President's Message
Atty. Benedicta Du-Baladad Message from the President:

Benedicta Du-Baladad


To FINEX members and friends,

PRESIDENT’S REPORT
November 2017 Issue

We are now on the final stretch of 2017. This year has been one of the busiest and exciting for both FINEX and the country.

Earlier this month, our country was once again placed in the limelight as we hosted this year’s ASEAN Summit. The summit provided us to showcase what our country can share to the world and the creativity of the Filipino people. Indeed, the recent hosting of the ASEAN summit placed our country

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Uncertainties: bullish with caution
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Flor G. TarrielaBy Flor G. Tarriela

Business World (FINEX Folio)
February 24, 2017

Uncertainties: bullish with caution

FINEX Folio is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Friday in BusinessWorld, opinion section.

ONE THING certain in the cross-over from year 2016 to 2017 is that we have more uncertainties this year -- uncertainties that once discovered will call for us to review the strategies that we have crafted for the year.

Two major external factors last year contribute to the uncertainties this year.

First, the Trump administration has sent a clear signal that he will live up to his campaign promises of 1) building a wall; 2) curtailing immigration; 3) protectionist trade policy, and 4) bringing back jobs to America. Three out of these four are what the Philippines and Asia would closely be monitoring.

In the United States, there were about 3.5 million Filipino immigrants in 2013, a substantial level of trade business and a lot of manpower outsourced to our country via business process outsourcing (BPO) companies. Overseas Filipino workers and BPO remittances contributed $26.9 billion and $23 billion, respectively, and are considered as anchors for the expected positive outlook by international investors on the Philippine economy.

Should we worry? The demographics of remitters in the US are different from remitters in other countries. They are in the higher value chains, which, it is safe to assume, are very stable. For the past years, we have improved our trade dealings with our Association of Southeast Asian Nations (ASEAN) neighbors, which is one of the main objectives of the ASEAN integration -- hence, decreasing reliance on trade outside the region. But admittedly, we still have a sizeable trade with the USA, exports at $8.645 billion & imports at $7.217 billion. On the BPO service industry, with the threat that jobs will be brought back to America, we understand that the expansion plans of the BPO companies crafted last year will still be implemented this year. But any additional expansion plans are on hold awaiting developments. However, the cost of doing business is approximately 4 times higher in the USA versus in the Philippines.

Second, Brexit, in the process of crafting a master plan on the exit mechanism of the United Kingdom from the European Union. The Brexit in itself has been discounted but not to the fullest. What is creating the uncertainty is the spill over effect of this populist sentiment in the coming political elections in some countries in Europe. If this sentiment escalates it will increase the probability of other European countries opting out of the current Union. We concern ourselves as the European community is a big variable in the equation that drives the world economy, a rightful aspiration of the Asean member countries which is embedded in the Objective in the Asean integration.

Both of this external factors bring about greater uncertainty impacting the global economy. The pronouncements coming from the USA may have broad effects in prices of goods and commodities that will be inflationary, hence lead to an increase in interest rates, which may happen on top of a view that interest rate will increase due to the their stronger economic performance. The uncertainty in the path of the European Union may lead to the decline in economic growth of each individual member countries but consequently reflect as a drag globally.

However, economic outlook in the Philippines remains “favourable with a positive outlook” as a concensus among economists and businessmen. We can still expect a high 6% GDP growth rate, one of the highest in Asia.

Not a surprise to many, the pivot of President Duterte in increasing and strengthening the relationship with China will undoubtedly give a positive economic pay-off to the Philippines. We may expect, from and with China an increase in the 1) trade activities specially export, 2) more tourists, 3) spill over of manufacturing activities; and 4) a share of the infra structure projects e.g high speed rail system that China is looking to develop in the region, and not to mention the assistance in low cost funding of the infrastructure projects of the Duterte administration.

This move may mitigate any potential shortfall from the remittances and BPO service centers. This may even increase the push for the other PPP projects that will be rolled-out this year. We may even see our GDP at all time high (even with the external uncertainties), especially with the timely passage of the Comprehensive Tax Reform, which is a net revenue gain for the government. Such gain maybe used in funding the expansionary fiscal stand that the government has announced. Once the fiscal tap has been opened, we may even see a GDP growth above 7%.

Incidentally, at a recent dinner given by Icon Wash Sycip in honor of US Ambassador Sung Y. Kim, PNB Director Wash was strategically seated between the US Ambassador and Chinese Ambassador Zhao Jianhua. Ambassador Kim even commented that the main menu was specially thought of with “US Angus beef cooked in Asian Chinese Style.”

We are optimistic in our business plans with a bit of caution that will have elbow room to adjust and be flexible to meet the fast changing variables brought about by developments.... cautiously bullish as we face 2017. This we are certain.

Flor G. Tarriela is Chairman of PNB and a Director of FINEX. She was formerly Undersecretary of Finance and the First Filipina Vice President of Citibank N.A. She is a natural farmer whose advocacy is “No Filipino Should be Hungry” and co-authored gardening books “Ooops, DON’T THROW THOSE WEEDS AWAY! and THE SECRET IS IN THE SOIL.

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