is it really ok?

Budget OK to be prioritized
BY JHOANNA FRANCES S. VALDEZ and BERNARD U. ALLAUIGAN, Reporters/BWorld/1.19.09

Three other bills top agenda as Congress goes back to work

LEADERS of the Senate and the House of Representatives vow to rush at least four measures, including the P1.415-trillion national budget for this year that is still pending before a bicameral conference committee, as lawmakers resume sessions today after a holiday break.

In separate interviews, Senate President Juan Ponce Enrile and House Speaker Prospero C. Nograles said the budget, which was not approved in time for the new fiscal year because of congressional wrangling, would be passed before the end of January. The government started the year with the reenacted 2008 budget as mandated by the Constitution.

At the center of the debates is the amount to be set aside for an "economic stimulus" package — higher public spending to keep the domestic economy afloat amid a global downturn.

Senator Edgardo J. Angara and Quirino Rep. Junie E. Cua, chairmen of the bicameral committee finalizing the budget, said the 2009 outlay would be ready for ratification any time this week. Mr. Angara said the only sticking point was the amount of the stimulus package.

The bicameral conference committee initially earmarked P15 billion, taken from debt service cuts, for the stimulus. Mr. Angara declined to disclose the final amount, saying it could still go up to P30-50 billion.

Lawmakers also pledged to extend the 20-year old Comprehensive Agrarian Reform Program (CARP) before the March 6 recess.

Also high on the priority list are measures calling for a higher deposit insurance coverage of P500,000, from the current ceiling of P250,000, and the extension of the rent control law that lapsed last December 31. These bills were previously not a priority.

In November, seven priority measures were listed by congressional leaders, including the budget and the CARP extension. There was no mention of the others — the proposed Magna Carta for Women, the rationalization of fiscal incentives, amendments to the Electric Power Industry Reform Act (EPIRA), the reproductive health bill, and a proposed national tourism policy program — yesterday.

Failing to agree on the bill to extend the CARP which expired last June, lawmakers instead passed a joint resolution extending the program for six months, supposedly to allow a thorough review of the law, before sessions adjourned last December 17

The original proposal was for a five-year extension. The dispute is over whether the government should continue the compulsory acquisition of farms from landowners for redistribution to farmers, or just carry on support schemes for program beneficiaries.

Different priorities for business sector

Business groups took a different view on what policy the government should pursue.

Edgardo Z. Lacson, chairman of the Philippine Chamber of Commerce and Industry, said that while his group supported the approval of the budget and higher deposit insurance coverage, both the CARP and rent control should be reviewed first.

Rent control is a regulating measure "which will not have a very healthy effect on the economy," he said.

Lawmakers, meanwhile, should use the CARP review period "to include more equitable ways of distributing wealth between landowners and farmers," he added.

Makati Business Club Executive Director Alberto A. Lim said all the legislative priorities, except rent control, were agreeable.

The Rent Control Act of 2005, which expired at the end of 2008, set a 10% annual cap on increases for homes being rented out for no more than P10,000 a month in Metro Manila and other highly urbanized cities, and P5,000 in other parts of the country.

Mr. Lim said Congress should add to the list of priorities measures cutting tax incentives and increasing excise taxes on "sin" products such as tobacco and alcohol, as tax collections could be a major problem for the government this year.

"Right now, [the government is] giving too many incentives and [it] is losing too many revenues when not much investments are expected to come in," he said.

Also on Congress’ agenda

Other priorities in the Senate include amendments to the Home Development Mutual Fund or Pag-IBIG charter to hike funds for housing and loan programs, the Magna Carta for Women, and the Tourism Act which seeks to create special tourism zones, Senate Majority Leader Juan Miguel F. Zubiri said.

Mr. Enrile said a measure defining the country’s territorial limits would also be rushed as the May 2009 deadline set by the United Nations Convention on the Law of the Sea nears. The measure is expected to bolster the country’s claim over the oil-rich Spratly Islands.

If President Gloria Macapagal Arroyo certifies the bill as urgent, the chamber can fast-track its approval within one week after sponsorship in the plenary, Mr. Enrile said.

In the House, Mr. Nograles said their other priorities were the reproductive health bill, pre-need code, amendments to Anti-Money Laundering Law, corporate recovery act, amendments to Oil Deregulation Law, and the rationalization of fiscal incentives.

The House is also not yet giving up on the move to amend the Constitution, which is expected to be cleared by the House constitutional amendments committee, despite stiff opposition from the Senate which wants any changes discussed only after the 2010 presidential elections to guard against term extensions.

La Union Rep. Victor F. Ortega, committee chairman, said his panel would push for a constitutional convention to amend the 1987 charter given the "limited time" to convene a constituent assembly.

the cutting hedge

Hedge funds unlikely to survive crisis
by BY WANFENG ZHOU and VIVIANNE RODRIGUES, Reuters/BWorld/12.11.08

NEW YORK — Even some strong and profitable hedge funds may not survive the ongoing credit crisis due to a lack of funding or credit, some top hedge fund managers said on Tuesday.

