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LONDON, Jan 21 (Reuters) – The International Monetary Fund will sharply cut growth forecasts this month and the world will not return to strong growth for two or three years, IMF Managing-Director Dominique Strauss-Kahn said on Wednesday.

“Things are not improving,” Strauss-Kahn said in an interview with the BBC’s “Hard Talk” programme. The International Monetary Fund’s last forecast was “not that good” and a new forecast, to be released in a few days, will be “even worse”, he said.

Asked about the fund’s forecasts for the world, U.S. and European economies, Strauss-Kahn said he did not know exactly how much these would be cut, but added: “I’m afraid that at least half a point or one percentage point down.”

In its November forecast, the IMF projected world output would grow by 2.2 percent in 2009 while the United States would shrink by 0.7 percent and the euro area would shrink by 0.5 percent but the credit crunch has tightened its grip since then.

Asked if the downwards revision meant the IMF expected a contraction in U.S. and European economies of between one and two percent this year, Strauss-Kahn said: “There is going to be this kind of contraction in the U.S., in Europe, including the UK.”

Emerging countries, while still growing, would also do worse than expected, he said. “China, India, Brazil, other emerging countries are going to experience very slow growth.

“Altogether, this first half of 2009 will be bad, the second half may show some improvement, but recovery can begin only at te beginning of 2010,” he said. “We are not going to go back to a high rate of growth before two or three years,” he added.

Strauss-Kahn said the IMF may need more funds in six months to finance bailouts of countries that fall victim to the financial crisis.

“The IMF has enough money today to deal with the countries coming today. If the crisis goes on, which is the most probable way, then down the road, in six months from now, we will need more money,” he said. “That’s why we need to organise now the way to have more money in six months, because it won’t be done overnight.”

Cris Evert Lato
Cebu Daily News

CEBU CITY, Philippines – About 30 percent of overseas Filipino workers (OFWs) are working in the United States, according to research group Ibon Foundation.

At least 52 percent of OFW remittances come from the US or are sent through US intermediary banks.

OFWs are expected to be affected by the global financial crisis affecting the US and other First World economies like Japan and Europe.

Some experts say the health and education sectors won’t be affected, sparing Filipino nurses and teachers in the US.

But University of San Carlos economics professor Fernando Fajardo thinks otherwise.

“Hospitals in the US which plan to expand or increase labor force may freeze business growth because banks are not willing to loan money because of the credit crunch,” said Fajardo, former assistant regional director of the National Economic and Development Authority in Central Visayas.

The situation may be used to exploit Filipino labor force abroad, warned Ibon Foundation executive director Jazminda Lumang.

“Cheaper OFW employment will lead to slower remittances to dependent families in the Philippines. This will lead to lower consumer spending and slower business,” said Lumang.

Robust real estate

Real estate, whose growth is fueled by OFW remittances, may also be affected, said Fajardo.

The Bangko Sentral ng Pilipinas reported that OFW remittances reached $12.2 billion from January to September 2008, a 17-percent increase compared to the same period last year.

This is one factor that boosts the confidence of most real estate companies in Cebu to continue their projects.

AboitizLand Inc. is expanding Kishanta Zen Residences in Talisay City, while construction is ongoing for a condominium building, Persimmon in Barangay (village) Mabolo, Cebu City.

Paramount Property Ventures Inc. (PPVI) recently launched its multi-million-peso development, Fonte de Versailles, in Minglanilla town, southern Cebu.

“Real estate is still a better investment because it’s on a solid ground. Our sales from international Filipino markets come from all over the world such as US, Middle East and Europe,” said Pia Mantecon, AboitizLand vice president for marketing, sales and customer service.

Filipinos working in other countries in Asia and Europe will continue to send money to their families, ensuring the sustained growth of the real estate industry.

“Thirty percent of the money sent by OFWs is invested in real estate. In general, we don’t see a material decline,” said PPVI business development consultant Boler Binamira.

A robust real estate sector is expected next year due to the rising demand for business processing outsourcing (BPO), tourism and OFWs, according to CB Richard Ellis (CBRE), an international commercial property and real estate services adviser.

“While it continues to expand its tourism infrastructure such as airport, hotels, resorts and retail facilities to accommodate the growing visitor arrival, the growing business community in Cebu mainly located in the Asiatown IT Park and Cebu Business Park has added new stimulus to the rapid growth and development of Metro Cebu,” said CBRE chairman Rick Santos.

