MSME Development and The Financial Crisis

FORUM SERIES
FOUNDATION FOR A
SUSTAINABLE SOCIETY
Global Financial Crisis and MSMEs
Proceedings

THEME

Finding Alternatives and Solutions to the Impacts of the Global Economic Crisis

BACKGROUND

Nations are confronted with two of the most significant crisis of its time: the climate crisis and the global
economic crisis. The climate crisis no doubt is a result of unprecedented, unsustainable growth and
development without regard of the cost to people and to the environment. The recent meltdown
among economic giants only underscores the needed shift in focus among societies over the
predominant economic paradigms. There is apparent call towards enhanced institutional governance,
greater participation of people and democratized access to resources.

Micro, small and medium enterprises (MSMEs) constitutes 99.7% of business firms in the Philippines. It
contributes 32% to total Gross Domestic Product and generates 70% of all employment. No doubt,
MSMEs are a potent force for sustainable development that stimulates local economy development and
a potential mechanism for improving social equity among the poor. However, the present global
economic crisis poses grave threat to their growth and survival considering the already many and
multiple challenges inherent among MSMEs.

The Philippines remains unclear in terms of what actions to take to mitigate the effects of the crisis.
Ongoing discourses are happening among various groups and civil society stakeholders to find
alternatives to the crisis confronted. FSSI working primarily with MSMEs and in the forefront of
advocating and promoting the triple bottom‐line (3BL) framework as the basis for enterprise
development deems it relevant and strategic to provide opportunities for such discussion.

FORUM OBJECTIVES

Through FSSI’s advocacy program, it is aimed that this proposed public forum will:

 Facilitate discourse and exchange among various stakeholders (CSOs, private sector,
government) in finding solutions and alternatives to mitigate the impacts of the crisis;
 Identify practical (short‐term) and strategic (long‐term) solutions that can be pursued among
the relevant stakeholders present;
 Contribute to on‐going initiatives of finding alternatives and solutions to the impacts of the
global economic crisis

COLLABORATING ORGANIZATIONS

The Freedom from Debt Coalition (FDC) –
Philippines is a nationwide multi‐sectoral
coalition conducting advocacy work in the
national, local and international arenas, to realize
a common framework and agenda for economic
development.

Mindanao Alliance of Self Help Societies‐Southern
Philippines Educational Cooperative Center (MASS‐
SPECC) is the oldest cooperative federation in the
country and consists of 252 cooperatives and
other self‐help groups operating in 20 out of 23
provinces in Mindanao.

The Cagayan de Oro Chamber of Commerce and
Industry Foundation, Inc. (Oro Chamber) is a non‐
stock and non‐profit voluntary organization of
businessmen and professionals working together
to foster and promote private sector initiative
toward business development in Cagayan de Oro
City, Misamis Oriental Province and nearby areas.

PARTICIPATION

PER INDIVIDUAL COUNT 76

10 – FSSI staff

PER ORGANIZATION 39
MEMBERS 18
CONVERGENCE, Helvetas, PHILSSA, FDC, PHILNET‐RDI,
PCF OR VCF, MINCODE, MASS‐SPECC, APPEND, NCSD,
NCCP, FPSDC, HEKS, SMPFC
Green Forum Philippines, NATTCCO, WAND, CBCP‐NASSA
PARTNERS 8
MILAMDEC Foundation, MILAMDE Ccooperative,
Greenminds, Coop Bank of Misamis Oriental, MMASON,
CDO handmade , PDAP, Oro Chamber, Bukidnon
Muscovado

OTHER STAKEHOLDERS 16
VJandep Bakeshop, Philippine National Bank, Boom
Marine Corp, Don2 GNC and Pharmacy, Oro Integrated

Coop, Al Rose Group of Companies, KAANIIS, BMC‐SVC,
NEDA, Department of Finance, BOPC, Kpmpi‐bmfi, IBON,

Ateneo, Salay Handmade

MEDIA 7
Sunstar CDO, Mindanao Gold Star Daily ABS‐CBN, CRA,
The Mindanao Current, Bombo Radyo, TV 39

MEDIA COVERAGE

Program / Format Guest / Topic Date

Maayong Adlaw! Mindanao!, Milo Tanchuling May 26 – Main News
Local Tv 39 May 27 – Live Intervidw
May 28 – Forum Coverage
DXCO, Radio Asenso Milo Tanchuling May 28
ABS CBN TV, Northern Milo Tanchuling May 30
Mindanao Datu Makadinding
Sunstar Cdo Salay Handmade, May 29
 Investing In People Oro Chamber, FSSI, FDC, May 14
 Best Expo ’09 Seen To MASS‐SPECC
Bring In New Money
Philippine Information Agency Oro Chamber, Fssi, Fdc, May 13
Best Expo ’09 Seen To Mass‐Specc
Bring In New Money
Bombo Radyo Milo Tanchuling May 28* ‐ Recorded Interview

In Collaboration with:
Finding Alternatives to the Impact of the Global

Financial Crisis
A Public Forum
May 28, 2009
Casa Real Function Hall, VIP Hotel
Don A. Velez St., Cagayan de Oro City
(08822) 726-080
TIME ACTIVITY
08:00- 09:00 am REGISTRATION
09:00–09:30 am Opening Ceremony/Forum Introduction
Welcome Remarks
Mercedes Castillo
Chairperson, Committee on Education & Advocacy
FSSI PHTO EXHIBIT

BOT member, FSSI
PANEL 1: Understanding the Impacts of the Crisis
09:30-09:55am PRESENTATION 1: The Global Economic Crisis: Asian Context and

Perspective
Joseph Lim, Economist, Ateneo de Manila University
09:55-10:20am PRESENTATION 2: The Global Economic Crisis: Assessment &

Response of the National Government
Dir. Dennis Arroyo, NEDA National Planning & Policy Staff
FSSI PHOTO EXHIBIT
OPEN FORUM/COFFEE
FORUM BREAK
10:20-10:45am PRESENTATION 3: The Global Economic Crisis: A Perspective from
Civil Society Sector
Rosario Bella Guzman, IBON, Executive Director
10:45-11:10am PRESENTATION 4: Challenges in MSME Development in a Global

Economic Crisis Situation
Clarence Pascual,
Pascual Labor Economist
11:00-12:00nn OPEN FORUM

12:00–01:30 pm LUNCH BREAK
In Collaboration with:
TIME ACTIVITY
01:30-02:20pm PANEL 2: SHARING OF LOCAL EXPERIENCES
PRESENTATION 5:: Community Experiences: Sailing Through Rough

Times
Jing Pacturan, PDAP Executive Director
PRESENTATION 6: LGU Initiatives: Local Response to Global

