Philippines counts the cost of Typhoon Haiyan

Super Typhoon Haiyan's devastating assault on the central Philippines exerted a catastrophic human cost, but analysts say its impact on one of Asia's fastest growing economies will be less traumatic.

The national economy has been on an upswing for the past five years and expanded 7.6 percent in the first half of 2013 -- a remarkable turnaround for a country once seen as an irredeemable non-achiever.

The government targeted gross domestic product (GDP) growth of between 6.0 and 7.0 percent for the whole year, and now the question is whether that needs to be re-calibrated in the wake of the typhoon damage.

The Philippines is no stranger to natural disasters, but Haiyan was in a class of its own, packing some of the strongest winds ever recorded by a storm making landfall.

More than 4,000 people were killed and up to 4.4 million displaced -- twice the number that lost their homes after the 2004 Indian Ocean tsunami.

According to the International Labour Organisation, around five million workers -- equivalent to the population of Norway -- had their livelihoods temporarily or permanently destroyed.

Risk modelling specialists such as AIR Worldwide have forecast the total economic loss at anywhere between $6.5 billion and $15 billion dollars.

But as grim as those statistics are, the macro economic cost of Typhoon Haiyan will, according to initial estimates from various sources, be lighter than might have been expected from a storm of such destructive power.

The typhoon barrelled through some of the poorest regions in the country, sparing any significant manufacturing base and largely impacting agricultural areas producing rice and coconut.

"The affected areas account for a relatively small proportion of GDP, so the impact on headline GDP is likely to be small and manageable," Credit Suisse said in a report that questioned forecasts suggesting Haiyan would shave one percentage point off the 2013 annual growth rate.

"Exports of agricultural products will be impacted, but they form a relatively small portion of overall exports," the report said.

There is some concern over a spike in inflation triggered by higher rice prices, but most estimates predict it would be short-lived, especially if enough rice seed is provided for the crucial December-January planting season.

The Philippine central bank has indicated it would consider tweaking monetary policy if the typhoon's inflationary legacy persists, but said economic growth goals for the year were still achievable.

"Our own runs (projections) show that 2013 GDP growth could still be within the government's target range, as rehabilitation efforts could make up for lost production," bank governor Amando Tentangco told the Wall Street Journal.

Economists such as Ronald Mendoza, executive director at the Asian Institute of Management in Manila, believe the reconstruction effort could prove to be the silver lining in the Haiyan story.

"There is a real opportunity here to encourage inclusive growth in a historically impoverished region that has been largely disconnected from those elements driving the national economy," Mendoza said.

"An ambitious rebuilding programme would not just be good for the region. It would also send an important message to foreign investors about the country's resilience and its ability to bounce back from crisis," he added.

The Philippines reached an important milestone this year as, one after the other, the three global rating agencies granted the country investment-grade status.

The move reflected higher growth, political stability and improved governance -- all of which have stimulated the interest of overseas investors.

The Credit Suisse report said the post-Haiyan reconstruction effort would boost GDP in 2014, and it also forecast a short-term shot in the arm for the country's current account delivered by a spike in overseas remittances.

The amount of money Filipinos living abroad send home every year is equivalent to 10 percent of GDP and previous disasters have traditionally seen a sharp jump of up to 15 percent in the size of the remittances.

But even the best-case economic scenario envisages a long, grim struggle for the millions of traumatised victims of Haiyan, for whom silver linings offer little immediate relief.

"Beyond the estimates of damage and reconstruction, it is important to consider the intangible losses," said Danilo Israel, senior research fellow at the Philippine Institute for Developmental Studies.

"The loss in human lives, the loss of bio-diversity, the destruction of heritage sites, the loss of relationships -- it's difficult to put a value on these intangibles, which can sometimes have a big impact on economic growth."

source: interaksyon.com

OFWs to hold Zero Remittance Day on Sept. 19 to protest corruption

MANILA - For four decades they've been called the anchor of the Philippine economy, but for one day, on Sept. 19, overseas Filipino workers will stop doing the one thing they're praised for: remit funds back home.

The gesture, dubbed “Zero-Remmittance Day,” is meant to send a message to the government that the workers are serious about the move to abolish the pork barrel system and end corruption.

In a statement, Migrante International's Gary Martinez said Wednesday 112 Filipino migrant organizations all over the world are coordinating their protest and will not send remittances to their families in the Philippines on September 19. It is meant as a blow against widespread corruption, patronage politics and social injustice.

“Filipino immigrants from all over the world will once again send a united message against the pork barrel system. Our remittances that keep the economy afloat are being plundered by greedy officials,” Martinez said.

Through the Zero Remittance Day, OFWs want to pressure the government to re-channel funds from PDAF to programs directly promoting the people’s interest, "including more efficient services and welfare assistance to OFWs in distress,” he added.

The first Zero Remittance Day was launched on October 29, 2008 in protest against the Global Forum on Migration and Development (GFMD) which was held in Manila. The ZRD criticized the GFMD and the Philippine government’s promotion of what it called "modern-day slavery" through the labor export policy. It was supported by more than 112 Filipino migrant organizations all over the world, resulting in hundreds of millions lost in remittances.

The second ZRD protested former Pres. Gloria Arroyo’s attempts to implement charter change through a constitutional assembly on July 26, 2009.

source: interaksyon.com

Construction industry forecasts 8 pct growth this year

MANILA - The construction industry this year expects to grow eight percent or faster than the economy, with public and private sector projects seen giving the sector a boost, the Philippine Constructors Association Inc (PCA) said on Tuesday.

