AQUINO MAY STRUGGLE TO KEEP INVEST PLEDGE / US ELECTIONS: STOCKS GAIN


[PHOTO AT LEFT -
A worker rests under a government project, a 300-meter flyover that will connect two main expressways, in this photo. -- AFP]

MANILA, NOVEMBER 1, 2010 (BUSINESS WORLD RESEARCH) AFP Posted on 10:33 PM, October 31, 2010 - PRESIDENT Benigno C. Aquino III may struggle to keep his promise to give the Philippines modern infrastructure, including water and electricity supplies, if history is anything to go by.

Mr. Aquino aims to build roads, railway lines, airports, seaports, power plants and water supply systems to attract more investment and bring jobs and economic growth to his struggling country.

He aims to make all this happen by following his late mother, ex-leader Corazon C. Aquino, who signed a "build-operate-transfer" (BOT) law in 1990 that helped the country emerge from a crippling energy crisis.

Under BOT the private sector puts up the capital, builds and runs the systems, and collects charges until they recoup their investments, at which time ownership passes to the government.

Next month Mr. Aquino is expected to invite bids for 10 projects worth nearly P128 billion, and businesses say that as long as they are given a level playing field he should be able to raise the money.

These projects include two Manila rail lines, two Manila toll roads, four provincial airports and a new dam to augment the capital’s solitary source of tap water for its 12 million-plus residents.

However, businessmen and analysts say the Philippine record is mixed. Contract enforcement issues as well as periodic bouts of populism blight its attraction for big-ticket infrastructure investments, they say.

"The BOT law is, I think, a good framework, a good law," Gilberto Mr. Llanto, of the Philippine Institute for Development Studies, told AFP.

"But somehow we faltered along the way, and the reason was -- and I think it was inexcusable -- weak institutions and bad governance," Mr. Llanto said.

John D. Forbes, chairman of the American Chamber of Commerce’s legislative committee, which liaises with the Philippine parliament, said the BOT scheme had fared badly since its success in solving the last energy crisis.

"Very few projects of any size were accomplished in the last decade," he said, citing the Manila airport terminal dispute with a consortium that included Germany’s Fraport AG.

In 2002, the government of then-president Gloria Macapagal-Arroyo unilaterally voided the 25-year airport concession, saying it was fraught with anomalies, and seized the facility two years later.

The affair continues to weigh on the minds of potential investors.

"There are many lessons to be learned and it’s very important to learn the lessons," Mr. Forbes said.

Philippine geography -- 7,100 islands on the typhoon and earthquake belts -- puts it at a severe disadvantage in international markets, said Mr. Llanto.

This makes infrastructure investments a priority, but with the government cash-strapped, there are no viable options for investment apart from the private sector.

However, if Mr. Aquino can get the country’s house in order, said Robert M. Sears, chairman of the local American Chamber of Commerce, the future could be bright.

"As long as there is transparency and there are clear-cut rules then I think it will encourage our investors to come back," Mr. Sears told AFP in an interview.

So far, prospects for the new president’s projects are bright. The economy grew by a stronger-than-expected 7.9% in the first half, its best half-year expansion for more than 20 years, amid rising investor confidence.

And the stock market hit record highs this month on the back of inflows of foreign money. Share prices have surged 35.86% since Mr. Aquino’s May 10 election.

Francis C. Chua, president of the Philippine Chamber of Commerce and Industry, said there must be more clear-cut rules and that projects must be studied and prepared thoroughly before the private sector is asked to spend its money.

"The [government] should intensify the development of feasibility studies ... and expand existing guidelines to allow greater private sector involvement and flexibility to participate in worthwhile projects," he said.

Mr. Forbes said Mr. Aquino must make the process more transparent and ease concerns about regulatory and judicial risks, such as legal challenges from defeated rival bidders that can tie up capital for years.

Beyond Mr. Aquino’s priority projects, the Philippines also needs to move fast in building new power plants to head off another looming energy crisis, said Jose D. Almendras, the Energy secretary.

"To me what is critical is 2011 and 2012. If there’s an unscheduled maintenance of a 300-megawatt plant we will have outages," Mr. Almendras warned in mid-October. -- AFP

FROM PHILSTAR

World stocks gain after US elections, Fed looms (philstar.com) Updated November 04, 2010 12:00 AM Comments (0)

LONDON (AP) — World stocks were slightly higher Wednesday as markets digested news that Republicans gained control of the House in midterm US elections and attention refocused on the Federal Reserve's plans to stimulate the world's biggest economy by expanding the money supply.

Investors expect the Fed to announce later in the day additional purchases of government-backed bonds, creating new dollars to lower market interest rates, boost credit and economic growth. The size and duration of the program will be key to investors' reactions.

In Europe, Britain's FTSE 100 was up 0.1 percent to 5,761.50. France's CAC-40 was up 0.3 percent to 3,878.91, and Germany's DAX rose 0.3 percent to 6,671.85.

Asian markets closed mostly higher and Wall Street was expected to remain steady on the open — Dow futures were flat at 11,148 as were Standard & Poor's 500 futures, at 1,193.10.

Investors took in stride US midterm congressional elections, which put Republicans — riding a wave of voter discontent over America's economic woes — in control of the House. President Barack Obama's Democratic Party retained control of the Senate, where Republicans from the anti-tax, anti-spending Tea Party movement won at least two seats.

