate the risk from a rise in the ultra-low bond yield (currently under 1% for the 10-year)
if markets become concerned about Japan’s public debt.
… watch S&P
and the IMF
Another year of
contraction in
2012
After rebounding by 4.4% in 2010 Japan’s economy likely contracted by around 1% in
2011 with a similar fall expected in 2012 before a lift to 1.4% growth in 2013. In year-onyear terms the economy has contracted each of the quarters since the March 2011
tsunami and we expect these falls to continue until Q3’12. The first two quarters of
contraction were primarily due to the tsunami but from Q4’11 onwards the bigger force
pushing the economy down is the strong Yen, which is undermining export manufacturing,
almost the sole area of growth over the last decade.
… exacerbated
by a falling trade
surplus
The surge in oil and gas imports for thermal power stations combined with weaker exports
will reduce the GDP growth rate by cutting the trade surplus. A lower trade surplus will
lower the current account surplus, which may start to restrict the government’s ability for
massive domestic borrowing to fund some 50% of its annual budget (weaker tax revenues
on a contracting economy will exacerbate this risk).
A steady fall for
manufacturing
We expect exports to have fallen some 3% this year due to the tsunami and the strong Yen
while imports have climbed by around 12% to produce a rare annual trade deficit (the last
was 1980; even in the GFC Japan managed a surplus). Industrial production likely fell 3%
in 2011 (from Q1: -2.5%yoy, -6.8%, -2.4%, and -2% estimated) with a fall of around 2.5%
expected for 2012 due to the strong Yen. Unless the Yen weakens towards 85-90 to US$,
which Japanese industrialists hope for, it’s hard to see positive growth ahead.
Deflation will
likely continue
Deflation returned in October and reached -0.5%yoy in November and is likely to remain
entrenched. The Yen’s year average rate to the US$ rose 10% in 2011 to 80; the rate is
currently at 77. The Yen is likely to remain under appreciation pressure through 2012 due
to deflation at home and continued high levels of global risk, which will encourage local
investors to repatriate funds. At some future point the Yen may well depreciate,
particularly if concerns over public debt emerge (see above).
…as will the
Yen’s rise
Dec 2011 – JP moves to a 2005 base year
GDP, real growth (2005p), %
CPI, year average, %
Overnight call rate, year end, %
Yen to US$1, year average
2009
-5.5
-1.4
0.10
94
2010
4.4
-0.7
0.10
88
Sources: 2009-2011 data from the BOJ and government sources; 2012-2013 forecasts by IMA Asia.
67
2011
2012
2013
-1.1
-0.3
0.10
80
-0.8
-0.5
0.10
75
1.4
-0.5
0.10
73
Regional Update
China
2012: A stable
leadership change
… with stable
policy settings
Scope for a mild
fiscal stimulus
… focused on
consumers
… + watch for
tax cuts
A cautious easing
in monetary policy
… aimed at loan
growth of 16%
China is on track for a stable leadership change this autumn with paramount leader Hu
Jintao and Premier Wen Jiabao due to start handing over their multiple roles to a new
leadership team that will likely be headed by Xi Jinping with Li Keqiang as his premier. A
related leadership change at city and provincial government levels as well as ministries has
been underway since early 2011. Policy settings are expected to remain stable through
the leadership change, which will stretch into 1H’13.
China will not repeat its massive 2009-10 stimulus as it will take years to clean up the side
effects of that exercise, which focused on a surge in bank lending to property developers
and local governments. However some easing is already underway and will expand in
2012. On the fiscal side, the process started in 2H’11 with a big lift in the personal income
tax threshold, which should support spending by most rural households and low-incomes
urban households. We also expect a restart of incentives for buying green appliances and
some types of cars. Financing and tax rebates may also be given to exporters along with
more tax cuts for corporates as a whole. The final structure of the overall package is likely
to be announced at the National People’s Congress in March.
Monetary tightening over the last year, which has led to a dramatic slowdown in the
property/construction sector, is likely to be gradually and selectively eased through 2012.
The two challenges for the People’s Bank of China (PBOC) will be gauging when to ease
back on the property sector to avoid a crash and matching a much reduced inflow of
foreign funds. The overall aim will be ensuring sufficient liquidity to support annual loan
growth of 16%. This may see the reserve requirement ratio (RRR) for large banks cut from
20% towards 18% by end 2012. With inflation heading down there should also be scope to
lower interest rates once the post-Chinese New Year trends become apparent.
GDP growth to
slow from 9.2% in
2012
… as exports
slow & the trade
surplus falls
… and property
prices ease
China is on track for a soft landing in 2012, which means GDP growth of around 8% and
inflation of 2-4% followed by a mild lift in growth into 2013. Underneath the top line
numbers some big swings are expected. Export growth will drop from 20.3% in 2011 to
around 8% in 2012 while a smaller easing in import growth – from 24.9% to around 12% –
which means that the trade surplus will fall from US$158b to $90b, the lowest level since
2004. This will bring a sharp slowdown in the export-focused factories, which Beijing will
try to cushion by sustaining local consumer demand. The property and construction
sectors have also entered significant adjustments with weaker demand through 1H’12
before stabilising in 2H’12. Beijing would like broad economic stability as a backdrop to the
leadership change in autumn but a bigger goal will be unwinding some of the risks in
property, banking, and local government debt by the start of 2013.
Local demand
should support
mild growth in
manufacturing
Q4’11 finished with signs that China’s export factories were preparing for a fall in orders
through 1H’12. The official measure for industrial production growth slowed to 12.4%yoy
by November from an average 14.3% in 1H’11 and we expect the 2012 rate to slow to 10%
with much of the growth impetus coming from local demand. Capex growth for plant and
equipment will also slow but this may be cushioned as China selectively revives some of
the stalled infrastructure projects like high-speed rail.
Big pay and
bonus hikes have
ended
Local government guidance of the annual wage rise for 2012 has dropped to 10% or less
from 20%+ for the last two years. December also saw export factories cutting back on the
3-4 month annual bonus paid at end 2010 to 1-2 months for 2011 (this led to strikes at
some foreign factories). The official measure of consumer sentiment fell sharply at the end
of 2011 and Beijing will give priority to stabilising this key measure in 2012.
Less inflation and
a slower rise for
the Yuan
Inflation eased to 4.1%yoy in December and we expect it to continue easing through 2012.
Beijing is likely to slow Yuan appreciation this year to around 2% from 4.8% for the year
average rate in 2011 in an effort to help exporters deal with the export slump.
GDP, real growth, %
PBOC 1-year loan, at Dec., %
Yuan to US$1, year average
2009
9.2
-0.7
5.31
6.83
2010
10.4
3.3
5.71
6.77
Sources: 2009-2011 data from CEIC and government agencies; 2012-13 forecasts by IMA Asia.
68
2011
9.2
5.4
6.96
6.46
2012
8.2
3.0
5.96
6.33
2013
8.6
3.0
5.46
6.15
Regional Update
Hong Kong
The new HK head
chosen in March
… is likely to be
Henry Tang
Chief Executive Donald Tsang steps down on 25 March, with his replacement to be
selected by a 1,200 member Election Committee packed with Beijing supporters. Former
Chief Secretary Henry Tang is the favourite to replace Tsang, as he has strong links to
Beijing and his status quo policies are popular with the HK business community and civil
servants. Tang’s main opponent, former convenor of the Executive Council CY Leung, is
more popular with HK residents but lacks Election Committee support. Democrat Albert
Ho will also contest the election, but has no chance of winning.
The political
challenge of HK’s
middle class
Tang’s policy goals largely focus on social issues including reducing income inequality,
bolstering the middle class, and building public housing. While Tang may make progress
on reducing inequality, his efforts to bolster the middle class will face difficulties. Many feel
under pressure as mainlanders have bid up local property prices.
