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ASIAN DEVELOPMENT BANK (ADB) EXTENDS $400-M LOAN FOR PH CCT PROGRAM


FEBRUARY 10 -IN THIS SEPTEMBER 2015 PHOTO, World Bank reports 4Ps fastest growing CCT program in the world. Around 8 million children are covered by DSWD's Pantawid Pamilyang Pilipino Program (4Ps). FROM philstar.comSeptember 23, 2015  VIA PIA-Western Mindanao he Asian Development Bank (ADB) has approved a $400-million loan to help the Philippines further expand its conditional cash transfer (CCT) program, which provides regular health and education grants to millions of the country’s poorest households. Along with the additional financing, ADB is providing a technical assistance (TA) grant of $1 million for demand-driven policy and advisory services. The loan package will help the Department of Social Welfare and Development (DSWD), the principal proponent of the CCT, strengthen program management, assess any proposed program or policy adjustments, and undertake operational spot checks on program implementation. ADB’s additional financing will be provided over four years to December 2019. The government has also sharply scaled up its support for the program, with a budget of P 62.7 billion, or about $1.3 billion, for 2016. READ MORE...RELATED, POLITICS, PATRIARCHS, PALLIATIVE AND THE POOR - Conditional Cash Transfer in the Philippines...

ALSO: P-Noy OKs Landbank, DBP merger; creates 2nd biggest bank in Philippines


FEBRUARY 10 -Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla Jr. said just like any other merger, the DBP-Landbank transaction would be subject to central bank approval. Philstar.com/File
MANILA, Philippines – President Aquino has approved the proposed merger of two state-owned lenders Land Bank of the Philippines and Development Bank of the Philippines (DBP), creating the country’s second largest bank with total assets of P1.604 trillion. Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla Jr. said just like any other merger, the DBP-Landbank transaction would be subject to central bank approval.
“A law or EO will only serve as legal basis for government banks to merge. But that said, no application has been filed with BSP so far,” he said in a text message. In his Executive Order 198, Aquino also approved the increase in Landbank’s authorized capital stock from P25 billion to P200 billion. Aquino said Landbank, as the surviving entity of the merger, requires higher capital to absorb the country’s seventh-largest bank in terms of assets. “The merger of DBP and Landbank will build a stronger and more competitive universal development bank able to fulfill its mandate of providing banking services to propel countryside development and to contribute to sustainable and inclusive growth,” Aquino said. With the merger, Landbank – DBP will be the second largest bank in terms of assets, overtaking Metropolitan Bank and Trust Co. (Metrobank) with P1.367 trillion and Bank of the Philipine Islands with P1.158 trillion. BDO Unibank is still the country’s biggest bank with total assets of P1.884 trillion. READ MORE...RELATED, LBP-DBP merger may need House approval- Belmonte...

ALSO: Remittance slowdown no cause for alarm, says think tank


FEBRUARY 14 -Gareth Leather, senior Asia economist at Capital Economics, said the recent slowdown in remittances is not a major cause of concern as other sectors of the economy are growing strongly. Philstar.com/File
London-based Capital Economics Ltd. believes the country’s strong manufacturing and business process outsourcing (BPO) sectors will more than make up for the slackening growth in remittances from overseas Filipinos.
Gareth Leather, senior Asia economist at Capital Economics, said the recent slowdown in remittances is not a major cause of concern as other sectors of the economy are growing strongly. The investment bank has penciled a four percent growth in cash remittances from Filipinos abroad both in peso and US dollar terms. “But even if remittances do remain weak, this shouldn’t be a disaster. Other sectors of the economy, notably manufacturing and business outsourcing, are growing strongly and should more than make up for the weakness in remittances,” he said. He pointed out the Philippines could finally be reaching a stage where it no longer needs to send people abroad in order to grow quickly. Remittances are equivalent to around 10 percent of the country’s domestic output as measured by the gross domestic product (GDP) and plays a key role in supporting private consumption and keeping the current account in surplus. READ MORE...

ALSO: What a recession does to your money


FEBRUARY 12 -Stock traders work at the New York Stock Exchange, Thursday, Feb. 11, 2016, in New York. AP/Mark Lennihan
NEW YORK — If we are indeed in the midst of a recession — and we won't know we're in one until well after it's begun — stocks likely still have a long way to go down.
The Standard & Poor's 500 index has dropped 14 percent since peaking last summer, and it joined markets around the world in another steep slide on Thursday. Worries are high that the sharp slowdown in China's growth, falling U.S. corporate profits and other downward pressures will pull the economy back into a recession. If a garden-variety one is on the way, the stock market's drop isn't even halfway done. Stocks have lost an average of 33 percent from top to bottom around past recessions, going back to 1929, according to a review by strategists at Credit Suisse. Investors are scared enough that they're already pulling pages from the recession playbook. They're moving into types of stocks and other investments that have typically held up best during past downturns and avoiding those that tend to get hit the worst. The temptation to sell everything and get out of stocks can be costly, though. Following every past recession, stocks have eventually gone on to recover their losses — and then climb higher. Every downturn is different, but a look at the numbers gives investors a sense of at least what's possible. Here's what they show: — How bad are recessions for stocks usually? Bad, but not as bad as the last one. A drop of more than 20 percent should be expected, and most recessions have seen the S&P 500 fall at least that much. Including the 19.9 percent drop around the 1990-91 recession, it's happened in 10 of the last 14. READ MORE...

ALSO: By Boo Chanco - End of the line?
[Indeed, it is pathetic our officials are fighting for the honor of being the industry’s father. It is more important to work together and save the industry by making it possible to move up the value chain faster. I see a very scary scenario in the horizon. Our economy will lose the growth momentum we have enjoyed because of a decline in OFW remittances and BPO revenues. Geo-political developments on one hand and disruptive technologies on the other will rain on our parade. The only question is when.]


FEBRUARY 12 -By Boo Chanco
OFW remittances and BPO revenues are the two pillars of the Philippine economy. With an annual potential of almost $50 billion in dollar earnings from these two sources, our economy had never seen better days in recent years.
So good were the earnings and jobs created by these two pillars that our leaders became complacent about introducing enough structural reforms in our economy to make growth more sustaining. Like Marcos before them, post EDSA presidents were happy to rest on the earnings of OFWs and lately, of our call center workers at home. Warnings have been issued about the need to complement these two legs of our economy. We need a resurrected industrial sector and a more productive agricultural sector as well. A study by the ADB said as much, but our officials are doing nothing much. The next administration will likely be faced with a more urgent situation. Developments abroad may result in a serious loss of revenues initially from overseas workers and eventually from our BPO industry. Low oil prices have forced many countries in the Middle East hosting our workers to introduce austerity measures, including the mass lay off of foreign workers. Malacanang has bravely said they are ready to help any OFW laid off, as if they actually have a credible plan to do this. There are about two million OFWs in the Middle Eastern oil producing countries. Even if only 10 percent of them lose their jobs, a crisis will arise not just in repatriating them, but also in giving them alternative employment here. READ MORE...RELATED, The nuclear deal with Iran: The end of the beginning...

