Morning Brief: 13 July 2011

Exports post 1st annual drop since October ‘09 MERCHANDISE EXPORTS in May contracted annually for the first time since October 2009, as electronics shipments plunged by more than a quarter -- a decline that industry officials and economists said placed full-year targets at risk.A total of $4.104 billion worth of goods were shipped out in May, 3.2% less than last year’s $4.241 billion, the National Statistics Office (NSO) reported on Tuesday. On a monthly basis, export receipts dropped 4.6% from April’s $4.302 billion, the NSO said. In comparison, exports grew 19.1% annually in April. Electronics shipments, which made up 46% of total export sales in May, plunged by 26.2% to $1.886 billion from $2.554 billion a year earlier. The decline was due largely to semiconductor exports, which fell 25.1% to $1.408 billion in May. Aside from electronics, exports of wiring sets and metal components also plunged in May, by 35.6% to $57.69 million and 21.9% to $53.42 million, respectively. But the contraction in these items was cushioned by increases in the second to fifth biggest products, namely: woodcrafts and furniture rose 98.1% to $186.33 million; apparel and clothing accessories, 6% to $159.93 million; coconut oil, 9% to $119.99 million; and petroleum products, five times up to $114.25 million. For the five months to May, total merchandise exports were still up, by 7.51% to $20.625 billion. The Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) said it would review its 8%-12% annual growth target for the year. “May was bad... this was primarily the effect of the Japan disaster as supply was disrupted... making our full-year 8-12% growth target unattainable at this time,” SEIPI President Ernesto B. Santiago said in a telephone interview yesterday. “A 5% growth is more doable and appropriate at the present time; but it is still up for review, seeing that we are still expecting a stronger performance in the second half.” Sergio R. Ortiz-Luis, Jr., president of the Philippine Exporters Confederation, Inc., said he would wait for a clearer trend. “Although there is a bit of difficulty in attaining our 10% growth target for 2011 due to problems in the Middle East and Japan, we are still keeping it until there is a clear trend that the decline will persist.” The government echoed the view, saying it would keep its 9%-10% full-year growth projection for now. “We will look at the next one to two months [to see] whether the trend holds up,” Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. said. “But, as of now, we will not change our growth target.” But University of the Philippines economist Benjamin E. Diokno said separately by phone that “the contraction was not a surprise, as world economic recovery is still weak and consumer demand for electronic products remains tepid, placing the 9%-10% export growth (target) at risk.” “Full-year growth would likely be around 5%-6%, since I expect export growth to be negative up to September,” Mr. Diokno added. Cid L. Terosa, senior economist at the University of Asia and the Pacific, was similarly cautious. “The export target of the government can still be attained if the semiconductor export market will show signs of improvement in the second half, which are [sic] normally the stronger periods in terms of sales and revenues.” The United States was the top export market in May, followed by Japan and China.

