Proving IMF And HSBC Wrong

NUMBERS DON'T LIE

By ANDREW JAMES MASIGAN

June 11, 2012, 3:10pm

Last month, I wrote about how the IMF saw the Philippines posting one of the slowest growth rates in the region this year. The Washington-based bank projected Philippine growth within the vicinity of 4.2 percent, trailing Thailand, Malaysia, Indonesia and Vietnam. As if on cue, the same forecast was parroted by other financial institutions including the DBS Group of Singapore, Standard Chartered Bank and the Citi Group.
I personally thought that the prognosis of these financial institutions did not do us justice—4.2 percent was too low considering that exports made a dramatic rebound over the first quarter, as did OFW remittances and tourism receipts. Even government spending was on overdrive given the effects of the R72 billion stimulus package launched last year. All things said, I thought that growth of 5.2 to 5.7 percent was about fair.

DTI Sec. Greg Domingo also thought the IMF sold us short. When I spoke to him last month, he said that most financial institutions only take global economic trends into consideration and not the latest developments in the local landscape. The Secretary was confident that we would surpass the IMF forecast. His estimate back then was between 4.5 to six percent.

Last week, NEDA finally announced our first quarter stats and pegged our growth at 6.4 percent. This exceeded everyone’s expectations including Sec. Domingo’s most optimistic forecast. Even better was that we are proving the IMF wrong by a long shot. Not only did we outdo the bank’s forecast by as much as 2.2 percentage points (equivalent to R32 billion worth of goods and services), we also outperformed Vietnam which grew by just four percent; Thailand, which grew by .3 percent; and the current darling of the investment world, Indonesia, which grew by 6.3 percent. Redemption, even a tentative one, is sweet indeed.

A New Respect
But even before our first quarter stats were released, I could already feel a new “curiosity”, and shall I say, respect, for the recent advances we’ve made as a nation. No doubt, the good news about our reform program is resonating in many business circles overseas.

Last week, I attended the Global Leadership Conference of the Entrepreneur’s Organization (EO) in Manama, Bahrain, a gathering of at least 300 prominent entrepreneurs from 37 nations. The Philippines has always been an active chapter in the EO circuit being one of the oldest chapters in the region. I have the honor of being one of the founding members in the Philippines, having helped launch the organization in 1996.
E.O. has several international conferences every year and the Philippine chapter never fails to be represented. I myself have attended more conferences than I can count. For some reason, we Filipinos have become known as the most approachable and fun chapter, having the unique ability to connect with fellow Asians, North Americans and Latinos. It just comes naturally to us, perhaps even to the chagrin of other chapters.

But despite being “popular”, we’ve never seen a genuine interest from our fellow entrepreneurs on the goings-on in the Philippines. As far as I can remember, I have never interacted with people interested in our economy or how it is to do business here. Not until Manama, Bahrain.
Throughout the conference, I was pulled aside, on several occasions, by colleagues from Latin America, Europe and the States to share my views on our economy and the opportunities that may be available for them. This has never happened before. Apparently, news is reverberating that the Philippines will be the next investment-grade economy, following Indonesia. Typically, keen entrepreneurs want to position themselves before everyone else.

We made a bid for the Philippines to host the next EO Global Leadership Conference in April 2013 and was in competition with Thailand and Japan for the privilege. I am proud to announce that we won by a landslide. It seems those in the know want a piece of the Philippines now.

Drivers Of Growth
I was glad to see that this time around the country’s growth was driven from multiple sectors and not just from one source. This tells me that the economy is growing holistically. Still, I am worried that foreign direct investments still contribute pittance to our overall growth equation. Fine, it increased 154 percent in the first two months of the year, bringing in $850 million in fresh capital, but it is still not enough to make a significant dent in our growth numbers.

In any event, growth is growth and I am just happy that economic expansion exceeded population growth two times over. For curious minds like mine who want to know where our growth stemmed from and how each area of the economy fared, here is a summary according to subsector.