ALSO: Residential condo dev’t seen slowing down


FEBRUARAY 12 -Rows of condominium buildings are seen behind a middle-class residential district in Mandaluyong, Metro Manila as the Philippines. FROM www.scmp.com Search by image
Property developers in the country are seen holding back on new residential condominium developments in Metro Manila this year to help address the supply overhang in the middle- and high-end segments.
In 2015, new residential projects in Metro Manila launched through pre-selling declined by 11 percent while the take-up of new inventory through pre-selling activities also contracted by 18 percent, property consulting firm Colliers Philippines said. About 32,700 residential condominium units were launched in the metropolis last year and 32,400 units were taken up by the market. “This is more reflective of the household creation that we see each year based on population growth in Metro Manila. Our estimate is that 30,000 new households are created each year. We’re now approaching that,” Julius Guevara, director for research and advisory at Colliers Philippines, said in a briefing yesterday. “But of course you have to consider that not all of these households can afford housing,” Guevara said, adding that of the more than 30,000 units taken up through pre-selling, some were accounted for by foreign buyers and speculative investors.The more cautious stance of property developers is likewise reflected by the decline in the issuance of licenses to sell by the Housing and Land Use Regulatory Board (HLURB) last year. Licenses to sell mid- and high-end condominium units fell by 11.9 percent while middle income housing licenses also fell by 10 percent. These are in contrast to the 82.4 percent growth in licenses issued by HLURB to sell socialized housing—reflecting the huge backlog in this segment. “There has been a mismatch in terms of actual demand from the end-user market versus what has been developed. That’s why we’re seeing such slowdown,” Guevara said. “In the horizontal space outside of Metro Manila, there remains unserved or underserved market. That’s where the actual demand lies, particularly in the lower end or socialized segment,” he said. READ MORE...


READ FULL MEDIA REPORTS HERE:

ADB extends $400-M loan for CCT program


SEPTEMBER 2015 PHOTO -- World Bank: 4Ps fastest growing CCT program in the world. Around 8 million children are covered by DSWD's Pantawid Pamilyang Pilipino Program (4Ps). FROM philstar.comSeptember 23, 2015  VIA PIA-Western Mindanao

MANILA, FEBRUARY 15, 2016 (PHILSTAR) By Ted Torres February 10, 2016 - The Asian Development Bank (ADB) has approved a $400-million loan to help the Philippines further expand its conditional cash transfer (CCT) program, which provides regular health and education grants to millions of the country’s poorest households.

Along with the additional financing, ADB is providing a technical assistance (TA) grant of $1 million for demand-driven policy and advisory services.

The loan package will help the Department of Social Welfare and Development (DSWD), the principal proponent of the CCT, strengthen program management, assess any proposed program or policy adjustments, and undertake operational spot checks on program implementation.

ADB’s additional financing will be provided over four years to December 2019. The government has also sharply scaled up its support for the program, with a budget of P 62.7 billion, or about $1.3 billion, for 2016.

READ MORE...

ADB Southeast Asia Department senior social sector specialist Karin Schelzig said the support, which builds on ADB’s initial loan to the project of the same amount, would help the government support more families, now also including high school students.

“This is important, as impact evaluation shows the CCTs are keeping vulnerable young people in school, opening the door to a better future,” Schelzig added.

The CCT program, known locally as Pantawid Pamilyang Pilipino, provides grants to poor families if they send their children to school, visit health centers and attend family development sessions. CCTs are an investment in human development that pays off when healthier and better-educated young people grow up to get better jobs and break out of the poverty trap.

Since the program’s inception, the number of CCT partner beneficiaries increased from 340,000 to more than 4.4 million at the end of 2015 – making it the fourth-largest CCT after programs in India, Brazil and Mexico.

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RELATED FROM 'BRIEFING PAPER --NGO's FORUM ON ADB

POLITICS, PATRIARCHS, PALLIATIVE AND THE POOR:
Conditional Cash Transfer in the Philippines
Ms. Nina Somera Policy Researcher, NGO Forum on ADB

Heralded. Misunderstood. Attacked. Threatened.

This has been the varying fates of the conditional cash transfer (CCT) program as it hogs the headlines every now and then.

Although many are becoming more aware of the packages of allowance under the CCT program, the political and social dimensions of the program have yet to be grasped and appreciated.

While the program has been operating since the Macapagal-Arroyo administration, it has been confronted by massive criticism due its sheer size and the personalities involved.

While CCT programs have had a positive reception among the government agencies generally, there remain questions on their sustainability.

And for a heavily indebted country, the details of its CCT program are worth examining, rather than immediately welcoming a program that is mostly made up of loans.

Nationally marketed as 4Ps, short for Pantawid Pamilyang Pilipino Program [Bridging Filipino Families Program], the Philippine’s CCT went through long, winding and even redundant questions which resulted in grueling discussions at the House of Representatives before the latter came up with a 2011 budget in the wee hours of 8 November 2010.

The 4Ps may have passed through the House’s needle hole but its proponents ought to prepare themselves to another round of grilling as the Senate takes its turn to produce its own version of the 2011 budget.

Although some senators have expressed their support for the program, which ballooned the budget of the Department of Social Work and Development (DSWD) by over 100 per cent, some senators are keen on having the money realigned and even slashed.

Despite the visibility of 4Ps and Social Work secretary Dinky Soliman in the media, some important aspects of the program need to be further discussed and understood and probably even exposed. By looking at these aspects, we can hopefully answer the fundamental and often-asked questions. Can we really have such huge money realigned at this stage? What are the implications of the program on the national finances?

Is it an acceptable flagship anti-poverty program? Is it really a dole-out? Will it work?

CCT as a social protection program

Conditional cash transfer (CCT) programs have been around since the 1990s. However it was in the last several years when these programs have been mainstreamed and upscaled particularly in Latin America. Among the more popular examples are Brazil’s Bolsa Familia and Mexico’s Oportunidades.

Brazil’s Bolsa Família provides financial aid to poor and indigent Brazilian families on condition that their children attend school and are vaccinated. The program attempts to both reduce short-term poverty by direct cash transfers and fight long-term poverty by increasing human capital among the poor through conditional cash transfers. Mexico’s Oportunidades targets poverty by providing cash payments to families in exchange for regular school attendance, health clinic visits, and nutritional support.

In Asia, CCT programs have been implemented in Bangladesh, Cambodia, Indonesia, Nepal, Mongolia and Pakistan, among others.



The Asian Development Bank (ADB) defines social protection as “policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people’s exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption or loss of income.”

At the core of a CCT program is a social contract where a state provides financial resources to a family in exchange for that family’s fulfillment of certain tasks such as ensuring that its children’s attendance in school, regular visits to community health centers, participation in government-sponsored feeding programs and attendance in more specific trainings, to name a few.

CCT programs also reinforce the family as a unit that can engender basic forms of social empowerment. Another value added is the programs’ general preference for women as head of households and managers of financial resources. In Bangladesh, its own CCT program aimed at having more girls attending schools, and has reportedly increased primary school enrollment by nine percent.

The initial evaluation of CCT programs has been generally positive, when one looks at the percentage of poverty incidence. In 1996, Mexico’s extremely poor population stood at 37 per cent. This figure dropped to 13.8 per cent by 2006 despite the country’s lackluster economic growth. School attendance likewise increased.

Another reason behind CCT’s appeal lies on the strategic method where both the beneficiary-targeting systems and conditions prevent misspending and leakages, or when financial resources end up with people who are not exactly among poorest of the poor.