February budget
Financial Secretary John Tsang will present the budget on February 1. Few big changes
are likely, with small increases in funding for public housing, tax breaks for SMEs, and
rebates for the middle class and office moving expenses possible. Donald Tsang has
stated that he will not meet his promise to cut profit tax from 16.5% to 15%, as HK is not in
the financial position to do so. The World Bank notes in its latest Doing Business guide
that HK’s effective corporate profits tax rate of 17.6% is above that of China (5.9%), Korea
(15.1%), Singapore (6.5%), and Taiwan (13.7%).
… fiscally tight
with few breaks
A downturn will
be cushioned by
China demand in
2012
With global trade growth expected to slow in 2012 HK’s growth this year will depend on its
tourism and investment links with the mainland and spending on several major
infrastructure projects. Growth in these areas should cushion a slowdown in port and
logistics work, slower growth in consumer spending, and a weak property market. We
estimate 2011 growth at 4.9% with growth in Q4’11 dipping to 3%yoy from 7.5% in Q1’11.
The pace will likely slow to 2%yoy through the first two quarters of 2012 before gradually
rising on stronger global growth into 2013. Unemployment, which hit a 13-year low of 3.2%
in November, will likely rise to 4% during 2012.
Growth in China
tourists will slow
… but remains
critical
Visitor arrivals from China surged 24% in 2011 to 28m (68% of all arrivals) while growth
from all other destinations was close to zero. Part of the surge from China is due to rising
wealth but a lot is policy driven (access to passports, approval to travel, etc.). Growth this
year is likely to drop back to 10% or less (as it did during the GFC) but even at that level it
will provide strong support for the local tourism and retail sectors. Retail sales for the first
11 months of last year were up 25%yoy by value and 18.6%yoy by volume with the pace
likely to drop back to about half that rate in 2012 as consumer sentiment eases (due to a
weaker property market and the Euro crisis) and tourism growth slows.
Housing
construction to
remain slow
HK’s housing market has weakened in 2011, with transactions falling 33% yoy and prices
easing from a peak in Q2’11. Mild declines in housing prices in 2012 are expected to keep
private construction growth (+1%) modest.
But infrastructure
spending is set to
rise
While government will avoid a swing to fiscal stimulus in the February budget several big
projects should lift infrastructure spending by 15% in 2012 and 10% in 2013. These
include the HK-Macau-Zhuhai bridge, Guangzhou-Shenzhen high-speed rail and MTR
extensions. In addition, a proposal for the US$17 billion expansion of the HK airport will be
debated in the Legislative Council in Q1’12.
Inflation will fall
Inflation should ease from the 6.2%yoy rate reported for November to 4% for 2012.
Interest rates will remain tied to US rates as required by the HK$ peg, which is expected to
remain in place.
GDP, real growth, %
Composite CPI (04/05), year average, %
Discount window base rate, % year end
HK$ to US$1, year average
2009
-2.7
0.6
0.50
7.75
2010
7.0
2.4
0.50
7.77
2011
4.9
5.8
0.50
7.78
2012
2.6
4.0
0.50
7.78
Sources: 2009-2011 from Censtat, HKMA, and CEIC; 2012-2013 by IMA Asia.
Dr. Mark Michelson, Chairman, Asia CEO Forum (Hong Kong)
Tel: (852) 2530-1115 ♦ Fax: (852) 2530-1125 ♦ Email: [email protected]
69
2013
3.8
3.5
1.50
7.78
Regional Update
Taiwan
President Ma’s
win
… will help with
China ties &
political stability
President Ma Ying-Jeou of the KMT won the January 14 presidential election in a result
that should underpin political stability and allow continued improvement of economic ties
with China. The victory was decisive enough to give Ma a solid mandate for his policies
(Ma won 51.6% of the vote; Ms Tsai of the DPP took 45.6%). This opens the way for
expanded commercial relations in 2012 under the Economic Cooperation Framework
Agreement (ECFA – see below). Ma will also have solid backing from the legislature as
elections on the same day saw his party, the KMT, win 64 out of 113 seats. The DPP
picked up 13 additional seats for a total of 40, which will give them a stronger voice in
opposition. Overall we see both the strong democratic electoral process and the actual
outcome as a plus for Taiwan’s risk profile and long-term growth prospects.
A small stimulus
is likely in 2012
With a slowing economy and low net public debt (38.5% of GDP in 2011), the Taiwanese
government is expected to expand its public spending in 2012. However, the size of any
budget deficit is expected to be modest, as Taiwan’s Budget Law prevents net public debt
rising above 40% of GNP (about 41.5% of GDP).
A new round of
tariff cuts with
China
In January the second stage of the ECFA came into effect. The tariff level on 400 items
reduced to zero, creating US$400-500m a year in tariff savings in industries including
petrochemical, textile and machinery. Taiwan and China plan to meet in early 2012 to
discuss expansions to the free independent traveller program and the relaxing of maritime
restrictions. ECFA’s actual dollar boost to Taiwan’s economy has been very small so far,
mostly by increased tourism, but it has helped lift sentiment and opened up a clearer
growth path for the continued transformation of Taiwan’s unique manufacturing paradigm.
A mild recession
from Q4’11
… with a mild lift
from Q2’12
The Taiwanese economy is expected to slow to 2.8% growth in 2012 as demand for its
exports drop and its construction sector slows. There’s little scope for a boost from fiscal
and monetary policy to counter the 2012 global downturn so there are downside risks if the
Euro crisis accelerates. At present we’ve pencilled in a mild recovery to 3.8% growth in
2013 as the US upturn consolidates and the Euro area hopefully exits its crisis. There is
upside potential if the US recovery proves stronger than expected or if China decides to
accelerate tourism or investment flows into Taiwan under ECFA. Neither is likely enough
to be included in the forecast yet although we’ll watch for them through 2012.
A much softer
downturn for
manufacturing
than in 2009
Export growth was almost flat in the final two months of 2011 from 15%ytd for the first
three quarters. Under our global outlook we don’t expect much better for 1H’12 with a mild
recovery to lift export growth to 2-5% in 2011 from 12.3% for 2011 and with a lift to 7% in
2013. Industrial production, which grew 7.8%ytd for the first three quarters, stalled in
October and fell 3.6%yoy in November. Overall we expect a Q4’11 contraction of around
5%yoy, with -5%yoy for Q1’12 before a gradual upturn to deliver zero industrial growth in
2012 with 5% likely in 2013. This is a milder downturn than the 2009 fall of 20% for
exports and 8% for industrial production.
… with lower
unemployment &
a milder easing in
consumption
Unemployment edged up to 4.3% in November and will likely average 4.9% across 2012
(versus 5.9% in 2009). The average year-end bonus paid in 2011 likely dropped to 12% of
annual income from 15% at the end of 2011. Together with factories rostering workers
onto unpaid leave this will see consumer spending growth soften in 2012. Construction is
expected to weaken in 2012 as demand for residential property slows due to weaker
investor sentiment and a new property tax of 10-15% on investment properties.
The NT$ eases in
2012
The year average NT$ appreciated 6.7% over the US$ in 2011 although its entered a
weakening trend from mid-2011 that we expect to continue through much of 2012 until
global risk recedes. A return to mild appreciation on the US$ is likely from 2013.
GDP, real growth, %
Official discount rate, year end, %
NT$ to US$1, year average
2009
-1.9
-0.9
1.25
33.1
2010
10.9
1.0
1.63
31.6
2011
4.6
1.2
1.88
29.4
2012
2.8
1.0
1.63
30.0
Sources: 2008-2010 government data and CEIC; 2011-2012 forecasts by IMA Asia.
