MUST KNOW | How does the economy really work? (VIDEO)

I have always wanted to figure out and understand how the economy really works, but it's hard to understand intangible concepts like recession, depression, credit, deficit, interest rate, etc without a good visual aid to compliment.

Marami akong gustong malaman tungkol sa ekonomiya, kaso andaming basahin na hindi ko rin maintindihan lalo na kung puro graphs lang at math ang nakikita.

What powers up the economic machine? What are the basic driving forces behind an economy? When is credit a good one? When is it called bad credit?

How can we help the economy? What do financial assets like stocks, bonds, and other investments have to do with the economy? So many questions in mind that really boggled me, until I found this video that enabled me to really understand the relationships that exist to run the economy.

Paano ba tayo makakatulong sa paglago ng ekonomiya ng bansa? How can we help the government achieve the target 7-8 percent GDP growth?

Seriously, if you want to have some crash course on how the economy works, you better watch this vid 'cause you will definitely thank the author of the video, businessman Ray Dalio, for explaining it clearly in an interesting animation!

Video Courtesy: Youtube channel Bridgewater

Did you enjoy this post? If yes, it would be nice if you can share this to others for them to learn what you've learned as well. If di naman nakakasagabal, pa-like na din po ng Spotlight Philippines facebook page. :)

PH economy grows by 5.7 percent in 1st quarter

The Philippine economy grew at a slower pace in the first quarter of 2014. PH's gross domestic product (GDP) grew by 5.7 percent in the first three months of the year, much lower than the 6.4 percent median estimate of 20 analysts queried by Reuters.

The growth pace was even slower than the 6.5 percent year-on-year growth in the fourth quarter of 2013, and the annual 7.7 percent growth in the first quarter of 2013.

The Aquino government is aiming for 6.5 to 7.5 percent GDP growth this year. In 2013, the economy grew by 7.2 percent, Southeast Asia's fastest at that time.

PH improves in ease of doing business! Check out the largest companies in the Philippines.

Recently, the Philippines was heralded by the World Bank as the most improved country in terms of Ease of Doing Business ranking. The Philippines jumped 30 spots from 138th to 108th this year. (Wow!)

This 30-spot jump was the biggest improvement for any country in the world this year. This could be accredited to gains in the following indicators: Resolving Insolvency indicator (where PH jumped from 165th to 100th), Getting Credit, Electricity, Paying Taxes, Cross-Border Trading, Dealing with Construction Permits, and Registering Property.

Seems like the PH is the up and coming roaring tiger cub economy of the century, to follow the lead of the Four Asian Tigers - Singapore, Hong Kong, Taiwan and South Korea. It's perhaps the best time to know which PH companies are creating this wave of sustained economic growth.

 

Would you know which companies are the largest in the Philippines? Well, according to a list made by Forbes in April 2013, eight (8) companies made it to the list of 2000 largest companies in the world.

 San Miguel Corporation leads the group of 8 major companies that would somehow drive the economic future of the Philippines. It's then followed by tycoon Henry Sy's SM Investments.

The list of largest companies in the Philippines are as follows:

1. San Miguel

Rank: 694

Sales: $16.6 B

Assets: $0.7 B

Profits: $25.1 B

Market Value: $7 B

2. SM Investments

Rank: 915

Sales: $5.3 B

Assets: $0.6 B

Profits: $13.6 B

Market Value: $16.6 B

3. PLDT

Rank: 1060

Sales: $4 B

Assets: $0.9 B

Profits: $9.9 B

Market Value: $15.1 B

4. BPI

Rank: 1142

Sales: $1.4 B

Assets: $0.4 B

Profits: $23.9 B

Market Value: $9.1 B

5. Manila Electric

Rank: 1308

Sales: $6.8 B

Assets: $0.4 B

Profits: $5.3 B

Market Value: $9.2 B

6. Aboitiz Equity Ventures

Rank: 1642

Sales: $1.6 B

Assets: $0.5 B

Profits: $4.6 B

Market Value: $7.8 B

7. Metropolitan Bank and Trust

Rank: 1666

Sales: $1.5 B

Assets: $0.3 B

Profits: $21.7 B

Market Value: $6 B

8. Ayala

Rank: 1784

Sales: $2.5 B

Assets: $0.3 B

Profits: $11.9 B

Market Value: $8.2 B

PH 2013 1st quarter GDP growth fastest among Asian countries

The Philippines economic growth was fastest among Asian countries for the first quarter of 2013, the National Statistical Coordination Board (NSCB) announced Thursday.

