SBEP magazine 2012

STRATEGIC BUSINESS ECONOMICS PROGRAM

SBEP NOVEMBER 2012

It's more fun

in SBEP

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contents

Now on its 38th year, the Strategic Business Economics Program is accepting limited applications to its Executive Education offering:

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Editorial

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Special Seminars

24

SBEP Class 2012

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2012 Golf Tournament and Homecoming Dinner

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Characters of Class 2012

Executive MBE (Master in Business Economics) and Executive CBE (Certificate in Business Economics) • A convergence of Economic Principles, Business Techniques, and Strategic Management • Designed for CEOs, CEO Designates, and Owners; Heads of Public Agencies and Institutions, and Senior Policymakers • A modular schedule suited for top executives • With research support from the School of Economics and the CRC Foundation Be part of a great tradition and a network of executives in an atmosphere of academic excellence and real business applications.

Strategic Business Economics Program 6/F, School of Economics, APEC Communications Building, University of Asia and the Pacific, Pearl Drive, Ortigas Center, Pasig City / Email: sbep@uap.asia / Tels. 634-2820 / 634-3095 / 634-2821

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editorial

Victor A. Abola, Ph.D.

Rapid Economic Growth Will Mean More Fun in the Philippines

T

he tag line adopted by the Department of Tourism for the government’s efforts to draw in more tourists into the country and contribute more to her economic development is “More Fun in the Philippines.” The line expresses a truth, but it may be a bit superficial. There must be more meaning to that promotional focus, not only for tourists but also for businesses, both domestic and foreign.

Businessmen will find more it fun in the country if their investments are secure in terms of property rights, minimal changes in the policy environment, better infrastructure to lower costs and to reach tourism destinations and finally the strict adherence to the rule of law. These necessary conditions to satisfy them, but they will not be sufficient.

To be sure, the country is in the cusp of the best economic conditions for a takeoff to rapid economic growth and thus join our East Asian neighbors in their highly-held status of well managed and fast-growing countries that have led the world in the past half century. In the past, we struggled with having the bare minimum acceptable level of international reserves of 3 months of imports. By endNovember, we had $84.1 B equivalent to 12.2 months of imports of goods and services. If measured in terms of imports of goods alone, it would be equivalent of more than 16 months. That would place the country next only to China and Taiwan.

We have also a relatively and fairly stable inflation rate. In 2012, it averaged 3.2% representing a significant slowdown from 4.6% a year ago. But even the latter was not at all bad, considering the rapid increase in crude oil prices during that year. More benign inflation is expected in 2013, as food supply remains abundant and crude oil prices are projected by the U.S. Department of Energy to be on a slight downward trend until 2014.

Tax collections should have risen

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by some 13% for the full year, and, thus, even without the benefit of tax increase or new taxes, the tax effort would have risen by 0.2% to 0.4% points. The passage of the controversial Sin Tax law which raised the rates on alcohol, beer and cigarettes (ABCs) and rationalized the system to have a more level playing field is expected to contributed an additional P33 B per year. That is some 0.3% of GDP for 2013 and beyond. But the tax effort will benefit even more from faster economic growth, as not the only the tax base expands, but taxpayers would also be more willing to pay more taxes as their profits/incomes expand.

Infrastructure spending has accelerated and was tracked at a 57% growth pace for the 1st 11 months of 2012. This has brought it to the highest level ever achieved, and the fastest rate of increase in more than 30 years.

Despite this, the robust tax collections have made it possible for the deficit to reach only P127.3 B which is only 45.6% of the full-year target. As a consequence, the debt-to-gdp ratio by the end of 2012 will be some 48.8% which will be the first time it goes below the 50% level in more than 30 years. It should be noted that even as early as 2010, the country’s debt ratio was already lower than Malaysia (A rating). By the end of 2013, with low interest environment, robust economic growth above 7% and tax collections, the debt ratio is expected slide by another 2.0% points, in which case, PH will have a lower debt ratio than Thailand.

The country’s stock and bond markets kept on making new records in 2012. The stock market recorded 38 new highs on the back of the strong economic fundamentals and recognition by credit rating agencies of the same that has resulted in an upgrade to just a notch below investment grade. Anticipating “making the grade” in 2013, foreign funds are flowing into the country

pressuring the peso to appreciate.

The focus in 2013 is to continue the momentum established for infrastructure spending, tax collections and residential housing construction. In addition, the exchange rate cannot be allowed to appreciate further, as this reduces the purchasing power of OFWs (who are the main drivers of new residential housing, and consumer spending in general), weakens the goods-producing sector (both for export and for domestic markets), and makes the business process outsourcing (BPO) sector less competitive, especially considering that the Indian rupee has depreciated by some 20% since 2010. In addition, we still need to get the public-private partnership (PPP) projects take off this year, and eliminate the regulatory roadblocks posed by local government units and changes in the playing field by the National Government that is cramping the private sector.

These are the main sticky points since convergence (of different government agencies) is occurring with regard to tourism, as the article of Ms. Cherryln Rodolfo, after the National Tourism Plan was put in place. The Department of Public Works and Highways, for example, is aligning its priorities to the tourism sector’s need for infrastructure to bring tourists seamlessly to the preferred destinations like Palawan and Panglao, Bohol, among others. The Department of Finance is showing more flexibility with respect to the onerous taxation on foreign airlines. And the Department of Trade and Industry is pushing for new hotels in the main destinations.

In short, it only requires now a relatively small leap in order to make the economy roar like an Asian Tiger. And once that happens, it will truly be “More Fun in the Philippines.”

SBEPTEAM

To make sound business decisions, you’ll need more than just information. You’ll need insights, analyses, and well-founded forecasts.

The Business Economics Club will give you all these, in a language which is simple, without being simplistic.

For any inquiries, you may call Ms. Mary Grace Agner at 637-0912 loc. 251 or 374. You may also reach BEC through fax no. 631-1280

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(L-R) Victor A. Abola, Ph.D., Program Director; Alonica R. Salazar, Marketing & Alumni Relations Manager; Jeanne Carla Y. Garcia, Program Assistant; Ledinia G. Coates, Executive Assistant; Rowena A. Araña; Program Coordinator; and Lea T. Riñon, Marketing & Alumni Relations Coordinator.

The SBEP Coordinating Committee, whose members include Dr. Emilio T. Antonio Jr., Associate Professor; Dr. Rolando T. Dy, Director of CFA; and Dr. Victor A. Abola, SBEP Program Director, ensures faculty staffing from the University.

Editor-in-Chief Editorial Assistant Contributors

Victor Abola

Printing

Inkwell Publishing Co., Inc.

Alonica Salazar Emilio Antonio Jr. Cherrylyn Rodolfo Edgar Ruado

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APPLIED BUSINESS ECONOMICS PROGRAM

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In addition to the fundamental management areas of production, marketing, and finance, ABEP also covers macroeconomic and microeconomic analysis, industry analysis, forecasting, and project analysis. Equipped with these tools, the ABEP graduate is prepared to make sharp business and economic analyses as well as draw out implications of business decisions—at the level of the company, the industry, and the economy as a whole.

For inquiries, please contact Ms. Elsie Tingzon at 637-8549 / 637-0912 loc. 225 & 375 or email: abep@uap.asia

special feature Victor A. Abola, Ph.D.

Associate Professor UA&P School of Economics and

Ma. Katrina Mercado

MS Industrial Economics UA&P School of Economics

There is a long-standing perception that exchange rate movements have an impact on inflation, and are therefore a cause for concern. However, an analysis of the exchange rate pass-through reveals a more reassuring set of facts.

Do exchange rate changes influence inflation?* Beating the consensus among economic analysts, the Monetary Board (mb) of the Bangko Sentral ng Piilipinas (bsp) cut its policy rates by 25 basis points to an all-time low of 3.75% on July 26, 2012. The move did not have a significant immediate impact on the peso-dollar rate, which moved back to below the P42/$1 territory in the first two weeks of August.

However, with the buoyant economic data from the US in the first half of the month (mainly due to signs of life in the labor and construction markets), there is a promise of a clear albeit slow recovery, in contrast to the double-dip recession that has gripped the Eurozone.

Thus, from August 13, the peso started to depreciate again from a low of P41.63 on July 19. It rose 1.7% to P42.32, compared with the average exchange rate of P41.90/$1 in July.

Despite this and the slight inflation increase in July, bsp officials say that there is room for further monetary easing. That would imply that they are not overly concerned about the effect of the peso depreciation on their inflation targets. The question is, should we be?

slogan “strong peso, strong republic.” And so the Philippines has a lingering fear of peso depreciations.

Popular perceptions are never without basis. The negative view of peso depreciations has been around for decades. It may be traced to the large and sudden depreciations in the past1, particularly in 1983, 1984, 1985 (the turmoil after the Aquino assassination), 1991, and 1998 (the Asian Financial Crisis). Table 1 shows the years when the peso had double-digit depreciations with correspondingly high inflation rates. During these years, three episodes are worth noting: in 1984, the highest peso depreciation of 50.3% was matched by an inflation rate of 50%; in 1991 (the first Iraq war), the peso depreciated by 13% and the inflation rate was 19.4%; and in 1998, the peso depreciated by 38.8% but the inflation rate was relatively small at 9.3%.

Notably, these were all prior to 2000, and peso depreciations of 13.1% in 2000 and 15.4% in 2001 did not result in doubledigit inflation rates.

Table 1 • High foreign exchange depreciations and inflation rates, 1983-1998 Year

Peso-dollar Rate

FX % change

1983

11.1127

30.1

9.5

Myths on exchange rate changes

1984

16.6987

50.3

50.0

The widespread but uncritical view is that peso depreciations (or a higher peso-dollar rate) indicate a bad economic performance and a greater likelihood of inflation. Conversely, when the peso appreciates, the usual interpretation is that the economy is doing well and that inflation will slow down. The latter was enshrined by former President Gloria Macapagal-Arroyo in her

1985

18.6074

11.4

22.6

1990

24.3105

11.8

12.3

1991

27.4786

13.0

19.4

1998

40.8931

38.8

9.3

*Most of the data presented have been obtained from Katrina Mercado’s thesis, “An empirical analysis of exchange rate pass-through to consumer prices in the Philippines” (2010).

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Inflation rate

Source: Bangko Sentral ng Pilipinas, uses CPI 2000=100

1 We disregard the nearly 100% devaluation of the peso in 1961 (from P2/$1 to $3.90/$1) as a result of the “decontrol” policy of then President Diosdado Macapagal, or the 1969 devaluation (from P3.90 to around P5.40/$1), as these episodes may be too distant in the past.

special feature Despite the widespread perception, there was not much respite from inflation when the peso appreciated. Peso appreciations were also accompanied by inflation more strongly prior to 2000. Figure 1 indicates that in 1992 and 1994, the peso appreciations ranged from 2.6% to 7.2%, and yet the inflation rates were elevated at 6.7% to 10.1%. In six of the seven years between 2005 and 2011, the peso appreciated by 1.7% to 10.1%. During that period, the inflation rate varied from 2.9% to 8.3%. The best inflation record was at 2.9% in 2007 when the peso appreciated by 10.1%. It has been claimed that the inflation rates would have been higher because crude oil prices had been spiralling upward during that period.

Ostensibly, the argument that a peso appreciation results in lower inflation rates does not seem valid. These broad strokes, however, should give way to sound empirical research that provides a quantitative link between exchange rate changes and the inflation rate.

Figure 1 • Peso appreciations and inflation rates 1992-2011 12 Inflation rate FX% change

-2.0

10 8

-6.0

6

-8.0

4

-10.0

2

FX change

-4.0

Inflation rate

0.0

0

-12.0 1992 1994 1995 1999 2005 2006 2007* 2008 2010 2011 Source: BSP, *Starting this year, the CPI is based on 2006=100.