The above forecast is by IMA Asia. Companies seeking local advice and forecasts should contact:
Michael Boyden, Managing Director, Taiwan Asia Strategy Consulting
Tel: (886 2) 8789 0978♦ Fax: (886 2) 8789 0877 ♦ Email: [email protected]
70
2013
3.8
1.8
1.88
29.1
Regional Update
South Korea
Free trade deals
(FTAs) face tricky
politics in Korea
… as President
Lee concludes his
term
North Korea
… a new leader
but little change
Room for stimulus
in 2012
2012 is a big election year for Korea with National Assembly polls in April and a presidential
poll in November. President Lee of the GNP is ending his single 5-year term facing
corruption charges and a counter-intuitive policy mix. Public protests over the forced
legislative passage of the Korea-US FTA (KORUS) last November has led Lee to agree to
renegotiate with the US. Yet unexpectedly Lee then announced the start of negotiations on
a China FTA, which would likely hurt more local industries than KORUS. Lee’s move will
hurt his party’s candidates in the April elections while the GNP’s presidential candidate, Ms
Park Guen-hye, is distancing herself from the president. Park will be the front-runner in the
presidential election, where she will likely face Ahn Cheol-Soo, the leading antiestablishment campaigner.
The death of Kim Jong-il is unlikely to change North Korea’s policy towards the South, but
may cause slight changes in the political situation of South Korea. It seems that North
Korea was governed by a 200-person body under Kim Jong-il rather than a one-man
dictatorship (see Regional page), we believe that the transition to Kim Yong-un will be
relatively seamless with few policy changes. However, the North’s leadership change will
likely spur South Korea’s next president to take a less restrictive stance on North Korea
than President Lee’s hard-line approach.
The Korean government will likely reveal stimulus measures in coming months. The
government has already announced a roll-back of punitive capital gains taxes on multiple
home owners and a 50 basis point interest rate discount for many first home buyers.
Weak growth in
2012
… as exports &
local demand dip
Korea’s economy is expected to remain relatively soft in 2012, growing by 3%. This is
weaker than the Bank of Korea’s 3.5% forecast, as we expect reduced export growth (8%
compared to 20% in 2011) will weaken the domestic economy. Consumption growth
(+1.4%) will likely be slowed by falling real wages (2011 wages are 7% lower than in 2007),
heavy household debt (73% of GDP), and rising borrowing costs. Investment growth is
forecast to ease in 2012 (+0.4%), as weak markets discourage spending. Growth will likely
strengthen in 2013 (4%), as recovering exports boost consumption and investment.
Electronics may
help exports
We expect manufacturing growth to slow from 6.5% in 2011 to 4.5% in 2012. The
manufacturing sector weakened in Q4’11, with industrial production growth slowing to
7%yoy in September to 6% in November, and the PMI fell to 44.9 (under 50 means
contraction), its lowest level since the GFC. However, the electronics components sector
(+13% yoy in Nov) remains strong, and will support manufacturing over the next year.
A small lift in
unemployment
Unemployment (3.1%) in Korea remains at near 10-year lows. While surveys suggest
labour hiring will be relatively similar in 2012 and 2011, slower manufacturing growth (see
above) will discourage some hires. We expect unemployment to average 3.5% in 2012,
and remain stable in 2013 (3.4%) as hiring picks up.
Inflation will ease
Korea finished 2011 with December inflation stuck at 4.2%, which is close to the rate for
the prior 11 months. We expect it to drop steadily in 2012 towards 3% by year end and
then continue at the level into 2013. This should open the way for a 50 basis point rate cut
over 2012 to 2.75% in the central bank policy rate by December. Korea will aim to keep
the Won weak, having gained a big boost for its export sector with a rapid slide in 2009. In
early January it was touching 15 Won to 1 Japanese Yen, which will be very painful for
Japan’s exporters who compete head-to-head with Korean firms.
… allowing a
small rate cut
… while the Won
stays weak
GDP growth, %
BOK Overnight call rate, year end, %
Won to US$1, year average
2009
0.3
2.8
2.00
1,277
2010
6.2
2.9
2.50
1,159
2011
3.5
4.0
3.25
1,107
2012
3.0
3.5
2.75
1,154
Sources: 2009-2011 government data (NSO, BOK) and CEIC; 2012-2013 forecasts by IMA Asia.
Tony Michell, Managing Director, Korea Associates Business Consultancy Ltd
Tel: (82 2) 335 7854/2614 ♦ Fax: (82 2) 323 4262 ♦ Email: [email protected]
71
2013
4.0
3.0
3.00
1,142
Regional Update
Indonesia
2012 – Indonesia’s
chance to step up
… but can it
justify investment
grade status?
The 2014 election
outlook is murky
… with the old
guard doing best
so far
The new land
reform law should
lift infrastructure
2012 is shaping up as a key year for Indonesia following the decision by Fitch, one of the
big three global ratings agencies, to return its sovereign debt to investment grade at the
end of 2011. This could open the way for the big pension funds in the West to buy
government bonds and to support big infrastructure projects. The first test of the new
rating’s impact will come in mid-January with a 30-year bond targeted at US$1.5b with a
likely yield of 5.375%. For money to flow into big projects three boxes need to be ticked:
political stability, which comes down to who takes over when President Yudhoyono (called
“SBY”) finishes his second term in 2014; a continuation of sound macro-economic policies;
and progress on micro-economic reforms.
The problem with the political outlook is that none of the contenders for the 2014 election
look strong on the reform and anti-corruption agenda pursued by the current government.
The field is led by Golkar’s Aburizal Bakrie and Gerindra’s Prabowo Subianto, who are
already in campaign mode thanks to substantial personal financial resources. PDIP’s
Megawati, Hanura’s Wiranto, and PAN’s Hatta Rajasa may also run. Yet there is popular
dissatisfaction over the same old guard taking charge, and a hope that an alternative figure
may emerge in 2012 to offer a credible challenge.
The land reform law passed in December should remove a major stumbling block to largescale infrastructure investment by enabling rapid resolution of land ownership disputes.
The government also wants to accelerate disposal of unused state land to private farmers
under new regulations that will likely be issued in January.
Steady growth at
6.5%
… driven by
local demand
Surging consumer
demand
… a boost to car
makers
Indonesia is one of the few emerging markets that should shrug off negative global forces
in 2012 thanks to strong domestic demand, the flow through from an upgrade in its
sovereign risk rating, and the prominence of commodities (for which there is surer demand)
in its export mix. Q4’11 GDP growth is likely to have been close to the steady 6.5%yoy
rate set in the prior three quarters and we see no reason for this to drop through 2012 with
the potential for a mild acceleration into 2013. Indonesia should become Asia’s fifth trillion
US dollar economy in 2013 with GDP per capita reaching $4,000, which is traditionally
seen as the take-off point for an emerging consumer market.
Retail sales grew 22%yoy in November making 2011 the second full year of surging local
demand (up 26% in 2010 and an estimated 21% for 2011). While vehicle sales slowed in
November the annual rate likely lifted by 20% to 0.88m units in 2011 with 1m units possible
in 2012. Suzuki, Toyota, GM (returning after leaving in 2005), and Geely have all
announced plans to expand capacity.
But watch out for
big wage rises
Despite the generally good outlook the economy does face domestic risks in 2012. Most
are to do with over-heating and in this area a key concern is a surge in wage demands.
Foreign firms in manufacturing (such as shoe makers) and services (such as banking) will
be the main targets but pressure will likely spread to other sectors.