Santos said opportunities for local and international developers are vast in the country, and Cebu specifically, due to lower operations cost.

“As companies’ revenues are under pressure, multinationals look to save costs. They move to the Philippines as it is easier to save a dollar than make dollar,” he said.

Labor is another main driver of BPO expansion as graduates from neighboring provinces such as Bohol, Negros Oriental and Leyte come to Cebu to find work.

Cebu will continue to be a leader in retail, hotel-resort and industrial segments.

But the demand for industrial space in Cebu will be slow because occupancy cost, including high power cost, limits the entry of most multinational companies, said CBRE general manager Trent Frankum.

But this low demand will be compensated by vibrant growth in the office, retail and hotel resort segments.

Frankum said a total of 115,623 square meters of new office space was scheduled for completion across Metro Cebu by the end of 2008.

“Anticipated slower growth in the call center segment will be compensated by high-value services such as back-office offshoring and outsourcing,” he added.

One indication that the real estate business is doing well is the stable transactions of land prices in Cebu and other parts of the country, said Frankum.

This means that there is still a robust medium to long-term growth for the real estate in the country despite worldwide fear of an economic slowdown.

Retail slowdown

CBRE expects a regional expansion of malls in Metro Cebu due to BPO and tourism growth.

On the other hand, Professor Fajardo said retail sales will slow down as people tighten their belts to brace themselves for the worse.

“There may be a lot of promos in malls but that goes to show that business is not good because if it’s doing well, they won’t hold bargain sales that often,” he said.

Although she admits a slowdown, Melanie Ng, president of Philippine Retailers Association Cebu Chapter, said retailers are still optimistic that people will buy during the holiday season.

“The buying power of Filipinos will still be there. Maybe it will not be that aggressive but Filipinos will still buy because it is part of our custom to buy something for Christmas,” she said.

For Jun Yap, president of Junrex Cellphones and Accessories Inc., sales of low-end mobile phone units have started to pick up again.

“If before we need to sell 1,000 cellphones to earn P1 million, today we need to sell 3,000 cellphones to get P1 million. We sell thrice as much to maintain growth,” Yap said.

Tourism still promoted

For Cebu’s tourism industry to grow, constant innovation from travel agencies and the Department of Tourism (DOT) is needed.

The decrease in the number of Korean, Japanese and US tourists is not yet alarming but players need to be creative and innovative to sustain the market, said Jennifer Franco, chairperson of National Association of Independent Travel Agencies Cebu Chapter (Naitas Cebu).

Franco said she noticed a change in the spending habits of foreign tourists like the Japanese.

“The Japanese market is now looking for middle-priced hotels, an indicator that they are careful with spending in line with the crisis,” she said.

Tourism Secretary Joseph “Ace” Durano, however, still projects industry growth nationwide from five to seven percent by the end of 2008.

Durano said marketing efforts are intensified in Asian countries which are nearer the Philippines. About P200 million out of the DOT’s P1.2 billion for 2009 will be spent on promotional campaigns to encourage inter-regional travel and strengthen the country’s position as a destination of choice.

Around P160 million will be spent for the country’s participation in the World Exposition in Shanghai, China in May 2010.

The remaining P40 million will be used to intensify market development efforts in the Asia Pacific region to promote medical and wellness tourism and shopping. It will also be used to develop English as a second language and vacation home investments.

Tourism arrivals went up from 3 million in 2007 to 3.4 million this year. The challenge is now how to increase hotel and resort rooms to accommodate more tourists.

According to CBRE, there were 4,585 DOT-accredited hotel rooms in Metro Cebu in 2007. The number went up to 7,384 in 2008. Another 1,930 rooms are expected to be added by 2009, noted CBRE.

Despite grim projections elsewhere, Efren Carreon, Neda-7 assistant regional director, said the global crisis does not have to mean a negative outcome in all sectors of the economy.

For some, it can even be advantageous.

Carreon cited stabilized food prices and a decrease in the cost of consumer goods as positive effects as oil price in the world market continue to fall.

BPO players in Cebu will benefit from the crisis as global companies undergo cost-cutting measures and be inclined to outsource operations, he said.

