Philippines leads Asia's out-performers amid China slowdown, S&P says

MANILA - The Philippines leads Asian countries that would continue to grow despite a slowing China, according to Standard & Poor's (S&P).

In a report on the region's credit conditions, S&P said China's slowdown is "the main risk factor" for Asia, as economic growth in some countries so far this year turned up less robust than earlier anticipated.

“For the year ahead, we see activity in China picking up only modestly under our base case, forecasting 2013 real GDP growth at 7.3 percent and remaining at that pace next year," said Andre Palmer, S&P credit analyst.

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PHL Recommended by Top Morgan Stanley Fund Manager

MANILA, Philippines - A well-known fund manager said the Philippines is one of the emerging markets to bet on, as the end of US stimulus raises social pressures in others.

According to Bloomberg, Ruchir Sharma, the Morgan Stanley fund manager who wrote the book "Breakout Nations", recommended investing more in the Philippines and Mexico than recommended by benchmarks, and less in countries like Brazil, Russia and China.

Bloomberg reported that many emerging markets will suffer more than developing countries as the Fed tightens up because they need continuous growth to satisfy citizens who have just emerged from poverty or trigger protests similar to those in Brazil and Turkey.

"There are positive stories as well. The selloff has been indiscriminate, but once the dust settles, the attention will turn back," said Sharma.

But Sharma said there's opportunity in countries trying to fix their finances, instead of giving in to populist pressure. - ANC 

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PHL Economy More Resilient Than Other Economies

THE PHILIPPINES, the former “sick man” of Asia, has fortified its economy, positioning it to weather storms engulfing the region’s vulnerable emerging markets and to snap back faster when global growth recovers.

“The Philippines is generally better placed than other economies because of its high level of reserves, which could help cushion the exchange rate volatility,” Shanaka Jayanath Peiris, the IMF representative in the country, said this month.

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PHILIPPINES is Most Resilient Market in South East Asia

MANILA, Philippines - Foreign investors should go back to Philippine financial markets as Southeast Asia’s fastest growing economy in the first quarter boasts of resiliency against potential threats to growth versus its neighbors, an investment bank said in a report.

“We find ourselves more comfortable with the macro-momentum in the Philippines compared with Thailand or Indonesia. This serves as a usual backdrop to our allocation,” Nomura said in its report titled Asean Navigator released yesterday.

“We are now overweight (for) Singapore and Philippines. We are neutral (in) Thailand and Indonesia. And we are underweight (in) Malaysia,” it added.

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PH up five places in global innovation rankings

Pinoy creativity is slowly gaining ground, and has in fact pushed the Philippines up a global ranking of countries.

The Philippines ranked 90th out of 142 in the World Intellectual Property Organization’s “Global Innovation Index 2013.”

Though still at the bottom half of the rankings, the country inched up from ranking 95th out of 141 last year.

It got a score of 31.2 of 100 points in the report, which WIPO said gauges “innovation capabilities and measurable results.”

Of the three factors observed in the report, the Philippines performed best in terms of innovation efficiency, ranking 24th globally.

It meanwhile ranked 77th in terms of innovation output, a performance it failed to match in terms of input, where it ranked 108th.

The country’s strengths, the report noted, included its number of graduates in science and technology courses, efficient use of energy and environmental performance.

The Philippines, however, remained the country with the second worst innovation performance in Southeast Asia.

Cambodia, at 110th, was the only country in the sub-region ranked lower than the Philippines in the list.

Singapore led Southeast Asia in terms of innovativeness, ranking 8th globally, followed by Malaysia (32nd), Thailand (57th), Brunei (7th), Vietnam, (76th) and Indonesia (85th).

Switzerland remained the most innovative country this year. It was followed by Sweden, the U.K., the Netherlands, the U.S.

At the bottom of the global innovation list, meanwhile, were Yemen, Sudan, Madagascar, Togo and Algeria.

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Pinoys abroad urged to promote Phl tourism

MANILA, Philippines - President Aquino is urging foreign visitors and Filipinos abroad to promote the Philippines as a tourist destination with more confidence now that the country is not only blessed with “natural gifts” but is also respected by the international community and striving for inclusive growth.

In his speech during the 8th Ambassadors, Consuls General and Tourism Directors’ Tour of the Philippines at Malacañang the other day, Aquino also expressed elation over the European Union (EU)’s lifting of air restrictions imposed on the Philippines.