The services sector, which contributes more than half of total domestic output, grew by a healthy 8.5 percent. Among its subsectors, wholesale and retail grew by 8.9 percent, other services grew by 10.5 percent, and real estate grew by 7.9 percent. Supporting growth in this sector is the 1.15 million tourist arrivals, which provided increased economic activity in transportation, communication, hospitality (hotels and restaurants), as well as recreational, cultural and sporting activities.

The industrial sector, on the other hand, grew by 4.9 percent. Again, a closer look into its subsectors reveal that manufacturing grew 5.7 percent, primarily due to strong demand here and abroad for Philippine-made furniture, apparel and food products. Utilities grew by 8.0 percent and construction by (only) 3.6 percent. Apparently, private construction contracted by -9.9 percent and was only offset by substantial increases in public construction.

After several quarters of decline, merchandise exports rebounded and grew by 7.1 percent while service exports (mainly from the BPO industry) grew by 11.1 percent. Net exports receipts was the second highest contributor to growth after the services sector.

Agriculture was somewhat a disappointment, growing by only one percent. As usual, OFW remittance was our main source of liquidity, growing at 5.4 percent, pumping in $4.8 billion into the system. No surprise household consumption grew by 6.6 percent.

All factors taken into account, our impressive growth would not have been possible without the massive increase in government spending. Thankfully, DBM’s early release of budget allocations last January paved the way for government agencies to fast-track the implementation of their respective infra projects. This allowed government spending to increase by 24 percent.

To the man on the street, all these facts and figures translate to 1.101 million new jobs and increased dispensable income per household.

Can Growth Be Sustained?
Again, some financial institutions think not. Both HSBC and the DBS Group think that the worsening situation in Europe and our dicey relations with China could weigh heavy on our export performance for the rest of the year. As mentioned earlier, net exports are our second driver of growth so a damper on this could drag down our performance for the entire year. HSBC’s regional economist, Trinh Nguyen, doubts whether government can sustain its high spending rate. While some financial institutions like Japan’s Nomura Securities have increased their 2012 growth projections for the country to 5.1 percent, HSBC maintains that we can only manage 4.4 percent growth for the entire year.

Even if government set a fighting target of between five to six percent growth, both NEDA Sec. Balisacan and DTI Sec. Domingo think we will surpass it.

Their optimism is predicated on our performance in April and May, a period where Europe was in the doldrums of its crisis. NEDA noted that despite the serious credit crunch in the western hemisphere, initial data indicate that our exports in fact increased so much so that they are looking at a 10 percent year on year uptake.

In addition, Sec. Baltican believes there is still considerable room to accelerate government spending.  On top of the continued capital expenditures of the DPWH and the DOTC, there are now 22 multi-billion projects ready for bidding at the PPP Center (from just under five projects this time last year). As to whether they will actually see public bidding this year or not is another story. The point is, the Secretary stresses, the projects in the PPP pipeline will be rolled out eventually and the economy will surely feel its ripple effect.
On the social infrastructure side, Balitacan disclosed that an additional R9.02 billion will be spent over and above what was already allocated in the national budget, on projects to benefit public health, education and social welfare. Balitacan believes that this should be sufficient to cover any negative effect the Eurozone crisis might bring.

For his part, Sec. Domingo is optimistic that substantive investments will begin to pour in this year. He has been busy going on road shows and entertaining investment missions into the country, with very promising results. He tipped on a new multi-billion dollar investment in the shipbuilding industry due to be finalized in the next few months.

And so, it all boils down to HSBC’s word against that of our government technocrats. As we have done with the IMF, I hope we prove HSBC wrong yet again.


Andrew is an economist, political analyst and businessman. He is a 20-year veteran in the hospitality and tourism industry. For comments and reactions, e-mail andrew_rs6@yahoo.com. Follow Andrew on Twitter @aj_masigan.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Time for PH to shine, says Citi

Economy resilient despite slow growth in Europe, US

By: Doris C. Dumlao
Philippine Daily Inquirer

The Philippines has come of age as a vibrant marketplace for capital-raising as well as merger and acquisition (M&A) deals, even as global investment appetite has been tempered by the eurozone crisis, a top regional official of Citigroup said.