Economic Challenges
Mayor Lawrence Cruz (for confirmation)
City Mayor, Iligan City
FSSI PHTO EXHIBIT

PRESENTATION 7:: MSME Sector: Surviving in a Period of Crisis
Loreta Rafisura, Salay Handmade Paper
PRESENTATION 8: Cooperatives Amidst Economic Crisis

Lydia Canalija, LIPI Employees MPC, Manager
02:20-02:50pm PRESENTATION 9: Finding Alternatives and Solutions

Milo Tanchuling
Secretary
Secretary-General, Freedom from Debt Coalition (FDC)
02:50-03:20pm PANEL 3: STAKEHOLDER REACTIONS
 From the Government:
Government
FSSI PHOTO EXHIBIT

o Dir. Alicia Eusenia, DTI Regional Director
 From the Cooperative Sector
o Sylvia O. Paraguya, MASS-SPECC
SPECC Executive Director
 From the Women Sector
o Dina Anitan, WAND Mindanao Coordinator
 From the Private Sector
o Ricardo Meñes, President, Oro Chamber of Commerce &
Industry Foundation
03:40-04:15 pm OPEN FORUM/COFFEE BREAK

04:15-05:00 pm SYNTHESIS/WRAP
SYNTHESIS/WRAP-UP
CLOSING REMARKS
Ricardo Meñes
President, Oro Chamber of Commerce & Industry Foundation
Joseph Y. Lim
The Global Economic Crisis: Asian Context
and Perspective
Lim has taught in the University of the Philippines School of Economics for 20 years before joining the Ateneo de Manila Univer‐
sity Department of Economics. Lim has numerous publications on the Asian financial crisis and is currently writing a study on the
current financial crisis. Lim’s most recent research topics include international finance, structural adjustments, international la‐
bor standards and poverty reduction. Several of these works were published in conjunction with the UNDP Macroeconomics for
Poverty Reduction.
Hard Landing to Global Imbalances in the
pre-2007 period
The Current Global • Latest US boom in 2004-7 spurred by

consumption and housing boom as US
Financial Crisis
g was negative
household savings g and the
Presentation by:
spending financed by debts and loans
Joseph Anthony Lim
Economist
Ateneo de Manila University
Hard Landing to Global Imbalances in the

pre-2007 period Global imbalances 2003-2007
• The resulting large US current account and
fiscal deficits were being financed by
countries with large current account
surpluses – the export-oriented economies --
especially PRC, Japan, the other East Asian
emerging markets and the oil-producing
countries (notably Russia)
Forum on Seeking Alternatives to the

Impacts of the Global Financial Crisis:
May 28, 2009 Organized by FSSI 1
Current Account vs Financial/Capital Accounts, billions &S$
• US CA deficit is completely offset by net
1000.0
Capital & Financial Accounts and Errors capital inflows to the US. Capital inflows to
800.0
600.0
Current Account, US from
400.0 – private capital flows from other countries
200.0 – central banks’ investment in US securities
0.0 from international reserves of other countries
-200.0 – most of net inflows to US in recent years go to
-400.0 debt securities (T-bills and bonds)
-600.0
-800.0
-1000.0
• But situation could not be sustained
The Current Global and Economic

Crisis: The Western Countries Origins of the US Subprime Crisis
• Roots of the crisis: • The rise of the securitization of loan assets, especially
housing mortgages, in the 1990s and intensifying in the
– the high leveraging in the US during the growth
2000s and the latest boom period in the US (2004-7)
period 2004 to 2007
– the subsequent asset price bubbles and bursting of • The dot-com bubble bursting in 2001 caused authorities to
the bubbles reduce Fed policy rates from 6.5% in 2000 to 1% by 2003.
– the subprime lending and securitization of mortgage Together with tax cuts by the Bush Administration, this led to
and other loan assets a consumption boom in 2003 to 2007 and large and
– The spread of the leveraging, asset bubble and widespread household investments in housing through
mortgage loans
securitization of loan assets to Europe and other
Western developed countries

Origins of the US Subprime Crisis (cont.) Origins of the US Subprime Crisis (cont.)
• Loan assets were highly securitized into mortgage-backed
• Fannie Mae and Freddie Mac – two government-sponsored securities (MBS) and credit debt obligations (CDOs)
enterprises -- were given incentives to securitize mortgages
and make housing affordable and gear a sizeable portion of
the mortgages to low-income households • These securities were insured by financial instruments issued
by private financial institutions (like AIG) known as credit default
swaps (CDS)
• The lax monetary and fiscal policies enticed households,
financial institutions and firms into high leveraging (debt-
financing), especially in the housing market • Housing loans were given without much credit investigation by
the mortgage underwriters to borrowers that were in the past
shut out from the mortgage market because of their higher risks
• The bad practices were given much incentives by low interest
of default (this is the subprime sector).
rates, skyrocketing housing prices and ‘irrational exuberance’
and were largely unregulated
The securitization of loan assets especially mortgage loans

Origins of the US Subprime Crisis (cont.)
• Sweeteners were given for mortgage debtors to purchase
houses (interest rate payments only in initial periods, a low
4% interest rate in initial years, with rates increasing
significantly after, etc.)

Dangers in the 2003-2007 US Housing Dangers in the 2003-2007 US Housing
Boom Boom
• Lenders and mortgage brokers cut off from the borrower, • The whole process was leveraged with buyers of the
who pays to the servicer securities highly leveraged and commercial banks and
investment banks borrowing to buy these securities
• The issuer of the mortgage-backed securities (MBS) or

CDO (investment banks, Fannie Mae/Freddie Mac) pools • M
Many b
borrowedd short
h t tterm and
d iinvested
t d iin securities
iti ththatt are
different types of loan assets into one financial instrument based on long-term loan (mortgage) assets – term mismatch
package – product not clear and transparent
• These dangerous activities were largely unregulated by the
• Rating agencies rated these securities very highly Securities and Exchange Commission (in charge of
disregarding the risks and concentrating on high prices of investment houses) and the Fed was lax with the commercial
real property used as collateral banks.
The bursting of the asset bubble, The bursting of the asset bubble,
defaults and financial chaos defaults and financial chaos
• Rising inflation (partly caused by high fuel costs, partly by high • Financial trouble hit all the investment banks and many commercial
spending) made the US Fed increase the policy rates from 1% to banks, insurance companies and other financial institutions
5.25% between 2004 to 2006
• Securitization of the loan assets made the crisis deeper with