The President said he was up until Wednesday midnight discussing the budget for 2014 as well as the peace negotiations with the Moro Islamic Liberation Front and was feeling tired until he saw reports on the lifting of air restrictions as well as other positive developments.

“So, it took us quite a long while (talking about the budget), and I had to admit the energy level was a bit down (yesterday) morning until I read the papers which surprisingly had tremendous good news, left and right. That’s kind of unique. I think I will preserve my copy of today’s paper for posterity, just in case they never repeat it again,” Aquino told the participants.

The President also said he was grateful to welcome this year’s tour participants at the Palace as it offered him a fulfilling break from his other duties.

“While looking at your faces, I was wondering if you’re all still victimized by jetlag... But, I’m told that the reason that you might be a little tired is that you have been experiencing firsthand what it really means to be, or what it means to say when we talk about ‘more fun in the Philippines.’ I hope that you really had fun and that the energy was well spent,” he said.

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“As I understand, these past few days, you have been to a number of tourist destinations in our country. I hear, for instance, that you were in Tagaytay, in which case I hope you enjoyed the brisk weather, the excellent buko pie, and the magnificent view of Taal Volcano,” he added.

“True, the sheer number of natural gifts in this country can take your breath away. Moreover, our fellowship - especially around the table, where Filipinos always make a point to share laughs and stories over adobo and lechon - cannot be found anywhere else. But I also hope that in the few days you have spent here, you have seen the can-do attitude and the renewed confidence that have revitalized the Philippines,” he noted.

Aquino also said Filipinos abroad should consider how his administration managed to turn things around: “From a place of unfulfilled potential, to a nation and people not just exceeding expectations, but creating even more potentialities for Filipinos and other people of good will.”

From the beginning, the President said, the administration decided that not only could tourism be boosted, but that it could be done sooner rather than later. So from day one, they worked to grow tourism in the Philippines to its full potential as an industry.

“You have probably already heard of the highly successful tourism campaign led by our own Department of Tourism, under the leadership of Secretary (Ramon) Jimenez. In fact, after the tours you have gone on, you can probably attest that it really is truly more fun in the Philippines. That is the secret of our campaign: we are not mouthing a marketing slogan. We are simply repeating a basic truth,” Aquino noted.

“The good news is you - and the millions of other tourists who have passed through our country - are not the only ones who have noticed. In their 2013 report, the World Economic Forum Travel and Tourism Competitiveness Index ranked us number one in the world in terms of government spending on tourism as a percentage of GDP (gross domestic product), which shows just how focused we are on our tourism sector. This also helped us jump 12 spots in their index - from 94th to 82nd. According to some publications, we are among the world’s best diving and beach destinations; and Travel+Leisure magazine has even recently called Palawan ‘The World’s Best Island,’” he added.

All these factors, he said, helped the government boost the number of tourists visiting the country.

“Do whatever part you can in building a Philippines that truly lives up to its potential - like being informal Philippine ambassadors by telling your friends back home just how fun it is here,” Aquino asked the participants.

“Our country is in an upswing, and I invite you, and every Filipino out there, to help keep our momentum going - to help us bequeath to future generations a Philippines they can be truly proud of,” he added.

He reported that last year, the Philippines breached the four million mark for the first time in history, recording 4.3 million international tourists or a 9 percent increase from the 3.9 million international tourists of 2011.

In 2011, the country recorded 37.5 million domestic travelers, which surpassed target for 2016.

“We have already surpassed the 2016 target as early as 2011. Of course, we are always looking to improve on our performance, and so we have decided to put just a little bit more pressure on Secretary Jimenez: from 35 million, the domestic tourism target for 2016 has been adjusted to 56.1 million travelers by 2016 and, of course, 6.8 million foreign tourists by next year. Just a slight increase in pressure, I am glad to say that this is a challenge that he has graciously accepted,” Aquino said.

This unprecedented boom in tourism, together with the government’s efforts to stamp out corruption in the bureaucracy and institute a government that actually worked for the people, had vastly altered the country’s economic landscape.

“The numbers might surprise you. The last time I welcomed visitors on this tour, I was already very happy to announce that our economy grew by 6.4 percent in the first quarter of 2012. Well, this year, I am even happier to share our growth numbers with you. The Philippines’ GDP ended up growing by 6.8 percent in 2012, and in the first quarter of 2013, we have recorded the fastest growth rate in East and Southeast Asia at 7.8 percent,” Aquino noted.

