STATE spending for infrastructure next year, as a percentage of economic output, remains below the 4%-5% benchmark believed needed to sustain growth, but economic managers of the Arroyo administration said this should not be a major problem.

Under the proposed P1.415-trillion budget submitted to Congress yesterday, the government plans to raise its infrastructure outlay by 20.67% to P147.47 billion next year, or P25.25 billion more than this year’s allocated P122.214 billion.

At P147.47 billion, however, public investment for infrastructure continues to lag behind a regional average of about 4% at 1.7% of the expected gross domestic product (GDP) for 2009.

This year, infrastructure spending accounts for 1.58% of GDP, which is projected to grow within a revised 5.5%-6.4% range.

Public sector infrastructure budgets, as against GDP, have been on a downtrend at least since 2000, documents from the House of Representatives’ Congressional Planning and Budget Department (CPBD) showed. Since the start of this decade, allocation for the sector in relation to GDP reached a peak of 3.54% in 2000 and had been below 2% since 2005, according to CPBD.

But Former Socioeconomic Planning Secretary Cielito F. Habito, current director of the Ateneno de Manila Center for Economic and Research Development, said in an interview yesterday that there could be an spike in this ratio as the 2010 elections approach, since "that’s been the pattern" in past election years like 2004 and 2007.

The World Bank has prescribed an infrastructure spending-to-GDP ratio of at least 5% for economic growth to become sustainable and to attract more investments.

While the government still eyes raising this spending level to 5.2% of GDP by 2010 under a medium-term development plan, Budget Secretary Rolando G. Andaya, Jr. yesterday noted that prevailing economic conditions do not warrant boosting outlays at a rate that would align with global yardsticks.

"Up to now, we’ve been having implementation problems with the infrastructure sector. Growth on capital outlay between January to June is only 2% year-on-year," he said in an interview. "There’s no sense in putting all those funds, when they can’t be spent withinthe year."

Mr. Andaya blamed the slow spending in the first semester on a slump in public construction, whose growth according to National Statistical Coordination Board contracted 9.5% in the first quarter year-on-year. "We identified the problems that caused the delay and, basically, it’s brought about by the increase in the price of steelWe expect infrastructure to catch up for the remainder of the year," he said.

But Mr. Habito said the government will have a lot of catching up to do in terms of public investment if it wants to sustain a 7.2% growth posted last year.

"I don’t know if the government could catch up in the remainder of the year," Mr. Habito said. "We have to have a more sustained and deliberate infrastructure spending."

Of the P147.47-billion proposed infrastructure outlay for next year, the Department of Public Works and Highways takes up the largest chunk at P99.72 billion, with roads and bridges alone accounting for P83.8 billion.

The Department of Agriculture will receive P17.315 billion, mainly for its post-harvest facilities and farm-to-market roads. The government is allocating P14.85 to the Department of Transportation and Communications; P8.5 billion to Education; P3.36 billion to Agrarian Reform Fund; P1.5 billion to Health; P1.16 billion to the Autonomous Region in Muslim Mindanao; and P1 billion to local governments.

It has also alloted P631 million for the rehabilitation of the Pasig River, P226 million to the Metro Manila Development Authority and P175.9 million to the municipal development fund.

The proposed 2009 budget assumes a P40-billion budget deficit.

The government estimates that the budget, which raises allocation for spending on agriculture by 62% to P35.8 billion, will help the economy expand 6.1%-7.1% in 2009 from a 5.5%-6.4% estimated growth this year.

Education got the biggest allocation at about P168 billion, or about 8.5% of total spending. Defense gets P65.2 billion, or aout 4.6%. Social welfare will receive a 117% increase in funding for cash payments and subsidies to families most vulnerable to soaring commodity prices. Government workers will get a pay rise, with P20 billion set aside for them.

Cost of debt servicing will fall to 21.4% of the budget next year from 22% this year and 31.6% in 2005. — with Reuters

OFW remittances surged 15.6% in May

PHILIPPINE DAILY INQUIRER - July 16, 2008

Foreign exchange remitted by overseas Filipino workers (OFWs) through banks reached $1.4 billion in May, up 15.6 percent from a year earlier, bringing the January-May total to $6.8 billion, up 14.7 percent, the central bank reported Tuesday.

OFWs deployed in the period from January to May totaled 533,945, up 40 percent from 382,777 recorded in the same period last year, said the central bank, Bangko Sentral ng Pilipinas (BSP), citing data from the Philippine Overseas Employment Administration.

Around eight million Filipinos, or one-tenth of the population, work overseas, mostly as nurses and caregivers, domestic helpers, ship crew members, entertainers and engineers.

The bulk of the remittances originated from the United States, Saudi Arabia, Canada, the United Kingdom, Italy, United Arab Emirates, Singapore, Japan and Hong Kong.

In a statement, BSP Governor Amando Tetangco Jr. said the establishment of more remittance centers by Philippine banks was expected to further facilitate the inflow of rising remittances.

The central bank expects total remittances coursed through banks this year would reach about $15.7 billion, up 9.0 percent from 2007.

Remittances in 2007 sustained domestic consumption, which was the country's biggest growth driver during the year. Consumption accounts for about 70.0 percent of the gross domestic product.

Tetangco said OFW remittances were expected to remain robust in the months ahead. He noted reports of expansion of oil-production capacity in the Middle East, which he said the expansion could result in increased demand for Filipino workers.

The remittances have helped to ease the drop of the peso this year while export earnings have slackened and imports have risen.

Exports grew only 3.1 percent in the January-May period, compared with the government's full-year target of 6.0 percent, because of weakening global demand for electronics, the Philippines' major export product. Imports rose 17.7 percent in the period from January to April, compared with the government's full-year projection of 10.0 percent.

Philippine properties 'hottest' in Southeast Asia

PHILIPPINE DAILY INQUIRER - July 4, 2008

MANILA, Philippines-We may have hot weather and hotheaded drivers, and "hot" money pocketed by some corrupt government officials, making life a little bit more difficult here in the Philippines. But looking at the brighter side, one "hot" item may bring back the word "pearl" in Asia's struggling Pearl of the Orient.

The Philippines was recently declared as a popular real estate hub in Southeast Asia by international commercial real estate services firm CB Richard Ellis Philippines.

It further cited that "investment opportunities in tourism, infrastructure, mining and real estate remain high" here.

In its July 2 news release sent to Inquirer Property, CBRE Philippines general manager Trent Frankum even used the superlative "hottest" in his description of how foreign investors took up properties in the Philippines. He enumerated the positive effects of the stable Philippine peso, increasing tourist arrivals, the BPO boom, and the influx of overseas Filipino workers' dollar remittances on the property market.

Frankum's declaration was heard in the recently held SMART Investment and International Property Expo at the Hong Kong Convention and Exhibition Centre June 21 and 22.

Not yet overpriced

In a recent phone interview with the Inquirer Property, Joey Radovan, vice chair of CBRE Philippines, said the reason for the country's popularity among property investors was that "we're not yet overpriced, we're still cheap." He cited, for instance, that Singapore is three to four times more expensive than Manila.

Rodovan, who also heads the global corporate services, said the developers are seriously looking at the European and Middle East markets.

Rodovan singled out business process outsourcing, tourism and OFW money as major drivers putting the Philippines in the map of Southeast Asia's most sought-after business locations.

Colliers

"Broadly agree" was the term used by Colliers International Philippines' managing director David A. Young, when asked to react on CBRE Philippines statement that the country is the "hottest" real estate hub in Southeast Asia.

Said Young: "The Philippines' real estate market is attracting unprecedented levels of investor from investors, most visibly in hospitality and tourism projects. A virtuous circle is evident. Capital investment in new infrastructure and tourist-related facilities is enhancing the Philippines' offering to new markets and generating increased visitor spending.

