Philippines Buys Back $1.3 Billion Worth of Overseas Bonds

The Philippine Finance Secretary Cesar Purisima said Saturday (October 15, 2011) that the government's successful buyback of some foreign-currency sovereign bonds should help the country's cause to win investment-grade ratings from credit agencies.

Around $2.2 billion of the eligible $17.7 billion of global and euro bonds have been offered by bondholders in the Philippines' latest liability management efforts, which sought to repurchase around $1.5 billion in foreign debt. The government accepted bonds with nominal principal amount of $1.3 billion and will pay bondholders a total $1.7 billion, including the purchase price and accrued interest.

Of the $17 billion debt that qualified for repurchase, about $2.2 billion of bonds were offered by investors, the government said. The nation will use mostly internal funds for the buyback, and the $1.7 billion figure includes accrued interest along with the bonds' original price, it said in the statement.

The $200 billion Asian economy is reducing its budget deficit, extending debt maturity and cutting its foreign- currency risks to achieve a higher credit rating. The administration of President Benigno Aquino had conducted bond exchanges and sold peso-denominated bonds to overseas investors since starting a six-year term in June 2010.

Purisima said the bond repurchase is "in line with our ongoing objective to rebalance our debt portfolio in favor of local currency. This should be supportive of our effort to obtain investment-grade ratings," he added.

The government expects savings of around $165 million in "net present value" from the buyback, Finance Undersecretary Rosalia de Leon said. Bonds due from 2013 to 2032 were accepted for purchase by the government in a transaction to be settled this month, according to the statement.

"This exercise highlights our strong liquidity and prudent debt management policy amid global volatility," Treasurer Roberto Tan said in the statement.

Despite recent upgrades from all three major credit agencies, Philippine debt still remains in junk territory. Fitch Ratings ranks Philippine debt a notch below investment grade while Standard & Poor's and Moody's Investors Service both place Manila's debt two notches below investment grade. A higher rating should save the Philippines, one of Asia's most prolific sovereign debt issuers, millions in debt services annually.

Purisima said the invitation to sell bonds back to the Philippines drew both local and international investors, and bonds accepted by the government have maturities spanning 2013 and 2032.

The bond repurchase will be financed with internal funds of the National Treasury. The government is currently offering to the public 10-year and 15-year peso-denominated retail treasury bonds, and hopes to raise over ₱200 billion (Php) Philippine Peso in the bond sale, the proceeds of which may also be used to pay for the repurchased foreign-currency bond.

National Treasurer Roberto Tan said the liability management exercise underscores the Philippines' "strong liquidity and prudent debt management policy amidst global volatility."

The transaction is expected to be settled on October 25, 2011.

For more updates, follow the Hikot's Philippines Economy Network.

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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 next ASEAN tiger cited by Asia Inc & Business leader could be the Philippines

The Philippines has a most unique economy in the world which is highly dependent on domestic consumption that drives their economy that could be hardly hit for any possible global economic recession. Inspite of rich resources, Philippines did not rely on exports to drive a better and fast forward economy.

The Philippines now tagged with fresh opportunities in Asia, boosting and high grades gold mining, boosting of oil and gas exploration,  good political leader,  revived confidence from global investors and now named as to be Asia’s next tiger economy, potentially regaining the glory lost decades ago, according to a visiting regional business leader from Brunei.

Dato Timothy Ong, a leading Brunei businessman who founded and now chairs regional dialogue platform Asia Inc. Forum, said in a press briefing on last September 26, 2011 that he has seen signs that the Philippines could return to its goal of being the next Asian tiger despite staying at the bottom half of the 10-member Association of Southeast Asian Nations (ASEAN) in terms of economic performance for years.

Ong is also the convener of ASEAN 100 Leadership Forum, which will be hosted by the city of Makati on Sept. 28-29, 2011 at the Makati Shangri-La. This year’s ASEAN meet aims to foster insightful and intelligent discussions on the future of ASEAN and how the region can emerge as one of the world’s significant economic blocs.

According to Dato Timothy  Ong, the Philippines can join the ranks of Taiwan, Singapore, South Korea and Hong Kong, the so-called Asian “tiger” economies or newly industrializing countries. He cited five reasons why the country, though a “dark horse,” or a sick man in Asia had the makings of the next move to be the next “tiger.”

The Chair of the regional dialogue platform Asia Inc. Forum cited 5 following reasons why the Philippines could be the next ASEAN Tiger as:

1.      The new leadership under President Aquino has promised to weed out corruption in the country, which has been creating a lot of optimism. It’s widely perceived that the high level of corruption in the country has driven up the cost of doing business.

 

2.      Mr. Ong said that the Philippines’ would be vast pool of hardworking professionals and skilled manpower, many of whom have been deployed across the globe. “With this wealth of human resources, it’s important to ask then why the Philippines aren’t more successful economically,” he said. Many countries had been dependent on Filipino Professionals and skilled workers to drive their economy like for example banning the Filipino to work in Taiwan will paralyze the Taiwan’s economy. Banning the Filipino to work in the Middle-east might paralyze their economy. Deporting Filipinos in (North Borneo) Sabah might paralyze the Sabah’s economy which the world knew how important the human resources are.  The continues development in the other north Asian countries had been dependent on Filipino skilled workers like for example the Billion Dollar projects of Korea’s builder Hyundai Engineering in Kazakhstan and Turkmenistan which been dependent on Overseas Filipino Workers as highly skilled which the builder could not outsource such kinds from the local man power pool in the 2 ‘stan countries. Many Leading fortune 200 companies in the world are talents hungry but the Philippines have vast and awashing man power pool. Many countries take advantage of Filipinos for not just for cheap labor but also trustworthy multi-tasker and English speaker that could compete globally.

 

3.      The third factor would be the Philippines’ “centers of excellence,” Ong said, noting that the country has become a competitive hub for business process outsourcing. He likened the Makati central business district to a “First World” city in a Third World country.  “If the Philippines is capable of being first world in these centers of excellence, why can’t it be First World in every respect?” he said.

 

4.      Ong said the fourth reason would be the Philippines’ homegrown companies that were at par with the world’s best.  He cited fast-food giant Jollibee Foods Corp., international port operator International Container Terminal Services Inc. and the Ayala group of companies. “There is a sense of optimism that characterizes the country as a whole.  As the new government takes its steps in leading the country towards change, it may be able to experience higher standards of governance,” he said.

 

5.      Finally, Ong noted the Philippines’ “sharply improving competitiveness” as another factor supporting its aspiration to be the next tiger economy. He cited recent reports that the Philippines had jumped 10 notches to 75 from 85 in the latest ranking of the World Economic Forum. Ong said this happened only within the first 15 months of the term of the new president.

Meanwhile, Ong said ASEAN would likely partly meet its target to establish an integrated economic community by 2015.

“A One ASEAN is important for our collective future to accelerate the economic growth, social progress and economic stability in the region; to promote active collaboration and mutual assistance in economic, social, cultural, technical and administrative spheres,” Ong said.

“At the moment, Southeast Asia is like a big gated community where neighbors barely know each other. They know each other by name, they exchange pleasantries but they wouldn’t really go out of their way to have dinner at each other’s house,” he said.

Once integrated, he said, ASEAN could be a very influential bloc as it could become Asia’s third-largest economy next to China and Japan and the ninth-largest in the world.

The Philippines hinting to be a the second ASEAN tiger is so closed to achieve.

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