BUSINESS LEADERS : RP MUST BRACE FOR RECESSION
MANILA, JANUARY 24, 2008 (STAR) Business leaders warned yesterday there was little the country could do to ward off the effects of a possible US recession, except to prepare itself for greater challenges ahead.
Bangko Sentral ng Pilipinas Governor Amando Tetangco said he hoped the US Federal Reserve’s emergency cut in interest rates of 75 basis points would calm local markets.
“We will be monitoring how markets digest the Fed’s surprise move. Overnight we saw some correction in the equities market in the US. This should benefit our own domestic markets as volatility would be reduced,” Tetangco said in a statement.
But Tetangco did not give any hints that Philippine policymakers will follow the Fed’s lead.
The United States is the largest buyer of Philippine exports and is also home to hundreds of thousands of Filipino workers whose remittances help support the domestic economy.
“We are projecting only flat growth this year for the reason that the United States might slip into recession,” said Ernie Santiago, president of the business group Semiconductor Electronics Industries Philippines Inc.
“We hope it will not be worse than 2001, that it will be a soft recession,” he said, recalling that in 2001, Philippine electronic exports slipped by almost 20 percent.
Electronics make up about 60 percent of total Philippine exports and Santiago said he estimates that electronic exports rose by only about three percent in 2007.
The industry has few options in the face of a US recession, he warned, saying that such an event would affect the electronics industry worldwide.
“If the US market will fall, it will be the same throughout the world,” he said.
The Philippine Stock Exchange, which fell 5.5 percent on Tuesday when markets throughout the world tumbled, recovered by 2.7 percent yesterday, partly due to bargain-hunting and partly due to the Federal Reserve rate cut.
Francis Lim, president of the Philippine Stock Exchange, said in a statement the market’s recent downturn was “not necessarily because of internal weaknesses but because of adverse developments overseas.”
He expressed hope that recent reforms in the market would “serve their purpose as shock absorbers and help temper the global market turbulence.”
“While the underlying reason for our market’s fall is beyond our control, the slump should serve as fresh reminder for the government and for the private sector to take necessary steps that will help us adjust to the challenges ahead,” he said.
“With the US weakening, most regional economies will almost certainly feel the impact and may see their own economies contract, reducing earnings and consequently, price valuations,” said Francisco Liboro, president of PCCI Securities.
Weathering the storm
Malacañang reiterated yesterday that the country’s strong economic fundamentals will protect the economy from external factors, particularly a weakening US economy.
Presidential Spokesperson Ignacio Bunye, in a statement, admitted that the slowdown in the US economy would have an impact on all countries but expressed confidence that the Philippine economy would be able to “weather the storm.”
“As Finance Secretary (Margarito) Teves said yesterday, while a possible slowdown or recession in the US economy could dampen the growth of emerging markets, the Philippines will likely withstand the adverse effects of such a development largely because of its improving economic fundamentals,” Bunye said.
President Arroyo has been boasting of the Philippines’ strong economic indicators over the past year, led by the peso which has consistently moved up against the greenback.
The peso closed yesterday at P41.25 to $1, higher than the previous close of P41.50.
Analysts expect the peso to strengthen further as big investments continue to enter the country and the remittances of the overseas Filipino workers remain strong.
The stock market has also been performing well although it suffered a slump at the start of the year.
Last Tuesday saw the Philippine stock market down by 173.89 points to 2,978.41 or a 5.52 percent drop as sell-offs continued because of fears of the US going into recession.
However, all other Asian markets also suffered a decline.
The Philippine stock market recovered yesterday, going up 79.85 points to 3,058.26 or 2.68 percent after the US Federal Reserve cut its interest rates.
Bunye said the administration has been working on expanding its trading partners, which would help cushion the impact of a possible US recession.
Bunye said that the country is also expecting a boost in its business process outsourcing industry as companies situated in countries suffering from an economic slowdown such as the US would start to outsource their operations in order to cut costs.
