From the News! – Your Daily News

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.

Kristine L. Alave
Philippine Daily Inquirer

MANILA, Philippines—A wage increase next year is unlikely as pressures on the pockets of workers appear to be easing, Labor Secretary Marianito Roque said.

In an interview recently, Roque said there will be a review of the minimum wage in July or August, but an increase is not forthcoming.

“Don’t bet on it,” he said. “The indicators are going down. Fares were rolled back, fuel and liquefied petroleum gas prices have gone down,” he added.

This year, the government implemented a P20 minimum wage increase in response to a clamor from labor organizations. Workers said they were hard-pressed in making ends meet because of record-high inflation and fare hikes.

Because of the financial squeeze that has affected many export-oriented companies in the Philippines, many workers will see their extra pay shrink next year, Roque said.

Despite the cuts in pay, workers are still better off this year compared to last year, Roque said.

“We removed the tax on minimum wage earners. So they have an extra P1,000 every month, even though there’s no overtime pay,” he said.

The labor official earlier said workers in the garment, electronic and automotive sectors would feel the heat of the crisis until 2010.

Recently, labor groups in export zones in Cavite and Cebu provinces reported that electronic firms and garment factories in the area had cut down on workers and factory hours because demand from their traditional and biggest markets, the United States and Europe, had slowed down.

The US and Europe have been hard hit by the financial credit crunch that has spread all over the world.

Roque noted that the Labor department is conducting a survey of companies in financial danger, hopefully to mitigate the adverse effects on the workers.

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.

Philippine Daily Inquirer

MANILA, Philippines – The Philippines’ foreign debt burden fell by $1.3 billion in the third quarter to $53.5 billion from $54.8 billion in the previous quarter, as local borrowers reduced their foreign currency exposure in view of the peso’s weakening against the dollar.

The country’s outstanding external debt as of end September was also lower than the $54.4 billion recorded in the same quarter last year, a Bangko Sentral ng Pilipinas report showed.

About 72 percent of the external debt stock represented public sector borrowings while the rest was contracted by the private sector.

External debt refers to all types of borrowings of Philippine residents from non-residents that were approved and/or registered by the Philippine central bank.

“The decline in the external debt stock was accompanied by a continuing improvement in the country’s external debt related ratios,” BSP Governor Amando M. Tetangco Jr. said in a press statement.

The substantial reduction in the debt stock during the third quarter was attributed by the BSP to the overall net principal repayments made by both the public and private sectors that summed up to $1.3 billion. This amount included a $511-million prepayment of debt made by state-owned National Power Corp.

In the last two years, local borrowers took advantage of the peso’s uptrend against the dollar to prepay debts. But even with the local currency losing steam, the data suggested that some would like to cut down their exposure to hedge against the possibility of further peso depreciation.

A weaker peso increases the peso equivalent of debts denominated in dollars. It likewise jacks up the cost of servicing foreign currency-denominated debt.

Classified by currency, dollar-denominated accounts accounted for more than half of the debt stock (53 percent) while Japanese yen-denominated accounts accounted for 26.8 percent. Multi-currency loans from the Asian Development Bank and the World Bank accounted for 9.3 percent, and the rest of the accounts, which were in 18 other currencies, accounted for 10.9 percent.

Year-on-year, the country’s debt stock declined by $945 million, also as a result of net principal repayments, which reached $3.3 billion.

The increase in the debt stock compared to a year ago was tempered by the following:

Upward foreign exchange revaluation ($1.5 billion), mainly reflecting the increase in the dollar equivalent of loans denominated in Japanese yen, which has strengthened vis-a-vis the US dollar.

Increased holdings of Philippine debt papers by non-residents ($442 million).

Upward audit adjustments ($404 million).

Prepayments of external debt accounts during the 12-month period ending September amounted to $1.8 billion. A big portion of the prepayment was accounted for by Napocor and commercial banks for their tier 2 capital issues.

The country’s external debt as a ratio of gross domestic product improved to 31.8 percent at end-September from 40.2 percent a year ago.

“Since 2002, the ratio has followed a downward trend, indicating a sustained improvement in the country’s capacity to service its maturing foreign obligations,” the BSP said.

The external debt service ratio–or the percentage of total principal and interest payments to total exports of goods and receipts from services and income (which include remittances of overseas Filipino workers)–was estimated at 10.1 percent in January to September 2008, lower than the 10.5 percent in the same period last year.

“The country’s debt service ratio has remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service maturing principal and interest payments during the current period,” the BSP said.

The maturity profile of the country’s external debt remained predominantly medium to long term, which accounted for 84.5 percent of the total.

Cielito Habito
Philippine Daily Inquirer

MANILA, Philippines – Ever notice how our economy has been behaving strangely lately? The latest strange (but welcome) behavior is how job generation based on the last two quarterly Labor Force Surveys (July and October 2008) appeared healthy even in the face of the world economic slowdown that has taken a definite toll on our economy.

In July, it was reported that about 1.3 million new jobs were created in our economy within the preceding 12 months. That was very good, given our need to create at least a million new jobs a year to keep pace with growth in the working age population.