“Rest assured, however, that this success will only make our administration work harder. We know full well the challenges that remain. We must make certain that this growth becomes even more inclusive - that the economic benefits do not merely trickle down to our people, but that every Filipino is able to ride the rising tide of progress,” he said.

The participants are from the United States (Mid-West, East Coast, Hawaii, San Francisco, Los Angeles and Guam) and Canada (Toronto and Vancouver). They visited Corregidor, Ayala Museum, Bangko Sentral ng Pilipinas, University of Santo Tomas Museum, Tagaytay, Emilio Aguinaldo Shrine in Kawit, Cavite, Dr. Jose Rizal Shrine in Calamba, Laguna and Solaire Resort and Casino along Manila Bay from July 8 to 10.

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European tourists expected to pour in

More European tourists are expected to visit the country after the European Union (EU) lifted a three-year ban on local airlines, top officials said.

Tourism Secretary Ramon Jimenez said he expects a “significant increase” in tourist arrivals from Europe, where flag carrier Philippine Airlines (PAL) may again fly.

European tourists, sans PAL flights to Europe, have already spiked by 8.5 percent to 213, 598 arrivals from January to March 2013 from 196,754 visitors a year ago.

“The United Kingdom, Germany and France are among the key European markets with stable influx to the country,” Jimenez’s statement on Thursday read.

Once PAL flights to and from Europe are made available later this year, tourist influx will likely “include those from adjacent countries,” Jimenez said.

“PAL will be able to effectively augment the existing services by foreign carriers that cater to tourists in the region,” he added, noting this will contribute to the goal of 10 million tourists by 2016.

The European Union on Wednesday dropped PAL from its so-called air safety list, which tags airlines banned from making flights to the bloc’s 23 member states.

All Philippine carriers have been included in the list in 2010, after the International Civil Aviation Authority highlighted problems in complying with safety policies.

Welcoming the development, Palace spokesperson Edwin Lacierda lauded the Civil Aviation Authority of the Philippines (CAAP), which EU cited for competence.

Aside from boosting tourism, direct flights to Europe will also “enhance competitiveness and facilitate the entry of investments from the Eurozone,” Lacierda said.

Transportation Secretary Emilio Abaya, for his part, called the easing “an assurance to the public of the country’s compliance with international aviation safety standards.”

While all other airlines in the Philippines however remain banned in EU member states, Abaya said budget carrier Cebu Pacific may be reevaluated within six months.

The Gokongwei-led airline this year figured in at least two airport mishaps: one of its planes overshot the Davao airport runway in June while another skidded at the NAIA runway.

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How did the Philippines trump China to become the fastest growing economy in Asia?

The Philippine economy grew by 7.8% in the first three months of 2013, surpassing every single analyst estimate and putting it just above China as one of Asia’s fastest growing economies. The torrid growth, the best in nearly three years, is especially impressive given that exports declined 6.2% as electronics shipments collapsed.

So how is it growing so fast?
1) Infrastructure

The Philippines, like Thailand, is pursuing a massive infrastructure spending program worth around $10 billion. It covers a wide range of investments, from power plants and bridges to roads and schools. Although not all the money has been spent, the program has already created upwards of 400,000 jobs and helped win an investment grading from rating agencies, opening up the country to more international money.
2) Domestic Demand

If foreigners aren’t going to buy your goods, you better hope the locals are. Domestic demand in the Philippines has been very strong, driven by private investment and consumer growth in a way that China must envy. Manufacturing growth is up by 9.7% due to demand for food, appliances, communication and transport, and construction was up a whopping 32.5% in the first three months of the year. Services expanded 7%.

“Initially, this was led by infrastructure spending from the government,” the National Economic and Development chief Artemio Balisacan told the Philippine Star. “By the second half of 2012, private construction started to rebound.”
3) Remittance Payments

Underpinning domestic demand is a raft of remittance payments that make their way to the Philippines each year from its vast diaspora—over $5 billion in the first quarter of 2013. The cash transfers have long helped the Philippines pay off foreign debt and boost domestic consumption.
Can it continue?

Good news lasts only so long, and analysts have pointed to several risks. Exports may continue to fall as China slows and Europe stagnates. Remittance payments, although large, are at their lowest in nearly four years, and the Philippine stock market tumbled almost 4% on Thursday, in line with the Nikkei, despite the strong economic growth figures. Manila is sticking with a 6-7% growth target for the whole of 2013.

