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Blinken to raise China’s support for Russia’s defense industrial base during visit

U.S. SECRETARY OF STATE ANTONY BLINKEN — PPA POOL/MARIANNE BERMUDEZ

WASHINGTON — US Secretary of State Antony Blinken on an upcoming visit to China is expected to raise US concerns Beijing is helping Russia build up its defense industrial base to fight the war in Ukraine, State Department spokesman Matthew Miller said on Tuesday.

The US has warned China not to aid Moscow’s war effort since Russia’s full-scale invasion of Ukraine in February 2022, which came just weeks after Russia and China declared a “no limits partnership.”

“What we have seen over the past months is that there have been materials moving from China to Russia that Russia has used to rebuild that industrial base and produce arms that are showing up on the battlefield in Ukraine,” Mr. Miller said at a press briefing. “And we are incredibly concerned about that.”

US officials briefed reporters last week on materials China was providing to Russia, including drone and missile technology, satellite imagery and machine tools, that fall short of providing lethal assistance but were helping Russia build up its military to sustain its two-year-old war in Ukraine.

A Chinese embassy spokesperson told Reuters last week that China was not a party to the Ukraine crisis and that normal trade between China and Russia should not be interfered with or restricted.

President Joe Biden raised the issue with Chinese President Xi Jinping in a phone call earlier this month, after which US officials said Blinken would travel to China in the coming weeks. Details of Blinken’s trip have not yet been announced.

“Without getting too far ahead of those meetings, you can certainly expect that that is an issue that he would be expected to raise,” Miller said.

Blinken raised the issue with NATO foreign ministers in Brussels earlier this month and would also discuss it when he meets counterparts from the Group of Seven (G7) advanced economies in Italy this week, he added. — Reuters

Taiwan submarine project chief quits; ministry says plans to proceed

XANDREASWORK-UNSPLASH

TAIPEI — Taiwan’s homegrown submarine program will remain on track, its Defense minister said on Wednesday, after the head of the program resigned due to what he said were unfair attacks against him and the military.

Taiwan, which China views as its own territory, has made the submarine program a key part of an ambitious project to modernize its armed forces as Beijing stages almost daily military exercises to assert sovereignty claims Taipei rejects.

Taiwan unveiled the first of eight new submarines in late September, though it won’t enter service until next year. The program has drawn on expertise and technology from several countries — a breakthrough for diplomatically isolated Taiwan.

In a statement late on Tuesday, Huang Shu-kuang said he had resigned as head of the submarine project as he and the program had been subjected to unfair attacks from people he did not name.

Mr. Huang told Reuters that the submarine task force, which includes the navy and shipbuilder CSBC Corp 2208.TW, will continue to operate despite his departure.

“It’s impossible that the team will be dismissed due to one man’s departure,” he said.

Defense Minister Chiu Kuo-cheng told reporters on Wednesday that Mr. Huang was a “conscientious” person but added: “The members of the task force are all on active duty and can work for a long time. It will not change due to a single personnel change.”

Mr. Huang has previously described the submarines as a “strategic deterrent” that can also help maintain the island’s “lifeline” to the Pacific by keeping ports along Taiwan’s eastern coast open.

Taiwan hopes to deploy at least two such domestically developed submarines by 2027, and possibly equip later models with submarine-launched anti-ship missiles. — Reuters

Investors summit to unveil the ‘power of ESG investing’

With the recent local and global events placing greater pressure on responsible investing, ESG is shifting with more mandatory disclosures and increased stakeholder scrutiny. As the momentum around ESG continues to grow, so does the challenge of keeping up to date with increasing regulatory and market demands.

Taking place on May 14, 2024 at Solaire Resort Entertainment City, the 2nd Philippine ESG Investors Summit aims to convene over 150 senior-level executives and stakeholders to engage in discussions about the challenges facing the industry, and to share solutions and collaborate with sustainably focused investors to come away with actionable insights on current trends that are shaping the ESG landscape.

