Manila Bulletin, 09 July 2014
By Chino Leyco
The Philippines has secured another credit-rating upgrade, this time from Japan-based R&I, which sees consistent rise in per-capita income in the country as a result of immense growth in infrastructure investments and continuity of reforms.
R&I raised the country‚Äôs long-term foreign-currency issuer rating by a notch from the minimum investment grade of BBB- to BBB. The rating was assigned a ‚Äústable‚ÄĚ outlook, which means it is unlikely to change within a year.
At the same time, the credit watchdog maintained the country‚Äôs short-term debt rating at a-2, which indicates high certainty that short-term financial obligations would be paid.
‚ÄúThe Philippines‚Äô economy continues to show strong growth, thanks to brisk investment coupled with private consumption driven by remittances from overseas Filipinos,‚ÄĚ R&I said in a report released yesterday.
‚ÄúThis should allow for relatively high growth and raise per-capita income levels steadily,‚ÄĚ it stressed.
Per-capita income in the Philippines has been modest compared with those of more advanced neighbors, but the country is catching up in this area. From $3,684 in 2009, per capita income in the country (using current prices and purchasing power parity) increased to $4,649 last year.
R&I recognized the country‚Äôs healthy fiscal situation, saying this helps fulfill the plan of boosting public spending.
‚ÄúSavings in interest payments, thanks to fiscal consolidation, help the government to finance infrastructure projects. Budget execution is also expected to accelerate,‚ÄĚ it said.
This year‚Äôs state budget for infrastructure at P404.3 billion, R&I cited, is 40 percent more than last year‚Äôs.
R&I also said the rollout of more projects under the Public-Private Partnership (PPP) program would help drive more job-generating investments and sustain the rise in incomes.
‚ÄúFurthermore, public-private partnerships, which utilize private capital [for funding public infrastructure], are underway, albeit gradually, and will likely boost investments,‚ÄĚ R&I said.
Earlier this year, the government awarded contracts for two PPP projects, namely the P1.72-billion automated fare collection and single ticketing system for the MRT and the LRT, and the P17.5-billion Mactan Cebu International Airport expansion project. This brings to seven the total number, and to P62.6 billion the aggregate cost, of the PPP projects awarded so far.
R&I also recognized the country‚Äôs sound macroeconomic fundamentals, including ample foreign-exchange reserves, improving manageability of government debt, and within-target inflation.
It also said reforms instituted by the Aquino administration, including legislative and administrative reforms in tax collection, helped improve the investment climate. R&I expressed belief reforms will be sustained even beyond 2016.
‚ÄúThere is risk that the next government will not be as reform-minded as the Aquino administration. However, pressures from growing international relationships, such as the establishment of the ASEAN Economic Community in 2015, along with public expectation for sustained reform initiatives, should deter the post-Aquino government from going backwards,‚ÄĚ it said.
Meantime, Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas welcomed the upgrade, saying this validates soundness of existing policies.
‚ÄúThe latest development on the country‚Äôs credit standing is a recognition of a host of favorable macroeconomic indicators, particularly an inflation outlook that is conducive for business and the stability of the financial system amidst a difficult operating environment,‚ÄĚ Tetangco said.
‚ÄúThe upgrade is an expression of confidence, in part, on the ability of the Monetary Authority to implement appropriate and timely measures that ward off threats to the economic stability we are enjoying. The BSP will continue to craft policies that will help maintain this stability,‚ÄĚ the BSP chief added.
Finance Secretary Cesar V. Purisima, likewise, affirmed the focus on sustainability of favorable trends for the economy.
‚ÄúReforms that this government has started to institutionalize help ensure that the positive momentum will not falter,‚ÄĚ Purisima said.
‚ÄúOn the fiscal front, administrative and policy reforms implemented by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) will make it easier in the future to keep the growth trend in public revenues,‚ÄĚ he said.
Investor Relations Office¬†(IRO) Executive Director Editha Martin said the country‚Äôs upward movement in the credit-ratings scale bodes well for raising the country‚Äôs international profile as an investment destination.
