Southeast Asian leaders pay last respects to Cambodian king

Singapore Prime Minister Lee Hsien Loong and Philippine Lower House Speaker Feliciano Belmonte will be visiting the Royal Palace tomorrow to pay tribute to the late King Father of Cambodia.

The Ministry of Foreign Affairs and International Cooperation said Lee and his wife would pay their respects at 11:00 on Sunday morning while Belmonte would visit 30 minutes later.

The ministry said that Indonesian Foreign Minister Marty Natalegawa also plans to fly to Cambodia and visit the palace at 15:00 on Monday afternoon.

Lee will also meet with Prime Minister Hun Sen after visiting the palace while Natalegawa is scheduled to meet Foreign Minister Hor Namhong, the ministry said.

Vietnamese Prime Minister Nguyen Tan Dung, Lao Prime Minister Thongsing Thammavong, and Thai Prime Minister Yingluck Shinawatra were the first foreign leaders to visit the palace to pay their respects. They also met separately with Hun Sen.

Chinese President Hu Jintao and Premier Wen Jiabao paid tribute to former king Norodom Sihanouk at a ceremony in Beijing Wednesday before the body was flown back to Cambodia.

Sihanouk died in Beijing Monday at the age of 89.-Asia News Network (October 20, 2012)

Indonesia imports rice despite sufficient supply

The Indonesian government has said that the national rice stock is enough to cover the nation’s needs for the next seven months.

“As of now, our national rice stock stands at 2.1 million tonnes and this is enough for 7.7 months. This is quite an adequate stock rate,” Coordinating Economic Minister Hatta Rajasa told reporters after a meeting with the State Logistics Agency (Bulog) at his office in Jakarta yesterday.

Regardless of the adequate national rice stock, Agriculture Minister Suswono said that the government would still import a maximum volume of 1 million tonnes of rice this year.

Suswono said the import was needed to fill the target of 2 million tonnes held in the Bulog’s rice reserve by the end of the year.

“Bulog’s rice reserve stock is estimated to stand at around 1 million tonnes by the end of this year...This means the government will need to make up the deficit with imports,” Suswono said.

Suswono said that the permission to import 1 million tonnes of rice had been issued by the Trade Ministry. However, it was likely that the government would only import 700,000 tonnes to cover rice reserve requirements.

Hatta stressed that Bulog needed to maximise its rice procurement from local farmers before the government moved on import plans.

“The main issue is not whether we have enough stock but rather how to strengthen our reserves. We want a strong reserve to prevent speculation and price fixing,” Hatta said.

The government had predicted that Indonesia’s total rice production might stand at 38 million tonnes this year, while consumption would reach 34 million tonnes. This means that the country would be able to book 4 million tonnes in rice surplus.

Deputy Agriculture Minister Rusman Heriawan said that in order to achieve food security, Indonesia would need 10 million tonnes of rice surplus annually.

Indonesia was self-sufficient in 2008 and 2009, however, it started to import rice to maintain its reserves in 2010 after a failure in harvest expectations.

Shrinking farmland areas and lower productivity have been regarded as the main factors that determine the country’s dependence on imports.

Hatta said that in order to alleviate a potential food crisis, the government had also allocated 2 trillion rupiah (US$104 million) to emergency food funds.

“[A total of] 1.4 trillion rupiah has been allocated for the agriculture ministry and 600 billion rupiah for food security credit programmes [KKP],” Hatta said.

Hatta added that the utilisation of emergency funds would be determined by the finance ministry with the coordinating ministry for the economy determining the criteria of a food emergency crisis.

Indonesia has signed agreements with Thailand, Vietnam and Cambodia to import rice should the country need it.

Rice imports have been a thorny issue between the government and some law makers at the House of Representatives.

The House has passed, on Thursday, a revision to the 1996 Food Law, which was aimed at strengthening food production in the country and moves food import to a last resort measure.

The law authorises the establishment of a new agency whose main mission would be to ensure food security.

A number of lawmakers recommended that this new agency should be at ministerial level.-Asia News Network (October 20, 2012)

Thailand-Vietnam business council on the cards

A joint Thailand-Vietnam business council will be proposed during a bilateral Cabinet meeting to be held in Hanoi on October 27.

Government spokeswoman Sansanee Nakpong said yesterday that the goal of this cooperative initiative would be to increase the value of trade between the two countries by 20 per cent annually from now through 2015.

Co-chaired by the prime ministers of the two countries, the council would consider how to tighten the partnerships and transport connections between Thailand and Vietnam. As there are already transport agreements between Asean and China, the arrangements struck by the Thailand-Vietnam council would need support from all parties.

The council would also hold separate meetings on the economy, security, tourism, education and culture.

On economic issues, Thailand wants to see the value of bilateral trade rise by 20 per cent yearly from US$9.08 billion (279 billion baht) seen in 2011, which was up by 25.47 per cent from 2010. Of the total, Thailand's exports to Vietnam were valued at $7.05 billion last year.

Sansanee said Thailand also wanted to see more solid regional cooperation on rice trading, particularly with the support of Vietnam. Such cooperation would strengthen regional rice exports and benefit all Asean countries participating in that trade.

Thailand will also propose that Vietnam support the establishment of an Asean federation of rice millers and traders.

In addition, the economic cooperation will focus on ways to bolster trade, investment and tourism through the East-West Economic Corridor.

On social and cultural issues, the focus will be on exchange programmes.

Thailand and Vietnam will also explore ways to solve cross-border criminal problems, including drug and human trafficking, through military cooperation. Vietnam said it would attempt to deal with the issue of illegal fishing in Thailand's waters as well as illegal labour migration.

The two countries also inked three memoranda of understanding. These were a joint statement between the foreign ministers; an MoU on the Thailand-Vietnam security outlook between Deputy Prime Minister Chalerm Yoobamrung and the defence minister of Vietnam; and one on the proposed Thailand-Vietnam business council between the Federation of Thai Industries and the Thai Chamber of Commerce and their counterparts in Vietnam.-Asia News Network (October 20, 2012)

US invites Burma to military drills with Thailand

The US has invited Burma to observe a major military exercise in Thailand, officials say, in what is seen as a sign of improving relations.

Burma has yet to respond to the offer to attend the Cobra Gold exercise next year, which brings together US and Thai troops and observers from across Asia.