U.S. Stocks Drop as Ireland Credit Rating Cut Smothers Rally A late rally in U.S. stocks faded, dragging the Standard & Poor’s 500 Index to a third straight loss, after Ireland’s downgrade to junk added to concern Europe is losing control of the credit crisis and overshadowed evidence the Federal Reserve hasn’t ruled out more stimulus.Semiconductor-related shares slumped, with Intel Corp. falling 1.8 percent after Novellus Systems Inc. (NVLS) forecast lower- than-estimated third-quarter earnings. Alcoa Inc. (AA) slipped 1.3 percent after second-quarter profit missed analyst estimates.Cisco Systems Inc. (CSCO) jumped 1.1 percent after two people familiar with the matter said it would announce job cuts. The S&P 500 dropped 0.4 percent to 1,313.64 at 4 p.m. in New York, after the index fluctuated between gains and losses throughout the day. The Dow Jones Industrial Average lost 58.88 points, or 0.5 percent, to 12,446.88. “There’s not a whole lot of conviction in the market,” said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, which oversees about $80 billion in assets. “Most investors are following Europe, and they are waiting to see if the earnings season will be good enough for them to get excited about equity prices. If that doesn’t happen, then you can add corporate performance to the ugly mix.” The benchmark index for U.S. equities gave up 2.5 percent during the previous two sessions, the most for the S&P 500 since March, as concern grew that Europe’s debt crisis will spread and American lawmakers failed to agree on cutting the deficit. The gauge had climbed 5.9 percent over the previous two weeks, its biggest gain since October 2009. The rebound in July came after the S&P 500 tumbled 3.2 percent in May and June amid disappointing economic data. Ireland Cut to Junk Rating by Moody’s Ireland joined Portugal and Greece as the third euro-area nation to have its credit rating reduced to below investment grade as European Union finance ministers struggle to contain the region’s sovereign debt crisis. Moody’s Investors Service cut Ireland to Ba1 from Baa3, citing the probability that Ireland will need additional official financing and for investors to share in losses before it can return to the private market to borrow. The outlook remains “negative,” Moody’s said in a statement yesterday. The euro fell to a four-month low against the dollar as European finance ministers failed to present a solution to the financial contagion that’s threatening to spread to Italy from Greece, Ireland and Portugal. In Spain, Finance Minister Elena Salgadosaid the nation might need to endure even deeper spending cuts in 2012 than those currently planned. Ireland, which had a top Aaa rating just over two years ago, has suffered after a real-estate boom collapsed, fueling bank bailouts and a surge in the country’s debt. “The downgrade underlines the need for something more radical in terms of a European solution,” said Austin Hughes, chief economist at KBC Ireland Plc in Dublin, which publishes a monthly index of consumer sentiment. “You really need Europe to come up with a solution rather than pushing it into the future. A solution needs to be found sooner than later.” Ireland’s government criticized the Moody’s downgrade, Dublin-based broadcaster RTE reported, citing a finance ministry spokesman. Ireland has met the targets so far under its bailout program and the downgrade is a “disappointing development,” the spokesman was cited as saying.

Crude Oil Advances Most in Two Weeks as Europe Works to Ease Debt Crisis Oil climbed the most in two weeks in New York as European governments worked to halt the region’s credit crisis.Futures increased as Italian and Spanish bonds rose amid speculation the European Central Bank bought the debt of the euro-region’s most-indebted nations to stabilize markets and ease concern that the credit crisis is worsening. Crude also gained after failing to sustain a move below the 200-day moving average and on forecasts that U.S. supplies fell last week. “The European Union is looking for some type of solution, and that’s tided us over for now,” said Carl Larry, director of energy derivatives and research with Blue Ocean LLC in New York. “Nobody wants to see the European Union fail, so everyone’s looking for some signs of competence.” Crude for August delivery rose $2.28, or 2.4 percent, to settle at $97.43 a barrel on the New York Mercantile Exchange in the biggest one-day gain since June 28. Prices have risen 30 percent in the past year. Prices pared gains from the settlement and after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 2.34 million barrels to 359.4 million. August oil rose $1.68, or 1.8 percent, to $96.83 a barrel in electronic trading at 4:31 p.m. Brent oil for August settlement increased 51 cents, or 0.4 percent, to $117.75 a barrel on the ICE Futures Europe exchange inLondon. The spread between the benchmark New York and London contracts narrowed to $20.32 a barrel from $22.09 at the settlement yesterday.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com 

BDO UNIBANK INC. 

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher 
(632) 858-3001 

ORO CHAMBER, MOFCCCI & BIR: eFiling and payment forum

eFiling and payment forum.  The Oro Chamber in partnership with MOFCCCI and BIR conducted a seminar on “BIR Online Filing and Payment” last June 30 at the OroChamber-PUM Conference Room.  The learning session was also supported by BusinessWeek, PARASAT Cable, PIA 10 and Sunstar CDO.  A similar activity will be held in July/August.