Despite this wave of new investment the Philippines is still playing catchup relative to its regional competitors. When it completes in 2011, Kingdom's Fairmont Hotel will be the first new luxury hotel to open in Makati for 15 years.

Tourists, hotels, condos

CBRE Philippines cited that last year, tourist arrivals broke the two-million mark for the first time since 2004, with arrivals rising to 3.091 million. CBRE said it is expecting new markets, such as Russia, Middle East, China and Korea, to help sustain tourism growth. CBRE is also projecting arrivals to increase to 3.4 million this year and generate US$5.8 billion in international tourism receipts.

Hotel room occupancy rates rose to 73.06 percent in 2007 from 71.95 percent in 2006. "New hotel and resort developments are currently in strategic business locations such as Makati City, Fort Bonifacio and the Bay Area as well as top tourist destinations such as Cebu and Boracay, further enhancing industry prospects," Frankum said.

New development projects include the US$153 million Kingdom Hotel, a combined hotel and residential condominium that will rise in Makati City.

"We expect 18,143 units to be provided from 28 upcoming residential condominiums in Makati that are targeted for completion between 2008 and 2013. Likewise in Fort Bonifacio, 11,652 units are expected to come on the market from 33 residential condominiums being constructed from 2008 to 2012," Frankum said.

Meanwhile, the offshoring and outsourcing (O&O) boom in the Philippines has created new opportunities for the real estate market, Frankum stressed. "Major investors and businesses are looking at the Philippines because it is one of the largest English-speaking nations in the world and has 33.5-million Filipinos in the workforce," he noted.

RP is now Southeast Asia's hottest property market

MANILA STANDARD TODAY - July 3, 2008

The Philippines is now the hottest real estate market in Southeast Asia, thanks to the business process outsourcing industry boom, said property services company CB Richard Ellis Group Inc.

Trent Frankum, CB Richard Ellis Philippines general manager, said the offshoring and outsourcing boom in the Philippines had created new opportunities for the real estate market.

"Major investors and businesses are looking at the Philippines because it is one of the largest English-speaking nations in the world and has 33.5 million Filipinos in the workforce," Frankum said in a statement.

He made the assessment at the recently held Smart Investment and International Property Expo, the largest and longest-running real estate expositions in Asia held in Hong Kong.

The expo showcased global real estate market opportunities and featured property experts and investors from global companies based in Asia, Australia and the United Kingdom.

Frankum said major multinational business process outsourcing firms were expanding their presence in the Philippines.

He cited Accenture, which has leased 1.3 million square feet. Other companies, such as Teletech, have built six facilities outside Metro Manila.

Forex reserves surge to record $36.5B

PHILIPPINE STAR - April 5, 2008

The countrys gross international reserves (GIR) will surpass earlier projections for the whole of 2008 with the March level surging to $36.5 billion as a result of the Bangko Sentral ng Pilipinas (BSP) foreign exchange operations and income from abroad.

The BSP reported yesterday that at the end of March, the GIR was already within half a billion dollar of the full-year projected level of $37 billion.

The BSP said the March GIR rose by over $200 million from $36.287 billion at the end of February, setting yet another historic high that would boost the balance of payments (BOP) position.

BSP officer-in-charge Armando Suratos said the increase in the March GIR resulted from the BSPs net foreign exchange operations and income from its investments abroad.

At this level, Suratos said the GIR could adequately cover 6.2 months worth of import of goods and payments of services and income. This is a far cry from the crisis level of a little over $20 million in the early 1980s when foreign investments left the country and creditors refused to lend to the government.

Suratos said the GIR was also equivalent to 3.2 times the countrys short-term external debt based on original maturity.

According to Suratos, the strong foreign exchange inflows in March were only partly offset by payments of maturing obligations by the National Government as well as the BSP.

BSP Governor Amando M. Tetangco said earlier that the BSP expects the countrys forex reserves to hit a record high of $35 billion to $37 billion in 2008 although the BOP surplus was projected to drop to $3.5 billion.

Tetangco admitted that the capital accounts under the BOP was relatively harder to project especially since it was unclear how the US economy would fare under the pressure of the credit market crunch and the balancing impact of the US Federal Reserve Board.

The BSP is expecting total remittances from overseas Filipinos to reach $16.2 billion in 2008 with labor deployment increasing despite the slowdown in the US economy.

The overall BOP position is critical in determining the position of the BSP as it performs currency stabilization function by swaying the market to smoothen foreign exchange volatility.

The bigger the surplus, the better the BSP would be able to stabilize the exchange rate whether it is appreciating or depreciating against other currencies, particularly the dollar.

Tetangco expects some developments in the debt payments of the national government after the International Monetary Fund (IMF) said there was some space for a much more aggressive effort to reduce foreign debt.

The countrys external debt rose by 2.9 percent to $54.9 billion in 2008 but the central bank said the countrys overall debt ratio actually improved due to higher reserve levels and the strength of the peso against the dollar.

The country prepaid a total of $1.2 billion last year but foreign debt continued to rise because the National Government would remain a net borrower until it has been able to balance its budget and start generating a budget surplus.

As a proportion of the countrys gross national product (GDP), the BSP said the total external debt was equivalent to 34.9 percent, coming down from 36.8 percent at the end of September and 41.7 percent in 2006.

In terms of gross domestic production, the external debt ratio also improved to 38.1 percent, from 40.3 percent in September and 45.4 percent in 2006.

The declining ratio indicates the countrys improving capacity to service its maturing foreign obligations, said Tetangco. The BSP reported that the external debt service ratio (DSR) was estimated at 9.6 percent in 2007.

This ratio represents the proportion of total principal and interest payments to total exports of goods and receipts from services and income.

The DSR has thus remained well below the 20 to 25 percent international benchmark, Tetangco pointed out. This indicated that the country has sufficient foreign exchange earnings to service obligations maturing during the current period.

ADB sees Philippine growth at 6%, will lend $750M

PHILIPPINE DAILY INQUIRER - April 3, 2008

The Asian Development Bank expects the Philippine economy to grow 6.0 percent this year, citing that the country will not be affected too much by a volatile global environment to be caused by a US recession.

The ADB, one of the Philippines' biggest sources of concessional loans, expects growth in Thailand at 5.0 percent, in Singapore at 5.2 percent and in Malaysia at 5.4 percent. It projects 6.0 percent in Indonesia, 7.0 percent in Vietnam, 7.7 percent in Laos and 7.5 percent in Cambodia.

The ADB has committed to support the Philippine government's goal of sustaining development and said it would set aside $750 million for lending to the Philippines this year, up 28 percent from $583.8 million allotted in 2007. The ADB allocated $175 million for the Philippines in 2005 and $650 million in 2006.

In its 2008 outlook for Asian economies, released Wednesday, the ADB said investment in the Philippines "is expected to expand in 2008. Improved fiscal position is allowing the government to raise investment in much-needed infrastructure."

Tom Crouch, ADB deputy director general for Southeast Asia, said in a news briefing that the Philippines and many countries in the region would not be substantially affected by weakening demand in the United States and other industrialized countries.

The Philippines will feel the impact of a global slowdown, as the United States accounts for close to one-fifth of Philippine export earnings, but the effect will not be "worrisome," he said.

"Private consumption will remain a major growth driver this year," Crouch said. "However, high food and fuel prices will force consumers to reduce their discretionary spending."

The Philippines posted a 2007 growth of 7.3 percent expansion. For 2008 the government is aiming for 6.3-7.0 percent. The ADB projection of 6.0 percent is higher than those of many foreign investment banks and the World Bank's 5.9 percent.

Crouch said a challenge for the Philippines this year would be the government's ability to sustain gains on the fiscal front.

He noted that "many economists and developmental partners" regard the government's ability to balance its budget this year "as the litmus test as far as credibility is concerned. The government has already established credibility, but it is important to sustain this."