Bonifacio Belen, executive director of Cebu Educational Development Foundation for Information Technology (Cedf-IT), agreed.

He said there is no objective data which shows that the “protectionist mindset” of US President-elect Barack Obama will result in the decline of available BPO careers.

“The ultimate reason (for companies) to be convinced to locate in a certain city is reduced costs and that points to us,” said Belen.

(Part 3: Survival and saving tips for companies, families and students)

Kristine L. Alave
Philippine Daily Inquirer

MANILA Philippines—The Labor department will conduct surveys and meetings with companies in export zones next month to gain a full picture of how the global credit squeeze affects them and to craft a plan to help their workers.

This was disclosed recently by Labor Secretary Marianito Roque, who noted that the Labor department is closely monitoring the employment situation in the export zones.

“The export industry is definitely affected because it is dependent on credit,” Roque said.

“We are going to talk to locators and see who are vulnerable. We are concerned about the Taiwanese and Korean locators,” he added.

Both Taiwan and South Korea are export-oriented economies that were heavily battered by the global economic meltdown.

He noted that he had already ordered his regional directors to make arrangements with locators and draft initial reports.

Recently, Texas Instrument, the world’s leading chip manufacturer laid off 400 workers due to reduced orders from the overseas market. Roque said the company has promised them to take back the workers once orders pour in.

Labor groups also said export zones in Cavite and Cebu have started to cut down working hours and lay off hundreds of workers because of slow down in demand from United States and Europe, their traditional markets that were crippled by the financial crunch.

Many of the companies that have shed workers and production hours belong to the semiconductor and garment industries.

Asked on the total figure of the workers that have been laid off from the export zones, Roque said DOLE has no official number yet.

He said it will depend on the reports from the January meetings and surveys.

Roque said he is not alarmed by the reports of mass retrenchment, although he admitted that there would be more job losses as the worldwide recession deepens.

But Roque said a significant rise in unemployment would be unlikely as it would mean that the pump priming initiatives in major economies have failed.

“There will be job losses. I would be lying if I say there won’t be any. But it is not massive,” Roque said.

Roque also noted that non-export oriented and local industries will not be severely affected by the recession.

“The local industries catering to local market won’t have any problems because it is cash-based,” the Labor chief explained.

Although employment in the construction sector slowed down, Roque said new jobs were created in the retailing sector.

Agence France-Presse
Inquirer.net

MANILA, Philippines — Jobs in the Philippines’ export sector will be at risk next year as the global financial crisis worsens, Labor Secretary Marianito Roque warned Monday.

His comments came after Texas Instruments, one of the largest employers in the local electronics industry, said it will lay off 400 workers, or nearly 20 percent of its work force in the northern resort of Baguio, from January 15.

Roque told reporters labor officials next month will visit the country’s export-processing zones, where most of the electronics companies are based.

Roque said the authorities did not know how many workers stood to lose their jobs. Electronics firms employ more than 300,000 people and account for nearly 70 percent of the country’s total export value.

Roque said a government study showed the sector would be among those to be hit hard next year as recession grips the United States and other key western export markets.

“Definitely the export industry will be affected,” Roque said.

“The export industry is dependent on credit so the effect will surely be considerable,” he added.

Philippine exports plunged 14.8 percent from a year earlier to $3.97 billion in October, the latest available official figures.

Ronnel Domingo
Philippine Daily Inquirer

MANILA, Philippines – Toledo Mining Corp. said it had laid off some 600 workers and contractors while some directors took pay cuts as dampened demand took its toll on nickel operations in the Philippines.

According to an industry source, the 600 workers comprise 90 percent of the company’s workforce at the Berong nickel mine in Palawan.

TMC has a 56.1-percent stake in the Berong nickel project, which it shares with partners Atlas Consolidated Mining and Development Corp. and European Nickel Plc.

In an interim report covering six months to September, company chair Reginald Eccles said the management resolved “to manage the company’s assets on the presumption of an extended period of poor demand and low nickel prices.”

“The remaining staff in the Philippines now comprise a core team of sufficient skill mix to manage our nickel resources, to maintain the Berong mine and plant in good order and, very importantly, to convert the MOUs with Jiangxi into legally binding agreements and advance value added processing trials,” Eccles said.