The US had stopped all co-operation with the Burmese military in the 1990s over its human rights record.

But it has begun lifting sanctions in response to Burma's series of reforms.

Thai and Burmese officials confirmed the invitation to the annual Cobra Gold exercise with BBC Burmese.

Thai Defence Ministry spokesman, Col Thanathip Sawangsang, said that Burma "is on the list of observers but it's not finalised yet".

A spokesman from the office of the Burmese president also confirmed the invitation, but said that they have yet to send an official response.

After decades of military rule, Burma has witnessed a series of political and social reforms since the military-backed civilian government came to power two years ago.

These include freeing hundreds of prisoners - political detainees among them - and introducing more press freedom.

Washington has been easing sanctions against Burma, including a recent decision to end economic sanctions.

But renewing ties with the Burmese armed forces is a far more delicate issue for the US, analysts say.

US officials are now openly talking of re-establishing co-operation with the Burmese military, says the BBC's South East Asia correspondent Jonathan Head.

This would challenge the predominant influence China has enjoyed for the past two decades in Burma, which has given its armed forces access to ports and monitoring posts on the Indian Ocean, our correspondent adds.

Cobra Gold, which began in 1980, is conducted in Chon Buri province, east of Thailand's capital, Bangkok.-British Broadcasting Corporation (October 19, 2012 13:20GMT)

US aircraft carrier cruises disputed Asian seas

America sent a nuclear-powered aircraft carrier on a cruise through the West Philippine Sea (South China Sea) on Saturday, projecting its power in waters that are fast becoming a focal point of its strategic rivalry with Beijing.

The USS George Washington’s mission could raise hackles in China, which is locked in disputes with the Philippines, Vietnam and other governments over ownership of islands in the region.

It will likely reassure the jittery smaller nations of Washington’s support in their tussles with China, whose growing economic and military might is leading to a greater assertiveness in pressing its claims in the West Philippine Sea. The United States is building closer economic and military alliances with Vietnam and other nations in the region as part of a “pivot” away from the Middle East to Asia.

China is also locked in an unexpectedly fierce dispute with American ally Japan over the ownership of islands in the nearby East China Sea. On Friday, Beijing staged military exercises near the islands to demonstrate its ability to enforce its claims.

China claims nearly all of the West Philippine Sea, where the US says it has a national interest in ensuring freedom of navigation in an area crossed by vital shipping lanes. Vietnam, the Philippines and several other Asian nations also claim parts of the sea.

The US Navy regularly patrols the Asia-Pacific region, and the trip by the George Washington off the coast of Vietnam is its second in two years.

A second aircraft carrier, the USS John C. Stennis, is also conducting operations in the western Pacific region, according to the US Pacific Fleet.

“China will take this as another expression by the United States of its desire to maintain regional domination,” said Denny Roy, a senior fellow at the East-West Center in Hawaii. “The US also wants to send a message to the region that it is here for the long haul …. and that it wants to back up international law.”

Vietnam is pleased to accept help from its one-time foe America as a hedge against its giant neighbor China. It has reacted angrily to recent moves by Beijing to establish a garrison on one of the Paracel islands, which Vietnam also claims. The United States also criticized the move by Beijing.

“Vietnam requests China to respect the sovereignty of Vietnam and refrain from taking any other similar wrongdoings,” the Foreign Ministry said this month.

While most analysts believe military confrontation in the waters is highly unlikely, they say tensions are likely to increase as China continues pressing its claims and building its navy.-Philippine Daily Inquirer (October 20, 2012 3:21PM)

WORLDS NEWS: Japan's patrol boats chase Chinese ships off disputed islands

Five Chinese government ships were seen sailing close to Tokyo-controlled islands in the East China Sea Saturday, prodding Japanese patrol boats to chase them away from the disputed chain.

It was the first time in 10 days that state-owned Chinese ships were spotted near the islands as bad weather had prevailed due to a powerful typhoon passing through.

Japan's coastguard said its patrol boats were warning the Chinese vessels "not to violate territorial waters" and keeping them under surveillance off the island chain, known as Senkaku in Japan and Diaoyu in China.

Despite the warnings, one of the surveillance ships responded by radio in Chinese, "This ocean area is integral part of China and we are carrying out legitimate operations," according to a coastguard official.

Such vessels have been spotted loitering in waters off the islands as the dispute has escalated over the last two months, with boats at times entering a 12-nautical mile territorial zone.

Tensions peaked in mid-September after Tokyo nationalized a number of the islands.

The coastguard said it had spotted four Chinese maritime surveillance vessels sailing 24 to 35 kilometers off Uotsurijima -- the largest island in the chain -- in the morning.

It added that a Chinese fisheries patrol boat was also spotted about 42 kilometers off another island, Kubajima.

The five ships were located within the so-called 44-kilometre "contiguous zone" where the coastal state may exercise the controls necessary to prevent and punish infringement of its customs, fiscal, immigration or sanitary laws and regulations within its territory or territorial sea.-GMA News (October 20, 2012 4:00PM)

PHL, France ink pacts on energy, culture

The Philippines and France on Friday signed agreements to cooperate on energy production and culture, as both countries committed to beef up their bilateral ties.

President Benigno Aquino III and French Prime Minister Jean-Marc Ayrault witnessed the signing of the two agreements, Malacañang said on Saturday.

Aquino cited the agreements as “affirmation of how we value the development of a more dynamic and robust partnership between our two nations.”

“This is a partnership that enjoys firm foundations,” he said.

A Declaration of Intent between the Philippine and French governments for a Study for energy production from biomass was signed by French foreign trade minister Nicole Bricq and Foreign Affairs Secretary Albert del Rosario.

The second agreement involved the Philippine Exhibition at the Musee Du Quai Branly in Paris.

"Under the Declaration of Intent, the French Government will extend a grant amounting to 372,272 euros to fund a feasibility study on rice straw as fuel to generate electricity using Organic Rankine Cycle (ORC) technology; while in the Agreement, the Philippines was chosen to be the featured country in a Grand Exhibition to showcase 300+ artifacts on pre-colonial Philippines," the Palace said in a statement.

Ayrault said his visit was “a good time to improve trust and confidence” between the two countries.

“(T)his is a good time to improve trust and confidence by investors because we do want to restore healthy exchanges both economically speaking and in terms of trade, and we would like a healthy balance of trade between our two countries,” he said.