Hong Kong-based Farhan Faruqui, head of global banking for Asia-Pacific at Citi, said in a recent interview with the Inquirer that cross-border M&A deals as an indicator of investment had significantly dropped globally because of the lingering uncertainties in Europe and the United States.

“But if you look at intra-Asia—Asian companies investing in the region—that’s a record high within Asia. It’s resilient. We’ve had a record year so far. So a lot of that (cautiousness by the West) is being replaced by Asian interest,” Faruqui said.

Asia’s share of global M&A doubled from 10 percent to 20 percent in the last five years, Faruqui noted.

Exciting time
He said that it is an “exciting time” for the Philippines, in particular, noting that the level of activity from capital raising and M&A was holding up well.

“When I travel across the region, the Philippines is increasingly on the agenda. We are seeing strong interest from our clients looking to find an appropriate entry point into the country. There are so many areas of activity where clients can enter—whether it is through investment in local firms or partnerships. We see clients looking at setting up a new business or to buy something,” Faruqui said.

“The Philippines has certainly attracted a lot of attention among international corporates. A lot of people are recognizing that if you’re in the region looking for business, this is the place to be,” he said.
Citi, which is celebrating its 200th year this year, is the leading M&A advisor in Asia-Pacific based on year-to-date volume of deals announced. It ranks second in terms of equity deals arranged and third-largest in debt underwriting.

Given global trends toward urbanization, the bank aims to serve current and emerging urban centers and is focused on supporting the world’s top 150 cities.

“Obviously, the fact that many parts of the world are slowing down helps in the sense that it singles out the Philippines as a very resilient economy. There are a lot of reasons to come here,” Faruqui said.
The banker noted the big opportunities in Philippine infrastructure and real estate.

Once the mining framework in the country becomes clearer, he said this could be another magnet for investments.

Infrastructure
“The way I define infrastructure is really progress. It’s not just a new road or power plant. It is also the perception of foreign investors to taxation, courts and rule of law and there has been progress across all these areas,” he said.

Faruqui also sees the Philippine business process outsourcing industry moving to the higher value-added knowledge process outsourcing on the back of strong education and language skills.
“Despite some political controversies and other challenges, broadly the mood is very upbeat. It’s basically the time for the Philippines to shine,” Faruqui said.

The power sector is also expected to attract a lot of new investments from both foreign and local players, whether to install new capacity or expand existing ones, said Usman Ahmed, Citigroup corporate and investment banking head for the Philippines.

While a lot of the optimism had been driven by the economic policies of the Aquino administration, particularly on fiscal management, Faruqui said credit should also go to the local private sector for prudent management of businesses.

And even if the financial system is awash in liquidity, the local private sector is seen very conscious about sticking to core strategies when expanding.

Remittances
Domestic consumption is likewise seen being buoyed by remittances, which have likewise held up despite the economic uncertainties in developed markets.

“Remittances haven’t dropped and all signs point to foreign direct investments increasing this year,” Faruqui said.

But heightened interest among foreign investors will not necessarily push local players to the sidelines.
“I think everybody is cautious in paying the right value. We don’t necessarily see a situation of price war in buying these assets,” Ahmed said.

Ahmed added that for foreign companies, “they have seen that the local capital market has been quite resilient, so they are able to access funding domestically at very competitive rates.”

Asked whether he thought Philippine assets were still reasonably priced, Faruqui said: “Relative to many other economies, I don’t think there’s an asset price bubble here. Obviously things to watch are unemployment, consumption levels, inflation—all areas which the government is watching every day,” he said.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Human Touch on tourism, retirement and health-care

THE biggest advantage of the Philippines as a tourism, retirement and health-care destination is its people.

The Filipinos are the biggest selling point of the country—not the beaches, hotels and resorts, various shopping opportunities, unique cuisines, or the relatively good private health-care system.

Filipinos are well known for their hospitality, bright smiles and friendly nature.  They provide a warm welcome to the visitors.

They also have the best grasp of the English language among all the countries in the region, making it easier for foreigners to communicate when they are in the country.

Filipinos also provide a “human touch” in attending to their elderly. It is the exact opposite of what is currently happening in the western world where senior citizens are living in assisted-living facilities.

