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BUSINESS HEADLINES THIS PAST WEEK...
(Mini Reads followed by Full Reports below)

TOURIST ARRIVALS BREACH 4-MILLION MARK END OF AUGUST
[RELATED: SSS offers options on pension increase]


OCTOBER 25 -Tourists line up at the immigration counters at the NAIA. File photo
 Foreign tourist arrivals in the Philippines breached the four million mark as of the end of August 2016, sustaining the upward growth trend. This is the first time the country surpassed four million arrivals in just the first eight months of the year. According to the latest report from the DOT, the figure was 12.59 percent higher than the 3.59 million arrivals in the same period last year. With the exception of May and August, most months of the year have observed double-digit gains so far. READ MORE...RELATED,
SSS offers options on pension increase...

ALSO: China remains as top contributor to PH growth
[RELATED: EU envoys, Iran back DU30 10-point agenda]


OCTOBER 10 -Foreign Secretary Perfecto Yasay say that the Philippine will continue to move forward with official talks with China despite South China Sea issue. CHINA remains to be one of the country’s top trade partners and one of its main sources of tourist arrivals despite disputes over the West Philippine Sea. Trade and tourism between the Philippines and China have remained strong throughout the years, according to the Department of Foreign Affairs (DFA). In 2015, China retained its spot as the Philippines’ second top trading partner in terms of total trade and the country’s fourth largest source of tourists. The DFA said the country’s bilateral trade with China reached $17.23 billion while almost half a million Chinese tourists visited the country. READ MORE...RELATED, EU envoys, Iran back DU30 10-point agenda...

ALSO:
MAKATI BIZ CLUB URGES RODY - ‘Keep US ties while pursuing China’

[RELATED: ‘China ties OK but US still key’]


OCTOBER 26 -THE Makati Business Club (MBC) on Tuesday welcomed the Duterte administration’s push to revitalize the country’s relationship with China, citing the gains from closer trade and investment ties, but stressed that it could do so while strengthening its economic partnerships with traditional allies such as the United States. “We support the drive for an independent foreign policy, particularly during this time when the Philippines has gained international respect, recognition and confidence over the past few years,” MBC said in a statement.
“Given China’s stature as a major player in global affairs, and the Philippines’ steady economic rise, both our countries stand to benefit from renewed and much closer ties, particularly in trade and investment,” it said. READ MORE...RELATED,
‘China ties OK but US still key’... ALSO, ANALYSIS -When business is not just business - Politics of investment promises
(An analysis on the Philippines' investment and financing agreements with China By Dindo Manhit)...

ALSO: Japan trip yields 12 deals worth $1.8 B
[RELATED: IN TOKYO - Dominguez says, It’s ‘fine time’ to do business in PH]


OCTOBER 28 -Philippine President Rodrigo Duterte, fifth from left, speaks to Japanese Prime Minister Shinzo Abe, right, during their meeting at Abe's official residence in Tokyo Wednesday, Oct. 26, 2016. Issei Kato/Pool Photo via AP
A total of 12 business agreements worth $1.8 billion have been signed between the Philippines and Japan during President Duterte’s state visit, Trade Secretary Ramon Lopez said yesterday. The deals consist of seven letters of intent (LOI) and five memoranda of understanding (MOU). Together, Lopez said the agreements would generate around 250,000 jobs to Filipinos. The agreements include the MOU of Ayala and Mitsubishi for a joint venture solar rooftop project, as well as the BCDA collaboration with Hitachi Asia Ltd. and The Power Grid Solution Ltd. for feasibility studies on the Clark Green City development. READ MORE... RELATED,  IN TOKYO - Dominguez says, It’s ‘fine time’ to do business in PH...

ALSO: By B. Romualdez - Japan antsy about Phl-China relations


OCTOBER 27 -ON BOARD WITH THE PRESIDENT TO JAPAN
Tokyo, Japan – On board the presidential aircraft for the five-hour trip to Japan, the President seemed to be in a jovial, light mood. He was very upbeat about the official visit, optimistic this will be a good one that will tighten the friendship between the Philippines and Japan even more. He described it as a “defining moment,” as we spoke briefly, – telling me the Japanese are one of our closest friends in the region. Some of those who were on board the presidential aircraft are members of his Cabinet led by Finance Secretary Sonny Dominguez along with IT adviser Ramon Jacinto and national security adviser retired general Jun Esperon. At the economic forum, some of the top businessmen who were present were Manny Pangilinan, Tommy Alcantara, Tessie Sy-Coson, Tony Tan Caktiong, Vivien Yuchengco, Edgar “Injap” Sia, Dennis Uy, as well as presidential adviser Joey Concepcion and Ambassador to the UN Teddyboy Locsin. READ MORE...

ALSO: 1.8M less poor Filipinos in 2015


OCTOBER 29 -1.8M Filipinos lifted out of abject poverty in 2015 PHOTO FROM FILIPINO TIMES BLOG The Aquino government was able to lift 1.8 million Filipinos from abject poverty in 2015 cutting poverty incidence from 25.2 percent of population in 2012 to 21.6 percent. The National Economic and Development Authority estimates that by the end of President Duterte’s term, the ratio of poor Filipinos to total population will be 15 percent. If within the three years covered by the Aquino administration, poverty incidence was cut by an average of 1.2 percentage points per year, NEDA said improvement will be faster within the next six years at 1.25 percentage points. According to the official poverty statistics released by the Philippine Statistics Authority (PSA) for 2015, the country’s poverty incidence for the said year declined significantly to 21.6 percent, from 25.2 percent in 2012 and 26.3 percent in 2009. READ MORE...


READ FULL MEDIA REPORTS HERE:

Tourist arrivals breach 4-M mark


Tourists line up at the immigration counters at the NAIA. File photo

MANILA, 0CT0BER 31, 2016 (PHILSTAR) By Mary Grace Padin (The Philippine Star) | Updated October 25, 2016 - 12:00am 1 0 googleplus0 0

MANILA, Philippines - Foreign tourist arrivals in the Philippines breached the four million mark as of the end of August 2016, sustaining the upward growth trend.

This is the first time the country surpassed four million arrivals in just the first eight months of the year.

According to the latest report from the DOT, the figure was 12.59 percent higher than the 3.59 million arrivals in the same period last year.