• Rising interest rates directly affected capacity to pay of borrowers problems of transparency and valuation of the securities
• Together with indiscriminate mortgage lending, this led to high • Starting September 2008: Bankruptcy of Lehman Bros, takeover of
defaults in the subprime housing market, starting late 2006 and Merrill Lynch and Bear Sterns, bailout of AIG, Citigroup, Bank of
intensifying in 2007 leading to crisis proportions in 2008 America shakes confidence; Stock markets worldwide collapse:
Beginning of ‘depression’ mentality worldwide – stock market
• Bursting of asset bubbles – collapse of housing prices and stock collapse
market prices in 2007 and 2008 onwards

There is the question of how problems in one small There is the question of how problems in one small
corner of US financial markets (the subprime mortgage corner of US financial markets (the subprime mortgage
market) could affect financial markets so powerfully market) could affect financial markets so powerfully
(this slide borrowed from Barry Eichengreen) (this slide borrowed from Barry Eichengreen)
• Recall that subprime mortgages accounted for only 3 per cent of US • Part of the answer is asymmetric information.
financial assets on the eve of the crisis (hence even a smaller share of
– This was the fear that similar problems lurked in other asset classes,
global financial assets).
precipitating
p p gppanicked selloffs.
• Part of the answer is leverage. • Part of the answer is counterparty risk.

– Many of those who held subprime-related assets were leveraged 12 to
– The failure of certain counterparties (can you say “Lehman Bros.?”) led
50 times (12 for commercial banks, 25 times for investment banks, 50
to illiquidity and losses for other investors, creating a domino effect.
times for certain now-notorious broker-dealers).
– These propagation mechanisms will be studied for years...
– $1 of subprime related losses thus forced $12 to $50 of other assets to
be liquidated.
17 18
The Deepening and Spreading of the US

Globalization: finance → trade Financial Crisis to the Real Sector
Figure 1
Finance driven globalization • The financial crisis led to strong credit squeeze as banks
180 350 refused to lend to borrowers and to other banks; interbank
160
300
rates increased sharply in September-November 2008.
140
980=100
250
120
• L
Losses iin b
business
i confidence
fid among llenders,
d iinvestors
t and
d
As percent of GDP, indices 19
100 200
finally consumers cut their spending significantly.
80 150
60
40
100
• Consumers were badly affected by sharp declines in wealth –
20
50 collapse in housing prices, stock prices, pension fund
0 0
payments and credit squeeze. Retail sales plummeted.
1980 1990 1995 2000 2006
Years
19
Global financial assets Global merchandise trade
Global financial assets as a percentage of GDP (right axis) Global merchandise trade as a percentage of GDP (right axis)

The Deepening and Spreading of the US The Deepening and Spreading of the US
Financial Crisis to the Real Sector Financial Crisis to the Global Economies
• Firms’ earnings suffered from sharp drop in sales. Many firms • European, Australian/NZ financial institutions participated in
teetered on collapse (e.g. the auto industry) the US subprime lending and had their own credit-led growth
and asset bubbles in their respective countries. They were
• Firms laid off workers increasingly leading to a vicious infected by the US financial and economic crisis in the US.
d
downward d spiral
i l off unemployment,
l t ffurther
th consumption
ti cuts,t
further firm losses, further layoffs, possible loan defaults of • US, Europe and Japan now in deep recession. US GDP
firms and households (credit card defaults), further cuts in contracted more than 6.5% in last quarter of 2008, another
lending, etc. 6.1% 1st quarter of 2009. Economists officially declared US in
recession since December 2007.
• Iceland suffered financial, economic and currency collapse

and had to ask for IMF help
The Deepening and Spreading of the US Market Failures

Financial Crisis to the Global Economies
• Contrary to the pronouncements of the institutions of the Washington
• Hungary, Ukraine, Serbia and Pakistan also had to run to IMF Consensus – IMF and US – trade and financial liberalization globally
for foreign exchange funds as massive foreign capital outflows carries tremendous risks – through market failures
in emerging markets led to liquidity shortages in foreign
reserves and sharp currency depreciation – both contributing • In the last two decades, economists have pinpointed market failures
to near-debt-defaults ((as opposed to market efficiencies)) in g
goods, labor and capital
markets – this global ‘depression’ shows the failure in all three
sectors.
• Russia also in a serious crisis due to massive capital outflows,
oil price decline and sharp and continuing depreciation of the
ruble • Perhaps the biggest market failures are in the financial markets
– Moral hazards and adverse selection (You don’t know whether
borrower will pay back, low interest rates attract ‘good’ and ‘bad’
• Asian NIEs registered negative growth starting 3rd quarter of
borrowers, when interest rate goes up, ‘good’ borrowers become
2008 ‘bad’, and you attract ‘bad’ borrowers)

Market Failures Responses of the US: Monetary and
Financial Policies
• Perhaps the biggest market failures are in the financial markets
– Transactions are over time (credit, loans) – even ‘good’ borrowers • The US Fed cut the Fed Funds Rate from 5.25% by end of
can become ‘bad’ if market conditions change (low interest rates 2007 to a range of 0-0.25% by December 2008.
become high interest rates, recession sets in, etc.)
– Systemic risks – domino effects -- aggravated by unregulated • The Fed gave a total of $1.6 trillion (as of November 2008) of
securitization short term loans to tackle the illiquidity problems of the banks
– Financial and capital account liberalization ‘globalized’ the risks of
securitization and high leverage to Europe and other countries
• The Fed supported JP Morgan and Bank of America to bailout
– The bankruptcy of Lehman Bros. and the systemic risks that
and takeover of Bear Stearns and Merrill Lynch, respectively, to
reverberated ensured that the subprime financial crisis became a
global financial and economic meltdown and possibly a global avoid systemic risks. But it let Lehman Bros. go bankrupt, led to
‘depression’. global havoc and ‘depression’ syndrome. After this, it had to
bail out AIG.
Responses of the US: Monetary and Responses of the US: Monetary and
Financial Policies Financial Policies
• The initial $350 billion advanced to the US Treasury was used
• The Fed also took the government-sponsored enterprises
instead by Treasurer Paulson to recapitalize troubled banks by
Fannie Mae and Freddie Mac into conservatorship
buying preferred shares of the banks. There is dissatisfaction
concerning the transparency of the disbursements of the funds
• In October 2008, to stop collapse of financial institutions and and conditions of the disbursements
encourage interbank lending and lending to firms and
households, Congress under Bush passed the creation of the
• The Obama economic team is using ‘stress test’ approach to
Troubled Asset Relief Program (TARP) with $700 billion given
solve banks’ insolvency problem. On May 6, 2009, the ‘stress
to US Treasury to buy troubled assets (mostly mortgage-
test’ (which many consider too easy) determined that 10 of 19
backed securities and CDOs) of financial institutions to clean up
US big banks required $75 billion capital infusion in case of a
their balance sheets.
‘worst scenario’. Bank of America required $33+ billion, Wells
Fargo $13+billion, GMAC $11+billion.