The 2nd Philippine ESG Investors Summit is also set to showcase interactive panel discussions and engaging keynotes covering core themes of the ESG space including:

  • Critical role of ESG investing in biodiversity preservation
  • Effects of ESG quality disclosure in both voluntary and mandatory regimes
  • ESG in the new normal of volatile global supply chains
  • Importance of index providers, standard-setting and green indices for the creation of sustainability impact
  • Key drivers of ESG within the context of geopolitics, energy crisis and inflation
  • Leveraging ESG frameworks towards a just transition
  • Net-zero pathway and the role of investors
  • Rapid growth of sustainable finance in emerging markets
  • Regulators’ perspectives on ESG disclosure for funds and corporates
  • Understand investor engagement trends and rise of investor proxy activism

For more information, you may visit https://pcm-asia.org/2esgph.

 

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US defense chief speaks with Chinese counterpart, Pentagon says

REUTERS

WASHINGTON – US Defense Secretary Lloyd Austin spoke with China’s defense minister on Tuesday, the first engagement the two have had in more than a year as the two countries seek to restore military ties.

The phone call comes as US President Joe Biden and Chinese President Xi Jinping have sought to manage tensions; the two leaders last year resumed direct military talks.

In a readout after the call, the Pentagon said Mr. Austin “underscored the importance of respect for high seas freedom of navigation guaranteed under international law, especially in the South China Sea.”

An escalating diplomatic dispute and recent maritime run-ins between China and the Philippines, a US treaty ally, have made the highly strategic South China Sea a potential flashpoint between Washington and Beijing.

China and US should explore ways to “get along” and “gradually accumulate mutual trust” by building a “non-conflict, non-confrontation”, pragmatic and cooperative relationship between their militaries, the Chinese defense ministry cited its minister as saying during the phone call.

Minister Dong Jun said the US should recognize China’s position on South China Sea, and respect China’s territorial sovereignty and maritime rights and interests there.

He also stressed that the Taiwan issue is “core of China’s core interests.”

The Pentagon said the two also discussed Russia’s war in Ukraine, North Korea, and Washington’s commitment to the so-called one China policy.

Austin last spoke with his Chinese counterpart in 2022, when he met China’s defense minister at the time, Wei Fenghe, on the sidelines of a gathering of Southeast Asian countries in Cambodia.

Before the November meeting between Mr. Biden and Mr. Xi, relations between the superpowers had become increasingly acrimonious, with friction over issues from Taiwan to China’s military activity in the South China Sea.

In October, the US military said Chinese military aircraft had carried out risky or reckless maneuvers close to US aircraft nearly 200 times since 2021.

Since then, the United States’ top military general has spoken with his Chinese counterpart.

This month, US military officials met their Chinese counterparts for meetings in Hawaii focused on how the two countries can operate safely.

US military officials have long sought to maintain open lines of communication with their Chinese counterparts to mitigate the risk of potential flare-ups or deal with any accidents.

“Secretary Austin emphasized the importance of continuing to open lines of military-to-military communication between the United States and the PRC,” the Pentagon said, using an acronym for the People’s Republic of China. – Reuters

Vietnam mounts ‘unprecedented’ $24 billion rescue for bank engulfed in giant fraud, documents show

A VIETNAM DONG note is seen in this illustration photo May 31, 2017. — REUTERS

HANOI – Vietnam has mounted an “unprecedented” rescue of Saigon Joint Stock Commercial Bank (SCB), a lender engulfed in the nation’s biggest financial fraud, according to three bank documents and new official information provided to Reuters by a person with access to the documents.

“Without lending, SCB will collapse,” according to the new information provided to Reuters. “If the lending continues, the national treasury will gradually dry up.”

Reuters is not identifying the source more specifically due to the sensitivity of the matter.

The new information also described the situation as “unprecedented” for the massive volume of the cash injections, the complexity of the operation and the scale of existing and potential damage to Vietnam’s financial system.

Reuters was unable to establish whether the conclusions about the impact on state coffers were broadly shared by other officials currently involved with monitoring SCB.