With the exception of May and August, most months of the year have observed double-digit gains so far.

READ MORE...

For August alone, the country welcomed a total of 502,739 tourists or an increase 4.59 percent year on year.

The DOT noted this was the first time the country surpassed 500,000 arrivals during the month of August.

Neighboring countries from Asia contributed to 60.95 percent of the total market share during the eight month period, while North and South America flew in 17.47 percent of the total visitors.

About 10.38 percent of the arrivals came from Europe while 5.13 percent came from Australasia.

Korea continued to be the country’s top source market with a total of 976,499 in tourist arrivals. US came in second with an aggregate of 584,149 in arrivals and China with a total inbound traffic of 484,567.

China registered the highest growth in arrivals from January to August with 50.29 percent.

The fourth largest market was Japan, with a total of 367,144 visitors. Australia ranked fifth accounting for 161,016 arrivals.

About 157,517 tourists were from Taiwan; 120,241 from Singapore; 117,535 from UK; 114,074 from Canada; and 95,129 from Malaysia.

The Philippine tourism sector also saw substantial growth from Hong Kong and India.

Meanwhile, the Philippines earned P164.25 billion in tourism receipts from January to August this year, up 7.92 percent.

The month of August slowed down the growth in tourism receipts as total revenues decreased by 28.58 percent to P15.69 billion.

Average length of stay for tourists was 9.65 nights while average daily expenditure for the month amounted to P4,095.32.

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RELATED FROM THE MANILA STANDARD

SSS offers options on pension increase posted October 28, 2016 at 11:55 pm by Gabrielle H. Binaday


Social Security Commission chairman Amado Valdez

Private pension fund Social Security System said Friday it may not increase the monthly contribution of members amid the possible implementation of the P2,000 across-the-board pension hike.

Newly-appointed Social Security Commission chairman Amado Valdez said in a press briefing SSS would propose six options if the P2,000 pension increase was signed into law.

SSS’s maximum life is expected to reach 2027 if the pension increase is staggered P500 annually.

The option calls for a P500 increase to all pensioners for four consecutive years starting in 2017 until it reaches the full P2,000 by January 2020. This will cost the pension fund P56 billion more annually.

SSS paid about P102 billion in pensions in 2015.

Another option seen by SSS is the implementation of the pension increase on a yearly and age group staggered basis.

“Under this option, pensioners are arranged by age and divided into five tranches. The first tranche includes the oldest pensioners,” SSS said.

It said the first group will receive the P2,000 monthly pensions increase in 2017, followed by the second in 2018 and so forth. This will cut the fund life to 2025.

PENSION HIKE VETOED

Former President Benigno Aquino III vetoed the SSS pension hike in January following the recommendation of then Finance secretary Cesar Purisima after noting that the pension fund life would be cut by 27 years from the current life of until 2049.

Valdez told reporters the agency would not raise contributions and instead use the remaining 10 years after the hike to “catch up” to lengthen the pension fund.

Valdez, however, said that the 10-year period would not be a “comfortable period” and a “challenge” to SSS.

“This is where patriotism comes in. It’s a cooperative effort... One possibility is to ask for government subsidy from Congress. But that will also be hard,” he said.

SSS said in a position paper submitted to the House of Representatives that a 17-percent increase on members’ monthly contribution would likely offset the possible revenues losses if the P2,000 across-the-board pension increase pushed through in the new administration.

SSS said in presentations to the House Committee on Government Enterprises and Privatization that the P2,000 pension hike was possible as long as a funding mechanism would sustain the life of the pension fund.

Committee members agreed to adopt similar legislative measures previously approved by the 16th Congress.

SSS chief actuary and senior vice president George Ongkeko Jr. said the SSS had always been supportive of the proposal to increase SSS pensions as long as provisions on the additional sustainable source of funding was included to avoid the shortening of the fund’s life.

“We are one with legislators in their desire to provide higher pensions for SSS pensioners. However, we also have to look after the welfare of other SSS members and ensure that the SSS fund life is intact,” said Ongkeko.


MANILA TIMES

China remains as top contributor to PH growth BY MICHAEL JOE T. DELIZO, TMT ON ON OCTOBER 10, 2016 SPECIAL FEATURES


Foreign Secretary Perfecto Yasay say that the Philippine will continue to move forward with official talks with China despite South China Sea issue.

CHINA remains to be one of the country’s top trade partners and one of its main sources of tourist arrivals despite disputes over the West Philippine Sea.

Trade and tourism between the Philippines and China have remained strong throughout the years, according to the Department of Foreign Affairs (DFA).

In 2015, China retained its spot as the Philippines’ second top trading partner in terms of total trade and the country’s fourth largest source of tourists.

The DFA said the country’s bilateral trade with China reached $17.23 billion while almost half a million Chinese tourists visited the country.

READ MORE...

From January to June this year, data from the Department of Tourism showed that about 340,958 Chinese travelers arrived in the Philippines, contributing 11.45 percent to the total volume of tourists.

Among the top 12 visitor markets, China posted the highest growth of 79.15 percent followed by Taiwan with a 31.29 percent increase.

China recorded the highest per capita spending for June 2016. On average, a visitor from China spends P63,404.99 while in the Philippines.


Binondo, located in Manila is the oldest Chinatown in the world, and is one of the busiest business places in the country.

“The Philippines continues to engage China in areas of mutual interest, including trade, tourism, investment, cultural cooperation, and people-to-people exchanges,” Charles Jose, spokesperson and assistant secretary of the DFA said.

“It should be noted that the West Philippine Sea/South China Sea dispute is not the sum total of the relations between the Philippines and China,” he added.

The official was optimistic that “there is still room for growth” and the upward trend in economic relations and tourism will continue.

“Both countries should work together to sustain this momentum of growth,” Jose stated. “More and more flights connecting the two countries are being increased or opened, so we are optimistic that we will welcome more Chinese tourists in the coming years.”

Among Filipino companies that have made significant investments in China are Oishi, Jollibee Foods Corporation, Eton Group, SM Malls, Robinsons Malls and Metrobank, bringing in world-class Filipino products and services to the Chinese market.

The Philippines is also the biggest source of imported bananas in China. Manila is still promoting coconut products, luxury furniture, home decor, fashion accessories, copper, and automotive parts, among others in Beijing.