Responses of the US: Monetary and Responses of the US: Monetary and
Financial Policies Financial Policies
• Due to banks’ unwillingness to lend to firms, the Fed in Oct. • The Housing and Economic Recovery Act of 2008
2008 expanded collateralized lending to commercial papers, (Bush)
making it effectively the alternative lender to firms
– insured $300 billion in mortgages assisting 400,000
borrowers
• The Obama team seems to have given up (just like the Bush – Lent money to mortgage bankers to help them
team) on cleaning up the bad assets or bad loans in the restructure mortgage debts by reducing the amount of
financial system (this is a risky approach: the same approach the mortgage in exchange for sharing in future
led to a ten year stagnation in Japan). appreciation of housing prices
– These did not lead to significant declines in foreclosures
and led to criticisms up to the current period about lack of
attention to solve the housing crisis
Responses of the US: Monetary and

Responses of the US: Old Fiscal
Financial Policies
Stimulus of Bush
Obama and his financial team announced
• On Feb. 2008, Bush signed into law an
• Refinancing for Up to 4 to 5 Million Responsible
Homeowners to Make Their Mortgages More Affortdable economic stimulus of $168 billion of income tax
• A $75 Billion Homeowner Stability Initiative to Reach Up rebates. This led to an artificial rise in GDP in
to 3 to 4 Million At-Risk Homeowners the second quarter of 2008. Since the tax
• Supporting Low Mortgage Rages by Strengthening
rebate was temporary the recession continued
Confidence in Fannie Mae and Freddie Mac.
in the third quarter as GDP growth turned
negative and deepened sharply in the fourth
quarter of 2008 with GDP growth at -6.3%

Responses of the US: Fiscal Stimulus Responses of the US: Fiscal Stimulus
• The Obama fiscal stimulus: passed American Recovery and • The Republicans
Reinvestment Act in Februuary 2009 ($787 billion) – prefer a larger proportion of the stimulus going to tax cuts
• It consists of: and rebates as well as mortgage relief; they were able to
– Roughly 2/3 in government spending and 1/3 in tax cuts, push for tax credits for housing and automobile purchases
especially for middle and low-income families – insist on trimming the government spending portion.
– Infrastructure spending consists of building energy grids,
roads and railways, modernization of schools
– The plan also calls for cash infusion into strained state
budgets
– Social spending included spending for education, ensuring
health care for low-income groups/ unemployed and
unemployment insurance
• Other developed and developing countries

Coordinated Global Responses
committed to fiscal stimuli to stop the fast- • In October 7-8, 2008, the Central Banks of the developed
deteriorating economic decline but are in varying countries simultaneously reduced their policy rates on the same
day. This cheered the markets only temporarily and did not stop
proximity in arriving at a strong fiscal plan the financial deterioration in the developed countries
• China has a strong $586 billion fiscal stimulus plan • Periodic statements of G7 countries to address financial system
weaknesses had not led to significant results.
• But whether fiscal stimuli will lead to economic
recovery depends on • The G20 meeting in mid-November 2008 (sponsored by Bush)
– the soundness of the fiscal plan got all the member countries promising to coordinate responses
– the return of credit flows in the financial sector to the global financial crisis.
– the return of confidence of consumers, investors and – This did not have any impact on global confidence.
lenders – But it did get countries to calling for a rejection of protectionism

Coordinated Global Responses
• The Davos World Economic Forum in Jan. 30-31 2009
– Resulted in calls by UK and Germany for a multilateral global
watchdog overseeing financial institutions
– Not attended by top US officials
– Brought about fears of protectionism from the US
• A US Congress
Co g ess bbill sstipulating
pu a g the
e fiscal
sca sstimulus
u us p
projects
ojec s sshould
ou d
use US materials – eventually watered down due to fear of trade
wars
• A view that the bailout of the US auto industry was a protectionist
move
• Subsequent G7 and G20 meetings powerless to stop the
global downslide

6/26/2009
Financial Vulnerabilities of
Asian Vulnerabilities to the
Global Financial Crisis East Asian Countries
Presentation by:
Joseph Anthony Lim
Economist
Ateneo de Manila University
Asian Countries Fixed Their Financial Asian Countries Fixed Their Financial Houses
Houses in Late 1990s and 2000s as a result in Late 1990s and 2000s
of the Asian crisis and other financial threats
• Stronger financial regulations and supervision
• Asian countries improved their financial led to
supervision and regulations after the Asian – Higher capital adequacy ratios in banks
crisis so that the financial sector was less – Limits to property lending
vulnerable to – Limits to unhedged foreign exchange borrowings
– The toxic assets from Western financial sectors – Regulations and limits on financial investments
– The over-leveraging that led to high asset bubble abroad by domestic financial institutions
bursting and defaults • This led to declining Non Performing Loan
ratios in the 2000s
Forum on Finding Alternatives to the

Impacts of the Global Financial Crisis
6/26/2009
Banks are generally in good shape for now: Data from

NPLs of Asian Banks had declined and are low: Data
Asian Economic Monitor Dec. 2008
from Asian Economic Monitor Dec 2008
Table 1
Table 2
Risk-Weighted Capital Adequacy Ratios (% of risk-weighted assets)
Economy 2000 2001 2002 2003 2004 2005 2006 Table1
2007 2008 2009 Non-Performing Loans (% of total commercial bank loans)
Hong Kong, China 17.9 16.5 15.7 15.3 15.4 14.9 14.9 13.4 14.8 … Economy 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Indonesia 21.6 18.2 22.4 19.4 19.4 19.3 21.3 19.3 16.8 17.8 China, People's Rep. of 22.4 29.8 21.6 17.8 13.2 8.6 7.1 6.2 … …
Japan 11.7 10.8 9.4 11.1 11.6 12.2 13.1 12.9 12.3 … Hong Kong, China 5.9 5.2 3.9 3.2 1.6 1.4 1.1 0.8 1.2 …
Indonesia 18.8 12.1 8.1 8.2 5.8 8.3 7.0 4.9 3.8 4.3
Korea, Rep. of 10.5 10.8 10.5 10.4 11.3 12.4 12.3 12.0 12.7 …
Japan 5.3 8.4 7.2 5.2 2.9 1.8 1.5 1.5 1.4 …
Malaysia 12.3 12.8 13.2 14.0 14.3 13.5 13.1 12.6 12.2 12.5
Korea, Rep. of 6.6 2.9 1.9 2.2 1.7 1.1 0.8 0.6 0.9 …
Philippines 15.6 15.3 16.6 17.4 18.7 17.7 18.5 15.9 15.5 …
Malaysia 8.3 10.5 9.3 8.3 6.8 5.6 4.8 3.2 2.2 2.2
Singapore 19.6 18.2 16.9 16.0 16.2 15.8 15.4 13.5 14.3 …
Philippines 15.1 17.3 15.0 14.1 12.7 8.5 6.0 4.5 3.5 3.8
Taipei,China 10.8 10.4 10.6 10.1 10.7 10.3 10.1 10.6 10.8 … Taipei,China 5.3 7.5 6.1 4.3 2.8 2.2 2.1 1.8 1.5 …
Thailand 11.4 13.3 13.0 13.4 12.4 13.3 13.9 14.9 14.0 14.6 Thailand 17.7 10.5 15.7 12.9 10.9 8.3 7.5 7.3 5.3 …
Exposure of some Asian banks to US