"There are going to be some firms that have good strategies that were strong in terms of discipline and their strategy itself, but may not survive this because they don’t have the assets or the funding to be able to survive," Ken Webster, president of the John W. Henry & Co. fund, said at the Reuters Investment Summit in New York.

The hedge fund industry has been hit hard by the worst global financial and economic crisis in decades. The average hedge fund lost 17.70% in the first 11 months of 2008, the worst-ever performance, figures from Hedge Fund Research show.

In October alone, investors withdrew over $40 billion from hedge funds and assets under management in the industry declined to $1.5 trillion at the end of that month, a level last seen at the end of the fourth quarter of 2006.

"There are a lot managers that are going out of business that have underlying positions that are profitable" because they can’t get the financing as a result of the credit crisis, Mr. Webster said.

J.W. Henry, which mainly uses trend-following style, has posted exceptionally strong performance this year. The firm’s Global Analytics program is up more than 80% this year, while its international foreign exchange program has returned about 76%.

Good returns and strong performance may actually increase the risk of higher redemptions, according to John Taylor, chairman and chief investment officer at FX Concepts, the world’s largest currency hedge fund, with $14 billion in assets.

Some of FX Concepts global funds are up more than 30% this year.

"We are liquid and people take the money assets," Mr. Taylor said at the Reuters Summit. "They need the cash. But thankfully we don’t need borrowing."

Cutbacks and shake-ups in the industry have already started, the fund managers noted.

On Monday, US hedge fund giant Citadel Investment Group LLC announced it is closing its Tokyo office and its Asia principal investment operations by the end of this year. The fund, which managed about $18 billion as of a month ago, lost about 13% in November, bringing its full-year loss to 47%, investors told Reuters.

The struggle to hold on to capital may lead hedge funds to become more open to offering lower fees and packages to attract new clients and extend their stay, Mr. Webster of J.W. Henry said.

"I think you’re going to see what we’re all seeing now, which is continued shake-up in the hedge fund industry," he said. "There’ll be a lot of external pressures on strategy that may force people out of the market. Overall, their strategy was working, but not in an environment like this."

the real deal

US: Global deal must be done by end-2009
by Imelda Abaño/BMirror/12.09.08

POZNAN, Poland—The top US delegate at world climate talks here said on Monday they are ready to lead the way toward an international agreement by the end of 2009.

Harlan Watson, the head of the US delegation, told journalists here that the US “is fully committed to reaching an agreement by 2009 that is environmentally effective and economically sustainable.”

He is also optimistic the new administration under President-elect Barack Obama will return the United States to the center of the global debate on climate change.

Looking toward a possible deal in Copenhagen next December to succeed the Kyoto Protocol that will expire in 2012, Watson said the US will figure out what is achievable within one year given the economic realities.

Earlier, Obama had pledged to bring US output of greenhouse-gas emissions back to 1990 levels by 2020. That’s still above the limit that the world’s biggest economy would have been required to meet by 2012 under the Kyoto Protocol, a global-warming treaty the US never ratified. It’s also short of a European Union pledge to cut the gases 20 percent from 1990 levels by 2020.

Watson said Obama’s 2020 emissions goal “is possible,” but warned it would not be “cost-free.” He also warned that the incoming Obama administration would be constrained by the economic crisis in offering incentives to countries such as India and China to commit to action to lower greenhouse-gas emissions.

“Whether or not there can be an agreement at the time of Copenhagen remains to be seen, and that would not be easy, but I think there is broad commitment, certainly on the part of the Bush administration,” Watson said.

President Bush has opposed forcing emissions limits on US companies and has been roundly criticized by environmental groups for not doing enough to tackle global warming.

Kyoto sets targets for 37 nations that expire in 2012. Countries in Poznan are discussing new targets for parties to that treaty, and also what action might be taken by the US and large developing countries such as China and India in a new pact.

Under Kyoto, the US would have been required to cut emissions by an average of 7 percent in the 2008-12 measurement period compared with 1990 levels. China and India, as developing countries, weren’t set targets under Kyoto, and reject goals until the developed world first has led the way.

On the other hand, California Gov. Arnold Schwarzenegger told UN delegates here that the “green rules and regulations that will help save our planet will also revive our economies.”

There is, the governor said, “far more economic risk in the status quo—wasting energy, burning fossil fuels and destroying forests—than there is in fighting climate change by developing clean, renewable energy and saving forests.”

He added, “States and provinces have long been at the forefront of developing green technologies and protecting our economy so that they are setting great examples for our federal counterparts.”