But he added that it was equally important for the government to respond to calls for higher spending for social services and infrastructure, especially given a tough external environment. He agreed that increasing public spending was needed to help the domestic economy cushion the effects of a global slowdown.

Crouch said increasing public spending should be matched with increasing revenue collection so as to avoid fiscal slippage.

RP ready for US recession fallout

PHILIPPINE STAR - March 23, 2008

The government is prepared to withstand the challenges brought about by a looming economic recession in the United States.

Finance Secretary Margarito Teves said the government has laid down mitigating measures to ensure that the Philippine economy would continue to grow in case the current slowdown in the US worsens into a recession.

"We continue to maintain our fiscal targets. However, we are prepared to finance additional spending if such spending is needed to counter emerging global risks that could dampen the country's growth prospects," Teves said.

The US is facing a serious economic crisis due to a credit crunch in its housing mortgage market. Investment companies are counting huge losses due to their exposure in the housing market.

Teves said that one way for the Philippines to cope is for the government to increase spending on activities and projects that would pump-prime the economy.

The priority of the government would be to finance any additional spending through revenues by improving tax collection and generating higher non-tax revenues, Teves said.

He also noted that GOCCs could be a key source of support for the National Government's pump-priming efforts.

"We are closely monitoring the developments in the US and other major markets and we are committed to doing what is necessary to mitigate the impact of a potential global slowdown on our economic growth and to maintain fiscal discipline," he said.

Asked if the government is sticking to its balanced budget goal amid its plan to increase spending, Teves said that for the moment the government has not changed its fiscal program.

"Along the way, it's possible that things could happen. We will continue to monitor thisWe need to work out possible scenarios," Teves said.

OFWs remit $ 1.3 billion in January

MANILA BULLETIN - March 15, 2008

Overseas Filipinos sent home $ 1.3 billion in January, higher by 15 percent compared to the same period in 2007, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

BSP forecasts remittances to reach $ 15.7 billion this year. Fund transfers from OFWs are a major contributor to the country's balance of payments (BOP) and overall gross international reserves (GIR).

"The robust foreign exchange inflows from remittances at the start of the year could be traced in part to the acceleration in the deployment of Filipino workers," BSP Governor Amando M. Tetangco Jr. said.

The biggest source of OFW monies are the US, Saudi Arabia, UK, Italy, the United Arab Emirates, Canada, Japan, Singapore and Hong Kong.

Preliminary data obtained from the Philippine Overseas Employment Administration (POEA) showed that the total number of deployed overseas workers grew year-on-year by 12.4 percent in January 2008.

Classified by type of worker, the number of deployed land-based workers grew 12.3 percent to 88,775 while that of seabased workers rose by 13.2 percent to 19,804. "Continued preference for and confidence in the professional competence and skills of Filipino manpower support the view that a high level of remittances could be sustained in the months ahead," said Tetangco.

In the meantime, the BSP said remittance flows are expected to improve this year due to banks and non-bank remittance agents' "intensified efforts to provide efficient transfer mechanisms for on-time delivery of remittances and to widen their network through the establishment of more remittance centers abroad and tie-ups with foreign financial counterparts."

"The recently concluded agreement between a local telecommunications service provider and a financial institution in Saudi Arabia is expected to further facilitate the electronic transfer of remittances," said Tetangco.

Last year OFWs remitted $ 14.45 billion, up 13.23 percent compared to 2006's full-year of $ 12.76 billion. Total remittances accounted for 10 percent of nominal gross domestic product (GDP) in 2007.

BSP said there are more overseas employment opportunities in construction, information technology, engineering, architecture, and hotel/restaurant service this year.

External trade grew 6.8% in 2007

MANILA BULLETIN - February 27, 2008

The Philippines' trade deficit widened 15.7 percent year-on-year to $ 5.04 billion in 2007, the government said Tuesday.

Imports grew 6.8 percent to $ 55.32 billion, outpacing exports which rose 6.0 percent to $ 50.27 billion in the same period, the National Statistics Office (NSO) said.

NSO is headed by Administrator Carmelita N. Ericta.

For December, merchandise imports totalled $ 5.0 billion, 19.7 percent more than a year earlier, while exports rose 21.2 percent to $ 4.7 billion.

Total merchandise trade in December 2007 increased by 20.4 percent to $ 9.473 billion from $ 7.869 billion in December 2006.

Revenue generated by exports grew by 21.2 percent to $ 4.472 billion from the 2006 level of $ 3.690 billion.

The same is true for imports as its growth reached 19.7 percent to $ 5.001 billion from $ 4.178 billion in December 2006.

The balance of trade in goods (BOT-G) in December 2007 recorded a deficit of $ 528.00 million, higher by 8.2 percent from last year's recorded deficit of $ 488.00 million.

Electronic products which accounted for 42.2 percent of the total import bill amounted to $ 2.110 billion, up by 1.6 percent growth over the 2006 figure of $ 2.076 billion.

Compared to the November level, purchases went down by 7.6 percent from $ 2.283 billion.

Among the major groups of electronic products, semiconductors had the biggest share of 33.8 percent, up by 1.7 percent to $ 1.689 billion from $ 1.661 billion during the same month in 2006.

Imports of mineral fuels in December 2007 ranked second with a 20.5 percent share, posting a growth of 90.6 percent to $ 1.023 billion over the 2006 level of $ 536.70 million.

Transport equipment, contributing 4.6 percent to the total bill, was the country's third top import for December 2007 with payments placed at $ 228.10 million from last year?s $ 197.78 million or an increase of 15.3 percent.

This may be due to the importation of other aircraft of an unladen weight exceeding 15,000 kg. Industrial machinery and equipment ranking fourth recorded a share of 4.5 percent at $ 226.91 million worth of imports; up by 44.5 percent from its year ago level of $ 157.08 million.

Iron and steel accounting for a 2.5 percent of the total imports, ranked fifth as foreign bill amounted to $ 126.55 million or a yearon-year growth of 49.6 percent from $ 84.59 million in 2006.

Organic and inorganic chemicals ranked sixth, comprising 2.2 percent of the total imports; registered $ 108.90 million worth of imports or an increase of 85.5 percent from its year ago level of $ 58.71 million.(Edu Lopez)

Businessmen still upbeat on RP

PHILIPPINE STAR - February 26, 2008

Business opportunities still abound in the Philippines despite the controversies hounding the Arroyo administration, analysts said.

In an interview, Astro del Castillo, managing director of investment firm First Grade Holdings, said the business community has gotten used to the political noise created by critics of the government.

"The business sector is comfortable with the current administration. We don't see a credible replacement at this time," Del Castillo said, referring to calls for the resignation of President Arroyo.

He said he has been in touch with foreign investors who are still willing to infuse money in the country, particularly in the mining, oil, tourism, real estate and transportation sectors.

However, the investors, he said, are remaining on the sidelines until the government is able to settle the issue regarding the botched national broadband network deal, which led to a flurry of corruption charges against ranking government officials.

"The general sentiment is that the business sector is still unaffected because the peso and the stock market are not sliding," he noted.

Del Castillo said the gauge of confidence among businessmen are the peso and stock market, both of which have remained stable.

However, he said he is not entirely discounting the recent events. "There is a dent for sure but the general sentiment remains unaffected."

In fact, he warned that if the issue of corruption against ranking government officials is are not solved immediately, the country might see a downturn in investments.

"Currently the protest actions are sporadic but if this drags on for a few more weeks we might lose some economic gains that we have already achieved," Del Castillo said.

Meanwhile, Sergio Ortiz-Luis, Philippine Chamber of Commerce and Industry (PCCI) chairman, said protest actions and the political turmoil are detrimental to the country's economic growth.