NSCB revealed that the country’s gross domestic product (GDP) grew by 7.8 percent in the first quarter of 2013, faster than China (7.7 percent), Indonesia (6 percent), Thailand (5.3 percent), and Vietnam (4.9 percent), Secretary of Socioeconomic Planning of the Philippines Arsenio Balisacan said.

NSCB attributed the 7.8 percent increase in the gross domestic product (GDP) of the country to the strong performance of the manufacturing (9.7 percent), and construction (32.5 percent) sectors, as well as the increase in government and consumer spending. The services and agriculture sectors also contributed to the growth with 7 percent and 3.3 percent, respectively. Meanwhile, the mining and industry contracted by 17 percent.

This was the second fastest growth rate of the country since a quarter in 2010 (8.9 percent), Balisacan said.

Smart, Meralco, Shell, Chevron, Nestle make it to top of 500 non-individual (corporate) taxpayers list

Telecommunications giant Smart, electric utility and distributor Meralco, oil titans Shell and Chevron, and food and beverage giant Nestle led the list of top non-individual (company) taxpayers of 2011 in the Philippines. The list was released by BIR to give hint as to which PH companies have paid less and which companies have paid accordingly in 2011.

Image, Data Courtesy: Inquirer, BIR

The full list of top 2011 PH non-individual (company) taxpayers is found here. The top 20 corporate taxpayers are as follows:

1 001901673-000 SMART COMMUNICATIONS INCORPORATED - P10,235,358,541.64

2 000101528-000 MANILA ELECTRIC COMPANY "MERALCO" - P8,302,481,339.38

3 000662551-000 SHELL PHILIPPINES EXPLORATION, B.V, - P6,367,809,783.82

4 206136596-000 CHEVRON MALAMPAYA LLC - P6,309,861,723.00

5 000421786-000 NESTLE PHILIPPINES INC - P4,886,077,359.00

6 006807251-000 SAN MIGUEL BREWERY INC. - P4,775,481,657.84

7 000768480-000 GLOBE TELECOM, INC. - P4,522,451,208.31

8 007515588-000 PMFTC INC - P3,709,288,593.70

9 000168801-000 PETRON CORPORATION - P2,620,598,749.07

10 000283731-000 PHILEX MINING CORP - P1,876,747,468.50

11 004470601-000 FIRST GAS POWER CORPORATION - P1,492,555,812.60

12 000164757-000 PILIPINAS SHELL PETROLEUM CORPORATION - P1,318,172,492.44

13 005038428-000 MANILA WATER COMPANY, INC. - P1,287,736,959.20

14 003841103-000 TEAM SUAL CORPORATION - P1,227,008,548.06

15 000342744-000 UNILEVER PHILIPPINES,INC. - P1,020,290,189.70

16 000887972-000 PHILIPPINE AMUSEMENT AND GAMING CORPORATION - P960,262,390.46

17 000237540-000 LAFARGE REPUBLIC, INC. - P901,299,306.06

18 005017501-000 SAN ROQUE POWER CORPORATION - P885,925,077.00

19 238684383-000 EMPERADOR DISTILLERS, INC. - P863,017,104.00

20 004625830-000 CITRA METRO MANILA TOLLWAYS CORPORATION - P856,585,600.86

Good News: PH gets first-ever investment grade

Photo Courtesy: HopeAndFail

A report from ABS-CBNNews has confirmed that the Philippines got its first-ever investment grade debt rating today (Wednesday), as Fitch Ratings gave the country a 'BBB-' with a stable outlook.

"The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn," Fitch said.

Fitch, however, expects the PH economy to slow down to 5.5% this year, lower than government target growth of 6-7% growth.

The Philippines still awaits two other internationaly recognized credit ratings agencies' provision of investment grade ratings - one from Standard & Poor's and the other from Moody's Investors Service, which both rate the country a notch below investment grade.

S&P awarded the Philippines a BB+ with a positive outlook, while Moody's gave it a Ba1 with a positive outlook

What does investment grade mean?

There are many dimensions of the term investment grade. Investopedia defines investment-grade for a company as the following:

Investment grade refers to the quality of a company's credit. In order to be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or Moody's. Anything below this 'BBB' rating is considered non-investment grade. If the company or bond is rated 'BB' or lower it is known as junk grade, in which case the probability that the company will repay its issued debt is deemed to be speculative.

