Philippine economy to grow better in 2nd quarter

The Philippine economy as measured gross domestic product (GDP) is likely to grow better in the second quarter of the year compared to the first quarter as exports growth would recover, according to the FMIC and UA&P market research.

The report expects investments to continue rise, and the government would spend more in the second quarter than it did in the first quarter.

Inflation is likely to remain within the 4.5-4.7% range for the second quarter due to stable rice and other food prices and the more than 10% fall in crude oil prices on May 5.

The report also expects tax revenues to slow down in the second quarter particularly for the Bureau of Customs on account of lower oil prices and peso appreciation vis-à-vis year ago levels.

Monetary policy is unlikely to change given our view that the headline inflation rate will not accelerate sub­stantially in the second quarter.

The peso will be volatile with a slight positive bias but will be subject to the changing and complex external en­vironment, the report added.

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12 returning overseas Filipino workers get LandBank loans

Twelve returning Overseas Filipino Workers are set to start their own businesses following the approval of their loans by the Land Bank of the Philippines (LANDBANK) under the Overseas Workers Welfare Administration’s OFW Reintegration Program (OFW-RP).
During the recent launch of the OFW-RP, P8.3 million in loans were approved for returning OFWs, now would-be entrepreneurs, from Bulacan, Pampanga, Zambales, Batangas, Iloilo, Bacolod, Cebu, Bukidnon, Davao, and Pasay as part of LANDBANK’s
P1-billion commitment to the P2-billion reintegration loan program jointly implemented by OWWA, LANDBANK and DBP.

The OFW-RP aims to provide economic opportunities for returning OFWs affected by political crises in the Middle East and other countries seriously stricken by natural calamities.

Among the initial loans that LANDBANK approved are a P2 million working capital requirement for an existing music school and another P2 million for a proposed business in agri-vet supplies trading.

Other approved oans include a P1-million business in Nuat Thai Foot and Body Massage; a P500,000 dental laboratory; P400,000 each for businesses in LPG Gas Trading and a fitness center; P300,000 each for palay trading, and an internet cafe
business; and a total of P1.4 million for four hog fattening projects.

“We at LANDBANK are glad to help our OFWs start their own businesses and engage in market-led economic activities. We offer a range of loan products including project modules such as bangus in bamboo cages, tilapia culture in earthen pond,
hog fattening project and native chicken project. The project modules would provide OFW-borrowers information on investment requirements and projected monthly income for the said projects,” said LANDBANK President and CEO Gilda
Pico.

Qualified OFWs may borrow from P300,000 to as much as P2 million at 7.5 percent interest per annum payable within one year or a maximum of seven years, depending on the loan project. LANDBANK will extend loan up to 80 percent of the total project cost while the remaining 20 percent is the equity of the borrower.

Eligible projects are those with confirmed market, market contract or service contracts that will generate an income of at least P10,000 every month.

Qualified borrowers are OWWA-certified OFWs who can no longer work overseas and who now want to engage in business and need financing assistance for working capital and fixed asset acquisition their preferred business.

2GO rolls out fully-automated self-service kiosk

Integrated supply chain solutions provider 2GO has rolled
out the country’s first and only fully automated self-service kiosk that
accepts documents, parcels, and cash for delivery.
Called the QuikMac, this latest innovation from 2GO will
provide greater convenience to customers who are always on the go.

“We are extremely proud and excited about this revolutionary service and we are
bringing this innovation to our customers who may not have the time to visit or
queue in our branches,” 2GO CEO Susan Valdez said.

Customers will also be able to send documents and parcels through the QuikMac
automated courier machine (ACM) at an introductory price of P70 for all sizes,
inclusive of the cost of the QuikPac pouch, for shipments from Manila to
Visayas-Mindanao.

The QuikPac pouches are provided through a dispenser. Customers may choose from
three sizes — small, medium, and large. For money remittance, the cost will
vary based on the amount of money that will be sent.

Valdez added that more QuikMac units will be deployed soon at convenient
locations in Metro Manila to provide 24/7 service to customers.