Financial Vulnerability: Open Capital
toxic assets
Accounts – Volatilities of ‘Hot Money’
• Even with better financial regulation and supervision,
some Asian banks were exposed and some may still be • Asian economies continued an open capital
secretly exposed to the toxic assets in the US account economy after the Asian crisis. China,
Vietnam and India partly opened up their capital
• When Lehman Bros.
Bros went bankrupt,
bankrupt some Philippine account to portfolio inflows
inflows. These flowed in sharply
banks – led by Banco de Oro, DBP and Metro Bank – in 2004 to early 2007.
were exposed to Lehman financial products (total of
$300 million) and had to set up loan loss reserves
• The one with biggest capital control – China – is the
only currency in developing Asia not depreciating
• If more multinational financial institutions fail, more
Asian banks may be adversely affected

6/26/2009
Stock Price Indexes

• From late 2007 up to the present, these Asian (last daily price, 1 January 2002 = 100, local index)
800
economies suffered sharp stock market and sovereign
Dow Jones Industrial Average
bond price collapse during the global financial crisis as 700 S&P 500
Nikkei 225
foreign money took flight Shanghai A Share
600
Hang Seng Index
– To get away from ‘risk’ to ‘safe’ assets – i.e. from Asian Jakarta Composite Index
KOSPI Index
currency-denominated assets to US treasury notes 500
Kuala Lumpur Composite Index
((US$),
) the yen
y and gold.
g Philippine Composite Index
St it Ti
Strait Times IIndex
d
400
Taiwan Stock Exchange Index
– To cash in on profits derived in emerging markets to SET Thailand
finance losses in their financial institutions 300 BSE 100

VNINDEX
– Stock shares and sovereign bonds also dumped by 200
domestic investors as their confidence plummeted as

100
global financial markets teetered towards collapse, local
exports declined, local earnings fell and layoffs 0
Jan-02 Aug-02 Mar-03 Oct-03 May-04 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09
increased Source: Bloomberg
Financial Markets in Asian Less Bank-Dependent

and More Equity and Bond Dependent • Thus the stock and bond market volatilities
Structural change of Asian financial assets and declines in the emerging Asian markets
Total billion US$ and shares on total: 1995 and 2007 reduce the efficiency and sources of financing
for the real sector.
• Stock and sovereign bond market declines

also kill investors’ confidence and some
consumer confidence.
Asia includes the People's Republic of China, Hong Kong, China, India, Indonesia,
Japan, Republic of Korea, Malaysia, Philippines, Singapore, Taipei,China, and
Thailand.

6/26/2009
• Sharp currency depreciations for the Asian economies

Currencies tumble amid flight to safety: Data from AEM Dec. 2008
are stagflationary because the potential positive
Broad Indices of Nominal Effective Exchange Rate (Jan 07=100): Selected Countries impact on exports is shut off due to the plummeting
120.00
world export market, especially from developed
110.00
countries.
100.00
India
Indonesia
• Currency depreciation also increases the external debt
Korea
90.00 Malaysia burden (Korea, Indonesia, Philippines) and lead to
Philippines
Taipei,China
Thailand
higher sovereign spreads and risk of default and more
80.00
depreciation
70.00
60.00
• Sharp currency depreciation also kills confidence and
reduces investors’ and consumers’ spending
Ju 7
Ju 8
M 7
Ap 7
Se 7
O 7
D 7
M 8
Ap 8
Se 8
O 8
D 8
09
Fe 7
M 7
07
Au 7
N 7
Ja 7
Fe 8
M 8
08
Au 8
N 8
Ja 8
Fe 9
-0
-0
0
-0
r-0
-0
0
-0
r-0
-0
0
l-0
-0
-0
l-0
-0
-0
0
b-
g-
p-
b-
g-
p-
b-
n-
n-
n-
n-
n-
ay
ay
ov
ov
ar
ar
ct
ec
ct
ec
Ju
Ju
Ja
• Starting second half of 2008, foreign • Sovereign bond spreads and credit
exchange reserves of most East default spreads have increased
Asian emergingg g economies ((except
p reflecting
g foreign
g investors p
perceived
PRC and Philippines) have fallen. But external and public debt risks of
it is not alarming. emerging Asian economies.

6/26/2009
External funding expected to tighten

and become more difficult and expensive • The high foreign currency sovereign bond
JP Morgan EMBI Sovereign Stripped Spreads (basis points)1
spreads and credit default spreads make it
2500 difficult for emerging Asian countries to
externally finance their economic stimulus and
2000
1882 social spending programs
1500 P ki t
Pakistan
Indonesia
1000
• For countries with moderately high debt burdens
764
671
or exposure to short-term debts, the high
Viet Nam
500 Philippines
440
sovereign bond spreads increase debt default
355
Malaysia People's Republic of China 173 risks as they cannot borrow to fund their debt
0
01-Jan- 11-Apr- 20-Jul- 28-Oct- 05-Feb- 15-May- 23-Aug- 01-Dec- 11-Mar- service payments.
07
1
07 07 07 08 08 08 08 09
As of 17 March 2009
Source: Bloomberg.
Results of Asian Crisis: East Asian economies, except

for China, had lower investment rates but higher
dependence on net exports
G ross Capital Form ation (% of G DP) of East Asian Countries declined after
Vulnerabilities in the Real

Asian crisis
50.0
Sector and Fiscal Sector 45.0
40.0
35.0
30.0 Korea, Rep.