Aggravated perceptions The opinion that currency depreciations are bad and appreciations are good is supported by an old economic theory that postulates that a 1% change in the exchange rate translates into a 1% change in the inflation rate (whether positive or negative for both). The argument is that the exchange rate would equalize the prices of the same goods in two different countries, a view that is based on the long-standing “law of one price” (lop). If we suppose that a hamburger sold both in the Philippines and in the US (with the same size and other characteristics) were to cost P100 in the Philippines and $2 in the US, then the exchange rate would be P50/$1. The lop assumes that there are no transport and other transaction costs involved. Thus, if a country devalues its currency (e.g., from P50 to P60/$1, or by 20%), and domestic prices do not change, the value of a hamburger in the US will be different from that in the Philippines. It remains at P100 in the Philippines, and at $2 in the US. If we were to convert our

P100 to US dollars at P60/$1, then we would get only $1.667.

That amount would not be enough to buy a hamburger in the US. To maintain the parity, it is necessary for the domestic price of hamburgers to rise to P120 (or by 20%), so that the value of a hamburger in the Philippines would be equal to that in the US.2 How does such an increase happen? If an American had $2, instead of paying for a hamburger in the US, he would need to change only $1.667 to buy an equivalent product in the Philippines. But such a condition would increase the demand for hamburgers in the Philippines. Assuming no change in supply, there would be additional demand for hamburgers in the Philippines as long as the local price has not reached P120. Only then will the additional demand cease.

Thus, economic theory postulates a one-for-one relationship between the two, i.e., a 1% currency depreciation will result in an additional 1% inflation, or equivalently, every 100% or 10% depreciation would lead to an additional 100% or 10% inflation, respectively.

Is the theory supported by evidence, both in general (for both advanced and developing economies) and for the Philippines?

A considerable degree of economic research has focused on the extent to which exchange rate changes translate into inflation.

This is the concept of the exchange rate pass-through (erpt), which measures what percentage of a 1% change in exchange rate eventually passes on to the inflation rate.

Evidence disproves theory and perception Almost all empirical studies for many countries have shown erpt to be incomplete or less than 1. It would be complete, and take a value of 1 if there is a one-for-one relationship between the percent change in the exchange rate and the inflation rate.

However, these studies also indicate that erpt estimates vary according to country groups and time periods. Earlier studies found a low erpt for developed countries and a high erpt for developing ones. However, later studies revealed that the erpt for developing countries had declined and were not significantly different from that of the developed countries.

Also, many of those studies focused only on the effect of currency depreciation on import and export prices (i.e., not yet up to the consumer level). This may be considered as only the first stage of erpt. The second stage would be the impact of import prices on the inflation rate. Combining the two stages would result in an overall erpt. The more recent studies focus on this total erpt, which is also our main interest.

The most influential of these studies is that of Campa and Goldberg (2006)3, which covered 21 oecd (advanced) countries See Paul Krugman, International Economics: Theory and Policy (2012), pp. 497-481 for a more detailed discussion.

3 Campa and Goldberg had done previous studies in 2002 and 2005 on ERPTs. Jose Manuel Campa and Linda S. Goldberg, “Distribution Margins, Imported Inputs and the Sensitivity of the CPI to Exchange Rates,” Working Paper 12121 (Cambridge, MA: National Bureau of Economic Research, 2006).

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special feature from the first quarter of 1975 to the fourth quarter of 2003.

They found that the Stage 1 erpt average was 0.64 (i.e., a 1% currency depreciation would result in a 0.64% change in import and export prices). However, the total erpt averaged 0.17 (i.e., a 1% currency depreciation would affect inflation by 0.17%).

When they introduced more explanatory factors that were deemed theoretically sound and calibrated their model, the overall erpt dropped to 0.13, even lower than the simple average of the total erpt for the 21 countries. They remarked that it was “not unusual for this sensitivity to be low, often below 10% of any exchange rate change.”

The main explanation why erpt can be so low and contrary to the theory may be simplified as in Campa and Goldberg’s assertion that “consumer prices could be insensitive to exchange rates because a small share of the goods composing the cpi basket have exposure to exchange rate changes via tradable products, or because the competitive structure or the size and behavior of the distribution sector isolates final prices from exchange rate movements.”

ERPT of the Philippines Earlier studies on erpt for the Philippines also focused on Stage 1 erpt, which we no longer report. The different econometric methods used in these studies are specified in Table 2. More recent studies have covered the total erpt and have found it to be between 0.025 and 0.72. Their data are only up to 2001 at the latest, but extend to as far back as 1968, 1970, or 1980. The most recent of these studies, which was conducted by Corinthas (2009) prior to our own, would show a low erpt of .056. These studies also support the idea that there has been a large decline in erpt when the estimate covers data from 1993 onwards (see Table 2).

Table 2 • Summary of previous ERPT estimates for the Philippines Long-run Exchange Rate Pass-Through Choudhri and Hakura (2001)

1979-2000 (quarterly)

0.33

Cortinhas (2009)

1968-2001 (monthly)

0.056

Lamberte (2003)

1980-2001 (monthly) (2 lags)

72.72 (1980-1993) 0.23 (1993-2001)

Lamberte (2003)

1994-2001 (monthly) (4 lags)

0.03

Dakila (2002)

1980-2001 (monthly)

0.66

Although Francisco Dakila of the bsp estimated it at 0.66 in 2002, bsp Governor Amando Tetangco Jr. implicitly provided estimates of 0.043 and 0.14 (using two different approaches) in a speech delivered in July 2007.

Our study — carried out in 2010 and updated in 2011 using quarterly data from 1993 to 2009, and employing methodologies similar to those used by other authors covering Asian countries — obtains a long-run total erpt of 0.03. This estimate was found to be robust since the short-run estimates (using another method) gave a result of 0.035, and another econometric approach provided results ranging from 0.0198 to

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0.0335 (with an average of 0.025, as shown in Table 3). Besides, this result was already obtained by Lamberte (2003) in his more complete model that included longer lag effects.

In short, the most recent and most reliable estimate is that a 1% change in foreign exchange results in a 0.03% inflation change. Another way of putting it is that a 10% depreciation would add only 0.3% to the inflation rate, which shows that the impact of currency changes (including appreciation in the opposite direction) on the inflation rate is rather small. One could say that it is inappropriate to use the foreign exchange rate to address inflation-related problems in the Philippine setting, since it is relatively ineffective and a currency appreciation has negative effects on the economy. Doing so would be similar to using an ax to cut a toothpick.

The decline of local ERPT Looking at the Philippine economy’s dynamics, we find that the significant decline in erpt was largely brought about by the trade and foreign exchange liberalization introduced in the early 1990s.

The sharp reduction in tariffs from 33.3% in 1990 to 6.8% in 2004 (see Table 4) and the replacement of quantity restrictions with tariffs also contributed to the decline. Controls on trade and nontrade transactions were removed as the foreign exchange rate was allowed to be market-driven (Tan, 1995). This foreign exchange liberalization complemented the trade reforms since the market-driven exchange rates enabled the market players to see the price signals clearly and to respond accordingly.

With tariffs and trade barriers reduced, domestic competition was expected to increase especially from imported goods. The degree of competition is only one of the few areas of industrial organization that influences the magnitude of erpt. With pricing-to-market observed as a phenomenon among exporters, these firms are expected to absorb currency changes to retain their market shares in the importing countries. Faced with greater competition globally, these foreign exporters to the Philippines likely absorbed currency fluctuations to keep their decreased market shares.

As regards Stage 2 pass-through, the waves of liberalization can also be seen as a significant factor in the decline of overall erpt. Owing to the standard markup model, domestic and external pressures on consumer prices may have been tempered by the increased competition. Faced with greater competition, domestic and external players pass on a lower percentage of currency changes to consumer prices to maintain their market shares. With reduced markup from both factors, full erpt would decline. At the same time, other sectors of the Philippine economy have opened up. The increased competition in the distribution (primarily transportation) sector can also be a reason for the low second-stage pass-through. Thus, with the decline in first-stage pass-through and the low second-stage pass-through, the degree of overall erpt decreases significantly. Another key factor is the bsp’s introduction of an inflation-targeting regime in 2002. More discipline with respect to money growth and quicker adjustments to avoid the build-up of inflationary expectations must have contributed to the drastic lowering of the Philippines’ erpt.

Thus, we conclude that the impact of exchange rate changes

special feature Table 3 • Results of Mercado-Abola (2011) study on Philippine ERPT Mercado-Abola

Period and methodology

Pass-through estimate

A. Main methodologies 1. Long-run ERPT

1993-2009 (quarterly)

Stage-1 FX to import prices

Cointegration

0.182

Stage-2 Import to consumer prices

Cointegration

0.163

Total ERPT = Stage 1 x Stage-2

0.03

2. Short-Run ERPT

1993-2009 (quarterly)

Stage-1 FX to import prices

Error-correction model

0.683

Stage-2 Import to consumer prices

Error-correction model

0.051

Impulse Response Function from SVAR

ERPT estimate

VAR 1 Model

10-quarter impact

0.00198

VAR 2 Model

10-quarter impact

0.00618

VAR 3 Model

10-quarter impact

-0.00215

VAR 4 Model

10-quarter impact

0.00335

VAR 5 Model

10-quarter impact

0.00289

Total ERPT = Stage 1 x Stage-2

0.035

B. Validating estimations

Table 4 • Comparative tariff rates, 1990-2004 1990

1998

2000

2004

Average tariff (%, all sectors)

33.33

11.32

8.47

6.82

Dispersion of tariffs (coefficient of variation)

0.44

0.96

0.99

1.07

Effective protection rate (%, all sectors)

29.39

8.59

7.06

6.33

Dispersion (coefficient of variation)

0.75

2.19

2.04

2.91

-

2.24

2.48

2.71

6,193

7,366

Percent of tariff peaks Number of product lines (8-digit level 2002 HS)

7,382

Source: Aldaba (2005)

on the inflation rate is negligible. We are one with the bsp in not being concerned about the peso’s current tendency to depreciate in relation to the US dollar.

References Aldaba, R. M. (2005). The Impacts of Market Reforms on Competition, Structure and Performance of the Philippine Economy. PIDS Discussion Paper Series. (2005-24).

Bacchetta, P. & van Wincoop, E. (2002, November). Why Do Consumer Prices React Less Than Import Prices to Exchange Rates? NBER Working Papers 9352.

Bailliu, J. & Bouakez, H. (2004, Spring). Exchange Rate PassThrough in Industrialized Countries. Bank of Canada Review.

Burstein, A. T., Neves, J. C., & Rebelo, S. (2003). Distribution Costs and Real Exchange Rate Dynamics During Exchange-RateRelated Stabilizations. Journal of Monetary Economics, 50.

Ca’ Zorzi, M., Hahn, E., & Sánchez, M. (2007). Exchange Rate PassThrough in Emerging Markets. European Central Bank Working Paper Series (739).

Campa, J. M., & Goldberg, L. S. (2006, April). Distribution Margins, Imported Inputs, and the Sensitivity of the CPI to Exchange Rates. Federal Reserve Bank of New York Staff Reports.

Campa, J. M. & Goldberg, L. S. (2002, April). Exchange Rate PassThrough into Import Prices: A Macro or Micro Phenomenon.

CEPR Working Paper , 1-33.

Campa, J. M. & González, J. M. (2002). Differences in Exchange Rate Pass-Through in the Euro Area. 1-27.

Campa, J. M., Goldberg, L. S., & González Mínguez, J. M. (2005).

Exchange Rate Pass-Through to Import Prices in the Euro Area.

Banco de España Working Paper (0538), 8-38.

Chew, J., Ouliaris, S., & Meng, S. T. (2009, June). An Empirical Analysis of Exchange Rate Pass-Through in Singapore. MAS Staff Paper No.50.

Choudhri, E. U. & Hakura, D. S. (2001). Exchange Rate Pass-Through to Domestic Prices: Does Inflationary Environment Matter? IMF Working Paper 01-194.

Cortinhas, C. (2009). Exchange Rate Pass-Through in ASEAN: Implications for the Prospects of Monetary Integration in the Region. The Singapore Economic Review, 1-32.

Ghosh, A. & Rajan, R. S. (2006, March). Exchange Rate Pass-Through in Asia: What Does the Literature Tell Us? Ito, T. & Sato, K. (2007, May). Exchange Rate PAss-Through and Domestic Inflation: A Comparison between East Asia and Latin American Countries. RIETI Discussion Paper Series.

Krugman, P. (1986). Pricing to Market When the Exchange Rate Changes. NBER Working Paper Series (1926).