“There’s a disconnect between the economy and the valuation of the market,” a Manila-based trader told Bloomberg. “While overseas investors say they like our economic fundamentals, they find valuations to be stretched.” The Philippine stock market is one of Asia’s best performing bourses, up 41% in the last year, but traders are clearly worried about whether there is an asset bubble in the making. The Philippines has strengths China doesn’t, but building roads and pushing up the budget deficit is not enough when it comes to a long-term strategy.

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Economic Buffers found sufficient

THE PHILIPPINES is expected to withstand risks better than many emerging markets amid increasingly trying global economic conditions, according to international debt watcher Fitch Ratings.

   “[M]ore testing funding conditions following the US Federal Reserve’s forward guidance on monetary policy, slower growth rates, and lower commodity prices add up to a less favorable economic and credit environment for emerging markets,” Fitch said in its “2013 Mid-Year Sovereign Review and Outlook” released late Monday.

Fitch said a prospective tightening in Fed policy settings raises risks for “weaker” emerging markets -- even as the US central bank’s exit is expected to be moderate and “orderly” -- as winding down the stimulus will “generate periodic bouts of market volatility.”

“Market volatility creates its own problems and can feed on itself. Losses can trigger fund redemptions and forced selling,” Fitch said.

“Sharp exchange-rate depreciations will raise inflation (at least in the short term) and reduce local purchasing power, which could increase political pressures. Fluctuations in interest rates, credit availability and asset prices, as well as uncertainty, may deter investment,” it noted.

Fitch said volatile capital flows and higher interest rates resulting from an end to the Fed’s asset-buying program amid a US recovery will hit some emerging market (EM) economies harder than others.

“The most vulnerable will be EMs with large external financing requirements (current account deficits and maturing external debts), low foreign reserve buffers, high levels of leverage, vulnerable debt structures (foreign currency, short maturity and non-resident creditors), those that have seen strong inflows of hot money and recent bank credit growth, and those with weak policy macroeconomic frameworks or weaker fundamentals as signaled by low ratings,” Fitch noted.

In a “heat map” illustrating emerging economies’ vulnerability to a sudden drop in capital inflows -- measured by indicators like state of external finances, public finances and bank credit levels -- Hungary, Jamaica, Lebanon, Mongolia, Turkey, and Ukraine showed at least three indicators in red, “signaling risky or stretched levels.” Countries like China, Indonesia, Poland, Egypt, Sri Lanka, and Dominican Republic had at least two red indicators, indicating moderate vulnerability. Economies like Argentina, South Africa, Romania, Vietnam, Tunisia, Ghana, Serbia and El Salvador, which showed several yellow and a few red indicators on the map, were subject to “lesser potential stress,” Fitch said.

Among the 31 emerging markets covered, only the Philippines and Nigeria did not have yellow nor red indicators, reflecting external positions and credit fundamentals that are stronger than those of the other economies.

Fitch’s map showed that, based on latest data, the Philippines’ current accounts and net foreign direct investments as percentage of the economy are at 2.3%. Countries with red indicators had this ratio in negative levels, such as Lebanon (-9%), Jamaica (-5.7%), and Turkey (-5.4%).

Moreover, the Philippines’ gross external financing needs stood at just 0.2% of foreign currency reserves, in contrast to the likes of Ukraine, with 161.1% ratio, and the Dominican Republic, 138.4%.

“Record foreign exchange reserves provide many countries with substantial buffers to cushion the pressures on balance of payments and currencies, and capacity to maintain foreign-currency payments,” Fitch said.

The Philippines also fares well in terms of debt position, with the share of its foreign currency-denominated liabilities in total outstanding debt only at 19.3%, lower than those of most emerging economies, such as Jamaica (72.4%) and Lebanon (59%).

At the same time, Fitch noted that “[a] greater share of EM sovereign debt is in local rather than foreign currency compared with the past, reducing the vulnerability of balance sheets to exchange-rate depreciation.”

Data of the Bangko Sentral ng Pilipinas show the Philippines had $81.64-billion international reserves as of end-June, already 93.84% of the central bank’s $87-billion projection for the year.

The government is cutting foreign debt to reduce its exposure to foreign exchange risks, and to help manage inflows into capital markets.

Fitch said emerging markets with better credit fundamentals would be “more resilient” to a “global liquidity shock” that could be brought about by Fed’s scaling-down of its stimulus program. Since late-May, US central bank officials have been saying they could start reducing a $85-billion monthly bond-buying stimulus this year in the face of economic recovery. Improved US prospects, in turn, have lured funds away from emerging markets.