The Berong partners have entered into memorandums of understanding with China’s Jiangxi Rare Earth and Rare Metals Tungsten Group Co. Ltd., mainly to finance and build a jointly owned nickel processing plant.

Also, Eccles said, TMC’s four non-executive directors have agreed to a 20-percent reduction in fees “as a demonstration of support for these harsh but essential cost-cutting measure.”

He said that the period April to September was Berong mine’s best in terms of record ore production, volume sales and progress in on-site ore processing.

However, these months were also the “worst because of the precipitous decline in Chinese demand for direct shipping ore, and a near halving in the Cash LME (London Metal Exchange) nickel price.”

Eccles said the price dropped to $15,750 per ton by end-September from $30,000 at the start of April.

“The price has continued to decline … to approximately $10,000 per ton (in December),” he added.

In the period under review, Berong mine shipped 370,355 wet metric tons (WMT) of laterite nickel ore at an average grade of 1.53 percent to customers in China and Australia. It was 5 percent higher than deliveries made in the same period in 2007.

The volume of ore mined reached 547,001 WMT, while ore inventories stockpiled at the end of September amounted to 323,115 tons.

Some two-thirds of the stockpile had been earmarked for delivery to BHP Billiton’s refinery in Australia under a long term supply agreement.

“The collapse in the nickel market occurred at a time when nickel inventories at Berong were being accumulated ahead of the scheduled operational shutdown from late October to end February, when offshore transshipment is impractical because of rough seas,” Eccles said.

Tonette Orejas
Central Luzon Desk

STA. RITA, Pampanga – A day after Christmas, 86-year-old Benjamin Mariano went to the Rural Bank of Sta. Rita in Barangay San Vicente here, wanting to get a word from the owner whose house sits beside the bank.

Aided by his bamboo cane, Mariano stood at the bank’s façade for two hours starting 9 a.m. on Friday. Coming and waiting have become a sort of a daily rite for this old man since Dec. 19 when the bank declared a holiday.

He said he has memorized the bank’s public announcement, which was printed in English and Kapampangan on a tarpaulin that was almost as big as the door in the building.

Trust

“I trust Turing but what will happen to my money?” said Mariano, a World War II veteran.

He has deposited all his pension funds from the Philippine government and retirement money from the defunct Philippine Constabulary-Integrated National Police in a savings account at the Rural Bank of Sta. Rita.

“All my savings are there. I want to know directly from Turing what’s happening. Are they closing for good or what?” Mariano said.

Turing is Dr. Victoriano de Castro, the bank’s president. The house’s caretaker does not know where De Castro went.

The Inquirer has been trying to contact De Castro since last week to no avail.

Raymund Laki, president of the Federation of Rural Banks in Pampanga, said De Castro has not left the country.

Aurora Dizon, 63, is in the same fix. A savings account in the bank holds her capital for vegetable trading and money lending.

“I hope I could get my money. It’s the only thing I roll,” Dizon said.

On Friday, she went around collecting the debt payments of vendors holding stalls at the temporary site of the town’s public market. She said she was unsure if she could still go on with her business with the way things have turned out at the bank.

Ana Marie Magtangop also dropped in on Friday to check the latest information. That’s an errand she did for her friend Servitas Agcaoili, a nurse in Jeddah, Saudi Arabia. Agcaoili has maintained a time deposit at the bank for her children.

“She’s worried because she plans to use that money for a small business when she returns from work abroad,” Magtangop said.

The Rural Bank of Bacolor, located in the City of San Fernando, is in the same situation.

Its president, Mary Anne Naguit, a daughter of De Castro, could not be reached for comment.

The bank’s announcement, posted also on the establishment’s façade, is the same as that of the Rural Bank of Sta. Rita’s. The Bacolor bank was established in 1963. The Sta. Rita bank is more than 50 years old.

“[On] Dec. 19, 2008, the bank was forced to go on voluntary bank holiday due to the unusual heavy withdrawals it experienced as a result of recent news about several rural banks which were closed by the [Bangko Sentral ng Pilipinas] around the country,” the announcement read.

On the same day, the BSP had placed four more banks under the receivership of the Philippine Deposit Insurance Corp.

In a report posted on its website on Dec. 22, the BSP confirmed that the Nation Bank in Bacolod City, Rural Bank of DARBCI in General Santos City, Bicol Development Bank in Legazpi City, and the Rural Bank of Carmen in Carmen, Cebu, were found to have insufficient assets to cover their liabilities, suffered from severe liquidity problems, and performed unsafe and unsound banking practices.