Investment grade, in the context of the country's ability to pay off its debts, means that the country is likely able to meet its obligations to creditor banks and other financial institutions. This means that the Philippines will be able to secure a spot in terms of financial investments (FDIs) and loan with relatively lower interests since there's no speculation it couldn't pay off its debts, as seen in the Aquino administration's continuous allotment of a big chunk of the government budget to paying off (bad) debts, in order for the country to settle its accounts and eventually be guaranteed access to more international funding due to its high reputation (investment grade).

Furthermore, financial dictionary defines investment grade as an indicator of a corporate bond's "creditworthiness and likelihood of default".

Some facts about the economy of the Philippines

According to World Bank country director Motoo Konishi, the Philippines "is no longer the sick man of East Asia, but the rising tiger." True as it may seem, PH has registered one of the highest growth rates in Asia since the Aquino administration started.

However, could the issue of 'inclusive' growth several years ago still be the same issue of today? There must be some truth in it. Here are some facts which that economic gains do not trickle down the bottom classes.

1. In 2009, about 25 million Filipinos or 1/4 of the population lived on $1 dollar a day or less.

2. In 2011, the 40 richest families in the Forbes wealthy list accounted for 76 percent of the total gross domestic product (GDP) of the Philippines. That's very high compared to Thailand's 33.7 petcent, Malaysia's 5.6 percent, and Japan's 2.8 percent.

3. In 2012, the two wealthiest people in the Philippines were worth a combined $13.6 billion, which is approximately six percent of the Philippine economy.

4. Minimum wages have not been increased to a point that could significantly impact the lives on the lowest social strata, despite corporate gains obtained by owners of profitable Philippine companies and corporations. Hence, the owners get increases, yet the workers don't.

5. Politics is a game-changer, with regards to effectiveness of public policy that negatively impacts PH capitalists and business owners.

6. Some sectors of the Philippine economy are under monopoly or duopoly; thus, prices of commodities (may it be goods or services) can easily be controlled and eventually directly affect the customer base - a big portion of which is powered up by the middle class.

Limitations on foreign investment in PH added

Aquino expands list of foreign investment limitations

MANILA, Philippines - President Benigno Aquino III has expanded the list of investment areas and economic activities that prohibit the participation of foreign investors under the 9th Regular Foreign Investment Negative List. 

The said list enumerates the industries and business activities that are open to Filipino businessmen, and defines the extent of participation of foreign investors in areas allowed by specific laws and the Constitution.

Aquino signed Executive Order No. 98 on October 29, Executive Secretary Paquito Ochoa Jr. said on Friday. The order, which also expands investment opportunities reserved for Filipinos, replaces E.O. 858 that started to take effect in February 2010. 

EO No. 98 takes effect 15 days after its publication in a newspaper of general circulation. 

“There are investments areas or activities which foreign ownership limitations imposed by law were not included in EO 858. Those changes are now reflected in the ‘List A’ of the new presidential directive,” Ochoa said.

Ochoa said among E.O. 98's amendments to E.O. 858 are:

• The foreign ownership and foreign practice limitations imposed under the Real Estate Service Act of the Philippines (Republic Act 9646); 
• The Philippine Respiratory Act (R.A. 10024); 
• The Philippine Psychology Act (R.A. 10029) and 
• The Lending Company Regulation Act of 2007 (R.A. 9474)

Except for R.A. 9474, which allows foreign ownership of up to 49 percent in lending companies, the three other laws limit the practice of non-Filipinos in the areas of real estate and health care such as respiratory therapy and psychology, unless there is a reciprocity arrangement prescribed by a law.

List A of EO No. 98 specifies the areas of economic activity where foreign ownership is prohibited or limited by the Constitution or laws, among them: 

• mass media 
• practice of all professions, cooperatives
• private security agencies
• small-scale mining
• private radio communications network, private recruitment for local or overseas employment 
• advertising
• ownership of private lands, 
• lending companies, 
• financing companies and investment houses regulated by the Securities and Exchange Commission

List B contains economic activities regulated by law such as: 

• small- and medium-scale domestic enterprises
• defense-related industry (i.e., manufacture of firearms, etc.) and 
• businesses that have implications on public health and morals (i.e., gambling, sauna, massage clinics, etc.)

