The World Bank said it would want to take part in the Aquino administration’s Public-Private Partnership (PPP) program, adding that it was prepared to provide financing if the government would require it.
“We are willing to support the government in its Public-Private Partnership program given its potential for boosting growth,” World Bank country director Bert Hofman said Friday.
The government’s economic managers are preparing a forum on the PPP this month, and World Bank representatives have been invited to take part in the activity, Hofman said.
During the forum, representatives from the government, developmental lenders like the World Bank, and private firms will sit down to discuss potential infrastructure projects, prioritizing those that are deemed necessary to attract more investments and sustain the economy’s robust growth.
Under the PPP, the government will invite private sector firms to invest in vital public infrastructure projects. It is seen to be a prudent way to develop the country’s infrastructure at a time when the government is facing a serious fiscal problem.
Creditors like the World Bank, and even commercial banks, are encouraged to provide loans to private firms which will, in turn, pour the funds in public infrastructure work.
“In the forum, we will be able to specifically determine projects to be supported,” Hofman said.
The government has stressed the need to boost infrastructure investments to shore up foreign investments.
The Philippines has been lagging behind its neighbors in terms of cornering foreign direct investments because of poor infrastructure in the country, economists said.
DOF bucks pleas to exempt electricity from VAT
The Department of Finance has rejected proposals to exempt electricity from the value-added tax, saying the proposed tax break would deny the government P12 billion a year in revenue and will mainly benefit high-income earners.
Instead of lifting VAT on electricity, the DOF said the government may instead allocate portions of the government’s VAT collection for pro-poor programs, such as additional subsidy to the country’s poorest households.
Proposals to lift VAT on electricity are being revived in Congress as some legislators said such a move would ease the burden on electricity consumers, especially the poor.
However, the DOF said in a position paper that withdrawing the VAT on power would benefit the rich more than the poor, because high-income earners consume the most electricity, and that poor households allocate just a small portion of their income for power.
In its study, the DOF said Filipino households earning a maximum of P80,000 a year account for only 6.6 percent of total electricity consumption of households in the country.
On the other hand, households earning at least P80,000 a year account for 93.4 percent of total electricity consumption of Filipino families.
Stocks: Bracing for a rocky October
Stocks closed out the best September in 71 years last week, but don't break out the champagne yet. October trading is likely to be choppy as uncertainty looms over the market.
September's run-up was spurred by economic readings that managed to beat painfully low expectations, said Alec Young, equity strategist at S&P Equity Research.
"The psychology and expectations about the economy had just gotten so depressed in August and double-dip fears were prevalent, so we got a relief rally in September when economic reports started coming out that weren't great but just weren't as bad," he said.
That relief is now subsiding amid a new wave of uncertainty about the economy ahead of the the government's monthly employment report, the first wave of corporate earnings and November's midterm elections.
But while that uncertainty is likely to stifle further rallies, it doesn't mean the market won't gradually make its way higher, Young said.
"The 9% months are over," said Young, referring to the S&P's 8.7% spike in September, its biggest September gain since 1939. "We're likely to continue seeing this upside, but it will be more like a slow grinding higher, not sprinting higher."
Jobless recovery?: Investors will be looking to a slew of reports on employment this week for hints of how "jobless" the recovery really is.
On Wednesday, payroll services firm ADP is expected to report that employers in the private sector added 18,000 workers to their payrolls in September after cutting 10,000 in the previous month. Outplacement firm Challenger, Gray & Christmas issues its report on planned job cuts in September.
The government's weekly jobless claims report comes out Thursday, with 455,000 Americans expected to file new claims for unemployment, after 453,000 were filed in the previous week.
And the most closely watched reading on employment is due Friday. Employers aren't expected to have added or cut any jobs in September after cutting 54,000 jobs in August. The unemployment rate is expected to have risen to 9.7% from 9.6%.
Midterm elections: The stomach churning ahead of the midterm elections -- which could bring with it new regulation and tax policies -- is likely to keep investors from jumping in, said Brian Battle, director of Performance Trust Capital Partners.
"Everyone takes their bets off the table before an election because of three levels of uncertainty," said Battle. "The first unknown is if conservatives re-take the House or Senate, the second is if they do, what their policies are going to be and whether they get them voted on, and the last thing is whether Obama vetoes it."
Earnings: The uncertain political climate is also causing businesses to exercise caution, said Battle.
"If Republicans do take the House, that will be good for companies and good for the markets because it will be a very pro-business environment," said Battle. "But until we have that clarity, it's really tough for corporations to make business decisions and project future earnings without knowing what tax policies and regulation will look like."
Corporate earnings kick off this week, with results from Alcoa, Costco and PepsiCo on deck.
Monday: The National Association of Realtors' pending home sales index, a measure of sales contracts for existing homes, is due before the start of trading and is expected to have risen 1% in August after rising 5.2% in July.
Factory orders are due from the Commerce Department. Orders are expected to have fallen 0.4% in August after rising 0.1% in July.
Tuesday: The Institute for Supply Management's services sector index for September is due in the morning and is expected to have edged up to 51.8 from 51.5 in August. Any number above 50 indicates growth in the sector.
Wednesday: In addition to reports on employment from ADP and Challenger, the U.S. government's weekly crude oil inventories report is due in the morning.
Costco is scheduled to release its third-quarter results before the opening bell. Analysts are expecting the company to post earnings of 95 cents a share.
A report from the Mortgage Bankers Association on the number of applications for mortgages is also on tap.
Thursday: In addition to the Department of Labor's report on jobless claims, the August consumer credit report from the government is due in the afternoon.
Credit is expected to have fallen by $3 billion after slipping $3.6 billion in July.
PepsiCo is on tap to report earnings before the start of trading. Economists expect the company to book earnings of $1.22 a share.
After the market close, Alcoa is slated to release its third quarter results, expected to report earnings of 6 cents a share.
Friday: In addition to the big jobs report, the Commerce Department releases the wholesale inventories report in the morning. Inventories are expected to have risen 0.4% in August after jumping 1.3% in July.
Crude Advance on Economic Data, Caps Biggest Weekly Gain Since February
Oil rose, capping its biggest weekly gain since February, after economic data from the U.S. and China bolstered optimism that demand is growing in the world’s two largest energy-consuming countries.
Crude advanced to the highest level in eight weeks as China’s purchasing managers’ index gained in September at the fastest pace in four months, according to a report today. U.S. consumer spending increased more than forecast in August as incomes climbed, a Commerce Department report showed.
“Where those two countries go, the world will follow on the price side,” said Roger Read, an analyst at Natixis Bleichroeder in Houston. “Expectations are that it’s no longer going to be a double-dip recession but some form of growth next year.”
Oil for November delivery climbed $1.61, or 2 percent, to settle at $81.58 a barrel on the New York Mercantile Exchange. It touched $81.64, the highest level since Aug. 5. The weekly gain of 6.7 percent is the largest since Feb. 19.
Purchases in the U.S. rose 0.4 percent for a second month, exceeding the 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News. Incomes were up 0.5 percent, the biggest advance this year.
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
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