The Philippines’ Partnership Pursuit Pulse

The Philippines Stock Exchange ahead double digits continued to pace Asean as it hosted the ADB annual meeting at Manila headquarters with a flurry of public-private infrastructure initiatives lifting property and construction listings. The national insurance fund will launch a dedicated investment vehicle and two toll roads were authorized by President Aquino with a completion deadline by the end of his term. Despite slowing exports and an island territorial spat with big trade partner China GDP growth was 6.5 percent the past quarter as inflation also calmed after topping 5 percent keeping the central bank on hold. Remittances provide support for a 5 percent balance of payments surplus also aided by a new tourism campaign and planned overhaul of the state airline in which conglomerate San Miguel has a 49 percent stake. On the tax front legislators have backed alcohol and tobacco levies which may further reduce the fiscal deficit from last year’s 2 percent of GDP. An anti-corruption sweep snagged the head of the Supreme Court for not disclosing financial assets and has former President Arroyo in its sights, although a bar on foreign travel for her to get medical treatment is considered punitive. Long-delayed agricultural reform has also resulted in the breakup of large plantations, including a sugar tract controlled for generations by the Aquinos. In Thailand the Shinawatra family saga has stifled share momentum under a post-flood V-shaped recovery as the prime minister insists her brother be allowed to return from exile as part of the reconciliation process which could include a bid to overturn asset seizures. Foreign investors had allocated almost $3 billion through April, and the currency has stayed relatively firm with the central bank benchmark at 3 percent. A 40 percent minimum wage increase for rural workers went into effect following a Yingluck campaign promise, as the Moslem insurgency in the south resurfaced with several car bombings.

The military with 50,000 troops there has increased border coordination with counterparts in Malaysia as it commences an election cycle where a minimum salary rise from the ruling party has also featured. The central bank argues the increment will not be inflationary and will instead aid domestic consumption. Prime Minister Najib has a 70 percent approval rating but the government as a whole has just 45 percent backing. The opposition endorses higher education and health spending and a crackdown on cronyism which has favored the Malay business and political elite. Energy subsidies remain a sensitive issue for both sides and foster the chronic 5 percent of GDP budget deficit. Fund managers backtracked heavily in Indonesia after it reversed course on rollbacks and mounted currency and bond market interventions. New taxes and employment mandates were also imposed on mining investment highlighting regional partnership perils.