CCT programs become more attractive when its investments are compared with the investments on other social protection programs. Asian Development Bank (ADB) economist Hyun H. Son cited Brazil which spends 3.7 per cent of the GDP for its pension programs where more than 50 per cent of its benefits go to the country’s richest 20 per cent.3 This is in stark contrast with that for Bolsa Familia which is equivalent to just .4 per cent of GDP but served the poorest 20 per cent of Brazil’s population in 2007.

In the Philippines, University of the Philippines School of Economics Dean said out that despite a 4.6 per cent economic growth, poverty could still rise from 30 per cent to 32 per cent in 2008: “The government has to simply prioritize spending on infrastructure and the social sector, especially on basic education, health and family planning services, and
environment.”4 He pointed out that while two out of three among the poor reside in the rural areas, rice allowances from the National Food Authority (NFA) appear to have been concentrated in Metro Manila.


Mae Paner a.k.a. Juana Change (Trailer) SCREENSHOT FROM YOU TUBE

Furthermore, CCT programs are concrete ways for the poor to benefit from the government’s resources. As Mae Paner, actor activist who has been a campaigner and a critic of Aquino described the scenario, “Kung ako ay mahirap at ngayon mararamdaman ko na ako ay pinahahalagahan ng aking gobyerno through the CCT, syempre matutuwa ako [If I were the poor and I would be able to feel that I am taken seriously by the government through the CCT, of course, I would be happy.”

CCT in the Philippines



In the Philippines, CCT was introduced in 2007 during the administration of Gloria MacapagalArroyo. Through a loan from the World Bank, 4Ps was piloted in two provinces and two cities covering some 6,000 households.

By 2008, 4Ps’ coverage increased to 321,000 families or around 1.6 people in 20 provinces, with Macapagal-Arroyo’s additional PHP5 billion.

In ascertaining the country’s poorest households, DSWD primarily used the 2006 Family Income Expenditure Survey, along with two other methods, the small area estimates and a proxy means test at the village or barangay level.

Back then, pregnant women were given PHP500 each month on condition that they subject themselves to regular medical check-up in health centers. Parents must also attend seminars on responsible and effective parenthood, among others. A family also received PHP 300 for each child, from three to 14 years, provided that they be in school 85 per cent of the time.

Moreover, children of certain ages had to undergo vaccinations and deworming. The most that a family received was PHP1,400 a month but DSWD pegs the average at PHP1,200. DSWD claims that the initial implementation of 4Ps has had remarkable results such as the prevention of stunting or where the height of a child is less than ideal for one’s age due to
poor nutrition. Another is that more women gave birth in hospitals and thus lessening the risks of maternal mortality and health complications for the new-born. DSWD’s assessment, however, remains preliminary.


The Politics Behind 4Ps

The current Philippine leadership is convinced of the 4Ps’ effectiveness. As early as his State of the Nation Address (SONA) in July 2010, President Benigno Simeon Aquino III appeared to be deadest in pursuing CCT. He mentioned that part of the PHP 177 billion debt of the National Food Authority (NFA) due to its over importation could have financed the PHP29.6 cost of the CCT for 2009, among many others.


2010 PRESIDENTIAL CAMPAIGN PHOTO -The ever-changing hues of Philippine politics: The Yellow Shirts -In this file picture dated May 7, 2010, Liberal party presidential candidate Benigno Aquino (right) raises the hand of his girlfriend Shalani Soledad during the Miting de Avance (final grand rally) of their party in Manila. Mr Aquino subsequently won the election. -- PHOTO: AFP PUBLISHED JAN 13, 2014, 3:48 PM SGT STRAITSTIMES.COM/ASIA REPORT.

In many ways, the President’s blessing to the CCT most likely ensures its passage in the two houses of congress that is dominated by the administration party. Senator Franklin Drilon, who chairs the body’s powerful Committee on Finance, told reporters, “Yes, the budget of P21 billion will be there.” Drilon also happens to be the chairperson of the President’s
political party, Liberal Party

Earlier his fellow senators Edgardo Angara and Gregorio Honasan expressed their intention to have the 4Ps PHP21.2 billion budget slashed to PHP15 billion. Another senator would like the budget further reduced to PHP6 billion.

The 4Ps likewise enjoys the confidence of key line agencies such as the Department of Finance (DOF), the Department of Budget Management (DBM) and even the Department of Health (DOH), Department of Education (DepEd) and the Department of Interior and Local Government (DILG), which do not share a gargantuan budget but are expected to deliver certain tasks under the 4Ps.

If there is one thing that unites the Aquino and its predecessor Macapagal-Arroyo, that must be the 4Ps.10 But still, not quite.


Pampanga Rep. Gloria Macapagal-Arroyo (CNN PHILIPPINES File photo) POSTED October 9, 2015.

In the budget hearings at the House of Representatives, Macapagal-Arroyo, who is now the representative of the second district of the province of Pampanga, grilled the DSWD, particularly 4Ps, described the current 4Ps budget as “ambitious and untimely.”

Macapagal Arroyo expressed doubts whether the DSWD has the capacity to deploy the 4Ps to 2.3 million households until 2014.

During the previous administration, a five year CCT program that would have lasted from 2008 to 2013 targeted 321,000.

Such critique is indeed legitimate except that it was shrouded with patronage politics, which is yet another concern with the CCT.

The remark came with so much history.


SOLIMAN

At the other end of the plenary session was DSWD Secretary Soliman, who was in the same position during Macapagal-Arroyo’s first term of office in the presidency.

But in 2004, Soliman led other Cabinet secretaries in bolting out of the administration. {Kimberly Jane Tan (2010)}.

 “Senators want to slash cash-transfer allocation

But the remark was also hypocritical. The US$1.2 billion total budget of the 4Ps for 2009-2014 was planned and negotiated under her watch. Although US$400 of it was only approved recently by the ADB, a Bank’s official confirmed that it was only the election rule that kept ADB from signing the loan with the Finance secretary of the previous regime: “There was a chance for the loan to be approved by GMA but we observed the one-month rule.”

Moreover, loans are typically prepared at least a year in advance. Since much of the 4Ps consists of loans which have been done deals even before the budget hearings, it becomes almost impossible to have the money behind the 4Ps realigned, much less have the program canceled altogether. Although banks have mechanisms for loan restructuring and cancellation, these would entail cost for the governments.

As an ADB official said: “It is possible but it will be very difficult.”

Thus the Philippines’ 2011 budget partially bears the imprimatur of the previous administration and is not yet the so called “reform budget” that the Aquino administration would like to see.

A Loan for a Flagship Anti-Poverty Program

By the tail-end of August 2010, the Asian Development Bank (ADB) approved a US$400 million loan specifically for the 4Ps which will run from 2011 to 2014. This comprises 45.2 per cent of the total cost of US$884.2 million, where US$484 million serves as the government’s counterpart.

Having ADB’s US$400 million in addition to the World Bank’s US$405 million, makes two-thirds of the whole 4Ps from 2009 to 2014 comprised of loans!
 


BELLO

Scholar activist and now, legislator Walden Bello put it clearly: “While [CCTs] may be a useful complement to structural reform, they are not a substitute for it, and the latter is the agenda of the multilateral agencies, which are loath to address structural issues.”