Vietnam’s public debt was stable last year at 37% of gross domestic product, while the budget deficit widened slightly to 4.4% of GDP. Foreign reserves were around $100 billion at the end of the year, according to the central bank. That is up from about $90 billion at the end of October, according to the independent regional watchdog ASEAN+3 Macroeconomic and Research Office.

As of the start of April, the Southeast Asian nation’s central bank had pumped $24 billion in “special loans” into SCB, according to one of the bank documents seen by Reuters, which provides daily updates since March 29 on overall injections from the central bank.

Lending has slowed slightly but averaged more than $900 million a month in the past five months, according to that document, a second document with updates from March 15 to March 20, and a third document from November with monthly updates from October 2022 to October 2023.

The central bank did not reply to requests for comment about the rescue effort. The finance ministry referred a question to the central bank. SCB initially told Reuters it would circulate the news agency’s request for comment, but did not respond to subsequent emails. An SCB official declined to comment when contacted by phone.

 

RUN ON BANK AFTER TYCOON’S ARREST

The State Bank of Vietnam’s previously unreported cash injections into SCB amount to 5.6% of the nation’s annual economic output, or about one-fourth of Vietnam’s foreign-exchange reserves.

The central bank placed SCB under its supervision to stem a run on the bank sparked by the October 2022 arrest of real estate tycoon Truong My Lan. Since then, SCB has been using the injections to cover cash withdrawals, according to one of the bank documents, which SCB sent to the central bank in November to account for its use of the loans.

After the central bank stepped in, SCB’s deposits plunged 80% to about $6 billion by December 2023, according to the new official information from the source. SCB could run out of deposits by mid-year at the current pace, and bad loans had surged to 97.08% of SCB’s credit balance as of October, it said.

Lan, the tycoon whose October 2022 arrest sparked the bank run, was sentenced to death on Thursday after being found guilty of masterminding the fraud. She had pleaded not guilty to embezzlement and bribery for allegedly siphoning off $12.5 billion in loans from SCB to shell companies while effectively controlling SCB through proxies.

Lan, formerly a prominent figure in Vietnamese finance, will appeal the verdict of the People’s Court of Ho Chi Minh City, one of her lawyers said.

Despite the official support, as of December SCB continued to face liquidity problems and at times struggled to settle payments on time when its customers transferred money to other banks, and to process payments via the country’s main clearing system, according to the new information. This affected customer “psychology” and created risks to the entire banking and financial system, it said.

The central bank had provided SCB, previously one of the country’s largest commercial lenders by deposits, with 592.7 trillion dong ($23.72 billion) in “special loans” as of April 2, according to a recent update produced by the bank on the matter, seen by Reuters.

That was up from 478 trillion dong at the end of October, according to the SCB document that was sent to the central bank. That indicates injections of 23 trillion dong ($910 million) a month since November.

This has slowed from the initial average of $3.7 billion a month the central bank initially injected in October and November 2022 and the monthly pace of nearly $1.2 billion from then until October 2023, the bank document shows.

 

BANK RESTRUCTURING SOUGHT

Vietnam’s banking sector is already facing heightened risks from prolonged turmoil in the real estate sector. The fraud prosecution is part of the authorities’ “blazing furnace” anti-corruption campaign, which triggered the real estate crisis, weighing on the economy and clouding the outlook for banks.

The central bank and the government have repeatedly sought help for SCB from the private sector, specifically calling on foreign investors, state media say, despite restrictions such as a 30% cap on combined foreign ownership of Vietnamese banks.

Late last year the central bank assigned private real estate company Sungroup to craft a plan to restructure SCB, according to the recent information from the source and three people familiar with the plan. Sungroup did not reply to a request for comment.

Reuters could not determine whether the Sungroup plan has been approved.

Any restructuring plan would hinge on the evaluation of real estate assets used by Lan and her companies as collateral for loans, but the legal status of those assets is often unclear, as many are still seeking permits while some violated rules on public land or permits, according to the new information.