Lamberte, M. (2003). Central Banking in the Philippines: Then, Now and the Future. PIDS Perspective Paper Series No. 5 , 46-50.

Liu, L.-g. & Tsang, A. (2008). Exchange Rate Pass-Through to Domestic Inflation in Hong Kong. Hong Kong Monetary Authority Working Paper (02/2008).

Nogueria Júnior, R. P. & León-Ledesma, M. A. (2008). Is Low Inflation Really Causing the Decline in Exchange Rate Pass-Through? 1-21.

Ortiz-Luis, S. J. (2007, September 5). Impact of Foreign Exchange on Business: The Exporters’ Game Plan for the Next Three Years.

Retrieved April 14, 2010, from the official website of the Philippine Exporters’ Confederation, Inc.: http://www.philexport.ph/policy/ strong%20peso-sept07.doc.

Sekine, T. (2006). Time-varying Exchange Rate Pass-Through: Experiences of Some Industrial Countries. BIS Working Papers (202).

Takhtamanova, Y. (2008). Understanding Changes in Exchange Rate Pass-Through. Federal Reserve Bank of San Francisco Working Paper (2008-13).

Taylor, J. B. (2000). Low Inflation, Pass-Through, and the Pricing Power of Firms. European Economic Review , 44 (7), 1389-1408.

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MBE Graduates June 2012

Raul C. Evangelista Senior Vice President Lica Auto Nations, Inc. "Competitive Strategies for Hertz Philippines: Overtaking in the Car Rental Business"

Last June 2, 2012, three distinguished SBEP alumni were awarded a Master in Business Economics (MBE) during the seventeenth UA&P graduation ceremony held at the PICC Plenary Hall. The recipients of the MBE completed all course requirements of the certificate program and successfully defended their thesis.

Ma. Jocelyn Q. Pobre Senior Assistant Vice President Development Bank of the Philippines "An Assessment of the Business and Social Skills Development of Micro-Entrepreneurs"

Robert Rol B. Ramos Vice President - Bus. Devt. & Account Mngt.

Head, Trust Group Unionbank of the Philippines "A Marketing Strategy for Unionbank Trust's Retail Unit Investment Trust Funds (UITFs)"

it’s more fun in sbep

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special feature

by Emilio T. Antonio, Jr., Ph.D. School of Economics University of Asia and the Pacific

The ball game for the Philippine economy has changed but policymakers are still trapped in the strategies used in the old games they are familiar with.

The Philippine Economy: New Realities, Old Policy Stance For decades, the Philippine economy has been managed in the context of the chronic shortage of foreign currencies and savings for investments. For more than a decade now, the situation has changed. From perennial shortages, the economy has posted consistent surpluses which should allow it to scale greater heights in terms of growth in economic activities.

Unfortunately, the behavior of policymakers suggests that they are still trapped with old framework of operating under shortages. Even worse, the recent improvements in the growth of economic activities recorded during the first half of the year have been taken as a confirmation of the correctness of their policy moves. However, while it is true that the economy’s performance has improved, we could probably achieve better performance if we break away from the prison of the past frameworks we have used in policymaking.

Indicators to consider

The differences between the past and the present can be highlighted in terms of two sets of indicators: (a) the favorable balance between the supply and demand for dollars; and (b) record levels of the nation’s savings rate.

In terms of the dollar situation, two key indicators highlight the sharp difference between the past and the present: a) the balance between the dollars that we earn and spend; and (b) the amount of dollars in the vaults of the BSP. In the past, we had to live with perennial shortages of dollars whose pains were eased up by foreign lenders and investors. Now, we have been experiencing a decade of surpluses (see Chart 1) thanks to our OFWs. We have also accumulated more dollar reserves in the process which can now cover almost a year of import requirements (see Chart 2). In the past, we were happy to reach three months of import cover.

More savings for investments

A similar thing has happened in terms of the availability of funds for investments. In the past, the Philippines posted the lowest savings rate among the Asian countries. Now, we rank second to China in terms of the proportion of income stashed away as savings

To a certain extent, this development has escaped the eyes of economic trend watchers. This is because in international comparisons, the Philippines still ranks among the laggards in this

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indicator. The problem lies in the way savings rate is calculated by international organization.

A nation’s gross savings is calculated by subtracting private and public consumption expenditures from the total income of the nation. Traditionally, the value of goods and services produced domestically (GDP) is considered as the nation’s income. The Philippines, however, is peculiar. More than one fourth of the nation’s income originates from the dollars sent by our overseas workers (OFWs). Thus, the more appropriate measure of how much the nation earns is the gross national income (GNI). This measure takes into account the contribution the income that OFWs generate.

Using GDP as the measure of the nation’s income, therefore, the Philippines would still pale in comparison with our neighbors.

Once the rate is based on the gross national income (GNI), however, the Philippines’ rank shoots past our neighboring countries taking a place next to China in terms of the rate the nation sets aside as savings. As of the latest estimate, savings rate stands at around 37%.

Which measure reflects a more accurate picture of how much of the nation’s income is saved? Obviously, the one based on GNI would reflect reality better in the Philippine case. We are, therefore, a nation of savers. Placing this side by side with

Chart 1

A Decade of Surpluses

50% 38% 25% 13% 0% -13% -25% -38% -50% 70

75

80

85

90

95

00

05

10

Source: National Statistical Coordinating Board (NSCB), National Economic Development Authority (NEDA)

special feature Chart 2 Gross and Net International Dollar Reserves 15.0000

Chart 3

Saving-Investment Rates

50%

Savings Rate

38%

11.2500

25% 13%

7.5000

GIR

Investment Rate

0% 70

3.7500

75

80

85

90

95

00

05

10

Source: National Statistical Coordinating Board (NSCB), National Economic Development Authority (NEDA)

0

NIR -3.7500 -7.5000

The trouble with more dollars 70

75

80

85

90

95

00

05

10

Source: Bangko Sentral ng Pilipinas (BSP)

our rate of investment, the picture that emerges is quite clear.

We have more funds than what we have used for investment (see Chart 3).

More dollars and funds are blessings

More dollars and more funds should spell blessings for the economy. In the case of more dollars, that means the price of dollars would stabilize and with this, prices of funds, labor and goods would also follow. Implication: the price environment becomes relatively predictable and domestic and foreign investors would be more attracted to businesses which do not thrive on the game of guessing prices (e.g. speculation on peso-dollar rate or profiteering from extraordinarily high prices of goods in short supply) or just lending more money to the government (which takes place when the Treasury Bill rates shoot up). They will focus on investing in real production activities which will result in the faster growth of the nation’s production, income and employment.

In the case of more savings, the consequences are similarly beneficial. Greater supply of funds would mean the price of funds will decline. Cheaper funds would also stimulate investments which would, in turn, push production activities which generate more income for the nation.

Can the blessing become a curse?

In the face of these blessings, the performance of the economy improved. Nevertheless, while the growth in the volume of production activities that we have been posting may be higher compared to those posted in the eighties and the nineties the rates remain slower compared to the best records posted in the fifties up to the seventies. Furthermore, the buying power of the incomes generated by these production activities also grew slower in the past decade compared to the decades of the fifties up to the seventies.

The question that we need to ask, therefore, is: why are the more recent favorable conditions not being translated to more significant improvements in the growth of the nation’s production and income? Do these blessings carry some cursed seeds that could hold back our growth potential?

Let us first consider the relative abundance of dollars. As expected, this stabilized the price environment which stimulated investments and improved the growth of production, income and employment over the past decade compared to the two decades that preceded it. Nevertheless, as was pointed out earlier, the pace of growth did not match those posted from the fifties to the seventies which were periods when dollar scarcity was the problem. What went wrong? The abundance of dollars went past mere stabilization of the price of dollars. It actually resulted in the significant drop in the peso-dollar rate.

Implications: the peso prices of exports dropped and squeezed the profits of exporters; the peso prices of imported goods also dropped pricing out those local producers competing with these imported goods. Furthermore, the peso incomes of those families relying on OFW remittances got eroded. In sum, the strength of the peso weakened the income generating powers of the three key income earners in the economy: the exporters, the import-competing industries and the OFW dependents.

The paradox of thrift

How about the impact of improved savings rate? Definitely, saving cannot be a vice. It reflects the judgments of families for the need to set aside funds not only for emergencies but also for future needs. Nevertheless, from the nation’s standpoint, they represent funds that are withdrawn from those that flow in the economic system. Thus, they represent resources which could have translated to demand for goods had they been spent and therefore a stimulus to economic activities. From this perspective, therefore, the high rate of savings can be viewed as a drag to economic growth. This is the classical example of what is called in economics as the paradox of thrift.

For these funds to stimulate economic activities, what should happen is that these funds should get spent again as investments. How? The usual route is the market for funds.

The increase in savings rate increases the supply of funds for investments. This in turn causes the price of funds (interest rates) to decline. Cheaper funds eventually stimulate expenditures on investment goods.

What is the present state of affairs? Clearly, savings are far higher than investments (see Chart 3). Thus the signal is clear.

The economy’s potential for growth is not being fully harnessed.

What turned the blessing into a curse?

The usual bottlenecks for growth (scarcity of dollars and funds) it’s more fun in sbep

11

special feature have been clearly unclogged. What is still constraining the economy to exploit its full potential? These can be more clearly seen once we examine closely how the policymakers have behaved in the face of these changed conditions.

Quite noticeable is asymmetry in the behavior of policy makers in pursuing exchange rate stability. Had the pressures on the pesodollar been on the opposite the direction (i.e. the peso-dollar rate being pushed up), the reaction of the monetary authorities would have been quick and easy to predict: they would have exhausted all means to prevent the peso from further depreciation. Now that the pressure in the prices of dollars is on the opposite direction, the efforts to stem the downward pressure seem less intense. If we were Chinese or Japanese, we would have lamented the peso’s strength and cracked our brains on how to prevent it.

To be fair, our policymakers have actually intervened to prevent a more substantial fall in the price of the dollars. They did this by buying a significant amount of dollars in the foreign exchange market thereby building up a more robust level of international reserves. In fact, the BSP has the right to boast that the present level of reserves in terms of the number of months of imports it can finance is the highest in our post-war history.

Unfortunately, the efforts to ‘mop up’ the ‘excess’ dollars in the foreign exchange market have not been sufficient to stem the fall of the price of dollars.

Not only were the policies not successful in stemming the slide of the peso price of dollars. Another problem was introduced because of the inflation targeting policy of the BSP. Buying dollars in the foreign exchange market also means that the BSP would be releasing pesos to the economic system. Fearful of the inflation that this could cause, the BSP felt the obligation to ‘mop up’ what they would consider as ‘excess liquidity’ in the system. How did they do this? They offered the financial institutions the opportunity of placing their funds in special deposit accounts (SDAs). These are deposit accounts at the BSP which offers sufficiently attractive interest rates (around 4%) to induce financial intermediaries to park their funds at the vaults of BSP. Faced with such an option to earn relatively attractive returns from a riskless instrument, we can expect financial intermediaries to place a substantial amount of their funds in the vaults of the BSP rather than exert more efforts to look for potential borrowers who might be willing to pay higher rates but are far riskier to lend to than the BSP. With this move, they were successful in freezing substantial amounts of savings at the vaults of the BSP. By the recent reckonings, the level of SDAs has reached almost two trillion pesos.

Viewed from another perspective, however, their success in mopping up ‘excess’ liquidity means that a substantial amount of savings remained unused for investment purposes. This clearly gives rise to the question: Should we consider the excess of savings over investment as ‘excess liquidity’? Or could it be that our fears of inflation are so excessive that we have choked the economy’s potentials to grow faster?

Need to shift paradigms

All these raise policy questions on how the economy has been and should be managed. What our present policy moves suggest is that might be still trapped by the old realities under which the economy operated. For decades, we faced chronic shortages of dollars and shortages of funds for investments. Under these conditions, policymakers’ attention had been focused on how to keep the peso-dollar rate from rising and to keep inflation rates at

12

it’s more fun in sbep

Despite the improved environment for growth, the economy is still stuck in the pace of the old play when we have the potential for a doubledigit performance.

bay by keeping a tight lid on monetary aggregates.