Ten Reasons Why EO 47 is Defective in Form

Ten Reasons Why EO 47 is Defective in Form
 

1.     NO CONSULTATION PROCESS. Contrary to the characteristics of good governance, which primarily mandates decision-making processes to be participatory, consultative and inclusive, EO 47, which effectively abolished the Commission on Information and Communications Technology (CICT), was issued without consulting the stakeholders of the information and communications technology (ICT) sector. In fact, in their media pronouncements, even the Department of Science and Technology (DOST) claimed they were not also consulted about the move. The CICT, even out of courtesy and to allow a smooth transition from CICT’s 10 –year operation to DOST, was not also consulted and did not even have an idea about the existence of EO 47.
 
2.     THE PRESIDENT WAS BLINDED. The President, based on the chronology of events and the collation of facts, could have been blinded into signing EO 47. EO 47 was signed on June 23, 2011 as shown on its face. But a few days before that, the President appointed a new commissioner to the CICT to head the Human Capital Development (HCD) Group which was left vacant for about a year. Sources say when some personalities confronted the President about the fact that the new commissioner only stayed in office for a couple of days and lost his position by reason of EO 47, the President allegedly answered “let me check”. In addition, for the first time, Secretary Ivan Uy, chair of the CICT was invited to the cabinet meeting called by the President on June 29, 2011 and was even made to present the Philippine Digital Strategy 2011-2015 for more than half an hour. No one informed Secretary Uy that, six days of on June 23, 2011, his position was already scrapped. Although technically, EO 47 was made effective on July 6, 2011, upon its publication on that day in the Manila Bulletin. Decency dictates that you do not cause a person to work without being informed that his termination was already signed a week prior. This only shows that the President was not well-apprised of the contents of EO and its implications.
 
3.     NO BASIS FOR DOWNGRADING ICT. The abolition of the CICT has no basis. On the contrary for the last two years, all ICT stakeholders have been pushing for the upgrading of CICT to a department. This is supported on record by various supporting statements and petitions, written and verbal, in the records of the Senate and the House of Representatives where there are pending legislations seeking for the creation of a Department of Information and Communications Technology (DICT). Several government line agencies and departments have also been supporting the move, including the DOST, which just suddenly changed its position during the Joint Hearing on the DICT Bill called  by Senator Edgardo Angara, chair of the Senate Committee on Science and Technology and Representative Sigfrido Tinga, chair of House Committee on ICT. In fact, the National Economic Development Authority (NEDA) Philippine Development Plan (NEDA PDP) 2011-2016 which was recently approved by the President supported the creation of the DICT. All the major business organizations including the Philippine Chamber of Commerce and Industry and the Joint Foreign Chambers already came out with their statements supporting the creation of the DICT.
 
4.    THE TITLE WAS DELIBERATELY MISLEADING. EO 47 used the action words “reorganizing, renaming and transferring” CICT when in fact is serve to dissolve and abolish the CICT. The framing of the title itself has been made to hide the real intent of the executive order. When the President probably read EO 47 beginning with its title, he did not realize its real effect because the framers of EO 47 shielded the eyes of the President from seeing that it really is a piece of document that abolishes the CICT, the same CICT to which he appointed a new commissioner just a few days prior. All the positions of the commissioners and the chair of CICT where dissolved by reason of EO 47 – that in effect, is not synonymous to a re-organization much more so a renaming. The fact that the CICT is a cabinet-level commission directly under the Office of the President, while the office created by EO 47 is under the DOST – do not speak of a mere transfer. The ICT office that EO 47 created under DOST is going to be manned by an executive director. EO 47 effectively abolished the four efficient and operational groups with assigned commissioners under the CICT, namely the HCD, Infrastructure Management, Cyberservices and e-Governance.
 