PNoy thanks France for role in PHL devt

Meanwhile, Aquino thanked France for playing an important role in the Philippines' development.

He cited France’s Official Development Assistance mechanism.

“France has remained a partner in upholding democracy and pursuing development. I thanked the Prime Minister for the continued contribution of France to achieving our development priorities through the Official Development Assistance mechanism, particularly in the areas of Climate Change, Sustainable Urban Development, and Capacity-building Projects for Local Government Units,” Aquino said.

He added Ayrault’s visit highlighted the interest of French businesses of the country's “efforts at reform and the positive economic developments” as both leaders committed to “accelerate the pace of our economic cooperation.”

“The Prime Minister and I agreed to accelerate the pace of our economic cooperation. Part of achieving this goal is easing the barriers that impede the growth of two-way trade and investment,” Aquino added.

For his part, Ayrault lauded the strength of Aquino and the Filipino people to rise above seemingly insurmountable odds, saying this trait was shared by the people of France.

“I would also like to pay tribute to your people, Mr. President, and I would like to pay tribute to the strength of the people and to your own personal struggle for liberty, for freedom, for democracy,” Ayrault said.-Black Peark (October 20, 2012 2:37PM)

PH donates P8.2-M to China

Despite a simmering territorial row in the South China Sea, the Philippine government is donating US$200,000 (over P8.2 million) to the Chinese government after recent earthquakes hit China’s southwestern provinces of Yunnan and Guizhou.

A Department of Foreign Affairs (DFA) statement said the donation is "a gesture of support and friendship" to the people of China.

The ceremonial handover of the donation was held during the courtesy call of Chinese Vice Foreign Minister Fu Ying on Foreign Affairs Secretary Albert F. del Rosario on Friday, October 19.

On September 7, two major earthquakes measuring 5.6 and 5.7 and several aftershocks hit Yunnan and Guizhou Provinces in southwestern China, causing the death of 80 and injuring more than 800 others.

Thousands of people were evacuated and were in need of relocation. Direct economic losses from the tremors were estimated at more than half a billion dollars, as reported by China’s state media Xinhua.-Black Pearl (October 19, 2012 9:00PM)

Phl, China to hunt down criminals together

The Philippines and China on Friday formally sealed a pact for that enhanced the two countries' cooperation in law enforcement and criminal prosecution.

In a statement, the Department of Foreign Affairs (DFA) reported that both countries will start exchanging criminal records, sharing information on criminal cases and jointly locating suspects, leads and witnesses in the investigation of crimes by November this year under the Mutual Legal Assistance Treaty.

The pact, whose instruments of ratification were exchanged at the 18th Foreign Ministry Consultations between Manila and Beijing on Friday, will allow the country to engage in transnational criminal cases beyond its physical and legal borders, DFA said.

Foreign Affairs assistant secretary Irene Susan Natividad handed Chinese Ambassador to the Philippines Ma Keqing the documents to signal the full acceptance of the agreement.

The Philippines ratified the treaty last May while China ratified it in 2001, following the signing of the agreement in October 2000.  The ceremonial exchange of instruments of ratification in bilateral treaties is considered exceptional, as the act is commonly done only by notifying the agreeing party that internal conditions already allow the full enforcement of a treaty.-The Philippine Star (October 19, 2012 2:43PM)

WORLD NEWS: China flexes muscles with drills amid island row with Japan

China was set to dispatch naval vessels and aircraft to the East China Sea on Friday, flexing its muscles in exercises likely to further stoke a bristling territorial dispute with Japan.

A fleet of 11 vessels, including some warships, along with eight aircraft were to be sent to waters off its east coast, China has said, in Beijing's most confrontational act yet in a row that has chilled ties between the regional heavyweights.

The one-day exercises were announced late Thursday in a dispatch by official Xinhua news agency that China's defense ministry also posted on its own website.

The drill is aimed at improving China's preparedness to "safeguard territorial sovereignty and maritime interests," according to a statement from the East China Sea fleet, cited by Xinhua.

The defense ministry has made no direct comment on the wargames yet, and it was not immediately clear whether they had begun or exactly where they would take place.

The exercises would mark the latest provocative move in the dispute over the tiny Japan-controlled islets known as the Diaoyu chain in China and the Senkaku islands in Japan.

Tensions in the long-running territorial dispute have soared since the Japanese government's move last month to formally nationalise the islands, which triggered anti-Japan protests across China and hit the sales of Japanese-manufactured products.

China has since then taken a number of steps seen as snubbing Tokyo, including refusing to send top officials to a global economic conference in Japan this month.

China has previously sent maritime surveillance ships and fisheries patrol vessels to waters near the islands as the row has escalated.

On Wednesday, a Chinese naval flotilla passed near separate islands that are internationally recognized as Japanese.

Friday's exercise will include vessels from the marine surveillance agency and fishery administration, according to the Chinese reports, which did not give a detailed breakdown on the vessels.

Japanese Chief Cabinet Secretary Osamu Fujimura told reporters that Tokyo had few details on the drills.

"We decline to comment on the drill, but we will continue monitoring various Chinese moves," he said.

Chinese citizens staged massive demonstrations across the country last month, forcing some Japanese firms to suspend or reduce operations, and a number of official and cultural events held in both China and Japan have been aborted.

Reports this week said Japan and the United States were considering holding a joint military drill to simulate retaking a remote island from foreign forces.

The exercise, part of broader joint exercises to start in early November, would use an uninhabited island in Okinawa, Japanese media reports said, quoting unidentified sources.-GMA News (October 19, 2012 12:09PM)

S&P: Recommend Investors switch away from Indonesia in favor of the Philippines! Why?

Both Indonesia and the Philippines have some weaknesses to overcome before they break into the investment-grade rating category but are making steady progress, Standard & Poor's Ratings Services said in a report.

"The positive outlook on Indonesia recognizes ongoing improvement in the government's balance sheet and the country's income metrics. A modest improvement in the country's political and policy dynamics, combined with Indonesia's other credit attributes, could lead to an upgrade," credit analyst Agost Benard said on Thursday.

The stable outlook on the Philippines indicates that risks to the ratings are balanced, S&P said.

"The Philippines has narrowed its fiscal deficits, lessened its reliance on foreign savings, and rationalized the public sector. A more conducive political setting has replaced the turbulent and obstructionist environment that prevailed for well over a decade."