“These companies not only sustain the warm trade relations between the two countries but they can also serve as channels of deeper understanding between the two cultures,” Jose said.

At the same time, most Chinese investments in the country go to the manufacturing sector. China has also expressed interest in participating in upgrading the country’s transport infrastructure.

The DFA encouraged China to also look into investment opportunities in the areas of agribusiness, tourism infrastructure and renewable energy.

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RELATED FROM THE TRIBUNE

EU envoys, Iran back DU30 10-point agenda Written by Tribune Wires Friday, 28 October 2016 00:00


'Duterte magic': 10-point socioeconomic agenda

Fourteen ambassadors representing the member-countries of the European Union (EU) expressed their continued support for the Duterte administration’s 10-point socioeconomic agenda.

They also bared plans to invest more in the Philippines, particularly in infrastructure, energy and civil security, among other fields of interest.

In a recent meeting with Finance Secretary Carlos Dominguez III, the ambassadors from the EU countries also emphasized their cooperation with the Philippines in implementing the peace agreement in Mindanao.


EU ENVOY FRANZ JENSEN: EU INVESTORS  CARE LESS ABOUT DUTERTE's LANGUAGE, WILL HIKE INVESTMENTS IN THE PH. SOURCE: ASIAN POLICY PRESS

Led by Ambassador Franz Jessen, head of the EU delegation to the Philippines, the 14 ambassadors who met with Dominguez were from the United Kingdom, France, Germany, Italy, Spain, Belgium, Czech Republic, Greece, Austria, the Netherlands, Romania, Denmark, Hungary and Sweden.

They expressed their interest in “working closely” with the Philippines in implementing its 10-point socioeconomic agenda on inclusive growth.



The ambassadors were one in saying that they are looking forward to further strengthening the EU’s bilateral relations with the Philippines, especially in the field of trade and economic cooperation.

Swedish ambassador to Manila Harald Fries, in particular, said businessmen from Sweden are increasingly optimistic over business prospects in the Philippines and have expressed interest in visiting Manila to explore possible investments in infrastructure, energy, business process outsourcing, military, civil security, among other fields.

Fries said a “record number of Swedish business leaders” would be coming to Manila in the next few weeks, headed by Sweden’s Minister of Enterprise and Innovation.

The other envoys who met with Dominguez were Ambassadors Asif Ahmad of the United Kingdom; Jan Top Christensen, Denmark; Massimo Roscigno, Italy; Nicolaos Kaimenakis, Greece; Theirry Mathou, France; Jaroslav Olša Jr., Czech Republic; Dr. Josef Muellner, Austria; Marion Derckx, Netherlands; Ronald Van Remoortele, Belgium; and Dr. Gordon Kricke, the ambassador-designate of the Federal Republic of Germany to Manila.

Chargé d’Affaires Mihail Bujor Sion of Romania, David Ambrus of Hungary, and Carmela Barcia, deputy chief of mission of the Spanish Embassy in Manila, also attended the meeting with Dominguez.

In response, Dominguez thanked the ambassadors for their support for the Duterte administration’s 10-point reform agenda as well as their continuing assistance to the Philippines and commitment to invest more in the country.

“If there are any business groups coming in, I will be very happy to meet with them,” he said.

REHABILITATION FACILITIES



Dominguez acknowledged that fund assistance to the Philippines to establish drug rehabilitation facilities here forms part of the EU’s broader program to help the country deal with its war against illegal drugs.

“Building facilities is probably only 25 percent of the solution to the drug addiction issues, and we certainly need a lot of training, a lot of help in that area,” Dominguez said.

Besides the EU member-states, other countries have also expressed their interest in investing in the Philippines and broadening areas of economic cooperation under the Duterte presidency.

Earlier, Iranian Amb. Mohammad Tanhaei informed the finance chief that Iran is keen on fostering better economic relations with the Philippines and, for starters, plans to import more bananas and explore areas of investment and cooperation in infrastructure and energy.

IRAN

In a courtesy call on Dominguez, Tanhaei said Tehran also wants to strengthen connections between his country’s central bank and the Bangko Sentral ng Pilipinas (BSP) to pave the way for Iranian investors to start doing business in the Philippines.

The ambassador also informed Dominguez that a deputy minister of Iran’s Finance Ministry would be visiting the country this November to discuss with Philippine officials a framework of cooperation between Manila and Tehran.

Tanhaei said he is going to invite the head of Iran’s central bank to visit the Philippines to discuss issues on banking cooperation with the BSP.

Dominguez, in response, said, “We do want to improve our relationship with Iran and we would be very happy to meet your central bank governor.”

Dominguez likewise assured Tanhaei that he would “be happy to assist him” and “will certainly welcome all of Iran’s officials” to Manila to help reinvigorate bilateral relations between the two countries.

WORLD BANK

In a recent statement, the World Bank said “the Philippines remains one of fastest growing economies in East Asia and the Pacific despite the weak global economy.”

“The country’s gross domestic product is forecast to grow 6.4 percent this year and 6.2 percent in the next two years,” the WB said.

“The Philippine economy may surpass the forecasts if authorities can further ramp up spending on public infrastructure as planned,” said the WB in its Philippine Economic Update entitled “Outperforming the Region and Managing the Transition.”

The WB pointed out that Mara Warwick, its country director for the Philippines, has said that “macroeconomic stability puts the Philippines in a good position to accelerate inclusive growth that benefits all Filipinos.”

According to the World Bank, its report noted that “as economic growth is sustained, and as spending on health, education, and social protection expands, extreme poverty is projected to decline from 10.6 percent in 2012 to 7.8 percent in 2016, 7.2 percent in 2017, and 6.7 percent in 2018.”

The WB report also took note of the Duterte administration’s plan to pursue comprehensive tax policy reforms as one of its priorities, “to make the country’s tax system more equitable, efficient and competitive in the region.”


MANILA TIMES

MAKATI BUSINESS CLUB URGES DUTERTE GOVT: ‘Keep US ties while pursuing China’ BY RAADEE S. SAUSA, TMT ON ON OCTOBER 26, 2016 BUSINESS

THE Makati Business Club (MBC) on Tuesday welcomed the Duterte administration’s push to revitalize the country’s relationship with China, citing the gains from closer trade and investment ties, but stressed that it could do so while strengthening its economic partnerships with traditional allies such as the United States.

