PHILIPPINE
Vol. 22, No. 9 September 2010
FACTSHEET The Month’s Highlights
Political
Malacanang furnished the Chinese government a copy of the probe results on last month’s bus hostage crisis. The report recommends filing charges against 13 persons and three media networks. The President confirmed his choice of former senator Manuel Roxas II as his unofficial senior adviser. The US granted the Philippines US$ 434 million in financial assistance under the Millennium Challenge Corp., hoping if would lead to economic reforms and fight poverty and corruption. The Supreme Court ordered the House to suspend impeachment proceedings against Ombudsman Gutierrez, citing a one-year prohibition under the Constitution. The President decided not to attend the AsiaEurope Meeting in Brussels in early October.
Economic
The Philippines could soon be taken off the list of countries not fully compliant with OECD-backed standards as officials rush to finalize guidelines implementing a law mandating the sharing of tax information. The Philippines and its ASEAN peers have taken issue with US policies that reportedly restrict trade. High US tariffs on garments and crops, trade distorting subsidies favoring American agriculture and ‘frequent recourse’ to antidumping probes are among the concerns raised. A ban on open-pit mining in South Cotabato that is threatening a US$ 5.2 billion coppergold prospect of Xstrata Plc will take effect on 3 October, although it is expected to be reviewed.
The country posted a balance of payments surplus of US$ 40 million in August, raising the eight-month tally to US$ 3.478 billion. The Aquino government achieved a surprising budget surplus in August, even after its two revenue agencies fell sharply below their targets. August’s P1.3 billion surplus is the result of spending ‘wisely’, Finance Sec. Purisima said. The budget deficit in the eight months to August reached P228.1 billion, 8.6% higher than the deficit posted last year. The government has moved back the official presentation of PPP projects by a month, citing the unavailability of a venue for expected investors. The announcement comes as the country’s neighbors have also announced ambitious investment plans to help fuel economic growth: Malaysia unveiled a US$ 440 billion, 10year investment plan that will be funded primarily by the private sector, and Indonesia said it needed US$ 140 billion – of which two thirds is to come from the private sector – over the next five years for infrastructure development. A regional trial court in Aparri town affirmed the ban on the importation, registration and distribution of secondhand vehicles at Port Irene in Santa Ana, Cagayan. The country’s current account surplus inched up 3.2% to US$ 4.4 billion in the first half. House Speaker Belmonte said he was in favor of reviewing fiscal incentives granted to foreign and local big businesses to find out if they do more harm than good to the economy. Belmonte issued the statement after discussions with officials of the Dept. of Finance during which the DOF offered to submit a list of revenue-eroding laws to Congress for review as the government tries to contain the fiscal deficit.
The external debt of the country hit US$ 57 billion as of June, up from US$ 52 billion in June 2009.
The BSP said it was considering relaxing foreign-exchange rules, especially on capital outflows, in a bid to temper the sharp rise of the peso, which has triggered complaints from the export sector.
The government plans to put up an insurance scheme that will compensate private investors involved in big-ticket infrastructure PPP projects to eliminate ‘risks’ arising from adverse court or regulatory decisions.
The Philippines has officially signaled its interest in a free trade agreement with the EU, firming up the new administration’s plan to increase the country’s engagement with its trading partners.
Exports climbed 35.9% to US$ 4.5 billion in July. The export performance in the first seven months reached US$ 20.538 billion, up 37.4% from last year. New independent power producer administrators (IPPAa) – firms that will win the right to sell the contracted output of IPPs – will no longer be eligible for incentives from the BOI, as the agency decided to suspend such privileges. The government has allocated P15 billion of next year’s proposed national budget as its counterpart fund for projects under the PPP scheme. The Aquino administration is bent on selling PAGCOR, its third largest revenue contributor after the BIR and Customs. PAGCOR has hired financial advisors to assist in the planned sale. DTI Secretary Domingo said that they will be going after industries that have cartel-like operations to bring down the prices of good and protect consumers. The passage of anti-trust laws is one of the priorities of the Senate. The energy sector has incurred a staggering P932 billion in outstanding and contingent liabilities, more than half of which would likely be shouldered by electricity consumers. Inflation inched up to 4% in August. The average inflation for the 8-month period stands at 4.2%. Gross International Reserves stood at US$ 49.578 billion as of the end of August. Bank lending grew at an even faster pace of 11.7% in July, helped by huge liquidity in the system and low interest rates. The auto industry continued to reap the rewards of a recovering economy and increased consumer confidence with vehicle sales jumping 37% to 112,454 units as of end-August. The Departments of Finance and Energy will spearhead the creation of an inter-agency team that would specifically focus on oil smuggling. All power generation and distribution utilities will be required to offer at least 15% of their shares to the public, according to the new rules being crafted by the ERC.