Philippine Weekly Update

POLITICS

Senate President Franklin Drilon expects the upper chamber to pass by March 2014 the freedom of information bill, which grants public access to government information not including sensitive national security and diplomatic issues.

President Benigno Aquino III rejected the resignation of Energy Secretary Carlos Jericho Petilla who decided to quit after failing to meet his self-declared target to restore electricity in all typhoon-affected towns in Visayas by Christmas Eve. As of 24 December, electricity has been restored in 317 out of 320 affected towns.

The Office of the Presidential Adviser on the Peace Process said that political dialogue between the government and the Moro Islamic Liberation Front would be renewed to complete peace talks and submit a comprehensive peace treaty to the Congress in 2014. The parties will complete in January next year the Annex on Normalization, the final document required to conclude the drafting of the peace agreement to be integrated in a proposed Bangsamoro Basic Law.

The ill-gotten properties of the late National Bureau of Investigation (NBI) Director Jolly Bugarin have been forfeited by the government after 27 years of litigation. The Presidential Commission on Good Government reported that the forfeited assets, estimated to be valued at P6.3 million in 1986 when the case against Bugarin had been initiated, are now worth P120 million.

The Makabayan bloc at the House of Representatives is proposing a bill that exempts water services, electricity, and petroleum products from the value added tax.

Customs Commissioner John Phillip Sevilla held some of the country's lower courts responsible for protecting rice smugglers. Sevilla said these courts favor traders, whose rice shipments have been put on hold by the Bureau of Customs (BOC) for lack of import permits, by issuing injunctions against the BOC.

Presidential Communications Operations Office Secretary Herminio Coloma, Jr. said that the government is prepared to cushion the effects of future power rate hikes and explained that a substantial percentage of the 2014 P2.265-trillion budget has been set aside for social protection and social safety nets.

The Office of the President issued a directive transferring the post-entry audit function of the Bureau of Customs to the Department of Finance's Finance Intelligence Unit, which is headed by Internal Revenue Commissioner Kim Henares.

ECONOMY

The National Economic and Development Authority (NEDA) said that the growth of the domestic economy for the first quarter of 2014 would not match the 7.7-percent growth figure registered for the same period this year due to the billion-peso damage of typhoon Haiyan to the country's agricultural sector.

Government-owned Bases Conversion and Development Authority (BCDA) and the Incheon Free Economic Zone Authority have entered into an agreement to look at prospective opportunities between the South Korean international business district and the BCDA's P59-billion Clark Green City project, seen to be the ‘Southeast Asian region's international business hub' that could complement and create synergy with the Songdo International Business District.

The Bangko Sentral ng Pilipinas (BSP) reported that inflation in December may have likely increased to 3.8 - 4.7 percent from last month's 3.3 percent mainly due to higher electricity rates and food prices. Annual inflation for 2013, however, is expected to stay well within the official target range of 3 - 5 percent.

The Export Development Council will carry on with its $120-billion export target by 2016 until the adoption of a revised figure, amid the negative impact of recent calamities to the export capacity of the country. NEDA Director General Arsenio Balisacan remains optimistic to achieve the target in view of the Philippines' immense potential in the services and manufacturing sectors. The final targets and strategies will be released next year once the Philippine Export Development Plan for 2014 - 2016 is completed.

The National Committee on Intellectual Property Rights (NCIPR) seized P7.76 billion worth of counterfeit and pirated products in 2013, marking an increase of 47 percent from last year's record and exceeding not only the P6-billion target for 2013 of the NCIPR member-agency Intellectual Property Office but also its P7-billion target for 2014. The NBI contributed the largest chunk of seizures valued at P3.74 billion, followed by the Bureau of Customs at P3.2 billion; Optical Media Board, P784 million; and the Philippine National Police, P54.6 million.

In response to the earlier call of the Joint Foreign Chambers of Commerce of the Philippines to expand the mandate of the Philippine Economic Zone Authority (PEZA) in creating and governing domestic economic and export zones (DEEZs), the Department of Trade and Industry (DTI) expressed concerns that setting up DEEZs can be complex considering that PEZA is originally created to manage export-oriented ecozones and that the proposal needs further study. Trade Undersecretary Adrian Cristobal, Jr. said that, while they are not dismissing the JFC proposal, the DTI is considering other possible policy reforms such as exempting domestic enterprises from duties on the importation of capital equipment.