List A may be amended any time to reflect changes brought about by new laws, according to Ochoa. 

List B may be amended not more than once every two years upon the recommendation of the departments concerned and endorsed by the National Economic and Development Authority, or upon NEDA’s own initiative and recommendation, approved by the President and promulgated by a presidential proclamation.

“For now, List B stays while the changes to the negative list covers only List A,” Ochoa said. 

Under the Foreign Investments Act of 1991 (R.A. 7042), foreign investors are allowed to own 100-percent equity in businesses excluded from the negative list.

Article Source: Philippine News Agency, InterAksyon

Philippines economic growth likely to surpass target 5-6%

In an Interaksyon report, the National Economic and Development Authority (NEDA) said Monday that the full-year economic growth of the Philippines will likely exceed the government's target of 5-6%.

In the first half of the year, economic growth averaged 6.1% bulked up by remittance-led consumer spending and the services sector including the business process outsourcing (BPO) industry.

The second half of the year will possibly reach at least 6% as more Filipino consumers will engage into extravagant shopping spree and other social gatherings, speeding up domestic spending, in the gift-giving and reunion months fed up especially by the release of Christmas bonuses and extra-month pays. 

Last month, credit ratings firm Standard & Poor's hiked its growth forecast for the Philippines while it cut or retained the outlook of the other Asian economies.

Biggest SM mall in Mindanao, SM Lanang Premier, opens

The biggest mall in Mindanao under Sy-led SM Prime Holdings, the country's largest mall developer, has been opened Friday (September 28) with 144,000 square meters retail space. Crowds of people trooped to the mall's opening day.

Photo Courtesy: SM Lanang Premier FB Page

SM Lanang Premier, the second SM mall in Davao City, is located at J.P. Laurel Avenue in Barangay (village) Lanang. The first one is SM City Davao, 9 kilometers away from SM Lanang Premier which opened in November 2001. 

Approximately 88 percent of the retail space now has contractual tenants. With its celebrated opening, SM Lanang Premier becomes the biggest and first premier mall development in the south.

Some of the stores which will be found in SM Lanang Premier are:

• SM Department Store
• SM Supermarket
• SMX Davao Convention Center
• Watsons
• Ace Hardware
• Forever 21
• Kultura
• Vikings
• Cha Time
• KFC
• Jollibee
• Mesa

SM Lanang Premier houses five cinemas, a 2,200-seater IMAX theater, a Science Discovery Center, a bowling center, and more than 1,500 parking spaces. The longest fountain in the country will be found in SM Lanang Premier.

Here are some of the gigs to look forward to in SM Lanang Premier's opening weekend! Images credits go to SM Lanang Premier and PWD World.

Japan manufacturers transfer to the Philippines

Japanese manufacturers transfer to the Philippines due to the country's young, English-speaking workforce following rising business risks that lower their confidence at home such as disasters and a rising yen.

Latest to invest are electronics firm Furukawa Electric Co. Ltd. and adhesive maker Cemedine Co. Ltd who injected $12.9 million or almost P500 million in initial capitalization alone.

Also building new facilities Power Rangers and Gundam toy maker Bandai (more than P350 million), camera and projector optical lens maker Fujifilm Corp. (approx. P1.1 billion), and electronics component maker Murata Manufacturing Co. Ltd. (no less than P300 million).

Companies expanding their presence in the Philippines include Canon Inc., and Brother Industries Ltd. with estimated initial investments of P3 billion and P2 million, respectively. 

Japan remains the biggest investor in the Philippines with total investments of P77.4 billion in 2011

Philippines economy more competitive

The Philippines did it again! 

The Philippines's economic competitiveness improved, as the country jumps 10 places  from no. 75 to 65 out of 144 countries in the World Economic Forum's 2012/2013 Global Competitiveness Report.

The Philippines is said to be one out of two countries to make a double-digit jump, a  twice-in-a-row 10-notch jump to be particular, in the last two years. This year, the country entered the upper 50 percent of the competitiveness rank. 

It can be recalled that the nation once entered the bottom 25 percent rank of economies - the least competitive ones.

Cooperation between the National Competitiveness Council and other government agencies led to improvements in 11 out of 12 pillars or factors that the report measures and compares.

These include government institutions, higher education and training, infrastructure, financial market development, technological readiness, macroeconomic environment,  goods market efficiency, labor market efficiency, market size, business sophistication, and innovation.

