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Tampakan needs $5.2 billion
Xstrata is edging closer towards production at its Tampakan project, considered the largest undeveloped copper-gold deposit in Southeast Asia with an estimated 12.8 million tones of copper and 15.2 million ounces of gold. But the company estimates it will need $5.2 billion for initial development.   [The cost of Tampakan copper]

PHILIPPINE BUSINESS DIARY

American bazaar, July 14
The American Women's Club of the Philippines has its next monthly bazaar on July 14 (8.30am-3pm), with about 300 stalls selling mainly Philippine-made handicrafts, art, clothing and accessories, textiles, furniture, homeware and food, at the World Trade Center Metro Manila in Pasay City.

CORPORATE BUSINESS

Tampakan needs $5.2 billion
The big mining firm Xstrata Copper now calculates its copper-gold project in southern Philippines will require an initial outlay of US$5.2 billion to develop, according to the results of its pre-feasibility study.
The unit of diversified Swiss global miner Xstrata has a controlling 62.5 percent interest in the Tampakan project, considered the largest undeveloped copper-gold deposit in Southeast Asia. The mine is estimated to contain 12.8 million tones of copper and 15.2 million ounces of gold, according to Xstrata.
The Tampakan mine is projected to produce an average 340,000 tonnes per year of copper and 350,000 ounces of gold for a 20-year operation period, says Xstrata Copper's Philippine affiliate Sagittarius Mines Inc.
First production is targeted in early 2016. Peter Forrestal, president at Sagittarius Mines, said the project's shareholders, which include Australian miner Indophil Resources and the Philippine firm Alsons Consolidated Resources, are currently evaluating the results of the pre-feasibility study.
He said the company is planning to start public consultations later this year, hoping to receive acceptance from surrounding communities for the project.
"The decision to invest will come at a later stage after the development and approvals processes," Sagittarius spokesman John Arnaldo said when asked about the company's investment plan for Tampakan.
Discovered in 1991, the project has never left the drawing board due to environmental problems and communist insurgencies. In December, a worker in the Tampakan mine was killed and two others wounded by a lone gunman believed to belong to the Maoist-led New People's Army rebels.
The Philippines is targeting to draw between US$10 billion and $13 billion in investments into its mining sector by 2013. But only around $1.8 billion has flowed in since 2004, dogged by legal uncertainties, disputes with local partners, insurgencies and opposition from the Catholic Church.

Renewable energy deal signed
A state-owned Philippine energy company and a Canadian firm have agreed to pursue renewable energy projects in the Philippines.
The two companies are looking at sites in the central Philippines which have been suffering from energy shortages, according to the memorandum signed by Philippine National Oil Company, Renewables Corporation and Constellation Energy Corporation.
"We are optimistic that this (agreement) with Constellation Energy will fast-track our hydro, solar, and wind energy projects," said Pedro Maniego, president of the Philippine partner. "We are initially looking at projects that will produce from 25 to 50 megawatts of energy," he added.
The first ventures are expected to be launched next year.