5.     REGRESSIVE AND RUNS OPPOSITE TO THE DEVELOPMENT OF THE ICT SECTOR BASED ON A HISTORICAL TIMELINE.  EO 47 runs counter and opposite to the direction of ICT development based on the history of the ICT sector in the Philippines and the previous presidential policies that impact on the growth of the sector. In 1994, with EO No. 190 of Fidel V. Ramos, created the National Information Technology Council (NITC) with the rationale that no single department such as the DOST can contain the full extent of the ICT sector. With EO No. 264, Joseph Ejercito Estrada established the Information Technology And Electronic Commerce Council (ITECC) from the merger of the National Information Technology Council (NITC) and the Electronic Commerce Promotion Council (ECPC). Both presidents made it their responsibility to chair the said councils. In consideration of the other responsibilities of the president and at the same time the importance of ICT development, Gloria Macapagal-Arroyo, with EO No. 269 created the CICT, a cabinet-level agency in transition to a department and placed the CICT directly under the Office of the President. Notable to mention is that it is in fact the DTI and DOTC and not the DOST that played major roles in the councils which were forerunners of CICT. But today, EO 47, despite the upward trend of the ICT bodies through the years by reason of presidential policies, was given little value and remanded a a concern to be handled by a mere office and run by an executive director.
 
6.    GLARING FORMAL ERROR. Instead of “By Authority of the President”, Paquito Ochoa signed EO 47 under the term “By The President”. Without the name of the President indicated in EO 47 before the name of Mr. Ochoa and with the signature of the President appearing on the side without any name, EO 47 being an executive legislation is not entirely without flaw and is open to a lot of surmises and interpretations as to what really took place when the President signed the said document, which harmless as some people may want to depict, but will in fact bring with major complications and repercussions in the ICT sector.
 
7.    NOT CONSISTENT WITH THE PRESIDENT’S PRINCIPLE OF “KAYO ANG BOSS KO”. The President and the Liberal Party in its primer defines governance as the relationship between civil society and the state, between the rulers and the ruled, the government and the governed. It is the process of making collective decisions, a task in which government may not play a leading, or even any role. In this view, government is taken as the instrument, while the process for governing involves governance. Good governance rests upon the principles of transparency, accountability, openness, and the rule of law. The process by which EO 47 was issued is an anathema to the persona and party of the President and is therefore believed to be not his own making.
 
8.     A DISRUPTIVE POLICY. EO 47 did not take into consideration the need for at least a smooth transition between the CICT and the ICT office under the DOST.  EO 47’s provision that it becomes effective immediately without the benefit of even just a short period for CICT and all its stakeholders in the private sector to wind up, draw a lot of suspicions as to why the urgency. For DOST to have just started consulting and appeasing all the organizations and to have retained some top-level CICT officials for purposes of a three-month transition is clearly a hindsight. If EO 47 was done in good faith, the three-month period could have been done without suspending CICT operations in the meantime.
 
9.     AN OPPRESSIVE POLICY. EO 47 now ties the hands most of the ICT organizations and institutions, leaving them with no choice but to accept the policy or otherwise earn government’s wrath and no longer enjoy government’s favor. EO 47 puts everyone on a “take it or leave it situation” considering the degree of passion and commitment many ICT stakeholders devote upon the sector. The temperament of the ICT sector is one which believes that the less trouble, the less argument, the less conflict with government is the best case scenario to ensure that the industry is not affected. The ICT sector is now forced to adopt the “business as usual” attitude. Various corners in fact, as a coping mechanism to the blow of EO 47, repeat in their minds the principle of “less dependence in government”, “we have done it without government anyway” and the so-called “private sector-led ICT industry”. At the end of the day, no matter how much we pretend that everything is normal, we know deep inside, something bad just happened.
 
10. CONTRARY TO MANY EXISTING LAWS. As of this writing, some researchers are still working of a list of international commitments and treaties that the Philippine Government has entered into with the CICT as implementing agency, since it is said that there are many. In the meantime, the pending data privacy law and the cybercrime law provide that the CICT is going to enforce it. That will have to go back to square one.  
--
Best Regards,

Atty. Jocelle Batapa-Sigue
Chair, National ICT Confederation of the Philippines (NICP)
Suite 201 Terra Bldg. Galo-Gatuslao Sts. Bacolod City 6100