Devnews 2009 November 5

DevNews Thursday; November 5, 2009 Peso-dollar rate: $1.00 = P47.540 Key national news coverage of the National Economic and Development Authority (NEDA) and other related news

There are 22 articles of note (2 negative, 4 neutral, 16 other) in the national press that can shape perceptions regarding NEDA and the economy.

negative news Neda say more? Inquirer / Business (link: http://business.inquirer.net/money/columns/view/20091104-234212/Neda-say-more) Breaktime by Conrado Banal AFTER ABOUT TWO YEARS of pushing and shoving, Finance Secretary Margarito Teves may finally get his pet project in the BIR. It is the $300-million seven-year contract between the Bureau of Internal Revenue and a foreign firm called Sicpa. Sic… what? It is a Swiss company, Sicpa Product Security, that has been wooing this cute administration of Gloriaetta on a scheme to monitor cigarette taxes. When Sicpa first broached the scheme, the National Economic Development Authority, which had a big say in government deals like it, already had misgivings. For two years, without the Neda blessing, the $300-million proposed contract between the BIR and Sicpa remained just that—a proposal. All of a sudden, from out of the blue, Neda, the same agency that questioned some of the features in the contract for two years, changed its mind. Today, Neda reportedly is all for the $300-million contract, even as this cute administration’s term is about to expire in seven months. Something happened along the way, do you think?

JTI rejects BIR deal for Swiss monitor plan Daily Tribune / Business (link: http://www.tribune.net.ph/business/20091105bus3.html)

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Japanese cigarette maker Japan Tobacco Inc. (JTI) expressed apprehension over the government’s approval of a plan allowing a Swiss-based company to negotiate with the Bureau of Internal Revenue (BIR) for a tracking system on locally-manufactured cigarettes for purposes of taxation. JTI Philippines general manager Roger Lamb said the agreement is another instance of regulatory unpredictability in the country, which he said now has one of the world’s most rigorous excise tax systems. Lamb said tobacco companies are expected to come up with a common position paper expressing their opposition to the proposed system. “We are very concerned about the reported approval. We were quite surprised that government the National Economic Development Authority gave its approval without consulting us,” he said. Lamb said allowing the Swiss firm SICPA SA to impose its technology on locally manufactured cigarettes will add a layer of cost on local tobacco firms. Under the SICPA proposal, new technology developed by the Swiss firm will enable government to track and trace each manufactured stick of cigarette or cigar so that these may be taxed accordingly.

neutral news Tariff issue stalls P54-B business BusinessMirror / Top News (link: http://www.businessmirror.com.ph/home/top-news/18194-tariff-issue-stalls-p54-bbusiness.html) By Max De Leon AT least P54 billion in fresh investments for ethanol production are now being held back by 18 companies as they are still awaiting a clear signal from the government that their projects will get enough government support, starting with a considerable tariff protection. Tetchie Cruz-Capellan, executive director of the Ethanol Producers Association of the Philippines, said this is why the group’s petition before the Tariff Commission—for the increase to 20 percent of the current 1-percent tariff imposed on imported ethanol—is critical. Tariff Commission Chairman Edgardo Abon said the petition will require lengthy deliberation, particularly since increasing the tariff to 20 percent is socially sensitive owing to the resulting P0.50-per-liter increase in ethanol-blended gasoline price.

Ethanol producers seek 20% increase in MFN tariff Business Mirror / Economy (link: http://www.businessmirror.com.ph/home/economy/18114-ethanol-producers-seek-20increase-in-mfn-tariff.html) By Paul Anthony Isla 2

THE Ethanol Producers Association of the Philippines (EPAP) on Tuesday said it will seek the Tariff Commission’s nod for its petition to increase the most favored nation (MFN) tariff of ethanol to 20 percent from 1 percent. “Unless there is strong government support, investors will remain reluctant to commit billions of pesos into the Philippine ethanol industry,” Tetchie Cruz-Capellan, EPAP executive director, said. In a letter sent by EPAP to Tariff Commission Chairman Edgardo Abon, Capellan explained how the local ethanol industry has not progressed as much as predicted two years ago because it lacks equity investments and stronger political support. Capellan pointed out that the Philippines has to be aggressive in attracting foreign capital to sustain initial efforts on biofuels and reach the mandated E10 blend by 2011.

