Friday, August 12, 2011


The United States is pressing for charter change to allow foreign companies to build majority stakes in companies that are currently barred by the 1987 Philippine Constitution, America’s top envoy in Manila said here last Thursday.

US Ambassador to the Philippines Harry K. Thomas Jr. disclosed that Philippine Finance Secretary Cesar Purisima will meet with US Trade Representative Ron Kirk in Washington next month to discuss the Philippines’ desire to join the Trans-Pacific Partnership (TPP), an Asia-Pacific trade organization that could vastly expand Philippine markets.

President Aquino sought US support for joining the TPP during his US visit last year. “Envisioned as a platform for economic integration across the region, the TPP countries would be in a best place to become the region’s leading hub for trade, investment and growth,” he told the Council for Foreign Relations in New York.

The TPP aims to eliminate tariffs among participating countries – Australia, Brunei, Chile, New Zealand, Peru, Singapore, Vietnam and the US – by 2015.

“The head of the USTR, Ambassador Kirk, pledged to have his team come out to the Philippines 4 times a year. They’ve already been there 3 times,” Thomas said, “Secretary Purisima will come here in September and sit down with Ambassador Kirk and his staff to go chapter and verse for everything the Philippines needs to do to establish a trade and framework agreement and eventually be part of the Trans-Pacific Partnership.”

“They have to change laws, issue executive orders and frankly, introduce amendments to the Constitution,” Thomas declared at a forum on Philippine-US relations organized by the Washington-based Asia Society last Thursday.

“Our priorities in the Philippines are basically the same as the priorities of the Philippine government,” he assured.

He equated the inability of foreign companies to gain a majority stake in the Philippines to the other ills that fuel widespread poverty – corruption and the rule of law. “For the Philippines, we have known what the constraints to economic growth have been…why the Philippines is 9th of 11 countries (in the Southeast Asian region) in foreign direct investments,” Thomas said.

“We are very pleased to see the Chief Justice of the Supreme Court and also the Speaker of the House now open to changing parts of the Constitution on the economic side,” he added.

Before flying to New York to visit his mother, the US envoy also met with Senate President Juan Ponce Enrile who called for debates to amend economic provisions of the Constitution that restrict foreign ownership of local industries.

Thomas’ assertion on the need for charter change is shared by some of the country’s top economists. Dr. Bernardo Villegas, who was one of the framers of the 1987 Constitution, argued the Philippine economy can not grow at a pace sufficient to reduce the poverty level from today’s 30 percent to 10 percent or less without large foreign investments.

He cited China which attracted over $100 billion in foreign direct investments (FDIs) last year. The Philippines generated less than $2 billion over the same period, lagging behind neighboring Indonesia and Vietnam which attracted $10 billion and $7 billion, respectively

FDIs amounted to $714 million in the first 5 months of 2011, up 15 percent from a year ago, according to the Bangko Sentral ng Pilipinas (BSP). Market fluctuations and a general sense of uncertainty spawned by America’s first-ever credit downgrade and concerns in Europe are reportedly driving money managers to emerging markets in Asia.

Total US FDIs reached nearly $6 billion just as the home mortgage crisis and economic recession was taking its grip on America in 2009. Much of that money went to the manufacturing sector in the Philippines, US statistics show.

Thomas admitted the US also has a significant stake in seeing a more economically robust Philippines. “The Philippines is the 8th largest country for US lead product exports, the 12th largest for food and beverage. It’s the only country that takes all American beef and that leads to a lot of American jobs,” he pointed out.

“At the same time we’re working to send more agricultural exports to the US, especially value-added processed food,” Thomas said as he recited a litany of Philippine products like aircraft parts and electronic goods that make their way to the American market.

The Philippines enjoyed about a $600 million surplus from nearly $15 billion in PH-US trade in 2010, according to USTR statistics.


The United States will send one of its highest military officers and a nuclear-carrier battle group to celebrate the 60th anniversary of its defense pact with the Philippines this month.

US Ambassador to the Philippines Harry K. Thomas Jr., speaking before the Asia Society Thursday evening, reiterated the American position that while it will not meddle in territorial disputes in the South China Sea, it is committed to the defense of the Philippines.

“The United States is a longstanding treaty ally of the Philippines,” he told a largely Filipino-American audience, “We are a strategic partner and we will remain that way.”

The Philippines is one of only two countries in the Southeast Asian region that has a defense treaty with the US. The Philippine-US Mutual Defense Treaty (MDT) was signed in Washington DC on August 30, 1951.

The MDT was thrust to the forefront because of rising tensions in the Spratly Islands that is claimed in whole or in part by China, Taiwan, Vietnam, Malaysia, Brunei and the Philippines.

The Philippines protested China’s harassment of its research ships exploring for oil and gas deposits in the area. China has also built structures that encroach on Philippine territorial waters, officials in Manila charged.

Outnumbered and outgunned, the Philippines has been forced to rely on the deterrence of the American security umbrella promised by the MDT.