Executive Secretary Eduardo Ermita said that the President’s trips overseas are also meant to draw more investors and to strengthen bilateral relations with countries outside of the US.
The President is currently in Switzerland for the World Economic Forum.
After her visit to Switzerland, the President will head to Dubai in the United Arab Emirates where she would present the Philippines as an investment destination to the country’s business community.
Senators meanwhile called on the government to undertake measures that would cushion the local economy from the effects of a feared global economic slowdown.
Sen. Manuel Roxas II also said the plunge in the country’s stock market because of a possible weakening of the US economy would only prove that the Philippines’ financial economy is different from the real economy.
Roxas said this was the reason why ordinary people could not feel the improvement in the economy even if the stock market was up, as claimed by the Palace.
“In the real economy, the needs of Juan de la Cruz are many — relief from high prices, high taxes,” Roxas said.
“We can see that 60 percent to 70 percent of trading are foreign funds. They come and go. If the economy is really strong, if there is a relation between the stock market and the real economy, then that should not have an effect,” Roxas noted.
But Roxas pointed out the administration should stop using the stock market as a gauge of the country’s real economic condition.
Sen. Loren Legarda said the Philippines must go back to the basics of aspiring to become self sufficient, especially in areas like agriculture and production of goods that are deemed basic necessities.
She said government talk of the Philippines seeking more trading partners to decrease reliance on any one foreign economy like the US could not be expected to have immediate results.
Sen. Francis Escudero also said there would be a need for the country to further expand trade and economic ties with other countries to lessen dependence on the US economy.
Despite the reported recession in the United States, Japanese businessmen have expressed confidence in the investment climate in the Philippines and the $4.3-billion “aqua city” project on the coast of Manila Bay in Hagonoy, Bulacan.
Toshihiko Suzuki, chief operating officer of Asian Countries and Island Optical Communications Establishment and Philippine Properties in Asia Comprehensive Business Venture Administration Corp. (AIPAC), and Kasuo Nakano, managing director of the Hifumi Co. Ltd., visited Hagonoy and conducted an inspection and survey of possible business sites.
Speaking in broken English, Suzuki told The STAR that investors like him feel more protected and safer since President Arroyo issued Executive Order 561 that legalized the formation of the super regions in the country.
Suzuki said the executive order encourages more foreign investors to do business in the Philippines.
He said Japanese investors are more interested now in direct investments based on proposals by local developers.
Suzuki said the $4.3-billion aqua city project that is set to be established in this town is part of the company’s total plan.
He said Japanese investors are interested in the development of Central Luzon, starting from Hagonoy to Nueva Ecija through the Angat River and Pampanga River system.
He said that there is a need to improve the conditions of the local waterways, especially the Angat River as it will become part of tourism projects and the international retirement facilities they plan to construct at the proposed aqua city.
The aqua city project will be constructed on the 13-kilometer stretch of the Hagonoy coastline which will be reclaimed.
The reclaimed area will be at least half a kilometer wide on the surface where industrial parks, a commercial area complete with a shopping mall and hotel, and a residential facility for foreign retirees will be constructed.
In the labor front, the Philippine Overseas Employment Administration (POEA) reported yesterday that employment opportunities for Filipino nurses, teachers and other workers in the United States remain bright despite the prevailing economic slump in the US.
Stella Banawis, POEA’s pre-employment services director, said job orders from employers in the US continue to increase even with the prevailing American recession.
“The job orders we are getting from American employers, in fact, are even increasing,” Banawis said.
Banawis added the POEA recorded a total of 33,000 job orders from the US in 2007 which was 20 percent higher than the figure in 2006.
POEA chief Rosalinda Baldoz also expressed confidence that the global economic slump would not affect the hiring of Filipino workers in the US and other countries abroad.
Baldoz explained that a majority of the countries that are hiring Filipinos are developed economies that have a manpower shortage. - Marvin Sy, Aurea Calica, Dino Balabo, Mayen Jaymalin
Chief News Editor: Sol Jose Vanzi
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