Delegates from 190 nations have gathered in Poznan at the midpoint of a two-year negotiation that aims to produce a treaty to fight global warming in Copenhagen next December.

build me up

Government speeds up infra buildup
by Jun Vallecera/BMirror/12.09.08

THE near certainty of slower-than-anticipated growth next year has forced the government to accelerate within the month its infrastructure-buildup program, the Department of Finance said on Tuesday.

The increased spending for school buildings, roads, ports, bridges and other public structures were to help prime the economy and ensure local output will hit 4.7 percent next year in terms of the gross domestic product, Finance Undersecretary Gil Beltran said in an interview.

Next year’s growth path was seen to range lower than this year’s anticipated expansion of 4.1 percent to 4.7 percent, and will likely range from 3.7 percent up to only 4.7 percent.

“It’s been decided that infrastructure spending will increase in December as part of the pump-priming effort, and ensure next year’s growth,” Beltran said.

He stressed that Budget Secretary Rolando Andaya has kept a list of specific infrastructure programs that will be pursued in earnest under the acceleration program.

Beltran said proceeds from the sale of the government’s remaining stake in Petron Corp. for an estimated P25.7 billion were to fund the accelerated- buildup program.

He said both Finance Secretary Margarito Teves and Budget chief Andaya were hopeful the sale proceeds can be booked under the present fiscal year and disbursed accordingly.

There had been initial apprehension the sale proceeds could not be booked soon enough, denying the government the opportunity to spend for critical public structures needed to ensure continued growth next year.

But Beltran said the optimism is high that the sale proceeds will be booked within the month and disbursed quick enough, and at a level sufficient to keep the budget deficit at or around P75 billion as planned.

The actual 10-month deficit stands at only P62.5 billion—enough fiscal space to undertake heightened public-spending programs, without wrecking the carefully calibrated budgetary numbers.

Beltran said the government is conscious of the impact of probable overspending on credit markets, for instance, and vowed this will not happen.

The government has worked hard to reduce its indebtedness to only around 66 percent of GDP from 95 percent of GDP as recently as four years ago.

Beltran said keeping the year’s deficit within check means ensuring that its level this year should not exceed 0.6 percent of GDP, given that last year this already equaled a full percent of GDP.

Asset sale proceeds this year, meanwhile, were seen to end the year at P34 billion, significantly lower than last year’s P90.6 billion.

The same sale proceeds were seen to reach P10 billion up to P15 billion next year with the planned sale of the Food Terminal Inc. in Taguig City and the government’s so-called Fujimi property in Japan.

foil, spoil

Election-related spending, other factors a foil to crisis
by Cail Ordinario/BMirror/12.09.08

IT’S just good luck—in an economic depression, the usual remedy is to spend, spend, spend; and with the depression from its main trading partner the United States spreading around the world, including the Philippines, the elections just around the corner is what the country needs. This early, those eyeing Mrs. Arroyo’s seat are already spending, spending, spending.

Add to this the expected increased transfer to outsourcing sites—the Philippines being a most preferred one—of more business back-room operations from scrimping businesses in the US, the continued remittances of Filipinos working abroad and tourists seeking cheaper but great destinations, of which the Philippines is at the top or near it, and economists begin to be more sanguine about the near future.

One of them, Dr. Bernardo Villegas of the University of Asia and the Pacific (UA&P), said that while he expects consumer spending in 2009 to slow down, he also expects the growth range will be within 3.8 percent to 4.5 percent, with the higher end being “the more accurate.”

He said the 4.5-percent gross domestic product (GDP) growth projection in 2009 is also the growth rate he expects for 2008, during which the economy grew by 4.6 percent in the first three quarters, but he sees it posting only about 4.3 percent to 4.4 percent in the last.

He predicts the country will feel the effects of the global slowdown until the second quarter of 2010, when he expects the United States economy to start its recovery. But due to several factors, 2009 will not be as difficult for Filipinos.

“The slowdown in the Philippine economy will be primarily due to stagnant exports—we are too dependent on electronics exports to the US consumer market that is contracting massively—and to sluggish foreign direct investments from the US. Fortunately, we have a reasonably large domestic market, thanks to our 90 million population made up of predominantly young people. This internal market, bolstered by some $16 billion inward remittances from overseas Filipino workers [OFWs], can keep personal-consumption expenditures growing still at 3 percent to 4 percent,” Villegas said in a statement.

Villegas noted election spending in the Philippines usually starts to flow a year before the elections, and this would also give a boost to spending. He foresees that “serious candidates” for President would pump in around P15 billion to P20 billion to the domestic economy next year.

“Presidentiables” could spend around P3 billion to P5 billion each in 2009, he added.

In addition, Villegas said the recession in the US and the recent bombings in Mumbai, India, will make the Philippines a more attractive business-process outsourcing (BPO) destination. This will not only secure jobs in the BPO sector but also continue the real-estate boom the country is experiencing.