2GO has over 200 branches nationwide and is expected to reach over a thousand
locations by mid-2011 in partnership with Tambunting and USSC.

Tourism special projects to help improve competitiveness

The National Competitiveness Council (NCC) is
pushing for the implementation of special projects to help
establish the country brand and key strategies in improving competitiveness.

Guillermo Luz, private sector co-chairman of the NCC, identified some of these special projects as the country tourism brand,
renovation of airports and upgrade of Roxas Boulevard-to-Intramuros
stretch.

Luz said there is a need to create a new and unified country brand and
campaign covering advertising, public relations, events, social marketing
and new media for both international and domestic audiences.

“There is an urgent need to fix both NAIA and Mactan airports, renovating and modernizing the
interiors and improving airport processes to make travel a more pleasant
experience.”

Luz pointed out that airports are the most visible destination for travelers which can leave a lasting
impression at both arrival and departure stages of a
trip.

Apart from project implementation, Luz said they are gearing up their
efforts toward undertaking industry and country strategies to build up
long-term competitiveness.

There is a need to prepare a five to 10-year industry roadmaps, country
competitors, potential of industry for value and employment growth,
projected investments by industry players and policy environment.

Luz  said country strategy entails benchmarking against key
competitiveness indices, tracking city competitiveness and key
indicators, focusing on lowest-ranking or easiest-to-fix indicators and
linking competitiveness plan to Philippine Development Plan, national
budget, Cabinet agenda and Legislative-Executive Development Advisory
Council (LEDAC).

NCC aims to address the improvement of the country’s
competitiveness from the bottom third of competitiveness rankings to the
top third by 2016.

The Philippine competitiveness ranking dropped by two notches to 41st
among 59 countries covered by the World Competitiveness Yearbook (WCY)
2011 recently released by Swiss-based International Institute for
Management and Development.

As the country implements these strategies and projects, Luz said it
hopes to achieve a higher foreign direct investments, double export
growth to $120 billion by 2016 with new products and services to account
for 30 percent of exports, and gross domestic product (GDP) growth of
seven to eight percent per year.

For its part, the Management Association of the Philippines (MAP) is
pushing a number of key actions, including pursuing infrastructure
strategic to the so-called big winners, intended to enhance the country’s
competitiveness.

MAP Task Force for Competitiveness chair Ambassador Cesar Bautista
said products and services where the country generate greatest potentials
for growth include agribusiness, tourism, information technology
(IT)-enabled services, electronics, logistics-enabled products,
manufacturing, mining; and health, wellness and retirement.

“There should be appropriate infrastructure and policies to ensure
effective linkages from investors’ sources of assets/resources to the
processing centers to the distribution centers to domestic/overseas
markets,” he said

Bautista said the task force would also push for the creation of a Strong
Investors Assistance Office and a Coalition for Competitiveness (CFC)
which will be a private sector initiative, similar to the business model
of Coalition Against Corruption.

Philippines is one of best in services sector

The Philippines emerged as one of the best performers in services exports, particularly in business process outsourcing, due to its rich human capital and good telecommunications infrastructure.
A World Bank (WB) study revealed that further reforms in the services sector, particularly in travel and tourism, could provide more  channels by which the country could diversify its economy, achieve high and sustained growth, and reduce poverty.

Titled “Exporting Services: A Developing Country Perspective,” the study aims to figure out the determinants of developing country participation in service exports and identify strategies for success based on the experiences of countries including Brazil, Chile, Egypt, India, Kenya, Malaysia, and the Philippines.

“Service sector performance critically depends on human capital, the quality of the telecommunications network, and the quality of institutions,” said Sebastiẚn Sẚez, World Bank Senior Trade Economist and one of the authors of the report.

“The experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening.”

The Philippine experience shows that services are a viable option for export diversification, the report says. Trade in goods is no longer the only vehicle to diversify exports for developing countries. Services are also an option that is available to these countries.