With “prospects both at home and abroad looking a bit better” this year, PCA said the construction industry is poised to grow faster than the 6-7 percent economic target set by the government for 2013.

“The staggering increase in public construction investments in 2012—reinforced by conducive macroeconomic conditions, government’s ability to further boost infrastructure expenditures, the growing electricity demand, and the 2013 midterm elections-related spending—will provide a blistering momentum to the construction sector in 2013,” PCA said.

“The increased growth of the private sector in real estate development supported by low interest rates will likewise contribute to the sector’s expansion,” it added.

The sustained growth of the tourism and business process outsourcing (BPO) sectors, the strong inflows of remittances from Filipinos abroad, as well as the rollout of the Aquino administration's public-private partnership (PPP) initiative are also expected to result in a construction boom.

“Increasing activities in these growth drivers would result in more civil construction works such as office buildings, roads and bridges, facilities for utilities, and the like,” PCA said.

Citing National Statistical Coordination Board (NSCB) data, PCA said the construction sector last year grew 14.4 percent or more than double the 6.6-percent growth in the country's gross domestic product (GDP) that year.

 The industry contributed P345 billion to the economy, higher than the P302 billion in 2011 and beating the P325 billion in 2010. The sector increased its share to GDP to 5.5 percent last year from 5.1 percent in 2011.

“[Last year’s] phenomenal growth was mainly caused by the upsurge in government spending on infrastructure, and sustained growth in private construction,” PCA said in its 2012 report.

Construction in 2011 declined mainly because of government under-spending amid delays in the Aquino administration's PPP program.

Last year, “[o]ne of the biggest contributors to the increased government spending is the Department of Public Works and Highways (DPWH),” PCA said.

“Since 2011, the department is committed to increase its expenditures to provide quality infrastructure facilities such as national roads, bridges, and major flood control projects. For 2013, more big-ticket infrastructure projects, including strategic tourism road projects, will be funded by the DPWH, allocating a total of P140 billion for the year—a staggering 40-percent climb from last year," the industry lobby said.

"Moreover, it is expected that public construction will continue to boost the sector in the next three years as the DPWH’s rally will be sustained to garner more than P600-billion capital outlays by the end of 2016,” PCA said.

source: interaksyon.com

Tax Test

NEW YORK, New York, United States — As Filipinos paid their income taxes this April, some employees in the middle-income bracket may have found themselves paying at a higher tax rate than their wealthier bosses, a number of whom derive income not from salaries but from investments in stocks and time deposits, which are levied lower final taxes and are not included in the computation of the taxable income. The labor force also sees how professionals and entrepreneurs are able to take advantage of tax avoidance mechanisms, resulting in the bulk of the government’s income tax collection coming from the salaried workers rather than the obviously richer class despite the heightened and high profile tax collection campaign of the Bureau of Internal Revenue.

This inequity in the tax system is not unique for the Philippines. Here in the United States, the New York Times reports that President Barack Obama and his wife Michelle had adjusted gross income of $789,674 in 2011 and paid just over 20% ($162,074) of it in federal taxes. Mr. Obama’s secretary, Anita Decker Breckenridge paid a slightly higher tax rate than her boss in 2011 on a salary of $95,000.

The presumptive Republican presidential candidate Governor Mitt Romney and his wife have filed with the Internal Revenue Service for a six-month extension to file his 2011 return although in January, upon prodding by his Republican rivals, he did release documents showing an estimated $20.9 million in 2011 income and payment of $3.2 million in taxes for an effective tax rate of 15.4%.

A survey by the New York Times and CBS News Poll conducted April 13-17 based on telephone interviews showed that a majority of voters say upper-income Americans pay less than their fair share of taxes, while half say capital gains and dividends should be taxed at the same rate as income from work. These strong sentiments are giving support to the proposed “Buffet Rule,” a minimum tax for the wealthiest Americans. Mr. Warren Buffet, an American billionaire, had testified in congressional hearings that he is doing well, does not need tax loopholes and could afford to pay more taxes as he assumed others similarly situated as him could also do.

During hard times like what the United States is going through, proposals like the “Buffet Rule” easily get popular support. Many will not accept the concept that a robust stock market helps raise capital for enterprises that then generate jobs and have a multiplier effect on the country’s economy. Others will not easily go with the thinking that saving the US financial institutions and banks with government funds was necessary to stabilize the financial and banking system so essential to trade and business. What the taxpayers see are the still extravagant compensation of the top executives of bank and financial institutions and the still higher incomes these companies have been making since the government bailout.

Before this mindset takes root in the Philippines, the banking and financial industry must launch an information drive to make clear to the public how the Philippine stock market operates to encourage investments and job creation rather than just a convenient pool for rich Filipinos to park funds and earn more income at very low final tax rates. The banks have to show how their low cost deposits are being channeled to productive sectors of Philippine economy which result in increased employment.

Unless the tax system in the Philippines passes the test of fairness and equity, tax reforms could become a major issue in the coming senatorial elections as it has become in the US presidential campaign.

Business Bits. Contrary to popular belief, I am finding out that New Yorkers are most considerate, thoughtful, and friendly, at least the ones I have met so far.

source: mb.com.ph