BUSINESS OPPORTUNITIES

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Growth targets may be cut
The Philippines may revisit its economic growth targets again this year if key drivers worsen further, a senior official at the government’s economic planning ministry acknowledges.
The International Monetary Fund has now forecast zero gross domestic product (GDP) growth for the Philippines this year and just one percent expansion in 2010. These numbers are radically lower than Manila's downscaled targets of 3.1 to 4.1 percent forecast earlier this month, which was already reduced from a previous estimate of 3.7 percent to 4.4 percent.
"The development budget coordination committee and the economic managers are closely monitoring global economic developments including indicators from global partners like the multilateral organizations," said undersecretary Rolando Tungpalan. Further revisions would be made if and when there are "hard numbers" to back them up, he said.
Tungpalan said Manila's revised forecasts have factored in lower world output projections, flat growth for 2009 salary remittances by Filipinos working abroad, lower exports and depressed manufacturing.
"Nonetheless, these assumptions show that the economy is still expected to post a positive growth rate, and the government is undertaking initiatives to ensure that this level of growth is realized," Tungpalan said.
"Remittances still managed to grow by 4.9 percent in February 2009, and deployment of overseas Filipino workers even posted growth of 30.2 percent compared to 25.3 percent in January," he added.
The Philippines expects 2009 exports to contract by between 13 and 15 percent, while imports are expected to decline by 12 to 14 percent. February imports plunged 32 percent from a year earlier to $3.06 billion.
Central bank governor Amando Tetangco has in effect rejected the IMF’s forecast that GDP growth would fall to zero this year. "While the Philippines is not immune to the global economic slowdown, a flat growth, as announced by the IMF yesterday, is unlikely," Tetangco said. "In the past seven years, the IMF has consistently underestimated Philippine GDP growth forecast by an average of about half a percentage point."
The IMF report said the Philippines' growth would be zero this year and 1.0 percent next year, following a 4.6 percent expansion last year and a 30-year high of 7.2 percent in 2007.
Manila says GDP growth likely eased to between 2.1 and 3.1 percent in the three months to March due to falling exports and job losses. However the government insists the economy is still on track to expand by between 3.1 and 4.1 percent over the year.
Tetangco said strong domestic demand "could drive the country's growth." Personal consumption accounts for more than two-thirds of the Philippine economy and had contracted only once, in 1985, over the past 30 years, he said.
Tetangco said Philippine exports, large salary remittances by a huge overseas-based Filipino working-age population, and a booming business process outsourcing sector, while not immune to the crisis, "retain important elements that render them less vulnerable to the world-wide economic down cycle."
"Recessionary conditions in the global economy are expected to encourage firms to outsource, as they seek to streamline costs further," Tetangco said, adding that a "stimulative" monetary stance by the central bank would also help boost business confidence.
Meanwhile, Fitch Ratings has cut its economic growth forecast for the Philippines to just 0.5 percent this year from a January forecast of 2.5 percent, reflecting shrinking consumption on the back of falling remittances and rising unemployment.
Manila's budget deficit may balloon to about 222 billion pesos, or 2.8 percent of gross domestic product, wider than a previous estimate of 2.2 percent, said James McCormack, managing director of Asia-Pacific sovereign ratings at Fitch. He added that the wider deficit would not necessarily trigger a credit rating downgrade.
"We have to look at the fiscal deterioration and try to separate how much of that deterioration is due to trying to stimulate growth and how much is due to structural weaknesses in public finances," he said.
"A big part of what we are going to see this year is probably a cyclical deterioration in the Philippines. In that sense, we probably wouldn't be moving the rating lower during a cyclical downturn then moving it back up when the cycle turns," he said.
Fitch rates Philippine sovereign debt at BB with a stable outlook, two notches below investment level, with a stable outlook. Standard & Poor's has it at three notches below investment grade and Moody's at four rungs below. McCormack said Fitch may release the results of its latest ratings review next month.
The Philippine economy is not expected to contract this year and Fitch Rating's estimated drop of 5-8 percent in remittances is not as sharp as the decline in exports in trade-dependent Asian economies such as Hong Kong and Singapore, McCormack said.
"For the Philippines, even to grow at half a percent is a pretty good achievement in this environment." 

PHILIPPINES INC.

Asian capital stabilizing
Capital markets in emerging Asia are stabilizing as the global economic crisis eases and investor appetite returns, the Asian Development Bank believes. The relative resilience of the region's economies should help the recovery of its equity, bond and currency markets but the road to health will be long and hard given uncertainty about the global downturn, the bank forecasts in a new report.
Net equity outflows from the region slowed significantly in the three months to March after a sharp withdrawal of funds in the latter half of 2008, according to the ADB’s annual Asia Capital Markets Monitor.
This suggests foreign investors are less pessimistic than they were about the region, while net private capital flows to the region for calendar year 2009 will likely remain positive. However, they will still be much lower than the record high seen in 2007, the Manila-based lender says.
"Emerging Asia's financial markets were hit harder than expected last year. But given that many emerging Asian economies will still grow this year while major global economies contract, Asia's financial markets should do better than most other regions," said ADB official Lee Jong-Wha.
Recent market turmoil reflects the "close interconnection between markets and economies around the world and underlines the need for governments and the financial sector globally to continuously improve regulation, oversight and risk management processes", said Lee.
Emerging Asia's equity prices were down nearly 42 per cent year on year to March 31, with India, Indonesia and Thailand faring worst. Over the same period, the Dow Jones Industrial Average on Wall Street lost 16 per cent.
Meanwhile, most emerging Asian currencies fell sharply against the dollar due to heightened risk aversion and massive deleveraging. Local currency bonds held up well but spreads over US Treasury bills of the region's dollar-denominated bonds soared, reflecting difficult external funding conditions, the report added.
In recent months though, emerging Asian equity markets have outperformed mature markets, with low valuations starting to attract buyers. Local bond issues are set to expand as governments seek to fund fiscal stimulus packages, a prospect that will likely cap gains in local currency bonds, it added.
Although most Asian currencies are expected to recover somewhat over the course of the year, further depreciation is possible in the near term amid continued deleveraging and as weaker exports reduce dollar earnings.
The report covers the markets in China, Hong Kong, India, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