When Thomas returns to Manila next week, it will be closely followed by the visit of Gen. Norton Schwartz, the US Air Force chief. His arrival comes on the heels of the visit of another ranking US military official, Pacific Command chief Admiral Robert Willard, in the last week of July.

The nuclear-powered aircraft carrier USS John Stennis (CVN-74) and her escort flotilla are scheduled to arrive in Manila in the last week of August, after leaving her home port in Washington state last July 25.

She rendezvoused with the rest of Carrier Strike Group-3 that is composed of the guided-missile cruiser USS Mobile Bay and ships under Destroyer Squadron 21 that includes the USS Pinckney, USS Kidd, USS Dewey and USS Wayne Meyer that left San Diego last July 29.

After their Philippine stop, the battle group will take up station to support US operations in Iraq and Afghanistan. The 1,000-foot John Stennis has a crew of 5,000 officers and men and has 4 strike fighter squadrons, 2 combat helicopter squadrons and the 2 other squadrons for electronic warfare and airborne early warning system.

“This shows our commitment to the Philippines,” Thomas stressed.

Amid fears that China could fill a perceived power vacuum in the South China Sea, the American envoy insisted that the US will continue to have a military presence in the region as he revealed that American warships make about a hundred port visits in the Philippines every year.

“We don’t take sides in this issue and we expect people to exercise restraint. This is something that should be negotiated on the table in a peaceful manner,” he explained.

As the US gets ready to mark the 10th anniversary of the Sept. 11 terror attacks, the American envoy said, “We are very confident in the ability of the Philippine government to align with us to combat terrorism.”

He noted recent battlefield setbacks for the Philippine military pursuing the Abu Sayyaf. “The Philippine military has taken a few tough weeks and they’ve had to sacrifice,” Thomas noted, adding that “their families are crying out for justice.”

Thomas pointed out that top Al-qaeda leaders Ramzey Yousef and Khalid Sheikh Mohammed hatched a terror plot called Bojinka that is widely seen as the precursor to the use of jetliners in the 9-11 attacks, in Pasay City just a few kilometers from the US Embassy in Manila.

Monday, August 8, 2011


Filipino-American businessmen in the region are keeping faith with the US economy, convinced that it will weather the triple whammy of an unprecedented credit downgrade, dysfunctional government and budget cuts that could hit Metro DC hard.

“The fundamentals are still sound,” observed Ramon Llamas, Vice President of Sun Trust Mortgage, Inc. in Oakton, Virginia.

“Everyone’s going to feel it but right now we don’t really know,” said John Cabrera, President of the Philippine-American Chamber of Commerce in Metro DC (PACC-DC). “It’s still premature and there so many different opinions out there that anything they say is just speculation.”

“We’re not going to worry ourselves out of business,” he declared. “Filipinos are worker bees so we just have to work harder, to grow and expand our business, and deal with the problems when they come.”

Standard & Poor’s lowered by a notch last Aug. 5 the US’ gold-standard AAA rating – the first ever in the nation’s history. The two other major rating retained their assessment of America’s creditworthiness but kept the US on a watch list.

They sharply criticized how US debt appears to have been politicized. “The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective and less predictable.”

They expressed doubt the White House and Capitol Hill can agree on the kind of deficit-busting measures that S&P believes is needed for the long-term health of the US economy.

“The credit rating is intangible but it is also very important,” banker Llamas tells the Manila Mail.

He said mortgage rates and consumer loans are expected to rise. “At the micro level, this might cause some short-term pain. It’s always difficult if you can not borrow to supplement your capital,” he explained.

“There will be a chain reaction,” he added, “There could be job losses.”

Llamas warned that Filipino migrants might be especially vulnerable, especially those holding temporary workers visas. “The impact on permanent residents or green card holders will be less because they don’t rely on just a single employer.”

Governors Bob McDonnell of Virginia and Martin O’Malley of Maryland warned last month about the effects of a credit downgrade and overly sharp budget cuts that could hurt individuals and businesses heavily dependent on the federal government.

But Cabrera told the Manila Mail that, “many of our members are not in the trade business. There is a handful involved in government contracting and they are worried about the budget cuts but so far no one is complaining…yet.”

Llamas said the US can still win back the coveted AAA rating.

The Philippines managed to claw its way to an S&P BB rating, just 2 notches below investment grade – interestingly because of the current US predicament – after Manila cut chronic budget deficits by raising taxes and improving revenue collections.

In Manila, presidential spokesman Ricky Carandang called the US credit downgrade a “wake up call” even as finance officials signaled they will continue buying US debt. The Philippines reportedly holds $23.6 billion in US treasury bonds.

The solution, according to Llamas, rests with the nation’s political leaders. “It depends on the political will of both Republicans and Democrats to work together because the bottom line here is if they can not settle their differences, it’s going to hurt the people,” he said.

Both Llamas and Cabrera predicted investments will continue to flow into the US despite its current woes. “This is a trust problem. The politicians should give us a reason to trust again,” Llamas said.