the Philippines unveil 72 billion-peso ($1.7 billion) Stimulus Package

Asian policy makers are bolstering efforts to protect their economies from weakening global growth, as Indonesia unexpectedly cut interest rates and the Philippines unveiled a stimulus plan.

Bank Indonesia lowered its reference rate by a quarter of a percentage point to 6.5 percent yesterday, defying the predictions of all 15 economists surveyed by Bloomberg News. Philippine President Benigno Aquino announced a 72 billion-peso ($1.7 billion) spending package today as his government cut growth estimates, while Singapore's central bank is forecast by economists to say this week that it will slow or end its currency appreciation.

"We want to be ahead of the curve in anticipating the impact of the global economy," Perry Warjiyo, Bank Indonesia's director of economic research, said in a Bloomberg Television interview today. "It will impact through the region, and we will see there is a decelerating trend of inflation and a downward revision to economic growth. Sooner or later, central banks need to rebalance the preference of their monetary policy response."

Emerging-market nations have turned from fighting inflation to supporting growth as a struggling U.S. recovery and deepening European crisis threaten the global economy. Brazil, Turkey, Russia and Pakistan have cut borrowing costs in 2011, while Asian countries from the Philippines to South Korea have refrained from further rate increases in recent weeks.

Taking Insurance

"It's primarily because of the weaker global economic backdrop that they are taking out some insurance against the global economic headwinds," said Leif Eskesen, a Singapore- based economist at HSBC Holdings Plc.

The MSCI Asia Pacific Index of stocks has slumped 15.4 percent this year as investors pare bets on emerging markets. Some Asian currencies have tumbled against the dollar in the same period, led by a slide of about 9 percent in the Indian rupee, according to data compiled by Bloomberg.

Indonesia's rupiah has weakened 3.5 percent in the past month. Bank Indonesia said yesterday it has sufficient foreign- exchange reserves to support the currency.

"We are confident we can stabilize the market," Warjiyo said in the interview today.

Asian nations from Malaysia to the Philippines are shifting their focus to shielding growth even as elevated inflation prompts policy makers in countries such as Vietnam and India to persist with monetary tightening.

India's industrial output rose 4.1 percent in August from a year earlier, less than the median 4.7 percent estimate in a Bloomberg News survey, a report showed today.

Philippine Spending will boost

Aquino said today the additional spending he authorized for the stimulus package includes 5.5 billion pesos for infrastructure. The Philippine government cut its growth forecasts for the Southeast Asian nation for 2011 and 2012.

"If the fiscal stimulus does its job, this should give the necessary push to keep our economic growth in a solid upward trajectory," central bank Governor Amando Tetangco said today. The Philippines has sufficient liquidity, a stable exchange rate and a "manageable" inflation outlook along with "fiscal space" to help support economic growth, he said in an e-mail reply to questions.

Bangko Sentral ng Pilipinas will consider global developments, including Indonesia's rate cut and the slump in Philippine exports in next week's policy meeting, Tetangco said.

"In most jurisdictions, inflation seems to have become less of a pressing concern," he said. "The weakness in advanced economies is seen to weigh more on emerging economies than previously anticipated."

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Singapore seen - Philippines economy will double by 2020

The Philippine economy may grow 80 percent larger within nine years as anti-corruption efforts build momentum and translate into greater foreign direct investment inflows, according to DBS Group.

In a research titled "Asia 2020," the Singapore-based financial service group said that over the coming decade, economic growth will be respectable and trending toward 6 percent.

Such growth will depend much "on policy and whether the large labor pool and resource endowment—which include gold, nickel and copper—can be effectively tapped upon," the paper said.

"We hold a cautiously optimistic view of the economy and expect reform to proceed at a moderate rate," DBS added. "By 2020, GDP will (in today's dollars) likely be 80 percent larger, and income levels 45 percent higher than at present."

The group said that the Aquino administration has so far done a credible job in introducing reforms focused on fiscal discipline and public-private partnership (PPP) on infrastructure investments as well as population management and anti-corruption reforms.

Amid criticism that the government is not spending enough, Malacañang has limited deficit-spending to ₱34.5 Billion in the eight months to August, or about a seventh of the ₱228.1 Billion recorded in the same period of 2010.