These policy moves are absolutely necessary since we were either propping up the peso through the use of borrowed funds (in the seventies) or portfolio investments (in the nineties). Furthermore, the heavy burden of repaying our debts in the eighties and early nineties continuously signaled the need for the control of nation’s expenses by tightly controlling the growth of liquidity.

Alas, these conditions are things of the past. Over the past decade, our reliance on foreign debts and portfolio investments has been dramatically cut. Furthermore, our debt burden has eased up. Thus, while we are still spending more than what we are earning from domestic economic activities (imports is still higher than exports), the remittances of OFWs have more than offset our trade deficits. In other words, we are financing our expenses with our own money and not the money of the foreigners. Thus, we have less worries about a possible debt build-up or a sudden disappearance of our financing sources.

Despite these dramatic changes in economic realities, our policy moves still seem to be guided by the old concerns and our problems get compounded by our unfamiliarity with the new territory. We are guarding very tightly the recurrence of a dollar shortage because we are afraid of the consequences of the rise in the price of dollars but we seem to ignore that the drop in the price of dollars could have even greater consequences on the growth of our income over the longer run. We also guard tightly the growth of liquidity because we got used to the reality that we were using other people’s money to stimulate the economy and we know the consequences of imprudence in this regard. Under the new environment, we seem to be oblivious of the opportunity cost of not channeling enough of our savings to investments allowing the surplus of savings over investments to widen simply because of our excessive fear of inflation.

Economic prospects

What do these imply on the prospects of the Philippine economy? The local and foreign economic pundits are optimistic over the prospects of the Philippine economy. They are right. In fact, the potentials are much greater than what is commonly perceived. Furthermore, hopes are being pinned on the capability of the government to stimulate the economy though deficit spending when this could be a feeble force for economic growth. Unlike developed economies where their government accounts for about 40% of total national spending, the Philippine government only handles about 12% of the nation’s spending capabilities.

Clearly, the present policy framework serves as a drag to the Philippine economic performance. The potential for a sustained double-digit growth is clearly within our grasp but we are letting this opportunity to slip through our finger through three mortal sins: our love for cheap dollars, our excessively tight control of liquidity which prevents the channeling of savings to investments and our exaggerated image of the potential of the government to stimulate economic activities. What a pity.

financial seminar

Intensive Training on Bonds Last March 28, 29 & 30, 2012, the SBEP organized a three whole-day “Intensive Training on Bonds” at the Case Room 1 of UA&P. It was attended by 13 senior executives from varied industries and services sector.

The Intensive Training on Bonds equipped the participants with a systematic and integrated learning on all bond and bond-related products available in the market today. Computer based exercises were provided to the seminar participants to facilitate straightforward and practical learning.

Dr. Victor Abola, SBEP Director, also an Economist and Finance Expert, delivered the course for Days 1 & 2. The following topics were covered: Credit Analysis and Interest Rate Risk; Bond Types and Conventions; Basic Fixed Income Mathematics; Zero-Coupon Pricing and Yield Estimation; Fixed-Rate and Floating-Rate Bonds; Bond Yield Curves; Measures of Return on Investment; Interest Rate Sensitivity; Managing Portfolio Risk; Convexity; and Convertible Bonds.

For Day 3, Mr. Augusto Cosio, Jr., President of First Metro Asset Management, Inc. (FAMI), the fund management subsidiary of the investment house – FMIC, and formerly Vice President of Banque Paribas Capital Markets Group in Hong Kong, delivered the following topics: Bond Portfolio Management Models; Holding Period Yield Immunization; Bond Portfolio Management Strategies; ROPs and Foreign Denominated Bonds.

The Intensive Training on Bonds is being offered by the SBEP bi-annually, in March and November. It is designed for the knowledge and appreciation of Chief Financial Officers, Treasury Managers, Bond Traders, Bank Officers, Risk Officers, Investment Managers, Trust Managers, Certified Public Accountants, Lawyers, and Individual Investors. Interested participants may call the SBEP Alumni Office at 6342820 / 6343095 / 6370912 loc. 222 or send an email to sbep@uap.asia.

(Alonica R. Salazar)

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it’s more fun in sbep

Breaking the Tourism Inertia

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it’s more fun in sbep

cover story

by Maria Cherry Lyn Salazar-Rodolfo Faculty of the School of Economics of the University of Asia and the Pacific and Vice-President of the Research, Education and Institutional Development (REID) Foundation Inc.

C

onsidered as one of the priority sectors under the Philippine Development Plan (PDP) 20112016, tourism radiates with prospects to generate economic opportunities, reduce poverty and promote sustainable development. The National Tourism Development Plan (NTDP) 2011-20161 lays down the framework for realizing those opportunities and for building the momentum that will break the decades-long inertia in tourism inflows and investments. This article explores the performance of Philippine tourism and the recent initiatives that make tourism “more fun in the Philippines” and enjoy “more fun(ds) in the Philippines.”

1

Prepared by the Asia Pacific Projects Inc. and Indra. it’s more fun in sbep

17

Why Tourism Tourism is a global business operating round-the clock, 24 hours and 7 days per week and churning out job and income opportunities with every tourist movement. In 2011, 980 Million (m) visitors stayed at least one night in an overseas destination, flown by air or ferried by sea or moved by trains/cars during the day, night or wee hours of the morning. The World Travel and Tourism Council estimated that these visitors generated USD1,170.6 Billion (bn) in export earnings (5.3 percent of the global exports), USD6,346 bn (9.1% of world GDP), and 254,941,000 jobs (8.7% of total global employment). According to the UNWTO Secretary General Taleb Rifai, the movements of these 980 million travellers worldwide and of 300 million in the APEC region in 2011 are “a clear demonstration of the power of the sector in the APEC region and more importantly the affirmation of a sector which today brings opportunities to millions of people who, in APEC members, live directly or indirectly, from tourism.2”

In the Philippines, tourism is now an “indispensable element of the national economy and an industry of national interest and importance which must be harnessed as an engine of socioeconomic growth and cultural affirmation to generate investment, foreign exchange and employment, and to continue to mold an enhanced sense of national pride for all Filipinos” as declared under Republic Act No. 9593 or the Tourism Act of 2009. The Aquino administration has selected tourism, agribusiness and infrastructure as priority sectors under its inclusive growth agenda.

Tourism ranks as the fourth largest export revenue earner, next to the Top 3 namely electronics, overseas remittances and BPOs. The National Statistical Coordination Board (NSCB) reported that the share of tourism direct gross value added (TDGVA) to total gross domestic product (GDP), a measure of the contribution of tourism industry to the economy, was 5.8 percent in 2010 (see Table 1). The TDGVA, a measure of the value added of different industries in response to activities of both domestic and inbound visitors, amounted to Php 518.5 bn in 2010.

Tourism growth drivers

Table 1 – Economic Footprints of Tourism in the Philippines: 2010 Tourism Accounts

Value (in m)

Contribution to National Accounts (in %)

Tourism Direct Gross Value-Added

PhP 518,465

5.8% of GDP

Employment

3.647

10.1% of national employment

Internal Tourism Expenditure

PhP 1,042,064 11.6% of total household final consumption expenditure and exports

Domestic Tourism Expenditure

PhP 932,838

14.5% of total household final consumption expenditure

Inbound Tourism Expenditure

PhP 109,226

3.5% of total exports

Source: NSCB-DOT Philippine Tourism Satellite Accounts

make greater impact on employment generation, there is a need to boost the spending and length of stay of visitors.

The top 12 markets already accounted for 80.30 percent of total tourism inflows, and sourced from a combination of short and long haul markets (see Table 2). The former refers to the (1) Northeast Asian group – South Korea, Japan, China Mainland, Hong Kong, Taiwan – that accounts for 46.9 percent of total arrivals (based on 2011 data), (2) Southeast Asian block primarily Singapore and Malaysia with a share of 5.9 percent of total arrivals. The long haul markets include Canada, Germany, Australia and United Kingdom and have a group share of 27.5 percent. The composition of the Top 12 hardly changed in the past three decades. Only the rankings changed. Korea gained the top post starting in 2006. China outranked Taiwan and Hong Kong (used to rank number four).

For the period January to September 2012, tourism flows already reached 3.1 m, 9 percent higher than its year-ago level.

Tourism flows comprise a major component of the twin drivers3 —expenditures and investments—of the growth process. The other two components are length of stay and spending per day.

An increase in tourism activities that translate to higher receipts stimulates investments which in turn serve as catalyst in pushing demand to higher levels. Let us consider the performance of Philippine international tourism. In 2011, the Philippines hosted 3.9 m foreign visitor arrivals, 11.3 percent higher than the previous year’s record, and the highest volume to date. The length of stay was an average of 8.04 days while average daily expenditure was equivalent to USD 92 per person per day. If tourism is to

2 Keynote Speech delivered during the Destination APEC 2020: A Conference on Enhancing Tourism and Air Connectivity in the AsiaPacific Region, 28-29 February 2012, Sofitel Hotel, Manila.

3

Norbert Vanhove, The Economics of Tourism Destinations, Elsevier Butterworth-Heinemann, 2005.

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it’s more fun in sbep

Island life. More fun in the

Philippines

Cover Story

cover story Arrivals from Mainland China and Taiwan continue to post double-digit growth. Factors such as income, prices and effects of previous visits influence the annual flows to the Philippines.

There is apparent loyalty by the markets and other factors such as increase in air seats between the Philippines and the regional short-haul markets of Korea, Malaysia, and Singapore also contribute to the double-digit growth. The relatively high share of repeat visitors 63.2 percent is an evidence of this loyalty, indicating that demand for tourism to the Philippines is driven largely by the markets’ familiarity about the Philippines. Such familiarity is a result of habit persistence (consumers develop the habit of making repeat visits to destinations) which in turn is due to favorable results of previous visits or the availability of products and services (as in the case of English as Second language that merit repeat visits), and of word of mouth advertising. Repeat visits by the Top 12 markets are accounted for by the Balikbayans, and by foreigners with economic, social and cultural ties in the Philippines. With the DOT’s “It’s More Fun in the Philippines” campaign, it is expected that repeat visitors will increase in numbers because they are supposed to fall in love with the Philippines such that they will want to come back and experience the fun. Repeat visitors are instrumental in communicating the true quality of products and services to their friends and relatives who can be first time visitors in the Philippines. They help improve the quality at the destination as they have basis of comparison with previous visits.

Commuting. More fun in the

Philippines

remained resilient and hailed as savior during crisis times. Its share to total volume ranges from 70 percent to 90 percent. The NSO and DOT estimate domestic tourism to be around 27.9 m in 2010. The average spending based on the most recent trip used as reference in the survey was Php1,680. Each traveller had an average of 2 trips. The growth of domestic tourism was enabled by factors such as improved market conditions, competitive fares offered by domestic airlines, expansion in terms Domestic tourism: Backbone of Philippine tourism of airport infrastructure and domestic airline seats and of interThe campaign is not just for foreign visitors. Filipinos and island movements via the RORO, and greater capacity of proforeign residents in the Philippines are likewise encouraged to active LGUs to harness the potentials of tourism by partnering explore the Philippines’ pride. Domestic tourism has always with private sector groups. that promotes competition. The Western Visayas region, home to the world-renowned Boracay, for example, is now served by 610 flights Table 2. Top 12 Source Markets of Philippine Tourism: 2011 vs 2010 per week from just 308 flights per week in Percent Share to Growth 2003. The gap between Central Luzon and Volume of Arrivals Country of Total Arrivals Rank Rate the Visayas and Mindanao has been partly Residence 2011 2010 2011 2010 (in %) bridged with the domestic flights between Clark-Cebu, Clark-Kalibo, and Clark1 Korea 925,204 740,622 23.62 21.04 24.92 Davao. The pro-active participation of an 2 USA 624,527 600,165 15.94 17.05 4.06 increasing number of LGUs in tourism 3 Japan 375,496 358,744 9.59 10.19 4.67 has resulted in the development of new 4 China 243,137 187,446 6.21 5.32 29.71 products and hotel/resort projects.