Malaysia
Singapore
25.0
Thailand
Indonesia
20.0
Philippines
15.0
10.0
5.0
0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

6/26/2009
With lower investment rates (except in PRC),

East Asian growth had been more export
dependent
• Lower investment rates is compensated by • Asia’s high dependence on trade and

higher positive net exports. Trade and current exports had been its most vulnerable
account deficits before the Asian crisis had
spot
p in the current g
global financial
b
become positive
iti ttrade
d and d currentt accountt
surpluses. This is part of the int’l reserves crisis and economic recession.
accumulation of these countries, or the so-called
‘savings glut’, which is really the big gap of
savings over investments because of the
investment decline (as % of GDP)

6/26/2009

6/26/2009

6/26/2009
Advancing intraregional trade integration

and openness
Evolution of ASEAN+3 exports by destination
Structure of Asia’s Trading Shares (%) on total exports of ASEAN+3
1987 Asia, 33.8 2007 Asia, 50.4
Patterns and Extent of PRC+HKG, 10.6
PRC+HKG, 22.0
Regional Trade ROW, 19.6

JPN, 8.3
ROW, 19.2
AS EAN, 7.8
JPN, 6.4
EU, 14.9 EU, 14.3
Other Asia, 7.0

US , 31.7 US , 16.2
AS EAN, 13.1
Other Asia, 8.9
From Giovanni Capanelli’s presentation “Asian Financial Cooperation and the Global Crisis in
AEA Conference – ACAES Session, “Financial Integration in Asia: New Wine in Old Wineskins?”
San Francisco, 3 January 2009

6/26/2009
Final Demand Composition of Asian Exports in

2006:
Still Dependent from the World
• Although there is more intra-regional

trade, more than 2/3 of the final demand of
Asia’s exports is still outside Asia, mostly
in the US and Europe. Thus Asian
economies are hard-hit by the deep slump
in the developed economies.
From Giovanni Capanelli’s presentation “Asian Financial Cooperation and the Global Crisis in
AEA Conference – ACAES Session, “Financial Integration in Asia: New Wine in Old Wineskins?”
San Francisco, 3 January 2009
1
Export Growth : PRC, India, NIEs and ASEAN5 ($ value, y-o-y, %)
50
40 People's Rep. of China
30
• Already, exports and GDP growth of India
20
Asian economies had been hard hit
10
ASEAN5
and mass layoffs
y in export
p industries 0
NIES4
are going on. -10

-7.3
-9.3
-20 -20.2
-23.6
-30
Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan-
03 03 03 04 04 04 05 05 05 06 06 06 07 07 07 08 08 08 09
1
3-month moving average.
ASEAN5 includes Indonesia; Malaysia; Philippines; Thailand; and Viet Nam.
NIES4 includes Hong Kong, China; Korea, Rep. of; Singapore; and Taipei,China.
Source: OREI staff calculations based on CEIC data.

6/26/2009
Exports industries affected and actual or

• Some countries are highly dependent on overseas
possible layoffs in these sectors
workers’ remittances for GDP growth, especially the
• Japan, Korea, Taipei,China – automobile, electronics, other Philippines and South Asian economies like Pakistan,
high-tech manufactured products Sri Lanka and India.
• PRC – electronics, garments, toys and handicrafts, processed
food (already affected by melamine scandal)
• Inflows of remittances are also significant for Vietnam,
• India – g
garments,, IT,, others
Indonesia Cambodia
Indonesia, Cambodia, Lao PDR and Myanmar (the last
• Malaysia – electronics, primary commodities three largely unrecorded and coming from Thailand)
• Philippines – electronics, garments, coconut
• Indonesia – primary commodities, others
• If the overseas workers lose their jobs (almost all
• Thailand – tourism, electronics, garments, etc
countries are contracting and laying off workers), the
• Cambodia – tourism economic slowdown may be significantly worsened in
• Vietnam – garments, electronics, coffee these Asian economies.
Growth of OFW Remittances (y-o-y, in percent)
Indonesia Philippines
Dec-2007 22.3 8.9
Mar-2008 13.7 13.2
Jun-2008 16.0 21.1
Sep-2008 16.9 17.1
Dec-2008 6.3 4.6

Jan-2009 na -0.1
Feb-2009 na 4.9
Mar-2009 na 3.1

6/26/2009
IMF Growth Forecasts getting worse and

• Latest WB prediction is that OFW worse: Crisis worse than expected
remittances of RP to fall in 2009 by 4%.
• Latest POEA data show 216,803 land-based

new OFWs in 2008 compared to 306,383 in
2007 (30% decline)
• Latest Reuter poll survey revealed that

Philippine overseas remittances expected to
fall by 5%.
Latest IMF Growth Rate Projections for

Developing Asia
• Note that countries with predicted positive
growth are those countries with high gross
capital formation (China, Vietnam), big
domestic demand due to large population
(China, India, Indonesia, Pakistan,
Bangladesh) and/or lower dependence on
exports (China, India, Indonesia,
Philippines).

6/26/2009
Unemployment Rates Increase!

Countrie s W ith Qua rte rly Countrie s W ith Monthly
• Need more social insurance as more
Une mployme nt Ra te Une mployme nt Ra te
China , Pe ople 's Re p. of
2007 2008 2009
Hongkong, China
2007 2008 2009
people lose jobs and poverty will increase
1st Q 3.4 2.6 … Jan 4.1 3.1 4.3
2nd
3rd
4th
Q
Q
Q
4.0
2.1
2.3
4.0
2.8
3.5
…
…
…
Feb
Oct
Nov
4.1
4.0
3.5
3.1
3.6
3.7
4.7
…
…
• Just like the Asian crisis, Asian countries
Ma la ysia
2007 2008 2009
Dec
Kore a , Re p. of
3.2 3.8 …
still not prepared for these social
1st Q 3.4 3.6 … 2007 2008 2009
2nd Q
3rd Q
3 4
3.4
3.1
3 5
3.5
3.1
…
…
Jan
Feb
3 6
3.6
3.7
3 3
3.3
3.5
3 6
3.6
3.9 insurance and social safety net
4th Q 3.0 3.1 … Oct 3.0 3.0 …
Philippine s Nov 3.0 3.1 …
1st Q
2007
7.8
2008
7.4
2009
7.7
Dec
Ta ipe i,China
3.1 3.3 … • Fiscal stimuli should include social
2nd Q 7.4 8.0 … 2007 2008 2009
3rd Q
4th Q
7.8
6.3
7.4
6.8
…
…
Jan
Feb
3.8
3.8
3.8
3.9
5.3
5.8
spending for the poor and vulnerable
Singa pore Oct 3.9 4.4 …
1st Q
2007
3.4
2008
2.6
2009
…
Nov
Dec
3.9
3.8
4.6
5.0
…
…
sectors adversely affected by the crisis.
2nd Q 4.0 4.0 …
3rd Q 2.1 2.8 …
4th Q 2.3 3.5 …
…=data unavailable
Source: National sources accessed through CEIC.
Government Finance (as % of nominal GDP for 2007)

Total Overall Public
Economy
Revenue Surplus/Deficit Sector Debt
Singapore 22.4 6.7 96.3
Fiscal Stimuli of countries Hong Kong, China

Korea, Rep. of
21.8
27
7.2
3.8
171.2
32.1
depend on their tax Taipei,China

China, People's Rep. of
13.3
20.6
-0.2
0.7
30.7
17.3
capability Malaysia
Thailand
21.8
17.2
-3.2
3.2
-1.7
41.6
37.5
Indonesia 17.9 -1.2 35
Philippines 17.1 -0.2 62.3
Viet Nam 24.9 -5.4 43.4
Cambodia 12.1 -1.2 …
Lao PDR 13.6 -2.7 69.3
…=data unavailable
Source: Asian Economic Monitor, December 2008.