He said the BPO sector will become even more competitive as the peso continues to depreciate against the dollar. Villegas expects the exchange rate to settle at P47 to a dollar in 2008 and reach up to P50 to a dollar next year.

“The BPO sector may actually benefit from the slowdown of the US economy. We should expect to see more US enterprises, medium-scale and large, who will increasingly make the Philippines the hub for their back-office operations, attracted by the much lower labor costs and less expensive rental of office space.”

Similar to BPOs, the tourism industry may also grow since most of those who will be looking for affordable vacation destinations may start considering the Philippines as the best alternative to high-end
destinations.

Villegas said that while other economists are fearful of the job security of most OFWs due to the recession, most OFWs will not be affected since they work in personal and medical services and are difficult to replace.

death to debt

National government debt rises to P4.1 trillion
by Jun Vallecera/BMirror/12.09.08

MORE than P76 billion worth of foreign and local debts were added to the national government’s (NG) debt burden in September this year, bringing the nine-month total to P4.1 trillion, the Bureau of Treasury reported on Tuesday.

The additional load raised the government’s debt as percentage of local output, or the gross domestic product (GDP) to 53.9 percent of GDP—significantly higher than the previous month’s 52.95 percent of GDP.

Treasury chief Roberto Tan said NG’s total debt outstanding aby JUn Vallecera/BMirrors of end-September stood at P4.1 trillion from only P4.024 trillion in August.

The 1.9 percent or P76-billion increase in NG debts during the month was traced to the continued sale of peso-debt papers on the domestic side, and to the impact of the weak peso and of so-called third currencies on the external side.

“Domestic debt increased by 0.4 percent or by P10 billion from the recorded end-August level arising from net issuances of government securities,” Tan said in a statement.

“The 4-percent increase in foreign debts of P66 billion was due to the P51-billion and P19-billion depreciation of the peso and third currencies against the US dollar, respectively,” Tan added.

Such increases were only partially made up for by net repayments totaling P4 billion, he quickly added.

Domestic debt, which includes the direct sale or assumption of debt notes and loans by government, totaled P2.369 trillion in September, up P10.2 billion or 0.4 percent higher than in August.

Foreign debt directly owed or assumed by the government, on the other hand, went up 4 percent, or the equivalent of P66.3 billion, during the period.

Contingent debt, which become direct NG obligations in the event of default by primary borrowers, retreated by 1.3 percent, or by P6.6 billion, to only P512.8 billion from P519.4 billion previously.

in the face of layoff

RP workers face layoffs in US, but . . .
by Estrella Torres/BMirror/12.11.08

AN official of the Department of Labor and Employment (DOLE) said an estimated 130,000 temporary Filipino workers in the US, mostly in the manufacturing, shipping and domestic services, face job losses due to the global financial crunch.

But Japan is set to open its borders to Filipino nurses and caregivers as the Japan-Philippines Economic Partnership Agreement takes effect on December 11, officials said. The first 500 Filipino health workers to Japan are set to be deployed by April next year, according to a labor attaché.

Labor Assistant Secretary Ma. Teresa Soriano said temporary workers holding seasonal working visas like the H-2B to the United States are the ones likely to be affected by the financial crisis that originated in the US.

Figures from the Philippine Overseas Employment Administration showed there are 128,910 temporary Filipino workers in the US, mostly deployed in factories, shipping as well as in hotels and casinos.

Seafarers in cruise and cargo ships are also set to be affected by the global financial crunch, according to the labor official; there are 47,782 Filipinos in cruise ships and 10,754 in general cargo ships worldwide.

Filipino workers in the manufacturing sector in South Korea, Taiwan and Macau also face threats of job losses due to the global financial crisis. “While some domestic helpers would be safe, those in certain countries may be affected,” said Soriano. She added that Filipino household service workers in Singapore, Macau and Hong Kong, whose employers are active players in the financial industry, may be also be affected.

Philippine Labor Attaché to Japan Danilo Cruz said, meanwhile, that the Japan-Philippines trade deal will benefit the country in terms of providing jobs to nurses and caregivers. But the guidelines in hiring there are yet to be finalized by the two parties.

“We are still discussing it and it may be signed within this month,” said Cruz. He said that Japan is expected to absorb the first 200 Filipino nurses and 300 Filipino caregivers by April 2009.

He said the POEA has yet to issue the guidelines on deployment. “No private recruitment agency will be involved here,” he said.

Cruz said Japan may be one of the rich economies hit by the global recession but with the lingering shortage of medical workers there, Filipino nurses and caregivers are very much needed.

Soriano meanwhile said that new markets like France, Australia, Canada, New Zealand and Guam can be explored by Filipino workers who may lose jobs in the US and other countries. The Philippines is the world’s third largest source of migrant workers, next with India and China. There are around 8.2 million Filipino workers deployed around the world.