Inflation drops
Inflation dropped to 3.8%yoy for December from 7% last January and will likely remain
around this rate through 1H’12. But big wage rises and plans to adjust the fuel subsidy
scheme (either by restrictions that limit distribution to low income households or a price
rise) could push inflation up later this year. Bank Indonesia’s policy rate is already at a
record low of 6% and will likely rise from 2H’12 to curb inflation. Global risk and volatility
will likely leave the Rupiah weak in 1H’12 but by 2H’12 an appreciation trend should be reestablished.
… but may rise
from mid-year
… as may the
Rupiah
GDP, real growth, %
CPI, year average, (2007=100), %
Central bank policy rate at end-Dec., %
Rupiah to US$1, year average
2009
4.6
4.8
6.50
10,356
2010
6.1
5.1
6.50
9,086
2011
6.5
5.4
6.00
8,776
Sources: 2009-2011 government data (BPS, BI) and CEIC; 2012-2013 forecasts by IMA Asia
James Castle, Chairman, CastleAsia
Tel: (62 21) 2902 1641 ♦ Fax: (62 21) 2902 1648 ♦ Email: [email protected]
72
2012
6.5
4.7
6.50
8,358
2013
6.8
5.2
7.00
8,037
Regional Update
Malaysia
The reform trend
should grow in
2012 & 2013
… helping to lift
growth & open up
markets
… with impetus
form a freer and
closer political
contest
Deregulating the
finance sector
… with bigger
foreign stakes
allowed
And privatising
state owned firms
Malaysia is gradually easing into a long-overdue phase of reform after some 30 years of
rigid policy settings that undermined growth and deepened social divisions. The tendency
to reform should consolidate through 2012 and 2013, providing better opportunities for
foreign firms through stronger growth, reduced country risks, and deregulation. Opposition
leader Anwar Ibrahim has played a key role in forcing reform onto the agenda by cobbling
together a diverse opposition that could win government and tapping into a growing
popular desire for reform that crosses the racial barriers that have traditionally defined
Malaysian politics. His acquittal in January in a questionable court case frees him to focus
on the next election, which is due in 2013 but may be called as early as mid-2012. While
the UMNO-led coalition, which has run government since independence, must still be
favoured to win but the result could be close. PM Najib, who took office in April 2009, has
responded to the opposition’s challenge by gradually elevating broad ranging reforms on
the government’s agenda despite opposition from many in his Malay-based party.
Malaysia aims to triple the size of its financial sector in the next ten years. It plans to do so
by allowing foreign banks to own bigger stakes in local lenders, issuing more banking
licences, easing short-selling rules, allowing companies to manage their foreign exchange
exposure and non-residents to trade onshore interest-rate derivatives. The foreign
ownership limit on banks will remain at 30%, but the central bank will grant exemptions on
a case-by-case basis. The main attraction of Malaysia to foreign banks is the size of its
Islamic banking, which tripled over the last decade to M$867bn (US$273bn). Malaysia
currently accounts for 63% of global Shariah-compliant debt issuance.
Najib’s reform program also includes reducing the states large role in the economy, which
includes a number of government-linked companies (GLCs) that dominate specific
industries. The sale of the government’s 43% stake in Proton, Malaysia’s loss-making
carmaker following earlier sales of government stake in firms such as DRB-Hicom, CIMB,
Malaysia Airports, and Telekom Malaysia.
A mild slowdown
before the pace
picks up in 2H’12
Growth will slow in 1H’12 from the 5.1%ytd pace set for the first three quarters of 2011 as
exports drop. Balanced against this will be strong domestic spending with consumer
demand (up 6.8%ytd by Q3’11) held up big payouts to public servants and low income
families under the FY2012 budget. Moreover, the authorities will start launching some of
the mega projects they plan to implement in conjunction with the private sector over the
next ten years. An expected pick up in global activity by mid-year should lift Malaysia’s
pace of expansion, delivering GDP growth of 3.8% in 2012 and 4.5% in 2013.
Softer growth, but
no contraction
thanks to
commodities
There has been a definite slowdown in the pace of monthly trade and production indictors,
but so far, Malaysia has avoided the recent contraction seen in some other SE Asian
countries. Exports and imports were up 8%yoy and 8.4%yoy respectively, while
manufacturing production expanded 4%yoy in November. Malaysia’s exports seem to
benefit from diversification into commodities with firmer demand and prices.
Less inflation and
a small rate cut
Inflation eased to 3.3%yoy in November from recent peak of 3.5%yoy in June and is
expected to fall into the 2-3% range in 2012. The central bank, which quickly raised rates in
early 2010 as inflation emerged, is being cautious in cutting rates but will have scope for a
modest 50 basis point cut to 2.5% this year. The M$ had a strong run against the US$ in
the 24 months to August (from 3.7 to 2.9), but is now taking a break to trade within 2.953.25 until the current global economic uncertainty dissipates.
… a weaker but
steady M$
GDP, real growth, %
CPI, year average (2010=100), %
Central bank overnight policy rate, Dec, %
Ringgit to US$1, year average
2009
-1.7
0.6
2.00
3.52
2010
7.2
1.7
2.75
3.23
2011
4.6
3.0
3.00
3.06
Sources: 2008-2010 government and Bank Negara data plus CEIC; 2011-2012 forecasts by IMA Asia.
Datuk Paddy Bowie, Managing Director, Paddy Schubert Sdn. Bhd.
73
2012
3.8
2.8
2.50
3.15
2013
4.5
2.6
2.50
3.00
Regional Update
Philippines
Policy stays
focused on anticorruption
… changing the
way government
business is done
in the Philippines
Winning a credit
rating upgrade
… although a
lower deficit may
be temporary
The payoff should
be a lift in
infrastructure
… but that has
to be proved in
2012
President Aquino, who is 18 months into his single 6-year term, will continue to make anticorruption the central plank in policy in 2012. As 2011 closed, Aquino engineered the
impeachment of Chief Justice Renato Corona through a vote in the House of
Representatives. Corona was appointed by President Arroyo, Aquino’s predecessor, and
has blocked all attempts to prosecute her for corruption. If she is successfully convicted it
may help end a culture of impunity for big politicians and business people that has done
great damage to the economy. The anti-corruption campaign is very popular, with
Aquino’s approval rating still above 70% in December. An unintended consequence of the
campaign has been a fall in infrastructure spending as bribery is entrenched in public
works and corrupt officials have feared exposure.
The bright side of slower government spending is a halving in the budget deficit from a
record P314bn in 2010. This helped the government win credit rating upgrades by Fitch
and Moody’s. Standard & Poor’s also raised the outlook on the country’s BB rating to
positive in December. The improved fiscal situation allowed the Philippines to sell
US$1.5b in 25-year bonds at a better-than-expected 5% yield in early January. Another
US$750m worth of bonds will be issued later this year. However, the deficit is set to rise to
P268bn (2.6% of GDP) in 2012, as public spending lifts to counter weaker global growth.
The government plans to spend P141.8b (US$3.2b) on a wide variety of infrastructure
projects in 2012. A focus on less corruption and a better bond rating should be a big plus
for infrastructure but that has yet to be proved. Part of the problem lies in the
government’s public-private partnership (PPP) scheme. Only one of 10 such projects
planned last year was awarded. This year the target is 16 PPP projects. The government
also hopes to renegotiate and restart the Chinese-funded North Rail project
connecting Metro Manila with the an international airport at the Clark Special Economic
Zone, a former US military base, 80km north of Manila. In 2011, the ADB criticised the
PPP scheme for lack of transparency, competition, and preparation as well as continuous
and often questionable litigation (see www.adb.org, July 2011).