The divided government was a sign that fights over taxes, deficits, health care and financial regulation were looming and could result in paralyzing uncertainty for the world's No. 1 economy. But investors seem to have already factored that outcome into stock prices.

The key issue is whether the two parties can work together, analysts at Bank of America Merrill Lynch said in a report.

"A popular Wall Street adage is that "gridlock is good" because it keeps the government from implementing new policies that further intervene in the private economy," the report said. "However, the short-term gridlock is very bad for the outlook, in our view."

With the election results clear, investors turned their attention to the outcome of the Fed's policy meeting Wednesday. The central bank is expected to announce the details of its plan to stimulate the economy by buying bonds. The plan, known as quantitative easing, makes stocks a more attractive investment by lowering bond yields.

Investors have been anticipating that the central bank's program will tally at least $500 billion. Any number significantly higher or lower than that figure could affect stock prices.

Broad stock market indexes have gained 12 percent since the Fed began hinting in late August that it would undertake the bond buying program by the end of the year. Over the last month, the Dow Jones industrial average is up 3.3 percent, and the broad Standard and Poor's 500 Index is up 4.1 percent.

Looking ahead, markets will also keep an eye out for US indicators, including a report on growth in the services sector as well as the ADP report on employment

In China, shares fell amid renewed signs that authorities may take further action to curb inflation. The benchmark Shanghai Composite Index lost 0.5 percent to 3,030.99. The Shenzhen Composite Index for China's smaller, second exchange fell 1.8 percent to 1,309.41.

"After the interest rate hikes in Australia and India on Tuesday, investors are fretting that China's central bank will likely raise interest rates again within this year," said Wen Lijun, an analyst at Nanjing Securities, in Nanjing.

In a quarterly report issued late Tuesday, China's central bank signaled it is likely to pull back further from stimulus policies meant to counter the fallout from the global financial crisis.

Among Asian shares closing higher was Hong Kong's Hang Seng index, which climbed 2 percent to 24,144.67.

South Korea's Kospi rose 1 percent to 1,935.97 and Australia's S&P/ASX 200 climbed 0.5 percent to 4,722.6.

Indexes in Singapore, Malaysia and the Philippines were also higher while Taiwan and Indonesia fell. Markets in Japan were closed for a public holiday.

Benchmark crude for December delivery was up 52 cents at $84.42 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 95 cents to settle at $83.90 a barrel on Tuesday.

In currencies, the dollar rose to 80.81 yen from 80.64 yen in New York late Tuesday. The euro rose to $1.4056 from $1.4030.

Asian markets higher as US election results unfold (philstar.com) Updated November 03, 2010 02:29 PM Comments (1)

BANGKOK (AP) – Asian stocks were mostly higher Wednesday as markets digested news that Republicans gained control of the House in midterm US elections and attention refocused on the Federal Reserve's plans to stimulate the world's biggest economy.

Oil prices rose above $84 a barrel amid expectations the Fed's upcoming announcement could further weaken the dollar and boost demand for crude. In currencies, the dollar was up against the yen and down against the euro.

Hong Kong's Hang Seng index climbed 2 percent to 24,132.38 while China's Shanghai Composite Index lost 0.1 percent to 3,041.14. Markets in Japan were closed for a public holiday.

South Korea's Kospi was ahead by 1.1 percent to 1,938.77 and Australia's S&P/ASX 200 climbed 0.4 percent to 4,722.8. Indexes in Singapore, Malaysia and the Philippines were also higher while Taiwan and Indonesia fell.

Investors took in stride US midterm congressional elections, which put Republicans — riding a wave of voter discontent over America's economic woes — in control of the House. President Barack Obama's Democratic Party retained control of the Senate, where the Republican-leaning tea party won at least two seats.

The divided government was a sign that fights over taxes, deficits, health care and financial regulation were looming and could result in paralyzing uncertainty for the world's No. 1 economy. But investors seem to have already factored that outcome into stock prices.

The key issue is whether the two parties can work together, analysts at Bank of America Merrill Lynch said in a report.

"A popular Wall Street adage is that "gridlock is good" because it keeps the government from implementing new policies that further intervene in the private economy," the report said. "However, the short-term gridlock is very bad for the outlook, in our view."

Stock market futures in the United States were little changed as election results streamed in. Futures for the Standard and Poor's 500 Index, the market index that most professional investors follow, were down 0.5 point, or less than 0.1 percent, at 1,192.20.

With the election results clear, investors turned their attention to the outcome of the Fed's policy meeting Wednesday. The central bank is expected to announce the details of its plan to stimulate the economy by buying bonds. The plan, known as quantitative easing, makes stocks a more attractive investment by lowering bond yields.

Investors have been anticipating that the central bank's program will tally at least $500 billion. Any number significantly higher or lower than that figure could affect stock prices.

Broad stock market indexes have gained 12 percent since the Fed began hinting in late August that it would undertake the bond buying program by the end of the year. Over the last month, the Dow Jones industrial average is up 3.3 percent, and the broad Standard and Poor's 500 Index is up 4.1 percent. The Nasdaq composite index has gained 6.8 percent over the same time frame. It closed at its high for the year on Tuesday.

Benchmark crude for December delivery was up 30 cents at $84.20 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 95 cents to settle at $83.90 a barrel on Tuesday.

In currencies, the dollar inched up to 80.66 yen from 80.64 yen in New York late Tuesday. The euro fell to $1.4012 from $1.4030.


Chief News Editor: Sol Jose Vanzi

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