Some of the assets include valuable properties in high-end districts in Ho Chi Minh City but most are unfinished projects.

The Lan family estimated the assets at $30 billion, a family representative told Reuters this month, while the market appraisal firm Hoang Quan, hired by the central bank for an assessment, valued them around $12 billion, according to a November public document from the police, which detailed Lan’s alleged wrongdoing.

Some of Lan’s Hong Kong business partners have expressed interest in the assets, Reuters reported earlier this month. They did not respond to requests for further comment about their interest in the assets after Lan’s trial verdict. – Reuters

UN committee unable to agree on Palestinian bid for full membership

SANJITBAKSHI-FLICKR

UNITED NATIONS – A United Nations Security Council committee considering an application by the Palestinian Authority to become a full U.N. member “was unable to make a unanimous recommendation” on whether it met the criteria, according to the committee report seen by Reuters on Tuesday.

The Palestinian Authority is still expected to push the 15-member Security Council to vote – as early as Thursday – on a draft resolution recommending it become a full member of the world body, diplomats said. Security Council member Algeria circulated a draft text late on Tuesday.

Such membership would effectively recognize a Palestinian state. The Palestinians are currently a non-member observer state, a de facto recognition of statehood that was granted by the 193-member U.N. General Assembly in 2012.

But an application to become a full U.N. member needs to be approved by the Security Council, where Israel ally the United States can block it, and then at least two-thirds of the General Assembly.

The United States said earlier this month that establishing an independent Palestinian state should happen through direct negotiations between the parties and not at the United Nations.

The U.N. Security Council has long endorsed a vision of two states living side by side within secure and recognized borders. Palestinians want a state in the West Bank, east Jerusalem and Gaza Strip, all territory captured by Israel in 1967.

Little progress has been made on achieving Palestinian statehood since the signing of the Oslo Accords between Israel and the Palestinian Authority in the early 1990s.

The Palestinian push for full U.N. membership comes six months into a war between Israel and Palestinian Hamas militants in Gaza, and as Israel is expanding settlements in the occupied West Bank.

The Security Council committee on the admission of new members – made up of all 15 council members – agreed to its report on Tuesday after meeting twice last week to discuss the Palestinian application.

“Regarding the issue of whether the application met all the criteria for membership … the Committee was unable to make a unanimous recommendation to the Security Council,” the report said, adding that “differing views were expressed.”

U.N. membership is open to “peace-loving states” that accept the obligations in the founding U.N. Charter and are able and willing to carry them out. – Reuters

Rupture on TC Energy’s NGTL gas pipeline sparks wildfire in Alberta

A section of TC Energy’s NGTL gas pipeline system in Alberta ruptured and caught fire on Tuesday, sparking a wildfire in a remote area, the company said.

“An initial ignition of natural gas at the rupture site is now extinguished. We are working to support Alberta Wildfire in their response to contain a secondary fire,” the company said in a statement on its website.

TC said there were no injuries and it was working closely with first responders in the region.

The fire broke out about 40 km (25 miles) northwest of Edson, Alberta, in Yellowhead County. Canadian broadcaster Global News said there was a plume of flames and smoke visible from many kilometers away.

Alberta Wildfire data showed one new active wildfire in the Edson forest area, which it listed as out-of-control and measuring 10 hectares.

TC Energy said it has isolated and shut down the affected section of the NGTL system. It activated emergency response procedures after being notified about an incident at about 11 a.m. (1700 GMT).

“The remainder of our system is operating normally and there are no commercial impacts at this time,” TC said.

The Canada Energy Regulator said it is sending inspectors to the area to monitor and oversee the company’s response and determine the impact of the incident.

NGTL is TC Energy’s natural gas gathering and transportation system for the Western Canadian Sedimentary Basin (WCSB). – Reuters

Judge temporarily blocks Ohio gender-affirming care ban

WESLEY TINGEY-UNSPLASH

 An Ohio judge on Tuesday temporarily blocked a Republican-backed state law banning gender-affirming care, such as puberty blockers and hormones, for transgender minors from taking effect later this month.