Also, Malacañang expects to auction off the first of big-ticket PPP projects before yearend.

"A new structure for project approvals and implementation is being established, which should complement the launch of PPP projects," DBS said. "Measures to counter corruption should raise investor confidence."

DBS noted that the savings rate has grown to 18 percent from 11 percent in 2004 adding that investment is beginning to follow the same path and that GDP should follow.

"In short, the reform momentum is building, and this should translate into greater FDI inflows and complement the rising domestic savings rate already apparent in the data.

Further, DBS said the country's young population could prove to be an advantage although the still-high birth rate remains a challenge, with an additional 19 million people seen within the next nine years.

"To some extent, resources have been spent in accommodating a rise in population at the expense of other investment, and this may have impeded GDP growth," DBS said.

PUPTF – Petroleum Task Force Mining Exploration

As the Aquino administration is poised to bet heavily in developing the country's oil and gas resources, an inter-agency task force has been created by Malacanang to oversee government approvals on upstream petroleum investments.

Under Executive Order No. 60 signed by President Aquino last September 30, 2011 it has been stipulated that the inter-agency Philippine Upstream Petroleum Task Force (PUPTF) will primarily watch over the implementation processes for the $1.0 billion fresh batch of investment for the Malampaya gas field project.

The EO creating the new task force basically amended Executive Order No. 254 which was the underpinning policy for oil and gas developments since 1995.

"It is in the interest of the Philippine government that projects such as the Malampaya Phases 2 and 3 are executed with no harm to people and the environment, with minimum disruption to the power supply of Luzon, and completed on time and within budget," the EO has emphasized.

The task force has to be chaired by Energy Secretary Rene D. Almendras and the membership will be completed by 17 more representatives from various government agencies. They shall include Executive Secretary Paquito Ochoa, Department of Transportation Secretary Manuel Roxas; Finance Secretary Cesar Purisima and Justice Secretary Leila De Lima, among others.

Aside from the Malampaya venture, the task force will also keep an eye on the new 15 petroleum blocks due to be auctioned by the Department of Energy (DoE) toward the end of this year.

Fundamentally, the role of PUPTF will be to "review, simplify and streamline the applicable rules, regulations and procedures" in upstream project implementations. These shall rope in "the efficient deployment of personnel, vessels, machinery, equipment, spare parts and materials to be used in petroleum operations."

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The Philippines Offers the Best Value Investing

Philippines Mining Boom

The Philippines will attract $18 billion in mining investments over the next five years as global commodity prices soar.

Mining output had already spiked 31 percent year on year in the six months to June to P63.92 billion ($1.48 billion), according to Environment and Natural Resources Secretary Ramon Paje.

A new mining law allowed foreign investments in 2005, and high metals prices were drawing even more investor interest.

“In terms of investments, the aggregate amount of $3.835 billion has been invested in the sector over the last six years. Total investments are projected to reach $18 billion by 2016,” he told a mining conference in September 2011.

The Philippines has an untouched mineral wealth estimated by Heffernan Capital Management at over $1 trillion, valuable metals like copper, gold and chromate deposits are among the biggest in the world.

Mining has had a checkered history in The Philippines, environmental issues, foreign investment restrictions, and accidents have slowed the industry for decades.

Ramon Paje said with just 30 major mines in operation, the Philippines was still not producing enough to take advantage of climbing gold, nickel, copper, iron and chromite prices.

Seven major projects should boost both mining investment and output over the next few years.

Xstrata PLC, LON:XTA $5.9 billion Tampakan project in the southern Philippines, one of the largest undeveloped copper-gold deposits in the Western Pacific, should start producing in 2016.

Tampakan project is estimated to yield an average of 375,000 tonnes per annum of copper and 360,000 ounces per annum of gold in concentrate over a 17 year life of mine.

Japan’s Sumitomo Metals, Australia’s Oceana Gold, and Britain’s FCF Minerals also plan to go ahead with separate nickel, copper-gold, and gold-molybdenum projects, according to Paje.

The three projects have a combined investment value of more than $1.8 billion.

Chamber of Mines of the Philippines president Philip Romualdez also told the conference President Benigno Aquino’s recent state visit to China drew $2 billion in mining commitments.