“We support the drive for an independent foreign policy, particularly during this time when the Philippines has gained international respect, recognition and confidence over the past few years,” MBC said in a statement.
“Given China’s stature as a major player in global affairs, and the Philippines’ steady economic rise, both our countries stand to benefit from renewed and much closer ties, particularly in trade and investment,” it said.

READ MORE...

It added, however: “As we strengthen ties with one of our neighbors, this should be in tandem with continuing to nurture our partnership with existing strategic allies and friends. In particular, our relationship with the United States, particularly on the economic front, should remain solid and should also be further expanded.”

In terms of net foreign direct investment, China has been lagging far behind the Philippines top foreign investors, putting in only $570,000 in 2015. The US, meanwhile, is among the Philippines’ top investors, registering $732 million that year.

The MBC expressed optimism Chinese trade and investment with the Philippines will improve: “We are confident of a further improvement of these figures as we take our renewed relationship to the next level.”
The business group also hopes infrastructure in the country will receive a big boost with the entry of Chinese investors. “China’s expertise in infrastructure will be critical to the Philippines’ development, as we seek to close the massive infrastructure gap that has been suppressing the country’s growth for the past years,” it said.

Close links with the US

But highlighting the importance of the country’s strategic relationship with the US, the business group pointed out that overseas Filipino remittances and the business process outsourcing industry – two major pillars of the Philippine economy – are closely linked with the United States. They said Filipinos in the US contribute the highest amount of remittances to the Philippines, valued at $8.4 billion, accounting for 33 percent of the country’s total remittances sourced from all over the world.

The US accounted for 12.7 percent of the Philippines’ total trade. The Philippines exported $9-billion worth of goods to the US, while the Philippines imported $7.47 billion, reflecting a trade surplus valued at $1.55 billion. (for what period is this?)

The MBC cited American companies for playing a crucial role in the development of the local BPO industry, contributing $22 billion to the economy and providing 1.2 million jobs in 2015. The US is also among the Philippines’ major investors, with $732 million in 2015, while Americans rank as the country’s second largest tourist market, generating P4.4 billion in tourist receipts. Moreover, solid people-to-people ties, shared history, and common values bind the two countries together, it added.

“We should also note that in time of need the United States has delivered $90.9-million worth of financial aid and has offered extensive manpower and technical support to our rescue and rehabilitation efforts in the aftermath of Super Typhoon Yolanda,” the MBC said.

Similarly, the United States makes up 36.1 percent of official development aid grants of the Philippines, in contrast to other countries with much smaller grants portfolio extended. The United States’ Millennium Challenge Corp., in particular, has extended more than $433 million worth of anti-poverty and human development programs in the Philippines since 2006. The MBC said these figures “reflect the invaluable commitment and steadfastness of the US in assisting growth of our people and our communities.”

“As we transition through this recalibration in our foreign policy, we call on the government to initiate another multisectoral dialogue similar to when it drafted the 10-point socio-economic agenda.

“We hope that the government will also invite the views of eminent leaders, foreign policy experts, policy makers, business, the academe and the youth. It is important for the world to see that the government continues its inclusive engagement and welcomes investments that will generate jobs,” the MBC said, adding it is prepared to participate in such discussion.

-------------------------------------------

RELATED FROM THE MANILA STANDARD

‘China ties OK but US still key’ posted October 25, 2016 at 11:55 pm by Othel V. Campos


Philippine President Rodrigo Duterte (L) and his Chinese counterpart Xi Jinping shake hands after a signing ceremony in Beijing on October 20, 2016. (AFP PHOTO)

The Makati Business Club welcomed the government’s push to revitalize the country’s relationship with China, but called for strengthening economic ties with the US and other “strategic” allies as well.

“We believe that as we strengthen ties with one of our neighbors, this should be in tandem with continuing to nurture our partnership with existing strategic allies and friends. In particular, our relationship with the United States, particularly on the economic front, should remain solid and should also be further expanded,” the business group said.

China’s expertise in infrastructure will be critical to the Philippines’ development to close the massive gap that has been restricting the country’s growth. China remains the Philippines’ second largest trading partner, with exports of $10.8 billion and imports of $6.4 billion.

The influential business group said while the Philippines invested $75 million into China as of 2012 against China’s $570,000 in 2015, the figures were expected to rise.

The United States is the Philippines’ third largest trading partner, accounting for 12.7 percent of total goods. The Philippines exported $9 billion to the US last year, and imported $7.47 billion, resulting in a trade surplus of $1.55 billion.

Remittances from migrant Filipino workers in the US and revenues from American business process outsourcing companies provide a major foreign exchange inflow to the Philippines.

OFW REMITTANCES

Filipinos in the US contribute about $8.4 billion in remittances, or 33 percent of the total. American firms have also been critical in the development of the BPO industry that contributed $22 billion to the economy and provided 1.2 million jobs as of 2015.

The US is also among the major investors with $732 million in 2015 and second largest source of foreign tourists.

“We should also note that in time of need the United States has delivered $90.9 million worth of financial aid and has offered extensive manpower and technical support to our rescue and rehabilitation efforts in the aftermath of Typhoon Yolanda,” the group said.

The US also provides 36 percent of official development assistance to the Philippines. Millennium Challenge Corp. has extended over $433 million worth of anti-poverty and human development programs in the Philippines since 2006.

“We support the drive for an independent foreign policy, particularly during this time when the Philippines has gained international respect, recognition and confidence over the past few years. As we transition through this recalibration in our foreign policy, we call on the government to initiate another multi-sectoral dialogue similar to when it drafted the 10-point socio-economic agenda,” said the business group.

“It is important for the world to see that the government continues its inclusive engagement and welcomes investments that will generate jobs. The Makati Business Club is prepared to participate in this discussion, as we work towards our shared aspiration of a progressive and inclusive Philippines,” the group added.