5

Taiwan

181,738

142,455

4.64

4.05

27.58

6

Australia

170,736

147,469

4.36

4.19

15.78

7

Singapore

137,802

121,083

3.52

3.44

13.81

8

Canada

117,423

106,345

3.00

3.02

10.42

9

Hong Kong

112,106

133,746

2.86

3.80

-16.18

10

UK

104,466

96,925

2.67

2.75

7.78

11

Malaysia

91,752

79,694

2.34

2.26

15.13

12

Germany

61,193

58,725

1.56

1.67

4.20

Sub-total (top 12)

3,145,580

2,773,419

80.30

78.78

13.42

Overseas Filipinos

207,152

228,445

5.2

6.4

-9.32

3,917,454

3,520,471

100.00

100.00

11.28%

Total foreign visitor arrivals

Not just a numbers game: Tourism is everyone's business Tourism is not just about counting the number of warm bodies of tourists.

As DOT Secretary Ramon R. Jimenez emphasizes in his speeches, “our President Aquino’s tourism goal to is to make tourism every Filipino’s business.” It’s about the airline crew warmly greeting and kindly assisting the passengers, the personnel at the airport—customs and immigration counters serving as efficient front-liners, the taxi driver or tourist transport driver it’s more fun in sbep

19

Table 3. Capacity on the Rise: Build and they will come Metro Manila Crimson Hotel Raffles Hotel and Residences Fairmont Hotel Holiday Inn and Suites Discovery Primea Citadines Salcedo Makati Worldhotels and Residences Movenpick Hotel & Residences Solaire Manila Belle Grande Manila Bay Complex Tune Hotels, Mall of Asia Sheraton Hotel Hamilton Hotel Belmont Hotel Marriott Manila (Expansion) Savoy Hotel Newport City SM Hotel Tune Hotels Mercure Hotel Marco Polo Ortigas Luxent Hotel Microtel Acropolis Microtel UP Technohub Tune Hotels B Hotel Hotel Novotel Kukun Hotel Ascott Bonifacio Global City Shangri-la Hotel Grand Hyatt Tagaytay and CALABARZON Microtel Sta. Rosa Kukun Hotel Pampanga, Central Luzon Best Western Premier Palawan Pangalusian Movenpick Huma Island Resorts Two Seasons Resort Princesa Island Resort & Spa Oakdrive Hotel Legend Mansion Iloilo and Boracay, Western Visayas Diversion 21 Richmonde Hotel GoHotels.com Crimson Hotel Savoy Hotel Newcoast Boracay Metro Cebu, Central Visayas Best Western Lex Capitol Hong Kong Plaza Hotel Summit Shores Mactan Bohol, Central Visayas Bellevue Bohol BE Resort Bohol Cagayan de Oro, Northern Mindanao Kukun Hotel Tune Hotels Limketkai Hotel Riviera Hotel Davao, Southern Mindanao Kukun Hotel Park Inn by Radisson Tune Hotels General Santos, Mindanao Microtel Thunderbird Hotel

Source: DOT

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Filinvest Corporate City, Alabang Ayala Center, Makati City Ayala Center, Makati City Ayala Center, Makati City Ayala Avenue, Makati City Salcedo Village, Makati City Makati City Makati City Entertainment City, Paranaque Entertainment City, Paranaque Aseana City, Paranaque Resorts World Resorts World Manila, Pasay City Resorts World Manila, Pasay City Resorts World Manila, Pasay City Resorts World Manila, Pasay City Mall of Asia, Pasay City Ortigas Center, Pasig City Ortigas Center, Pasig City Ortigas Center, Pasig City Timog, Quezon City Libis, Quezon City Diliman, Quezon City Timog, Quezon City Scout Rallos, Quezon City Araneta Center, Quezon City Bonifacio Global City, Taguig Bonifacio Global City, Taguig Bonifacio Global City, Taguig Bonifacio Global City, Taguig

345 units 267 280 348 142 220 324 554 500 800 204 350 540 400 200 510 400 182 150 333 118 88 120 140 160 401 179 220 500 460

Nov 2012 Jan 2013 Jan 2013 Feb 2013 Q1 2014 Q1 2014 Q4 2013 2015 Mar 2013 2014 June 2014 2016 2012 2013 2014 2016 Q4 2015 Dec 2013 Q4 2013 Q4 2013 Sept 2012 Q4 2012 Q1 2013 Sept 2013 2014 2014 Dec 2012 Q1 2014 2015 Q4 2015

Sta. Rosa, Laguna Nuvali, Sta. Rosa, Laguna

60 150

Q1 2013 Dec 2013

Angeles City

78

2012

El Nido Busuanga Coron Puerto Princesa City Puerto Princesa City Puerto Princesa City

42 85 42 83 61 168

Oct 2012 Dec 2012 Dec 2012 2013 2013 2014

Iloilo City Iloilo City Iloilo City Boracay, Aklan Boracay, Aklan

100 90 106 180 500

2013 2013 2013 2014 2016

Cebu City Cebu City Mactan, Cebu

88 200 200

Nov 2012 Q1 2013 2014

Panglao, Bohol Panglao, Bohol

159 200

Aug 2012 Q1 2013

Cagayan de Oro Cagayan de Oro Cagayan de Oro Cagayan de Oro

150 162 150 304

Jan 2013 Jul 2013 Q2 2013 2013

Davao City Davao City Davao City

186 204 155

Feb 2013 Feb 2013 Oct 2013

General Santos City General Santos City

66

Dec 2012

cover story safely moving the tourist from airport to destination, the hotel staff responding to queries at any time of the day or night, the farmer producing quality vegetable and fruits, the boatman and local tour guide promoting ecological consciousness, the weaver churning out creative pieces of bags, scarves and the like using indigenous materials, the local painter or craftsman injecting the local flavor to the furnishing and fixtures, and the communities of choirs and dancers showcasing their pride of place for culture and heritage among others. In his speech during the Makati Business Club Conference in March 2012, Secretary Jimenez pointed out, “the advantage of Philippine tourism is our people.” How do we now harness this strength of the Filipino people to our advantage?

The DOT has set its sectoral targets for 2016: 10 m foreign visitor arrivals, 35.5 m domestic travellers, Php 1,991 bn in tourism receipts and 6.8 m employment level. The NTDP 2011-2016 identifies ways to break the tourism inertia and to continue to build the momentum of investments that we now see around us. The projects listed in Table 4 are expected to add 13,534 rooms to the total capacity of 96,052 recorded in 2010.

New investments are needed to fill in the estimated gap of 50,687 rooms across the country.

Table 4. Targets for Key Markets

The Next 5 Years: Aiming for ''The Philippines as a Must Experience Destination in Asia''

Total

For decades, we lamented at the poor performance of tourism relative to our Asian neighbors and to the size of the outbound travel markets. Such performance was manifested in the low volume of arrivals and the low rankings in global competitiveness reports.5 The NTDP identified the undeveloped tourism sector relative to its market and product potentials as the focal problem of Philippine tourism and examined the binding constraints6 to development. These constraints include poor infrastructure/ accessibility to and within the country, lack of competitive Figure 1. Inclusive Destination Concept

Source: Sustainable Tourism Management Plan for the Central Philippines, 2008

5

The Travel and Tourism Competitiveness Reports of the World Economic Forum revealed low rankings for the Philippines in the areas of regulatory framework and business environment/infrastructure. The 2011 report showed an overall ranking of 94th out of 139 countries.

6

Source: Hausman, R., D. Rodrik, and A. Velasco. 2005. Growth Diagnostics. John F. Kennedy School of Government, Harvard University, Cambridge

Markets

2011

2013

2016

CAGR

Korea

925,204

1,249,168

1,959,727

17.6%

USA

624,527

874,767

1,1450,122

15.8%

Japan

375,496

445,398

2016

CAGR

China

243,137

439,071

1,011,749

32,4%

ASEAN

331,672

524,310

1,042,097

23.2%

Australia

170,736

256,359

471,663

21.4%

Taiwan

181,738

224,164

307,076

13.7%

Hong Kong

112,106

172,024

326,986

16.1%

Canada

117,423

153,232

228,427

13.6%

United Kingdom

104,466

137,237

206,641

13.4%

Germany

61,193

79,488

117,679

12.3%

India

42,884

64,369

118,538

22.8%

Russia

20,185

28,153

46,374

18.1%

Scandinavia

59,379

78,431

117,988

16.2%

Others

546,988

828,828

2,019,543

24.2%

3,917,454

5,545,999

10,000,000

19.0%

Source: NTDP 2011-2016

products and destinations (plus lack of information and poor image), and weak governance. These factors characterize the rigidities or supply fixities behind the inertia in Philippine tourism over the years. Even if the markets would want to increase their travel to the Philippines following an increase in purchasing power, they face constraints such as lack of flights or available seats, lack of rooms, visa issues, and lack of salient information to make them decide in favor of the Philippines.

On the average only 45 percent of planned visits are actually realized due to these supply rigidities. For decades, the number of flights per week and seats to the Philippines lagged behind the competitive hubs of Thailand, Singapore, and Malaysia. Airline capacity to the Philippines started to expand only in the last three years as a result of the liberalization of the air service agreements and the institutionalization of the pocket open skies policy for the secondary gateways under Executive Order No. 29 (series of March 2011). Hotel room capacity started to pick up only in the past five years as evidenced by the recent completion of projects and new projects in the pipeline.

Under the NTDP 2011-2016, the vision is “to make the Philippines the must experience destination in Asia.” By setting the targets to 10 M (Table 4) by 2016, the DOT seeks to break away from the past characterized by low levels of infrastructure investments, lack of exciting product concepts, and fragmented approach to development. It is DOT’s way of building the demand and “exerting positive pressure on the other government agencies to align their policies and programs to the tourism ambitions of President Aquino.”7 How can this be achieved?

7 Speech delivered during the NTDP 2011-2016 Donors’ Forum, 21 November 2011, Mandarin Oriental.

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Convergence Works Convergence is the key to breaking this tourism inertia, to finally resolving the perennial problems that plagued the industry for decades. It is the key to building the capacity that Philippine tourism urgently needs and it is happening for the first time in decades, in a more institutionalized and transparent way. Section 98 of R.A. 9593 created the Tourism Coordinating Council with the DOT as chair and its members include agencies such as Department of Public Works and Highways (DPWH), Department of Transport and Communications (DOTC), Department of Justice (DOJ), Department of Finance (DOF), Department of Foreign Affairs (DFA), Department of Environment and Natural Resources (DENR), Commission on Higher Education (CHED), Department of Trade and Industry (DTI), Technical Education Skills Development Authority (TESDA) and DOT-agencies such as the Tourism Infrastructure and Enterprise Zone Authority (TIEZA). Among other functions, the TCC is mandated to approve annual infrastructure development plan that shall promote access to and from airports and seaports, Tourism Enterprise Zones (TEZs) and other tourism destinations. In the past two years, the DOT, supported by the industry’s stakeholders and by President Aquino, have been pursuing this convergence. The effects of these efforts will be seen in the next two years.

DOT-DPWH – The Tourism Act of 2009 mandates the coordination of DOT with DPWH in establishing a tourism infrastructure program in the DPWH work program, in identifying vital access roads and other infrastructure requirement in identified tourism areas, and according priority status to the funding and implementation of tourism access. On January 2012, the DPWH and DOT signed a Memorandum of Agreement to implement this convergence program which resulted to the funding of Php 12 bn worth of tourism roads for the fiscal year 2013.

DOT-DOTC – The DOT is pursuing convergence with the DOTC in the following areas: prioritizing the development of international and domestic airports in the NTDP, upgrading seaports for cruise tourism, updating regulations on the grant of franchise for tourist transport, and addressing the safety requirements of international regulatory agencies.

DOT-DOF – With support from the Department of Budget and Management, the DOT and the DOF have achieved convergence when the DOF supported the implementation of 24-7 operations for Customs personnel in international airports and seaports. Other agencies that are called to implement the same are the Department of Justice, Department of Health and the Department of Agriculture.

The DOF has likewise supported the DOT’s goals through the repeal of the common carriers tax through legislation, a major action plan under the NTDP. This action is expected to boost the connectivity by global airlines including long haul ones to the Philippines. The bill has been approved in the lower house. The tourism industry continues to advocate for the filing of the Committee Report and passage of this bill before the Christmas break.