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European firm sets up $120M equity fund for PH

European investment firm Brummer & Partners has set up a $120-million private equity fund to look for opportunities in the Philippines, taking advantage of the country’s fast-growing economy.

The new fund, which will be called Navegar, will make long-term investments in the country, putting in about $10 million to $20 million in various companies in the consumer and service sectors. Navegar is the group’s second venture in an emerging market after a similar foray in Bangladesh in 2008.

“There are probably a lot of good opportunities in this country. The challenge for us is to pick the best ones,” said Patrick Brummer, co-founder of Brummer & Partners. Brummer plans to take minority investments in privately held companies and eventually exit after several years once that company goes public or is acquired by a larger firm.

He said the group’s ventures in emerging markets were part of a strategy to find new areas for growth amid the slowdown in advanced economies. Brummer, which manages $15 billion in funds globally, is headquartered in Stockholm, but has offices in New York, London, Singapore and Dhaka.

“I’d rather be investing in the Philippines than in the west in the next 10 years,” Brummer said, but added that the decision to come to the Philippines was not merely a reaction to the country’s recent economic success.

Brummer said the group took note of the country’s young population and relatively predictable economic growth. Talks with local partners to set up shop in the Philippines started five years ago and were finalized early this year, he said.

“We’re not starting this fund on the assumption that the economy would grow 7 percent for 10 years. Growth will not be a straight line,” he said. “But if the Philippines grows an average 5 percent, I would be very happy with that. What will it be for the next couple of years? That’s the million-dollar question,” he added.

Honorio Poblador, one of Navegar’s local partners who will manage the fund in the Philippines, said the group was in talks on potential investments in companies in the consumer sector, particularly in the food, apparel and retail industries.

He said the firm was also considering investments in consumer finance, real estate and the business process outsourcing (BPO) sector. One of Navegar’s local partners is Javier Infante, founder of Ambergis Solutions, the BPO firm that was eventually acquired by Canadian telco giant Telus International.—Paolo G. Montecillo

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Foreign investors seen to come in

The Philippines still has what it takes to “pull” investors from overseas to put in money in the country despite the recent volatility in financial markets that have seen most fund managers returning to traditional safe havens.

Governor Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP) said factors such as low-yields and slow growth in advanced economies were reversing. However, he noted that countries exhibiting stable growth like the Philippines remained attractive destinations for investors.

“The push factor at the time was low interest rates and sluggish economic growth,” Tetangco said, referring to global economic conditions that saw investors flocking the Philippines in the first half. “But now that there are signs that the US economy is recovering, that push factor is beginning to diminish. But we still have the pull.”

He noted that that the Philippines had Asia’s fastest-growing economy in the first quarter of the year and that inflation remained low. Low inflation means better returns for investments denominated in peso since yields are not offset by the price increases.

Tetangco said the country also continued to enjoy robust foreign exchange income in the form of remittances from overseas Filipino workers (OFWs) and from the business process outsourcing (BPO) sector and the tourism industry.

“Our external position remains in surplus and our fiscal position continues to improve,” he said, pointing out that these would help the country weather volatile market conditions as foreign money in local stocks, bonds and government securities get repatriated to markets like the United States. Despite the sudden flight of investors seen in the latter part of June following signals of an end to the US Federal Reserve’s bond-buying program, the country continued to enjoy net “hot money” inflows for the first half.

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BSP: Cheap credit helped small businesses in ’12

MANILA, Philippines—Small businesses boomed over the last year as entrepreneurs took advantage of access to cheap credit and rising household income levels that were supported by the country’s economic growth, the central bank reported.

Data from the Bangko Sentral ng Pilipinas (BSP) released late Monday showed a healthy increase in savings by microfinance clients, which exceeded loans extended to small enterprises at the end of the first quarter.

“This is a testimony that the entrepreneurial poor are capable of saving, [which] is contrary to the customary belief that the poor do not save,” BSP Governor Amando M. Tetangco Jr. said.

At the end of March this year, the BSP said microfinance institutions had over one million clients—the highest ever recorded. These clients had total savings of P8.224 billion in the same period, significantly higher than the P6.43 billion at the end of 2012.

Outstanding microfinance loans in the same period totaled P8 billion. While this was lower than the P8.4 billion in outstanding loans reported at the end of last year, this was still significantly higher than the P2.6 billion in 2002.