However, the country failed to gather pace in the areas of health and primary education where it lost 6 places to 98th.

15,000 businesses gave insights to this year's competitiveness survey, and out of these, 132 came from the Philippines. The country's great performance this year can be attributed to the increasing business confidence in the Philippines - a signal that the Philippines PNoy administration must be doing something right and efficient particularly in governance and implementation.

The announcement came after the Philippines registered a 6.1-percent increase in its Gross Domestic Product in the first half. The complete Global Competitiveness Report can be viewed below.

The Global Competitiveness Report 2012-2013

MRT 3 expansion, major infrastructure projects approved

It's all systems go for the purchase of 52 more train cars for the Metro Rail Transit Line 3 (MRT 3) in the P8.63 billion MRT 3 Capacity Expansion Project, which was approved by the board of the National Economic and Development Authority (NEDA). This was done to increase the capacity of MRT, in response to future serious overloading or full-capacity problems. 

Ten (10) other major infrastructure projects, seen as big boosters of Philippine economic growth in the coming years, were also given approval. The approved proposals, which came from the Department of Transportation and Communication (DOTC) and the Department of Public Works and Highways (DPWH), include: 

• P9.76 billion Light Railway Transit Line 2 East Extension Project - extension of LRT 2 coverage by another 4.19 kilometers from the existing Santolan Station to the Masinag Junction (intersection of Marcos and Sumulong highways) 
• P4.799 billion Bicol International Airport Project - construction of a new facility in Daraga, Albay; replacement of current Legazpi Airport 
• P7.44 billion New Bohol (Panglao) Airport Project - construction of a new airport at Panglao Island; replacement of existing Tagbilaran facility 
• P6.12 billion Bridge Construction Acceleration Project for Calamity-Stricken Areas Phase II - replacement of 66 temporary bridges with steel ones across 15 regions 
• P8.4 billion National Roads Bridge Placement Project - construction and replacement of 133 bridges across the country; use of UK-made pre-fabricated double-lane modular steel bridges 
• P5-billion Funding for Flood Control Projects - creation of a flood management master plan for Metro Manila, rehabilitation of dikes, seawalls strengthening, river dredging, and construction of river control works  
• P4.97 billion Restructuring of the Bridge Construction and Replacement Project - extension of the implementation of an existing project from January this year to December 2015 
• P3.91 billion Change in Scope, Increase in Cost and Implementation Extension for the Mindanao Roads Improvement Project - change of implementation period from January this year to December 31, 2014 
• P5.72 billion Strengthening of Angat Dam and Dike Project - rehabilitation of 44-year-old dam and its embankment structures; implementation by state-run Metropolitan Waterworks and Sewerage System (MWSS) 
• P2.60 billion Agus 6 Hydroelectric Power Plant Uprating Project - shift in financing to on-lending by the national government from state-run Power Sector Assets and Liabilities Management Corp. (PSALM) 

Source: Interaksyon

Facts and Figures: Economy of the Philippines

Economy of the Philippines:

GDP (purchasing power parity):
$351.4 billion (2010 est.) country rank: 34
$327.4 billion (2009 est.)
$323.9 billion (2008 est.)

GDP (official exchange rate):

$188.7 billion (2010 est.)

GDP - real growth rate:
7.3% (2010 est.) country rank: 31
1.1% (2009 est.)
3.7% (2008 est.)

GDP - per capita (PPP):

$3,500 (2010 est.) country rank: 162
$3,300 (2009 est.)
$3,400 (2008 est.)

GDP - composition by sector:

agriculture: 13.9%
industry: 31.3%
services: 54.8% (2010 est.)

Labor force:

38.9 million (2010 est.) country rank: 15

Labor force - by occupation:

agriculture: 33%
industry: 15%
services: 52% (2010 est.)

Unemployment rate:

7.3% (2010 est.) country rank: 76
7.5% (2009 est.)

Population below poverty line:

32.9% (2006 est.)

Household income or consumption by percentage share:

lowest 10%: 2.4%
highest 10%: 31.2% (2006)

Distribution of family income - Gini index:

45.8 (2006) country rank: 36
46.6 (2003)

Investment (gross fixed):

15.7% of GDP (2010 est.) country rank: 131

Budget:

revenues: $26.84 billion
expenditures: $33.75 billion (2010 est.)