He added that the same multilateral agencies, with their structural adjustment programs, have been among the root cause of poverty.

There even more practical concerns in having a national flagship. The US$400 million loan with the ADB comes from the Bank’s ordinary capital resources (OCR) which are near commercial rate. It also comes with a .15 per cent annual commitment fee.

This loan is payable in 25 years which includes a five-year grace period.

These terms usually accompany large-scale projects like roads, railways and hydropower dams. ADB (2010).

But unlike the latter, the 4Ps is a non-revenue generating project that can further burden succeeding administration with loan repayments.

The Aquino administration may only have to pay the commitment fee but its successors will shoulder 0.827 per cent by March 2016 up to 5.55 per cent by September 2035.

Although many CCT programs have been supported by loans, it is prudent that a non-revenue generating program be buttressed by government funds or those which have far less conditionalities.

National Anti-Poverty Commission chair Joel Rocamora explained, “Walang pera ang gobyerno [The government has no money]. The fiscal space of the government is too narrow.”
 



Meanwhile Social Watch Philippines asserted that CCT would only drive the country to further indebtedness.16 In the House’s version of the 2011 budget, 78 per cent of the PHP1.645 trillion has been earmarked for debt servicing.

It is also unclear whether the loan has been negotiated well. As feminist Reihana Mohideen asserted, “The government and its negotiating team should not borrow loans at market rates for such a program, but demand that the ADB provides the government with grant funding instead. If the Philippines does not qualify for grants, then insist on changing the
terms with the ADB and other international finance institutions.”

Also, the 4Ps budget may be too big for a social protection program which has yet to be thoroughly validated. ADB itself said, “Although we can plausibly argue that social protection promotes income growth, we don’t yet have to estimate private and social rates of return for social protection and CCT programs.”

CCT and Poverty: System and Semantics

One persistent issue leveled against the 4Ps is its being a dole-out. Caution has to be exercised in this argument as the latter can be heavily tainted with a very middle class ethos, one that sweepingly disregards the very existence of the working poor.20 At the outset, the 4Ps is not a dole-out mainly because of the social contract that governs a CCT program. Yet the program can also be considered a dole-out in the sense that it is not sustainable, even from the point
of view of those among the ranks of the poor.

Florian Taldo of Kalipunan ng Damayang Mahihirap (Kadamay), an urban poor-based people’s organization, opined “Ok lang naman basta’t makarating sa tamang tao pero mahirap din sanayin ang mga tao. Iba pa rin ang kagyat na solusyon” [The program is fine for as long as the resources go to the right people. But it is not good to when people get used to this. It is still different when there is a sustainable solution].

Jessica Amon of Community Organizers Multiversity (COM), an NGO which used to be headed by Soliman also expressed a similar view.

Both Taldo and Amon cited that what the poor primarily needs are jobs.

Aside from jobs, Taldo and Amon cited permanent housing and tenurial security as a priority issue among the poor. Although the government has provided resettlement sites especially for communities living in so-called danger zones, these sites often fail the minimum living standards such as the presence of water and electricity services, infrastructures like lamp posts and roads and most importantly, proximity to sites of employment.

In Metro Manila alone, it is estimated that there are around 581,000 families of informal settlers. Seventyfive
per cent of them live in danger zones.

The Inter-American Development Bank (IADB), which has likewise been deeply involved in the CCT programs in Latin America, is indeed keen on seeing CCTs expand their capacity in “improving productive opportunities” by the inclusion of job training, microfinance and agricultural development.

This is one of the gaps in the 4Ps which limits the program as a mere poverty mitigating measure. Brazil’s Bolsa Familia has been linked with programs on preferential housing, microcredit and local business development while Mexico’s Oportunidades has been attempting to include credits for secondary school graduates towards microenterprise, further education or housing.

Although 4Ps by its name reflects its temporary nature, having it as a flagship anti-poverty program makes it problematic. This has also led some legislators to question the role of DSWD, which appears to override the functions of NAPC, the government agency that is solely dedicated to poverty eradication.

This observation is somehow informed by the very wide disparity between the proposed budget of the two agencies, PHP34.3 billion for DSWD and PHP60 million for NAPC.

For Rocamora though, “There is nothing much to take over.” He added that NAPC has sat on its mandate in the last five years.

During a budget hearing at the House, for instance, one legislator emphasized the oft-quoted biblical passage of teaching one to fish rather than giving one fish. But the same legislator came from a family of hacienderos, who have been linked to the oppression of sakadas or sugar cane workers.

In an interview with Amon, the latter opined that US$400 million or PHP 18 billion could have built adequate communities with over 100,000 low-cost 32 square meter homes within the city.

Based on COM’s estimates, a unit in a low-cost housing in a community that meets minimum standards may cost between PHP 180,000 to PHP225,000. [Julia Johanssen (2009)].

Amon added that the allowances under the 4Ps are rather low, especially for those located in cities and towns, that it might not prevent children from working. “Ang batang nangangalakal ay kikita ng PHP50 sa isang ikot” [A child who collects scrap metal, newspapers and glass bottles can earn PHP50 in one round].

She said that what government should watch out for are the shocks such as eviction and disasters which always find the poor quite vulnerable.

Another practical concern lies in children covered by the program, 0-14 years old. This means that support can stop midway, just before a child reaches grade school. The coverage could have been stretched to 16 or 17 years old and therefore allow a child to finish high school.

Amon and Taldo also pointed out the susceptibility of 4Ps to the idiosyncrasy of local politics.

Although the DSWD has devised a targeting system, the program is not absolutely foolproof from patronage politics especially at the barangay or village level. Local officials may tend to vouch for households who have been supportive of them during the elections.

Political Will in Poverty Reduction

If, as the ADB stressed, a CCT program’s impacts is driven by “political commitment,” poverty reduction and more so, poverty eradication hinge on political will that is sustained through different administration.

The palliative nature of the 4Ps somehow reflects the state of such political development in the Philippines.

The Comprehensive Agrarian Reform Program (CARP), the flagship anti-poverty program of the late Philippine President and mother of the current president Corazon Aquino is instructive.


PHILSTAR PHOTO JUNE 30, 2014 -.After 26 years, CARP ends :CARP expired yesterday after Congress went on recess without approving a proposal, certified as urgent by President Benigno Aquino III, to extend it for another two years. ANGELES CITY, Philippines – The  Comprehensive Agrarian Reform Program (CARP) ends today with a farmers’ group rating it as the bloodiest with 664 farmers getting killed in the name of land reform. By Ding Cervantes (The Philippine Star) | Updated June 30, 2014 - 12:00am 5 1216 googleplus0 1

CARP was more than a social protection measure. It was a social justice measure.

But instead of distributing lands to their actual tillers, along with a package of adequate extension services, CARP was substantially weakened by legislators who are themselves owners of vast haciendas.

Despite her pronouncement of having her family’s vast sugar estate subjected to CARP, Cory Aquino failed to betray her own class.


Entrance to the Cojuango-Aquino Hacienda Luisita, San Miguel, Tarlac City.

Her family opted for the stock distribution option (SDO), instead of awarding most workers actual parcels of land out of the Cojuangco’s 6,443 heactare-Hacienda Luisita.

The same problem hounds other programs such as those of the Department of Health (DOH), aims to increase the coverage of the national health insurance system particularly among the poor. [Che de los Reyes (2010)].

