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Rody’s Russian gambit

Thursday, 25 May 2017 00:00 Published in Editorial

A usual line among economists goes that  whenever the United States sneezes, the Philippines catches pneumonia which reflects the sheer dependence of the local economy to that of the US.
Economist Bernardo Villegas said the country is highly dependent on electronics exports to the US consumer market that is contracting massively and to sluggish foreign direct investments from the US.
The growing domestic market made up of predominantly young people and still dependable remittances from overseas Filipino workers plus the business process outsourcing (BPO) boom provided the boost that the economy needed.
The independent foreign policy Rody has adopted may change the resiliency of the economy as a result of the opening of new investments and trade avenues in countries such as China and Russia.
Russia is a largely unexplored market with trade between the Philippines and Russia amounting to only $226.25 million in 2016.
In the first semester of last year alone, total trade transactions of the country reached $65.6 billion, with Japan being the top trading partner for last year.
Russia was the country’s 33rd trading partner last year with Philippine exports only amounting to $48.93 million.
Rody landed in Moscow last Tuesday hoping to improve ties and with it trade bringing along with him practically his entire Cabinet and up to 300 Filipino executives.
Rody and Russian President Vladimir Putin had a bilateral meeting last year on the sidelines of Asia Pacific Economic Cooperation Summit in Peru, in which Russia committed to buy $2.5 billion of agriculture products from the Philippines.
The two leaders also met during the Belt and Road Forum hosted by China in Beijing early this month.
Trade Secretary Ramon Lopez said the mission is hoping to promote the country’s manufactured and agricultural products for exports to Russia, while eyeing to get investments in sectors of manufacturing, agribusiness, energy, infrastructure, information and technology business process management (IT-BPM), and tourism.
Prospects for exports include automotive parts and equipment; processed food, beverages, and marine products; information communication technology (ICT) products and services; and canned and processed fish products.
Agricultural products for promotion here are calamansi, coconut, mango and banana.
The country’s exports to Russia are currently inconsequential consisting of static converters worth $14.75 million for the entire of last year; carrageenan, seaweeds, and other algae, at $5.01 million; fresh or dried desiccated coconuts, at $3.91 million; pocket lighters, at $2.44 million; and ignition wiring sets and other wiring sets of a kind used in vehicles, aircraft, or ships, at $2.05 million.
Also the country buys fuel from oil-producing Russia but only at $58.69 million last year.
Lopez sees Russia as a new frontier for the country’s expanding trade capability.
He said the first task is for the Russians to have an increased awareness on the Philippines, the businesses here, and the opportunities.
Businessmen who accompanied Rody said to be explored are ventures with Russian oil, mining and infrastructure firms.
The ball had started rolling even before Rody’s visit through the inauguration of the Joint Commission on Trade and Economic Cooperation (JCTEC) made up of Philippine and Russian economic officials.
The body serves as both countries’ forum for trade, investments, iron and steel, aviation, energy, information and communications technology, intellectual property, agriculture, transportation, science and technology, tourism, higher education and labor.
As in the Chinese experience, despite the controversies that pops up once in a while, the country is immensely benefiting from the opening of new sources of financing for government projects as a result of the foreign policy shift.
Winning over to the country Russian investments and trade, which are currently too small to matter, is expected to add another layer to protect the country from the effects of the still unpredictable global economy.
The independent foreign policy shift of Rody is also a necessity amid the Trump administration’s increasingly protectionist policies.