-------------------------------------------------

RELATED FROM PHILSTAR - ANALYSIS BY DINDO MANHIT

When business is not just business: The politics of investment promises By Dindo Manhit (philstar.com) | Updated October 28, 2016 - 9:46am 1 23 googleplus0 0


Philippine President Rodrigo Duterte, left, and Chinese President Xi Jinping attend a signing ceremony in Beijing, China, Thursday, Oct. 20, 2016. AP/Ng Han Guan, Pool

An analysis on the Philippines' investment and financing agreements with China

While it is tempting to read recent events in the Philippines as being solely influenced by the president’s personal sentiments and as designed by his foreign affairs team, the benefits of a bilateral relationship are the product of dynamics within two countries.

Thus, although President Rodrigo Duterte has enlivened the Philippine side of the relationship, the path that the two countries’ ties will take also depends on China’s interests in its neighboring region.

Learning lessons from elsewhere in Southeast Asia, the government should keep its eyes open to the possible political and financial consequences of heavily tapping Chinese loans and of closer entanglement with some of China’s state-owned enterprises.

READ MORE...

The principles of China’s economic diplomacy

Duterte is an important figure in the “springtime” of the Philippines-China relationship, but Beijing gets equal credit. China’s new opening into the Philippines represents that country’s latest success in a concerted effort to connect key transport lines emanating from or around China and to simultaneously support Chinese state-owned infrastructure firms.

Whether its called One Belt One Road, the 21st Century Maritime Silk Road, or another similar term, the bottom line is the same: China is rebuilding itself at the center of the world’s trading lanes.

With that end in mind, the pillars of China’s economic strategy are the two-fold offer of loans for infrastructure development and, typically, the proviso that China’s firm be contracted for the projects.

China’s major construction firms are largely state-owned enterprises, ensuring that a large slice of what China lends a country returns to the Chinese government. The receiving country borrows the money to pay for infrastructure that would benefit its residents and spur enough growth in the economy to pay off the investment.

Thus, when Duterte returned from China with US$9 billion in new credit facilities, the expectation is that some of that available credit will be tapped for investments in infrastructure.

This method of cooperation is not unique to China, but typical of the Philippines’ dealings with international organizations or other countries that provide low-interest loans.

Traditionally, when it needs to, the Philippines borrows money mainly from the World Bank, the Asian Development Bank, or Japan for large investments.

According to ADB, developing countries in Asia will require US$8 trillion in infrastructure investment between 2012 and 2020—an amount that far outstrips the US$125.6 billion that was on offer in 2012. For this reason, the World Bank and the ADB welcomed China’s establishment of the Asia Infrastructure Investment Bank (AIIB) in 2015, which the banks believe could help meet the shortfall in loans available internationally.

"Developing countries in Asia will require US$8 trillion in
infrastructure investment between 2012 and 2020—an amount that
far outstrips the US$125.6 billion that was on offer in 2012."

The cautionary tale of NorthRail

Although China has significantly increased its credit available to developing countries in recent years, the Philippines is no stranger to Chinese financing for domestic projects.

Between 2002 and 2007, the Philippines reportedly received the largest share of China’s loans to Southeast Asia. The biggest project, and the flagship of the two countries’ economic cooperation, had been the NorthRail project (the North Luzon Railway), whose first phase was valued at more than US$500 million.

The Philippines obtained a US$400-million loan from the Export-Import Bank of China (EximBank) to pay for the majority of the project’s first phase.

"Between 2002 and 2007, the Philippines reportedly received
the largest share of China’s loans to Southeast Asia."

The Philippines contracted China National Machinery and Equipment Group (now Sinomach) to build the railway. The problems set in after construction started, as the project was beset with cost adjustments and delays that later had the government scrambling to amend the contract and reduce the scope of work. After all was said and done, the Philippines was to pay 127 million more than initially planned for less work to be completed.

The NorthRail mess ended up in court, and the Supreme Court ruled that the contract between the Philippines and Sinomach had been invalid from the get-go. However, the financing agreement between China’s EximBank and the Philippines was still in place, making the government still responsible for paying back the US$184 million that had been disbursed to Sinomach.

Matters turned worse when, after the Supreme Court nullified the contract, EximBank declared a default event that allowed it to demand that the Philippines immediately pay in full.

The Philippines negotiated to pay EximBank back over a two-year period, but the Philippine government and Sinomach are still locked in legal battles. The experience has become a cautionary tale for the Philippine government over the standards required of international contractors and the pitfalls of borrowing money for uncertain returns.

The Beijing deals are not just business

In any case, Duterte’s delegation returned from Beijing with US$15 billion for 26 different commitments, but not yet contracts. Nine commitments are related to transport infrastructure projects, of which six are in partnership with the state-owned China Communications Construction Company (CCCC) or its subsidiaries China Harbour Engineering Company, China Road and Bridge Corp., and CCCC Dredging. It will be for the president and the NEDA Board to investigate these companies’ ability to carry out projects to completion and full satisfaction.

Both China Harbour Engineering Company (CHEC) and China Road and Bridge Corp. have projects around the world. CHEC, for example, is building a bridge in Brunei, a deep sea port in Myanmar, and a multi-use development in Indonesia.

At the same time, some of the two companies’ projects have drawn local opposition, notably in Sri Lanka and Papua New Guinea, but also in Costa Rica, Guyana, and Kenya. In Sri Lanka, Reuters reported that “President Maithripala Sirisena’s administration has suspended most Chinese infrastructure projects that, it says, were badly priced and financed on onerous terms harmful to the national interest.”

Of course, CCCC Dredging is infamous for carrying out the Chinese government’s dredging work in the Spratlys.

Beyond commercial diligence, however, the Philippines should consider if there are political strings attached to any low-interest loans it taps and in its partnerships with foreign state-owned firms. Loans are not inherently bad, but the political pitfalls attached are worth examining.

"The Philippines should consider if there are political
strings attached to any low-interest loans it taps and in its
partnerships with foreign state-owned firms."

Just this year, it was discouraging for the Philippines to witness the constraints that some of its Southeast Asian neighbors faced in voicing their opposition to important politico-military developments in the region.

At this year’s ASEAN meeting in Laos, Cambodia’s willingness to block messages from the important joint statement has been attributed to their reliance on China’s funding; Cambodia announced that was receiving US$600 million in new Chinese aid just days after the diplomats tussled in Laos.

In pursuing his independent foreign policy, Duterte should be careful to ensure he does not inadvertently tie the country’s hands in defending the national interest.


