OFW remittances, BOP surplus to sustain PHL economic growth, as joblessness grows

OFW remittances, BOP surplus to sustain PHL economic growth – economist

 Jobless Filipinos hit 12.1M, SWS: Unemployment rate rose to 27.5% in Q4


Robust growth in the remittances of the Overseas Filipino Workers (OFWs) as well as surplus in the country's balance of payments (BOP) will continue to sustain the country's economic growth, a senior economist of a multinational bank said Tuesday, despite last month's decline in the gross international reserves (GIR).

"[The] Philippines is likely to show some modest strength despite the large month-on-month drop in FX (foreign exchange) reserves for January," explained ING Bank Manila senior economist Joey Cuyegkeng. "Data on the country’s external payments position would likely support the Philippines.”

ING Bank Manila is a wholly-owned subsidiary of Dutch company, ING Bank NV.

Last month, the Bangko Sentral ng Pilipinas (BSP) reported a $2.286 billion cash remittances from OFWs for November 2013 --9.5% higher than the $2.087 billion recorded in November 2012.

The BSP said the November 2013 figure brought cash remittances for the first 11 months of last year to $20.605 billion, or 6.1 percent higher than the $19.417 billion in the same period of 2012.

"Data on December OFW remittances comes out next Monday (Feb. 17). Resilient remittances should help support sentiment for the Philippines," Cuyegkeng said.

BOP surplus

Meanwhile, the country's BOP remains in surplus at $5.085 billion, higher than the $4.4 billion projected by the BSP for 2013. The surplus in the country's BOP was recorded despite uncertainties brought by the Federal Reserve’s easing of its monetary stimulus last year.

The BOP is a summary of all the transactions of a country with the rest of the world. Items computed in the BOP includes OFW remittances, revenues from exports and imports, foreign investments, tourist receipts and revenuers from the business process outsourcing sector, among others.

A negative BOP means that more money is flowing out of the country than coming in, and vice versa. A surplus in the BOP adds to the country’s GIR.

Cuyegkeng said sustained growth in these two indicators would help the country sustain its economic growth  despite the 5.16% decline in the country's foreign exchange reserves or GIR announced by the BSP last week.

GIR position

According to the BSP the Philippines' GIR dropped to $78.9 billion in January from $83.2 billion in December 2013. The BSP said this is the GIR's lowest position since the $76.129 billion recorded in June 2012.

An ample GIR shields the country from external shocks such as inflation. Just last week the National Statistics Office (NSO) reported that the Philippine inflation hit its two-year high in January at 4.2 percent from 4.1 percent in December 2013 and 3.1 percent in January 2013.

However, in a press statement issued on Feb. 8, BSP governor Amado Tetangco Jr. said the country's foreign reserves of approximately $20 billion will remain adequate over the "optimal level" even if the government spends a large amount for its debt services.

He said the January reserves could even cover 11.3 months' worth of imports of goods and services and income.

Tetangco said part of the decline was due to debt services by the national government.

"It is a fairly large amount of debt service payments (made) in January," he said in a statement.

Another reason cited by Tetangco was the drop in foreign exchange operations of the BSP, which hit $1.377 billion from $1.6 billion in December. However, the BSP's gold holdings recovered to $7.7 billion from $7.5 billion a month ago.

For 2014, the BSP targets GIR to hit $88 billion as current accounts were expected to continue to be in surplus. — 11 Feb 2014 DVM, GMA News