DOT-DILG-DTI – The three agencies are working towards the reduction of the costs of doing business at the local levels in aid of the investment promotion strategy.

DOT-DFA-DOJ – The three agencies continue to review the visa regulations and policies in support of the strategy of enhancing international air connectivity.

DOT-DENR – For the safeguarding of biodiversity and natural resources as well as development of ecotourism sites.

DOT-CHED and TESDA – The convergence is aimed at implementing a tourism skills development program *Based on the presentation “Convergence for Tourism Development” by Assistant Secretary Rolando Canizal.

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Tourism’s development in the next five years is anchored on the inclusive destination concept that would maximize the support and commitment of all industry stakeholders, more effectively engage the LGUs, while at the same time admitting the need to prioritize investment in strategic destinations to ensure the orderly development of all the destinations (NTDP 2011-2016).

Under this approach, the Philippine tourism assets were grouped into existing and emerging tourism development areas (TDAs). The groupings were identified based on their main tourism resources, market orientation; and their main transportation and destination infrastructure, product development and marketing, and institutional and human resource development deficiencies and needs. The results: A total of 78 existing and emerging TDAs clustered into 20 thematic cluster destinations on the basis of their ability to support one or more of the main market-product themes for which the Philippines could be positioned in its domestic and international markets; and their linkage to one or more main international and domestic tourist air, sea, and road gateways.

In order to pursue the targets under this inclusive destination approach and address the binding constraints mentioned above, the DOT’s three core strategic directions are: • Improve market access and connectivity to and within the Philippines.

• Develop and marketing competitive and sustainable tourist destinations and products.

• Improve tourism institutional governance and human resource capacities that are responsive to global and local industry needs.

1. Enhancing international and domestic connectivity In the next five years, the DOT seeks to promote convergence with government agencies whose mandates impact on the availability of adequate, reliable, safe and sustainable air, sea and land infrastructure and to complete the reform agenda at the

cover story natural and cultural heritage sites, and protect vulnerable groups (especially women, children and indigenous groups) from exploitation in the cluster destinations; and implement the roll-out of strategic marketing activities such as branding, market diversification, advertising and travel fairs.

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Philippines soonest time possible. Take the case of air transport. There is an urgency to relieve the congestion in NAIA, to address the FAA downgrade and EU blacklist; to expand air access in key markets through liberal air service agreements; to expand airport and seaport terminal capacities; to attract more foreign airlines particularly long haul operators to deploy their capacity to the Philippine gateways by removing the burden of the common carriers tax and gross Philippine billings; to enhance competitiveness of Philippine airports by implementing 24-7 operations on shift basis; to comply fully with the international aviation regulatory requirements; to pursue visa-free or visa on arrival facilities for key markets; to design, finance, and implement a strategic access infrastructure program to improve air, sea and road linkages between the key secondary international airports and strategic destinations and their existing and emerging tourist development areas; to develop destination infrastructure (i.e. water, power, waste management facilities) for sustainability; and to undertake regulatory reforms and other initiatives to encourage improved domestic tourist transportation services. The urgency needs to be emphasized given that airlines are now investing on fleet expansion and/or refleeting programs for 2014 onwards. The Philippines will miss this new wave of investments if the reforms are not completed.

2. Developing and promoting competitive products and services There won’t be any tourism if there are no attractions to begin with. The Philippines has a relatively abundant pool of attractions but competitive product concepts have to be developed and promoted. In the next five years, the DOT is expected to enable the environment for the development of large, mixed-use tourism complexes in the vicinity of main international airports, and non-urban, community-based tourism programs in strategic locations by lowering costs through streamlining of processes and promoting public-private partnerships; to implement the mandatory accreditation and skills development to promote quality tourism; to safeguarding

3. Strengthening tourism governance and institutions The Tourism Act of 2009 emphasizes the role of partnership between the DOT and the LGUs and the need to strengthen the institutional capacities of both in undertaking their shared responsibilities. At the same time, the Tourism Act seeks to strengthen partnership with the private sector and other stakeholders in tourism. In order to create this sustainable tourism environment, the DOT aims to provide assistance to the LGUs in the areas of tourism planning, product development and licensing, safety and security, cleanliness and local promotions.

The Filipino talent pool will likewise become more competitive through skills the development of a tourism education and training system that is comprehensive and focused on specific career goals and in preparing globally competitive graduates.

The initiatives will be focused on increasing productivity and pursuing excellence rather than mediocrity, motivating employees, and increasing the attractiveness of tourism jobs in the Philippines.

As the year 2012 ends, the tourism sector is preparing for the roll-out of projects and completion of policy reforms, an evidence of the people’s faith in promises and commitment of the Aquino administration. These projects and reforms are what we need to significantly expand tourism capacity and make the DOT and the other frontline business enterprises aggressively boost the global demand for Philippine tourism. Convergence is key to breaking down the inertia. We have started to shakeit off. We already see some of these convergence activities and alignment of policies and programs between DOT and the other agencies, proof of political commitment. As this momentum continues to build up and accelerate after the 2013 elections, Philippine tourism by 2016 will truly be more fun for everyone.

Shopping. More fun in the

Philippines it’s more fun in sbep

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SBEP CLASS 2012

ACOSTA, Rodelio C. “Rodel” Partner isla lipana & co. (pwc Philippines)

ALBAÑO, Julieta S. “Juliet” Chief Finance Officer liquigaz phils. corp.

CARPIO, Miriam G. “Miriam” Vp Finance GRAND MONACO ESTATE DEVELOPERS, INC.

CUSTODIO, Darlene Magnolia A. “Darlene” City Mayor LGU, GENERAL SANTOS CITY

DELOS SANTOS, Antonio R. “Anton” Treasury Manager SEMIRARA MINING CORP.

ECHAVEZ, Nova Princess P. “Nova” City Mayor LGU, OZAMIZ CITY

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EDDUBA, James S. “James” Municipal Mayor LGU, PASIL, KALINGA

magahin, Olegario J., Jr. “Gary” Acting Bank Officer IV Bangko sentral ng pilipinas

EVANGELISTA, Mario S. “Mario” Internal Audit Manager OCLP Holdings, Inc.

MALAGAPO, Eduardo P. “Ed” CEO / Principal Al-Andalus international school

HIGURE, Yoshinari “Yoshi” CEO ANGELCOCO, INC.

MELLIZA, Teofilo S. Jr. “Pilo” PNP – Board of Trustee philippine national police

LIM, Antero S. “Ter” Municipal Mayor LGU, GOA, cAMARINES sUR

LIM, John-John Patrick V. “John” Partner isla lipana & co. (pwc philippines)

LUMBERA, Rizalina V. “Riza” Chief Legal Officer public safety mutUal benefit fund, inc.

PALANG, Raquel P. “Kay” FVP/Deputy Treasurer UNIONBANK OF THE PHILIPPINES

PANGARUNGAN, Princess Diamond P. “Princess” President pacasum college

Perez, Ruby Gisela L. “Ruby” AVP – Corporate Planning & Investor Relations UNIONBANK OF THE PHILIPPINES

SAIDAMEN, Nikkolai D. “Nico” Executive Vice President LANAO RESOURCES CORP.

SOLAMO, Ricky A. “Ricky” Consultant, Department of Surgery THE MEDICAL CITY HOSPITAL

PORTER, James Philip Roland V. “James” Investor

SAIDAMEN, Saidamer D. “Sandy” Vice President LANAO RESOURCES CORP.

TABOR, Junalina S. “Juna” Chief Finance Officer Semcalaca Power Corporation VP-Finance / Chief Finance Officer SEMIRARA MINING CORP.

RESMUNDO, Leopoldo A. Jr. “Nonoy” Assistant Vice President Development bank of the philippines

romualdez, Benjamin Philip G. “Philip” Chairman, President & CEO BENGUET CORPORATION

RUADO, Edgar H. “Bong” President & CEO FORT PRINCE ENTERPRISES

SANTIAGO, Leocadio S.C. Jr. “Leo” Police Director for Operations PHILIPPINE NATIONAL POLICE

SANTOS, Benjamin D. Jr. “Benjie” Regional Comptroller Division Philippine national police

SIA, Melanie S. “Lani” Lawyer SENATE OF THE REPUBLIC OF THE PHILS. / TRANS-SIA SHIPPING AGENCY & SIA COPRA ENT.

VILLAFLOR, Thomas L. “Tom” Chief Operating Officer RURAL ELECTRIFICATION FINANCING CORP.

YU, Robert C. “Rob” President RY LOGISTICS, INC.

VALLES, Jose Ronald V. “Ronald” Assistant Vice President Manila Electric Company

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special feature

SBEP’s 38th Anniversary Celebration:

2012 Golf Tournament and Homecoming Dinner

by Alonica R. Salazar

T

he SBEP’s 38th anniversary celebration featuring a Golf Tournament and a Homecoming Dinner was held last January 20, 2012 at the Wack-Wack Golf and Country Club, Mandaluyong City. The success of both grand festivities could be credited to the hard work and generosity of Class 2012—the host batch.

The exciting day started with a Golf Tournament at the West Course of the Wack-Wack Golf and Country Club. Four VIPs led the ceremonial tee-off at 9:00am. They were the following: (1) Former Mayor and Congressman of Cagayan de Oro City, and SBEP Alumnus (Class 2000), Mr. Constantino G. Jaraula; (2) GBU Head of United Laboratories, Inc., Mr. Felipe Aqui, Jr.; (3) President of First Metro Asset Management, Inc., Mr. Augusto

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M. Cosio, Jr.; and (4) SBEP Director, Dr. Victor A. Abola. A total of 47 alumni, faculty, current participants, and guests joined the tournament.

Mr. Yul Catabran (Class 2005) came out as the Overall Champion and Mr. Felipe Aqui, Jr. emerged as the Lowest Gross Champion. Division winners were Mr. Kim Cabatit (guest) for Class A; Dr. Ricky Solamo (Class 2012) for Class B; and Mr. Art Lumibao (guest) for Class C. Batch Champion was Class 2008 represented by Mr. Sonny Laraya and Mr. Ric Enriquez. For the Fun Holes, Mr. Augusto M. Cosio, Jr. bagged Nearest to the Pin at Hole #14. Mr. Ernesto Villaluna (Class 1992) won the Most Accurate Drive at Hole #5 and Mr. Yul Catabran (Class 2005) bagged the Longest Drive at Hole #10. Unluckily, nobody won the

special feature

holei n - o n e prize—a Club Car Golf Cart.

All those who participated in the golf tournament were happy to go home with a fantastic giveaway package comprised of the following: NIKE dry-fit shirt, NIKE golf cap, Nike sleeve of balls, and golf umbrellas. The SBEP and Class 2012 would like to thank the following generous sponsors for making the 2012 Golf Tournament a huge success: Platinum Sponsor – United Laboratories, Inc.; Gold Sponsors – Pacsports, Club Car, South Forbes Golf Course, Public Safety Mutual Benefit Fund Inc., and Semirara Mining Corporation; Silver Sponsors – Ortigas & Company Limited Partnership, Manabat, Delgado, Amper & Co., Isla Lipana, Al Andalus International School, Liquigaz, Lanao Resources, RY Logistics, Inc., Angel Coco, UnionBank, Jaraula Development Corporation, R-II Builders, Stradcom Corporation, and Mayor Antero Lim of Goa, Camarines Sur.

The festivity did not end at the golf tournament. Shortly before dinner, the Banquet B of the Wack-Wack Golf & Country Club was brought to life as family and friends of the alumni and Class 2012 celebrated the Homecoming with a feast prepared by ‘Via Mare.’ A total of 127 alumni, current batch, guests, faculty, and staff graced the Homecoming Dinner.

The entertaining program started with an invocation by Ms. Raquel Palang (Class 2012). The recognition to Class 2012 was delivered by Dr. Victor Abola and the welcome address was given by Dr. Eduardo Malagapo – Class 2012 president. The masters of ceremonies of the night were Mr. Edgar Ruado (Class 2012) and Ms. Alonica Salazar.