Microfinance lenders used to offer below-market interest rates for borrowers. This proved ineffective in opening up access to financial services for low-income households and businesses.

A new approach was adopted in 2001, where loans were offered at normal rates. But under the new scheme, banks were allowed to subsidize administrative costs, provisions for loan losses and intermediation fees. At the time, the BSP said, this was consistent with the proposition that “what matters most to the poor and underserved segments is access to financial services rather than interest-rate cost.”

A microfinance loan averages P25,000 a person, but can reach a low of about P2,000 and a high of P150,000, the BSP said.

This approach “enables people to seize economic opportunities,” Tetangco said.

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PH elementary schools win 16 medals in Bulgaria math fest

MANILA, Philippines — With a 16-medal haul, the Philippine elementary mathematics team topped the primary division in the just-ended 2013 Bulgaria International Math Competition (BIMC), held June 30 to July 4 in the Black Sea city of Burgas.

The good news was relayed to the Philippine Daily Inquirer on Sunday by Dr. Simon Chua, president of the non-government Mathematics Trainers’ Guild of the Philippines (MTG) and head of the Philippine delegation to the 29-country contest.

The young Filipino math wizards, mostly students from Metro Manila private schools, bagged three gold, four silver, four bronze and five merit medals in the annual competition. The teams from Vietnam and Thailand placed second and third overall.

In an e-mail, Chua also said that the Philippine high school team bagged a total of 14 medals, but failed to land in the Top 3, where the teams from Japan, Hong Kong and China emerged as champions.

The Filipino medalists in the elementary level were: (Gold) Jinger Chong from St. Jude Catholic School; Shaquille Wyan Que from Grace Christian College; and Vicente Raphael Chan from Zamboanga Chong Hua High School. (Silver) Stefan Marcus Ang from St. Jude Catholic School, Steven John Wang from UNO High School, Jose Ignacio Locsin from St. John Institute in Bacolod City, and Tiffany Mae Ong from Immaculate Conception Academy; (Bronze) Luke Matthew Bernardo from Philadelphia High School, Adam Christopher Chan from Grace Christian College, Ryan Mark Shao from Xavier School, and Eason Wong from Philippine Cultural College.

The merit medal winners were William Joshua King from Bethany Christian School in Cebu City, Anna Nicola Baizas from Philippine Science High School, Jaymi Mae Ching from Jubilee Christian Academy, Alyana Zoie Chua from MGC New Life Christian Academy, and Christopher Jose Carlos from Ateneo de Manila University.

In the high school division, the country’s medals came courtesy of the following: (Gold) Clyde Wesley Ang from Chiang Kai Shek College and Farrell Eldrian Wu from MGC New Life Christian Academy; (Silver) John Thomas Chutak from St. Stephen’s High School, Shawn Gabriel Cabanes from Zamboanga Chong Hua High School and Sedrick Scott Keh from Xavier School; (Bronze) Kelsey Lim and Kaye Janelle Yao, both from Grace Christian College; Andrew Lawrence Sy from Xavier School, Andrea Jessica Jaba from St. Jude Catholic School; Nathanael Joshua Balete from St. Stephen’s High School, and John Aries Hingan from San Beda College-Alabang.

The merit medalists were Genmark Tanno from Southville International School, Joseph Raymond Fadri from Makati Science High School and Andrew Brandon Ong from Chaing Kai Shek College.

The following countries also took part in this year’s BIMC: US, Russia, India, Bangladesh, Nepal, Indonesia, Iran, South Korea, Kazakhstan, Malaysia, Mexico, Nigeria, Romania, Taiwan, South Africa, and the Netherlands, among others.

The other members of the Philippine delegation were Director Lolita Andrada of the Department of Education; Director Filma Brawner of the Science Education Institute of the Department of Science and Technology; and Rechilda Villame, Dr. Eduardo dela Cruz, Arvie Ubarro, Isidro Aguilar, Joseph Wee, and Robert Degolacion, all team coaches and MTG officials.

After a six-hour bus trip from Burgas to Istanbul on Friday, the group took a connecting flight to Dubai before returning to Manila the following day.

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Peza investments up 92% in H1

Investment pledges registered with the Philippine Economic Zone Authority (Peza) surged by nearly 92 percent to P83.7 billion in the first six months of 2013 from the P43.6 billion recorded a year ago.

The bulk of these investments came from manufacturing companies, most of which are based in Japan, Peza director general Lilia de Lima said on the sidelines of the Sonion Philippines Inc. facility inauguration in Batangas.