Economy starts bubbling

The Asian Development Bank (ADB) has slightly lowered its 2011 growth forecast for the Philippine economy amidst subdued government spending and exports, but increased public and private investment should see a pickup in economic activity next year.

In its latest Asian Development Outlook 2011 (ADO), ADB trimmed its gross domestic product (GDP) forecast for the year to 4.7%, from 5.0% seen in April.

Growth for 2012 is projected to pick up to 5.1%, with brighter prospects seen for investments, which since 2010 have been a major contributor to GDP growth.

“Job creation remains lackluster, with the youth unemployment rate more than double the overall jobless rate,” said ADB Chief Economist Changyong Rhee.

“Further increases in investment along with policy and governance reforms are needed to boost jobs.”

Government spending fell back in the first half of 2011 after high election and typhoon-linked outlays in 2010 with government agencies taking a more cautious stance amidst an anti-corruption drive.

However, private investment grew strongly, while private domestic consumption also increased, supported by a firmer labor market and remittances from overseas workers.

Merchandise export growth, in contrast, was weaker than expected. Electronics, which make up about half the economy’s exports, are still affected by insipid global demand and supply chain disruptions linked to the earthquake in Japan.

Inflation averaged 4.8% over the first eight months, driven by higher food and oil prices. In response, the central bank raised policy interest rates and banks’ reserve requirements twice. Net portfolio investments in the first seven months remained high, helping to push stock prices to record highs in August, but foreign direct investment remains subdued with delays in bids for planned infrastructure projects.

For 2012, increased investment supported by upgrades in sovereign credit ratings and resilient consumer spending will help GDP growth to pick up. Inflation forecasts are retained at 4.9% for 2011 and 4.3% in 2012, assuming that global oil and food prices moderate as expected.

“The Philippine Development Plan 2011-2016 focuses on improvements in the business environment to raise investment and employment with higher outlays on infrastructure supported by public-private partnerships,” said Neeraj Jain, Country Director for ADB’s Philippines Country Office.

‘Some of the public-private partnership infrastructure projects that have been planned must get under way to achieve the growth we forecast for 2012.”

Undervalued Real Estate in the Philippines

Foreign investors looking to invest in real estate-related businesses have ranked Manila as their last choice among various key cities in the Asia-Pacific.

According to the Emerging Trends in Real Estate Asia Pacific 2011 survey conducted by the Urban Land Institute (ULI), global real estate investors gave Manila a score of 4.56 points out of a possible 9, placing the city a few points below “fair” and somewhere within the realms of “abysmal.”

Topping the survey was Singapore with a score of 5.96 points, followed by Shanghai with 5.87, Mumbai with 5.79, and Hong Kong with 5.70.

In an interview with the Inquirer, ULI global trustee and South Asia chairman Simon Treacy said the Philippines, in general, was suffering from a negative image, prompting investors in publicly listed real estate firms to bypass the country when deciding on where to allocate their funds.

“Manila is at the bottom of the pack because the Philippines hasn’t gone to the next level. The country’s image hasn’t really improved. Even with the new administration, there’s still a negative perception of the country,” Treacy said.

“The Philippines rarely ranks when it comes to investment allocations. Since the Philippines doesn’t get a lot of airplay, its real estate prospects become undervalued. Marketing is very important, on a national level, because not a lot of real estate investors look to the Philippines when deciding where to put their capital,.”

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USA will Support the Philippines' Spratly issue but Filipinos - cautious might betray again

A United Nations convention is clear on what constitutes sovereign territory, and the United States is prepared to do whatever is asked of it by the Philippines in connection with the South China Sea / West Philippine Sea dispute, US Ambassador Harry Thomas Jr. said Monday (June 13, 2011) in Makati. Thomas Statement is absolutely opposite of the statement of Rebecca Thomson; US spokesperson saying “The US will not support the Philippine Spratly Issue as they are out of the Issue. Even USA is not united of their stands for the Spratlys issue.

 “We will do whatever we’re asked,” Thomas told The STAR during a visit to the newspaper office, when asked if the US would be willing to participate in the settlement of the territorial dispute.