Taxes and other revenues:

14.2% of GDP (2010 est.) country rank: 190

Budget surplus (+) or deficit (-):

-3.7% of GDP (2010 est.) country rank: 112

Public debt:

55.4% of GDP (2010 est.) country rank: 44
57.3% of GDP (2009 est.)

Inflation rate (consumer prices):

3.8% (2010 est.) country rank: 125
3.2% (2009 est.)

Central bank discount rate:

4% (31 December 2010) country rank: 105
3.5% (31 December 2009)

Commercial bank prime lending rate:

7.7% (31 December 2010 est.) country rank: 120
8.566% (31 December 2009 est.)

Stock of narrow money:

$29.08 billion (31 December 2010 est.) country rank: 58
$24.86 billion (31 December 2009 est.)

Stock of broad money:

$97.35 billion (31 December 2010 est.) country rank: 52
$83.3 billion (31 December 2009 est.)

Stock of domestic credit:

$98.22 billion (31 December 2010 est.) country rank: 52
$85.54 billion (31 December 2009 est.)

Market value of publicly traded shares:

$202.3 billion (31 December 2010) country rank: 33
$130.5 billion (31 December 2009)
$85.63 billion (31 December 2008)

Agriculture - products:

sugarcane, coconuts, rice, corn, bananas, cassavas, pineapples, mangoes; pork, eggs, beef; fish

Industries:

electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, fishing

Industrial production growth rate:

12.1% (2010 est.) country rank: 17

Electricity - production:

61.93 billion kWh (2009 est.) country rank: 42

Electricity - consumption:

54.4 billion kWh (2009 est.) country rank: 43

Electricity - exports:
0 kWh (2009 est.)

Electricity - imports:

0 kWh (2009 est.)

Oil - production:

9,671 bbl/day (July 2010 est.) country rank: 86

Oil - consumption:

307,200 bbl/day (September 2010 est.) country rank: 42

Oil - exports:

28,900 bbl/day (September 2010 est.) country rank: 86

Oil - imports:

338,400 bbl/day (September 2010 est.) country rank: 30

Oil - proved reserves:

168 million bbl (1 January 2010 est.) country rank: 64

Natural gas - production:

2.94 billion cu m (2008 est.) country rank: 55

Natural gas - consumption:

2.94 billion cu m (2008 est.) country rank: 75

Natural gas - exports:

0 cu m (2008 est.) country rank: 163

Natural gas - imports:

0 cu m (2008 est.) country rank: 110

Natural gas - proved reserves:

108.7 billion cu m (1 January 2011 est.) country rank: 52

Current account balance:

$9.51 billion (2010 est.) country rank: 26
$8.788 billion (2009 est.)

Exports:

$50.72 billion (2010 est.) country rank: 54
$37.6 billion (2009 est.)

Exports - commodities:

semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits

Exports - partners:
US 17.7%, Japan 16.3%, Netherlands 9.5%, Hong Kong 8.4%, China 7.6%, Singapore 6.7%, Germany 6.6%, South Korea 4.7% (2009)

Imports:
$61.07 billion (2010 est.) country rank: 42
$46.39 billion (2009 est.)

Imports - commodities:

electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic

Imports - partners:

Japan 12.6%, US 12%, China 8.9%, Singapore 8.6%, South Korea 6.9%, Thailand 5.7%, Indonesia 4.2% (2009)

Reserves of foreign exchange and gold:

$62.37 billion (31 December 2010 est.) country rank: 28
$44.24 billion (31 December 2009 est.)

Debt - external:

$63.75 billion (31 December 2010 est.) country rank: 49
$63.1 billion (31 December 2009 est.)

Stock of direct foreign investment - at home:

$24.44 billion (31 December 2010 est.) country rank: 64
$22.44 billion (31 December 2009 est.)

Stock of direct foreign investment - abroad:

$6.591 billion (31 December 2010 est.) country rank: 56
$6.191 billion (31 December 2009 est.)

Exchange rates:

Philippine pesos (PHP) per US dollar -
45.11 (2010)
47.68 (2009)
44.439 (2008)
46.148 (2007)
51.246 (2006)

Source: Central Intelligence Agency

MVP offers to buy MRT

MANILA, Philippines—Local infrastructure giant Metro Pacific Investments Corp. (MPIC) has offered to buy the government’s stake in the Metro Rail Transit (MRT) 3 train line traversing Epifanio de los Santos Avenue for $1.1 billion.