ANALYST DINDO MANHIT


PHILSTAR

Japan trip yields 12 deals worth $1.8 B By Richmond Mercurio and Louise Maureen Simeon (The Philippine Star) | Updated October 28, 2016 - 12:00am 3 619 googleplus1 0


Philippine President Rodrigo Duterte, fifth from left, speaks to Japanese Prime Minister Shinzo Abe, right, during their meeting at Abe's official residence in Tokyo Wednesday, Oct. 26, 2016. Issei Kato/Pool Photo via AP

MANILA, Philippines - A total of 12 business agreements worth $1.8 billion have been signed between the Philippines and Japan during President Duterte’s state visit, Trade Secretary Ramon Lopez said yesterday.

The deals consist of seven letters of intent (LOI) and five memoranda of understanding (MOU). Together, Lopez said the agreements would generate around 250,000 jobs to Filipinos.

The agreements include the MOU of Ayala and Mitsubishi for a joint venture solar rooftop project, as well as the BCDA collaboration with Hitachi Asia Ltd. and The Power Grid Solution Ltd. for feasibility studies on the Clark Green City development.

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Centro Manufacturing and Nippon Freuhaf have also agreed on the production of wing van body sets for trucks.

Meanwhile, LOIs were signed by Japanese industry giants Toyota, Mitsubishi, Tsuneishi, Minebea and Ise Foods.

Meanwhile, the Department of Agriculture (DA) said it has secured P5 billion worth of contracts for the banana industry after it signed a deal with a Japanese company that will import 20 million boxes of Cavendish bananas.

Agriculture Secretary Emmanuel Piñol said the DA and Farmind Corp. have signed an agreement for the supply of 20 million boxes of bananas annually which is expected to translate to about P5 billion.

“The signing of the agreement will mark the start of the development of about 7,000 hectares of banana farms which Farmind would like to be located in former conflict areas in the Southern Philippines,” Piñol said.

Japanese company Farmind is a subsidiary of Fresh MD Holdings Inc. that operates a fresh produce distribution network in Japan.

FARM WORKERS

The deal is estimated to result in the direct employment of about 14,000 farm workers and other ancillary services.

Philippine bananas used to dominate the Japanese market supplying as much as 90 percent of the total requirements but in recent years, bananas from Ecuador have penetrated Japan.

Currently, the Philippines only holds 75 percent of the of banana supply in Japan due to lower oil prices that allowed Ecuador to bring its produce to Japan at a significantly lower transport cost.

“The entry of the Farmind supply contract, however, will once again allow the Philippines to dominate the Japan market,” Piñol said.

The Philippine Investment and Economic Forum in Japan was a success, according to Lopez, as it recorded 1,000 attendees from the Japanese business delegation and another 200 from the Philippine business delegation.

Lopez said the Philippine government is bullish in further advancing trade with and investments from Japan following the successful visit.

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RELATED FROM THE MANILA TIMES

It’s ‘fine time’ to do business in PH – Dominguez BY RAADEE S. SAUSA, TMT ON ON OCTOBER 29, 2016 BUSINESS


DOMINGUEZ

NOW is a “fine time” to invest in the Philippines as Tokyo rekindles its ties with Manila and the Duterte administration has crafted a “business-friendly” socio-economic agenda underlining its readiness to drastically reduce poverty and lift the economy to high middle-income status in six years’ time, Department of Finance (DOF) Secretary Carlos Dominguez 3rd told the business community here on Friday.

Dominguez said that President Duterte, who is in Japan this week, has put in place a “clear and coherent” strategy, a 10-point economic program to maintain policy stability, achieve high and inclusive growth, and make doing business in my country easier” in the months ahead.

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To guarantee economic inclusion, he said the planned higher investments in infrastructure, human capital and social protection are geared to reduce the poverty rate from the current 26.5 percent to 17 percent by the time President Duterte leaves office in 2022.

Dominguez said at an investment forum that the current administration is accelerating public spending on infrastructure, human capital and social protection in pursuit of inclusive growth, and is mounting a tax reform plan to raise enough funds for these priority investments areas.

REVISING REGULATIONS

Dominguez also informed forum participants that the Bureau of Internal Revenue (BIR) is now revising regulations on the value-added tax (VAT) withholding system involving projects funded by Japan’s Overseas Economic Cooperation Fund (OECF), taking into account the concerns raised by the Japanese government and contractors of Organisation for Economic Co-operation and Development (OECD)-funded projects.

“I have also instructed our Internal Revenue commissioner to prioritize the resolution of the VAT issues on Japanese contractors undertaking ODA projects,” he said.

(According Assistant Secretary Mark Dennis Joven of the DOF-Revenue Operations Group, this issue pertains to Revenue emorandum Circular 45-2015, which the BIR issued during the previous administration.)

Dominguez said the Duterte government has also taken initial steps to stamp out official corruption, cut red tape in the bureaucracy, and simplify tariff rules in order to entice investors from Japan and elsewhere to set up shop in the Philippines.

“This is a fine time for looking at the Philippine economy as an investment destination. The opportunities are many and the possibilities are large. The Philippines is an economy that is finally ready for more regionalization,” he said.

He assured his audience at the forum that, “The Duterte administration has taken a definite pro-business policy.”

JAPAN AND PHILIPPINES

Dominguez added that, “The bilateral relations between Japan and the Philippines has deepened and we look forward to more intensive cooperation. We look to investment inflows from Japan especially those that will support strategic investments in the infrastructure industry.”

He said public-private partnerships and other investment opportunities are in store for Japanese businesses in such Philippine sectors as transportation, banking, energy and tourism.

“There are numerous investment possibilities open to our regional partners,” he said. “We have expanded our public-partnership program to include unsolicited proposals from potential investors.

The energy and transport sectors are key areas needing more investments. Our banks are seeking new partners. Our primary industries are open to joint ventures,” he said.

As the Philippine economy grows, the domestic market is expected to “expand dramatically,” which, Dominguez said, will “translate into growth opportunities for traditional sectors such as retail and food processing.”

“We are likewise seeking new markets for our exports,” he said. “Through regional partnerships, we envision the growth of trade volumes between the Philippines and Japan.”

With tourism viewed as a key contributor to the anticipated economic growth of the Philippines, Dominguez said “we need new investments in tourism facilities. In this area, we have found strong support from our neighbors in the region.”