"The foreign investors will start to look at other locations if we keep this up. We are not the only investment destination," Ortiz-Luis warned.

In fact, he said investors have voiced other concerns about investing in the country such as the high cost of power.

With this in mind, he said the government must strive to quickly resolve the problem.

"If this keeps up then we should expect a lingering effect but if we can resolve this quickly then the market will be able to outgrow it," he said.

Subprime woes seen not hitting RP

MANILA BULLETIN - February 22, 2008

The buoyant real estate sector said the subprime mortgage woes that now threaten economic recession in the US is not likely to happen in the Philippines following the implementation of document procedure to avert delinquencies in payments of housing loans.

In a statement, Chamber of Real Estate and Builders' Association Inc. (CREBA) chairman Manuel M. Serrano said the government housing institutions have already implemented the change in the documentation on installment sales of house and lot packages from the conventional deed of sale with mortgage (DSM) to the Contract to Sell (CTS) mode.

"While the switch in documentation appears simple, the implications are far-reaching," Serrano said.

Serrano explained that under a CTS mode, a 100 percent collection of monthly amortizations is assured such that should delinquencies ensue, the holder of the CTS has simply to cancel the contract, forfeit all previous payments, and re-sell the house and lot. The title to the property purchased is transferred only upon full payment of the consideration.

On the other hand, under the DSM mode the title to the property purchased is transferred immediately in the name of the buyer and the balance of the consideration is covered by mortgage and annotated at the back of the title covering the property.

When delinquencies occur, which was the case with what is now happening in the U.S, Serrano said the mortgagee has still to resort to foreclosure, repurchase the property through the auction sale, and consolidate ownership only after the redemption period of one year has expired - a process that is not only time-consuming but expensive as well. In the meantime, the money covered by mortgage remains idle.

Apart from the assurance of a 100 percent collection of receivables, said the CTS has opened opportunities for Filipinos to afford decent shelter.

Under the CTS mode, a token 10 percent equity from a housing loan borrower will suffice as against the substantial 30 percent equity required under the DSM mode.

"While the DSM equity requirement was meant to minimize chances of foreclosure but in essence it constricts the market only to the moneyed who can afford the payment of substantial equity upfront even if the payments of monthly amortizations are well within the capability of the buyer to meet," Serrano noted.

In addition, a mortgage origination under the DSM is messy and takes long time to process and approve because of the many supporting documents that the buyer must satisfy to establish the buyer's eligibility, proof of capability to pay such as Income Tax Returns and list of income sources, a thorough credit check and proofs of good credit standing such as good track records in payments of credit cards, utility bills, etc.

Under the CTS, Serrano said, all these unnecessary requirements may be dispensed with because in essence, the issue of repayment capability is selfpolicing. How the buyer performs under the terms and conditions of the CTS is what establishes his right to acquire the property he contracted to purchase or not;

"If the buyer misrepresents and is therefore unable to pay and by reason of which is contract is cancelled, he has only himself to blame. This is why under CTS, all that is required is that he files an information sheet and he understands fully the terms and conditions of the CTS," he said.

That is why the housing bonds and securities backed by mortgage receivables could shaky as what happened in the U.S. As a result, before housing securities can henceforth be marketed, future investors may require issuance of an insurance cover or sovereign guaranty.

On the other hand, housing bonds and securities backed by CTS, because of its all attractive features of 100 percent collection assured, may not only be attractive to ordinary invistors, local or foreign, but may also serve as ideal substitutes for insurance and bank reserves.

The use of the CTS in lieu of DSM was CREBA's proposal which was adopted by the government financial institutions involved in financing installment sales of house and lot packages.

Since its adoption in the late 1990's, banks have been scrambling in purchasing CTS receivables instead of DSM receivables.

BPO industry seen to keep growing

MANILA BULLETIN - February 12, 2008

The business process outsourcing industry in the Philippines will likely grow almost 43 percent this year to bring in $ 7 billion in revenue, government officials and industry executives said yesterday.

A dozen deals are expected to be signed between local business process outsourcing (BPO) firms and foreign companies that would contribute to attaining the industry's target of creating 200,000 jobs this year and 40 percent increase in revenues over last year.

This developed even as President Gloria Arroyo in a keynote address at yesterday's opening of the 8th e-Services Global Sourcing Conference & Exhibition announced that investments in telecommunications infrastructure would form part of the P200-billion total infrastructure budget of the government this year.

The government is set to establish the Philippine Cyber Corridor in various cities outside of Metro Manila to encourage more offshoring and outsourcing firms to locate in the regions.

Business Processing Association of the Philippines (BPA/P) CEO Oscar Sanez confirmed to reporters at the same event that a dozen deals are being forged during the two-day event.

"A dozen business deals are to be signed but these are ongoing leads and in the process to be finalized," Sanez told reporters.

Of the expected business deals to be signed before the end of the two-day conference, Sanez said these have been the results of ongoing discussions in the BPO sector particularly in financial services and call centers.

"These deals would help the industry achieve the growth targets of an additional $ 2 billion in revenues this year to reach $ 7 billion total from last year's $ 5 billion or a 40 percent growth until 2010," he said.

As of last year, there were already 320,000 workers employed by the industry.

Sanez said the P350 million additional training for work scholarship program granted to the Technical Education and Skills Development Authority will be distributed to 54,000 potential hires through scholarship vouchers that they can use to enroll at TESDA-accredited institutions.

Since its inception in 2006, the program by President Gloria Arroyo has already benefited 44,331 call center agents, 6,346 medical transcriptionists, 389 software developers, 254 animators, 50.66 percent of whom have found employment in various BPO firms in the country.

Sanez, however, said that the industry does not measure its growth in terms of investments inflow because it is not capital intensive but rather in terms of computers and people.

With the Philippines being singled-out for its competitiveness in the voiceservices sector, Sanez said the country could leverage on that strength and established with future niches to establish it as a center of excellence in higher value added services.

According to Sanez, the next sectors where the country has the most potential to excel are in software, animation, architecture and engineering services. The software industry grew by 28 percent last year and expected to grow by 50 percent this year.

He further said that as the industry matures, there would be further consolidation where growing BPO companies acquiring smaller ones to expand their operations and yet there are new entrants into the industry that are still learning the ropes.

Fiscal outlook ‘much improved’ — UBS

By Lee C. Chipongian
Manila Bulletin - July 25, 2007

National Government’s fiscal position is still considered "much improved" despite the first half revenue shortfalls of P52 billion.

"Although the momentum of fiscal improvement has recently slowed, we do not believe as this implies the need for a more downbeat view of the fiscal finances," UBS Economist Philip Wyatt.

At the same time, HSBC Treasury chief Arnulfo Veloso said the budget deficit is not "an issue." He said that for an economy to grow it needs to spend more. "(Meeting the deficit target) is just a good grade, what’s important is that the government is productive whatever the (deficit) grade is." HSBC forecasts that the government will have a higher deficit of P80 to P90 billion this year.

The UBS also brushed aside concerns about government missing the full-year deficit since they think fiscal officials will be able to fix or plug loopholes in the fiscal side by selling state assets. "(Government) asset sales (will) limit further shortfalls in the deficit targets allowing the government to meet its planned P63-billion deficit target this year," said Wyatt.

For the first semester, government reported a primary surplus of P88.6 billion. According to Wyatt, "the fiscal picture remains much improved and primary surpluses strong. This implies that the administration will succeed in continuing to pay down government debt and reduce the debt burden upon the financial system."

The Bureau of the Treasury (BTr) said that as of June the primary surplus was 29.9 percent off the program of P118 billion.

For 2007 the DoF is projecting a primary surplus of P259.5 billion or 3.9 percent of gross domestic product. A strong primary surplus implies a government’s improved capacity to pay debts.