Conclusion: What Now?

“You cannot kill it,” an ADB official ominously suggested of the 4Ps’ fate in Congress.

Indeed it will be too late and difficult to touch the budget for the conditional cash transfer program at this point.

Despite the pockets of opposition and torrent of criticism, there is so much reason to believe that 4Ps will obtain the Senate’s nod.

Nonetheless, safeguards must be set in monitoring the operations of the CCT.

Through House Resolution 529, Bello and two of his colleagues at the House of Representatives earlier called for a closer oversight. The same call is being campaigned by Drilon at the Senate. After all, despite the possibility that this be used as a political reward, 4Ps may have one virtue which many a politician would like to be gone.

As Rocamora put it, “Dahil hindi dadaan sa kanila ang pera” [The money will not pass through them].

Civil society must also engage both the governments and the banks involved.

Although the World Bank and the ADB are devising the methodologies for a joint monitoring and evaluation of the 4Ps, it is unclear whether the banks would allow members of civil society organizations (CSO) as observers in this proposed process.

Although we can expect that Congress will let 4Ps pass, the larger context of the debates must be continuously be engaged. However new and modern 4Ps may be, it miserably falls short of squarely confronting the old and nagging issues of patronage politics, inequitable distribution of wealth, gender inequality and discrimination. Unless these are thoroughly addressed, it is difficult to imagine many being liberated from real and perpetual poverty.

BRIEFING PAPER DECEMBER 24, 2010
By Ms. Nina Somera
Policy Researcher, NGO Forum on ADB

This has been the varying fates of the conditional cash transfer (CCT) program as it hogs the headlines every now and then. Although many are becoming more aware of the packages of allowance under the CCT program, the political and social dimensions of the program have yet to be grasped and appreciated. While the program has been operating since the MacapagalArroyo administration, it has been confronted by massive criticism due its sheer size and the personalities involved. While CCT programs have had a positive reception among the government agencies generally, there remain questions on their sustainability. And for a heavily indebted country, the details of its CCT program are worth examining, rather than immediately welcoming a program that is mostly made up of loans.


nina somera
Female
Quezon City, Philippines
Writer/researcher in Isis…
From Nina's page at PCDN

[READ COMPLETE BRIEF pdf file @ http://forum-adb.org/docs/BP-201012.pdf

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RELATED: FROM PNoy AQUINO OFFICIAL GAZETTE (GOVPH)

UPDATES: Pantawid Pamilyang Pilipino Program

READ @ http://www.gov.ph/programs/conditional-cash-transfer/


PHILSTAR

P-Noy OKs Landbank, DBP merger; Creates 2nd biggest bank in Philippines  By Prinz Magtulis and Delon Porcalla (The Philippine Star) | Updated February 10, 2016 - 1:00am


Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla Jr. said just like any other merger, the DBP-Landbank transaction would be subject to central bank approval. Philstar.com/File

MANILA, Philippines – President Aquino has approved the proposed merger of two state-owned lenders Land Bank of the Philippines and Development Bank of the Philippines (DBP), creating the country’s second largest bank with total assets of P1.604 trillion.

Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla Jr. said just like any other merger, the DBP-Landbank transaction would be subject to central bank approval.

“A law or EO will only serve as legal basis for government banks to merge. But that said, no application has been filed with BSP so far,” he said in a text message.

In his Executive Order 198, Aquino also approved the increase in Landbank’s authorized capital stock from P25 billion to P200 billion. Aquino said Landbank, as the surviving entity of the merger, requires higher capital to absorb the country’s seventh-largest bank in terms of assets.

“The merger of DBP and Landbank will build a stronger and more competitive universal development bank able to fulfill its mandate of providing banking services to propel countryside development and to contribute to sustainable and inclusive growth,” Aquino said.

With the merger, Landbank – DBP will be the second largest bank in terms of assets, overtaking Metropolitan Bank and Trust Co. (Metrobank) with P1.367 trillion and Bank of the Philipine Islands with P1.158 trillion. BDO Unibank is still the country’s biggest bank with total assets of P1.884 trillion.

READ MORE...

“The merger will build a stronger universal development bank with a solid resource base, unmatched geographical reach, a loan portfolio catering to priority sectors and institutional knowledge and experience in development financing,” said Ma. Angela Ignacio, commissioner of Governance Commission on GOCCs (GCG).

The GCG, created by RA 10149, has advocated for the merger since 2013.

Astro del Castillo, managing director at First Grade Holdings Inc., said the merger is unlikely to get regulators worried of the government cornering higher banking assets.

He said Landbank’s resulting assets would just be around 13 percent of the total Philippine banking assets of P11.9 trillion as of September last year.

“I am sure the regulators will examine the merger carefully and will have the necessary tools to prevent any distress from happening,” Del Castillo said in a phone interview.

For the industry, the merger will have its pros and cons.

“You will have economies of scale, wider reach and bigger SBL (single borrowers limit) that can contribute to countrywide development,” said Lorenzo Tan, president of the Bankers Association of the Philippines.

“If not governed and managed properly, it can be a ‘too big too fail’ situation,” he added.

According to a merger fact sheet, the government said the merger was undertaken to remove the “unnecessary overlap” between the DBP and Landbank’s functions.

In particular, both lenders have concentrated their business on providing credit to the agriculture sector as well as micro, small- and medium-enterprises.

Finance Secretary Cesar Purisima said the merger will expand the reach of both banks, backed by stronger capitalization that will help them extend bigger credits.

As of June 2013, DBP has 104 branches, while Landbank has 337. Both banks have capital adequacy ratios – a measure of financial strength – way above the BSP-mandated 10 percent.

In terms of deposits, an additional P300 billion in DBP deposits will be added to Landbank’s P912.6 billion. DBP also has P204.56 billion in loans as of 2014.

Landbank will also absorb an institution which have recorded three straight years of positive net income until 2014.

“With better capital adequacy and robust resources, we can expect government banking to continue growing, especially in terms of efficiency and size of public served,” Purisima said.

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RELATED FROM PHILSTAR

LBP-DBP merger may need House approval’ By Paolo Romero (The Philippine Star) | Updated February 15, 2016 - 12:00am 0 0 googleplus0 0


Speaker Feliciano Belmonte Jr. said he has ordered a study of the EO as he believes the merger should have been approved by Congress. STAR/File photo

MANILA, Philippines – The House of Representatives will look into the legal basis of Executive Order 198 of President Aquino that merged two state-owned financial institutions, the LandBank of the Philippines (LBP) and the Development Bank of the Philippines (DBP), Speaker Feliciano Belmonte Jr. said Saturday.

The House leader said he has ordered a study of the EO as he believes the merger should have been approved by Congress.

“I think the merger should not have been done just like that (through an EO),” Belmonte said.

“We’ve been talking about this merger for quite some time so this EO came as a surprise to us,” he said.

He said Finance Secretary Cesar Purisima should explain why he pushed for the merger through executive action instead of going through Congress.

Belmonte said he would like to believe there was no rush or subterfuge in Malacañang’s move, since the EO was signed in the last months of the Aquino administration.

“Everybody was in favor of the merger anyway,” Belmonte said.

Valenzuela City Rep. Sherwin Gatchalian warned the union would leave local government units (LGUs) on the losing end.