It is the “human touch” which makes up for what the Philippines is lacking in terms of geriatric care expertise and knowledge that can be found in developed countries.

Many seniors in Europe feel is1olated with their children predictably only visiting them only during Christmas and their birthdays.

Foreign retirees living in the Philippines certainly do not feel any loneliness because of the tight relationships a community in any part of the country forms.

This is also the reason why more assisted living facilities and nursing homes are being established in the country as compared to 2002.

There are now facilities in Cebu, Iloilo, Laguna, Manila, Subic and Tagaytay with more being built in key cities across the country.

These facilities have two distinct advantages over those that can be found in developed countries—the price performance ratio and the more than competent capabilities of the Filipino caregivers.

Assisted-living facilities and nursing homes in the Philippines are more similar to a family home. The facilities here are also smaller, usually only having four to 10 rooms—a concept that is now also being imitated in developed countries.

Caregivers and nurses from the Philippines are also very much in-demand in other countries with 70 percent of nursing graduates now working abroad.

Here in the Philippines, caregivers are not only doing their jobs, they are also building relationships with their patients.

Filipinos definitely have the ability to make even an unfamiliar place feel like home in less than a day, enabling foreign retirees to adapt very fast to their new surroundings.

When marketing the Philippines as a retirement and health-care destination, it mostly involves real estate, beaches, accommodations, health care and lifestyle. But let us not forget to highlight the most important component this country has to offer—its people.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Marc Daubenbuechel is the executive director of the Retirement & Healthcare Coalition. He is also a project manager at the European Chamber of Commerce of the Philippines. For your comments, e-mail daubenbuechel@eccp.com

Philippines Urges Credit-Rating Companies to Adjust Criteria

by Bloomberg, By Ye Xie and Shamim Adam
 
Credit rating companies are failing to keep up with the bond market in recognizing that the Philippines deserves to be classified as investment grade, Finance Secretary Cesar Purisima said.

“They need to adjust their model to reflect the realities,” Purisima said in an interview at Bloomberg’s headquarters in New York yesterday. “My biggest frustration is really with those watching from the outside.”

Enlarge image

Cesar Purisima, Philippines secretary of finance. Photographer: Munshi Ahmed/Bloomberg

The Philippines is rated two steps below investment grade at Moody’s Investors Service and Standard & Poor’s, in line with Turkey and Jordan. The average yield on the Philippines’ foreign debt has declined 32 basis points, or 0.32 percentage point, this year to 4.13 percent, compared with an average of 4.26 percent for investment-grade countries, according to data compiled by JPMorgan Chase & Co.

Philippines bonds have rallied, and the cost to insure the securities against default has fallen, as the government cracked down on tax evasion and reduced debt levels. Both S&P and Moody’s have a positive outlook on their ratings, indicating they may upgrade the classification.

“On the implied ratings, we are between three to four notches underrated, which is the largest gap in the world,” said Purisima, who is in the U.S. to meet with investors and credit-rating companies. “What I am asking for is to reduce that gap.”

‘Asset Bubbles’

The cost of protecting Philippines’ bonds against default for five years with credit-default swaps is 179 basis points, 67 basis points below that of Russia, which is rated three notches higher at S&P, according to data compiled by Bloomberg.

Rating companies are facing increasing scrutiny from investors and regulators after their top ratings on bonds backed by U.S. subprime mortgages underestimated the risks of the securities and contributed to the global financial crisis in 2008. S&P’s decision to strip the U.S. of its top credit grade in August was followed by gains in the nation’s Treasury debt.

While rated four steps below Spain at S&P, Philippines raised funds in the international market at lower costs. The Southeastern Asian country sold $1.5 billion of 25-year dollar- denominated bonds in January to yield 5 percent in January. Spain’s bonds with similar maturities yielded 190 basis points more.

Purisima, 52, said policy makers are examining foreign capital inflows and investment in real estate as they seek to ward off excessive increases in currency valuation and housing prices.

“We are monitoring carefully the situation to make sure we don’t create problems down the road for us in terms of asset bubbles,” Purisima said. “We are very far from the situation.”