‚ÄúIt is always good to have institutions outside the government point out the strengths of the Philippine economy. The string of credit-rating upgrades that the country has secured in recent years makes it difficult for investors not to notice the Philippines,‚ÄĚ Martin said.
By ¬†Chino Leyco
The Philippine government‚Äôs infrastructure program, the supposed centerpiece of the Aquino administration, is seen to become a new global benchmark that other developing nations may emulate, a cabinet official said.
On the sideline of the World Economic Forum (WEF) on East Asia, Finance Secretary Cesar V. Purisima cited the two-pronged approach of the government in boosting infrastructure, which include Public-Private Partnership (PPP) program, and higher budget allocation for infrastructure projects.
‚ÄúWe need connections to supply chains. We need to make it easy for tourists to visit and move around the country. We need to make it easier for investors to do business here. All of these require heavy investments in infrastructure, and the Aquino administration is doing exactly that,‚ÄĚ Purisima said in a speech delivered at the Bloomberg Leadership Forum.
He said the national government targets to increase the budget for infrastructure from 2.9 percent¬† of the economy, as measured by its gross domestic product (GDP), last year and 3.1 percent this year, to 5 percent by 2016.
Moreover, under the PPP program, over P1 trillion in infrastructure projects are already in the pipeline.
According to data from the PPP Center, there are 57 infrastructure projects under the PPP program that are in various stages of implementation.
So far, contracts have already been awarded for seven PPP projects that have a combined cost of P62.6 billion.
These projects are the following: Daang Hari-SLEX Link Road Project, PPP for School Infrastructure Project Phase 1, NAIA Expressway Project, PPP for School Infrastructure Project Phase 2, Modernization of the Philippine Orthopedic Center, Automatic Fare Collection System, and Mactan-Cebu International Airport Passenger Terminal.
‚ÄúSoon, one can look at the PPP program of the Aquino administration and say that it has been one of the better [economic development] programs not only in the Philippines but in the world,‚ÄĚ Purisima said.
Rising infrastructure spending is credited for helping boost growth of the Philippines, which last year became the fastest growing economy in Southeast Asia and one of the fastest in the world with an expansion rate of 7.2 percent.
Robust economic growth achieved amid relatively weak global economy helped the Philippines secure investment grades last year.
Malaya Business Insight, 23 May 2014
By Angela Celis and Irma Isip
The Philippines will continue to close its main gateway, the Ninoy Aquino International Aiport under the ‚Äėopen skies‚Äô of Asean which takes effect next year according to Trade Secretary Gregory Domingo.
Domingo during a lull in the discussions at the World Economic Forum on East Asia admitted to reporters ‚Äúpressure from local airlines‚ÄĚ to keep NAIA closed to international airlines.
Finance Secretary Cesar Purisima also explained to delegates that the country needs to ease first the congestion at the Ninoy Aquino International Airport before it can be opened as the key entry point from the open skies being negotiated by the 10 economies in Asean.
In a related development, Transport and Communications Secretary Joseph Emilio Sevilla said the government will build a second runway at the NAIA that will cost P2 billion, as an immediate solution to the congestion.
Domingo said: ‚Äúwe are part of the open skies (agreement in Asean) but our stand is our open skies is all ports outside Manila,‚ÄĚ
Purisima said infrastructure bottlenecks in the aviation industry must first be addressed before pushing for open skies policy on a national scale.
Purisima said yesterday NAIA is a problem aching to be solved immediately.
(As if to make a bad situation worse, air conditioning failed in Terminal I and III for about two weeks. ¬†Terminal II built by Lucio Tan for Philippine Airlines remains comfortable)
‚ÄúThe challenge really is congestion in Manila so we need to fix the infrastructure (if) we want to have more connections,‚ÄĚ Purisima said at the forum on East Asia Economic Outlook.
Purisima politely suggested open skies policy will attract more foreign airlines and increase the number of tourists only if the airports are comparable to those in Asean region. ¬†The Federal Aviation Authority of the US has raised to 1 the category of the NAIA from 2. ¬†The upgrade directly relates to safety.