6/26/2009
• Fiscal Capacity for Fiscal Stimulus

– Countries with limited tax effort (tax revenue less than 18%
of GDP): Cambodia, Taipei,China, Lao PDR, Philippines,
Thailand, and Indonesia
– Countries with already significant fiscal deficit in 2007:
Vietnam, Malaysia, Lao PDR, Thailand, Cambodia, and
Indonesia
– Th
The Philippines
Phili i just
j t came outt off severe fiscal
fi l crisis
i i in
i 2002
to 2006.
• There is also the question of government capacity,
transparency and honesty in channeling infrastructure
and social projects efficiently to the proper sectors and
without leakages (e.g. through corruption)
Cost of Fiscal Stimulus Package (as % of GDP)

Total Size of
Second-Round Vulnerabilities
announced approved
size budget
China, People's Rep. of 12.6 12.6
• Economic slowdown or recession in Asian economies
Malaysia 9.0 9.0 will lower tax revenue collections and hamper fiscal
Singapore 8.2 8.2
Viet Nam 5.8 5.8 stimuli
Philippines 4.1 2.0
Korea, Rep. of 3.8 3.8 • Failure of export firms and other firms affected by
Hongg Kong,
g China 3.6 3.6
Thailand 1.6 1.6 economic slowdown may lead to higher bank defaults
Japan 2.0 2.4 – weaken financial sector
Indonesia 1.4 1.4
• Reduction in household income due to layoffs,
Source:
The cost of f iscal stimulus package are draw n f rom OREI country diminished work hours, currency depreciation may
w rite up; new s releases; national budget documents; ADO 2009
(Japan). Data on the f iscal balance are obtained f rom Asian lead to bank defaults, especially in mortgage loans
Development Outlook (various issues), Asian Development Bank;
International Monetary Fund Article IV, International Monetary and credit card payments – again weaken financial
Fund; National sources; CEIC; and OECD Outlook estimate.
sector and may lead to property bubble bursting

6/26/2009
Latest developments on the Chiang Mai

Initiative Multilaterilization (CMIM)
• ASEAN+3 Finance Ministers Meetings in 2008 and

• Just like the Asian crisis – lack of Feb. 29 2009 recommended the multilateralization of
adequate regional response to the the CMI with a pool of originally $120 billion of
extremelyy grave
g crisis. Asian currency swaps. Pledges are:
– $38.4 billion each from China and Japan (total of $76.8B)
Monetary Fund a long way off
– $19.2 billion from South Korea
– $24 billion from ASEAN (ASEAN countries squabbling about
how much to give)
– But still no details on the mechanisms
Latest developments on the Chiang Mai

Details still to be determined in the CMIM
Initiative Multilaterilization (CMIM)
• how to conduct surveillance: which agency?
• But a country can avail 80% of funds only with IMF
conditionality!! • IMF conditionality to fight for: 20%, 50%, or zero?
• expansion of membership?
• scope -- only liquidity provision or other support?
• ASEM meeting in Oct.
Oct 2008 decided the money will be
bank rescue funds? Fiscal funds? Trade financing?
a self-managed reserved pooling arrangement
• mechanisms of funds disbursement, repayment
governed by a single contract
schemes, escape clauses
• first step to create an Asian Monetary Fund (AMF)?
MALAYO PA!

6/26/2009
Continuing Failure in the International Continuing Failure in the International

Financial Architectures Financial Architectures
• In Oct 2008, US Fed gave Singapore, Korea, Brazil, Mexico, • Only important countries are given special treatment and
Australia $30 billion currency swap credit line each and $15 early help (US giving money to Singapore??????). The
billion to NZ others have to run to the IMF: Pakistan, Iceland, Hungary,
Ukraine etc.
• IIn D
Dec. 2008
2008, K
Korea, Chi
China, JJapan fforged
d th
the ffollowing
ll i
currency swap agreements: China and Japan will provide • Developing countries badly affected only has IMF to run to –
Korea bilateral currency swaps worth $26.5 billion and $ 20 no new international financial and economic architecture in
billion, respectively, to help stem won depreciation place since 1997!! Especially since source of contagion is
US and international finance’s inability to do global financial
surveillance!
• The latest and most serious global recession • For the sake of developing and emerging
(depression) since the 1930s is a result of a economies, need a new paradigm and world
combination of order that controls, monitor and regulate
– Globalization of finance – Financial and capital flows
– Globalization of trade – Trade flows
– Lack of control and supervision in global finance
finance,
capital flows and trade • Need developing countries’ pool of
emergency funds controlled and
conditionality imposed by developing
countries themselves

Dennis Arroyo
The Global Economic Crisis: Assessment and
Response of the National Government
Arroyo is the Director of the National Economics and Development Authority National Planning and Policy Staff. He is part of the
team that prepared the Economic Resiliency Plan to cope with the global crisis. Arroyo worked with the World Bank Washington
and Manila Offices as a consultant from March 2001‐2004. He wrote extensively on economics for the Philippine Daily Inquirer
from 1998 to 2004. He has earned his masteral degree in Economics from the University of the Philippines Diliman and is cur‐
rently a doctoral candidate in the same university. Arroyo also received further training in the United Nations at Geneva in Hi‐
Global Crisis
The Global Crisis and the “The world economy is in a once-in-a-
Economic Resiliency Plan hundred years recession.”
– Japanese Prime Minister Taro Aso
“The
The lack of confidence is total… consumers
are not consuming, businessmen are not
Dir. Dennis Arroyo taking on workers, investors are not
National Economic and Development Authority investing, and the banks are not lending.”
– Governor Ordonez (Bank of Spain)
Grim signs of the recession
• Suicide rate in Japan increased to 2,345 in