Peso Rally

The peso has rallied 2.2 percent versus the dollar this year, the best performer among the most-traded Asian currencies tracked by Bloomberg. The Philippine Stock Exchange Index climbed 16 percent this year, outperforming a 0.4 percent retreat for the MSCI Emerging Market Index.

Remittances from overseas workers and outsourcing from multinational companies, rather than speculators, are the main reasons supporting the peso, according to Purisima.

The government is trying to direct foreign capital into infrastructure investment to help boost growth, he said.

‘Right Direction’

The Philippine economy expanded 6.4 percent in the first quarter from a year earlier, the fastest pace since 2010, as President Benigno Aquino boosted government spending to counter faltering global demand.
In December, S&P boosted the rating outlook to positive, while citing a narrow tax revenue base, low household income and high foreign debt burdens as constraints for credit improvement.

Philippines’ per capita gross domestic product was about $1,383 in 2010, less than one third of Brazil, according to the World Bank. About 43 percent of its debt was denominated in foreign currencies, leaving it “vulnerable to adverse” currency movements, the S&P said in a statement on Dec. 16.

While there’s room for improvement, the government is moving in the “right direction,” as Aquino’s administration cracks down on tax evasion and reduces the proportion of foreign bonds in the total debt mix, Purisima said.

Tax revenue increased 12 percent in April from a year earlier, according to the government data. In January, the Treasury raised $1.25 billion by selling 25-year peso bonds to global investors as part of its strategy to reduce the reliance on foreign debt for financing.

“The important thing is that we are pointing in the right direction and moving forward,” Purisima said. “It’s dangerous to look at measures in isolation.”


For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Housing law misconceptions resulted in failure to resolve squatting–former senator

By Fat Reyes   INQUIRER.net

MANILA, Philippines – Former Senator Joey Lina on Thursday said misconceptions arising from the understanding of the Urban Development and Housing Act (UDHA) resulted in the failure to resolve the proliferation of illegal settlers in the country.

In an interview after the first day of the 1st National Conference on the Urban Development and Housing Act, Lina, also the principal author of the law, said it had yet to be fully utilized 20 years after its implementation.

The multi-sectoral conference, a two-day seminar aimed at addressing the misconceptions, was organized by the Philippine Federation of Real Estate Service Professionals (PFRESPI) together with the Housing and Urban Development Coordination Council (HUDCC) and the Department of Interior and Local Government (DILG). Mayors, governors, landowners, developers, real estate practitioners, and other local government officials participated in the event.

Lina stressed that one of the misconceptions lay in some sectors’ belief that “a right to housing is a right to free housing,” saying that nowhere in the world was free housing provided by government for the homeless.
“Right to housing may be a right to lot only or house and lot, but never free,” he said.
Lina also emphasized that it was wrong for people to “construe consultation as consent,” and that illegal settlers’ possession or use of property for a long time did not translate to ownership.

“After all the parties have been heard in a consultation, it is still the government that decides finally,” he said.
Lina, however, stressed that if relocation and eviction was the last resort, the government must exhaust all alternatives to relocate the settlers near their job sites before moving them out.

“It would be more expensive for them to move outside because they would lose their jobs. When all the alternatives are exhausted, that’s the time you can move them out of the site,” Lina said.
Lina also said that landowners who were against the law misunderstood it, saying that landowners were not required to pay informal settlers “disturbance compensation” nor look for and pay for relocation of illegal settlers.

“Only the government has the responsibility to spend for the relocation,” he said.

Lina also urged local government units to exercise political will in helping the underprivileged, as he described relocation efforts as “very emotional tasks.”

More housing sites for illegal settlers, members of formal sector

Vice President Jejomar Binay, who served as a key speaker for President Benigno Aquino III, said the government was well on its way to its P10 billion housing program, saying that medium-rise in city housing units would be made for the 140,000 Filipino victims of homelessness.

Binay said that housing projects were also being constructed for members of the formal sector, citing the plan for the construction of 31,000 housing units for firefighters, and officers of the Bureau of Jail Management and Penology (BJMP) and the improvement of the PAG-IBIG program for teachers.

Binay said that the conference was proof of the administration’s drive to push for the rights of every Filipino to a decent and safe housing.


For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.