Throughout dinner, the guests were serenaded by the celebrated band, “The MOBB” – featuring our very own alumni – Mr. Aton Atilano (Class 1982), Mr. Gerry Reyes (Class 1999), and Mr. Doods Policarpio (Class 1999), with the special participation of Dr. Ramon Quesada (former SBEP Director). The dance floor came alive as the guests danced with the music of The MOBB throughout the night.

The fabulous raffle prizes glued the

audience to their seats. These were donated by the alumni and Class 2012 which included a 32” LCD Devant Full-HD TV, an overnight stay in a deluxe room at Crowne Plaza, 2 free golf memberships for 1 year at South Forbes Golf City, a Piccolo Dolce Gusto coffee maker, an iPod dock with speaker, a NextBase super slim DVD player, and Rustans gift certificates—for the major prizes.

Dr. Eduardo Malagapo, Class 2012 president and “2011 Bagong Bayani Awardee for Outstanding Community and Social Services,” and also the “Blas F. Ople Awardee Para sa Natatanging Bagong Bayani,” delivered the inspirational message to the guests. The homecoming dinner formally concluded with Dr. Emilio T. Antonio’s closing remarks.

The SBEP would like to express gratitude to all the sponsors of the golf tournament and homecoming dinner for their generous assistance in contributing to the SBEP Endowment Fund. Last but not least, the program would like to acknowledge Class 2012 and the hardworking SBEP staff for making the festivities of January 20, 2012 an enjoyable and memorable experience for everyone. it’s more fun in sbep

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SBEP Alumni Association As a member of the SBEP Alumni Association, you are entitled to the following privileges: 1.

2.

3.

4.

5.

20% discount on all SBEP Financial Seminars Copy of the SBEP Annual Alumni Magazine (to be sent by mail) Unlimited access to the UA&P Graduate School Library SBEP Alumni ID card (to be sent by mail) Copy of the Market Call (to be sent by mail every quarter) – a publication of First Metro Investment Corporation (FMIC) and UA&P Capital Markets Research Group. This highly informative newsletter gives you the current standing and a thorough analysis of the workings of our macroeconomy and the capital markets.

For those interested to join, please submit the following requirements:

– Accomplished Alumni Data Form

– One (1) piece 1x1 picture (preferably white background)

– Annual membership fee of PhP1,500.00 (check should be payable to the UA&P-SBEP Alumni Association, Inc.) For any SBEP Alumni concerns, please call our office at 6370912 to 28 loc. 222, 6343095 or email us at sbep@uap.asia

Strategic Business Economics Program Your Executive Edge!

Congratulations and more power to SBEP 2012!

From Dr. Ricky A. Solamo and family

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Mr. Rodelio Acosta “Sir Rodel is a person who possesses a very genuine character. He leads by example and can go out of his way to make someone feel special.

He is a responsible father to his family, a good friend and a great mentor.

I am so blessed to be under his wing.” =) —Maricel Buan-Labrador, EA to Mr. Acosta Ms. Julieta Albaño “Juliet is highly independent and diligent person. Despite her tight work schedule and demand for quality family time, she still managed to squeeze her time reading the SBEP materials. She displayed a lot of enthusiasm for new knowledge and information. She is fun and interesting to be with.”—Juna Tabor Ms. Miriam Carpio “Miriam is a dedicated mother and supportive wife to all the business endeavors of her husband, Dr. Rey A. Carpio. She’s able to strike a balance between family, attending SBEP class and managing the financial side of their own company, the Grand Monaco Estate Developers, Inc. She is a caring and loving person and easy to go with and I really admire her humility.”—Juna Tabor Mayor Darlene Custodio “When she has set a goal...she’s so focused to it, you can almost say she is driven!”—Nova Echavez Mr. Anton Delos Santos “Anton is quiet and reserved during lectures but friendly and vocal during small group discussions and coffee breaks. He is a dependable classmate and offers good insights about business especially the mining industry.”

—Gary Magahin, Jr.

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Mayor Nova Princess Echavez “She is a dedicated public servant and devoted mother to her kids. Nova is one of the nicest local executives we have and one of the promising young leaders in Mindanao.”—Bong Ruado Mayor James Edduba “A quiet and serious person, he is very down to earth and easy to be with. I have known him since college and one my closest friends.”

—Bong Ruado Mr. Mario Evangelista “I have known Mar, as his friends call him, only for a short period of time; that is, as a classmate at SBEP of UA&P. Mar is such a humble person, dedicated to his job, family and to his study in the university. We should have more persons like Mar in this world.”—Antero Lim Mr. Yoshinari Higure “ Yoshinari Higure is fun to be with. He is as passionate about helping the poor coconut farmers in his business, as he is about his sports.”

—Nonoy Resmundo, Jr. Mayor Antero Lim “Mayor Antero Lim exudes the warmth of a dear friend, and the confidence of a leader.”—Nonoy Resmundo Jr. Mr. John-John Patrick Lim “Technical expertise in banking, insurance and finance is John’s forte. His family is his joy and inspiration.”

—Rodel Acosta

Atty. Rizalina Lumbera “Riza is a consummate student of law, an excellent interior decorator, and an economist at heart. She is also a perfect negotiator, with the interest of the company in mind.”

—Gen. Pilo Melliza Mr. Olegario Magahin, Jr. “Gary is an inspiration to all of us. He shows that there are no limits to what one can achieve and that there are no excuses not to reach one’s potential” —Anton Delos Santos Dr. Eduardo Malagapo “Doc Ed, as he is fondly called, is a tireless individual driven to better himself and the lives of others. He is a successful entrepreneur, educator, musician, and a recipient of the “Blas F. Ople Award para sa Natatanging Bayani” in recognition for his outstanding achievement in promoting higher education for OFWs. His witty remarks in class make learning more fun.”

—Mario Evangelista

Gen. Teofilo Melliza “The general among the generals.... hardworking, straightforward, sharp mind...”—Riza Lumbera Ms. Kay Palang “Kay is a skilled juggler, able to balance her roles as a loving wife, nurturing mother, diligent student, dependable colleague, supportive leader, and highly productive Deputy Treasurer. Possesses a discerning heart that of a child— genuinely concerned for others, rejoices at others’ triumphs and readily lends a shoulder at others’ disappointments.

Never mistake her well-mannered behavior and well-groomed looks as signs of a stereotyped shy and timid Filipina. Contrary to first impressions, this modern day version of “Maria Clara” drives a monster truck, is strong willed and determined to do well on anything she sets her mind on. She’d stand her ground at any Father Damaso and would put any Ibarra in his proper place when in the trading floor.”—Ruby Perez Ms. Ruby Gisela Perez “Who wouldn’t recognize Ruby’s everpresent smile and contagious laughter?

Surely, one can’t help but be at ease with her right away. But behind that child-like smile is a tough lady who is passionate in everything that she does, a fastidious worker who would not settle for anything but the best. She is one person you would definitely want to be on your team!”—Kay Palang Mr. James Philip Roland Porter “Mr. James Porter is a gentleman in his own right, soft spoken, and extremely approachable. Surely, you’ll enjoy his company. He shares his thoughts openly in class, and amazingly delivers more over coffee. His in-depth knowledge of the corporate sector is such that I learned so much from him. Cheers, Sir James!”

—Tom Villaflor Mr. Leopoldo Resmundo, Jr. “Don’t be fooled by his gentle looks because Nonoy can be assertive, outspoken and idealistic. Always asking questions that relates business economics to social responsibilities, he would constantly barrage the lecturers with queries and clarifications on poverty, social inequities and other social issues.”—Gary Magahin, Jr.

Mr. Benjamin Philip Romualdez “A very recognizable person in class—a head taller than all, with his distinct, unshaven, slightly long curly locks of wavy hair and dapper bearing. Philip is now becoming a well known media star because of his regular appearance defending his passion for mining. Is it possible of him running soon for a political office following in his father’s and relatives’ footsteps?”—James Porter Mr. Edgar Ruado “Bong suffers from a split personality, from a serious, no non-sense guy at work to a completely childish-like, funny guy in school. But he is a true friend you can really rely on. He would tell you what you need to know straight to your face—he is that kind of person and that is why he is so loved by his friends and co-workers.”—Lani Sia Gen. Leocadio Santiago, Jr. (Ret.) He once said...“Heroes are born by courageous acts they make in extreme situations.” “Tagoy”, as PNP calls him, is a hero in his own right. He has dedicated his life in making this country it’s more fun in sbep

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safe and secure. Always thinking and acting for the good of his unit, of his men, and most of all, of this country.

—Benjie Santos, Jr.

everyday from dreaded diseases like cancer. I think this is one the primary reasons why he joined SBEP. God bless and mabuhay ka Doc Ricky!”—Robert Yu

Lt. Col. Benjamin Santos, Jr. “Benjie as we know him can be described as open, diligent, no doubt intelligent, willing to share, helpfully and most important of all God fearing! A very professional police officer, always trying to learn and as human as anybody, a great family man!”—Leo Santiago, Jr.

Ms. Junalina Tabor “Juna is the typical Finance head, a very calm and mild-toned person, but delivers a volume of message when she starts speaking up. I love interacting with her as I learn from her experiences.

She unselfishly shared what she knows and does what she can when asked for assistance.”—Juliet Albaño

Atty. Melanie Sia “She is often perceived as a snob but is actually very friendly and a familyoriented person. Always conscious of what she wears and always seen on TV during the impeachment trial, Lani is a beauty and brains personified.”

—Bong Ruado Dr. Ricky Solamo “A man who has it all. Successful and respected man in the medical community. A wonderful father and husband. A friend who is honest and caring. A dedicated doctor who serves and saves countless patients’ life everyday—the rich, the famous, the ordinary people and the less fortunate in life who cannot afford proper medical attention. A visionary and a leader who always keeps up and update himself with medical advancement to be able to lead his medical team effectively and competently serve and save more lives

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Atty. Jose Ronald Valles “Atty. Jun Valles graduated from San Beda College of Law. Although he started his SBEP late in December 2011, his five months attendance with the program was not only focused on the academics but as well as his relationship with the rest of the participants. His main concern was the good service provided by Meralco to all its clients in terms of reasonable and affordable rates billed to them monthly.

That was why his questions to the professors were always focused on latest innovation in reducing the tariff. He is tatak “San Beda lawyer” in the likes of Secretary De Lima and Ex-Senator Saguisag but he is more concerned on customer satisfaction and loyalty.”

—Ed Malagapo Mr. Thomas Villaflor “On first impression, Tom comes across as a college professor. A man of few words to a point of seriousness. But once you get him talking, he is the real deal— down-to-earth, soft-spoken with a quick mind and passion, and knowledgeable about his work.”—James Porter Mr. Robert Yu “The soft spoken, mild mannered gentleman from SBEP 2012.

Robert strikes you as someone who’s predisposition is calculated and refined.

Yet beneath all of these is a person who’s fun and easy to get along with... Silent water truly runs deep.”—Ricky Solamo

Memoirs of the First SBEP Jakarta Trip

By Rowena A. Araña

For most if not all, members of SBEP Class 2012, the 2nd out-of-town conference (OTC) was something they looked forward to. After much weighing of the pros and cons and subtle campaigning for those for and against the proposed venues, Thailand or Jakarta, a verdict was reached and the majority opted for the latter. I guess it was Dr. Vic Abola’s pitch over lunch with the weekend class that swayed their decision and overtook the votes of the fewer weekday attendees. And so after 7 years of flying to Shanghai as SBEP’s 2nd OTC destination, we journeyed to Jakarta and hoped to have a different experience.

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Indonesia is the world’s fourth-mostpopulous nation, Southeast Asia’s largest economy and has a trillion dollar economy today, as reported by our Indonesian resource person, Mr. Stefan Handoyo during our predeparture briefing five days before the trip. With that in mind and other exciting prospects he shared with us, we ventured into this seemingly attractive investment destination.

The air was humid and warm, typical of summer, when we arrived at the Soekarno Hatta International Airport in Jakarta. A bit drained from the flight, we managed to pose and smile for the photo op while waiting for our bus that would transport us to our hotel.

We arrived past dinner time at the hotel and immediately checked in at our respective rooms to retire for the day.