Indonesia faces key rating constraints due to the perception that reforms have stalled due to a lack of policy initiatives. The abandonment of a planned electricity tariff rise, inability to cut fuel subsidies and a rising trade deficit has added to this view, it said.

A positive outlook on the Indonesia rating suggests at least a one-in-three chance of an upgrade, S&P said, adding there is more upward than downward pressure on the rating.

At 11.41 a.m (0441 GMT) the Indonesian index was up 0.32 percent, while the Philippines index was up 0.06 percent

STOCKS NEWS INDONESIA

StanChart cuts stocks outlook to 'underweight' Standard Chartered Equity Research lowered its outlook on the Indonesian equity market to 'underweight' from 'neutral' citing concerns over lower corporate margins as food prices rise and commodity prices remain under pressure.

"We forecast this trend to continue and recommend investors switch away from Indonesia in favor of the Philippines, which we believe is only halfway through the same four-year re-rating process that Indonesia experienced between 2006 and 2010," analysts Clive McDonnell and Benjamin Wong said in a note on Thursday.

Investors have been steadily decreasing exposure to the Indonesian market as they look to reallocate to markets with lower valuation risk as recovery expectations revive in Asia, the research unit said.

Standard Chartered also cut its Jakarta Composite Index 12-month target to 4,400 from 4,500. At 10.55 a.m (0355 GMT) the Indonesian index was up 0.28 percent, while the Philippines index was up 0.11 percent.-Rebuilding for the Better Philippines (October 18, 2012)

Noy on China: I will do what is right and leave the rest to God

President Aquino vows to continue to do “what is right” as far as the country’s relations with China is concerned and leave the rest to God.

Aquino said it is tough to make decisions concerning the country’s territorial dispute with China.

He must decide whether to “adopt the kowtowing attitude or stand up for that which you think is right.”

In an interview with Rappler’s Maria Ressa at Malacañang on Wednesday, Aquino said: “When you stand up for that which is right, how hard should it be? Or how diplomatic should it be?

“Primarily, I’ll do everything that I can then leave everything else to God.

“Hopefully He will guide us, He will strengthen us, He will point the directions we are supposed to go to.”

Aquino said he would also decide the actions to take based on what a “reasonable” individual would do given the particular circumstances.

At the Annual Presidential Forum of the Foreign Correspondents Association of the Philippines, Aquino cited the “very gradual warming up” of relations with China that had begun.

He said this would likely continue as “ultra nationalist” sentiment in Beijing was likely to ease after a leadership change next month.

“We hope these domestic pressures on China will be lessened after the transition, so we will have more room to negotiate and discuss in more reasonable terms and less ultra-nationalist terms,” he said.

“We are taking a wait-and-see attitude,” he added.

The domestic pressures in China ahead of its once-in-a-decade transition of power had affected efforts to improve diplomatic relations to a level seen before the dispute flared, Aquino said.

Chinese President Hu Jintao is expected to hand over power as head of the Communist Party to Vice President Xi Jinping during a congress starting on Nov. 8.

But Hu will remain the country’s president until next March.

Aquino said no back-channel talks are going on with China on the territorial issues – at least for now. He also denied taking a bilateral approach to addressing the problem.

Earlier, Sen. Antonio Trillanes IV was revealed to have been involved in back-channel talks with Beijing, supposedly with the Palace’s blessings.

“That is not correct,” Aquino said when asked if Trillanes’ China mission was an indication of the President’s openness to bilateral talks, which Beijing prefers.

“Bilateral (talks) can be a component but multilateral is the approach. The problem is multilateral. In ASEAN alone, there are four countries of the 10 who are claimants to the Spratlys group,” he said.

“So how can two talk or how can one of four talk with China and bind the other three?”

Aquino said multilateral talks can only be effective if it “binds everybody.”

“Otherwise, we settle a portion of the problem and we retain the rest of the problem,” he told the group of foreign and local journalists.

Aquino said there seemed to be a “little bettering” of the relations between Manila and Beijing, despite the two sides holding their ground firmly.

He cited Interior and Local Government Secretary Manuel Roxas II’s meeting with leader-in-waiting Xi at the China-ASEAN Expo in Nanning City recently to discuss the territorial dispute.

“The little warming up is that they have initiated dialogue with us. Initially at Vladivostok (in Russia at the Asia Pacific Economic Cooperation summit) but that didn’t push through, but subsequently at the China-ASEAN Expo,” he said.

“The messages were practically the same, only there are some differences. That’s why I said there seems to be a very gradual warming up,” he said.

“I want to be very precise. We are hopeful this gradual warming up will be really warmed up by the time of the transition.”

Aquino said the mood was different at the height of the standoff at Panatag.

“If you were to return to what it was before the conflict in Bajo de Masinloc happened, then that is a very significant improvement,” he said.-The Philippine Star (October 19, 2012 12:00AM)

Indonesia leads Phl in race to investment grade

The Philippines has to overcome hurdles before it can reach investment-grade rating, debt watcher Standard & Poor’s Ratings Services (S&P) said, justifying its decision to put the country’s credit outlook behind Indonesia, South East Asia’s largest economy.

In a report titled “The Race to Investment Grade: Indonesia and the Philippines,” S&P addressed investor questions with regard to the two countries seen to be Asia’s leading bright spots at this time of global economic turmoil.

Under S&P’s metrics, the Philippines and Indonesia are both at BB+, a notch below investment grade status. Indonesia, however, has a positive outlook, which means S&P could upgrade its rating within 18 months. Philippines, on the other hand, has a stable forecast.

“The stable outlook on the Philippines indicates that risks to the ratings are balanced,” S&P analyst Agost Benard said.

“The positive outlook on Indonesia recognizes ongoing improvement in the government’s balance sheet and the country’s income metrics,” he added.

Benard pointed to the country’s low revenue base, which puts pressure on its fiscal profile despite noting some improvements under the Aquino administration. Budget deficit hit P71.208 billion as of August, well below the P183.343-billion third quarter cap. Revenues rose 11.1 percent.

The Philippines also has a lower per capita income than Indonesia. S&P said from 1991 to 2011, Indonesia’s per capita income — estimated income of each person affected by economic growth— increased to $3,600 from $928 as against Philippines’ which rose to $2,330 from $1,014.