Dodging a 2012
recession
… thanks to
OFW remittances
A structural
change in exports
… from goods to
services
Less inflation,
lower rates and a
steady Peso
In 2009 the Philippines dodged a recession during the GFC and we expect it to do the
same this year thanks to strong growth in domestic spending. Not only does this need to
offset weaker external demand but also a persistent decline in exports that may be
structural rather than cyclical. As for much of the last decade growth in consumer
spending, which accounts for an outsized 70% of GDP, will be critical and with a strong
10.6%yoy rise just reported for November growth in remittances this year could exceed the
5% rate reported in 2009 reaching US$20b (some 9.5% of GDP)
Merchandise exports have been sliding since May and by October were down 4.3%ytd. As
imports have been running strong (up 12.2%ytd by October) the trade deficit soared to
US$9.2b by October 2011. This structural shift appears to represent the departure of
some key light manufacturing from the Philippines, notably in electronics. Fortunately it is
being countered by soaring income for services exports, particularly from business process
outsourcing (BPO), where export earnings hit a record high of US$8.7bn in the 12-months
to September 2011. Without this the exchange rate would have collapsed.
CPI inflation eased to 4%yoy in December from an October peak of 5.3%yoy and is likely
to moderate further in the coming months. This will allow the central bank to cut its policy
rate from the 6.5% to 5.5% by end-2012. The Peso has dropped 5% to 44 against the
US$ from a 2-year high of 41.8 in August and should hold close to this level into 2013.
GDP growth, %
CPI, annual average, %
Central bank overnight loan rate, year end
Peso to US$1, annual average
2009
1.1
3.3
6.00
47.6
2010
7.6
3.8
6.00
45.1
2011
1.5
4.4
6.50
43.4
Sources: 2008-2010 BSP data and CEIC; 2011-2012 forecasts by IMA Asia.
Peter Wallace, Managing Director, The Wallace Business Forum
Tel: (63 2) 810 9606 ♦ Fax 810 9610 ♦ Email: [email protected]
74
2012
3.8
3.9
5.75
43.4
2013
4.3
4.5
5.75
42.5
Regional Update
Singapore
A policy focus on
fixing the issues
that annoy
Singaporeans
Singapore’s political landscape will continue to be shaped by the outcome of the 2011
parliamentary and presidential elections in which voters expressed considerable
dissatisfaction with the PAP, which has ruled Singapore since independence. Voters are
unhappy about high immigration, rising income inequality, expensive housing, persistent
flooding of major streets, and public transport price increases. The government has
launched a response across all these areas. In late 2011 stamp duty rates were raised for
foreign buyers of real estate and local buyers of investment properties, and from January
employment pass requirements for low to mid-level foreign workers have been tightened.
January also saw big pay cuts announced for the top politicians: PM Lee’s pay dropped
35% to US$1.7m while ministers will see their pay cut to US$850,000 from US$1.2m.
Better relations
with Malaysia
Singapore continues to improve its traditionally vexed relationship with Malaysia. The latest
areas of cooperation (announced in early January) include a possible undersea road tunnel
linking the two countries, aviation links between Singapore’s Changi and Malaysia’s Senai
airports, and a joint radio frequency spectrum for digital broadcast and mobile broadband.
Moreover, under an earlier agreement , Singapore’s and Malaysia’s sovereign funds,
Temasek and Khazanah, will jointly develop hotels, apartments, offices and shops on 5.4m
square feet at the edge of Singapore’s CBD. This S$11bn (US$8.6bn) project should give
a boost to construction, the growth of which eased to 1.5% in 2011 from 20.1% in 2010.
Booming construction helped to cushion the impact of the GFC on the Singapore economy
and will most likely play a similar role in the current, much milder slowdown. We expect 6%
growth in construction activity in 2012.
… open up new
commercial
opportunities
… & scope for
new building
A soft downturn in
2012
… as local
demand helps
offset an export
fall
Preliminary figures show that GDP grew 4.8% in 2011 following the post-GFC rebound of
14.5% in 2010. Growth was led by manufacturing (7.4% following a 29.7% rebound in
2010) and services (4.7% following 10.6% in 2010), with construction noticeably weaker
(1.5% following 6.1% in 2010). Growth is likely to be flat or negative for the first two
quarters of 2012 (in YoY terms) before gradually recovering in 2H’12. As in 2009, a big
drop in external demand, which will undermine manufacturing, is expected to be partly
offset by a milder easing in domestic demand. This should result in GDP growth of 2.5% in
2012 with a lift to 4.5% in 2013 provided the Euro crisis has stabilised.
Manufacturing
growth has
stopped
Singapore’s manufacturing and trade flows reacted instantly to the 2H’11 downshift in
global demand. Excluding the highly volatile pharmaceuticals sector, manufacturing output
declined on a year-on-year basis every month between July and November. This is
consistent with the New Orders component of the Purchasing Managers Index falling
below the 50 expansion-contraction threshold in June-December. Non-oil domestic exports
(NODX) also lost ground in recent months, posting a steep 16.3%yoy decline in October.
Similarly, non-oil imports (NOM) have been below year-ago levels for most of 2H’11. A
7.5%yoy increase in November most likely resulted from inventory replenishment. We
expect relatively weak growth of NODX and NOM of 2.5% and 2.1% respectively in 2012.
Consumers will
cut back
Personal consumption will be constrained by falling home prices, as the housing market
starts to respond to the government’s cooling measures. The pace of outstanding housing
loans subsided to 16.7%yoy in November from an early-2011 peak of 23%yoy. Retail
sales (excluding cars) likely rose 9% by value and 6% by volume in 2011 with about half
that pace expected in 2012 before a gradual lift into 2013.
Less inflation and
a lower S$
Inflation of 5.7%yoy in November should steadily fall to within a 2.5-3.5% range in 2012.
The authorities are currently more concerned with growth than inflation and the MAS,
Singapore’s central bank, started easing monetary policy in October by slowing down the
pace of S$ appreciation against an undisclosed basket of currencies. Further monetary
easing is likely in April. The S$ has fallen 7.3% on the US$ since August and is likely to
stay soft until global growth resumes.
GDP, real growth, %
3 month interbank interest rate, Dec, %
S$ to US$1, year average
2009
-0.8
0.6
0.69
1.45
2010
14.5
2.8
0.44
1.36
Sources: 2008-2010 government data and CEIC; forecasts for 2011-2012 by IMA Asia.
75
2011
4.8
5.1
0.44
1.27
2012
2.5
2.5
0.44
1.30
2013
4.5
2.5
0.94
1.27
Regional Update
Thailand
Thaksin’s big
political agenda
for 2012
… a tighter grip
on the money
ministries
… & resurrecting
the TRT team
Dr Thaksin, who runs the government from outside Thailand as he faces a 2-year jail
sentence if he returns, is keen to transform Thai politics and national finances in 2012. At
the end of January the government, nominally headed by his sister PM Yingluck, will carry
out its first major cabinet reshuffle after five months in office. Under performing ministers
will be jettisoned and posts will be rearranged so that all ministries with a role in plans for
massive infrastructure spending are placed in the hands of members of Thaksin’s Pheu
Thai Party. In May, a 5-year ban on political activity by 111 politicians, mostly from
Thaksin’s earlier but now-defunct Thai Rak Thai party, will expire and some core Thaksin
supporters are likely to be brought into government through a second cabinet reshuffle.
Pressure for a pardon for Dr Thaksin will grow, although it is unclear if the Thai elite will
give way on this.
Thaksin’s big
spending plans
for 2012-16
Thaksin wants to spend a lot of money. His starting point is the current budget with
spending of B2.38t, a deficit of B400b, and public debt at B4t or 40% of GDP. To this will
be added B350b for water management projects plus B300b in soft loans from the central
bank via commercial banks to SMEs hit by the floods. A massive B2.27t will then be raised
and spent for "New Thailand" mega-projects between 2012 and 2016.
