News / Asia

Philippines Hopes Better Credit Rating Will Draw Investors

A worker counts U.S. dollar bills, which are being exchanged for Philippine Pesos, inside a money changer in Manila, April 1, 2013.
A worker counts U.S. dollar bills, which are being exchanged for Philippine Pesos, inside a money changer in Manila, April 1, 2013.
Simone Orendain
The Philippines has shrugged off decades of financial woes to earn its first investment-grade credit rating from one of the world’s leading ratings agencies. Fitch Ratings cites the Aquino administration’s improved money management, pro-growth policies and plans to increase revenues through a new “sin tax.”

Economists say it was only a matter of time before the Philippines would be given an investment-grade rating.  They point to the stock market, which has consistently reached record levels for more than half a year, and the solid yield on treasury notes backed by flush reserves.

Being one notch short of investment grade means a country’s bonds are “junk” or that the country that issues the bonds has a stronger chance of having to pay higher interest and defaulting.

Citigroup Philippine Economist Jun Trinidad said, now that the “junk” status is behind it, international investors will come around to the Philippines.

“That constraint, that institutional rigidity is gone now," noted Trinidad. "So that’s more financial benefits expected to come.”

Trinidad was referring to attracting big institutional investors to its stock market, such as pension funds and large mutual funds.

Royal Bank of Scotland’s Southeast Asia Senior Economist Enrico Tanuwidjaja said the investment grade rating is an overall endorsement of government policy.

“The market, in general, has acknowledged the improving fiscal, external position and then strong focus on the investment spending, governance and increasing tax revenue," Tanuwidjaja said. "Everything seems to chug along quite nicely.

Since he took office three years ago, President Benigno Aquino has been pushing major infrastructure projects that would entail partnerships between the public and private sector - with the hope of attracting foreign investment.

Twenty-five projects include light rail upgrades, school construction and new airports.  But the foreign chambers of commerce have grumbled about the slow pace of getting the projects up and running.  So far, one has broken ground, another is in the first phase and eight are in the bidding stages.

Ratings agencies claim that favorable ratings can help increase foreign direct investments for such projects, but economics professor and former budget secretary Benjamin Diokno disagrees.

“Foreign direct investment is governed by another dynamics.  It does not respond simply because you get investment grade," Diokno explained. "FDI’s would be sensitive to issues like, ‘Is the government policy consistent?’”

Diokno says companies want less red tape and less restriction on foreign ownership of businesses.

Although he says investment grade will make it easier for the Philippines to borrow money from foreign sources, there is no need right now, because the government holds more than $83 billion in foreign reserves.

“So we’re very comfortable.  We have large reserves.  It’s more than enough," Diokno said.

The investment upgrade could have some downsides. Diokno said if more money comes in, the Philippine peso will appreciate further, straining export businesses, and foreign remittances - which account for about 10 percent of the economy.

According to Enrico Tanuwidjaja, the Central Bank of the Philippines has taken some measures to keep the peso from appreciating too much and is trying to stave off large-volume short-term investment.

Tanuwidjaja expects the two other credit agencies to give the country investment grade ratings.  He said once that happens, the central bank will need to have strong monetary policy in place to handle the potential glut of capital.

You May Like

In US, Still No Decision in Racially-charged Case

Missouri town, many Americans on edge over whether jurors will indict white police officer in August shooting death of unarmed black teen More

Corruption Fighters Want More From World’s Strongest Nations

Anti-corruption activists say final communique fell short of expectations and failed to fully address systemic problems More

Philippines Leery of Development on Reef Reclamation in S. China Sea

Chinese land reclamation projects in area have been ongoing for years, but new satellite imagery reportedly shows China’s massive construction project More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine Marks Anniversary of Deadly 1930s Faminei
X
Daniel Schearf
November 23, 2014 4:32 PM
During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video Law Enforcement, Activists in Ferguson Agree to Keep Peace

Authorities in Ferguson, Missouri, say they have agreed with protest leaders to maintain peace when a grand jury reaches its decision on whether to indict a white police officer in the shooting death of a black teenager. Ferguson, a suburb of St. Louis, has been the scene of intermittent violence since the August 9 shooting intensified long-simmering antagonism between the police and the African-American community. VOA's Zlatica Hoke reports.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid