Business News:
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ADB bats for ‘selective’ capital controls As developing countries brace for impact of looming United States rate hike
By Prinz P. Magtulis (The Philippine Star)
Updated September 26, 2015 - 12:00am
MANILA, Philippines - “Selective” capital controls could be imposed by countries in developing Asia – including the Philippines – in order to manage the impact of the upcoming US interest rate hike while boosting growth, the Asian Development Bank (ADB) has suggested.
“To deal with monetary policy dilemma between stabilizing the domestic financial sector and responding to the need for domestic demand stimulation, regional authorities can… (adopt) careful macroprudential policy that selectively controls destabilizing capital flows,” the ADB said in a report released Tuesday.
“Imposing filters on several types of debt flows can make independent monetary policy more effective,” the report updating the Asian Development Outlook said.
In particular, the Manila-based lender said its studies showed that controls to capital flows in bonds, money market commercial and financial, and derivatives have been “effective” in dealing with spillovers from central bank actions abroad.
The policy recommendation came after the multilateral organization slashed its growth forecast for developing Asia to 5.8 percent this year from the original six-percent forecast in March.
Slowing growth would have required lower interest rates, something when done would make economies more unattractive to capital seeking higher returns. As a result, the ADB said capital controls could come in handy.
“Regional monetary authorities need more scope for conducting monetary policy that is more independent of conditions and policy in the US without jeopardizing the stability of national finance,” the report stated.
Last week, the US Federal Reserve kept its near-zero policy rates in place since 2006 despite recent improvements in the US economy that could have warranted higher interest rates to control financial stability.
It cited, among others, the rout in emerging markets in recent months, especially following China’s devaluation of its currency, the yuan, which effectively signaled weakness in Asia’s largest economy.
The Philippine peso, specifically, has weakened versus the greenback by about five percent since the end of last year. Other regional currencies have slumped as well as capital seeks refuge in the US dollar.
In a briefing last Tuesday, ADB principal economist Joseph Zveglich Jr. said Asian currencies could tumble further as long as the US keeps the market waiting for its much-anticipated hike in rates.
“We are still anticipating for something to happen in the coming months or before the end of the year. We see this more as a question of “when” not “if,” Zveglich told reporters.
“While this [US rate hike] is something that will create volatility, we do not expect it to come as a shock to the region,” he added.
On its policy-meeting last Thursday, the Bangko Sentral ng Pilipinas (BSP) kept its policy rates unchanged at four and six percent, citing risks from the El Nino phenomenon which could tilt record-low inflation higher in the months to come.
The BSP also cited the persistent weakness in the global economy and the volatility in the world markets in justifying its decision.
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ADB bats for ‘selective’ capital controls As developing countries brace for impact of looming United States rate hike | Business, News, The Philippine Star | philstar.com
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Fitch backs BSP regulation to manage real estate risks
By Lawrence Agcaoili (The Philippine Star)
Updated September 26, 2015 - 12:00am
MANILA, Philippines - Fitch Ratings believes the proactive supervision and regulation being undertaken by the Bangko Sentral ng Pilipinas (BSP) would help contain macro-prudential risks stemming from the real estate market.
Fitch welcomed the plan of BSP to release a residential real estate price index (RREPI) later in the year since the lack of data on property prices and affordability indicators make it difficult for the debt watcher to assess the effect of credit growth on the real estate market.
“The proactive supervision and regulation of the BSP, particularly on the introduction of real estate stress tests and caps on mortgage loan values relative to collateral, may help to contain risks,” the debt watcher said.
It noted private sector credit is still growing at a brisk pace despite moderating to 14.1 percent in end June from 19.9 percent in end-2014.
Data from Colliers International show average land values in the Makati Central Business District jumped by more than 50 percent since end-2012.
Fitch, however, said relatively low vacancy rates and strong growth in rents suggest some fundamental support for current price levels.
As early as 2014, the BSP was contemplating on launching the index that would track property prices in Metro Manila and nearby provinces. The monitoring would be expanded to cover other key cities in the country.
The RREPI would help the central bank address concerns of a “bubble” in the country’s booming residential real estate sector brought about by the improving purchasing power of Filipinos.
BSP Deputy Governor Diwa Guinigundo said a statistical index like RREPI would help make a general characterization of the real estate sector and the likely path of property prices.
Likewise, it would also be useful to produce a decomposition into residential and commercial property prices which are driven by different dynamics.
He pointed out the country continues to have a large backlog in the housing sector while the capacity of the clients has increased due to overseas remittances, higher employment, and the business process outsourcing (BPO) sector.
“The risks of asset price inflation appear manageable and have, in fact, been addressed by a number of macroprudential measures,” he said.
He explained demand for commercial space has reportedly been shooting up as the robust economic tempo has generated great interest from investors.
“But again, the various macroprudential measures and careful monetary stance of the BSP have helped support the sustainability of this segment,” he added.
According to him, key property builders and developers are now more risk-conscious and, therefore, have conducted themselves responsibly, while banks engaged in real estate have been advised to ensure their capital base is not unduly challenged by their exposure in real estate.
The BSP stepped up its watch over the real estate sector as early as 2012 by ordering banks to disclose more comprehensive reports on their exposures to the property industry.
The pre-emptive macroprudential policy measure approved by the Monetary Board required stress tests for banks to determine if their capital will be enough to absorb credit risk that may arise from their exposure to the property sector.
The BSP explained universal, commercial, and thrift banks would need to meet a capital adequacy ratio of 10 percent of their qualifying capital following the stress test results.
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Fitch backs BSP regulation to manage real estate risks | Business, News, The Philippine Star | philstar.com
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DTI to institutionalize Industry Development Council
By Kathleen A. Martin (The Philippine Star)
Updated September 26, 2015 - 12:00am
MANILA, Philippines - The Department of Trade and Industry wants to institutionalize the Industry Development Council so succeeding administrations would not be able to hamper improvements being undertaken to upgrade industries.
“There’s already a draft executive order submitted to Malacanang,” Trade assistant secretary Rafaela Aldaba said.
This is only one of the implementation challenges of the country’s new industrial policy which was introduced to create more and better jobs, and reduce poverty at the same time.
“We need to strengthen our institutional coordination, there are a lot of agencies with whom DTI has to coordinate with for the implementation of our industrial policies,” Aldaba said.
“Of course, we know all the different agencies have varying mandates. So how to reconcile these varying mandates is truly a challenge for us,” she continued.
The new industrial policy, meant to improve competitiveness and productivity, tasks the government to create a proper environment for private sector development.
The phases of development of the industries such as manufacturing, agribusiness, and services until 2025 have been planned under this new policy.
But Aldaba stressed the creation of programs under the industrial policies remains a difficult task for regulators and concerned agencies as measures should be specific to one industry.
“In crafting our industry support programs, there is no one-size fits all approach. We need to fully understand each industry in order to come up with strategic measures so this would enable us to tailor the measures to specific circumstances,” Aldaba said.
At the same time, she noted there should be focus on small businesses which need all the support they can get in terms of financing and access to technology.
“We need to create more space for our micro, small and medium enterprises because up to now, it’s still the large enterprises that control bulk of the value-added services and the employment,” Aldaba said.
“For the MSMEs, most of the issues are access to financing and access to technology that we need to address,” she said.
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DTI to institutionalize Industry Development Council | Business, News, The Philippine Star | philstar.com
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EU urges Philippines companies to maximize GSP+ scheme
By Richmond Mercurio (The Philippine Star)
Updated September 26, 2015 - 12:00am
MANILA, Philippines - The European Union has asked Philippine companies to step up efforts in taking advantage of the EU’s Generalized System of Preferences Plus (GSP+) to fully utilize the benefits of the scheme.
In a recent dialogue between EU officials and Philippine companies, the European Chamber of Commerce of the Philippines (ECCP) said the EU urged the Philippine business community to maximize and reap the full benefits of the GSP+ status grant.
While significant improvements have been seen in machinery and agri-food industries, the EU said there are still much more untapped development potential in trade following the GSP+ status grant.
The EU noted that despite the promising benefits of the EU GSP+ in trade, the Philippines pales in comparison with India, Bangladesh, and Pakistan which are seen to be the largest EU GSP+ users.
The Philippines became the only beneficiary country of the EU GSP+ in Southeast Asia after securing the grant status in December last year.
The EU GSP+ scheme allows beneficiary countries to export 6,274 products to any of the 28 members of the EU bloc at zero tariff for a period of 10 years.
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Products that may avail of the duty-free access include coconut and marine products, processed fruit, prepared food, animal and vegetable fats and oils, textiles, garments, headwear, footwear, furniture, umbrellas and chemicals.
Prior to securing EU GSP+ status, the Philippines was a beneficiary of the regular GSP program which covered 6,209 products, with 2,442 products subject to zero duty and the rest subject to lower tariffs.
The EU, however, stressed the EU GSP+ grant comes with a price, as beneficiaries are expected to comply with 27 international conventions as well as the EU reporting and monitoring procedure.
The ECCP said the Department of Trade and Industry already expressed its commitment in helping the Philippine company expand and diversify product lines.
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EU urges Philippines companies to maximize GSP+ scheme | Business, News, The Philippine Star | philstar.com
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Military and Defense News:
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Spending ban may delay PHL air support in South China Sea dispute – SBMA's Garcia
September 26, 2015 12:36am
Plans to renovate an air base at Subic Bay, enabling Philippine fighter jets to respond quickly to any Chinese moves in the disputed South China Sea, may face delays due to a spending ban before general elections, a senior official said on Friday.
New fighter jets and two frigates are to be stationed at the former US naval facility in Subic Bay northwest of the Manila from early next year, the first time the massive installation will have functioned as a military base in 23 years.
Subic Bay's deep-water harbor lies on the western side of the main Philippine island of Luzon, opposite the South China Sea, and is about 130 nautical miles (240 km) from Scarborough Shoal, a rocky outcrop China seized control of in 2012.
China has built seven artificial islands on submerged shoals and outcrops in the area, which it says is part of its territory, and is believed to be constructing three airfields there.
Roberto Garcia, chairman of Subic Bay Metropolitan Authority, - which is overseeing the conversion of the industrial and commercial complex - said the military had to move quickly to repair the base's airfield because a pre-election ban on military spending kicks in March.
The Philippines holds national elections in May.
"That is my concern, if the military does not get funding for the repairs, the air and naval bases may be delayed," Garcia said, adding that South Korea was due to deliver the first two fighters in early December.
An air force general, who declined to be named because he was not authorized to speak to the press, said the government had yet to respond to a request for 100 million pesos ($2.14 million) to refurbish Subic's airfield.
The Philippine Air Force has been allocated about 10 percent of the 200-hectare airport facilities to house a squadron of 12 FA50 light fighters for maritime security missions.
Once one of the biggest U.S. naval facilities in the world, Subic was shut in 1992 after the end of the Cold War.
"With the situation in the South China Sea right now, it looks like the presence of foreign troops will increase in coming months," Garcia said, adding that approval by the Supreme Court of a new military pact with the United States would change the situation. A ruling is expected next month.
— Reuters
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Spending ban may delay PHL air support in South China Sea dispute – SBMA's Garcia | News | GMA News Online
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Philippine Navy mock amphibious assault
Posted on September 25, 2015
Philippine Navy and Marine units conducted a mock amphibious assault in Ternate, Cavite on Thursday, as part of the five-day Exercise “PAGSISIKAP” 2015 which started Monday, Navy public affairs office chief Cmdr. Lued Lincuna said.
“This mock amphibious raid was a combined special operations designed to put into test, evaluate and further enhance the capability of the Fleet-Marine personnel in the conduct of an integrated attack from its initiation from the sea through naval platforms, to the insertion of troops and infiltration into the hostile terrain, to demolition raid and close-quarter combats and finally to the extraction of the VIPs from the enemy-laden environment,” he added.
Aside from war-fighting capabilities, it was also an avenue for the troops to run through the tactical combat casualty care by air and water that comprised of life-saving techniques and strategies for providing first aid and care on the battlefield for combat casualties.
Exercise “PAGSISIKAP” 2015 is the 12th iteration of the annual Fleet-Marine amphibious exercise conducted by the PN in order to develop and achieve an amphibious-capable and credible force and enable the Fleet-Marine forces to assert more efficiency in the conduct of its mandated task. (PNA)
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Philippine Navy mock amphibious assault
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