Money is not a
problem
The immediate problem is funding as the current budget is already at a constitutionally
imposed limit on deficit spending. This will be handled in two ways. First, an election
promise to lower energy costs will be dumped and the Oil Fund, which subsidises petrol
diesel and LPG prices, ended (so expect higher fuel costs from Q1’12). But by far the
biggest gain comes from a proposal to transfer one quarter of the government’s entire debt
(B1.14t left over from the 1997 Asia Financial Crisis) from the Ministry of Finance to the
Bank of Thailand (BOT). This would allow an equally massive amount of new government
borrowing. We note that the BOT’s annual earnings on its forex holdings at B25b are
considerably less that the B65b in interest on the debt being handed to it. This is
sufficiently problematic for stable central bank operations that it may be blocked.
… if debt can be
transferred to the
central bank
A recession now
with an upturn
from mid-2012
The massive floods in Q4’11 will have produced a sharp fall in growth that lowered the
2011 GDP growth rate from 3.1%ytd for the first nine months to zero for full 2011. The
contraction will likely continue in Q1’12 before spending on reconstruction (funded as much
by insurance payouts as public funds) kicks in and lifts growth to 2.8% for 2012.
Growth will be
held back
Four issues are critical to the outlook: the strength of the export manufacturing recovery;
the resilience of the large rural sector; whether Thaksin’s big projects actually occur; and
business, consumer, and foreign investor sentiment. The latest data shows exports, which
grew 24.8%ytd for the first 9 months, stalling in October and plunging 12%yoy in
November. This year we expect export growth of 2.5% as a steep fall in Q1’12 gives way
to a steady recovery in 2H’12 that will lift export growth to 8% in 2013. Industrial
production, which is likely to have fallen by 12%yoy or more in Q4’11 (giving full 2011
growth of -3.7%) will likely fall another 6-10% in Q1’12 before lifting to average 2% growth
this year with 5% possible in 2013. The big problem is imports, which will likely grow 10%
this year due to rebuilding and could push the trade balance into deficit, suggesting a lift in
country risk.
… by a weak
manufactured
exports growth
… and a trade
deficit
Mild inflation and
one more rate cut
… with a weak
Baht
Despite the floods inflation eased to 3.6%yoy in December, after hovering at just over
4%yoy in the previous eight months. The BOT has cautiously trimmed its policy rate from
3.50% to 3.25%. Given post-flood shortages and rebuilding costs we don’t expect inflation
to fall much this year with at most another 25 basis point rate cut possible. The Baht is
down 6.8% on the US$ since August in line with other Asian currencies. Elevated political
and economic risks are likely to keep the Baht soft for most of 2012 and 2013.
GDP, real growth, %
CPI (2002 index), year average, %
Central bank, policy rate, year end, %
Baht to US$1, year average
2009
-2.3
-0.9
1.25
34.3
2010
7.8
3.3
2.00
31.7
2011
0.0
3.8
3.25
30.5
Christopher Bruton, Consultant, Dataconsult Ltd
76
2012
2.8
3.9
3.00
31.1
2013
4.4
4.2
3.50
31.7
Regional Update
Vietnam
The 2012 agenda
… stabilizing the
economy
… and moving
on reforms
Vietnam’s communist party leadership enters the second year of its 5-year term in January
led by Party head Nguyen Phu Trong. The government, under President Trong Tan Sang
and PM Nguyen Tan Dung, has just completed the first six months of its 5-year term. The
policy focus for 1H’12 will be stabilising the economy after a surge in inflation followed by a
collapse in construction as monetary policy was tightened. In February 2011 the
government committed to undertake major reforms that would stabilise the economy but
then largely failed to implement them. Yet the year finished with leaders talking up an
economic crisis, which suggests an effort to create the impetus for reforms is underway.
Monetary policy
should ease from
Q2’12
Monetary policy is likely to ease by Q2’12 with the policy rate dropping from 15% now to
13% at the end of 2012. Local firms want a rate cut as inflation is easing (though still at
18%yoy in December), the trade deficit is shrinking, and the construction sector plunged
10.5%yoy in Q4’11. The IMF has advised against a premature easing but PM Dung has
already asked the central bank to cut interest rates while also limiting credit growth to 15%
and lowering inflation to 10%yoy by end-2012.
Watch for bank
consolidation in
2012
A big fall in the real estate sector has exposed structural weaknesses in the banking
sector. Non-performing loans (NPLs) are set to rise from 3.3% of total loans to 10%+,
causing severe problems for some of the 42 local banks, which are generally undercapitalised and suffer from weak risk management. A banking reform plan aims to create a
three tier system, with the top tier of 12-15 large healthy banks accounting for 80% of the
market. More foreign banks are being allowed to take small stakes in local banks with
Credit Suisse recently taking 15% in Sacombank and Japan’s Mizuho Financial Group
taking 15% in Vietcombank. Other foreign banks, including HSBC, Standard Chartered
and ANZ, already have stakes in Vietnamese banks.
… and progress
on big power
sector plans
By the end of Q1’12 Hanoi will aim to clarify plans for a major lift in infrastructure
investment, which includes up to 13 nuclear power stations. Weak infrastructure is a
major barrier to growth. In December, state-owned Electricity of Vietnam lifted electricity
prices by 5% following two years of losses due to weak hydro-power plant production,
which required more oil purchases for thermal generation.
Growth dips in
2012 and lifts into
2013
Growth dipped to 5.9% in 2011 from 6.8% in 2010 largely due to monetary tightening,
which led to a 1% fall in real growth for construction spending. Other parts of the economy
were less affected with services up 7%, industry up 5.5%, and agriculture up 4%. Weaker
demand from Europe and tighter monetary policy through much of 2012 will limit GDP
growth to 5% before a lift to 6.5% in 2013 as local and overseas demand improves.
Manufacturing
should be resilient
in 2012
Exports grew 32.8% in 2011 (US$ terms), including 28.4%yoy growth in Q4’11, which was
by far the strongest performance in Asia as 2011 closed. Despite a recession in Europe
(16% of exports in 2010) we expect total export growth of 15-20% this year with a mild lift
in US demand (20% of exports) and steady demand from China (10% of exports) and
ASEAN neighbours (14% of exports). Manufacturing output rose by 8.3%yoy in December
from 5.6%yoy in November and 4.2%yoy in October as Western buyers sought out
cheaper suppliers and the newly established electronics sector continued to expand.
Crucial support
from FDI and
remittances will
continue
Vietnam received US$11bn in foreign direct investment (FDI) in 2011, about the same as
in 2010. FDI for real estate fell to just 5.8% of the total in 2011 from 34.3% in 2010. The
government hopes for a similar inflow this year. Remittances from offshore Vietnamese
workers may have grown 8% last year to $9bn (7.3% of GDP) and we’d expect similar
growth this year.
Slower Dong
depreciation
The Dong fell 7.4% against the US$ in 2011 (year average basis), 6.7% in 2010 and 7.6%
in 2009. We expect a slower (5.4%) pace of Dong depreciation in 2012, as the economy
becomes more balanced and economic policy somewhat more credible.
GDP, real growth, %
CPI, yoy, % (2005=100 from 2007)
Central bank refinancing rate, year end, %
Dong to US$1, year average
2009
5.3
6.7
8.00
17,860
Source: 2008-2010 data from the IMF and CEIC; 2011-2012 forecasts by IMA Asia.