In stark contrast, the same figure a year ago was only 392,000 jobs, and yet this was the period that our economy was recorded to have grown at a 30-year high of 7.2 percent. The latest October jobs figure, while a bit lower at 861,000 new jobs year-on-year, was nonetheless again better than the previous year’s job generation (786,000).

And yet, economic growth had already slowed down significantly to the 4 percent level this year. We had, in short, less job creation last year when we had much faster (even record) production growth, and strangely enough, more job creation this year when economic growth has been much slower.

More puzzles
You’d think looking more closely at the data would help explain the puzzle. But the puzzle deepens even more when you check the breakdown of output growth and job generation across major sectors of the economy.

The services sector has significantly slowed down from its brisk growth in past years, with last year’s growth rate (7.2 percent) cut down to just about half this year (3.7 percent). And yet, services provided 44 percent more jobs this year (699,000) compared to last year (485,000).

The industry sector posted a healthy 7.1 percent growth in the third quarter, surpassing last year’s performance (6.6 percent). And yet it had created only a thousand new jobs in the 12 months preceding last October; the same figure last year was 182,000.

Agriculture is no less a puzzle. Last year, it posted an impressive growth of 5.6 percent in the third quarter, but lost 11,000 jobs. This year its growth has slowed down to less than half of last year’s pace (2.5 percent)–and yet generated 161,000 new jobs.

Job-killing growth?
These seeming contradictions puzzle me even more in light of the general impression one gets from experience–not only in the Philippines but elsewhere as well–that the “growth-employment elasticity” is usually lopsided downwards.

In plain English, a 1-percent fall in output (or slowdown in its growth) usually results in much more job losses than the jobs that are gained when the economy grows by 1 percent.

It was in this context that the term “jobless growth” came about. Economists had begun to notice that much of the economic growth in the world’s economies in at least the past decade has not been accompanied by a commensurate growth in jobs.

In many cases in fact, there were hardly any job increases at all even as economies continued growing–hence the term. Worse, there have been episodes when growth actually speeded up, and yet jobs actually fell, as in last year’s experience with our agricultural sector. This is not just jobless growth; it is better described as “job-killing growth!”

But what we’re seeing right now is the exact opposite. As growth slows down, we seem to see more jobs coming about than when the economy grew much faster. This is all welcome of course, but how do we explain such perverse trends?

Job profile
I am not about to question the statistics, even though many would immediately point to that as the possible answer. There are actually answers to be found in the further details of the job numbers. Where have the latest jobs been coming from?

I examined the available tables from the National Statistics Office (NSO) website, made some calculations, and found the following: Of the surprising 699,000 new services sector jobs mentioned above, more than half were in trade. And since I am not seeing an unusual proliferation of retail stores and shopping malls in the past 12 months, I surmise that what this means is that large numbers of Filipinos have taken to the usual informal sector selling/vending activities–”nangangalakal,” as squatters near our neighborhood describe the common occupation in their area.

And this includes selling items scavenged from the neighborhood garbage piles, which they systematically pore over and collect usable items from before the municipal garbage collection trucks come to collect them.

It would seem, then, that much of the puzzles I’ve been describing simply reflect the resilience of the average Filipino. When our poor compatriots find themselves against the wall, they will find a way. Clearly, the kind of growth we have been experiencing gives us little to be happy with or gloat about even if the posted GDP growth rate is faster than that of our neighbors. What continues to elude us is quality growth, one whose benefits permeate throughout the economy such that as the saying goes, “the rising tide lifts all boats.”

The best of the holiday season to all–and here’s wishing us all a joyous new year (“prosperous” may not be quite realistic)!

Comments are welcome at chabito@ateneo.edu

Jerome Aning
Philippine Daily Inquirer

MANILA, Philippines–The Department of Labor and Employment regards 2008 as another year when industrial peace “reigned,” with only only five strikes recorded, the lowest in the seven decades of the agency’s existence.

DOLE’s year-end report said the country “experienced the most stable and calm industrial front ever” amid the global financial crisis spawning an economic slowdown or recession in many economies of the world.

Labor Secretary Marianito Roque, citing a report from the National Conciliation and Mediation Board (NCMB), which tries to settle labor-management disputes, said the “relentless” efforts of the agency to prevent strikes and lockouts drastically reduced their occurrence for the last 21 years.

The board primarily provides conciliation and mediation services to disputing parties. It also promotes other modes of labor dispute settlement such as grievance handling, voluntary arbitration and labor-management cooperation. It also introduced the concept of preventive mediation, wherein labor and management conflicts are settled without the pressure of a threat of strike or lockout.

Roque said that with the intervention of NCMB, the annual number of strikes and lockouts tapered off gradually from a high of 581 in 1986 to its lowest yet of five in 2008, adding that notices of strikes/lockouts had a disposition rate of 89 percent, as compared to the 86 percent in 2007. The settlement rate was at 77 percent as against 74 percent last year.

The labor chief said efforts to settle industrial disputes and prevent debilitating strikes and lockouts gained headway as disputing parties resorted to less costly and more expeditious means of settling their disputes.