Judge Michael Holbrook of the Franklin County Court of Common Pleas said that the two transgender children and their families who are suing to challenge the law, which would also prevent transgender girls from competing on girls’ sports teams, would be permanently harmed if the law takes effect on April 24.

The order will remain in place for two weeks, or until a hearing on the families’ motion for a longer-term order blocking the law. Ohio Attorney General Dave Yost in a statement said he was confident the law would be upheld.

“This is just the first page of the book,” he said. “We will fight vigorously to defend this properly enacted statute, which protects our children from irrevocable adult decisions.”

Ohio is one of at least 22 Republican-controlled states that have passed laws restricting gender-affirming care. Tuesday’s ruling comes a day after the U.S. Supreme Court allowed Idaho to enforce its ban while it appeals a lower court order blocking it.

Ohio’s Republican-controlled legislature passed its law in January.

The vote overrode the veto of Governor Mike DeWine, a Republican who said he made his decision after hearing from parents of transgender youth that gender-affirming care had been lifesaving for their children.

In his ruling, Holbrook said the families who challenged the law were likely to succeed in their argument that it improperly addressed two separate subjects, healthcare and sports, rather than a single subject as required by the Ohio constitution.

He did not directly address whether they were likely to succeed in proving that the law was discriminatory and took away families’ right to make choices about their healthcare.

“We are thrilled and relieved that Ohio’s ban on gender-affirming healthcare has been halted and that transgender youth can continue, for the near term at least, to access medically necessary healthcare,” Freda Levenson of the American Civil Liberties Union of Ohio, a lawyer for the plaintiffs, said in a statement. – Reuters

EU auditors say lobbyists can easily slip under bloc’s radar

REUTERS

BRUSSELS – Lobbyists can easily bypass EU transparency rules to influence policy, the 27-nation bloc’s auditors said on Wednesday.

The European Court of Auditors’ (ECA) report comes as European Union institutions discuss a new Ethics Body to guide the conduct of officials and ahead of a planned review of the bloc’s transparency register of lobbyists.

That review follows a 2022 cash-for-influence scandal at the heart of the European Parliament in which Qatar and Morocco have been accused of bribing decision-makers.

Qatar has denied wrongdoing. Morocco has complained of “judicial harassment” after a probe by Belgian prosecutors.

More recently, European Commission President Ursula von der Leyen said her pick for the EU’s new business envoy had decided not to take up the post, after critics alleged cronyism.

Any accusations of wrongdoing risk damaging the EU’s reputation ahead of European Parliament elections in June.

ECA warned the transparency register risked becoming “a paper tiger” unless it was significantly bolstered.

“A range of lobbying interactions with EU lawmakers can be hidden from the public eye,” said Jorg Kristijan Petrovic, who lead the audit, which identified major loopholes.

These include requirements to register meetings between lobbyists and high-ranking staff only and solely for pre-scheduled appointments. The report also said that funding for more than one in three NGOs was unclear.

Currently, a formal record is not required for spontaneous meetings, unscheduled phone calls and email exchanges, said ECA.

New EU ethics rules are expected to set standards regarding acceptance of gifts, hospitality or travel, meeting lobbyists, financial interests, and on conditions for activities after terms have ended.

While roughly 12,500 organizations are listed in the EU register, watchdog Lobbycontrol estimates up to 29,000 lobbyists are active in Brussels where bloc-wide policies are honed.

Lobbycontrol campaigner Max Bank said Big Tech has stepped up its lobbying considerably in recent years, spending 113 million euros ($120 million) in 2023, with the five largest companies alone spending 33 million euros in the EU hub.