Congestion is a different problem.
The Aquino administration adopted a pocket open skies policy, which liberalized the country‚Äôs secondary international airports by allowing more foreign carriers to fly and bring in more tourists.
‚ÄúIt‚Äôs okay to take small steps as long as you continue to take the right direction,‚ÄĚ the finance chief added.
Tony Fernandes, AirAsia CEO, said during the forum there is great potential in the Asean region.
‚ÄúWe‚Äôre moving in the right direction, but there‚Äôs still a lot to be done. Open skies is one thing, but there are still a lot of invisible barriers,‚ÄĚ Fernandes said.
‚ÄúThere‚Äôs a disconnect between policymakers and what the private industry thinks. The communication has to grow between the private sector and the government,‚ÄĚ he added.
Meanwhile Purisima said he is confident the Aquino administration will succeed in pushing through with its planned reforms in the last two years of its term.
‚ÄúThe good thing about President Aquino is that he is extremely popular. He has the political capital to make sure that on the last two years of his term, he will follow through with the reforms,‚ÄĚ Purisima said.
‚ÄúWhat‚Äôs important is we have set the foundations. We can‚Äôt finish it all in six years. But the important thing is the opportunity is there. That‚Äôs why we‚Äôre optimistic,‚ÄĚ he added.
Meanwhile, the alternative runway will be located in the South of the main current runway, Abaya said the biggest challenge is the relocation of the 600 households that will be affected .
NAIA¬†has only one runway that currently handles commercial aircraft takeoff and arrival of 40 events per hour its lower compared three years ago of 52 to 56 events per hour. But , NAIA still operating beyond its capacity limit of 36 events per hour. NAIA handles 625 flights daily.
At the session on Connect on Trade:Lifting Barriers to Growth, Singapore Senior Minister of Finance Josephine Teo said when Asean opens its skies next year, demand for air traffic will grow, driven by a growing middle class in Asia and specifically in Asean who are now interested and can afford to travel.
Open skies will allow Asean airlines to fly with fewer restrictions within the region and according to Teo, Asean could consider the EU aviation as a reference point.
She said while there is today overcapacity among low cost airlines, it is a matter of timing that demand would grow and multiple links and direct city links are needed to satisfy the travelling preferences of people in Asean.
The benefit, Teo added, would be in reduced cost of air transport passenger and freight.
‚ÄúBut this¬†goes beyond idea of single aviation for the market and demand for air travel but also because of the tremendous effort on harmonizing regulatory requirements.‚ÄĚ
She admitted though that challenges many Asean economies face is in the overcapacity of their airports and need to invest in airport infrastructure to expand the capacities.
Teo also broached the idea of considering liberalizing air transport agreement (ATA) as a bloc with other countries like what it forged with China.
Teo said there is a potential for a region to region ATA between Asean and EU.
The Philippine Star, 23 May 2014
By Teresa Cerojano
MANILA, Philippines ‚ÄĒ An Asian Development Bank official warned Thursday of a largely unnoticed crisis in Southeast Asia: private investment in infrastructure has not recovered in the nearly two decades since the Asian financial crisis.
Stephen Groff, ADB Vice President for operations, said in an interview on the sidelines of the World Economic Forum on East Asia, that private funding for infrastructure in five of the biggest Southeast Asian members has declined steeply. It was $38 billion in 1997 and around $25 billion in 2010.
“It’s coming up but it’s nothing like it was in 1997,” he told The Associated Press. “Essentially, the ASEAN financial crisis led to a crisis of confidence with governments, a crisis of confidence in the private sector, and there hasn’t been enough investment or discussion or development of tools that allow risk-sharing to be used appropriately.”
The five members he referred to were Indonesia, Malaysia, the Philippines, Thailand and Vietnam. The other members are Singapore, Cambodia, Laos, Myanmar and Brunei.
Groff said while private investors assume risks, there are other types of risks that governments and financial institutions need to assume “and that hasn’t yet come into play as much as it needs to.”
