_LEADING ECONOMIST AND BUSINESS LEADERS BULLISH ON PHILIPPINE BUSINESS OPPORTUNITIES

An overflow crowd greeted the bullish message of leading representatives of the Philippine private sector including the economy, capital markets, mining, infrastructure, real estate, human resources and outsourcing with enthusiasm on January 26, 2012, in a forum hosted by the Philippine-American Chamber of Commerce and the Philippine Consulate General and sponsored by EisnerAmper, a top international accounting firm.

“The Philippine economy is growing at a high rate and will continue to progress,” said Dr. Bernie Villegas, one of the country’s most respected economists, as he marshaled fact after fact showing the economy’s progress.

Sid Consunji, president of DMCI Holdings, spoke about the opportunities for foreign investors in infrastructure projects, real estate and government-sponsored public private partnership projects such as airports, roads and bridges.

Bien Araw, Senior Vice President of Benguet Mining, told the audience, which included many private equity fund and bank representatives, that mining is open to 100 percent foreign ownership and the Philippines is one of the most mineralized countries in the world, rich in gold, copper and nickel.

Gigi Zulueta, Asia Pacific Director of personnel firm ZMG War Howell, described how the Philippines has captured the number one spot in call centers and is making inroads in other areas such as animation, legal documentation, editing, accounting and other knowledge-based and higher value outsourcing sectors.

“People were encouraged and engaged. They stated till the end which is rare for a New York audience,” said PhilAm Chamber President Butch Meily.

Others who spoke included Consul General Mario de Leon and the Chamber’s past-President and long-time Board member, John J.P. Howley. Mr. Howley commented, “The diversity of the Philippine economy and the very sound government fiscal policies have created the foundation for sustained growth. It is a very exciting time for US-Philippine business relations.”

Founded in 1920, the Philippine American Chamber of Commerce is one of the oldest bilateral business organizations in the United States. It has played a key role in promoting Philippine-U.S. business ties over its more than 90-year history. For more information about the Chamber, please go to www.philamchamber.org.

HSBC predicts that by 2050, the Philippines will leapfrog 27 places to become the world's 16th largest economy.  Whether that is a blessing or a curse will depend entirely on how much the Philippines is willing to invest today in education, renewable energy, sustainable waste and water management, and other critical infrastructure.  And whether the Philippines is willing to educate and empower women with basic family planning and birth control education.

With a population at 100 million already and more than half of its population under the age of 25, the Philippines is looking at significant population growth over the next 40 years.   It could become one of the wealthiest nations in the world if it invests in its most important natural resource -- its people  Or it could become one of the poorest nations in the world if its economic growth does not exceed its population growth.

HSBC is using some fairly optimistic GDP growth assumptions to support its projections.  Its report assumes that the Philippines will achieve an average GDP growth of 8.4% from 2010 to 2020, 7.3% from 2020 to 2030, 6.6% from 2030 to 2040 and 5.8% from 2040 to 2050.  These assumptions compare with GDP growth of less than 5% in 2011 after hitting a little more than 7% in 2010.  Most experts believe that major factors in the lower growth rate in 2011 were the weakening global economy and the Philippine government's slow start on infrastructure development.  Whether the Philippines can sustain increasing investments in large infrastructure projects remains to be seen.

The report from HSBC's global research department predicts that the world’s largest economy in 2050 will be China, followed by the United States.  The biggest losers over the next 40 years will be in Europe.  HSBC predicts that only five European nations will be in the top 20, compared to eight today.

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The Philippine Government projects that the country's Gross Domestic Product (GDP) will grow by 5 to 6% this year despite uncertainties in the global economy.  Some economic analysts are projecting lower growth.

GDP growth in 2011 should be about 4.5 to 5.5%, slightly below last year's targets, well below the 7 to 8% growth projected by the government last year.  Final figures for 2011 will be released by the end of this month.

The government intends to meet the 5 to 6% target for 2012 with increased government spending and the full implementation of the Aquino Administration's public-private partnership (PPP) program.  The government is also counting on sound macro-economic fundamentals in the Philippines playing a major role in helping the country survive the global economic slowdown and the debt crisis in Europe._

The World Bank has cautioned that higher GDP growth in 2012 will require an improvement in exports, acceleration of public-private partnership projects and private sector investment, and a full recovery of public spending.

The Philippine Stock Exchange ended up 4% for 2011, making it the best performing stock market in Asia for the year.

Other economic indicators were also positive.  The Philippine Peso ended about flat against the US Dollar at Php44 to US$1, unlike some other regional currencies which depreciated.

Analysts expect inflation to remain manageable.

Remittances from Overseas Foreign Workers (OFWs) grew by 6.2% year over year in October, slightly less than the 8.4% growth in September but still strong.

The Philippine Government has started the process of releasing funds for infrastructure development to ensure an early start this year in contrast to last year's lower-than-planned release of funds.  A key factor in the early release of infrastructure this year is the slow global economy and the failure to meet economic growth targets last year.