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MANILA, Philippines—The number of unemployed Filipinos in the last quarter of 2013 swelled to more than 12 million, making the 7.2-percent growth in the country’s gross domestic product (GDP) last year, considered the second-fastest after China, far from inclusive.
The unemployment rate rose to 27.5 percent, or an estimated 12.1 million individuals, as 2.5 million Filipinos joined the ranks of the jobless between September and December, a Social Weather Stations (SWS) survey found.
The level of joblessness across the country was almost 6 points higher than the 21.7 percent (some 9.6 million) in the previous quarter, results of the SWS survey conducted from Dec. 11 to 16 showed. The results were first published in BusinessWorld.
Nikka Policarpio, 19, who graduated from the University of Santo Tomas last year with a degree in journalism, is among the millions of unemployed.
Nearly a year after college, Policarpio is already in between jobs since she left her first job last month as a marketing communications specialist.
“I have been applying at different media companies for less than a month now… I want to take a rest before I start working again,” said Policarpio, who resigned from her nine-month stint with a cosmetics company because the low compensation did not match the heavy workload.
The high unemployment rate despite the high GDP growth may have contributed to the pessimistic outlook of Filipinos last December.
A survey by another polling outfit, Pulse Asia, found that 55 percent of Filipinos felt the national quality of life deteriorated in the past 12 months. They also expected the situation to remain the same for the whole of 2014.
‘Understandable’
Malacañang on Monday described as “understandable” the findings of the SWS survey.
Presidential spokesman Edwin Lacierda pointed to calamities that hit the country last year to help “explain” why unemployment rate increased to 27.5 percent at the end of 2013.
Lacierda cited Super Typhoon Yolanda (international name: Haiyan), which devastated central Philippines last November, and the 7.2-magnitude earthquake that hit Bohol and Cebu provinces a month earlier.
According to the Geneva-based International Organization for Migration, some 6 million workers saw their livelihood destroyed or disrupted as a result of Yolanda.
Lacierda said the siege of Zamboanga City by Nur Misuari’s followers “also disrupted” economic activity in the area.
“Certainly, it’s very unfortunate that these things happened, but we have to rise up. That is the role of government: to provide for its people,” he said.
‘Bloodied but unbowed’
“We were bloodied but unbowed,” Lacierda added, borrowing the words of William Ernest Henley’s poem, “Invictus.”
Despite the increase in the unemployment rate, Lacierda said the government would “continue to ensure that our people find employment.”
The latest jobless rate, however, was below the 34.4 percent posted in March 2012.
The unemployment rate has mostly remained over 20 percent since May 2005, according to SWS. It was under 15 percent from 1993 to March 2004, and was within 16.5 percent to 19 percent from August 2004 to March 2005.
Different definitions
The SWS definition of unemployment covers respondents aged 18 and above who are “without a job at present and looking for a job.” This excludes those not looking for work such as housewives, students and retired or disabled persons.
This is different from the official definition in the Labor Force Survey (LFS), which covers persons 15 years and over who are reported not working, looking for work and available for work.
The government’s latest LFS put the official unemployment rate at 6.5 percent (about 2.6 million Filipinos) as of October 2013.
The SWS survey also found that 40 percent of respondents believed there would be more jobs in the next 12 months, 31 percent claimed the number of available jobs would remain the same, while 21 percent expected fewer jobs.
Unemployment picked up sharply among men (from 13.4 percent to 21.2 percent) but remained higher among women (from 32.4 percent to 35.9 percent).
Highest among 18-24
Across age groups, joblessness remained highest among those 18-24 years old (52.3 percent). It was 33.1 percent in the 25-34 age bracket, 25 percent in the 35-44 age bracket and 17.7 percent among those 45 years old and older.
The nationwide unemployment included those who were retrenched (10.4 percent), resigned from their jobs (13.5 percent), and first-time job seekers (3.5 percent).
‘Endo’
Of those retrenched, 6.8 percent did not have their contracts renewed (also called “endo” or end of contract, usually after six months so that the workers won’t be regularized and the employer won’t pay benefits), 1.6 percent had employers whose businesses ceased operations and 2 percent were laid off.
The survey, which used face-to-face interviews with 1,550 Filipinos, had a margin of error of plus-or-minus 2.5 percentage points.—PDI Reports from Rafael L. Antonio and Kathleen de Villa, Inquirer Research; and Christian V. Esguerra February 10th, 2014

 

Philippines upgraded to investment grade by Moody’s

Philippines upgraded to investment grade by Moody’s

MOODY'S Investors Service has upgraded the country's credit rating into investment grade.

In a statement today, the debt watcher said it has upgraded the Philippines’ rating by one notch to Baa3 -- a step into investment grade -- with a "positive" outlook, from Ba1 with a "stable" outlook.

Moody’s had placed the country’s rating on review for upgrade on July 25.

“The factors that prompted the review remain intact, namely the sustainability of the country's robust economic performance; ongoing fiscal and debt consolidation; and political stability and improved governance,” it said.

It added that the funding conditions in the country -- even amid the recent volatility in financial markets -- remained stable, and highlights the country’s “relative lack of vulnerability to external financial shocks, such as those arising from anticipated tapering by the US Federal Reserve of its quantitative easing policy.”