But he quickly added, “What we want to say is right now we believe consistently that is not something for us to do. We have not been asked to do that. And we can’t deal with hypotheticals.”

Later, when pressed about US participation in negotiations, he said, “We have not been invited.”

Thomas spoke as China warned external powers to stay out of the overlapping territorial claims in the Spratly Islands.

Reuters reported Monday (June 13, 2011) from Beijing that the warning was contained in a commentary in the main military newspaper Liberation Army Daily, which is controlled by China’s Communist Party, and where articles are vetted to reflect official thinking.

President Aquino welcomed Thomas’ statement as he noted the military power of China and its huge population.

“We don’t want any hostility to break out,” Aquino said at Malacañang, even as he reaffirmed that islands in the West Philippine Sea are within undisputed Philippine territory under an international convention.

“Perhaps the presence of our treaty partner, which is the United States of America, ensures that all of us will have freedom of navigation, will conform to international law,” Aquino added.

Earlier Monday (June 13, 2011), Thomas said the US would stand with the Philippines in all issues.

“I want to assure you – on all subjects, we in the United States are with the Philippines. The Philippines and the United States are strategic treaty allies. We are partners,” Thomas said at the launching of the US-supported National Renewable Energy Program in Makati City.

“We will continue to consult and work with each other on all issues, including the South China Sea and Spratly Islands,” Thomas said.

The Philippines has protested Chinese military activities in the West Philippine Sea, which is within the country’s territory as defined under the 1982 United Nations Convention on the Law of the Sea (UNCLOS).

The UNCLOS, Thomas said, is “pretty clear on what is Philippine territory.”

Thomas mentioned that US President Barack Obama has said Washington supports the 2002 Code of Conduct in the South China Sea under UNCLOS.

Among other things, the Code of Conduct calls for all claimants to sit together and settle the dispute, he said.

President Aquino is so thankful

President Aquino welcomed Thomas’ declaration.

“We are grateful to the (US), especially when they reiterated that we are strategic partners, we have a treaty between us,” Aquino said when asked for his reaction to Thomas’ statement in a press briefing later at Malacañang.

The President stressed the importance of adhering to international laws, specifically UNCLOS.

“What that law says is that you have exclusive economic authority or exclusive economic zone extending 200 (nautical) miles from your continental shelf,” Aquino said.

“Reed (Recto) Bank, which is the subject of incidents lately, is located 80 (nautical) miles off Palawan, the closest of our contention in the Spratlys, the closest China (has) is 576 (nautical) miles if I remember correctly - 576 is obviously greater than 200,” he added.

“Why should there be a dispute if we are conforming to international law?” Aquino asked.

“Of course, they are a superpower, more than 10 times our population, we don’t want any hostility to break out. Perhaps the presence of our treaty partner which is the United States of America ensures that all of us will have freedom of navigation, will conform to international law,” the President said.

Deputy presidential spokesperson Abigail Valte said in a press briefing that the statement of the US ambassador “reaffirms even more our commitment to finding diplomatic and a peaceful resolution on the issues that we have in the West Philippine Sea.”

Valte said the statement was welcome because “everybody knows that we always have good relationship with the United States and so with other countries as well, even if we have issues with them.”

But Valte said there was no need to elaborate on the kind of assistance that the US is prepared to offer in the event of armed hostilities with China.

“We are in the process of trying to find a peaceful resolution to the conflict that we are in the middle of. So we do not want to make any statement that would be contrary to that position,” she said.

“I think with or without that clear statement, we have always been firm on our position on the issue. I don’t think anybody can doubt our resolve to have a resolution, a peaceful and diplomatic resolution on the issue,” Valte said.

“Our resolve cannot be questioned and that we will do so, we will pursue such resolution through diplomatic moves,” Valte said.

Valte said there should be no talk of military assistance yet because all claimant-countries were talking and seeking a peaceful resolution to the issue.

Chinese Ambassador Liu Jianchao said on Saturday that “military means” was not an option for China.

Authorities have recorded six to seven incursions into Philippine-claimed areas by Chinese vessels and aircraft.

Drilon appeal for Peace in Spratlys

Sen. Franklin Drilon, an administration ally, called for an end to incendiary statements on the West Philippine Sea issue.

