Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : An obscure ZIM in Africa traded Down Under -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (407)	10/28/2002 12:26:24 AM
From: TobagoJack	Read Replies (1) \| Respond to of 867

Philippines online.wsj.com Eyeing the Thai Approach By JAMES HOOKWAY MANILA, Philippines -- The Philippines has been quietly moving up the economic value chain over the last year or so. Intel Corp. has made the country its biggest foreign manufacturing and test site for its premium Pentium 4 chip. A Texas Instruments Inc. plant here makes a chip that is found in every Nokia cellular phone. And sales of these components and other electronic goods have helped sustain decent economic growth, accounting for roughly two-thirds of Philippines exports. But what happens when customers start paring back orders as the world's economy recovery sputters? Philippine President Gloria Macapagal Arroyo has been thinking about that. Ever since China began soaking up the foreign investment that used to go to Southeast Asia, the region's leaders have been learning from each other as they try to stimulate their domestic economies to compensate. Faced with scant new investment funds and a soft economy in the U.S. -- the Philippines' biggest export market -- Ms. Arroyo has become a fan of Thai Prime Minister Thaksin Shinawatra's new populist, domestic-oriented growth strategy. "I think Thaksin has a good model," says Ms. Arroyo. "In the beginning it was looked upon with some skepticism, but he showed it could work and in a short period of time." Philippines: Economic Overview She wants to do the same thing in the Philippines, beginning with what she calls "small scale pump-priming" for the agricultural sector, which contributes 20% of the Philippines gross domestic product and supports about half the population. Ms. Arroyo is now encouraging banks to lend to small and medium-sized enterprises instead of cash-hungry property developments and uncompetitive manufacturing businesses. Economists say smaller businesses often make better use of capital than do industries struggling to cope with the world's economic slowdown. "Their repayment rates are much higher than some of the large enterprises," Ms. Arroyo says. "In the Philippines, it seems the smaller they are, the better payers they are." Strong Growth Some economists think Manila is on the right track. The Philippines has shown unexpectedly strong growth this year and once-high inflation has been declining. Inflation-adjusted GDP expanded 4.5% year-to-year in the first half of 2002 -- one of the highest growth rates in Asia. Manila forecasts GDP to grow by 5% to 5.5% next year, although some private economists say expansion could be the 4% to 5% range. Now, the question for policy makers is how to sustain that growth when demand for electronics exports threatens to taper off. The answer could be in just the kind of small-scale pump-priming which Ms. Arroyo is talking about. The tricky part is figuring out what businesses the Philippines should push. While Thailand has developed its tourism industry, terrorist and security worries keep many tourists away from the Philippines. The country doesn't have the same positive brand cache as Thailand, either, in skill industries such as furniture and handicrafts. The Philippines is, however, a well-established player in the business-services sector. Dozens of multinational companies now use the country as their back office hub thanks to its technology-savvy, English-speaking work force. For example, business consultancies such as Accenture Ltd. develop software programs from Manila for their clients, including several U.S. telecommunications companies. Getting the Message And the imminent explosion in demand for new cellular-phone applications will also help the Philippines. Working from a humble office building in the Alabang suburb of Manila, for example, Wireless Services Asia sells mobile phone ring-tones and icons around the world. It has customers as far apart as Venezuela and China, and maintains offices in Singapore and Finland. There's a sufficient critical mass of mobile messaging services in the Philippines, says Wireless Services' Chief Operating Officer Rainer Leinonen, for his company to pick up overseas contracts as well. Still, the Philippines government needs to husband its funds or all this progress might go to waste. In particular, the country's persistent failure to collect adequate tax revenue has forced Manila to borrow abroad to fund its wide budget deficit, instead of financing badly needed infrastructure projects. This year's deficit blew through the full-year target after just seven months. The problem has worsened since 1998, when former President Joseph Estrada took office, and Ms. Arroyo is struggling to curb the corruption that plagues tax collection. Investors also are looking for progress in creating a new asset-management law to help cope with nonperforming loans in Philippine banks, currently equivalent to about 18% of all outstanding bank lending. The sluggish privatization of the country's power-generation sector -- a potential source of government revenue-also is stealing attention from the small-business revival. "For the markets its still those three things that matter-the budget deficit, the asset-management law and the privatization," says Sameer Goel, an economist at Bank of America in Singapore. "That's what the markets will judge the Philippines on." --Mr. Hookway is a staff reporter in The Wall Street Journal's Manila bureau. Write to James Hookway at james.hookway@wsj.com Updated October 28, 2002