“No one is naive anymore after Qatar, money can buy your influence,” said Paul Tang, a Dutch socialist member of the 705-strong European Parliament. – Reuters

IMF hikes growth forecast for PHL

The International Monetary Fund (IMF) sees the Philippine economy growing by 6.2% this year. — PHILIPPINE STAR/RYAN BALDEMOR

By Luisa Maria Jacinta C. Jocson, Reporter

THE INTERNATIONAL Monetary Fund (IMF) raised its gross domestic product (GDP) growth forecast for the Philippines for this year and 2025. 

In its latest World Economic Outlook (WEO), the IMF upwardly revised its Philippine growth forecast to 6.2% for this year from 6% previously. This is within the government’s revised 6-7% growth target.

“Real GDP growth for 2024 was revised slightly to 6.2% from the January WEO forecast of 6%, reflecting carryover from a better-than-expected outturn in the last quarter of 2023,” IMF Representative to the Philippines Ragnar Gudmundsson said in an e-mail.

The Philippine economy grew by 5.5% in both the fourth quarter and full-year 2023.

Based on IMF projections for emerging and developing Asia, the Philippines is expected to post the second-fastest GDP growth this year, just behind India (6.8%). It is ahead of Vietnam (5.8%), Indonesia (5%), China (4.6%), Malaysia (4.4%) and Thailand (2.7%).

“Growth in emerging and developing Asia is expected to fall from an estimated 5.6% in 2023 to 5.2% in 2024 and 4.9% in 2025, a slight upward revision compared with the January 2024 WEO Update,” according to the report.

The multilateral lender sees five Association of Southeast Asian Nations member economies (ASEAN-5) to expand by an average of 4.5% this year, slightly lower than the 4.7% forecast it gave previously. 

The ASEAN-5, composed of the Philippines, Singapore, Malaysia, Vietnam, and Indonesia, is forecast to grow by 4.6% next year, slightly higher than its 4.4% projection in January.

For 2025, the IMF sees Philippine GDP growing by 6.2%, a tad higher than its previous forecast of 6.1% but below the government’s 6.5-7.5% target.

Mr. Gudmundsson said the forecast for 2025 is supported by expectations of an “acceleration in domestic demand and investment.”

Next year, the Philippines has the second-fastest projected growth in the region, just behind India and Vietnam (both at 6.5%).

“Over the medium term, structural reforms to close infrastructure and education gaps, attract greater foreign direct investments (FDIs), and harness benefits from the digital economy should help realize a (Philippine) growth potential of about 6-6.5%,” Mr. Gudmundsson said.

“These reforms should be complemented by strengthening existing social protection schemes and addressing climate change through a more integrated strategy that includes a carbon pricing scheme,” he added.

Economic managers are targeting 6.5-8% growth from 2026 to 2028.

Meanwhile, the IMF sees global growth settling at 3.2% for both 2024 and 2025. It raised its 2024 forecast by 0.1 percentage point but kept its 2025 projection unchanged from January.

“Nevertheless, the projection for global growth in 2024 and 2025 is below the historical (2000-2019) annual average of 3.8%, reflecting restrictive monetary policies and withdrawal of fiscal support, as well as low underlying productivity growth,” the IMF said.

It said that emerging market and developing economies are expected to “experience stable growth through 2024 and 2025, with regional differences.”

INFLATION
Meanwhile, the IMF sees inflation averaging 3.6% this year, lower than the 3.7% forecast in its January update.

“Inflation is projected to gradually approach the target of 3% in the second half of 2024, though risks remain tilted to the upside as a surge in food or fuel prices could lead to increased pressure for greater wage hikes and persistence in core inflation,” Mr. Gudmundsson said.

Inflation accelerated for a second straight month to 3.7% in March, mainly due to high food and transport costs. The BSP sees inflation averaging 3.8% this year.

BSP Governor Eli M. Remolona, Jr. has said that upside risks to inflation have worsened, prompting the central bank to be “somewhat more hawkish than before.”

Inflation could temporarily accelerate to above the 2-4% target over the next two quarters, according to the BSP.

The IMF also sees inflation averaging 3% in 2025, same as its previous estimate.

The BSP expects inflation to average 3.2% next year.