PHILSTAR

Remittance slowdown no cause for alarm, says think tank By Lawrence Agcaoili (The Philippine Star) | Updated February 14, 2016 - 12:00am 0 41 googleplus0 0


Gareth Leather, senior Asia economist at Capital Economics, said the recent slowdown in remittances is not a major cause of concern as other sectors of the economy are growing strongly. Philstar.com/File

MANILA, Philippines – London-based Capital Economics Ltd. believes the country’s strong manufacturing and business process outsourcing (BPO) sectors will more than make up for the slackening growth in remittances from overseas Filipinos.

Gareth Leather, senior Asia economist at Capital Economics, said the recent slowdown in remittances is not a major cause of concern as other sectors of the economy are growing strongly.

The investment bank has penciled a four percent growth in cash remittances from Filipinos abroad both in peso and US dollar terms.

“But even if remittances do remain weak, this shouldn’t be a disaster. Other sectors of the economy, notably manufacturing and business outsourcing, are growing strongly and should more than make up for the weakness in remittances,” he said.

He pointed out the Philippines could finally be reaching a stage where it no longer needs to send people abroad in order to grow quickly.

Remittances are equivalent to around 10 percent of the country’s domestic output as measured by the gross domestic product (GDP) and plays a key role in supporting private consumption and keeping the current account in surplus.

READ MORE...

Although remittance growth has slowed in US dollar terms, the economist explained currency depreciation has meant that they are holding up much better in peso terms, which is what matters for domestic purchasing power.

He added the broader economy hardly seems to have been affected as the country’s GDP grew 5.8 percent last year.

He noted the key factor behind the slowdown in remittances has been a recent sharp drop in money being transferred over from the US that account for 40 percent of the total as well as weaker growth from the Middle East that has a 20 percent share.

“The drop in remittances from the US looks to have been caused by a change in regulations that has made it more difficult for US banks to transfer money to the Philippines,” Leather said.

He added Filipino workers are likely to find other ways of sending their money back to their loved ones in the Philippines.

More worrying, he said, is the outlook for the Middle East, where lower oil prices are weighing heavily on economic prospects.

In the first 11 months last year, cash remittances went up 3.6 percent to $22.83 billion from $22.08 billion in the same period in 2014. The full-year data for 2015 will be released tomorrow.

For this year, remittances are expected to increase four percent on account of the steady deployment of Filipino workers, greater diversification of country destinations, and shift to higher-skilled types of work.


PHILSTAR

What a recession does to your money By Stan Choe (Associated Press) | Updated February 12, 2016 - 2:05am 3 126 googleplus0 6


Stock traders work at the New York Stock Exchange, Thursday, Feb. 11, 2016, in New York. AP/Mark Lennihan

NEW YORK — If we are indeed in the midst of a recession — and we won't know we're in one until well after it's begun — stocks likely still have a long way to go down.

The Standard & Poor's 500 index has dropped 14 percent since peaking last summer, and it joined markets around the world in another steep slide on Thursday. Worries are high that the sharp slowdown in China's growth, falling U.S. corporate profits and other downward pressures will pull the economy back into a recession.

If a garden-variety one is on the way, the stock market's drop isn't even halfway done.

Stocks have lost an average of 33 percent from top to bottom around past recessions, going back to 1929, according to a review by strategists at Credit Suisse.

Investors are scared enough that they're already pulling pages from the recession playbook. They're moving into types of stocks and other investments that have typically held up best during past downturns and avoiding those that tend to get hit the worst.

The temptation to sell everything and get out of stocks can be costly, though. Following every past recession, stocks have eventually gone on to recover their losses — and then climb higher.

Every downturn is different, but a look at the numbers gives investors a sense of at least what's possible. Here's what they show:

— How bad are recessions for stocks usually?

Bad, but not as bad as the last one.

A drop of more than 20 percent should be expected, and most recessions have seen the S&P 500 fall at least that much. Including the 19.9 percent drop around the 1990-91 recession, it's happened in 10 of the last 14.

READ MORE...

The last recession was far more painful for investors, with its 57 percent plunge. But that occurred when investors were questioning whether the financial system would even continue to exist, and it was far from typical. You have to go back to the Great Depression to find a bigger drop for stocks.

— Which stocks tend to do worst?

Size matters. The smaller the company, the more its stock tends to fall during a recession. The Russell 2000 index of small-cap stocks has done worse than the S&P 500 index of large-cap stocks in each of the past five recessions.

A similar scenario is playing out now. The Russell 2000 has lost 27 percent since peaking in June, nearly double the S&P 500's drop.

— Which stocks tend to hold up best?

Even when the economy's shrinking, people still buy food and diapers.

Because profits tend to stay steadier for companies that sell everyday items to consumers, so do their stock prices. That's why investors lump them with health care and telecom stocks into a category known as "defensive" stocks.

They still fall during recessions, but not as much as the rest of the market. Procter & Gamble and other makers of consumer staples fell 31 percent around the Great Recession, roughly half the broad market's loss.

—What about other "safer" investments?

Bonds are a traditional comfort blanket for investors during downturns because they are less volatile than stocks, and they generate regular income for investors. During the last recession, bonds helped to limit losses for investors with balanced portfolios, and then helped them get back to even long before stock-only investors did.

The average intermediate-term bond mutual fund has returned 1.3 percent this year, through Wednesday.

Another traditional landing spot for jittery investors, gold, has also climbed this year.

— Why might the playbook not work as well this time?

Investors scarred by the Great Recession have piled into relatively safe stocks in recent years, even while the economy was growing, in search of steadier returns. All that demand means they're trading at higher prices relative to their earnings, and more expensive valuations mean these stocks may not offer as much protection as in past downturns.

As for bonds, their low yields mean they're not producing as much income. That in turn means they can't possibly provide as strong a cushion as in past recessions.

Gold, meanwhile, is up this year but has been on a general downward trend since the summer of 2011. Gold tends to do best when worries about inflation are spiking. Many central banks around the world now see the opposite — a sustained cycle of falling prices, or deflation — as the bigger threat.

— Why not sell stocks and just get out of the way?

It's scary to watch the stock market plummet, but long-term investors have always eventually been made whole.

Someone with terrible timing who bought an S&P 500 index fund on Oct. 9, 2007, when stocks peaked before the financial crisis, got back to even by August 2012, aided by dividends. That meant a wait of about five years.

Plus, much of stocks' long-term returns can come from just a handful of really big days, and it's impossible to predict when they'll occur. Miss them, and owning stocks gets much less lucrative. Two thirds of the S&P 500's gain over the last decade has come from just five days.

"This is the whole point of why equities generate the best returns of any major asset class over long periods of time," says David Lefkowitz, senior equity strategist at UBS Wealth Management Americas. "They have higher volatility. If you can live with the higher volatility, you should be in a position to earn higher returns. I fully expect that stocks ultimately will reach new highs."


PHILSTAR

End of the line? DEMAND AND SUPPLY By Boo Chanco (The Philippine Star) | Updated February 12, 2016 - 12:00am 3 177 googleplus0 9


By Boo Chanco

OFW remittances and BPO revenues are the two pillars of the Philippine economy. With an annual potential of almost $50 billion in dollar earnings from these two sources, our economy had never seen better days in recent years.