Moody’s said the country’s macroeconomic fundamentals remain robust, as evidenced by the 7.6% gross domestic product (GDP) growth it posted in the first half -- one of the fastest among Asia and other emerging markets.

It likewise noted that, even as growth has outperformed even the government’s expectations, inflation remains well-anchored.

“The new growth path is being reinforced in part by improved fiscal management. Revenue growth has accommodated sizable increases in infrastructure and social spending, although revenue generation remains weak when compared with investment-grade countries overall,” the debt watcher said.

The government’s prudent liability management also makes the country less vulnerable to external risks and reflects the country’s strong external accounts position and the ample liquidity in the domestic market.

“In addition, the Aquino administration has maintained its popularity among voters, which in turn supports the further institutionalization of reforms for good governance,” Moody’s said.

The upgrade from Moody’s places the country’s debt at investment grade among all major credit rating agencies, after Fitch Ratings and Standard & Poor’s earlier gave the country the much-coveted status in March and May, respectively. -- BWonline 3 Oct

Group hits ‘policy instability’ in Fedex case

Group hits ‘policy instability’ in Fedex case
MBC pushes move to lift restrictions on foreign investments

The head of the Philippines’ most influential business group has thrown its support behind Federal Express after the Court of Appeals voided one of the international cargo forwarding giant’s permits to operate in the country.
According to Makati Business Club (MBC) chair Ramon del Rosario, the recent CA ruling—which declared FedEx a foreign-owned public utility and, as such, prohibited by the Constitution from operating locally—highlighted the risks that make foreign investors think twice about doing business here.
“This is most unfortunate as it again illustrates the lack of stability and predictability in our economic policy environment,” Del Rosario said in a text message to the Inquirer.
At the same time, he pointed out that the court ruling “emphasizes the urgent need to address a fundamental problem in attracting foreign investments,” which are the restrictive economic provisions of the 1987 Constitution that limit foreign ownership to 40 percent of any local firm.
Del Rosario drew parallels between the recent adverse ruling against FedEx and a similar ruling released last year by the Supreme Court against telecommunications giant PLDT.
“The FedEx and PLDT court rulings demonstrate the inadequacy of relying on executive pronouncements and rulings that are subject to judicial challenge, without dealing with the constitutional restrictions,” he said.
Del Rosario said MBC was backing the moves of Congress to liberalize laws on foreign ownership in order to make the local environment more attractive to investments from overseas.
“It is time for Congress to act on these restrictions and we support [House] Speaker [Feliciano] Belmonte’s efforts in this regard,” he said.
FedEx—one of the largest freight forwarding companies in the world—holds a five-year permit to operate in the country granted by the Civil Aeronautics Board (CAB) in May 2011. The CAB permit was backed by a Department of Justice opinion issued in 2004 stating that “international air freight forwarders are not covered by the nationality requirement under the 1987 Constitution, hence, may be issued a certificate of public convenience subject to the CAB’s pertinent rules and regulations set forth under Republic Act No. 776 and other existing laws.”
However, in its decision first issued on Jan. 23, 2013, the CA said it was “not bound by the resolution of the justice secretary.” Siding with locally owned complainants Merit Freight International Inc. and Ace Logistics Inc., the court denied FedEx’s appeal in another decision dated June 6. PDInquirer 11 Aug 2013

The PH judiciary in the age of ICT

Sounds good to me: "... the entire system should be connected to the Internet for easy access by the public."

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Automating the judiciary
By Artemio V. Panganiban
Philippine Daily Inquirer
June 22nd, 2013