According to the BSP, the receivership “paved the way for the PDIC to take over the banks’ assets to protect the interest of their depositors and to start processing deposit insurance claims.”

The BSP also put under PDIC receivership the following banks since Dec. 9: Rural Bank of Parañaque, Rural Bank of Bais in Negros Oriental, Pilipino Rural Bank in Cebu, Rural Bank of San Jose in Batangas, Bank of East Asia in Cebu, First Interstate Bank in Tacloban, Philippine Countryside Rural Bank in Cebu, Dynamic Bank (Rural Bank of Calatagan) in Batangas, and San Pablo City Development Bank in Laguna.

The Sta. Rita and Bacolor banks said while they deemed it unfortunate to close during the Christmas season, they have “no choice but to go on holiday to prevent a total depletion of its funds through unabated panic withdrawals.”

Confidence

The two banks also expressed confidence that the assets “shall become the basis” of BSP in determining if they could avail of a loan.

They said they were coordinating with the Monetary Board “to fully safeguard the interest of all its depositors and valued clients.”

The banks did not announce dates when they would resume operations, saying only they would do that “as soon as possible under the supervision of the Bangko Sentral [ng Pilipinas].”

Laki said the two banks have not yet been placed under PDIC receivership. The FRBP has 28 members and “all these are generally stable,” Laki said.

“Their capital is well beyond or within the 10 percent banking requirement,” he said.

Joel Guinto
INQUIRER.net

MANILA, Philippines – The government has set a P300-billion “sustainability plan” to fuel economic growth and to protect and generate jobs in the face of the global economic crisis, the full impact of which is expected to hit the country early next year, officials said.

The plan, presented to President Gloria Macapagal-Arroyo at a Cabinet meeting Tuesday, includes building and rehabilitating infrastructure, increased spending for social services,
and an expected increase in capital and consumer spending as a result of reduced corporate and individual income tax rates, Economic Planning Secretary Ralph Recto said.

Budget Secretary Rolando Andaya said the government would give priority to “quick-moving” infrastructure projects that have no right-of-way and other legal issues.

“We presented an economic sustainability plan,” Recto said at a news conference in Malacañang. “It is not a contingency plan. It is not a recovery plan—there is nothing to recover from.”

He said the plant was for “continuing what we have been doing and stretching every peso in the budget to ensure that we save and create as many jobs as possible.”

Recto noted that while millions of jobs were being lost in the United States and China, the Philippines generated about 800,000 jobs this year.

He said Cabinet members were instructed to ensure that the infrastructure projects, such as rehabilitation of roads and construction of hospitals, school buildings and irrigation facilities, would have a multiplier effect so that “more jobs are saved, secured, and
created.”

Local government units will also be encouraged to spend on infrastructure development, he added.

Recto said that despite the global recession, the worst-case projection of the government’s top economic officials was a 3.7-percent growth in the gross domestic product next year, and the high end of the projected range was 4.7 percent.

Philippine Daily Inquirer

THE BUSINESS slowdown due to the global financial crisis and the expected adverse impact of the recent removal of the tariff on cement have prompted local cement firms to rethink expansion and investment plans, and implement downsizing of their workforce.

An industry source who requested anonymity said one of the big three cement firms operating in the country had already laid off 45 employees in its Mindanao operation and 20 others in its Luzon plant. This company, the same source said, is also shutting down for six months one of its plants in Luzon.

He said local cement companies were having difficulties due to a drastic slowdown in demand and the unfair competition posed by imported cement that were being brought into the country without tariff.

Cemex Philippines was also reported to have reduced its workforce by three percent last month to cope with a depressed market. The firm is also shutting down kiln operations in its plants in Antipolo City and Naga, Cebu, until market conditions improve. Reports say, however, that the supply of cement will not be disrupted as both plants keep sufficient inventory levels, and kiln operations will restart once inventories are depleted.

In a related development, the Cement Manufacturers Association of the Philippines said in a report that while construction activities increased last year, cement firms expect uncertain growth of 2009 sales as the financial crisis hits the construction industry. This situation is made worse by the adverse effects of the removal of cement import tariffs.