De Lima noted that a lot of foreign companies are now inclined to put up their respective facilities in the Philippines, given the robust performance of the local economy and the ease of doing business in an economic zone.

“What’s good now is that we’re on the radar of European companies … those from Germany and the UK. In the United States, when we went to New York and San Francisco, I talked to several firms there who are interested. These are from the manufacturing and IT sectors,” De Lima revealed.

There also has been “several leads” from automotive firms, but the Peza head declined to cite further details until agreements have been firmed up.

What is clear, according to De Lima, is that once these investments materialize and companies start their operations, employment and export figures will also increase.

De Lima further assured prospective investors that there is adequate space in economic zones as new areas are being developed in Cavite, Laguna, Batangas and Central Luzon, while existing ones are also being expanded to accommodate new companies. On the average, the utilization rate of existing economic zones are said to be 85 to 90 percent.

According to De Lima, Peza has already approved applications for the creation of new economic zones, but these may need presidential proclamations before the areas are developed.

At present, there are already 286 economic zones in the country, she said.

Also, De Lima revealed that several firms operating in the country’s economic zones will inaugurate new facilities within the year.

Some of the companies are Canon Inc. and Brother Industries Ltd., which will be making printers with reported investments of 6 billion yen and 4.23 million yen, respectively; Japanese electronics manufacturer Funai Electric Co. Ltd., which took over the inkjet business of Lexmark International; and electronics components maker Murata Manufacturing Co. Ltd., which was earlier reported to have invested 620 million yen.

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PHL less risky among Asian economies — Nomura

Sustained growth spurred by tourism, investments, remittances, and business process outsourcing limits the risks faced by the Philippine economy in the coming years compared to its Asian peers, according to global financial services giant Nomura.

 

Its June 28 report “Asia's rising risk premium,” released on Tuesday, noted Asian economies will be distinguished based on macroeconomic risks when the US Federal Reserve starts scaling back its $85-billion bond buying stimulus. 

 

“The investor preference would be for sustainable growth over fast growth, favoring countries that pursue structural reforms and unwind the loose macro policies... The Philippines stands out in this low-risk category,” the report read.

 

“[C]ountries either with weak economic fundamentals or that are too slow in normalizing macro policies and implementing structural reforms could struggle to attract investment,” it added.  

 

Nomura groups China, Hong Kong and India “firmly” in the high-risk danger zone category, while Indonesia is at the lower end of high-risk zone.

 

Korea, Malaysia, Singapore, Thailand and Japan are in the medium risk zone, while Taiwan shares the low risk zone with the Philippines. 

 

Nomura's barometer was largely based on residential property prices, domestic private credit and savings as well as their ratio to a country's output. 

 

“The danger zone does not mean that a financial or balance of payments crisis is imminent,” Nomura clarified.  

 

“But it does mean that, without a move toward less-accommodative macro policies to rein in debt and property markets, and a step-up of structural reforms to boost productivity-enhancing supply, some countries could face a crisis in the next few years,” it added. 

 

Rising investments

 

By contrast, the Philippines' rising investments, particularly in infrastructure, as well as sustained dollar inflows from remittances and BPOs “continue to be highly supportive of strong growth momentum which looks to be set in motion for the next couple of years,” Nomura said. 

 

Nomura noted that the Philippines is slowly moving towards an investment driven economy.  “From a savings/investment perspective, a strong investment cycle is underway, led by private sector capex (capital expenditure) spending,” the report read. 

 

“This rise in investment ratios has been accompanied by higher domestic savings, boosted by a growing middle class, as well as lower fiscal deficits as a result of reforms to improve governance,” it added. 

 

The financial giant expects remittances—already up 5.7 percent year-on-year to $6.916 billion as of end-April—to remain the Philippines' key economic driver on the back of “strong demand for higher-skilled workers.”

 

Sought for comment, University of Asia and Pacific School of Economics dean Peter U said the Philippines is now “better positioned to face risks.”

 

“We're at a high point compared to our past. And probably better ,” U told GMA News Online. 

 

The economist said the country will “stay within strong growth trajectory” on the back of government hiking infrastructure spending and private construction. 

 

The country's “fairly healthy” dollar reserves—$82.9 billion as of end-May—provide room for monetary policy moves that can cushion any risks, U noted. 