DRASTIC REDUCTION OF GOVT CORRUPTION

Dominguez pointed out that the president has committed to “a drastic reduction of corruption in government,” and that “this effort is helped by more intense implementation of programs to reduce smuggling in our ports and tax evasion in our revenue-generating agencies.”

“We have simplified tariff rules and the Securities and Exchange Commission has simplified the process for incorporation,” he said.

Freeing 10 million people from poverty over the next six years will mean “a reduction in human misery, in child malnutrition, in vulnerability to extreme weather conditions and in communities weakened by crime and violence,” Dominguez said.

POVERTY REDUCTION

But he said poverty reduction can only succeed if enough jobs are produced for the unemployed, if farms are transformed from being poverty traps into becoming engines for prosperity, and if the problem of disarticulated economies is solved to end the great wealth disparities among Philippine regions.

He said the government needs to build new roads and railways, provide adequate power to communities and new industries, modernize ports and domestic shipping, reduce oppressive personal income tax rates to raise the spending power of wage earners, and raise enough revenues to spend more not only on infrastructure but also on health, education and other forms of human capital development.

At the same time, the government also needs to deepen the country’s financial system with an eye on widening popular access to the banking system, support small industries with credit and raise capital for industrialization, he said.

“We seek to simplify the system, broaden the tax base, widen the value-added tax net and raise more revenues despite the rate reductions in personal and corporate income taxes,” he said. “We will supplement this with specific taxes on products that damage public health and pollute the environment. This is a pro-poor tax program with 40 percent of public spending directed toward social services.”


PHILSTAR By Babe Romualdez with the President in Japan

Japan antsy about Phl-China relations SPYBITS By Babe G. Romualdez (The Philippine Star) | Updated October 27, 2016 - 12:00am 3 1 googleplus1 0


ON BOARD WITH THE PRESIDENT TO JAPAN

Tokyo, Japan – On board the presidential aircraft for the five-hour trip to Japan, the President seemed to be in a jovial, light mood. He was very upbeat about the official visit, optimistic this will be a good one that will tighten the friendship between the Philippines and Japan even more. He described it as a “defining moment,” as we spoke briefly, – telling me the Japanese are one of our closest friends in the region.

Some of those who were on board the presidential aircraft are members of his Cabinet led by Finance Secretary Sonny Dominguez along with IT adviser Ramon Jacinto and national security adviser retired general Jun Esperon.

At the economic forum, some of the top businessmen who were present were Manny Pangilinan, Tommy Alcantara, Tessie Sy-Coson, Tony Tan Caktiong, Vivien Yuchengco, Edgar “Injap” Sia, Dennis Uy, as well as presidential adviser Joey Concepcion and Ambassador to the UN Teddyboy Locsin.

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The presidential schedule included courtesy calls on the President by officials of the Japan-Philippines Parliamentarians Friendship League, as well as an address before the Philippine Economic Forum with an estimated 1,000 participants. As noted by Prime Minister Shinzo Abe himself, President Duterte is very popular in Japan and this was very apparent during his visit.

The Wednesday activities were among the most fruitful as far as trade and commerce is concerned, with the Keidanren (Japan Business Federation) chairman Sadayuki Sakakibara hosting lunch for the President and his official delegation.

Keidanren is one of the biggest economic organizations in Japan with close to 1,500 companies, industrial associations and regional economic organizations as members. The federation was founded in August 1946 right after the end of World War II for the purpose of reconstructing the Japanese economy and hastening its recovery.

Japan happens to be the biggest trade partner of the Philippines as well as its top official development assistance donor. The Japanese, however, are a little antsy about the strengthening ties between the Philippines and China.

A major concern was the perceived strained relations between Manila and Washington, with President Duterte’s sharp rhetoric against the United States becoming a major concern not only among Japanese businessmen, but also to many observers across the region.

The bilateral meeting between the President and Prime Minister Abe will serve as an opportunity to emphasize the importance of maintaining friendly ties with the United States in upholding regional peace and stability in the face of China’s growing assertiveness.

As everyone knows, Japan also has maritime disputes involving the East China Sea with China claiming sovereignty over the Senkaku Islands.

RIPPLES OF ANXIETY

President Duterte’s China visit – where he was promised $24 billion in loans and investment agreements – has caused ripples of anxiety that reverberated not only in Asia Pacific, but also across Western nations. The US, of course, has sought clarification regarding the President’s “confusing” statements, announcing the Philippines’ separation from the US, but saying later there would be no changes as far as alliances are concerned.

In contrast with his sharp remarks about the US, President Rody has expressed admiration for the work ethic of the Japanese and their industriousness.

In his remarks prior to his departure for Japan, the President noted the “abiding partnership” between Japan and the Philippines, “based on common aspirations and shared values of democracy, adherence to the rule of law and the peaceful settlement of disputes.”

The President’s assurance that there would be no military alliance with China should go a long way in assuaging the fears of Japanese and other investors across the globe. Explaining that his visit to China was purely for economics, Duterte went on to say that there was no talk about military alliances or stationing of Chinese troops in the Philippines.

MARITIME COOPERATION

The China visit, however, saw President Duterte and Chinese President Xi Jinping signing a memorandum of understanding for the “establishment of a joint Coast Guard committee on maritime cooperation.” Japan for its part has promised to help the Philippines beef up its maritime capabilities, starting with the donation of 10 Coast Guard vessels with the first one having arrived two weeks earlier. Yesterday’s activities also included a signing of the memorandum of implementation for the transfer of a Japan Maritime Self-Defence Force’s trainer aircraft TC-90 as part of the agreement for the transfer of Japanese defense equipment and technology to the Philippines – further underscoring Japan’s serious intent to enhance defense cooperation with our country.

Tugade vehemently denies Goldberg’s assertion Transportation Secretary Art Tugade, who also joined the President’s trip to Japan, sought me out to deny Ambassador Philip Goldberg’s statement that he, along with Sen. Alan Peter Cayetano, made an “unpublicized” trip to China last June – which paved the way for President Duterte’s visit to China that resulted in $24 billion worth of soft loan and investment pledges. (Photo shows Speaker Bebot Alvarez and Art Tugade in the holding room for the President before the economic forum.)