So good were the earnings and jobs created by these two pillars that our leaders became complacent about introducing enough structural reforms in our economy to make growth more sustaining. Like Marcos before them, post EDSA presidents were happy to rest on the earnings of OFWs and lately, of our call center workers at home.

Warnings have been issued about the need to complement these two legs of our economy. We need a resurrected industrial sector and a more productive agricultural sector as well. A study by the ADB said as much, but our officials are doing nothing much.

The next administration will likely be faced with a more urgent situation. Developments abroad may result in a serious loss of revenues initially from overseas workers and eventually from our BPO industry.

Low oil prices have forced many countries in the Middle East hosting our workers to introduce austerity measures, including the mass lay off of foreign workers. Malacanang has bravely said they are ready to help any OFW laid off, as if they actually have a credible plan to do this.

There are about two million OFWs in the Middle Eastern oil producing countries. Even if only 10 percent of them lose their jobs, a crisis will arise not just in repatriating them, but also in giving them alternative employment here.

READ MORE...

As for the BPOs, an article last week in The Economist suggests the beginning of the end.

Technology, The Economist said, may spell the end for this industry as we know it. The Economist sounded certain the low end part of it that we now control will be wiped out by new technologies.

“Call centers have created millions of good jobs in the emerging world,” The Economist declared, “technology threatens to take those jobs away again.” And it pointed out we have the most to lose once that happens.

“The Philippines is also, probably, the end of the line. New technologies are poised to abolish many call-center jobs and transform others. At best, jobs will be created more slowly in the Philippines and India; at worst they will vanish. And it is likely that nowhere else will be able to talk its way out of poverty as they have done. There might never be another Manila.”


FROM MAGELLAN SOLUTIONS UPDATE: The Philippine BPO Industry -Progress Projections for 2016 12th of January, 2016/ In: Business Process Outsourcing, Call center industry, Philippine Outsourcing 0 0 Philippine Economic Growth. With the Philippines surpassing India as the top offshore destination for voice services, the country’s business process outsourcing (BPO) industry is expected to sustain its momentum for the following years. Industry experts and insiders look forward to a revenue of $20-25 billion by 2016, as well as a projection of 8% of the country’s total GDP (gross domestic product). This figure is predicted to shoot up to $55 billion by 2020 which could account for 11% of the country’s GDP. Moreover, the industry is set to create over 1.5 million new jobs this 2016; it currently employs over one million workers. The Philippines ranks 7th as prime BPO location out of 51 countries. Though the business districts of Makati; Bonifacio Global City in Taguig; and Mandaluyong continue to be attractive spots for global firms, the cities of Sta. Rosa, Davao, Cebu, Bacolod, and Iloilo have been pegged as areas for outsourcing growth. FROM MAGELLAN SOLUTIONS BLOG

The Economist reports “overall, though, the call-center explosion has been a colossal boon for Filipinos who speak good English... Experienced workers can often find managerial jobs. And though the night shift is hard, it is far better than being a maid in Saudi Arabia.

“The Philippines has long exported workers: remittances are worth around 10 percent of GDP. But business-process outsourcing is catching up fast. Many of the 1.2m people who found jobs in outsourcing in recent years would otherwise have gone abroad...”

The Economist also noted it is not only Manila that will suffer the loss of call center jobs due to technology.

“Outsourcing firms are already building call centers in provincial cities in the Philippines, where employees are less picky. And other countries, some of them in better time zones, are trying to grab a share of the business. South Africa is especially keen. But they are likely to be disappointed, because the call-center industry is on the verge of profound change.”

I had warned about this in past columns. We have seen how disruptive technology killed a once profitable medical transcription service. The next serious disruption is starting to happen—that includes smart phone apps that will render some customer service jobs redundant.

I have seen how my own children in California are now using iPhone apps for many things that in the past necessitated talking to a live person. Here is how The Economist sees it:

“Much of the call-handling and data-processing work sent overseas is basic and repetitive, says Pat Geary of Blue Prism, a British technology firm. When somebody challenges a gas-meter reading or asks to move an old phone number to a new SIM card, many databases must be updated, often by tediously cutting and pasting from one to another. Such routine tasks can often be done better by a machine.

“Blue Prism makes software ‘robots’ that carry out such repetitive tasks just as a person would do them, without requiring a change to underlying IT systems—but much faster and more cheaply. The firm has contracts with more than 100 outfits.

“Increasingly, Western companies prod customers to get in touch via e-mail or online chat. Software robots can often handle these inquiries.

“The cleverest systems, such as the one Celaton, another British firm, has built for Virgin Trains, refer the most complex questions to human operators and learn from the responses. The longer they run, the better they get…

“Software robots are only going to become faster, cleverer and cheaper. Sarah Burnett of Everest, a research firm, predicts the most basic jobs will vanish as a result. Call-center workers will still be needed, not for repetitive tasks, but to coax customers into buying other products and services. That is a harder job, demanding better language skills.

“So automation might mean fewer jobs, or at least less growth, in India and the Philippines, but more jobs in America and Europe. This might already be happening. Between 2013 and 2014 America’s share of global contact-center employment rose slightly, from 19 percent to 21 percent, according to Everest.

“Outsourcing contracts that move work overseas have become rarer. Western banks are especially keen on repatriating work,” says Arie Lewin of Duke University, an expert on outsourcing. That is partly because of America’s stringent, but vague Dodd-Frank Act, which has made them paranoid about their suppliers’ activities.

“This might work well or badly for the Philippines. Perhaps software robots will wipe out the dullest jobs, freeing Filipinos for more interesting conversations... Or it is possible that computers will learn to handle almost all simple inquiries, leaving humans to deal with the most incoherent, irate customers…”


The Philippines has become the call-center capital of the world. Workers at Visaya Knowledge Process' call center in central Manila sit shoulder to shoulder as they speak with people in the United States. A tote board on one wall tracks in-coming calls as well as metrics like the time spent with each customer. (Don Lee / Los Angeles Times) Don Lee Don LeeContact Reporter

It is clearly urgent to move up the value chain in BPO services. This was seen some years ago by Mariels Almeda Winhoffer who was at that time head of the local IBM unit.

The threat of a technological disruption in the BPO business was why she made it her mission to gear the country to develop expertise for handling Big Data Analytics. She worked with CHED to develop a curriculum that is now being used by a number of universities. But we need to move those baby steps up several notches rather quickly.

The thing with disruptive technologies is that the impact could be merciless.

Indeed, it is pathetic our officials are fighting for the honor of being the industry’s father. It is more important to work together and save the industry by making it possible to move up the value chain faster.

I see a very scary scenario in the horizon. Our economy will lose the growth momentum we have enjoyed because of a decline in OFW remittances and BPO revenues.

Geo-political developments on one hand and disruptive technologies on the other will rain on our parade. The only question is when.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco .

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RELATED FROM THE ECONOMIST JANUARY 16, 2016

The nuclear deal with Iran: The end of the beginning Jan 16th 2016 | From the print edition
Timekeeper

Sanctions are about to be lifted



ACCORDING to America’s secretary of state, John Kerry, “Implementation Day” for the Iran nuclear accord could be just “days away if all goes well”.

He was not expecting two US Navy patrol boats and their crews to be seized by Iranian Revolutionary Guards on January 12th after unintentionally entering Iranian waters near an island naval base. But with both sides determined to smooth things over, the boats and the sailors were released the following day.