This suggested slower growth for the Philippines during the period.

“Aside from slower growth, the Philippines has made little inroads in improving family planning. Its relatively high population growth rate (averaging about two percent per year), compared with 1.3 percent in Indonesia, also detracts from attaining higher per capita wealth levels,” S&P said.

Reacting to S&P’s low revenue base finding, Finance Assistant Secretary Ma. Teresa Habitan said: “Improving revenue generation is our priority and the reason why we are pursuing “sin” tax and fiscal incentives reforms.”

But the country is not all behind Indonesia when it comes to other factors such as political stability and external strength.

“Since the inauguration of the Aquino administration in 2010, political stability and the legislative environment have improved. The president has high levels of public support and commensurate backing in the legislature,” S&P said.

For Indonesia, S&P said: “A modest improvement in the country’s political and policy dynamics--combined with Indonesia’s other credit attributes--could lead to an upgrade.”

Indonesia’s external profile is also “less robust and more susceptible to global commodity cycles,” the credit rater said as evidenced by sustained overseas Filipino remittances.

S&P said a positive rating for Indonesia does not mean the country will be upgraded first before the Philippines.

“The next rating action could be an upgrade, but we could also revise the outlook back to stable,” it said.-The Philippine Star (October 19, 2012 12:00AM)

Aquino: Philippines has asked Australia to be strategic security partner after US, Japan

The Philippines has asked Australia to be its third strategic security partner after the United States and Japan.

This developed a week before Aquino is set to pay state visits to Australia and New Zealand next week. Canberra is still studying the proposal.

Even without the strategic partnership, Australia is already helping the Philippines with the Coast Watch System, the President said in an interview with members of the Foreign Correspondents Association of the Philippines on Wednesday.

"There are various trainings being conducted by their military security forces with our own personnel in the form of scholarships," he said. "We face the same challenges be it terrorism, global climate change, or relationships with the superpower in the neighborhood."

Aquino will pay state visits from October 22 to 26 upon the invitation of New Zealand Prime Minister John Key and Australian Prime Minister Julia Gillard.

In New Zealand, Aquino will proceed to Auckland where he will meet with the Filipino community and deliver a speech in a forum hosted by the Philippines-New Zealand Business Council.

He will also have meetings with several New Zealand companies for possible investments in the Philippines.

Aquino will go to Wellington to meet with Key and Governor-General Jerry Mateparae, where they are expected to discuss bilateral concerns, including the recently signed framework agreement between the government and the Moro Islamic Liberation Front.

From New Zealand, the President will fly to Australia to meet Gillard and Governor-General Quentin Bryce in Canberra.

Aquino's last stop will be in Sydney where he is scheduled to deliver a keynote address at the Philippines-Australia Business Forum as well as address The Asia Society of Australia.

The President will also meet with representatives of Australian business groups.

He will unveil a statue of Dr. Jose Rizal in Campbelltown in Sydney as well as meet with members of the Filipino community in Australia.

The President will be accompanied by Foreign Affairs Secretary Albert del Rosario, Trade Secretary Gregory Domingo, Defense Secretary Voltaire Gazmin, and other Cabinet secretaries who will also be meeting with their counterparts.-Black Pearl (October 7, 2012 7:06PM)

2 police killed investigating terror in Indonesia

Two police officers have been found dead in central Indonesia, a week after they disappeared while investigating suspected terrorist activities, authorities said Wednesday.

National police spokesman Col. Agus Rianto said the officers' bodies were found Tuesday with their throats slit and stripped of almost all their clothes in a shallow grave in mountainous Poso district of Central Sulawesi province, the site of deadly religious clashes a decade ago.

"They apparently were tortured before being killed," Rianto told a news conference.

He refused to say who might be involved, but another police spokesman, Brig. Gen. Boy Rafli Amar, said some members of Jemaah Anshorut Tauhid, an organization founded by convicted radical cleric Abu Bakar Bashir and designated a terrorist group by the U.S. in February, were involved in the murder.

"There is more than one perpetrator and they are well trained," Amar said, adding the guns of the officers were taken.

Rianto said the two had been missing since Oct. 8, a day after police arrested a suspected militant who tipped them off to a possible terrorist training camp in Poso, where clashes between Christians and Muslims left more than 1,000 people dead between 2001 and 2002.

Indonesia, a secular nation, has been battling terrorists since 2002, when militants linked to the Southeast Asian network Jemaah Islamiyah began attacking Western nightclubs, restaurants and embassies. More than 260 people have been killed in the attacks, many of them foreign tourists.

Recent terror attacks in Indonesia have been carried out by individuals or small groups and have targeted security forces and local "infidels" instead of Westerners, with less deadly results.-Black Pearl (October 17, 2012 6:53PM)

Stocks shine as Thais, Filipinos nurture stability

The two Asian nations with the region's best performing stock markets in the past year are unlikely havens for global investors: Thailand and the Philippines.

Both are better known for troubled politics but have outshone higher-octane neighbors as new leaders nurture relative calm.

The PSE benchmark in the Philippines has soared 29 percent. Thailand's SET index is up a whopping 33 percent.

By contrast, an index compiled by MSCI that tracks stocks in 12 Asian countries is up a ho-hum 2 percent.

The Philippines, long blighted by a succession of deeply corrupt governments, has gained a measure of credibility due to the stability ushered in by the 2010 election of President Benigno Aquino III.

Thailand too has benefited from an improvement in its politics.-The Philippine Star (October 17, 2012 4:46PM)

Vietnam Economic Ascent Threatened as Middle-Income Trap Looms

Vietnamese coffee farmer Le Thi Do looks up at the five-meter-high (16-foot) ceiling of her six- bedroom, yellow house and then points to a small, squat building next door and says: “We used to live in that tiny one.”

Do, 71, has been a barometer of Vietnam’s fortunes since the French left in 1954. As the country divided, her family fled to the south, surviving the war, Communist victory and a decade of hardship that followed by growing vegetables. As the economy opened in 1986, she switched to coffee and prospered as the rate of economic growth tripled in five years.

Then, the boom that benefitted Do and millions of others started to slow. Prices of fuel, raw materials and labor soared as the currency fell. Banks, tied to funding state monopolies, became reluctant to lend to small businesses. Bad debts rose. Growth fell below 7 percent in 2008 for the first time in seven years and could drop to 5.2 percent this year, the government estimates, the slowest since 1999.