By January, the government plans to issue allotments for Php141.8 billion (US$3.5 billion) worth of infrastructure projects. The implementing departments and agencies will then be able to bid these out,

Budget and Management Secretary Florencio Abad said the infrastructure projects include national roads and bridges; airports, seaports and lighthouses; classrooms and other education facilities; potable water supply systems, irrigation and post- harvest facilities; and flood control and slope protection structures.

The Department of Public Works and Highways (DPWH) will receive Php91.57 billion, representing almost 65 percent of the total government infrastructure program.  The Department of Agriculture is the second biggest recipient with Php24.49 billion, followed by the Department of Education (DepEd) with Php13.97 billion.  The Department of Transportation and Communication (DoTC) will receive Php7.20 billion, which will be used to improve airports, ports and other projects.

John J.P. Howley

_Graft cases have been filed against former Philippine President and current Congresswoman Gloria Macapagal-Arroyo, her husband Jose Miguel Arroyo, and two former government officials in connection with the aborted $329-million national broadband network (NBN) deal between her administration and ZTE Corp. of China.  Prosecutors allege an agreement to accept large kickbacks in return for approving an overpriced deal with the Chinese telecommunications company.

The charges were filed with the Sandiganbayan, a special anti-graft tribunal.  The Office of the Ombudsman, which filed the case, found no probable cause to justify an indictment for the more serious offense of plunder.  Unlike plunder, violation of the anti-graft law is a bailable offense.

During Senate hearings in 2008, ZTE consultant Dante Madriaga, testified that the deal was originally priced at $130 million, but that the cost was increased to accommodate kickbacks.  Former Economic Planning Secretary Romulo Neri testified that Benjamin Abalos, the former Chairman of the Commission on Elections, offered him a bribe to approve the contract.  Jose de Venecia III, son of then House Speaker Jose de Venecia II and cofounder of Amsterdam Holdings Inc., which lost in the bidding for the NBN contract, testified that Mike Arroyo intervened to help ZTE Corp. win the deal.  De Venicia said the ex-president’s husband was promised a $70 million commission.

Arroyo's husband and former elections chief Benjamin Abalos have denied the accusations.  Former President Arroyo herself also has previously denied wrongdoing in the latest case.  Under public pressure in 2008, she canceled the deal.

A similar case had been filed against Arroyo before the Office of the Ombudsman while she was still President, but this was dropped in 2009 on the ground that she was immune from suit.  The alleged kickbacks also formed the basis for two impeachment charges filed against Arroyo while she was President, but both charges were dismissed in the House of Representatives.

The current charges in the Sandiganbayan allege violations of Republic Act 3019 section 3 (g) and (i) and Republic Act 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees.

Section 3 (g) makes unlawful the “entering, on behalf of the government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby.”

Section 3 (i) deems a practice corrupt when the official is “directly or indirectly becoming interested, for personal gain, or having a material interest in any transaction or act requiring the approval of a board, panel or group of which he is a member, and which exercises discretion in such approval, even if he votes against the same or does not participate in the action of the board, committee, panel or group.”  The same provision states that “interest for personal gain shall be presumed against those public officers responsible for the approval of manifestly unlawful, inequitable, or irregular transaction or acts by the board, panel or group to which they belong.”

Former President Arroyo is presently under arrest in a separate case alleging fraud during the 2007 senatorial elections in parts of the southern island of Mindanao.  Her advocates argue that the administration of her successor, President Benigno "Noynoy" Aquino, is engaged in an attempt to destroy her reputation so as to distract attention from his administration's own failures.

In the midst of dealing with the worst disaster of his Presidency, and addressing the urgent needs of families affected by the tragedy, the Philippine Daily Inquirer reports that Philippine President Benigno Aquino is also asking the right questions.

“I need to ask myself. Did the government do enough to prevent this kind of a tragedy? I don’t think I can accept that we have done everything,” Mr. Aquino told evacuees at Cagayan de Oro Central School during a visit to the disaster zone four days after Tropical Storm “Sendong” struck. “I know we could have done more.”

Areas devastated by tropical storm Sendong have been declared under a state of calamity, allowing the mobilization of national resources to augment relief and rehabilitation efforts of local governments as the death toll from floods and landslides rose to almost a thousand, with nearly 20,000 families displaced by heavy rains in Northern Mindanao at the weekend.

The President promised not only immediate assistance, but also that his administration would "fine-tune all of the systems in place so that now we can prevent this tragedy from ever happening.”  He pledged to conduct a full fact finding inquiry, to relocate people living in danger zones, and a doubling of reforestation efforts to create a natural barrier against flood.
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The aircraft business is going strong in Asia.  So is the airport business.  As millions of people throughout Asia join the global middle class, they are discovering the pleasures of travel throughout the region.  And what a region it is.  From Angkor Wat in Cambodia to the Chocolate Hills of Bohol in the Philippines, there is plenty to see in Southeast Asia.  This is creating tremendous demand for new airports and other basic infrastructure.  For a review of what is going on, and what it means for the global economy, click here.