The amount will be enough to settle the government’s outstanding debt to MRT Corp. bond holders, MPIC said.

The acquisition will give the group, chaired by businessman Manuel V. Pangilinan, 100-percent ownership of the company that holds the right to operate and manage the train line until 2025.

In a letter to Finance Secretary Cesar Purisima and Transportation Secretary Jose de Jesus, MPIC offered to buy shares in MRT Corp. currently held by state-owned lenders Land Bank of the Philippines and Development Bank of the Philippines.

MPIC was earlier given control over a 29-percent stake in MRT Corp. by the block’s owner, Fil-Estate Corp. of businessman Robert John Sobrepeña.

MPIC said it planned to spend $300 million to increase the MRT’s capacity to 700,000 passengers a day from the current 350,000 a day.

The capacity expansion would be completed in two to three years, according to the proposal letter, a copy of which was obtained by the Inquirer.

MPIC said it was willing to accept a lower rate of return on its investment if it would acquire the MRT stake from the government. It added that it would not seek any government guarantee for the project.

MPIC, however, urged the government to extend the build-operate-transfer contract by another 15 years to 2040 to make it financially viable.

The government stands to save $150 million in annual subsidies if it accepted the proposal, the letter said.

The proposal was offered as an alternative to the way the government wanted to privatize the MRT, which was to bundle it with the Light Rail Transit (LRT) line 1 that runs from Baclaran in Pasay City to Roosevelt, Quezon City.

The letter said any company that would be awarded the contract for the two train lines would have to assume responsibility of the lines’ debt obligations totaling about $2.6 billion.

Any company that wins the contract for both lines would have to spend a lot of money before even starting to improve the train line’s facilities. The letter said this expense would then be passed on to the riding public, raising train fares to as much as P100 a ticket.

In an interview, Transportation Undersecretary for rail transport Glicerio Sicat said the government was looking at two methods of privatizing the MRT line.

The first was for the government to take over the train system, improve its operations and facilities before finally bidding out a contract for the train’s operations to private parties.

“However, this method will take a long time and will be very expensive,” Sicat said.

The second method, Sicat said, was to look for a private company willing to acquire the government’s stake in MRT. The government would not have to spend a single peso and pass on the responsibility to the private investors.

MPIC controls Hong Kong-based First Pacific Co. Ltd.’s interest in the Philippines, including investments in telecommunications, infrastructure, healthcare and power generation and distribution.

Source: Paolo Luis G. Montecillo, Philippine Daily Inquirer

PH economy at its fastest pace in 24 years

MANILA, Philippines—The Philippine economy grew at its fastest pace last year since the 1986 Edsa People Power Revolution, expanding 7.3 percent due to strong domestic demand fueled by the billions of dollars overseas Filipino workers sent home.

Government data showed gross domestic product (GDP)—the total value of goods and services produced in the country—rose a seasonally adjusted 3.0 percent in the final quarter of 2010, more than double market expectations and a turnaround of a third-quarter contraction.

The National Statistical Coordination Board (NSCB) said the strong performance of the Philippine economy—coming off growth of just 0.9 percent in 2009—was achieved on the back of the world recovery from the global financial crisis.

“The global economic recovery which resulted in record growth rates of foreign trade … contributed to an economic performance in 2010 that well surpassed the government’s target of 5.0 percent to 6.0 percent,” the NSCB said.

Also boosting growth were higher remittances from the millions of Filipinos working abroad and the extra money that was pumped into the economy by politicians who campaigned in the national and local elections held in the middle of last year.

“Remittances have been pretty healthy and that has really helped to support private consumption in the Philippines,” said HSBC economist Sherman Chan. Remittances from overseas Filipino workers are expected to top $20 billion this year.

The NSCB said industry delivered its best seasonally adjusted quarterly growth in at least 15 years, rising 6.7 percent in October to December from the previous three months, with food manufacturers and mining leading the way.

“This shows the economy is not losing steam yet. That is in large part due to accommodative monetary policy, which has helped to sustain investments even though the government is pursuing fiscal consolidation,” Chan said.

Strong growth from industry and recovery by the farm sector more than offset falling government spending, which fell an annual 7.6 percent in the quarter.

NSCB Secretary General Romulo Virola said the 7.3-percent full-year GDP expansion was the highest since 1986 when the dictator Ferdinand Marcos was toppled in the Edsa Revolution.