Roque said that for 2008, disputing labor and management resorted to a total of 509 cases of preventive mediation (PM) processes to hasten the settlement of their disputes. With preventive mediation, disputing labor and management request the NCMB for conciliation in the settlement of their conflict.

Roque also hailed social partners for displaying maturity, saying their preference for alternative dispute resolution (ADR) modes indicated their heightened awareness of the benefits of resolving disputes amicably and expeditiously.

“ADR is less costly and more expeditious as compared to compulsory arbitration which has proven to be adversarial, expensive and susceptible to delays,” Roque said, adding that ADR “also facilitates dispute settlement and, thus, ensures labor and management harmony and continued productivity of workers.”

The DOLE chief said the preventive mediation cases handled by NCMB had a 100-percent success rate in 2008, which was just about the same in 2007.

Under PM, cumulative monetary benefits as a result of settlement of CBA deadlock issues were computed at P183 million benefiting 1,674 workers during the period.

Michelle Remo
Philippine Daily Inquirer

The Government Service Insurance System (GSIS) and the Social Security System (SSS) have been urged to consider raising the monthly pension received by its retired members as one way to help stimulate household spending given a slowing economy.

Economic Planning Secretary Ralph Recto said the proposal was made at a recent meeting of the Development Budget Coordination Committee (DBCC) to come up with measures to boost the economy next year.

If the GSIS and the SSS would increase the pension for its retired members, Recto said, this would be one form of fiscal stimulus. No specific amount of increase was specified.

Recto said the national government has come up with its own fiscal stimulus package to help pump-prime the economy next year and state-owned firms like the SSS and the GSIS were being asked to do their share.

The country’s chief economist said, however, that the economic team would not force the two pension fund managers to accept the proposal if they felt this would put their financial health at risk.

Finance Secretary Margarito Teves said the SSS and the GSIS were being encouraged to study how increasing the pension would affect the actuarial life of their funds.

“They should, of course, first study this,” Teves told reporters. “But if the proposal proved to be feasible, then they are encouraged to implement it. It is a good proposal.”

In an earlier statement, the GSIS said the actuarial life of its fund was estimated to last until 2055. On the other hand, the actuarial life of the SSS fund is estimated to last until 2036.

At present, pensioners of the GSIS receive an average of P7,800 a month.

Officials said the government was keen on looking for ways to boost the economy next year, when the global economy is seen to slide into a recession.

In its World Economic Outlook, the International Monetary Fund said the global economy would likely grow by 2.2 percent next year. Under its definition, a global growth of less than 3.0 percent constitutes a recession.

The Philippines is not expected to be spared from the ill-effects of the crisis as the United States and Europe are two of its biggest export markets. Many overseas Filipino workers are also in those parts of the world.

Weakening global demand for imports and labor is seen to drag down growth even of emerging economies like the Philippines, which is highly dependent on consumption to drive its economy.

The national government has proposed a P1.4-trillion national budget for 2009, higher than the P1.236 trillion set for this year, to take into account the need to spend more on infrastructure and social services.

Teves said even state-owned firms would be asked to increase spending on programs and projects that help to spur economic activity. If the SSS and the GSIS are being asked to consider raising pensions, government-owned banks are being encouraged to boost lending activities.

Doris Dumlao
Philippine Daily Inquirer

The exposure of Philippine commercial banks to the real estate sector expanded in the third quarter despite the worsening US property downturn that triggered a global financial turmoil, the central bank reported.

It reached P223.9 billion at end-September, up 5.1 percent from a quarter earlier and 16.4 percent from a year earlier, said the central bank, Bangko Sentral ng Pilipinas (BSP).

The additional exposure came in the form of P7.7 billion worth of new loans and P3.2 billion in investments in securities issued by real estate companies, the BSP report said.

Real estate loans increased 3.7 percent as of end-September from the end-June level. Loans extended for the construction and development of real estate properties for commercial purposes accounted for 71 percent while the remainder was granted for the acquisition, construction and improvement of residential units that will be occupied by the borrowing household.

In terms of asset quality, nonperforming real estate loans rose 5.2 percent to P16 billion from the previous quarter. This brought the ratio of non-performing real estate loans to total real estate loans to 7.4 percent from the previous quarter’s 7.3 percent.

Investments in debt securities issued by and in equity securities of real estate companies amounted to P8.9 billion as of end-September, up from P5.7 billion a quarter ago and P6 billion a year ago.

Earlier this year, the BSP approved a liberalization of regulations on real estate for the first time since the Asian crisis to pump in more money into two of the government’s priority sectors—infrastructure and housing.

The BSP agreed to adopt a single-industry limit of 20 percent on real estate loans as a share of total loans. The 20-percent cap was slapped on the banking sector’s exposure to the volatile property sector by the BSP shortly before the Asian currency crisis erupted, but a leeway to increase the exposure to 30 percent was incorporated, including loans not exceeding P3.5 million to finance the purchase or improvement of residential units.

Under the new rules, the 20 percent cap was kept but the BSP redefined real estate loans to carve out certain items such as those lent for infrastructure. Likewise excluded from the computation of real estate loan exposure was residential lending.