The NG fiscal program this year includes collections of total tax revenues of P1.118.8 trillion, or 16.7 percent of GDP. Tax revenues – or taxes that will be collected by the Bureaus of Internal Revenue and Customs are programmed at P1.003.1 trillion.

The BIR will collect P730 billion while the BoC will contribute P228 billion. The rest of taxes will come from non-tax revenues of P115.6 billion this year, which is "expandable" to P175 billion. The 2007 expenditure program is P1.181.8 trillion.

For the first six months the government had a deficit of P41 billion but managed a small surplus of P800 million for June.

Industries’ gross revenue up 12.8%

Business World - July 23, 2007

Total gross revenue of industries grew slower by 12.8% in the first quarter this year, compared to 15.1% in the same period of 2006, a statement yesterday of the National Statistical Coordination Board read.

Real estate continued to post the fastest growth at 29.9%, boosted by higher income from rental and leasing operations from the country’s newly opened super malls and the sustained demand for office spaces from the business process outsourcing industry.

This was followed by the Finance sector, which expanded by 15.9%, bolstered by the resurgence of the insurance sector and the higher utilization of financial services.

Favorable performances were also registered in Trade, as well as in Transportation, Communication and Storage which grew by 14.5% and 10.8%, respectively.

Growth of total employment, however, slowed down to 0.6% from 1.1% in the previous year, weighed down by the decline in Manufacturing by 0.4% and the flat growth registered in Electricity and Water.

The rest of the industries recorded positive growths in employment: Mining and Quarrying was up by 6.4 %; Private Services, by 3.9 %; Trade by 1.9 %; and Real estate and Finance with 1.4% and 0.8% growth rates, respectively.

Total compensation at current prices accelerated to 6.6% from 4.8% in 2006. Total compensation of industries represents the salaries and wages paid out by all industries in cash and in kind.

The top performers, which posted double-digit growths were: Transportation, Communication and Storage, up by 16.1 %; Electricity and Water, up by 16%; Finance, up by 15.9 %; Real Estate, up by 10.6 %; and Mining and Quarrying, up by 10.1%.

Increases in both compensation and employment resulted in higher growth in compensation per employee at current prices at 5.3% from 3.6% in the same period last year.

Finance reported the highest growth in terms of compensation per employee at 15.1%, followed by Transportation and Communication, as well as Real Estate with 14.9% and 9%, respectively.

Property sector helps lift incomes of RP industries

By Darwin G. Amojelar
Manila Times - July 23, 2007

PHILIPPINE industries’ income grew more than a tenth in the first quarter of the year, boosted by the real-estate sector, the National Statistical Coordination Board (NSCB) said.

In a statement, the NSCB said the country’s total gross revenue rose by 12.8 percent in the first quarter from 15.1 percent in the same period last year.

The statistics agency attributed the increase to the real estate sector, which continued to post the fastest growth at 29.9 percent, boosted by higher income from rental and leasing operations from the country’s newly opened super malls and the sustained demand for office spaces from the business processing outsourcing (BPO) industry.

This was followed by the finance sector, which expanded by 15.9 percent, bolstered by the resurgence of the insurance segment and the higher utilization of financial services.

NSCB said the trade and transportation, communication and storage businesses grew by 14.5 percent and 10.8 percent, respectively.

Job generation, however, slowed down to 0.6 percent from 1.1 percent in the previous year, weighed down by the decline in manufacturing by 0.4 percent and the flat growth registered in the electricity and water industries.

Businesses that registered job-generation were the mining and quarrying, up by 6.4 percent; private services, 3.9 percent; trade, 1.9 percent; and real estate, 1.4 percent; and finance, 0.8 percent.

Total compensation at current prices accelerated 6.6 percent from 4.8 percent last year.

Double-digit growth was seen in transportation, communication and storage; electricity and water; finance; real estate; and mining and quarrying.

The NSCB also said that the compensation per employee rose 5.3 percent from 3.6 percent as a result of increases in both compensation and employment.

Bull run seen to extend through 2008
PSEi forecast to hover near 5,000 mark

By Daxim Lucas, Elizabeth Sanchez-Lacson
Philippine Daily Inquirer - July 23, 2007

THE LOCAL stock market will likely continue its bull run into next year with the Philippine Stock Exchange index (PSEi) continuing to post new all-time highs, officials of a major fund management firm said.

BPI Asset Management vice president Adelbert Legasto predicted that the PSEi would hit anywhere between 4,500 and 5,000 by 2008.

At the lower end of the company's forecast, this would give stocks on the PSEi an average upside of 20 percent from the index level of 3,738.28 as of last week's close.

Legasto said his optimism was based on the fact that PSE-listed stocks continued to lag that of neighboring bourses in terms of price-earning multiples.

"The average price-earnings ratio for the Philippines is only 16.2 times, versus 18 times for the US, 22 times for Indonesia and 40 times for China," he said, quoting BPI's own earnings estimates for local firms.

Some conservative analysts, however, put the average price-earnings ratio of the local stock market at 19 times.

Legasto said he expected the stock market to receive a boost from the country's strong economic fundamentals, including robust domestic output which BPI expects to grow by 6.4 percent this year.

Equity raised by listed companies mainly through follow-on offerings and stock rights issuances has surged by 78 percent to P45.4 billion in the first half from P25.5 billion a year ago.

Documents from the Philippine Stock Exchange (PSE) showed a slack in equity from initial public offerings (IPOs) and private placements during the period.

PSE president Francis Lim said that IPOs would pick up dramatically in the coming months with big names in the pipeline. The tally does not yet include proposed offers by GMA Network Inc., Vista Land, Pepsi Cola Philippines, Cebu Pacific and eTelecare, which are either listing this week or sometime during the year.

"As such, we in the PSE remain confident that total proceeds this year from various capital-raising sorties will hit a new all-time high, based on IPOs we have in the pipeline," Lim added.

Based on PSE figures, proceeds from two IPOs in the first half this year amounted to P2.92 billion or 67.8 percent lower than the P9.09 billion a year ago. National Reinsurance Corp. of the Philippines completed a P2.82-billion sale of its primary shares, while Pacific Online Systems Corp. conducted its own sale of P104.78-million worth of primary shares last April.

Proceeds from the follow-on offerings of four companies went up by 158.4 percent to P26.98 billion in the first half from P10.44 billion a year earlier. The follow-on offerings allowed Filinvest Land Inc., to raise P5.92 billion; Rizal Commercial Banking Corp., P5.67 billion; Union Bank, P5.04 billion, and Alliance Global Group Inc. (AGI), P10.35 billion.

Equity from stock rights offerings hit P15.4 billion from January to June this year or roughly 20 times bigger than the P751.96 million recorded for the same period last year. The companies that conducted the rights offerings included Megaworld Corp. (P10.79 billon) EEI Corp. (P540 million) AGI (P3.11 billion) and Geograce Resources Philippines Inc. (P489.88 million).

Peso continues uptrend, closes at 44.80 to $1

Reuters - July 21, 2007

The peso continued to gain more ground against the dollar yesterday, helped by foreign fund inflows into share offers by local firms and broad buying of high-yielding assets.

At yesterday’s trading at the Philippine Dealing System (PDS), the peso closed at its intraday high of 44.80, up 20 centavos from Thursday’s close of 45 to the dollar.

Yesterday’s close was the highest since August 2000.

Trading volume amounted to $517 million on an average rate of 44.860 to the dollar.

Analysts said most Asian currencies were up against the dollar as worries over subprime mortgages pinned the dollar near record lows against the euro and weighed on credit markets.

Those worries stayed at the fore after Fed Chairman Ben Bernanke said on Thursday losses on these subprime loans could hi $100 billion and threaten consumer spending.

The peso’s rally this month has primarily been driven by foreign inflows into share offers by local firms, including a $221-million offer by Aboitiz Power Corp, which had its stock market debut this week.