Growth by sector

Private sector investment in construction, machinery and equipment resulted in a robust 17-percent growth in gross domestic capital formation. This supported the healthy pace of growth in manufacturing and services, according to the NSCB.

Industry contributed 3.9 percentage points to total GDP growth on the back of brisk manufacturing, particularly electrical machinery, petroleum and coal products, and food—thanks to a strong pick-up in domestic demand and the rebound in external trade.

The services sector contributed 3.5 percentage points to GDP growth, boosted by the strong performance of trade and private services. This was complemented by flourishing domestic investment, robust expansion in business process outsourcing, hotels and restaurants, wholesale and retail trade, and import and export trade.

Due to fewer typhoons, the agriculture sector managed to grow 5.4 percent in the fourth quarter. “Only two typhoons hit the country compared to seven in the last quarter of 2009,” Socioeconomic Planning Secretary Cayetano Paderanga noted.

Nonetheless, full-year growth in agriculture, fishery and forestry was subdued due to the lingering effects of the El Niño weather phenomenon in the first half of 2010.

Inflation, interest rates

Robust domestic demand, and rising global food and fuel prices, however, are adding to concerns about inflation.

“We were expecting the central bank to hike rates by the second quarter. But given these strong growth numbers, I think there’s scope for the central bank to normalize its monetary policy as early as the first quarter,” said Euben Paracuelles, an economist at Nomura in Singapore.

The Philippines is one of only two countries in Southeast Asia—the other is Indonesia—not to have raised interest rates since the end of the global financial crisis. The policy rate has been at a record low of 4 percent since July 2009.

The Bangko Sentral ng Pilipinas (BSP), however, said inflation was manageable.

“Not necessarily inflationary because the economy has expanded, its absorptive capacity has grown,” BSP Deputy Governor Diwa Guinigundo said in a text message to reporters.

Inflation is expected to rise up to the third quarter before stabilizing toward 2012, the BSP said on Friday. Annual inflation was 3.0 percent in November and December, after hitting a one-year low of 2.8 percent in October.

Exciting prospects

“We are looking toward exciting growth prospects,” Guinigundo said.

Likewise brimming with optimism, Paderanga said “the 2010 economic performance bolsters confidence that the economy is on a path of strong recovery.”

Arsenio M. Balisacan, dean of the University of the Philippines School of Economics, agreed that the rate of economic expansion in 2010 could provide momentum for future growth. But he added the challenges were many.

“Government has to raise revenue to sustain support for infrastructure development, investment in the social sector, particularly education and health, and institution building,” Balisacan said.

John Forbes, an investment adviser with the local American Chamber of Commerce, said the promise of further political stability during President Benigno Aquino III’s six-year term offered hope for a sustained period of strong growth.

He cited Mr. Aquino’s anticorruption campaign, social welfare spending and multibillion-dollar infrastructure upgrade plans as factors the Philippines could finally start to match its dynamic Asian neighbors.

“The Philippines is an economy in the world’s fastest-growing region and it is surrounded by economies that have grown at very high rates for a very long period of time,” Forbes said.

He said average GDP growth for the Philippines had been below 5.0 percent for the past decade.

“What this figure (2010 GDP growth) demonstrates is the potential of the Philippine economy to grow almost twice as fast (as 5.0 percent),” he said. With reports from Agence France-Presse and Reuters

Source: Riza T. Olchondra, Philippine Daily Inquirer

Oil up in Asia on demand hopes

SINGAPORE - Oil rose in afternoon Asian trade on Monday on expectations that an improving US economy will lead to higher demand for crude, analysts said.

New York's main contract, light sweet crude for February delivery, rose 34 cents to 91.72 dollars per barrel.

Brent North Sea crude for February was up 28 cents at 95.03 dollars.

The two contracts closed 2010 at a two-year high, buoyed by hopes that improved US economic momentum will bolster global growth and translate into higher oil demand, analysts said.

"A stronger US dollar means that the US economy is gaining momentum, which increases the future demand in oil," said Ong Yi Ling, an investment analyst from Phillip Futures in Singapore.

In afternoon Asian trade, the dollar was unchanged from Friday at 81.28 yen, while the euro was at 1.3298 to the dollar, down slightly from 1.3381.

The United States is the world's biggest oil consuming nation and the recent cold winter spell in its northeast region also boosted crude prices.

Source: Inquirer.net