The BSP expects the Philippine peso to rebound shortly as remittances from overseas Filipino workers increase and certain foreign loans enter the country, offsetting the volatility caused by the recent unexpected move of the U.S. Federal Reserve to taper monetary stimulus.

According to the Philippine Exporters Confederation, Inc., the local garment sector will make an appeal in Washington for the approval of an act that seeks to permit locally manufactured apparel that make use of imported American fabrics to be exported to the U.S. duty-free. Buyers Association of the Philippines President Robert Young said that the enactment of the bill will increase local garment exports to the U.S. by 15 - 20 percent and generate about 200,000 jobs.

The National Statistics Office (NSO) reported that 2.99 million Filipinos out of the country's 40.96 million-strong labor force are unemployed this year. The unemployment rate for 2013 increased by 7 percent from last year's figure. The NSO also reported that about 7.5 million Filipinos out of 37.98 million with jobs are considered underemployed. The underemployment rate for this year stood at 19.8 percent, slightly better than last year's 20-percent figure.

The Philippine Stock Exchange index managed to register gains for the fifth consecutive year and closed at 5,889.83 points, 1.3 percent higher than last year's closing of 5,812.73 points.

As of November this year, domestic liquidity ballooned to P6.7 trillion, 36.5 percent higher than the level a year ago.

Asian Development Bank President Takehiko Nakao is confident that emerging Asian economies will withstand the impact of reduced U.S. monetary stimulus following the Federal Reserve's move to taper its asset purchases.

Total equity deals in the Philippine Stock Exchange this year reached P175 billion, compared to last year's P219 billion. The level is expected to normalize back to the P200-billion level in 2014 as markets gradually recover from the effects of the U.S. Federal Reserve's tapering of monetary stimulus.

The Bureau of Treasury is set to sell treasury bills and bonds worth P135 billion in the first quarter of 2014, marking a rise of 10 percent from the P122.96-billion government securities sold last year in the same period.

The Philippine Exporters Confederation, Inc. estimates a 20-percent expansion in electronics and semiconductor exports in 2014 due to the steady demand for these commodities abroad and the market entry of new foreign firms including Canon, Inc., Epson, and Brother Industries. Electronic exports for this year are expected to amount to $20 - $21 billion, down from $22.5 billion in 2012.

Oil firms have raised oil prices at P1.15 per liter for gasoline, P0.75/L for diesel, and P0.60/L for kerosene, amid strong international demand for fuel. A net increase for major fuel products in 2013 stood at P3.59/L for gasoline and P4.68/L for diesel.

Customs Commission Sevilla observed that the bureau's unsystematic and unstandardized import valuation system has resulted in lower revenue collections under the Aquino administration. He also admitted that the BOC would likely miss its 2013 collection target of P340 billion.

The Bureau of Internal Revenue reported that excise-tax collections from tobacco and alcohol products have already passed the 2013 official target of P85.5 billion. Sin tax collected from January to November this year stood at P91.6 billion.

The NSO reported that total imports in October this year decreased by 8.6 percent to $4.824 billion in from $5.277 billion in the same month a year ago due to the decline in purchases of electronic products, chemicals, minerals, plastics, industrial equipment, and other commodities.

BUSINESS

Nueva Ecija Representative Estrellita Suansing has filed a bill that imposes a 10-percent ad valorem tax on soft drinks and carbonated drinks sold in bottles and other tight containers. The bill seeks to allocate revenue collected to the rehabilitation fund for typhoon-affected areas in Visayas as well as curb consumption of said beverages argued to increase the risk of developing various health problems.

San Miguel Corporation looks at expanding its energy portfolio through more acquisitions and offering its power generation business to the public in 2014 by introduction of its controlling stockholder Top Frontier Investment Holdings Inc., a listing already approved by the Philippine Stock Exchange and the Securities and Exchange Commission.

The Pasay City Council is set to proceed with the city's joint venture agreement with SM Land, which bagged the local government's P54.5-billion reclamation project, after previously recalling the award of contract.

Malaysian firm Ranhill Berhad may lose its petroleum exploration contract in the Sulu Sea with the Department of Energy for non-compliance with work commitments.