Mr. Gudmundsson said that the BSP should “maintain a sufficiently restrictive monetary policy stance until inflation fully returns to target.”

“Scope for a gradual reduction in the policy rate could emerge later this year provided that inflation expectations are firmly anchored and upside risks to the inflation outlook do not materialize,” he added.

At its latest meeting in April, the Philippine central bank left its benchmark rate unchanged at a near 17-year high 6.5% for a fourth straight meeting.

From May 2022 to October 2023, the Monetary Board raised borrowing costs by 450 basis points (bps).

Mr. Remolona told Bloomberg on Monday that if inflation continues to worsen, there is a chance that there will be no rate cuts this year.

The central bank will likely begin policy easing by the first quarter of 2025, he added.

Remolona says rate cut more likely in 2025 on inflation risks

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. — BLOOMBERG

THE WINDOW for the Philippine central bank to start reducing the key rate in the second half of 2024 is narrowing as the risk that inflation may breach its target for a third straight year rises, according to Philippine central bank Governor Eli M. Remolona, Jr.

“The upside risks have become worse than before, and that’s the reason we’ve stayed hawkish,” Mr. Remolona said in an interview on Monday at the Bangko Sentral ng Pilipinas (BSP) office in Manila. “The policy rate is on the tight side. So, by being hawkish, what we mean is we will stay where we are,” he said.

Monetary easing will more likely begin in the first quarter of 2025, and the cuts won’t be “huge” — just enough to bring the benchmark closer to the neutral rate of about 6% from the current 6.5%, the governor said.

As things stand, the odds are “over 56%” that inflation may breach the BSP’s 2%-4% target again this year and “that’s a reason to be hawkish,” Mr. Remolona said. “That has to change significantly before we decide to cut,” he said.

Policy makers across the world, including in the Philippines, have signaled they’re not in a rush to lower borrowing costs and wanted to see more evidence of firmly decelerating price pressures before pivoting to easing. Since taking over in July 2023, the BSP governor, who has worked at the Bank for International Settlements and the Federal Reserve of New York, has adopted a broadly hawkish stance.

Price risks in the Philippines have lingered even after the BSP’s most-aggressive tightening campaign in two decades that has taken the key rate to a 17-year high. Mr. Remolona presided over the last increase in October, done out of the cycle, to rein in inflation. It helped that economic growth remained among the fastest in the region.

Rice inflation in the Philippines hit a fresh 15-year high in March while the peso has touched a seven-month low, weakening along with other emerging currencies as the Middle East conflict intensifies. Mr. Remolona said he’s comfortable with the peso’s current level and that the BSP has hardly been intervening in the foreign currency market. The peso fell for a fourth day.

An “extraordinarily weak” economy would increase the need for a rate cut, the governor said, but he pointed out that the BSP’s latest growth estimate for 2024 was better than the 4.5% forecast he gave last year, without disclosing details.

The Philippines is seen to expand by 5.8% this year, according to a median estimate in a Bloomberg survey of economists, after rising by 5.5% in 2023.

Philippine inflation, meanwhile, quickened for a second month to 3.7% in March with price pressures seen persisting until next quarter, longer than the BSP previously expected. The peso fell as much as 0.3% against the dollar on Tuesday to P56.99, the lowest since Sept. 6, 2023.

“Things have gotten worse in terms of inflation. So yes, if the trend continues, it won’t happen this year,” the governor said of the rate cut.

An escalation in the Israel-Iran conflict that could impact global oil supplies is a potential risk to the Philippine economy, Mr. Remolona said. The Southeast Asian nation imports nearly all of its fuel needs and is among the world’s top buyers of rice.

“The broadly hawkish stance is prudent given upside risks to inflation and perhaps the BSP is seeing growth will remain intact,” said Robert Dan J. Roces, chief economist at Security Bank Corp. in Manila. “Add to these recent bets that the Fed won’t rush to cut rates. This should be supportive of the peso.”