A view that the Bangko Sentral ng Pilipinas (BSP) would tolerate a higher peso and expectations of a widening current account surplus have also helped.

“I guess this will look good for the state-of-the-nation address next week for the President. I have a hunch they won’t intervene,” a trader in Manila said.

President Arroyo is due to deliver the address on Monday

Peso hits new high on IPO inflows
Currency marked 7-year high, closing at P45:$1

By Daxim Lucas
Philippine Daily Inquirer - July 20, 2007

MANILA, Philippines -- The peso rose to a new seven-year high, and briefly flirted above a major resistance level, as fund flows into the local stock market ahead of a major stock offering continued.

At the Philippine Dealing System, the peso closed at 45:$1 -- its highest level since August 2000 -- after touching P44.99 during afternoon trading. The closing rate marked a 28-centavo appreciation for the local currency against the US dollar which, in recent weeks, has been taking a beating in foreign exchange markets worldwide.

Nonetheless, the head of one of the most influential treasury operations in the country pointed out that recent developments on the local and international front have yet to make their influence felt on the local currency.

“The foreign exchange play is supply driven and has not factored in internal and external pressures that are building up,” HSBC treasurer Jose Arnulfo Veloso said in a message to the Philippine Daily Inquirer, parent company of INQUIRER.net.

Trading at the PDS was brisk, with $637.5 million changing hands at the end of the session. At its weakest level Thursday, the peso stood at P45.22.

Veloso said the bulk of the inflows were destined for initial public offerings (IPO) on the Philippine Stock Exchange (PSE). The P8.9-billion IPO of broadcaster GMA Network Inc. is ongoing, with its shares expected to be listed on the bourse by month’s end.

The HSBC treasurer pointed out, however, that the peso’s strength may be short-lived, given the unfolding developments abroad.

“The Bear Stearns sub-prime market and its full-blown impact will not support a strong peso,” he said.

A fund manager with a local bank said the peso is set to test the P44 level over the short term, with the major resistance pegged at P44.50.

Apart from inflows into the equity market, the bank official said the rush to convert dollar holdings into pesos is also adding to the rapid appreciation of the local currency.

“There is a tendency now for OFWs (overseas Filipino workers) to send [dollars] as soon as they earn them, instead of holding onto them,” he said. “This creates even more momentum.”

HSBC officials earlier said they expect the peso to settle at around the P45:$1 level by yearend, but admitted that it is possible for the currency to appreciate to as high as P42 briefly, before settling back to more “sustainable” levels.

Japan-based R&I upgrades RP outlook from ‘stable’ to ‘positive’

By Des Ferriols
Philippine Star - July 20, 2007

The Japan-based Ratings and Investment Information Inc (R&I) has upgraded its outlook on the country from “stable” to “positive,” indicating the possibility of future credit rating upgrade.

R&I affirmed its a-2 rating on the country’s foreign currency short-term rating and BBB- on foreign currency issuer rating but the rating outlook was changed from “stable” to “positive.”

The upgrade came in the wake of official data that the Arroyo administration had missed its fist semester fiscal targets and is in danger of missing its full-year deficit target of P63 billion.

According to R&I, it is optimistic of continuing economic reforms but it cautioned that the Arroyo administration should concentrate on infrastructure development in order to mobilize foreign and domestic investments for future growth.

“For the government to attract the desired foreign investment in areas such as biotechnology fuel and mining in the future, accelerating development of the investment environment would be essential,” the agency said.

According to R&I, the country’s fiscal situation had improved against a backdrop of higher annual revenues following the increase in the value-added tax rate.

“Capital inflows from foreign countries, in a show of confidence, also are strong,” R&I said in its report, adding that together with remittances from overseas Filipinos, this supported an economic boom.

Even after the Arroyo administration missed its first semester fiscal targets, R&I expects the continuation of the fiscal reconstruction and growth-oriented policies towards 2010.

“Provided favorable economic conditions continue in the future R&I may consider upgrading the rating,” the Tokyo-based credit rating agency said.

R&I said it based its evaluation on the 2006 performance of the government when the National Government deficit dropped to 1.1 percent of gross domestic product (GDP) from 5.3 percent in 2002.

R&I noted that in 2006, the ratio of tax revenues to GDP recovered to 14.3 percent after falling to 12.4 percent in 2004.

“If the government can maintain these robust economic conditions, achieving its plan of reducing the outstanding public sector debt should become realistic,” R&I said.

The agency noted that it is counting on the Arroyo administration’s commitment to reduce the public sector debt from roughly 80 percent of GDP at the end of 2006 to 50 percent in 2010.

However, R&I admitted that the 2006 fiscal performance had been due to the reenactment of the 2005 budget and fiscal management in 2007 under “normal” budgetary conditions “would be a challenge”.

Peso breaks into 44-to-$1 territory

By Des Ferriols
Philippine Star - July 20, 2007

The peso is likely to keep rising as long as economic conditions improve, Finance Secretary Margarito Teves said yesterday as the currency hit another seven-year high against the dollar.

“For as long as the macroeconomic fundamentals continue to improve the peso will likely continue to improve,” Teves said.

At yesterday’s trading at the Philippine Dealing System (PDS), the peso broke into the 44 to $1 territory during midday trading to hit 44.990 before closing at 45 to the dollar. Transaction volume amounted to $637.50 million on an average rate of 45.090 to $1.

Yesterday’s closing rate was 28 centavos higher than Wednesday’s close of 45.28 and was the highest since the peso last touched the 44.980 to $1 level in August 2000.

Teves said the government was not interested in imposing capital controls to cap the peso’s rise.

Market traders said the peso’s strength was the direct result of heavy foreign exchange inflow into the capital market supported by the continued inflow of remittances from overseas Filipino workers (OFWs).

The relative strength of the peso also became even more pronounced due to the inherent weakness of the dollar which has been dropping to record lows against the Euro as housing woes in the US threatened to worsen.

According to analysts, the peso was packing up momentum at the moment but there could be tempering effects as the market anticipates a possible increase in US interest rates.

Should the US Federal Reserve Board decide to increase US rates, funds that have been flowing into the equities market could flow right out as they take advantage of better earnings in the US.

From January to June, data from the Bangko Sentral ng Pilipinas (BSP) said the peso was averaging at 46 to the dollar.

Net foreign portfolio investments continue to enter the country, reaching a record high of $870 million in June to bring the total net portfolio investments in the first semester to $2.5 billion, or over three times higher than last year.

Data from the BSP show that registered foreign portfolio investments in June alone surpassed the previous highest monthly total of $580.8 million recorded in May.

BSP Governor Amando M. Tetangco Jr said the central bank registered a total gross inflow of $1.9 billion in June which went mostly to shares listed at the Philippine Stock Exchange—one of the hottest exchanges in the region this year.

Tetangco said 82 percent or close to $1.6 billion of June inflows went to PSE-listed shares where holding and property firms as well as listed banks captured 73 percent.

The remaining 16 percent, according to Tetangco, were placements in peso-denominated government securities, primarily Fixed Rate Treasury Notes or FXTNs where investments amounted to $294.3 million. Placements in peso time deposits made up the remaining $38 million or two percent of total gross inflows.

The peso is the top performing currency in Southeast Asia this year, up over 8.5 percent since the start of the year, due to record inflows of remittances from millions of overseas workers and strong foreign portfolio investments.

Peso rises further to 45.25

By Eileen A. Mencias
Manila Standards - July 18, 2007

The peso yesterday surged to a fresh seven-year high of 45.25 against the US dollar as foreign funds buying shares in companies with initial public offerings shored up the value of the local currency.

“We saw the peso rising mainly due to flows coming from IPOs and the equities market,” said Estelito Biacora, vice president for treasury at the Bank of the Philippine Islands.