INFRASTRUCTURE

Public-Private Partnership Center Executive Director Cosette Canilao said that the agency, if requested to participate, is ready to assist in the infrastructure reconstruction efforts of the government in Haiyan-affected areas.

AGRICULTURE

The United Coconut Association of the Philippines reported that the country exported 133,876 metric tons (MT) of coconut products in copra terms last month, marking a year-on-year growth of 64 percent, despite the large number of coconut trees damaged by typhoon Haiyan. The volume of coconut exports for the first 11 months this year reached 1.84 million MT, 36 percent higher than last year's export volume for the same period.

The government is looking at implementing an abaca-integration project that intercrops abaca with other farm crops and vegetation in the Leyte-Samar region, which has surpassed Bicol as the leading abaca producer in the country. A similar project is already implemented by the Fiber Industry Development Authority and funded by the Bureau of Agricultural Research in abaca farms in Bicol.

ENERGY

Senator Ferdinand Marcos, Jr. is pushing for his proposed bill on the promotion and development of hydrogen as an alternative and sustainable source of power, amid electricity and petroleum cost hikes. The lawmaker said that fuel hydrogen is processed from deuterium, which is abundant in the Philippines. The bill seeks to create a hydrogen research and development center, under the Department of Science and Technology.

The Supreme Court has issued a 60-day temporary restraining order stopping the Manila Electric Co. (Meralco) to exact its P4.15/kwh electricity rate increase. Meralco said it would refund consumers who have already paid their bills reflecting higher electricity rates.

The Makabayan bloc in the House of Representatives proposed a bill that seeks to repeal the Electric Power Industry Reform Act to fight against the alleged power cartel in the market and protect the consumers from expensive power costs.

The Energy Regulatory Commission, jointly with the Department of Energy and the Philippine Electricity Market Corporation, issued a resolution lowering the price cap for wholesale electricity sold at the spot market at P32,000 per megawatt hour (mWh), from P62,000 mWh.

The Philippine Independent Power Producers Association is warning of more power shortages following the decision of power regulators to lower the maximum price for electricity sold at the spot market. The group explained that the price reduction could discourage them from repairing, upgrading and building more power plants.

PROJECT BIDS

The Department of Transportation and Communications has launched its invitation to bid for the P2.5-billion Integrated Transport System Project-Southwest Terminal, a public-private partnership project that involves the creation of a public transportation hub in southern Metro Manila that will connect passengers from Cavite to urban transportation vehicles like the Light Rail Transit Line 1, public buses, jeepneys, and taxis.

TYPHOON

The National Disaster Risk Reduction and Management Council reported that, as of 29 December 2013, the partial and official death toll from typhoon Haiyan rose to 6,155, with more than 16 million people affected.

ASEAN

Trade Undersecretary Ponciano C. Manalo, Jr. said that the Philippines is increasingly seen by foreign investors as a regional hub in investments in areas like retail, automotive parts exportation, and airport maintenance, in view of the ASEAN Economic Community in 2015.

The mining industry within the ASEAN region has an immense potential, with Indonesia being the world's largest producer of nickel and largest exporter of refined tin; the Philippines having mineral resources valued at about $850 billion; Vietnam holding some of the world's largest bauxite reserves; and Myanmar boasting of significant natural resources, including copper, zinc, tungsten, tin, precious stones and industrial aggregates. ECCP External Affairs Vice President Henry J. Schumacher noted that, in order for the Philippines to realize its potential, the present Philippine mining law should be retained and complemented by the implementation of an internationally competitive fiscal regime to provide a stable regulatory environment that will increase investor confidence. He also said that the Philippines needs conformity of local ordinances to national policies, as well as respect for vested interests under existing agreements.

House Speaker Feliciano Belmonte, Jr. expressed confidence that the government is on course for the ASEAN Economic Community in 2015. Belmonte said that several priority economic bills including measures on cabotage law amendment, rationalization of fiscal incentives, and land administration reform, among others, would help the country maintain its global competitiveness and readiness for regional integration. Belmonte said he would also push for a well-defined national policy on competition, the revision of the Foreign Investment Act and the Foreign Investment Negative List, the amendment of the restrictive economic provisions in the Constitution, and a review of the Public Services Act, among others.