77
2010
6.8
9.2
9.00
19,151
2011
5.9
18.7
15.00
20,659
2012
5.0
14.0
13.00
21,861
2013
6.4
9.0
11.00
22,772
Regional Update
India
PM Singh’s weak
coalition
… hurt by
internal failings
… and slow on
legislation
Watch key state
polls in Q1’12
… will Rahul
Gandhi rise?
A big reform
agenda is stalled
… except for a
food subsidy bill
PM Singh’s Congress-led government has struggled to exert its authority since winning a
second 5-year term in May 2009. Its problems come down to three factors: a series of
corruption scandals; a collapse in the top leadership team due to Mrs Gandhi’s illness; and
fragmentation by the regional parties in the coalition, notably the Trinamool Congress. As
a result, legislation has stalled with just 17 bills (mostly rudimentary) passing in the winter
session and the backlog of unpassed bills growing from 86 to 96. Most damaging was the
defeat of the anti-corruption Lokpal Bill and a failed attempt to relax FDI restrictions in
retailing. Whether this can be turned around depends on Congress’s performance in
upcoming state elections and a change in the top leadership. Meanwhile, decision making
will be suspended; even the Finance Budget will be postponed until after the state polls.
Elections are due in five states in the next two months, including the crucial state of Uttar
Pradesh (UP), where Rahul Gandhi leads the campaign for Congress. A strong victory,
although unlikely, could prompt Congress to bring forward the next national election with
Rahul Gandhi elevated to party president and then to PM (reunifying the leadership split
between Mrs Gandhi and Mr Singh). If Congress stumbles in the state polls India would be
left with a weakened central government with modest reform capacity at best.
After the March state polls there is a window to push through some long-pending reforms
including bills on land acquisition, mining, corporate regulation, nuclear power, pensions,
higher education, judicial reforms, and taxation. Yet if Congress is weakened it will likely
focus most of its energy on passage of the Food Security Bill, its biggest political weapon
ahead of the 2014 national elections. Although the bill subsumes existing food subsidies
the scale is much bigger and the cost could cripple the national budget.
India’s growth
slide should
bottom in Q1’12
… as inflation &
rates ease growth
will lift in 2H’12
Consumers slow
big purchases
… credit growth
is slowing
The rupee’s fall
… has stopped
for now
India’s economy slowed during 2011 as high interest rates were belatedly applied by the
Reserve Bank of India (RBI) to bring down inflation. Inflation has been stuck in a 910%yoy band since January 2010 with the RBI lifting its repo rate from 4.75% to 8.50% by
the end of 2011. As a result, industrial production growth slid from a high point of 14%yoy
for Q1’10 to an estimated 2%yoy for the just completed Q4’11. The RBI had initially
assumed inflation was due to high food prices but clearly India was growing beyond its
capacity, which allowed inflation to become entrenched across the economy. As demand
growth has stalled and global food prices are steady we expect inflation to drop to around
6%yoy by mid-2012, which should open the way for the RBI to cut rates from March
onwards with around 150 basis points (bp) cut by December and another 50bp in 2013.
The lift in industrial production should start in the June quarter and build into 2013.
Consumers have not been impressed by politicians, inflation or high interest rates, leading
to a pronounced slowdown in all vehicles sales through 2H’11, which cut passenger car
growth to 7.5% in 2011 (from 26.1% in 2010); 3-wheeler growth to 16.3% (36.1%); and 2wheeler to 18% (from 30.7%). This downturn should bottom in Q1’12 with a lift from Q2’12.
Bank lending for commercial purposes edged down from 23%yoy at the start of 2011 to
17.7%yoy for November and will likely ease to 16%yoy by mid-2012.
The rupee’s bungee jump from 44=US$1 in July to 52 for December appears to have
halted but the rebound is likely to be slow until global risk concerns ease towards the end
of 2012 and inflation has clearly abated. Foreign exchange reserves finished 2011 at
$296bn, down $25bn from an August high point but in line with the end of 2010, which
suggests a modest cushioning of the rupee’s fall by the RBI.
Calendar year starting January
GDP (Production), real growth, %
GDP (Expenditure), real growth, %
Inflation - WPI, year average, %
Inflation - CPI, Indust workers, yr avg, %
RBI lending (repo) rate, year end, %
Rupee to US$1, RBI Ref Rate, yr avg.
2009
7.0
6.8
2.2
10.9
4.75
48.3
2010
8.6
9.9
9.4
12.0
6.25
45.8
2011
7.0
7.2
9.4
9.0
8.50
46.6
2012
6.0
6.3
6.0
6.0
7.00
51.2
Sources: 2008-2010 data from the government (NCI, RBI) and CEIC. 2011-2012 forecasts by IMA Asia with guidance from IMA India.
Adit Jain, Chairman, IMA India
78
2013
7.2
7.0
7.0
6.5
6.50
49.7
Regional Update
Australia
PM Gillard aims to
reach 2013 before
calling a poll
PM Julia Gillard of the Labor Party heads a minority government, supported by three
independents and the Green Party. The government’s majority increased from 1 seat to 3
seats at the end of 2011 with the installation of an opposition MP in the non-voting
speaker’s seat. The government is not required to call an election until the end of
November 2013, and may well wait to near the end of term, as the Labor Party is currently
behind the opposition Coalition in polling (46%:54% on a two party preferred basis).
The mining tax
will pass
The first item on the Labor party agenda in 2012 is the passing of the mining tax. The
House of Representatives passed the mining tax late last year, and the Senate is expected
to pass the legislation in coming months. The next major issue is gambling reforms. One
independent, Andrew Wilkie, has threatened to walk away from the government if the
reforms are not passed by May. However, these reforms are deeply unpopular with
sporting clubs, a large interest group that relies on gambling machines for revenue. Gillard
may try to convince Wilkie to accept lesser reforms so she can escape the sporting clubs
wrath. Gillard could also let Wilkie go, now that she has a 3-seat majority.
… gambling
reforms are less
certain
Scope for
stimulus if needed
in 2012
The Labor Government is trying to return the budget in 2012/13 in an attempt to prove its
economic credentials before the next election. However, if global conditions deteriorate,
Australia is in a strong position to stimulate, with public debt of just 7.7% of GDP and a
AAA rating. In the short term however, the Labor Government will be hoping that its fiscal
cutbacks encourage the Reserve Bank of Australia (RBA) to cut interest rates to boost the
economy. We expect one 25 basis point cut in the RBA’s policy rate in 1H’12.
Steady growth in
2012
… driven by
mining capex
… & a mild east
coast recovery
Australia is set for steady growth in 1H’12 with the potential to lift in 2H’12 if China pulls off
its soft landing (as we expect) and the Euro areas avoids a major crisis. While commodity
prices have fallen, Australia has benefitted from an investment boom in the mining states
that will likely sustain the economy until commodity demand recovers. But, the mining
boom hides weakness in the non-mining states, which have felt the negative effects of a
weaker global economy, a steep rise in interest rates, and a high $A. Interest rate cuts in
November and December followed by a further cut in early H1’12 should provide a boost to
the weaker eastern states from Q2’12. We expect strong 4% GDP growth in 2013 and
2014, as the global economic situation improves.
Employment
constraints to
return in 2013/14
Year-on-year full-time employment growth turned negative (-15,000 jobs) in November for
the first time since the GFC. Employment losses were heaviest in the largest state, New
South Wales (-19,200 jobs). Jobs growth remained strong in the mining states of Western
Australia and Queensland (7,000 jobs each). Employment conditions are tight in Western
Australia (unemployment rate 3.9%) but less so in Queensland (5.2%), due to its weak
tourism sector and inbound migration to the state. We expect the increase in
unemployment to be mild in 2012 (0.3% to reach 5.5%) as some of the job losses in the
non-mining states are alleviated by workers moving to the mining states. Capacity
constraints will return in 2013, with unemployment dropping back to 5%.