As scheduled, several classes were lined up for the next two days inside the hotel. The first class was given by Dr. Rolly Dy who talked about Project Analysis (Projana). Four Filipino expatriates and an Indonesian lady executive joined the group in the morning class of Dr. Dy. We were fortunate to hear first hand insights from these guests who are prominent in the Indonesian business community. Dr. Dy graciously encouraged interactions and sharing of information that extended until lunchtime. In the afternoon, Mr. Pete Dimaculangan took the floor and discussed Business Ethics which drew some interesting exchanges of ideas from the class. At the end of the day, our energetic local tour guide, “Durja”, enthusiastically brought us to our dinner venue, at a restaurant enclosed in a former Dutch establishment that dated back in the 16th century. Not even the smallest detail about the place like not a single nail was used in that building could drive our attention away from the appetizing aroma emanating from the dining area. Minutes later, we were treated to sumptuous Indonesian dishes some of which were served in plates “on fire” just like our sizzling pans (less the fire) in the Philippines.

The heavy dinner was just right to provide the class ammunition for yet another activity and that was to prepare for their respective case assignments in Projana and Business Ethics to be presented the following day. So after dinner, they joined their respective groups and immersed themselves on their assigned cases.

True enough the following day was filled with more activities. Since Dr. Rolly Dy had already taught them the analytical tools in analyzing a project and Mr. Dimaculangan had walked them through the intricacies of business ethics, everyone got ready for their case presentations. Their preparation was halted though as they still had to listen to the last lecture in the morning to be given by Dr. Vic Abola about HR Economics. He ended his lecture early sensing that the class needed more

time for their case presentations.

The afternoon went by quickly and soon everyone was agog with the case presentations ahead. All five groups took turns in their case reporting. Aside from quizzical comments from the lecturers particularly from Dr. Dy, the presentations went on smoothly. The last presentation had to be cut short as the guests for the next activity started coming in. It was time for the economic briefing and business matching with the Indonesian business executives. To give a short background on the Philippine economy to the Indonesians, Dr. Abola presented an overview on the Philippine economic situation. In response, Mr. Bernardino Vega, Jr., a half-Filipino half-Indonesian consultant to prominent business and government personalities in Indonesia, gave a primer on doing business in Indonesia. Around 20 Indonesian and Filipino guests based in Indonesia attended the event, with the help from DTI, particularly from the office of the newly appointed commercial attaché to Indonesia, Ms. Alma Argayoso and her local trade officer Ms. Mulyati Djuari. Also in attendance were Consul Germinia Aguilar-Usudan from the Philippine Embassy and representatives from the Jakarta local city government.

Both parties gave considerable inputs in doing business in Jakarta. As reported in the briefing, business opportunities in Indonesia abound hence paving the way for investments to pour in. It was a good

starting point to meet and discuss bilateral business prospects. The event was concluded successfully.

After the long day, I could see the beaming faces of the participants as they already accomplished their academic duties.

The group was treated to a delightful dinner in another local restaurant set in a native ambiance. The food was lavish and not spicy at all. (My impression about the food being spicy totally banished and so I ate with gusto especially the seafood dishes they served.)

Some of us were curious about the food they served in flaming pans just like in the previous evening. It was apparently some delectable seafood dishes.

The next day, everyone seemed light and bright, after all, it was time to finally go out and explore Jakarta. First off, we traveled for almost an hour to get to the outskirt of Jakarta where the Oishi Plant is located.

Surprisingly, traffic was moderate and we got to Oishi on schedule. Upon our arrival at the plant site, we were met by Mr. Richard Yu, Operations Manager and another colleague.

We were no longer surprised to know that they are both Filipinos. Some twenty Filipino employees are apparently working in the site as well. We were brought directly to their meeting room and they showed us a short presentation, from the company’s establishment in Jakarta up to their presentday operations. Just like in its Shanghai counterpart, the Oishi plant in Indonesia was also beset with local concerns but they

were able to deal with them eventually. The company is relatively young (it has been operating for 8 years now), but it has already accomplished a lot in terms of market share.

While in the middle of presentation, some of us started munching on the product samples laid on the table. They were just too irresistible especially the ube, cheese and chocolate flavored pillows snacks. We were informed that some of these variants are not sold in the Philippines. So we munched on (noisily) amidst the amused looks of our hosts. I guess it was our loyalty and pride as well, to be eating something produced by a Filipino company in a foreign land. Our gracious hosts impressed us further with their hospitality by letting us have a look inside their factory where the packing production line was held. With our head caps and face masks on, we stayed for a while to watch the packaging of some of the products (and we could see the workers systematically doing their tasks). At the end of the brief tour, we were rewarded with boxes of Oishi goodies equivalent to about a year’s supply (if you won’t share). After some photo ops and pleasantries, we left Oishi and headed back to Jakarta.

Almost halfway from the city proper, we stopped for lunch in a restaurant inside a rustic building. I was hoping it would live up to its name “President Executive Club”. Well, I was somehow impressed as the interior was modernly adored and the floor inside the restaurant was carpeted. By this time some of the dishes were spicier, I noticed, and so I picked the dishes with less red colorings in them. While waiting for others to finish their lunch, I hopped from one table to the next taking pictures and occasionally joining some groups for chit-chat. But I would always be drawn to the tables where the loudest laughs or guffaws were coming from. I was certain it was either from the table of Lt. Col. Benjie Santos or Dr. Ricky Solamo. They never ran out of funny stories to tell. Also in the comedy department, continued on page 36 it’s more fun in sbep

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would be Mr. Bong Ruado with his witty remarks that could match those of Dr. Solamo’s. Another source of liveliness in the class would also be the class president himself, Dr. Ed Malagapo who kept the class enthralled by his funny comments in the class. Another noteworthy character would be Mr. Nonoy Resmundo, Jr., who asked the most questions hence making the class more exciting.

Our next activity on our itinerary was shopping. Jakarta may not be known yet for shopping but we shopped anyway when we went to their tiangges, much like the ones we have in Manila. Jakarta however, is known for its batik fabric.

I wasn’t surprised that even the men bought some batik clothes for their wife.

After dinner we passed by one of their upscale malls. Nothing much caught our fancy; after all, we have lots of malls back home.

Our second to the last day was devoted for sight-seeing activities. After breakfast we were dropped off at the Monas or National Monument, which is like the Luneta Park in Manila. The monument is a symbol of Jakarta’s independence. At night the tip of the monument, which is a bronze flame and coated with gold leaf, is lit. At the north side across the monument is the State Palace where the President and Cabinet hold office. Before we were all scorched under the sun, we went back to our bus and went to our next destination—the Taman Mini Park. The Taman Mini Park is the Indonesian counterpart of our Nayong Pilipino where one could see all the popular tourist destinations put together in one place. Apparently, their classification was based on the provinces or six main islands of Indonesia—Java, Sumatra, Kalimantan, Sulawesi, Maluku and Papua. Each province showcases

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its own local architecture, costumes, artifacts, etc which are displayed in their intricately designed pavilions. Roaming around, one could see the rich cultural heritage of Indonesia.

Our next stop was at the Komodo Dragon Museum which houses local animals such as turtles, crocodiles, alligators, snakes, and the Komodo dragons (which originated from the Komodo Islands in Indonesia). Speaking of these native giant lizards, some daring participants answered to the challenge and bravely went down to the enclosure where the resident 7-foot long Komodo dragon lay motionless. Mind you, even Dr. Abola gave in to the clamor and posed for the camera with the mighty reptile just inches under him. After the morning tour in the park and the close encounter with the animals, we boarded our bus exhausted. On our way back to the city, I was amazed by the tree-lined highways and well-groomed parks that we passed by. In less than an hour, we reached the city and we were dropped off in a posh mall in the commercial district.

We took a quick lunch in a restaurant and afterwards we were given time to shop or look around. Some of us went to the supermarket and bought some goodies for pasalubong. The rest opted to have a break and had coffee at Starbucks.

Soon after the group reassembled and we headed back to the hotel to deposit our stuff. It was Saturday and as scheduled, we heard an anticipated Mass at the Jakarta Cathedral. It was interesting to note that just across the church was a Moslem temple. The mass was said in Bahasa Indonesia (official language of Indonesia) but we managed to follow and participate in the celebration. After the mass, we went to another local restaurant for our last dinner in Jakarta.

We enjoyed our last dinner together, this time all the lecturers joined us. It was a good night to conclude our six-day stint in Jakarta. I know everyone was looking forward to be home again the following day. But I know that at least for such a period of time, the participants had developed a bonding with one another and shared memories only they could experience in Jakarta.

Class of 2012 Indonesia Trip

By Edgar H. Ruado

I

t took a while before the SBEP staff could decide the location and venue of our out -ofthe-country lectures because of the seeming diverse opinions by most of the class members and even among the class officers themselves.

In fact, the entire class were initially asked to list down their preferred choice of venue, suggestions varied with some wanting to go to Korea, while others preferred going to Shanghai, Kuala Lumpur, Bangkok and Hongkong before finally deciding on Jakarta, which still had to be put to a vote. In short, the class of 2012 wanted anywhere but Shanghai, which has been the regular venue of previous SBEP out of the country conferences.

That essentially is how we describe the SBEP Class of 2012. DIVERSE. Owing to the fact that most of us have different backgrounds and persuasions, with some coming from the banking sector, real estate, mining, with lawyers, doctor, academicians, accountants, police and military, lawyers, national and local government officials and businessmen to name a few. Having a diverse background however was not a barrier for us and in fact, it is precisely the fact that we are from the different spectrum of the society that somehow made it work and enjoyable.

FUN is an understatement to describe our Jakarta trip. Aside of course from the lengthy but valuable insights we learned from the lecturers, both from the UA&P and the Filipino businessmen based in Jakarta.

The OISHI plant visit was a great experience for us and it was good to know that a Philippine based company is doing well in a foreign soil. It likewise served as our alternative “pasalubong” since we didn’t really had time to shop or a convenient excuse to some.

We also had a glimpse of the city and a short visit at the mall. I could go on and on but really, most of the time we spent there was something that we will cherish forever. It was a deviation from our usual chores at work and schedule and it was indeed something that we don’t mind doing again in the future.

The Class of 2012 is grateful for the patience and understanding, not to mention the great work of the SBEP staff who always facilitated and assisted us during lectures.

Our sincere thanks to Dr. Victor Abola, our beloved professors and lecturers and the entire SBEP staff and the entire UA&P community for making us feel at home all the time.

The entire SBEP Class of 2012 will forever be grateful and will always be an integral part of the SBEP family. That in all things God maybe Glorified.

KAPIHAN SA SBEP

The SBEP Alumni Office organized a Kapihan last June 1, 2012 at the UA&P Dining Hall. It was attended by 29 alumni represented by the different SBEP batches. The host batch for this kapihan session was Class 2011.

The aim of the SBEP Kapihan is three-fold: 1) To bring back the SBEP alumni to UA&P - all alumni from Class 1975 to 2012 are encouraged to attend the kapihan. This will be a quarterly reunion for the SBEP alumni and their guests.

2) To get first-hand updates on what’s happening in the economy and the business environment - Dr. Victor Abola, our program director, will start the kapihan with an informal / short briefing on pressing economic issues and their impact on the business sector. The attendees can freely join the interactive discussion while having breakfast and coffee.

- Other UA&P economists / professors and distinguished guests from the government and private sector will be invited as speakers.

3) To provide a venue for networking with fellow senior executives on a quarterly basis

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-

The SBEP boasts of its alumni (numbering 1600+) from hundreds of companies, representing not only top corporations, but also medium-sized, dynamic enterprises, professionals (lawyers, doctors, engineers, etc.), and government officials including the military. The diversity and level of backgrounds contribute to a truly enriching exchange of theory, experience, and wisdom.

The invitation to the next Kapihan session will be sent to all alumni through email. The SBEP alumni may bring a guest(s) to the kapihan. Registration is for free.

The only cost to the attendee is breakfast.

For more inquiries on our quarterly Kapihan, please get in touch with Ms. Tata Salazar, marketing and alumni relations manager or with Ms. Lea Riñon, marketing and alumni relations coordinator, by email: sbep@uap.asia or by phone: 6342820 / 6343095 / 6370912 loc. 222.

It’s time to be updated and re-connected! Be part of the SBEP-Alumni Loop!

it’s more fun in sbep

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SBEP CLASS 2012

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