Companies who have either sold or are selling new or additional shares this month include Aboitiz Power Corp., GMA Network Inc., Phoenix Petroleum Philippines Inc. and Philippine National Bank.

The peso opened at 45.45 against the dollar, up from Monday’s close of 45.55. It rose to a high of 45.245 before closing at 45.25.

Volume turnover stood at $626.5 million, slightly lower than Monday’s $649 million, with the peso averaging at 45.317 against the dollar.

Dealers said they expected the peso to trade in a narrow range, wary of central bank intervention.

HSBC said the “fundamentals of the peso’s trend remain undisputable in our view, highlighted by the strong balance of payments’ surplus.” The bank said it saw the peso breaking current support levels and ending at 43 by the end of the year.

Bear Stearns, meanwhile, expect the peso to end at 40, supported by the country’s strong domestic product growth.

The Bangko Sentral ng Pilipinas, however, is expected to intervene to cap the gains of the peso. Central bank’s dollar purchases have impaired its operations, resulting in a P19.75-billion loss in May because of the strong appreciation of the local currency.

Losses from foreign exchange operations stood at P21.5 billion in the first five months of the year in stark contrast to the P21.15-billion gain it reported in the same period last year.

Strong inflows from remittances and investments have pushed the peso to seven-year highs.

Sources said the central bank had been buying dollars in the spot currency market to slow down the appreciation of the peso. Its purchases in May alone exceeded $2 billion.

Much of the central bank’s purchases in the spot currency market are immediately swapped with banks for pesos to prevent an increase in domestic liquidity that could threaten inflation.

Central bank’s forex swaps at the end of May hit $10.06 billion, up from $7.82 billion at the end of April. The central bank’s forex swaps amounted to only $2.2 billion in May last year.

If not for the central bank’s purchases in the spot currency market, the peso would have long breached the 45:$1 level, traders said.

The Monetary Board last month allowed the central bank’s treasury department to increase the $10-billion limit on forex swaps to half the gross international reserves, or almost $13 billion.

The increase in the limit allowed the central bank’s treasury department to purchase more dollars in the spot currency market and slow the appreciation of the peso.

Gov’t sees strong growth in second quarter.
More infrastructure funds readied

Inquirer - July 17, 2007

Consumer demand and expenditure related to congressional elections has continued to boost the economy in the second quarter after a stellar first quarter, according to a senior economic official.

“We see indicators for strong growth for (the second quarter),” Dennis Arroyo, head of policy planning at the economic planning agency, told Reuters in an interview.

“For example, note that election spending, a big factor in (the first quarter), peaked not in Q1 but in Q2.

Secondly, even the stock market peaked not in Q1 but also in Q2 and groing on this month.”

“We see signs of strong consumer spending, in particular car sales were quite up. So, (the second quarter will be strong.”

The Philippines enjoyed its highest annual growth in 17 years in the first quarter at 6.9 percent, thanks to healthy consumption fueled by record remittances from millions of overseas workers and candidate spending before the poll on May 14.

But Arroyo said growth in the April-June period was unlikely to match the first quarter. “We were overjoyed with the 6.9 percent,” he said. “I would rather be conservative.”

The Philippines is targeting full-year growth of 6.1 to 6.7 percent this year, up from 5.5 percent in 2006.

Arroyo said the third quarter was traditionally weak, as the rainy season dents consumption, but he expected fourth-quarter annual growth to be strong after devastating typhoons last year knocked the final three months’ performance.

“So hopefully, with no typhoons this year we will see additional strong growth for Q4. “

At the same time, President Macapagal Arroyo also told Reuters that the government would continue to pour money into infrastructure projects despite below-target revenues in the first half of the year.

“At the end of the day we will be able to meet our targets in revenue and meet our targets in infrastructure spending, not only on physical infrastructure but human capital spending,” Mrs. Arroyo said in an interview.

Ms. Arroyo, a former economics professor, is determined to raise spending on the country’s transport network, power facilities and schools after years of belt tightening put its infrastructure years behind neighbors such as Malaysia and Thailand.

The country has earmarked P142billion for capital expenditure this year, an 83-percent increase from 2006.

With tax revenues likely to be P53 billion below target in the first half due to endemic evasion and corruption, the government has insisted proceeds from asset sales will plug the gap, allowing it to meet its budget deficit goal of P63 billion and its higher spending plans.

The President said a railway connecting Manila to Clark, the country’s second-busiest international airport, 80 kilometers north of the capital, was being built with Chinese financing and was likely to be finished by the end of her term in 2010.

She also said an ill-fated passenger terminal, originally set to open in late 2002, at the crowded Ninoy Aquino International Airport would hopefully be ready for business by the end of the year.

The government seized the terminal in December 2004 in a bitter dispute with German airport operator Franport AG over the contract for the facility. A long-delayed opening in early 2006 was suspended after a section of ceiling collapsed.

“Legally we are in possession. It is now making it physically safe and acceptable to FAA (Federal Aviation Administration) and all the other standards that we are working on,” Arroyo said.

The terminal, designed to handle 13 million passengers a year, has become a symbol of the graft and legal uncertainties that can beset foreign investors in the Philippines.

But Ms. Arroyo said the Philippines’ low cost, English-speaking population and its strategic location in Asia were attracting foreign investors such as Texas Instruments, the world’s biggest maker of mobile phone chips, and South Korean ship builder Hanjin.

I believe we are becoming one of the best values for investment in the region and the world is beginning to take notice,” she said.

Stocks breach 3,800-pt index to finish at fresh record high

By Zinnia B. Dela Peña
The Philippine Star - July 6, 2007

The stock market soared by 70.66 points yesterday for another record finish as investors welcomed another set of benign inflation figures, dealers said.

Consumer inflation slowed to 2.3 percent in June from 2.4 percent in May, easing concerns over the outlook for higher interest rates.

The composite index jumped 70.66 points to finish at the day’s high 3,802.32. The low was 3,730.64 points.

The broader all-share index gained 37.26 points to 2,435.43.

Gainers led losers 93 to 32, with 47 stocks unchanged.

Volume was 3.6 billion shares worth P5.3 billion.

“Stocks were boosted by the benign inflation numbers. This confirms and strengthens the bullishness of the market,” said Lawrence de Leon of Accord Capital Equities Inc.

“Low inflation figures help to sustain the current low-interest rate environment that has been fuelling the rise in stocks,” he added,

The low inflation rate in June somewhat offset mounting concerns over the government’s capability to meet its fiscal targets this year, said Chase Yap of 2TradeAsia.

“A low inflation regime is positive news for interest rate-sensitive sectors such as property and banking.”

Yap said investors have already priced in the government’s fiscal problems but are still optimistic that it will be able to sell stakes in several key assets, such as San Miguel Corp and Manila Electric Co, before the end of the year.

“If ever the government does overshoot its budget deficit target this year, the difference may not be that big because it could still complete the sale of its stakes in San Miguel and other big-ticket assets,” said Yap.

“It’s more of a tidal wave of optimism in the global arena. Everytime the overseas markets are up we tend to dance with them. Despite danger signs we are seeing now in the domestic arena, its hard to stop the bulls from continuing their run,” First Grade Holdings managing director Astro del Castillo said.

“I think government’s commitment to reverse the declining collection sits well with the investing community,” del Castillo added.

“The economy is strong, the inflation is benign and there’s also some bargain-hunting (after the correction on Wednesday).The main factor on hitting the new record high is a lower consumer price index which shows that the management team of the administration is trying their best to manage well the inflation,” he said.

Ayala Corp added P20 to P585 and unit Ayala Land Inc was up 25 centavos to P18.

Select mining stocks rose in line with firmer base metal prices.

Atlas Consolidated and Mining Development Corp added P1.50 to P16.50 while Philex Mining Corp, the Philippines’ oldest mining operator, inched up 10 centavos to P5.80.