Services exports as a percent of total exports increased from 9 percent in 1999 to 21 percent in 2009 in the Philippines. Its services exports rose by 3.6 percent on average per year during the period, higher than that of Asia as a group which averaged 1.5 percent per year.
Unlike many developing countries, the Philippines has been a net exporter of services since 2006.
The Philippines is currently the third largest player in business process outsourcing (BPO) in the world, accounting for 15 percent of the global BPO market, after India (37 percent) and Canada (27 percent).

“That’s a tremendous achievement in just over a decade,” said World Bank Country Bert Hofman. “The liberalization of the Philippine telecommunications sector in the early 90s improved the quality and efficiency of telecommunications
infrastructure through greater competition. That’s a very important factor for the success of the industry. But the bigger story is really the rich human capital that the country possesses and which it has to continue to nurture.”

Fred Ayala, BPAP Chairman, said the BPO sector currently employs close to 500,000 people and has generated about
US$9 billion worth of exports in 2010.

The industry has agreed on an aggressive goal of US$25 billion in annual revenue by 2016 and a direct workforce of 1.3 million. “There is an urgent need to develop supervisors, middle managers, and more skilled workers to respond to increasing market demand for a broadening array of  knowledge-based, complex services,” Ayala said.

“Additional investments in human capital, strengthening of intellectual property rights through the passage of a comprehensive
data protection law, and improvement of quality control may further promote the growth of high-value-added activities within the BPO industries not yet fully exploited in the Philippines and successfully tapped by other countries, such as India,” Ayala added.

The report also highlights the importance of developing the tourism sector. Tourism accounts for about 6 to7 percent of the country’s gross domestic  product and directly employs about 3.5 million people. It says tourism could contribute more to help address poverty should reforms outlined in the National Tourism Development Plan (NTDP) are effectively
implemented.

The study says major impediments to tourism competitiveness are largely associated with weak ground and air transport infrastructure—roads, railways, ground transport network, and airports. Weak physical infrastructure, it says, lowers accessibility to tourism destinations and discourages private sector investments in accommodation facilities.

Tourism Undersecretary Daniel Corpuz said the government has already started to put in place important reforms that will increase tourism arrivals in the country.

Corpus said country has implemented a liberalized air policy in selected international airports outside Metro Manila to promote greater tourism flows to the country. “More reforms are underway to transform the Philippines into a ‘must experience destination in Asia,’” said Undersecretary Corpuz.

Asean economies show resilient growth

The economies of Association of Southease Asian Nations (Asean) have shown resilience in growth in the second quarter of 2011, according to the latest Asian Business Cycle Indicators (ABCIs).

However, the general trend masks diverse country performances. For instance, Malaysia and Thailand show upward movement in business cycles.

Activity is picking up in Malaysia on the back of sound export performance particularly electronics and robust private consumption.

Thailand, though had experienced a temporary impact of the Great Touhoku Earthquake in Japan, is recovering led by strong investment.

Indonesia and Singapore maintained their growth momentum though not as robustly as in Malaysia and Thailand. Sound private consumption and investment, as well as stable business sentiment support growth despite weaker government spending
in Indonesia.

Continuing capital inflows and their volatility still constitute a challenge for policymakers. In Singapore, strong manufacturing output has contributed to the positive outlook.

In the Philippines, the weaker outlook is due to a slowdown in export growth and remittances partly as a result of the Great Touhoku Earthquake and geo-political tensions in the Middle East and North Africa.

Some signs of slowing appeared in China and India. Weaker consumption and sluggish exports to OECD countries will be the reason in China. Weak domestic sales (in particular cars) and the adverse impact of commodity price hikes explain the weaker prospect in India.

A policy challenge in the region is to cope with inflationary pressures. Although headline inflation has peaked out in most Southeast Asian countries except Vietnam, inflationary pressures still remain – as core inflation rates are high in Southeast Asia.

Interest rates have been raised in most countries and additional increases are expected. In addition to interest rates, allowing more flexibility for exchange rates would be an option for some countries, such as Indonesia.

The Great Touhoku Earthquake in Japan has had a temporary impact on activity and exports in some countries, such as Indonesia, the Philippines and Thailand but in general the magnitude of the negative impact appears to have so far been
limited.