 

The Philippine economy grew 7.8 percent in the first quarter, the fastest in Asia. — VS, GMA News

 

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BSP: Investors returning, worst is over for markets

MANILA, Philippines - The worst is over for the financial markets and investors are already beginning to realize that the Philippine economy remains safe and sound as they return to developing nations, a senior central bank official said recently.

“The initial market reaction has started to subside. We can see that in the middle of June, investors have started coming back,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said in a speech last Friday.

Fund managers have started re-positioning their portfolios back to the US from emerging countries after the Federal Reserve signaled it could wind down its stimulus measures “later this year.”

As a result, regional stock markets have plummeted in value for weeks, with the Philippine Stock Exchange index (PSEi) losing as much as 6.5 percent to enter the “bear” territory last week.

The PSEi, one of the world’s best last year, has since bounced back, closing up 2.17 percent at 6,465.28 last Friday. Guinigundo attributed this development to the level of domestic participation in the local bourse.

“Unlike in many stock markets in the region, that of the Philippines is supported by domestic investors with ratio at 50-50,” he said, adding that the recent correction was in fact “healthy.”

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“Many have become bear market in recent days but let me clarify that that is not the case in the Philippines,” he said.

As for the foreign exchange market, Guinigundo said the BSP expects the peso’s depreciation versus the dollar “to be reversed in the next few months of 2013.”

At the height of market volatility, the peso sank to P44 to a dollar from P41.

The peso, Asia’s second best performer last year, has lost 5.24 percent of its value versus the greenback to end trading at 43.20 last Friday. Losses ballooned to as much as 6.7 percent two weeks ago.

“Let me also assure you that we have buffers that are comfortable and that we will be able to supply the dollar needs of the market anytime,” Guinigundo said.

“The BSP’s toolkit is also sufficient to ride up the turbulence,” he said.

The bond market, meanwhile, has also been showing “stronger discipline,” with credit default swaps (CDS) of government securities already rebounding to stable levels, Guinigundo said.

Local CDS spreads – which gauge insurance acquired by investors for holding Philippine bonds – have decreased to 139 basis points from 157 basis points against US Treasuries. 

“This means it is favorable to us... There is better trust and confidence in Philippine bonds,” he said.

At the end of the day, Guinigundo said the volatility in the financial markets has amplified not only the government’s resilience, but also those of market participants.

“Let me share with you a quote from Warren Buffett which said, ‘Only when the tide goes out do you discover who’s been swimming naked,’” he said. “The tides have begun to recede and the Philippines was found to be wearing decent swimming trunks.”

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Economy weathers financial market turmoil

The recent shock to the country’s financial markets and the little effect it had on the real economy showed that the Philippines is much better equipped to deal with crisis-related capital flight, according to the Bangko Sentral ng Pilipinas.

“Our outlook hasn’t changed. We continue to see a good turnout in economic performance down the road,” BSP Deputy Governor Diwa C. Guinigundo said.

He was commenting on the recent release of data from the United States that showed the world’s largest economy grew at a slower-than-expected pace in the first quarter of 2013.

This comes shortly after signals by the US Federal Reserve that it would trim down its $85-billion bond buying program that was originally launched to prop up the American economy.

The signals by the US Fed earlier sent local equity prices crashing, wiping out all gains made by the local bourse since the start of the year. The peso also fell to its lowest point in more than a year as foreign investors pulled out of emerging markets to return to traditional safe havens.

Guinigundo said that despite the volatility in financial markets, the country’s foreign exchange income—linked to remittances from migrant workers and business process outsourcing (BPO) revenues—kept the country’s external payments position robust.

“Whenever there are capital outflows, normally one would see tightness in the market, liquidity and credit. But we didn’t experience that,” he said.

“Instead, it is clear that in the Philippines, we have both dollar and peso liquidity and it remains ample and consistent with what is required to sustain the economy,” he said.

This differed from the country’s situation during the Asian financial crisis in the late 1990s, wherein capital flight from emerging markets made it harder for businesses and households to take out loans, choking economic activity in the Philippines and across the region.

Guinigundo also allayed the analysts’ fears of the economy possibly overheating, following the release of data last week that showed domestic liquidity—the amount of money in the system—grew at its fastest pace in six years.

The fast growth in liquidity means more money in each person’s hands, leading to high inflation rates that can eventually choke economic activity.

“We believe overheating is a remote issue because the potential capacity of the economy has gone up. In addition, productivity has improved while efficiency appears to have climbed in recent years,” he said.

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