Infra needs a good kick start

Wednesday, 24 May 2017 00:00 Published in Editorial

The suggestion to turn the Development Bank of the Philippines (DBP) into an infrastructure bank from its current orientation of being a state lender for industries and small businesses may just provide the needed boost for the Duterte administration’s massive infrastructure buildup.
Infrastructure development will cost P8.4 trillion up to the end of President Duterte’s presidency or up to P1.5 trillion a year.
Finance Secretary Carlos Dominguez said the DBP makeover into an infrastructure bank will support the ambitious spending program.
A risk analyst, Anders Corr, wrote in Forbes last May 13 that the national debt could swell to $452 billion, assuming a 10 percent interest rate on loans “bringing Philippines’ debt to gross domestic product ratio to 197 percent, second-to-worst in the world.”
Dominguez said the DBP could follow the model of the Development Bank of Japan Inc. which pioneered project financing in Japan, specifically in the sectors of energy and infrastructure.
Dominguez, however, said the Duterte administration will exercise fiscal prudence and that the increased government spending for infrastructure would create more jobs and business opportunities, which, in turn, would sustain the country’s growth momentum.
Government spending primes the economy to induce the private sector to spend and invest more and infrastructure has been the area in which the Philippines is lagging behind its Asian peers.
Sustaining the six percent growth, which is economists said would be the growth threshold to reverse the poverty trend, would have to be anchored on infrastructure as increased economic activity requires more roads and other government projects.
The ultimate goal of Rody is to reduce the poverty level to 17 percent from about 25 percent during the term of Noynoy.
Noynoy was an utter failure in reducing the poverty rate despite the steady growth in the economy mainly due to the scarcity of jobs. Some economists termed the economic growth trend during the term of Noynoy as jobless growth.
Dominguez said the government will only resort to borrowing and mostly from local sources if the economy fails grow as expected to finance debts.
“With good infra, real estate values will go up, so more property taxes can also be collected. More opportunities for businesses also means more revenues for the government,” Dominguez said.
DBP as an infra bank can help its clients raise funds for projects by tapping the capital markets.
Funding is needed for the government’s modified hybrid public private partnership (PPP) formula in which the government would build infrastructure and later bid out the operation and maintenance to the private sector.
This system, Dominguez hopes, will speed up the implementation of projects, as a traditional PPP usually takes an average of 29 months before it can take off.
Under hybrid PPP, the government selects, finances and builds big-ticket projects through competitive public bidding and, upon completion, auctions off their operation and maintenance to the private sector.
The infra buildup plan starts with the development of the Clark International Airport in Pampanga, and possibly the Davao airport while two of the largest projects would be the Manila-Clark Railway and the Mega Manila Subway that Japan already committed to provide financing.
Two projects using the “hybrid” PPP scheme were started in less than nine months, a significant improvement from the usual 29 months that it takes for a traditional PPP project to get going. The two projects are the Plaridel Bypass Road, which will link the North Luzon Expressway in Balagtas, Bulacan with the Maharlika Highway in San Rafael, Bulacan; and the Central Luzon Link Expressway, which will connect Cabanatuan City in Nueva Ecija to Tarlac.

Rhetoric not only for Rody

Tuesday, 23 May 2017 00:00 Published in Editorial

President Rody Duterte appears to have had a dose of his own tough talk after he recounted last Friday that Chinese President Xi Jinping said China is willing to go to war over the South China Sea dispute.
In a meeting with Xi recently during his visit to Beijing for the Belt and Road Forum, Rody suggested that the Philippines will start exploring for oil on areas the Philippines is claiming.
Xi told Rody “I don’t want to quarrel with you but if you force the issue we’ll go to war.”
Xi’s comment immediately seized by local American sycophants demanding that China again be brought to the United Nations (UN).
Similar to Rody’s “I’ll kill you” rants, several China observers said the threat was typical of Xi’s rhetoric.
Xi like Rody came from a local government post before assuming leadership in China and has a tough stand against criminality and corruption.
The forceful words of Xi was in contrast to what transpired last Friday when both the Philippines and China agreed on a biannual bilateral consultation mechanism on the South China Sea.
The consultations are largely based on consensus and negotiations instead of bringing in a third party to mediate.
China had rejected the Permanent Court of Arbitration (PCA) ruling last July which was the result of a case on the territorial dispute that the Philippines submitted during the term of American lackey former President Aquino.
Under the BCM, foreign affairs and other officials from both countries will meet alternately in China and the Philippines once every six months. The next meeting in the second half of the year will be held in Manila.
The guidelines for the Code of Conduct (CoC) on the South China Sea that will eventually be the main document that will bind claimants on the resolving of disputes over the area was signed on the same day.
The agreement on the CoC was signed 15 years ago which shows how slowly the Asian consensus method in arriving at decisions work.
Nonetheless, the outline for a peaceful resolution of the maritime conflicts had been laid down and is expected to preempt future confrontations among countries which have overlapping claims on the South China Sea.
Among the guiding principles in the proposed CoC as well as the bilateral negotiations between the Philippines and China are the importance of maintaining and promoting peace and stability, freedom of navigation in and flight above the South China Sea, addressing territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned.
China had backed a “dual-track” approach in settling the sea disputes that is through negotiations between directly concerned parties, and for China and Association of Southeast Asian Nations (Asean) members to work together to maintain peace and stability in the South China Sea.
Also discussed were maritime cooperation and the possible establishment of technical working groups.
Chinese Vice Foreign Minister Liu Zhenmin said China hoped there would be some joint development in gas and oil before maritime disputes are ultimately solved.
“The word mechanism demonstrates the bilateral consultation will be institutionalized rather than just a once-off thing,” Liu said.
Rody knew when he talked with Xi that the negotiations between the Philippines and China would extend beyond his term with little or no resolutions to be reached going by the consensus process.
Thus Rody in raising the possibility of a unilateral oil exploration is apparently his way of haggling for the best concession that China can offer amid the ongoing bilateral negotiations.
Rody, in using the art of haggling, went for broke with Xi to get the maximum concessions in the subsequent negotiations.

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