The Supreme Court launched recently in the Regional and Metropolitan Trial Courts of Quezon City a new pilot program, called “eCourt,” to automate the trial courts. The aim is to speed up the delivery of justice by reducing case processing time, eliminate sources of graft, and improve public access to performance information in the lower courts.
Brief backgrounder. In the 1990s, the Supreme Court began computerizing its administrative, personnel and financial processes via stand-alone programs. Later, during the term of Chief Justice Hilario G. Davide Jr., which started on Nov. 30, 1998, the Court embarked on the computerization of the entire judiciary through its Action Program for Judicial Reform or APJR. Among the many projects of the APJR is the electronic library which was conceived by Justice Antonio T. Carpio.
With the support of the US Agency for International Development, (USAid), the Court, under CJ Davide, pilot-tested in Pasay City the Case Management System or CAS, a computer program designed to expedite the resolution of cases through the effective monitoring and strict observance of time limits of case events from filing to disposition.
A second APJR computerization project, the Court Administrative Management Information System or Camis, supported by the Canadian International Development Agency (Cida), was simultaneously tested in Metro Manila. It aimed to build and strengthen the capability of the Office of the Court Administrator to evolve a system of tracking the more than 800,000 pending cases in the trial courts.
During my term as chief justice, the Court, with the help also of USAid, fully computerized the processes at the Sandiganbayan via an improved version of CAS called Case Management and Information System (CMIS). The antigraft court was then headed by Presiding Justice Teresita J. Leonardo-De Castro, now a member of the Supreme Court and chair of its committee on computerization.
Transparency and good governance. The eCourt was launched by Chief Justice Maria Lourdes P.A. Sereno, Justices De Castro and Marvic M.V.F. Leonen, Court Administrator Midas P. Marquez and Executive Judge Fernando Sagun Jr. It is also supported by the USAid and the American Bar Association Rule of Law Initiative or ABA-ROLE headed by Robert C. La Mont. It incorporates the lessons learned in the APJR and improved the past systems in various ways:
First, the new program includes the payment of docket fees, which will be collected and accounted for more transparently and systematically, unlike in the manual system which was both slow and susceptible to corruption.
Second, new cases were automatically raffled, without the use of the old  tambiolos  (manually-operated roulettes) which could be manipulated to enable parties to select “friendly” judges.
Third, eCourt flagged detention prisoners to show their places and length of detention. At present, the accused who are too poor to post bail, or who are charged with capital offenses (and thus not bailable) are detained indefinitely in cramped and overloaded jails simply because there is no system to monitor them. Often, they are forgotten and indefinitely detained.
Fourth, the new system automatically produced periodic and easy-to-comprehend reports.
Indeed, technology is being harnessed to assist the judiciary to declog its dockets, open its processes to public scrutiny, and eliminate occasions for graft. In the words of Chief Justice Sereno, computerization “will put the seal of transparency and good governance on the courts.”
Suggested improvements. Once the pilot in the QC courts is freed of electronic bugs, it will be rolled out “in major economic centers” nationwide. This is, of course, most welcome and long overdue.
However, beyond these improvements, I believe that computerization should not be restricted to stand-alone systems. It should encompass the whole judiciary including the appellate courts and the Supreme Court. I know that under Presiding Justice Andres Reyes Jr., the Court of Appeals successfully installed its own computer program and reduced its backlog to a bare minimum.
However, I think the Court of Appeals system, as well as that of the Sandiganbayan, the Court of Tax Appeals, and the Supreme Court should be electronically standardized and interconnected seamlessly with the eCourt system of the trial courts.
Case numbering is an example of an item that needs to be standardized and integrated in judicial automation. Under the present system, the case number in the city and municipal courts (where most cases originate) is not carried through to the  regional trial courts. When the case is elevated to the appellate courts, it is assigned a new number, and still another when it reaches the Supreme Court. Worse, trial courts in the various regions have different ways of numbering their cases.
As a result, it is difficult to identify the origin of appealed cases. This erratic case numbering requires the tedious and time-consuming elevation of the hard copies of lower court records before the appellate courts and the Supreme Court can review them, thereby causing long delays.
However, once computerization is standardized and interconnected, the appeal process will be simplified because the original case records, often quite voluminous, can be electronically elevated with a click on a computer keyboard.
Finally, the entire system should be connected to the Internet for easy access by the public.

More on the limits of foreign ownership of PH business enterprise

Point of Law - Grandfather rule: A test for public utilities?