SEE ALSO: Gov’t balks at plea to increase tariff rate on imported ethanol, Bworld / Economy, S1-2

‘Distorted’ oil tariff prompts gov’t review Inquirer / Business (link: http://business.inquirer.net/money/topstories/view/20091104-234216/Distorted-oiltariff-prompts-govt-review) By Abigail Ho NEW OIL TARIFFS resulting from the effectivity of the Asean Free Trade Agreement in January may bring about “distortions” that will have to be reviewed, various government officials said. In a hearing at the Tariff Commission Wednesday, Zenaida Monsada, oil industry management bureau director at the Department of Energy, said that when tariffs on crude oil and finished products from the Asean become zero by Jan. 1, 2010, a “negative tariff differential regime” could arise. “Normally, we have a positive tariff differential between crude and finished products. It just means that finished products are slapped a higher tariff. But with the effectivity of the Afta, we’re seeing a negative tariff differential,” she explained. “We’re proceeding toward a regime of negative tariff differential, where finished products will get lower tariffs than crude.” Ramon Kabigting, director of the Department of Trade and Industry’s Bureau of International Trade Relations, acknowledged that there would be “distortions” in the tariff structure when the Afta takes effect. Tariff Commission chair Edgardo Abon said these distortions could have “big revenue implications on the country,” and would have to be thoroughly studied.

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other news Group bares P12-billion bulk water project Philstar / Business (link: http://www.philstar.com/Article.aspx? articleId=520360&publicationSubCategoryId=66) By Mary Ann Ll. Reyes MANILA, Philippines - A local group is undertaking a $255-million (approximately P12 billion) bulk water supply project, to be financed mainly from loans, that aims to solve the impending water crisis in Metro Manila. Sierra Madre Water Cop. (SMWC) has submitted to Manila Water Corp. and Maynilad Water Services Inc. an offer to supply 700 million liters per day of water over a 25-year period. “We are confident that Manila Water and Maynilad will accept our offer,” SMWC president Roy Zosa said, adding that they are open to the possibility of the two investing directly in the project. It will include an 11 to 15 megawatt hydroelectric facility. Bulk water is proposed to be delivered to Mabitac, Laguna via tunnel and overland pipeline to a proposed treatment facility to be owned and operated by the water distributors. Treated water can be delivered by gravity across Laguna Lake to as many terminal points as needed. He also noted that with twice the average rainfall of the Laiban Dam project and a development scheme that involves much smaller dam construction and run of river system harvesting for a significant portion of supply, the SMWC project has less than half the construction cost per MLD of Laiban, and can deliver initial water in 24 months, as compared to five years for Laiban. It will be recalled that the San Miguel Bulk Water Co. has submitted an unsolicited proposal to the MWSS to undertake the Laiban Dam project. The proposal is now being reviewed by an inter-agency panel, which expects to submit a recommendation to the MWSS board before the end of the month on whether or not MWSS should enter into a joint venture arrangement with SMBWC for Laiban. SEE ALSO: Bypass MWSS, anti-Laiban firm proposes, Inquirer / Business (http://business.inquirer.net/money/topstories/view/20091104-234214/Bypass-MWSS-antiLaiban-firm-proposes)

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Group proposes cheaper alternative to Laiban dam, Manila Times / Business (link: http://www.manilatimes.net/index.php/business/5313-group-proposes-cheaper-alternative-tolaiban-dam)