Tugade says what is true is that he plans to visit China soon to follow up Chinese investors’ interest in rail and transportation projects, jokingly adding that this seems to be a “failure of intelligence” on the part of the CIA.


BY BABE ROMUALDEZ -PHILSTAR SPYBITS


MALAYA BUSINESS INSIGHT

1.8M less poor Filipinos in 2015 By ANGELA CELIS October 28, 2016


1.8M Filipinos lifted out of abject poverty in 2015 PHOTO FROM FILIPINO TIMES BLOG

The Aquino government was able to lift 1.8 million Filipinos from abject poverty in 2015 cutting poverty incidence from 25.2 percent of population in 2012 to 21.6 percent.

The National Economic and Development Authority estimates that by the end of President Duterte’s term, the ratio of poor Filipinos to total population will be 15 percent.

If within the three years covered by the Aquino administration, poverty incidence was cut by an average of 1.2 percentage points per year, NEDA said improvement will be faster within the next six years at 1.25 percentage points.

According to the official poverty statistics released by the Philippine Statistics Authority (PSA) for 2015, the country’s poverty incidence for the said year declined significantly to 21.6 percent, from 25.2 percent in 2012 and 26.3 percent in 2009.

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This translates to 21.93 million poor Filipinos, an improvement from the 23.75 million recorded in 2012.

“We are pleased to note that this is within the target set in the Philippine Development Plan, which is 20 to 23 percent for the year. This has resulted from a generally low and stable inflation, improved incomes, and higher employment rates in the period,” Rosemarie Edillon, NEDA deputy director general said.

“Even so, the rate of poverty reduction between 2012 and 2015 could have been faster, if not for the major shocks, especially the intermittent typhoons and El Nino that adversely affected agricultural production, rural incomes, and food prices,” she added.


‘Family of 4 needs P120K monthly’ NEDA deputy director general Rosemarie Edillon said most Filipinos fail to attain a “simple and comfortable life” partly because many are trapped in the cycle of poverty as parents have failed to secure a comfortable retirement, thus burdening their children, who themselves fail to secure their own future. PHILSTAR File photo JUNE 29, 2016

Edillon said that the improved poverty reduction indicates that the goal to eradicate poverty in the country is “very possible and highly achievable.”

“We’re confident that it can be reduced so much more, especially now since we are coming from a much lower base which is at 21.6 percent,” Edillon said.

“Since we want to up the ante a bit, then we’re looking at something like a 1.25 percentage points reduction every year, and that brings us to about 13 percent to 15 percent by 2022,” she added.

Subsistence incidence among Filipinos, or the proportion of Filipinos whose incomes fall below the food threshold, was estimated at 8.1 percent in 2015. In 2012, the subsistence incidence among Filipinos is at 10.4 percent.

Subsistence incidence among Filipinos is often referred to as the proportion of Filipinos in extreme or subsistence poverty.

In nominal terms, the magnitude of the food poor population is 8.23 million, an improvement from the 9.81 million in 2012.

Edillon said that one of the major factors in the improvement of poverty reduction is the increased budget in government’s social development programs, which significantly augmented the income of the poorest households.

“The broader implementation of the Conditional Cash Transfer (CCT) or the Pantawid Pamilya Program, which had a 194.1 percent increase in terms of budget from P21.2 billion in 2011 to P62.3 billion in 2015, recorded a 91.3 percent growth in terms of coverage from 2.3 million families in 2011 to 4.4 million household beneficiaries in 2015,” Edillon said.

“The regularity of the cash transfer sustained for three years for many CCT beneficiaries has accorded them some resiliency to weather certain shocks. The program also induced more economic activity in the poor barangays given the presence of a cash economy. These conditions may have also encouraged a number of them to diversify their livelihood sources,” she added.

FAMILY OF 5 NEEDS P6,329 EVERY MONTH

The PSA said that in 2015, a family of five needed at least P6,329, on average, every month to meet the family’s basic food needs and at least P9,064, on average, every month to meet both basic food and non-food needs.

These amounts represent the monthly food threshold and monthly poverty threshold, respectively, and indicate increases of about 15 percent in food and poverty threshold from 2012 to 2015.

Thus, the poverty incidence among Filipino families was estimated at 16.5 percent in 2015, an improvement from the 19.7 percent poverty rate in 2012.

The subsistence incidence among Filipino families on the other hand, or the proportion of Filipino families in extreme poverty, was estimated at 5.7 percent in 2015. In the same period in 2012, the proportion of families in extreme poverty was recorded at 7.5 percent.

The PSA said that in 2015, on average, incomes of poor families were short by 24.6 percent of the poverty threshold.

This means that on average, an additional monthly income of P2,230 is needed by a poor family with five members in order to move out of poverty in 2015.

Edillon said that while the poverty figures showed improvement, she said that there is a lot more work ahead, particularly in reducing inequality across regions and sectors.

“We need to pay greater attention to the lagging regions particularly in Mindanao, as well as to the agriculture sector where many of the poor are found,” she said.

LOW EARNING CAPACITY

Edillon added that the underemployment rate still tends to be steep among regions with high poverty incidence.

She said that this signals the low earning capacity of the poor and their limited access to regular and productive jobs, otherwise known as in-work poverty. The working arrangements are typically informal, temporary or casual, and low-paid, which cause them to desire additional work.

“Therefore, we in government should leverage on employment as a tool for sustaining the momentum of reducing poverty. This involves addressing both demand and supply side constraints in order to raise job-preparedness of the labor force,” Edillon said.

“We need to significantly improve the business climate to create opportunities for quality, productive employment,” she added.

ARMM HIGHEST POVERTY INCIDENCE IN 2015

Meanwhile, regional data show that ARMM and Eastern Visayas posted the highest poverty incidence rates in 2015.

Edillon pointed out that these are the regions that are most vulnerable to natural and man-made shocks.

“Man-made shocks, mostly arising from armed conflict, can be addressed by the current efforts to attain lasting peace, along with deliberate strategies to bridge the development gap,” she said.

“Natural shocks, however, are mostly outside of human control, but individuals and communities can be made more resilient to the impact of the shocks. A mechanism to accelerate relief and then recovery and rehabilitation efforts following a calamity also needs to be put in place immediately,” she added.


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