By Francis Ed Lim

Philippine Daily Inquirer
Wednesday, May 22nd, 2013

Not known to many, the Supreme Court rendered a sequel to Gamboa vs Teves, a 2011 decision affirmed in 2012, that defined the term “capital” for purposes of determining whether a public utility complies with the foreign ownership limit under the Constitution.
This is the case of “In the Matter of the Corporate Rehabilitation of Bayan Telecommunications Inc.” (G.R. Nos. 175418-20, December 5, 2012), which was consolidated with other cases relating to the rehabilitation of Bayan Telecommunications Inc. (Bayantel). In this case, The Bank of New York filed a creditor-initiated petition to rehabilitate Bayantel. In due course, the receiver recommended the rehabilitation of Bayantel by, among others, converting part of the company’s debt into equity. However, the rehabilitation receiver imposed, as a condition, that the resulting equity ownership of foreign creditors should not exceed the 40-percent foreign ownership limit under the 1987 Constitution.
The Bank of New York disagreed, explaining that the acquisition of shares by foreign creditors would be done, both directly and indirectly, to meet the control test under RA 7042, or the Foreign Investments Act of 1991 (FIA).
The control test deals with a situation where a corporation and its non-Filipino stockholders own stocks in an SEC-registered company. It provides that, where at least 60 percent of the capital stock outstanding and entitled to vote of each of both corporations is owned and held by citizens of the Philippines and at least 60 percent of the members of the board of directors of each of both corporations are Filipino citizens, the investee company is considered a Philippine national.
The “grandfather rule,” on the other hand, requires that the citizenship of individuals or natural persons who ultimately own or control the shares of stock of the corporation must be considered for purposes of determining compliance with the Filipino ownership requirement.
Under the proposed structure for Bayantel, the foreign creditors would convert part of Bayantel’s debt to common stock of the company. As a result, they would own 40 percent of the outstanding capital stock of Bayantel, while the remaining 40 percent of the shares would be registered to a holding company that would retain the other 60 percent equity reserved for Filipino citizens. According to The Bank of New York, this structure would comply with the control test under the FIA and, therefore, would not violate the Filipinization requirement prescribed by the Constitution for public utilities.
The issue was whether or not the proposed structure  would violate the foreign ownership limit imposed by the Constitution for public utilities.
The relevant provision is Article XII, Section 11 of the 1987 Constitution, which states that “[n]o franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens.”
In ruling on the issue, the Supreme Court cited its 2011 en banc decision in Gamboa, which interpreted the term “capital” as referring only to shares of stock (whether common or preferred shares) that are entitled to vote in the election of directors. The court held that two steps must be taken to determine whether the conversion of debt to equity violates the constitutional limit on foreign ownership of a public utility: First, identify which class of shares the debt will be converted into, whether common shares, preferred shares that have the right to vote in the election of directors, or non-voting preferred shares; Second, determine the number of shares with voting rights held by foreign entities prior to conversion. If upon conversion, the total number of shares held by foreign entities exceeds 40 percent of the capital stock with voting rights, the constitutional limit on foreign ownership is violated.
The Supreme Court observed that the proposed structure would give foreigners a 77.7-percent effective ownership of the common shares of Bayantel. It then ruled that the structure would violate the foreign ownership restriction for public utilities set by the Constitution.
The FIA expressly recognizes the control test in determining the nationality of a corporation in which there are foreign investors. Yet, the Supreme Court disregarded the argument of The Bank of New York that its proposed structure is compliant with this test. The court stated that the proposed structure “is precisely the scenario proscribed by the Filipinization provision of the Constitution.” It is also worth noting that in its 2012 Gamboa decision, the Court cited with approval the en banc ruling of the SEC in Redmont Consolidated Mines Corp. vs. McArthur Mining Inc., et al. (SEC en banc case No. 09-09-177, March 25, 2010), which stated that “the Grandfather Rule must be applied to accurately determine the actual participation, both direct and indirect, of foreigners in a corporation engaged in a nationalized activity or business.” Interestingly, all members of the First Division who rendered the Bayantel decision participated in the 2012 Gamboa decision which, as stated above, quoted with approval the Redmont decision of the SEC. In fact, four of them—Justices Martin S. Villarama, Teresita Leonardo-de Castro, Lucas P. Bersamin and Jose Portugal Perez—concurred in the 2012 Gamboa decision.
My question is: Does it now mean that a public utility, or any corporation that is nationalized under the Constitution, can no longer invoke the control test to determine whether it is in compliance with the foreign ownership limit imposed by the Constitution? Otherwise stated, is the grandfather rule now the test for said companies?
If so, it would be a huge setback to the Aquino administration’s drive to attract more foreign investments into the country.
(The author, former president and CEO of the Philippine Stock Exchange, is now co-managing partner and head of corporate and special projects department of Accra law.  He may be contacted at felim@accralaw.com)