$A to stay strong
Mining investment flows and commodity exports will keep the $A above parity in 2012/13.
Australia also has safer banks and higher interest rates than most developed nations,
which will encourage currency inflows.
Year ending December 31
GDP, real growth, %
RBA cash rate, year end, %
A$1 = US$, year average
US$1 = A$, year average
2009
1.4
1.8
3.75
0.79
1.27
2010
2.6
2.8
4.75
0.92
1.09
Source: 2008-2010 data from the ABS; 2011-2012 forecasts by IMA Asia.
Andrew Hordern, Regional Economist, IMA Asia
Tel: +61-2-9252 4336 ♦ Email: [email protected]
79
2011
2.0
3.3
4.25
0.99
1.01
2012
2.8
2.8
4.00
1.01
0.99
2013
4.2
2.8
4.25
1.04
0.96
Regional Update
New Zealand
A stable political
outlook
… with good
legislative
capacity
Fiscal easing will
reverse in 2012
… watch for
asset sales
The loss of
workers overseas
PM John Key won a second 3-year term in November 2011, although his National Party fell
two seats short of a majority. As a result, the Nationals will govern in a coalition with the
ACT (1 seat), United Future (1 seat) and Maori Parties (3 seats). The coalition numbers
give the government scope to pass legislation with support from the Maori Party or both of
the other two parties. In return for the minority parties’ support, the National Party has
agreed to introduce government spending limits (albeit with no penalty if breached) and to
sell a maximum of 51% of government equity in state-owned firms.
The Nationals main policy for its current term is to push the New Zealand economy into
surplus by 2014/15. Currently the deficit is expanding, increasing from 3.7% of GDP in the
year to June 2011 to 4.3% of GDP in the year to September 2011. PM Key plans to reduce
spending by funding infrastructure through partial asset sales (four energy companies and
Air NZ) and restructuring welfare benefits to move recipients back into the workforce.
The NZ government may consider incentives to stop the skill drainage as workers move
overseas. With higher wages and lower unemployment rates in Australia, a net 35,750
Kiwis moved to Australia in the year to November 2011, 15,000 more than the previous
year. Government incentives could include bonuses to the Kiwisaver program.
Growth has
slowed to 1%yoy
… but should lift
from mid-2012
After reporting solid GDP growth of 1.8%yoy for Q3’11 the pace has slowed to around 1%
by our estimate to mid-2012. Export growth has slowed from over 20%yoy in the year to
September to 7% by November. Part of the decline is attributable to falling commodity
prices, which have dropped in each of the last seven months of 2011. In addition, weak
housing approvals in the year to November (-16%yoy) have pulled down the construction
sector (see below). Earthquake reconstruction in Canterbury is expected to start in earnest
in 2H’12, driving the economy in the following year. We expect 2% GDP growth in 2012
with a lift of 3.2% in 2013 as rising demand boosts private consumption by around 3%.
A complex labour
market as some
skilled workers
leave
Employment growth will be hampered in 1H’12 by the slow growth in the economy. Job
mismatches are also restricting employment growth, as many skilled workers have moved
overseas and more unemployed workers have become long-term unemployed (30% of total
unemployed), which makes them less attractive to employers. Building for reconstruction
projects will lower the unemployment rate in 2012 to around 6.4% from 6.7% in 2011,
before an improving economy in 2013 takes the rate down to 5.6%.
Inflation to ease in
1H’12, allowing
rate cuts
Inflation remained strong in Q3’11, but is expected to ease to below 3% in 1H’12.
Reconstruction in Canterbury will create capacity constraints, putting upward pressure on
inflation in 2012 and 2013. The Reserve Bank of New Zealand (RBNZ) will likely respond
to rising inflation by raising rates 25bp in late 2012 and a further 75bp in 2013.
Mild housing
recovery in 2012
Declining property prices (-2% in Nov) and a weak economic environment lowered dwelling
sales by 14%yoy in November. Housing investment is estimated to have fallen 10% in
2011, but is expected to partially recover in 2012 (+4%), as earthquake reconstruction picks
up and a ten-year low variable mortgage rate (5.9%) boosts housing demand in Auckland.
NZ$ to strengthen
in 2013
Weaker commodity demand will likely keep the NZ$ below its 85 US cents peak in July last
year, with a mild easing expected in the first half of the year. As trade flows and NZ
interest rates increase, demand for the NZ$ will rise, lifting the currency.
Calendar years
GDP(Expenditure), real growth, %
GDP(Production), real growth, %
Official cash rate, year end, %
NZ$1 = US$, year average
US$1 = NZ$, year average
NZ$1 = A$. year average
2009
-0.1
-2.1
2.1
2.50
0.62
1.60
1.26
Source: 2008-2010 data from Statistics NZ; 2011-2012 forecasts by IMA Asia.
80
2010
2.4
1.3
2.3
3.00
0.72
1.39
1.27
2011
1.3
1.0
4.3
2.50
0.79
1.26
1.25
2012
2.0
2.2
3.6
2.75
0.77
1.30
1.32
2013
3.2
3.2
3.8
3.50
0.79
1.27
1.32
Regional Update
Asia Brief contributors
The Asia Pacific Executive Brief is produced by a unique network of in-country experts who run briefing and
advisory programs that are designed to help senior executives monitor and anticipate critical business
developments through timely insights and analysis. Further information on the markets and the peer group
briefing programs is available from the Country Directors listed below.
Asia &
Global
Singapore: Richard Martin, Managing Director, IMA Asia ♦ Web: www.imaasia.com
Mob: (65) 9023 9642 ♦ Email: [email protected]
Australia
Sydney: Katie Tucker, Client Support Manager, IMA Asia ♦ Web: www.imaasia.com
China
Shanghai: James Loudon, China Representative, IMA Asia
Tel: (86) 186 0165 5179 ♦ Email: [email protected]
Hong Kong
Hong Kong: Mark Michelson, Chairman, Asia CEO Forum, Hong Kong
Tel: (852) 2530 1115 ♦ Fax: (852) 2530 1125 ♦ Email: [email protected]
India
New Delhi: Adit Jain, Chairman, IMA India ♦ Web: www.ima-india.com
Indonesia
Jakarta: James Castle, Chairman, CastleAsia♦ Web: www.castleasia.com
Japan
Canberra: Chris Nailer, Associate Director, IMA Asia & Director MBA program, ANU
Malaysia
Kuala Lumpur: Datuk Paddy Bowie, Managing Director, Paddy Schubert Sdn. Bhd.
Pakistan
Karachi: Babar Ayaz, Managing Director, Mediators (Pvt) Ltd
Philippines
Manila: Peter Wallace, President, The Wallace Business Forum ♦ Web: www.dataphil.com
Tel: (63 2) 810 9606 ♦ Fax 810 9610 ♦ Email: [email protected]
South Korea
Seoul: Tony Michell, Managing Director, Korea Associates Business Consultancy
Tel: (82 2) 335 2614 ♦ Fax: (82 2) 323 4262 ♦ Web: www.kabcltd.com
Email: [email protected]
Singapore
Singapore: Richard Martin, Managing Director, IMA Asia ♦ Web: www.imaasia.com
Taiwan
Taipei: Michael Boyden, Managing Director, TASC Taiwan Asia Strategy Consulting
Tel: (886 2) 8789 0978 ♦ Email: [email protected] ♦ Web: www.tasc-taiwanasia.com
Thailand
Bangkok: Christopher Bruton, Managing Director, Dataconsult Ltd
Vietnam
Bangkok: Christopher Bruton, Managing Director, Dataconsult Ltd
81

the month`s highlights - The Wallace Business Forum

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