assignment 7

1. Transportation and Communication Services

Implementation of the enhanced Organized Bus Route (OBR) System using the Radio frequency identification (RFID) Technology to track and efficiently control the travel of around 2,664 city buses within Metro Manila using wireless technology, thus decongesting the major thoroughfares in the metropolis.

Enhanced the monitoring and provision of emergency assistance. Being operated at the MMDA Communication and Command Center in Guadalupe, Makati City, the Surveillance Camera System monitors not only traffic conditions but the general situation and other important public concerns through strategically installed CCTV cameras within the metropolis.

The Administration also improved the country’s competitive advantage in information and communications technology (ICT), which resulted to the robust economic activities in the ICT industry with gross revenue of US$17.934 Billion and total employment for 371,965 individuals from 2004 to 2008.

• Centers of information technology and business processing outsourcing (IT-BPO) services all around the country have been connected. Aside from Metro Manila and Metro Cebu which have already been considered as “ICT Centers of Excellence”, the Administration has been promoting the top 10 “Next Wave Cities” to be the destinations of ICT industry outside Metro Manila and Metro Cebu:

Metro Laguna (Sta. Rosa, Calamba, Los Banos, San Pablo)
Metro Cavite (Dasmarinas, Bacoor, Imus, Cavite City)
Iloilo City
Davao City
Bacolod City
Pampanga Central (Angeles/Clark, Mabalacat, Dau)
Bulacan Central (Baliuag, Marilao, Meycauyan)
Cagayan de Oro City
Bulacan South (Malolos, Calumpit)
Lipa City

• Policies were implemented promoting systematic and accelerated ICT advancement.

o Removed barriers and allow full competition in the provision of high-speed networks and connectivity. This resulted in the reduction of cost of local internet connections from PhP30 per hour in 2000 to PhP15 per hour in 2008.

o Allocated radio frequencies to allow broadband wireless access network.

o Liberalized the telecommunications environment/ industry to allow the entry of more players, ie, the telecommunication operators (TelCos).

This enabled the mobile telephone industry to experience robust growth. About 62% of the total populace (or about 56 million out of the 88 million Filipinos) are now mobile telephone subscribers who are connected to 14,506 cell sites, nationwide, as of end of 2008. To date, there are 11 international gateway facility (IGF) operators who can provide international long distance calls; six (6) cellular mobile telephone system operators; 11 public trunk radio operators; 14 inter-exchange carrier licenses that service other carriers’ traffic using their own networks; and, 74 local exchange operators or those with fixed line services.
o Authorized the retail-pricing for local telephone lines by allowing local exchange carriers to design price packages.


2. Business Process Outsourcing

The Arroyo Administration’s strategic foresight of using information technology to advantage early on, built the necessary physical and regulatory infrastructure that enabled the Services Sector particularly the Philippine Business Process Outsourcing (BPO) industry, to become one of the main economic growth drivers of the country. The growth in the BPO also improved the country’s Balance of Payments (BOP) and investments.
The BPO sector has been growing through the years. The total number of full-time employees rose to 371,965 in 2008 more than triple the 2004 number of 100,500 full-time employees. BPO revenues skyrocketed as the industry expanded. From US$1.5 billion in 2004 it grew more than three times to US$6.1 billion in 2008.
The Philippine BPO sector caters to varied support services functions. The rise of Animation, Software Development and Medical Transcription in 2003 became an addition to promising BPO investments that were portrayed in the succeeding years. It marked the rise of digital servicing, niche service operations and marketing using information technology. Later on, outsourcing services were popularized in the following support service functions, namely: (1) Human Resources such as recruitment and payroll; (2) Customer Service and helpdesk functions; (3) Procurement and materials management; (4) proof reading and editing; and (5) layout and design. Among the top contact centers in the country are Sykes, Convergys, Ambergis, and People Support. Some of the companies that have set-up internal BPO operations in the country include HSBC, AIG Business Processing Services, Chevron Texaco, Procter and Gamble Asia Pt. Ltd., Shell Shared Services, among others.


3. Financial System
The purposeful financial reforms in the past enabled the Philippine financial system to weather the global financial storm. The BSP strengthened its financial supervision and regulation particularly through the alignment of accounting practices with international standards, the enhancement of risk management systems, and strengthening bank capitalization.

1. Capital Adequacy Ratio. From 2001-2008, the average capital adequacy ratio (CAR) of banks remained above the BSP minimum requirement. The CAR, which indicates the overall health and condition of the banking sector, is the proportion of a bank’s capital to its risks. This helps ensure that banks have enough capacity to absorb a reasonable amount of loss and that they are complying with their statutory capital requirements as mandated by the BSP. It is also an indicator that banks are well-capitalized.

The average CAR of Universal Banks (UBs) and Commercial Banks (KBs) was at 17.2% from 2001 to 2007, way above the BSP minimum requirement of 10%. As of December 2008, CAR is at 15.7%, slightly lower than the 15.9% CAR during the same period in 2007.