“This year has been very difficult for everyone,” said Do, who had to raise pay 20 percent for harvest pickers, to 120,000 dong ($5.75) a day. “We need funds for cultivation, but we have limited access to bank lending. You can get a loan if you have good connections. Otherwise, it’ll be little or no money.”

After two decades of development, Vietnam risks falling into the so-called middle-income trap, where rising earnings and costs outpace productivity. Government pledges to restructure banks, curb corruption and reorganize the public sector may take years, prompting investors to turn to faster-growing rivals in Southeast Asia such as the Philippines and Indonesia.

’Hard Part’

“Moving through the middle-income bracket is risky and requires time, political will, perseverance and luck,” said Jonathan Pincus, an economist in Ho Chi Minh City with the Harvard Kennedy School’s Vietnam program. “The government needs to do more to reform the economy and get back to a sustainable higher rate of growth. You have to do the hard part of building institutions, building a legal system, enforcing the rules governing financial institutions.”

Government efforts to curb rising prices and stabilize the dong slowed growth to 4.7 percent in the first nine months of 2012. Inflation eased to a year-on-year pace of 6.48 percent in September from more than 23 percent in August 2011. The currency has risen about 0.9 percent this year against the dollar, after falling more than 7 percent in 2011.

Stocks Drop

The slowdown has hurt stocks, with the benchmark VN Index, Asia’s worst performer in 2011, down 18 percent since its peak this year on May 8. Yields on five-year government bonds have fallen 220 basis points since the start of 2012, to 10.35 percent, as inflation decelerated and lenders sought the relative safety of state-backed debt.

Communist Party General Secretary Nguyen Phu Trong apologized two days ago in a televised address to the nation for “big mistakes” made by the ruling party, including corruption and lax oversight of state-owned conglomerates.

“We are trying to speed up the restructuring process of state companies, aiming to improve their operations and efficiency,” Deputy Finance Minister Vu Thi Mai, said in an Oct. 11 interview. She said that as of the end of last month, 53 state enterprises had submitted restructuring plans to reduce costs and accelerate “the privatization process.”

The country faces a challenge that others have struggled to overcome. Of 101 middle-income economies in 1960, 13 attained the World Bank’s high-income bracket by 2008, including Japan, Hong Kong, Singapore, South Korea and Taiwan, according to a report this year from the Washington-based development lender.

Income Group

Vietnam joined the World Bank’s lower-middle income bracket in 2009, with gross national income per capita rising to $1,260 last year, from $110 two decades earlier, according to the bank’s website. The World Bank classifies lower-middle-income economies as those with GNI per capita of $1,026 to $4,035 and upper-middle income from $4,036 to $12,475.
Once Southeast Asia’s fastest-rising destination for foreign investment, Vietnam risks losing out as other nations in the region become more attractive to investors.

Pledged foreign direct investment to Vietnam fell 28 percent in the first nine months of 2012 from a year earlier, the government says. FDI inflows rose more than 31 percent in Malaysia and Indonesia in 2011 and an estimated 89 percent in neighboring Myanmar, compared with a 7 percent drop in Vietnam, according to the United Nations Conference on Trade and Development.

Myanmar Appetite

“The appetite that a lot of global investors have for Myanmar in particular now, but also countries like Indonesia and the Philippines, is based in part on disillusionment about Vietnam’s performance relative to its promise,” said Mark Gillin, a director of AIM Capital Management Ltd. in Ho Chi Minh City. “Given the work ethic and the dynamism of the people here, Vietnam should be doing far better.”

Moody’s Investors Service on Sept. 28 cut the rating on Vietnam’s debt for the first time since 2010 to B2, leaving it on a par with Cambodia and five levels below Indonesia. Vietnam’s banks have the highest level of bad debt in Southeast Asia, according to Moody’s.

Vietnam dropped 10 places to 75 on the World Economic Forum’s Global Competitive Index this year, swapping places with the Philippines, which rose 10 slots to 65.

Even so, the country has come a long way since 1986, when the government swapped Soviet-style central planning for “Doi Moi,” or economic renovation -- allowing private business and granting packages of land to farmers to grow their own crops.

Changed Life

Do and others who began growing coffee were some of the first to gain. “Coffee changed my life and the lives of many people here,” said Do in the highland region of Dak Lak.

Production of coffee, introduced in French colonial days, more than quadrupled in the five years following the start of Doi Moi, reaching 118,800 metric tons in 1991, according to the U.S. Department of Agriculture’s Foreign Agricultural Service.

Vietnam is now the world’s largest coffee exporter after Brazil, shipping 1.6 million tons in the last crop year, according to the government. The 10 tons a year that Do harvests from her 2.5-hectare (6-acre) plot earned her enough to build a 160 million dong home, school her nine children and send two of them on to college.

Change spread as entrepreneurs started businesses in other industries, and the opening attracted overseas manufacturers such as Samsung Electronics Co. (005930) and Canon Inc. (7751)

‘Exciting’ Times

“It was exciting,” said Le Quoc Vinh, 44, chief executive of publisher Le Media Joint-Stock Co. in Hanoi, who was studying English at Hanoi University as Doi Moi began. “It was the first time we really felt we had to compete to improve our lives.”

Vinh publishes five consumer titles, including Vietnam’s best-selling fashion magazine, Dep, or Beauty, and features 14 top Vietnamese models on its latest cover and advertises Louis Vuitton bags and Shiseido cosmetics. Like Do, he prospered during the boom and now drives a Mercedes, and his eldest son is studying in Australia. He said many clients have cash-flow challenges and advertisers are struggling to sell their products.

“If you’re not inside the system, you don’t really have a chance,” said Vinh. “If you’re not friends with that bank, it’s almost impossible to borrow. If you’re not friends with that state-owned company, it’s difficult to win a contract.”

Even with the restraints on business, the commercial hub of Ho Chi Minh City, formerly called Saigon, shows the changes of the boom years. In the new terminal at Tan Son Nhat airport, the scene of intense fighting in the last days of the Vietnam War, travelers eat at Burger King and Domino’s Pizza. Downtown, the yellow, Roman-columned building that once housed South Vietnam’s parliament is now the Ho Chi Minh City Stock Exchange.