“All sides should exercise calm and avoid issuing statements because this is a very sensitive issue. We must defend our sovereignty but we must also be very careful in issuing statements,” Drilon said.

Drilon emphasized that only the Department of Foreign Affairs should be allowed to issue statements because the issue involves diplomacy and foreign relations.

Drilon also said the country’s relations with China cannot be easily set aside. He was apparently referring to a call by Albay Gov. Joey Salceda for a boycott of Chinese products.

He also stressed that the issue should be discussed multilaterally, or taken up before the International Court of Justice.

The Philippines and other countries in the Association of Southeast Asian Nations (ASEAN), he added, may take a united stand against China’s alleged bullying.

“This cannot be resolved on a bilateral or one-on-one basis. China is too big so the discussions should be multilateral, meaning the claimants in ASEAN should form a body to face China,” Drilon said.

Senate committee on foreign relations chair Loren Legarda also pushed for diplomacy in resolving the issue.

“It is to the region’s and the international community’s collective interest that the parties remain committed to exploring ways for building trust and confidence on the basis of equality and mutual respect,” Legarda said.

Cagayan Rep. Juan Ponce Enrile Jr., for his part, called for sobriety.

“Let the concerned agencies do the talking instead of (Palace) spokespersons who may not have a full grasp of West Philippine Sea, diplomacy, conflict management, and negotiations,” he said.

“When it comes to foreign policy, we should speak with one voice. We cannot compromise our foreign relations from interpretations made by spokespersons who muddle the handling of a potential conflict,” he said.

Enrile decried the apparently contradictory statements made by presidential spokesman Edwin Lacierda and Valte, his deputy, on the Spratlys issue.

He said that while Lacierda was quoted as saying that the country is “committed to a multilateral approach to the resolution of claims in the Spratlys,” Valte invoked the RP-US Mutual Defense Treaty (MDT).

Enrile said the agencies that should speak for the country on the issue are the DFA and the Department of National Defense.

Enrile’s father, Senate President Juan Ponce Enrile, Sen. Joker Arroyo and other senators have expressed doubts on whether the MDT can compel the US to help the Philippines in case of an armed confrontation with China.

Enrile said the best way to resolve the conflict would be through negotiations under the framework of the UNCLOS.

Boycott All Chinese Product

Rep. Enrile also chided Salceda for calling for a boycott of Chinese-made goods. Salceda belongs to the ruling Liberal Party.

“Why on earth are we calling for a boycott of Chinese goods? China is bigger than the Philippines in terms of consumer market, so how can we, as a neighbor, even contemplate about it?” he asked.

“As responsible elected officials, we should refrain from instigating a trade war with the third biggest buyer of Philippine exports. The saber rattling is uncalled for. Let’s put a stop to that,” Rep. Enrile said.

“We should instead focus on setting up our national coast defense system to protect our baselines and buy and patronize Filipino products so that we help our economy,” he said.

Sen. Ralph Recto also slammed Salceda for his boycott call.

“The right response is to increase our trade and investments with China and perhaps, maybe with the right growth formula, we can get even economically years from now,” he added.

He said that it would be a “big economic victory” for the Philippines if it closes its $900-million trade deficit with China.

The country imported $7 billion worth of goods from China in 2010 as against its exports of a little over $6 billion.

Recto likewise noted that as part of the emerging economies and touted by respected global bodies as among the Top 25 countries with strong economies by 2025, the Philippines should “act accordingly” and should not be “boycott happy.”

“We should not only engage China diplomatically but also through business,” Recto stressed.

“The Spratlys question should be settled peacefully. You can’t be saber rattling with China. It’s our biggest trading neighbor,” Recto said.

“An action like that (boycott call) has repercussions. They can tell all you Filipino people in China, go home. They can call for a boycott of all Filipino products. I don’t know who will lose in this one. So we should take it easy,” Sen. Enrile said.

Recto said the Armed Forces of the Philippines should beef up its arsenal and capability “not for arms race but to protect our coral reefs and fishermen.”

Recto said the AFP should start buying modern equipment and fleet.

“We should start buying some of these equipment and I don’t care if we buy them from China,” he said.

 

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Net Foreign Direct Investment Inflows surge 142% in March 2011 - Banco Central

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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