Shares in San Miguel Corp, the country’s largest food and beverage company, gained after it confirmed it was in talks for the possible sale of its stake in Australian dairy company National Foods to Japan’s Kirin Brewery.

San Miguel Corp.’s A-shares added P1.50 to P75.50 while its B-shares rose P3.50 to P86.50.

Metropolitan Bank & Trust Co., the country’s largest lender in terms of assets, closed higher by P1.50 or 2.11 percent at P72.50 while holding company Aboitiz Equity Ventures Inc. grew by P0.30 or 3.41 percent to P9.10.

Telecommunications giant Philippine Long Distance and Telephone Co. (PLDT) went up by P30 or 1.12 percent at P2,720.

Strong peso saves gov’t P2B in interest

By Lee C. Chipongian
Manila Bulletin - July 5, 2007

The Department of Finance (DoF) said that the government saved P20B from interest payments in the first half of the year because of the strong local currency.

Based on DoF documents, the National Government spent P129 billion in interest expense for the January-June period, better than the program of P149.9 billion.

For the second quarter the government has programmed interest payments of P55.60 billion, and P12.11 billion for the month of June alone. The full-year program for interest expenses is P303.23 billion.

Government’s interest expenses are the second biggest item in the national budget.

The DoF said government will probably save P30 to P40 billion in interest payments this year as they engage in additional loan prepayments and conversions and debt swaps/exchange.

Last year the DoF reported P30 billion as interest savings on past loans and about P18 billion from its debt exchange program. Interest payments were also reduced because of a drop in interest rates as borrowings are lower in 2006.

Based on Bureau of Treasury numbers, the government paid P310.1 billion in interest payments last year, way below the program of P340 billion because of lower rates and peso appreciation. In 2005, NG interest payments totaled P299.8 billion.

DoF officials said the government will continue to pay lower interest payments in the next three years until it drops to below P200 billion by 2010.

The government’s expected outstanding debt this year is P3.924 trillion, or 58.3 percent of gross domestic product.

Peso continues appreciation

By Maria Eloisa I. Calderon, with Reuters
Business World - July 4, 2007

The peso yesterday rose against the dollar, helped by the revival of investors’ bullish sentiment about the stock market. It closed at P45.83, climbing by seven and a half centavos from Monday’s close.

"We’re seeing some semblance of another run in the stock market. The Philippine market is getting attractive again and we’re seeing some inflows," a currency trader said. Philippine stocks yesterday closed at a fresh record as players tracked the overnight rally on Wall Street.

The peso opened at P45.80, reached a low of P45.90 and a high of P45.73, before settling at P45.83. It averaged at P45.816 from Monday’s P45.995 . Volume of transacted dollars grew to $485 million from $467.25 million.

In a research note, Standard Chartered Bank said strong remittance flows from Filipinos overseas and portfolio investments are expected to continue buoying the local currency. It warned, however, of a possible slowdown in equity inflows, which account for a large portion of portfolio investments, amid decelerating export growth.

Standard Chartered also warned that any slippage in the government’s fiscal reforms would have debilitating effects on the peso. "We will be keeping a very close eye on the fiscal performance of the Philippines going forward as any sign of fiscal slippage is likely to be punished by the market," the bank said.

Meanwhile, other Asian currencies dithered after a four-session rally driven by the dollar’s weakness, amid verbal intervention in South Korea and fears elsewhere that the gains were overdone. Still, Korea’s won managed to rise by 0.4% and hit a seven-week high of 916.8 per dollar at one point. The Thai baht rose by 0.45% and the Singapore dollar hit a one-week high near 1.5220 per US dollar.

China’s yuan also rose to its highest level against the dollar since the July 2005 revaluation, hitting 7.5951 per dollar, giving traders another reason to be bullish on Asia. The Singapore dollar has gained more than a percent in the past four sessions.

The US dollar’s weakness was broad-based. It matched a 26-year low versus sterling and stayed near a record low against the euro, undermined by the view that the Federal Reserve is unlikely to lift rates anytime soon given a recent run of soft inflation data and concerns over the mortgage market.

The Indonesian rupiah barely budged from near 9,000 per dollar. "US equities are rallying on the lower rate hike risk and that seems to be the story Asia is running with: no Fed hike so the party is on!" said Sean Callow of Westpac Bank.

Stocks close at new record high

By Zinnia B. dela Peña
The Philippine Star - July 4, 2007

The local stock market extended its gains for a fourth straight day as share prices rose 1.63 percent to another record finish yesterday, inspired by Wall Street’s rally overnight and expectations of strong second-quarter corporate earnings, dealers said.

The Philippine Stock Exchange composite index, the PSEi, gained 60.31 points to finish at a record 3,751.99, coming off an all-time intra-day high of 3,760.49. The previous record was set on June 20 when the index settled at 3,718.88. The PSEi is now up 769.45 points or 25.8 percent since the start of the year.

Analysts said that after a recent pullback, there was an element of select bargain hunting to provide additional support.

A total of 2.5 billion shares changed hands, valued at P5.9 billion. Advancers beat losers 106 to 24 while 41 stocks ended unchanged.

“We’ve probably not seen the end of this rally yet,” said First Grade Holdings managing director Astro del Castillo.

He said recent technical corrections allowed players to hunt for bargains among blue chip issues and in laggard second and third-line stocks.

“There was fresh interest in some of the large-caps and select second- and third-line stocks after last week’s losses, added Chase Yap of 2TradeAsia.

Yap said investors anticipating solid corporate earnings for the second quarter have also started accumulating stocks.

“There is renewed confidence in the market but we will have to watch over the next few days to determine if the market is ready for a new and sustainable breakout level,” said James Lago of Westlink Global Equities.

Yap said investors anticipating solid corporate earnings for the second quarter have also started accumulating stocks.

“Some investors are positioning early, and are snapping up issues which they believe have performed in line with expectations and maybe fared even better.”

Among blue chips, index heavyweight Philippine Long Distance Telephone Co. (PLDT) was the biggest gainer, surging P50 or 1.89 percent to P2,700 as it extended the gains of its New York-traded American depositary receipts.

Conglomerate Ayala Corp. gained P5 or 0.92 percent to P550 while three of its subsidiaries also went up: Globe Telecom, the second largest phone firm, rose P45 to P1,400; Ayala Land was up 75 centavos or 4.41 percent to P17.75; and Manila Water Co., which holds the water supply concession for Metro Manila’s east zone, rose 50 centavos to P13.

Another Ayala unit, Bank of the Philippine Islands, likewise increased P3 or 4.38 percent to P71.50

Oil giant Petron Corp. gained 40 centavos or 7.41 percent to close at P5.80.

San Miguel Corp. saw its A shares steady at P73.50 but its B shares gained one peso to P83.

Listed information and technology conglomerate IPVG Corp. was the top gainer with shares rising by 20 percent to close at P8.40 from the previous close of P7 on news that the firm’s call center firm acquired a 260-seat contact center operated by Globalstride Corp. and existing customer accounts of Globalstride Holdings Ltd.

A total of 20.754 million IPVG shares changed hands valued at P159.56 million.

Among the top gainers, second-liner technology stocks shared the spotlight. Aside from IPVG Corp., Island Information and Technology rose 20 percent to close at 12 centavos. Transpacific Broadband Group and Information Capital Technology Ventures gained 19.8 percent and 17.5 percent, respectively, to P2.42 and P4.70.

Other top gainers were Mabuhay Holdings, Oriental Petroleum, Swift Foods, Mutlitech Investments, Zeus Holdings and ATN Holdings.

On the losing side, meanwhile, were Aboitiz Transport, Prime Gaming, Abra Mining and Medco Holdings, shedding off between 6.38 percent to 15.56 percent.

Century Properties Group

Infrastructure spending increased