1.4 million Pinoys to fall into poverty in 2010–WB Business Mirror / Economy (link: http://www.businessmirror.com.ph/home/economy/18184-14-million-pinoys-tofall-into-poverty-in-2010wb.html ) By Cai Ordinario DUE to structural problems in the economy, the global economic crisis and the recent typhoons, at least 1.4 million Filipinos will be thrust into poverty by 2010, according to the latest Philippine Quarterly Update (PQU) released by the World Bank on Wednesday. The World Bank said that despite its upward revision of the country’s gross domestic product (GDP) growth in 2009 and 2010 and the efforts exerted by the national government to eradicate poverty, this will not be enough to prevent at least 1.4 million Filipinos from being thrust into poverty next year. The bank said the country’s poverty rate is estimated to be higher compared with a scenario without any global crisis. The bank said the country’s poverty rate is seen to be 0.9 percentage points and 1.5 percentage points higher in 2009 and 2010, respectively. “Despite [the] improvements and the strong fiscal stimulus undertaken by the government, it is estimated that the global economic recession will throw 1.4 million Filipinos into poverty by 2010 compared to a no-crisis situation. Damages and losses inflicted by typhoons Ondoy and Pepeng are estimated to further worsen poverty incidence in the Philippines,” the bank said in the report. Lachler said one of the reasons poverty increased over a supposedly high-growth period was that growth during this period may have been more modest compared with what was declared in the National Income Accounts (NIA). This does not, however, involve reasons of sanitizing official data but of more technical in nature. He said these technical issues with the NIA are not unique to the Philippines. Lachler said the bank observed this in other countries. “It turns out that the divergence between survey- and NIA-based growth data is not unique to the Philippines,” the bank said in the East Asia Update. “NIA estimates are typically, though not always, larger than survey-based estimates, and there is a tendency for the National Accounts-based estimates to grow more rapidly than the survey-based estimates,” the bank added.

Precrisis growth level remains elusive for RP in 2009, 2010 Business Mirror / Economy (link: http://www.businessmirror.com.ph/home/economy/18183-precrisisgrowth-level-remains-elusive-for-rp-in-2009-2010.html)

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BOTTLENECKS to growth will continue to keep the country’s gross domestic product (GDP) below pre-crisis levels, albeit at a higher projected growth rate in 2009 and 2010, according to the Philippine Quarterly Update (PQU) released by the World Bank on Wednesday. The bank said the bottlenecks to growth include poor business climate, infrastructure, education and fiscal consolidation. The Washington-based lender revised its GDP projections for the Philippines upward from its PQU July 2009 edition. Since the beginning of the crisis, the World Bank has released quarterly updates for the Philippines. The last PQU was released in July 2009. In July the bank projected that the economy will post a contraction of 0.5 percent in 2009 and a growth of 2.4 percent in 2010. However, the bank’s projection remained at 4 percent in 2011 while downward revisions were made for growth in 2012 and 2013 to 4.3 percent from 4.5 percent, and 4.5 percent from 5 percent, respectively.

More rice tenders eyed Business Mirror / Top News (link: http://www.businessmirror.com.ph/home/top-news/18191-more-rice-tenderseyed.html) By Jennifer Ng MANILA could hold more tenders before the end of the year if the Inter-agency Committee on Rice and Corn finds the Philippines would need to beef up its rice inventory for the first quarter of 2010. The decision may come before the end of November. National Food Authority (NFA) Deputy Administrator Ludivico Jarina said, “Once that assessment is out, we can determine if we will go on bidding or adopt other modes [of procurement].” A bidding for 250,000 tons of rice had already been held in Quezon City on Wednesday. Out of the 14 companies that tendered bids, only six were found financially eligible. Daewoo International submitted the lowest bid of $468.50 per ton for 100,000 tons. Vietnam Southern Food Corp. 2 offered the second-lowest bid at $480 per ton for 150,000 tons. Other qualified bidders include Thai Hua Co. Ltd., $563.25 for 100,000 tons; LG International, $549.77 for 150,000 tons; Toepfer International Corp., $534.99 for 100,000 tons, and Asia Golden Rice offered $570 for 100,000 tons.