The region, which will launch next year a common market comprising 600 million people, needs to spend $60 billion yearly until 2020 to meet its infrastructure needs. But Groff said ASEAN currently spends only about half that.
He said while there has been some progress in a number of countries in recent years in helping facilitate private investments in infrastructure by addressing legal and regulatory issues that restrict private participation, the process is not easy and takes time.
There is a need to think about financing interest mechanisms, mechanisms to mitigate risks, developing bankable projects that attract private investments and bringing back home the region’s extra savings that have been invested in low-yielding treasury bonds in the U.S. and Europe, he added.
To bring back some of those funds, the ADB has helped develop the ASEAN Infrastructure Fund which began lending last year. Two infrastructure projects in Indonesia have been funded while more projects throughout the region are in the pipeline, Groff said.
The fund is being managed by the ADB, with funding coming from ASEAN members and the bank.
Indonesian Finance Minister Muhamad Chatib Basri said infrastructure is the “first priority” for his country after it had established political stability under outgoing President Susilo Bambang Yudhoyono.
However, he said the ” main challenge in the future is not only sustainable growth but also shared growth.”
Philippine Finance Secretary Cesar Purisima said the region’s relatively young population, natural resources and its geographic location are factors that would contribute to growth. But to make sustainable growth a reality the “capital surplus region” has to make more infrastructure investments, he added.
“We have the money … but we need to make our financial markets more efficient and more connected,” he said. “Governance is the most important ingredient because businesses want predictability, want open economy, want to be able to reduce the risks.”
Business World, 22 May 2014
Regional leaders and speakers at the ongoing World Economic Forum on East Asia in Makati City highlighted gains that have been made so far — from regulatory reforms to curbing corruption — but noted that countries faced similar challenges involving infrastructure, governance and even food security.
Philippine President Benigno S. C. Aquino III, keynoting the afternoon plenary session, touted gains made in the first four years of his administration — from above-target economic growth and resulting credit ratings upgrades to the detention of his predecessor, Gloria Macapagal-Arroyo, on corruption charges.
The same themes were expounded by Cabinet officials who spoke at earlier sessions, including Finance Secretary Cesar V. Purisima and Budget Secretary Florencio B. Abad.
Similar reforms were presented by Indonesian President Susilo Bambang Yudhoyono, Vietnamese Prime Minister Nguyen Tan Dung and Myanmar Vice-President Nyan Tun.
At a morning session focusing on the region‚Äôs prospects, the upcoming economic integration of ASEAN was cited as a means of addressing barriers to development and stability, including the ongoing political crisis in Thailand and territorial disputes with China — seen as risks to investment.
Highlighting the heightened tensions over China‚Äôs claims to the South China Sea, Vietnam‚Äôs Mr. Dung blasted the regional power for ‚Äúslandering‚ÄĚ his country, and Klaus Schwab — the Forum‚Äôs founder — while stressing that the organization was not taking sides, said there was a need to ‚Äúresolve this situation which has potential to create a situation we do not want.‚ÄĚ
‚ÄėWE HAVE TO CHANGE…‚Äô
Mr. Schwab, returning the discussion to the issue of growth and equitable progress, said the biggest challenge for the world, and not just the region, was ‚Äúsocial inclusion.‚ÄĚ
‚ÄúWe have to change the way we run our economies,‚ÄĚ he said.
‚ÄúIncome inequality has been getting worse across the world for the past 30 years,‚ÄĚ Lee Il-Houng, G20 Sherpa and ambassador for international cooperation of South Korea, noted earlier in the day.
Mr. Aquino was in agreement, saying in his speech that ‚Äú[i]nclusive growth cannot be delivered by simply delivering the services… [that the people] deserve.‚ÄĚ
Mr. Yudhoyono called for ‚Äúmobility for all‚ÄĚ, while Mr. Dung said ‚Äúdomestic reform must be coupled with regional integration.‚ÄĚ
Mr. Schwab said it didn‚Äôt matter if the viewpoint was glass half full or glass half empty, only that the ‚Äúglass is still growing… there is more water [in it].‚ÄĚ
The morning session on East Asia‚Äôs economic outlook also cited long-standing development gaps.
