South Korean ratings agency gives Philippines a credit lift

The Philippines got a ratings boost from South Korea's NICE Investors Service Co. Ltd., which took into account various factors, including the country's improved fiscal policy, private consumption and the strong Philippine peso.

In a report distributed to reporters on Tuesday, NICE rated the country's long-term foreign currency at "BB+," with a positive outlook. The Philippines is currently rated one notch below investment grade by the top three credit-rating agencies, with a potential upgrade anticipated within the year.

In its report, NICE said that weak taxes have been holding back improvements in the country's fiscal condition but it noted that the Aquino administration has "advanced its tax administration, increasing overall tax revenue."

"In addition, the government has been committed to fiscal consolidation by taking various measures, like enacting the 'sin' tax law and implementing other fiscal-reform actions," it added.

"As the government has consistently enhanced the business environment to attract more investment, the efforts are expected to begin to deliver visible outcomes in the future," the agency said.

Cited in the report were "solid" private consumption, partly driven by continued growth of money from overseas Filipino workers [OFW], and the rapid expansion of the business process outsourcing (BPO) sector.

"Consumption based on [OFW] remittances is robust enough to absorb external shocks to some extent; on the back of increasing government expenditure and rebounding export, the economic growth rate of 2012 is expected to jump from that of the year before," NICE said.

While the strong peso has been cited as hurting the BPO and export businesses, the debt watcher said the currency's appreciation combined with the global economic slowdown has "largely contributed" to price stabilization.

NICE cautioned that relatively large public debts to gross domestic product have undermined the government's ability for infrastructure investment and that the share of foreign currency-denominated debts is still relatively high.

"But the increasing mid/long-term domestic borrowings may limit default risks that would be triggered by external changes," it said. (http://bit.ly/VW1zuv)

Business Mirror

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Japan plans to give patrol boats to Philippines

Members of Philippine Coast Guard put up flags as they welcome the training vessel "KOJIMA" of the Japan Coast Guard in Manila, 11 August 2004. AFP FILE PHOTO

Japan plans to donate patrol boats costing $11 million each to the Philippines, ramping up the regional efforts to monitor China's maritime activity in disputed waters.

The Japanese Government plans to finance the deal in its fiscal 2013 budget starting in April and hopes to officially sign it early next year, the Nikkei business daily has reported.

Japan will then provide the Philippines with the newly built patrol vessels, which will cost more than one billion yen ($11 million) each, the newspaper said, without specifying the number of boats on offer.

Territorial disputes

Both the countries are locked in separate territorial disputes with China. Japan's dispute is over a group of uninhabited islands in the East China Sea known as the Senkakus in Japan and the Diaoyus in China.

The Philippines is one of several Southeast Asian countries, including Vietnam, that are rowing with China over claims to parts of the South China Sea. Two of the hotspots are the Spratly islands and Scarborough Shoal.

The Japanese coastguard also plans to train Philippine and Vietnamese personnel as part of additional efforts to boost security cooperation with Southeast Asia, the Nikkei said.

In the fiscal 2013 budget draft, 2.5 billion yen has been allotted for such expenditure, it said.

Last month, Japanese Foreign Minister Fumio Kishida visited Manila and called for stronger ties with the Philippines to help ensure regional peace.

Japan's coastguard had last month said it would create a special unit comprising 10 new large patrol boats to boost its surveillance of the Senkaku/Diaoyu islands.

The long-running row over the islands intensified in September when Tokyo nationalised part of the chain, triggering fury in Beijing and huge anti-Japan demonstrations across China.

In the most serious high-seas incident yet, Japan had last week said that a Chinese frigate locked its weapon-targeting radar on a Japanese navy vessel on January 30. China has angrily denied the charge.

Keywords: Territorial disputes, East China Sea, South China Sea, Senkakus island, Diaoyus island, Spratly islands, Scarborough Shoal, Japan-China territorial disputes, China-Southeast Asian nations territorial dispute. (http://bit.ly/Y4ZPRb)

The Hindu Business Line

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