No Honking

Foot passengers who five years ago paid 500 dong to take the antiquated ferry across the Saigon River to District Two, now walk over Thu Thiem bridge, while cars speed through a Japanese-financed tunnel, where the frenetic lane-changing and horn-honking of the city’s streets are banned.

The carved images of gods of the 18th-century, incense- filled Giac Vien pagoda rub shoulders with the water slides of Dam Sen water and amusement park, where the increasingly chubby children of the new middle class view the changing city from a Ferris wheel.

“I grew up in a difficult time, where everybody around me had to work very hard, and the money we could make was not very much,” said Vinh, the publisher, who as a four-year-old hid with his parents in a small room in their house as U.S. bombs rained down. “Now, some families have become rich while other families are not so rich. There is a gap between neighbors.”

Bank Ties

To sustain Vietnam’s growth trajectory and narrow that gap, the government has pledged to address the inefficiency that has grown through ties between banks and the state companies that receive much of their lending.

State enterprises’ non-core investments, such as property and stocks, account for as much as 12 percent of their registered capital, Deputy State Auditor Le Minh Khai said in July. Vietnam Electricity, known as EVN, and Vietnam National Shipping Lines, or Vinalines, have “large” investments in non- core businesses, Khai said. Government-controlled companies account for about a third of the total market value of the VN Index (VNINDEX), according to data compiled by Bloomberg.

EVN’s Chairman Dao Van Hung was fired in February after the power company lost 11.5 trillion dong over two years, according to the government’s website. The utility has been building a 93,351 square meter twin-tower headquarters since 2007 that the company said may be completed next year. Behind a solitary guard under a parasol, the empty structure with a rubble-strewn entrance looms above the city’s old quarter.

Making Arrest

Police arrested Duong Chi Dung on Sept. 4 after a three- month manhunt for the former chairman of Vinalines, part of an investigation into contracts that the government says raised the cost of a floating dock by 72 percent in 2007.

The restructuring of state monopolies is inextricably linked with a clean-up of the banks that funded them.

The government promised to complete the restructuring of weak banks by the end of next year. Prime Minister Nguyen Tan Dung approved a plan in March that would allow the finance ministry to buy collateralized non-performing assets from commercial banks to strengthen their balance sheets.

The central bank chief, Nguyen Van Binh, said in April the level of bad debt at some lenders may be “much higher” than reported. The bank estimated non-performing loans were 8.6 percent at the end of March.

Political Pressure

Government-run banks are often subject to political pressure to lend to favored state-owned enterprises, according to a January policy paper from the Harvard Kennedy School.

Binh has vowed to crack down on violations by groups with vested interests who are working against the banking reforms. In a televised interview posted on the government’s website on Oct. 7, he said some lenders are controlled by only one or two individuals or a small group of shareholders, and 70 percent to 90 percent of outstanding loans at some banks are made to “serve those shareholders.”

“They may manipulate operations at one bank and affect the whole system,” Binh said. “Group interests are the biggest obstacle in the entire Vietnam banking system restructuring process.”
Police arrested Asia Commercial Bank (ACB) founder Nguyen Duc Kien, one of the country’s wealthiest men, on Aug. 20 for alleged economic mismanagement, sparking a run on the bank.

Capital Needed

The financial system needs an injection of 250 trillion dong to 300 trillion dong, according to a 298-page report published in September by the National Assembly’s Economic Committee and compiled by an advisory group.

Vietnam is still attractive to some external investors, especially as China is getting more expensive, said Pincus at the Harvard Kennedy School. Intel Corp. (INTC) opened a $1 billion assembly and testing plant in 2010 in Saigon Hi-Tech Park that Rick Howarth, general manager of Intel Products Vietnam, said last month was “ramping up smoothly.”

In Jabil Circuit Inc. (JBL)’s factory nearby, a young Vietnamese technician carefully solders parts for an electronic point-of- sale terminal, checking her work against a computer screen above her station. As many as 20 percent of Jabil’s 1,350 local workers had no previous computer experience, said Kesavan Swaminathan, general director of the Vietnam unit of St. Petersburg, Florida-based Jabil.

“We teach them here,” said Swaminathan at the plant, which operates 24 hours a day, seven days a week. “Some of them initially freaked out, but as they are being guided and coached, they realize it’s an additional skill they are learning.”

Bus 611

The technology park has a new, four-lane avenue flyover above the clogged main road of Le Van Viet Street, along which bus 611 carries riders for 4,000 dong -- without air- conditioning, and in a haze of motorbike fumes and tropical heat -- across a bridge that’s only wide enough for a single truck.

Symbols of Vietnam’s boom years in the capital Hanoi are juxtaposed with reminders of how far the country still has to go to even out the benefits of economic gain.

Between the Bentleys and Range Rovers in the square by Hanoi’s yellow-and-cream opera house, street vendors carry food and wares on bamboo poles on their shoulders. Across the square, burnished in gilt, a Gucci outlet sells handbags for twice the average annual wage, while a cleaner in a French maid’s pinafore mops the marble floor.

“Business has been very difficult this year,” said Nguyen Thi Nhung, 38, who sells lingerie and hair accessories from a mobile metal cart. “People do not want to spend on frivolous items like pretty bras.”

Pushing Cart

In a conical hat and face mask to shield her from the traffic fumes, she pushes her cart for miles each day till after 10 p.m. to pay for her children’s schooling.
“My dream is that my kids will one day work in an office like that,” she said, pointing to a 10-story glass office block, that houses foreign firms and a private gym on the top floor. “I want them to have an easier life than I do.”

Vietnam isn’t the only country in the region facing a slowdown as Europe’s debt crisis erodes trade. Growth in developing East Asia, which excludes Japan and India, will probably ease to an 11-year low of 7.2 percent, from 8.3 percent last year, the Washington-based World Bank said in an Oct. 8 report.

Still, Vietnam is only at the bottom rung of the middle- income ladder, and must first catch more-advanced neighbors, such as Thailand, where GNI per capita last year was $4,420.

Bite Bullet

“Will Vietnam grow from $1,500 to $5,000 per capita income uninterrupted or will it have to go through the boom and bust cycles?” said Deepak Mishra, World Bank lead economist for Vietnam in Hanoi. “If it wants a smooth transition to an upper- middle-income status, it will have to bite the bullet and credibly restructure its economy.”