Despite ‘recovery,’ wage picture worse Business Mirror / Top News (link: http://www.businessmirror.com.ph/home/top-news/18193-despite-recovery-wagepicture-worse.html) By Imelda V. Abano

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NEW YORK—As job cuts continue around the world due to the global economic downturn, the International Labor Organization (ILO) expressed worry that market demand will wither to such an extent it will slow down recovery. The ILO “Global Wage Report 2009 Update” released on Tuesday says inflation-adjusted wage growth fell sharply around the world last year to 1.4 percent, from 4.3 percent in 2007, adding that wages continue to fall in a number of countries this year. “The continued deterioration of real wages worldwide raises serious questions about the true extent of an economic recovery, especially if government rescue packages are phased out too early. Wage deflation deprives national economies of much-needed demand and seriously affects confidence,” said Manuela Tomei, director, ILO Conditions of Work and Employment Program, and lead author of the study. The report emphasized that the Philippines, through the National Wages and Productivity Commission, has requested continued ILO technical support in improving the current minimum-wage system, with the aim of protecting nonstandard workers.

World Bank sees 1.4% growth for RP Bworld /Headlines THE WORLD BANK has upgraded its growth forecasts for the Philippines, saying sustained remittance inflows, improved global recovery prospects, and increased public spending would allow targets to be met. The Washington-based lender sees the economy expanding by 1.4% this year, a reversal from its July forecast of a 0.5% contraction. The upgraded outlook supports the official growth goal of 0.8-1.8%. The bank’s sister organization, the International Monetary Fund, and the Manila-based Asian Development Bank also have forecasts -- 1% and 1.6%, respectively -- within the state’s target range. The revised forecasts came as the bank also upgraded its projection for East Asia, whose "rebound from the economic downturn has been surprisingly swift and very welcome."

Ranks of mahirap increasing Bworld / Headlines By GS Dela Pena THE NUMBER OF FILIPINO FAMILIES which consider themselves as "mahirap" or poor has continued to increase this year, a new Social Weather Stations (SWS) survey showed. Self-rated poverty -- respondents are asked to class themselves as poor, not poor or on the borderline -- was at 53% in September, up from June’s 50% and equivalent to some 9.7 million families. A Palace official blamed the economic slowdown, and raised the prospect of the rate further increasing as two strong storms devastated parts of the country after the poll was staged.

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But the result of the latest survey, made exclusive to BusinessWorld, was still lower than last year’s peak (59%, June) and the Arroyo administration’s record of 66% (hit three times, the last being September 2002).

San Miguel stake sale may help keep 2009 deficit under control Bworld / Headlines By ADB Romero THIS YEAR’S deficit cap will likely be breached as programmed asset sales will not be enough to offset lackluster revenue collections and the impact of two storms, the Finance department yesterday said. Adding the government’s stake in San Miguel Corp. to the privatization mix, however, could keep the shortfall under the P250-billion ceiling, Finance Secretary Margarito B. Teves said in a briefing. The government has targetted asset sale revenues of P30 billion for the year, to come from auctions for the Food Terminal Inc. complex (FTI, P13 billion), part of its stake in Philippine National Oil Co.--Exploration Corp. (PNOC-EC, P13 billion), and a lease for property in Fujimi, Japan (P6 billion). The attempt to bid out FTI failed last month and officials are now looking at a negotiated sale. The Fujimi asset is to be put on the block on November 16, while a date for the PNOCEC stake has yet to be announced. SEE ALSO: Gov’t likely to breach budget gap goal: Teves, Malaya / Business (link: http://www.malaya.com.ph/11052009/business/busi1.html)

BDO sees GDP growth exceeding government target Business Mirror / Economy (link: http://www.businessmirror.com.ph/home/economy/18185-bdo-sees-gdp-growthexceeding-government-target.html) By Erik de la Cruz The domestic economy will grow by 2.3 percent this year according to Banco de Oro Unibank (BDO), a more upbeat forecast than the government’s growth projection of 0.8-1.8 percent. The economic research team of the country’s biggest bank, in a report released on Wednesday, predicts growth next year will be a bit faster at 2.5 percent, but below the government’s target of 2.6 percent to 3.6 percent. “The country is struggling to rise above the challenges in the wake of the recent calamities that besieged the country,” says BDO chief market strategist Jonathan Ravelas, referring to the onslaught of recent back-to-back typhoons. 8

But on a positive note, he said “growth prospects continued to improve” following the betterthan-expected performance of the economy in the second quarter of this year, and with the global economy now recovering from the deepest slump seen in decades.