2. Non-Performing Loans. From 2001-2009, Non-Performing Loans (NPLs) have been steadily declining. NPL is an indicator of financial soundness, expressing banks’ exposure to bad debts. Non-performing only means that payments of interest and principal have remained unpaid for 30 days or more.
NPLs in UBs and KBs have been steadily declining. In 2001, NPL was at PhP281.9 billion (17.3% of total loans), decreasing to PhP88.2 billion in 2008 (3.5% of total loans). As of March 2009, NPL is PhP88.6 billion (3.6% of total loans) lower than the March 2008 NPL of PhP96.4 billion (4.5% of total loans).

3. Domestic Liquidity. Domestic liquidity, or M3, recorded double-digit growth rate of 15.6% in December 2008. The increase in the domestic liquidity was fueled by strong growth in both the net domestic assets (NDA) and the net foreign assets (NFA). Both credit extended to the private and public sectors grew by 16.8% and 18.2%, respectively, in 2008. Further, domestic liquidity continued to grow in by 15.0% last May 2009. An appropriate level of liquidity only means that there is a proper functioning of the financial system and can help support economic growth, while keeping guard against any build-up in price pressures.

4. Interest Rates. Reverse repurchase rates (RRP) decreased from 9.72% in 2001 to 5.44% in 2008 to keep inflation within the government’s target ranges. Recently (July 4, 2009 release), RRR were further reduced by 25 basis points to 4%. Given prevailing downside pressures on prices and output, the reduction in policy rates will support economic activity as banks are expected to pass on the lower borrowing costs to clients.

5. Legislative Measures. The following were vital legislations which strengthened the Philippine financial system:

. RA 9182 as amended by RA 9343 - Special Purpose Vehicle Act (2002 and 2006). The Special Purpose Vehicle Act facilitated the cleaning of bad assets in the banking system.
. RA 9505 - Personal Equity Retirement Account (PERA) Law (2008). RA 9505 was passed to improve the country’s saving rates by allowing the creation of tax-free personal retirement accounts.
. RA 9510 - Credit Information System Act (2008). RA 9510 is designed to help boost bank lending by enhancing the availability of credit to small borrowers.
. RA 9576 (2009). RA 9576 increased the insurance coverage for deposits to PhP500,000 from PhP250,000 in order to protect depositors.

The 1997 Asian Financial Crisis provided some hard and painful lessons for emerging economies like the Philippines which resulted in its banks not having been substantially affected by the global economic crisis due to their: (1) very limited exposure to subprime and other structured and sustained securitized products; (2) relatively stronger balance sheets and profitability; (3) improved risk and liquidity management frameworks; (4) placement under strengthened supervisory and regulatory systems; and (5) exploration of other profitable business lines such as consumer lending, which arrested the strong search for yields common among financial institutions in advanced economies.

6. Inflation and Prices. Under the Arroyo Administration, inflation remained in single digits, ensuring stable prices to benefit consumers. Factors like the strong peso and improved agricultural production as well as sound monetary policy contributed to the slowdown of inflation from 2001-2008, notwithstanding the volatility of world food and oil prices that put upward pressure on inflation in 2008.
Inflation eased from 6.8% in 2001 to 2.8% in 2007. The 2007 inflation rate is well below the 4.0-5.0% target range for 2007 and the lowest annual average in 21 years. Inflation was kept in single digits in 2008 at an average of 9.3%.
Inflation rate improved in 2009, at a lower 5% average from January to June 2009, or almost back to its 2007 level. In light of the global crisis, the BSP was quick to provide liquidity to boost spending and investment and support market confidence. However, it remained committed to price stability and inflation was still well contained in June 2009, dropping to 1.5% from 3.3% in May, the lowest in more than 22 years.
From 2001 to 2009, the Arroyo Administration undertook intensive price monitoring activities and regular market visits. Strict enforcement of the Price Tag Law and Price Act were pursued to ensure availability of basic necessities to consumers at reasonable prices, keeping prices low. Meetings and dialogues with industry associations, manufacturers and retailers were continuously conducted.

7. Markets. The strong economic fundamentals achieved by the Arroyo Administration through its economic reforms had a strong positive impact on the Philippine Markets as these improved investor climate and brought confidence in the peso and the Philippine stock market.

The continued foreign exchange inflows from OFW Remittances, export earnings, and overall positive market sentiment enabled the strong performance of the peso in the past years. The peso appreciated by 9.5% from an average of PhP50.99/US$ in 2001 to PhP46.15/US$ in 2007. Although the peso fell in 2008, the peso remains strong and has averaged at P47.8160/US$ for the first half of 2009. In 2008 to the first half of 2009, investor concerns about a slowing global economy resulted to risk aversion and the decreasing value of the peso. However, due to the stored value of the peso from the previous 6 years, the peso value was not substantially diminished.
As a result of an improved fiscal condition, declining inflation and a strong peso, investor confidence in the economy was renewed, resulting into positive reactions from investors and the financial market. The Philippine Stock Market Composite Index (Phisix) increased from 1168.1 index points in 2001 to 2587.4 index points in 2008.



Reference:
http://www.gov.ph/sona/sona2009/2009_SONA_TECHNICAL_REPORT.pdf