As long as there are no new shocks, the big day looks set to be announced in the next few days—sooner than was expected when the deal was struck last July. Iran will be judged to have complied with all its obligations in dismantling those parts of its nuclear programme which offered a path to building a bomb.

In return the UN, America and the EU will drop or suspend all their nuclear-related sanctions. At the same time, Iran will apply the Additional Protocol of its safeguards agreement (subject to ratification by its parliament, the Majlis) with the International Atomic Energy Agency, a measure which gives the agency’s inspectors access to materials and sites beyond declared nuclear facilities.

Iran is very near to completing the removal of some 14,000 uranium-enrichment centrifuges. The core of the Arak heavy-water reactor, which had the potential to produce plutonium, was reportedly taken out on January 11th and is being filled with cement.

Most of Iran’s stockpile of low-enriched uranium was sent to Russia and Kazakhstan in late December. Nuclear proliferation experts are amazed at the speed with which Iran has acted. Iran’s foreign minister, Mohammad Javad Zarif, and the head of its Atomic Energy Organisation, Ali Akbar Salehi, have appeared determined to navigate all obstacles, even supposed red lines drawn by the supreme leader, Ayatollah Ali Khamenei, to get the job done.

A priority for them was to get the sanctions lifted before Majlis elections on February 26th.

After more than two years in office, President Hassan Rohani will cite the achievement as evidence that his policy of engagement with the West has worked, ending a crisis that had left Iran’s economy in ruins. He will urge voters to back moderate candidates who support him and to weaken hardline factions that were opposed to the negotiations.

Yet there are still important players in the regime, such as the Revolutionary Guards, who remain hostile to the deal and are prepared to test the West’s commitment to it.

The IAEA received minimal co-operation in preparing its report, published in early December, on the possible military dimensions of Iran’s nuclear programme. It concluded that Iran had a parallel clandestine weapons programme until 2003 and that some aspects of it continued until 2009.

But there was no admission of this by Iran and no access to the scientists the agency wanted to talk to. It was also unable to carry out verification procedures at the Parchin military complex, where it believes there was an explosives chamber.


In graphics: The implications and consequences of Iran's nuclear deal

Western diplomats decided that Iran’s obfuscations were predictable and it was time to move on. That raises questions about how much Iran may get away with in the future. Gary Samore, a former White House arms-control adviser now at Harvard, says that the Iranians’ caginess about their past nuclear weapons-dabbling was a reminder that the deal was not a “strategic solution to the nuclear problem but something purely transactional”.

The response to an Iranian test of a nuclear-capable ballistic missile in October that violated a UN Security Council resolution was also less than resolute. Mr Samore says that it was clearly intended by the Guards to provoke a reaction from America that would give Iranian critics of the deal the chance to stall or kill it. Persuaded by Mr Kerry, who had his ear bent by Mr Zarif, not to rise to the bait, Barack Obama flip-flopped over slapping on new sanctions, first indicating he would, but then withdrawing the threat.

As for the prospects of the deal holding, Mr Samore thinks the Iranians have an incentive to co-operate for the time being, as they will benefit by up to $100 billion from the unfreezing of assets. But if other benefits, such as increased oil revenues, are slow to come, this might not last.

A more immediate threat will come from whoever is the next American president. A Republican could choose to sabotage the deal with new sanctions, while even Hillary Clinton, says Mr Samore, will need to show there is a new sheriff in town if Iran’s behaviour in non-nuclear areas (missile tests, the unjustified imprisonment of American citizens, support for the Syrian regime and abuse of human rights) does not change. Getting to Implementation Day has been surprisingly smooth. What comes after will be a lot harder.


INQUIRER

Residential condo dev’t seen slowing down: SUPPLY OVERHANG IN MIDDLE- AND HIGH-END SEGMENTS NOTED SHARES: 4631 VIEW COMMENTS By: Doris Dumlao-Abadilla @inquirerdotnet Philippine Daily Inquirer 12:40 AM February 12th, 2016


Rows of condominium buildings are seen behind a middle-class residential district in Mandaluyong, Metro Manila as the Philippines. FROM www.scmp.com Search by image

Property developers in the country are seen holding back on new residential condominium developments in Metro Manila this year to help address the supply overhang in the middle- and high-end segments.

In 2015, new residential projects in Metro Manila launched through pre-selling declined by 11 percent while the take-up of new inventory through pre-selling activities also contracted by 18 percent, property consulting firm Colliers Philippines said.

About 32,700 residential condominium units were launched in the metropolis last year and 32,400 units were taken up by the market.

“This is more reflective of the household creation that we see each year based on population growth in Metro Manila. Our estimate is that 30,000 new households are created each year. We’re now approaching that,” Julius Guevara, director for research and advisory at Colliers Philippines, said in a briefing yesterday.

“But of course you have to consider that not all of these households can afford housing,” Guevara said, adding that of the more than 30,000 units taken up through pre-selling, some were accounted for by foreign buyers and speculative investors.

The more cautious stance of property developers is likewise reflected by the decline in the issuance of licenses to sell by the Housing and Land Use Regulatory Board (HLURB) last year. Licenses to sell mid- and high-end condominium units fell by 11.9 percent while middle income housing licenses also fell by 10 percent. These are in contrast to the 82.4 percent growth in licenses issued by HLURB to sell socialized housing—reflecting the huge backlog in this segment.

“There has been a mismatch in terms of actual demand from the end-user market versus what has been developed. That’s why we’re seeing such slowdown,” Guevara said.

“In the horizontal space outside of Metro Manila, there remains unserved or underserved market. That’s where the actual demand lies, particularly in the lower end or socialized segment,” he said.

READ MORE...

In the meantime, Guevara said the secondary market for residences in the metropolis continued to soften as the completion of new projects had added to the existing stock. As such, vacancy rates for residential condominium units in all major districts rose.

Rents continued to increase albeit at a modest rate of 1.1 percent quarter-on-quarter in the fourth quarter for all major central business districts (CBDs) in the metropolis, with Rockwell Center commanding the highest rate per square meter averaging at P963 per month. Makati CBD monthly rental rate averaged at P883 per square meter (up by 0.91 percent quarter-on-quarter) while premium condominium units in Bonifacio Global City averaged at P891 per square meter (up 10 percent quarter-on-quarter). In Ortigas, average rental rate rose by 1.2 percent quarter-on-quarter to P506 per square meter.

For the full year, however, Colliers Philippines sees average rental rate falling by 5 percent by yearend due to an increase in competition for tenants. This assumes that 13,500 new residential units scheduled for delivery this year will be completed.

Ieyo De Guzman, deputy managing director for investment services at Colliers Philippines, said: “The good side of it is that the developers are cognizant of the situation,” noting that by scaling back their product launches, they were “not adding to the problem” and were “mature” enough to take into consideration current market conditions.

Guevara added that the residential market was coming down to the “safe” level that merely matches the number of new households created each year.

“I don’t think developers will be launching aggressively this year or next year, at least not in Metro Manila,” he said.

Given the slowdown in Metro Manila’s residential property market, he said property developers were looking for new areas to develop as well as to build their recurring income stream, such as by building office space or hotel/leisure projects.


Chief News Editor: Sol Jose Vanzi

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