RP expects $121-million fresh investments from Taiwan Philstar / Business (link: http://www.philstar.com/Article.aspx? articleId=520356&publicationSubCategoryId=66 ) By Ma. Elisa Osorio MANILA, Philippines - The country expects to get $121 million in fresh investments from Taiwan in the manufacturing and construction , agri-business, and energy sectors, the Manila Economic and Cultural Office (MECO) in Taipei said. MECO resident representative Antonio I. Basilio said the prospective areas of new Taiwanese investment range from the micro sector including food cooperatives, to the country’s freeport and special economic zones. Specifically, Basilio noted that Clark and Subic are eyeing $24 million worth of investments in the fields of aluminum coil, piping, and stainless steel and light manufacturing.

DOF urges big corporations to pay taxes in advance Philstar / Business (link: http://www.philstar.com/Article.aspx?articleId=520354&publicationSubCategoryId=66 ) By Iris C. Gonzales MANILA, Philippines - The Department of Finance (DOF) is urging the country’s large corporations

to pay their taxes in advance to give the government funds for the necessary rehabilitation work after typhoons Ondoy and Pepeng hit the country. As a sweetener, Finance Secretary Margarito Teves said the government will give early-bird discounts to those who would be paying their taxes in advance. However, the government, with Congress, has yet to iron out the details of the plan including the amount of discount to be given. The DOF is essentially supporting the joint resolution filed by Quezon Rep. Danilo Suarez last Oct. 26 authorizing the Bureau of Internal Revenue (BIR) to collect 10 percent from the gross sales of all large taxpayers as advance payment of taxes for the next two years.

Biofuels board backs tariff hike on ethanol Malaya / Business (link: http://www.malaya.com.ph/11052009/business/busi8.html) By John Poquiz 9

Producers of ethanol are pushing for a sharp increase in the tariff of imported ethanol from the current 1 percent to 20 percent to boost local production and attract more investors. Rafael Coscuella, chief of the Sugar Regulatory Administration and vice chairman of the National Biofuels Board (NBB), said ethanol producers, who have invested heavily in response to the call for development of biofuels, are disappointed over the government’s inaction. "While the NBB works with the concerned agencies to address these issues, we cannot overemphasize the need to address just as urgently the tariff issue," he said.

Auto tariff protection, subsidy pushed Manila Bulletin / Business (link: http://www.mb.com.ph/articles/227932/auto-tariff-protection-subsidy-pushed) By Bernie Cahiles-Magkilat Implementation of a 10 percent tariff protection on all automotive imports and a subsidy of P10,000 per completely built up (CBU) production are being pushed to make the local automotive industry viable and competitive under a globally liberalized trading regime. A highly-placed industry source said these proposals are the most controversial components of the Deloitte Consulting LLP study, which was commissioned by the Philippine Automotive Competitiveness Council Inc. (PACCI) composed of the five major automotive assemblers in the country. The Deloitte study has also urged for the purging of the current list of participants in the Motor Vehicle Development Program (MVDP), which is administered by the Board of Investments. According to the source, the proposals support the development of a competitive and viable domestic motor vehicle industry, which has been left behind by its neighboring countries, under a globally liberalized trading regime. The source said that the 10 percent tariff should be imposed across all motor vehicle imports and was seen as very radical as this would go against the country’s commitments in the ASEAN-Common Effective Preferential Tariff (CEPT) for a zero tariff regional trading starting January 1, 2010.

DIS Public Information Division - andrei bauzon

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