In her yellow house in Dak Lak, Do retains the optimism that characterizes many Vietnamese who’ve seen their lives improve since 1986.

“The situation will gradually get better in the next few years when the global economies recover and the government sorts out problems like the bank lending,” she said. “I’ve seen so many things here improve in the past few decades.”-Black Pearl (October 17, 2012 2:13PM)

Ties with China 'bettering' but far from warm - Aquino

President Benigno Aquino III said on Wednesday there has been "a little bettering" in bilateral relations between the Philippines and China but admitted relations between the two countries remained far from warm.

In an open forum with members of the Foreign Correspondents Association of the Philippines, Aquino said both countries are "still a long way of really taking it back to where (our relationship) was."

"There is some degree of change in terms of a little bettering of the situation compared to where it was at the height of the tensions," he said. "We are still hoping that we will resolve this amicably; that reasonable voices will prevail; and that both sides are really geared towards arriving at a solution that will satisfy not just the bilateral concerns but more importantly I guess the multilateral concerns affecting this issue."

Aquino said the government is still keeping the option of bringing its territorial disputes with China before the International Tribunal on the Law of the Sea of the United Nations.

"There are several law firms that we are consulting that are conversant in international law to precisely chart the course of how we will utilize the legal procedures in international law to advance our claims," he said.

Aquino noted that China has already initiated a dialogue with the Philippines.

Aquino was supposed to meet with Chinese President Hu Jintao in Vladivostok last month but this did not push through due to scheduling issues.

Instead, Chinese Vice President Xi Jinping and Interior Secretary Manuel Roxas II met in Nanning last.

Roxas admitted that Manila and Beijing remained at a deadlock over the Panatag (Scarborough) Shoal issue, where vessels of the two countries engaged in a standoff earlier this year.

"But as I said, talk-talk is better than no talk," Roxas said.-Black Pearl (October 17, 2012 1:30PM)

Philippines, China to discuss relations amid territorial row

Since the escalation of tension between the Philippines and China in April owing to territorial disputes in the West Philippine Sea or the South China Sea, Manila and Beijing are set to meet Friday to "review existing cooperation and chart future direction of Philippines-China diplomatic relations."

In a statement, the Department of Foreign Affairs said the 18th Foreign Ministry Consultations (FMC) between the Philippines and China would be held in Manila on October 19. The 17th FMC was held in Beijing in January.

The Philippine panel will be headed by DFA undersecretary for Policy Erlinda F. Basilio while Vice Foreign Minister Fu Ying will head the Chinese side.

The Chinese delegation to the FMC will call on Foreign Affairs Secretary Albert F. Del Rosario.

"The FMC is a regular bilateral mechanism meant to be a venue for the two countries to discuss bilateral, regional and multilateral issues of mutual concern, as well as to explore and deepen areas of cooperation in various fields, such as trade and investment, tourism, culture and education, defense and security, agriculture and fisheries, transportation and communication, and consular matters," the DFA said.

The tension between Manila and Beijing over Scarborough Shoal (Panatag Shoal) began in April when Philippine Navy personnel boarded eight Chinese fishing vessels who were allegedly caught poaching giant clams, baby sharks and other species in the area. However, the arrest of Chinese fishermen was blocked by Chinese government vessels.

Citing the United Nations Convention on the Law of the Seas, the Philippines is claiming the territory, saying the area is within its 200-mile exclusive economic zone. Beijing, on the other hand, claims the territory, citing historical basis.-Black Pearl (October 17, 2012 1:30PM)

Vietnam's ruling party chides leaders, signals reform

Vietnam's ruling Communist Party has promised economic reforms and a restructuring of state firms and the banking system after a top-level meeting that criticized senior members, thought to include the prime minister, but left them in their posts.
The banks are swimming in bad debt, much of it owed by the huge state enterprises at the heart of the economy. Moody's downgraded Vietnam last month and said bank reforms should be implemented quickly.

The central committee, the powerful body of more than 170 senior members of the Communist Party of Vietnam, "came to the decision not to discipline the collective of the Political Bureau and a comrade member of the Political Bureau", the party said in a statement on its website late on Monday.

Some analysts had forecast that Prime Minister Nguyen Tan Dung, in power since 2006, might be ousted. He has faced questions in parliament over a scandal involving Vinashin, a huge state shipbuilder he had championed but which almost collapsed in 2010 under $4.5 billion in debt.

Bloggers have accused him of greed, cronyism and economic mismanagement. The authorities have responded with a crackdown on dissent and three high-profile bloggers were recently jailed for up to 12 years for anti-state propaganda.

The plenum urged that the business climate be improved and foreign investment encouraged, according to a report by the official Vietnam News Agency (VNA).

While it advocated the restructuring and renovation of the state-owned enterprises (SOEs), "the committee continued to affirm their core role", according to the report.

"Resolute adjustments must be made so that the SOEs can have appropriate structures and take the lead in scientific and technological renovation ... and maintaining the socialist orientation of the economy," it said.

However, it added that non-core investments should be ended and the state should withdraw from firms in which it holds less than 50 percent of the capital.

In addition, the SOEs "must be reorganised in the model of joint stock and limited liability companies".

The central committee also ordered amendments to the 2003 Land Law to tackle corruption, speculation and lawsuits in the interests of socio-political stability, the VNA report said.

CONTINUITY

Jonathan Pincus, dean of the Fulbright Economics Teaching Programme in Ho Chi Minh City, said the plenum had opted for continuity in policy -- restructuring the financial system and SOEs were longstanding aims, even if progress had been slow.

"No more details were provided, but perhaps we can expect more bank mergers and continued pressure on public investment financing," he said.

Soaring inflation and the collapse of the property market have contributed to the bad-debt problem at banks, and the central bank last year launched a plan to restructure the sector through mergers and acquisitions of the weakest lenders.

In August, it gave approval for Sahabank to take over weaker lender Hanoi Building Bank (Habubank), the second such deal this year.

The central bank said in July that bad debt in the banking system had risen to 8.6 percent of loans as of the end of March, almost double the previously published figure.

Banks have slowed lending to tackle the problem. The authorities have also tried to tighten lending conditions in order to keep a lid on inflation.

As a result, the economy has slowed and the government has forecast growth of 5.2 percent in 2012 after 5.89 percent in 2011.-Reuters (October 16, 2012)