Below are Mr. Remolona’s comments on other matters:

On cutting the reserve requirement:

“If we’re going to lower it, we don’t want to do it while we’re hawkish. We definitely want to lower it significantly. One question is by how much and the other questions is when.”

On push for capital market reforms:

“It’s very important for our transmission mechanism. Right now, the policy rate is an overnight rate. There are no significant economic decisions that are being made based on an overnight rate. You need one year, a mortgage is five years. So that’s how a deeper capital market helps the transmission mechanism.”

On shift to market-determined overnight reverse repurchase facility:

“It took a little bit of adjustments, but we’re now where we want to be. When we do the auctions, on some days it’s above the policy rate, on some days it’s below. We want the policy rate to be in the middle. When we started doing it, it was always below the policy rate, which means there’s just too much liquidity in the market. Now it’s sometimes above, sometimes below, that’s where we want it to be.” — Bloomberg

Red tape poses challenge for foreign investors, says German ambassador

A German national flag flies atop the illuminated Reichstag building in Berlin, Germany. — REUTERS

By Justine Irish D. Tabile, Reporter

BUREAUCRATIC RED TAPE and foreign ownership restrictions remain some of the challenges facing foreign investors in the Philippines, Germany’s ambassador to the Philippine said on Tuesday.

German Ambassador to the Philippines Andreas Michael Pfaffernoschke told reporters on Tuesday that foreign businesses still face hurdles in terms of securing permits, especially at the local level.

“There are many permits you need in the Philippines; there is sometimes corruption involved, and there are different layers of government units that are involved in getting permits,” he said.

“So, making these things easier, streamlining the processes, and reducing red tape are definitely among the key concerns.”

Mr. Pfaffernoschke said issues involving red tape are not just a concern of German businesses, but of the broader business community.

“When it comes to red tape… it’s the number of permits you need, it’s the time it takes to get a permit… I think it’s not unique to German businesses, you will hear this from the whole business community in the Philippines,” he said. 

David Klebbs, economic counselor of the German Embassy, said that the typical obstacles faced by German businesses doing business in the Philippines involve bureaucracy.

“It’s sometimes not easy to get the right permissions; there are different levels, local government units, and (other) different things,” Mr. Klebbs said.

While some German businesses may say that doing business in the Philippines is easier, he noted most still say that it is difficult.

“Most businesses say (that) they feel it’s difficult. They feel it’s not so easy to understand what’s happening. So it really helps to have certain things. What usually helps is a one-stop shop, which is also being done already by the Filipino government,” he said.

Mr. Klebbs said the government should try to make the permits processing “as easy and transparent as possible.”

The Philippines may look into lifting the foreign restrictions on ownership and procurement, which may lead help attract more investments, he said.

“If you look, for example, at the Procurement Law, it is one of the magical tools that the country has to be open to foreign investors … In the end, you can get many offers if you do it well, and you can choose the best provider,” Mr. Klebbs said.

“There are companies that started on the procurement contracts in the Philippines and were not in the Philippines before, and now they’re very successful,” he added.

He said that the procurement law should be more open and procurement procedures should be less complicated and time-consuming.

“Same as foreign ownership. It is really difficult for foreign companies to do business if they’re not able to own their businesses,” he said. “Also with the ownership of land. Sometimes you need land to do business. If you can’t own the land, you can’t do the business because it’s too risky.”

“But we think that it is better to allow it. But I do understand this notion that certain things should stay for the people, but it’s a balanced approach,” he added.

The House of Representatives has already approved Resolution of Both Houses (RBH) No. 7, which seeks to amend the restrictive economic provisions of the Constitution.

Under Article 12 of the Constitution, foreign ownership of land and businesses is only limited to 40%.

Germany was the top source of foreign-approved investments in the Philippines last year, accounting for P393.99 billion, and among the leading sources of foreign direct investments, contributing $149.89 million.

Data from the Philippine Statistics Authority showed that total trade between the Philippines and Germany was valued at $4.65 billion in 2023.

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