Budget deficit has doubled
The Philippines budget deficit in the three months to March more than doubled compared with last year, as the economy is battered by slowing revenue. Finance Secretary Margarito Teves said the 119.7 billion pesos deficit was up from the 51.6 billion pesos 12 months ago and 8.72 percent higher than the target ceiling of 110.1 billion pesos for the quarter.
"This is largely due to lower revenues that were adversely affected by the slowdown in economic activity," he said. Tax relief measures passed by the government to help boost spending also contributed to the bigger financing gap, Teves said.
The export-dependent Philippines has been rocked by the global economic downturn as demand in its key overseas markets dries up.
Economic Planning Secretary Ralph Recto said Manila will ask donor nations and multilateral aid agencies to sustain or raise assistance levels to the Philippines to reduce the gap, which could further hamper business activity.
"Past experience shows that ODA (official development assistance) levels are easily affected by economic cycles, and since a number of economies appear to be near or at the bottom of that cycle, we are concerned that ODA from development partners such as Japan and Europe will become scarcer," he said.
Teves said total revenue for the three months to March fell 7.2 percent year on year to 235.4 billion pesos, which was 16.4 billion pesos short of the target. Spending in the quarter soared 16.4 percent from a year earlier to 355 billion pesos, slightly below the 361.8 billion pesos target. Manila had planned massive spending in the first half to breathe life into the flagging economy.
The March deficit soared 182.6 percent from a year earlier to 52.7 billion pesos, as revenues plunged 10.4 percent to 75.9 billion pesos and spending surged 24.4 percent to 128.6 billion pesos.
"We recently adjusted our fiscal targets to align our expectations with current market developments. We will strive to meet these revised goals even as we continue to monitor domestic and global developments that may have an impact on our fiscal performance," Teves said.

Imports continue to slide
Philippine imports plunged 32 percent from a year earlier to US$3.06 billion in February as shipments of key electronics components continued to fall. Electronics components, which made up 35.1 percent of total imports, suffered a 42.9 percent drop to $1.07 billion, signaling further bad news for the electronics sector.
The imported components form the basis of the electronics products which make up more than half of the Philippines' exports, indicating shipments will continue to slacken.
Fuel and lubricants, the second-largest imports, fell 42.7 percent in February to $483.9 million, says the National Statistics Office.
The drop was widely within economists' projections, said Jose Vistan of AB Capital Securities who expected imports to improve in the coming months after indications that developed countries' economies have bottomed out.
"There are early signs of a bottom, although it's too early to conclude a bottom. So the level of decline in our imports could slow down to 20 percent, and so on," Vistan said. "We may have seen the worst in percentage drop."
However Radhika Rao, an economist from IDEAglobal Ltd, does not expect imports to recover until exports rebound. "With much of intermediate goods intended for re-exports making up a substantial part of import volumes, until the export end recovers, we don't expect any respite from weak data on this front," Rao said.
Despite the fall in imports, the Philippines’ trade deficit in February rose 31 percent to $552 million. The government earlier announced that exports fell 39 percent to $2.51 billion in February.
The United States was the main source of the Philippines' imports in February with $652.8 million or 13.6 percent of the total. However, this was still a 36.2 percent drop from the same period last year.
Japan was the second biggest source of imports, with 13.2 percent, while Singapore was third with 12.6 percent.

Inflation rate headed down
The Philippine central bank expects annual inflation to have fallen to its lowest level in 14 months in April's data, giving the authority flexibility on policy at its next meeting.
Annual inflation in April probably eased to 4.5-5.4 percent against 6.4 percent in March, reflecting a fall from high commodities prices in 2008, said central bank governor Amando Tetangco.
With inflation falling, Tetangco said the Philippines is on track to meet its 2009 target for average inflation of 2.5 to 4.5 percent and 3.5 to 5.5 percent next year.
"The lower April inflation forecast confirms our within-target inflation outlook for 2009 and 2010 and the flexibility that this provides to monetary policy," Tetangco said.
Tetangco said the central bank is prepared to ease monetary policy to help boost economic growth.

Manila to boost borrowing
The Philippines expects to increase overseas borrowings this year to 174.9 billion pesos from a previous estimate of 147.4 billion pesos. National treasurer Roberto Tan also says the government has adjusted its borrowing mix this year to 72-28 percent in favor of local debt from 75-25 percent previously.
Manila wants to source more cheap funds from multilateral development lenders this year but it cannot rule out possible overseas debt issues, Tan said. The Philippines may consider going back to the overseas debt market later this year when it has a clearer grasp of the country's fiscal position, he added.
Manila, which relies heavily on local and foreign debt issues to bridge its budget deficit, raised US$1.5 billion in a sovereign debt offer in January to cover its commercial funding needs in 2009.
But the government last week raised its 2009 budget deficit estimate to 199.2 billion pesos, or 2.5 percent of GDP from 2.2 percent of GDP, requiring additional borrowing.
"It is an option," Tan said. "We will only come to a specific decision whether we will tap the international market in the latter part of the year once we get a handle of the domestic capital market situation." Tan said the government may resort to foreign debt sources "if there is a sudden tightening in domestic liquidity and borrowings costs become more expensive."
Manila has twice raised its domestic borrowing plan for the year after it widened its 2009 budget deficit estimate for the second time in nearly 2 months last week due to a slowing economy.
It now aims to borrow 463.1 billion pesos from the domestic debt market, 21 billion pesos more than previous plan of 442 billion pesos, to fund a larger deficit of 199.2 billion pesos this year and make up for lower state revenue.