‚ÄúWe need to invest in infrastructure to assure our connectivity with each other and the rest of the world,‚ÄĚ Mr. Purisima told forum participants.
Among others, he noted that the Philippines‚Äô infrastructure backlog has hindered the country from implementing an ‚Äúopen skies‚ÄĚ policy, which would relax aviation restrictions that currently provide local players an advantage over foreign rivals.
‚ÄúThe challenge really is congestion in Manila, so we need to fix, of course, infrastructure,‚ÄĚ Mr. Purisima said.
Mr. Purisima was responding to a comment by AirAsia Group Chief Executive Officer (CEO) Anthony F. Fernandes in the same session that many Southeast Asian economies have been moving in the right direction by taking steps toward an ‚Äúopen skies‚ÄĚ policy. At the same time, Mr. Fernandes noted: ‚ÄúOpen skies is one thing, but many invisible barriers still exist.‚ÄĚ
Mr. Purisima also highlighted infrastructure‚Äôs role in supporting agriculture, which in the Philippines accounts for a third of the work force but contributes less than a fifth to national output.
‚Äė‚ÄúThere is need for sectoral interventions, in particular, in agriculture,‚ÄĚ Mr. Purisima noted.
‚ÄúAnd here infrastructure takes that role. Rice facilities, storage facilities, irrigation — we need to invest [in those],‚ÄĚ he stressed, adding: ‚ÄúWe need to give [farmers] better access to technology.‚ÄĚ
‚ÄúIf we succeed in doing that, we improve the overall competitiveness of the country.‚ÄĚ
Mr. Fernandes echoed Mr. Purisima‚Äôs view later in the session, urging governments to ‚Äúallow businesses to grow by facilitating them by providing the right infrastructure.‚ÄĚ
Infrastructure, however, is not the only issue casting a shadow on the region‚Äôs otherwise upbeat outlook.
In an opening press conference, Forum co-chairs Takeshi Niinami, chairman of Lawson, Inc., and James T. Riady, CEO of Lippo Group in Indonesia, cited risks posed by current geopolitical tensions.
‚ÄúTensions are real and this impacts directly and indirectly business enterprises,‚ÄĚ Mr. Riady said at the press conference.
‚ÄúCapital markets reflect that immediately.‚ÄĚ
Mr. Niinami stressed, however, that business must not take a back seat to territorial disputes.
‚ÄúWe have to focus on the business first, then politics follows,‚ÄĚ he said.
The Asset, 25 May 2014
While quite a number of governance reforms had already been put in place over the last four years, the Philippines’ Aquino administration is bent on implementing more.
The country’s finance secretary Cesar V. Purisima said the administration will continue to take advantage of the political capital of President Benigno Aquino III to pursue additional reforms in his remaining two years in office.
This is to help ensure the good governance agenda is institutionalized and sustained beyond 2016.
“The people have come to know the impact of good governance on their lives as the economy makes huge strides,” Purisima said in one of the sessions of the 23rd World Economic Forum on East Asia (WEF-EA), which the Philippines recently hosted.
As the public appreciates the benefits of good governance, he said, the administration is hoping for the swift passage in Congress of bills backed by the executive branch.
Some of these legislative measures are the amendment of the charter of the Philippine central bank, the streamlining of customs procedures, the rationalization of fiscal incentives, and the easing of restrictions on foreign investments.
The bill seeking to amend the regulator’s charter is aimed at providing the monetary authority with more flexibility in managing liquidity in the economy. It is also aimed at giving the central bank more teeth in regulating banks.
One of the key provisions in the proposed bill seeks to allow the central bank to trade its own bonds in the capital market. Another seeks to require banks to secure prior approval of the regulator before changes in their ownership structure take place. This is to ensure the financial entities are managed by qualified people.
The bill seeking to streamline customs procedure is aimed at helping the bureau of customs in its fight against smuggling, while the one seeking to rationalize fiscal incentives seeks to lift unnecessary tax perks to boost revenue collection of the state.
The bill easing restriction on foreign ownership is aimed at boosting investments and job creation, and increasing incomes.
So far, some of the key reforms implemented in the first four years of the Aquino administration include the Sin Tax Reform law that raised levy on alcohol and cigarettes, the Reproductive Health law, the tighter campaign against smugglers and tax evaders, and the reform in the national budget process to have integrity in handling of public funds, among others.
Moreover, infrastructure development has been accelerated under the Aquino administration.
Purisima said that out of over 50 projects included in the Public-Private Partnership (PPP) programme, seven have been awarded to winning bidders.
These projects are the Daang Hari-SLEX Link Road, the first and second phases of the PPP for school infrastructure project, the Ninoy Aquino International Airport (NAIA) Expressway Project, the modernization of the Philippine Orthopedic Center (MPOC), the automatic fare collection system, and the Mactan-Cebu International Airport passenger terminal building.
Purisima said that with the continued pursuit of reforms, the Philippines, which has become one of the fastest growing economies in Asia, is expected to generate more gains in the economic and political front.
Philippine Daily Inquirer, 21 May 2014
By Cesar V. Purisima
As policymakers and business leaders gather in Manila this week for the World Economic Forum on East Asia, the talk will inevitably turn to growth.
Sustaining economic growth has become harder for Asian policymakers as interest rates in the developed world rise on signs of recovery. After years of easy credit, emerging markets will have to compete for funds to fuel development, and woo investors with fundamentals and structural reforms.
Reforms have the power to alter a country‚Äôs economic destiny. This is why they inspire confidence from markets, businesses and citizens. To see how reforms can change perception and reality, one may look at the Philippines.
Since assuming office in 2010, President Aquino has turned around a country from being ‚Äúthe sick man of Asia‚ÄĚ to an economic comeback story. He undertook reforms that economists have been urging and politicians shirking (from). These include the Sin Tax Law that raised the levy on alcohol and tobacco products, and spurred the revamp of commonplace procedures.
Our reforms have been rewarded.
Gross domestic product grew by 7.2 percent in 2013, the fastest in the Asean (Association of Southeast Asian Nations) region, notwithstanding natural calamities, including Super Typhoon Yolanda (international name: Haiyan) that is said to be one of the strongest ever recorded.
Moreover, the Philippines received investment grades from Fitch, Standard & Poor‚Äôs and Moody‚Äôs in 2013, lowering the country‚Äôs borrowing costs and allowing us to redirect funds for social services and infrastructure. The Philippines earned another rating upgrade this month from S&P, which showed the reforms will endure beyond President Aquino‚Äôs term.
A powerful force
Our efforts have boosted the country‚Äôs ranks in global surveys. Its rank jumped 26 places in the World Economic Forum‚Äôs Global Competitiveness Index since 2010, and 30 places in the International Finance Corp.‚Äôs¬† Doing Business Index in 2013.
Despite our gains, much remains to be done both at the national and Asean levels. In the remaining years of our term, the Aquino administration will intensify efforts at reform by opening up more sectors to foreign investments, rationalizing tax incentives and institutionalizing transparency.
Those who doubt our commitment should take note of the unpopular enactment of the reproductive health bill and the amendment of the Sin Tax Law.
Across Asean, we must integrate our economies in a way that simplifies rules and lowers the cost of doing business. With our young populations and growing economies, we have the potential to become a powerful force for liberalization. However, we need reforms.
Without those, growth is fleeting. For too long, many politicians have avoided unpopular reforms. But our citizens deserve better.
Reward for telling truth
The Aquino administration‚Äôs electoral success and approval ratings are proof that voters listen to, and reward, politicians who tell the truth. This is as true in the rest of the Asean as it is in the Philippines.
The good news is that reforms are not rocket science. We are well-aware what needs to be done. Good governance is good economics. Just look at the Philippines.
(Editor‚Äôs Note: Cesar V. Purisima is the finance secretary of the Philippines. Manila is hosting the World Economic Forum on East Asia from May 21 to 23).