Philippine Economic Growth
January 2009, or up by 15% 9 GNP GDP 8.0
8
• Two-thirds of the world is in recession 7
6.9 7.2
6.4
5.9 6.1
• As of March 2009,
2009 the financial crisis had
growth rate, %
6 5.4
55
5.5
4.9 5.0 5.4
4.6
5
wiped out around 45 percent of global 4
4.2 4.4
wealth 3 2.3
1.8
2
• US unemployment at a 26-year high
1
0
2001 2002 2003 2004 2005 2006 2007 2008
Source: NSCB
1
2009 Macro
Macro--assumptions Export Growth
2009 Feb 20 2009 April 16
8.8
Inflation 3.0 – 5.0 2.5 – 4.5 4.4 6.6
10 1.1
91-day T-bills 5.0 – 7.0 5.0 – 7.0 0
180 day LIBOR 1 0 – 3.0

1.0 30 1 0 – 3.0
1.0 30 10
-10
-11.4
Forex P 45 - 48 P 46 - 49 -20 -14.8
-30
Dubai oil $ 45 - 60 $ 45 - 60
-40
Merch exports -8% to -6% -15% to -13% -40.3 -41.0
-50
Merch imports -10% to -8% -14% to -12% June Jul Aug Sept Oct Nov Dec Jan
'08 '09
The most vulnerable sectors

Shock absorbers
OFWs vulnerable to displacement:
– OFWs who work in the US under temporary working • Oil prices trending down: from $ 140/ barrel to $ 50
visas (129,000); • Inflation is easing: from 9.3% in 2008 to 3.5% in
– Seafarers in the cruise ships (130,000); 2009
– Factory workers in South Korea, Taiwan and Macau • Share of US to total Philippine exports falling: from
(
(268,000);
) 34.2% in 1998 to 20.1% in 2001 to 16.0% in Jan-
– Household service workers in Singapore, Macau and Aug 2008
Hong Kong (48,000) • Ample supply of Gross International Reserves, at
Commodity exports vulnerable jobs: $ 39 B
– Garments (121,000); • Corporate income tax rate to fall from 35% in 2008
– Electronics (111,000); to 30% in 2009
– Wiring and harness (2,000); • Minimum wage earners exempt from income tax
– Coconut oil (2,000)
2
Strong banking sector
GIR, Current account balance,
– Banks with exposure to Lehman Brothers and
Merrill Lynch: Banco de Oro Unibank, DBP, 16,000
Remittances ($Mn) 40,000
Metrobank, RCBC, Standard Chartered, Bank of 35,696*
Commerce, UCPB, Security Bank 12,000 CAB Remittances GIR
10,940**
30,000
– Banks’ exposure to Lehman Brothers: $ 386
million, or only 0.3% of total banking assets 8,000
– Capital adequacy ratio (banks’ capital in relation 20,000
to their risks) is 15.49% (2008). 4,000

1,707***
– Non-performing loans (NPL) ratio, once 18% in 10,000

0
2001, down to less than 4%. 2000 2001 2002 2003 2004 2005 2006 2007 2008
– Bank lending continues to expand -4,000 0
Source: BSP; *As of Oct 2008, **Jan-

**Jan-Aug2008, ***Jan-
***Jan-Jun2008
2008 Q4 GDP of Selected Asian Countries

Quote from Agost Bernard,
China 6.8 Associate Director at Standard and Poor’s
Vietnam 5.5
Indonesia 5.2 “Yes, the Philippines is 'lucky' because they have
Philippines made the necessary adjustments and reforms when
4.5
y
Malaysia 0.1 times were still ggood. So theyy are facingg the global
g
Hong Kong market problems and economic slowdown from a
-2.5
S. Korea considerably improved position, compared to what
-3.4
Singapore
they were in 3-4 years ago…
-4.2
Thailand
“The Philippines is an 'island of calm' currently, while
-4.3 there is turmoil in the higher rated and previously
Taiwan
-8.4 stable countries… ”
-10 -8 -6 -4 -2 0 2 4 6 8
3
“The Philippines is inherently strong, a potential Economic Resiliency Plan: Objectives
beneficiary of these financial woes,” Bank of New 1. To ensure sustainable growth, attaining the
York Mellon’s chairman for Asia Pacific, Christopher higher end of the growth targets.
Sturdy, said in an interview (Philippine Daily Inquirer)
2. To save and create as many jobs as possible.
The Philippines is in a relatively strong position to
“The 3. To protect the most vulnerable sectors: the
weather the global downturn with the economy driven poorest of the poor, returning OFWs, and
by private consumption and services, which are less workers in export industries.
vulnerable to external shocks,” JP Morgan said in a 4. To ensure low and stable prices to support
report titled “ASEAN Year Ahead 2009: Philippines consumer spending.
Well-Positioned to Withstand the Downturn.” 5. To enhance competitiveness in preparation for
the global rebound.
Breakdown of the P 330 B Package Two waves of infrastructure
PhP 160 B addition to the budget 2009 P 160 billion budget increment funds this
PhP 40 B corporate and 4,000 – 5,000 small projects in the BESF
individual tax breaks Stress speed
p in job
j creation
PhP 100 B GOCCs, GFIs, private
sector 2010 P 100 billion off-budget funding
Big-ticket items for PPP
PhP 30 B temporary additional
benefits to GSIS/SSS/
PhilHealth members
4
P 160 billion increment P 160 billion increment
Scale up quick-disbursing high impact projects (i.e.,

Award contracts quickly. Take advantage of
labor intensive, high local value added) such as
window of opportunity (i.e., good weather) Construction, Repair, or Rehabilitation of
Irrigation Systems, other local infra like roads,
Realign budget from projects that may be difficult to asphalt overlay, etc.,
implement (i.e., right of way issues, no detailed Spend 60-80% of the productive portion of the
engineering plans) to fast projects Implementing Agencies’ budget in the S1 of 2009
Work with LGUs on infrastructure projects
Periodic review of agency performance by the
Downscale/defer implementation of new projects
Economic Managers
without ICC/NEDA Board approval and/or
difficult to implement immediately
Labor Displacement Asian Crisis Lay-

Lay-offs vs. Global Crisis
as of April 15, 2009
Laid-off OFWs
(6,695) Under flexible working 84,500
hours (52,498 )
58,379
Laid-off domestic
workers (58,379)
Lay-offs from Lay-offs from

Asian Crisis Global Crisis*
As of April 15, 2009

Source: Philippine Overseas Employment Administration
Source: Philippine Overseas Employment Administration
5
Comprehensive Livelihood and Emergency
CLEEP job targets
Employment Programs (CLEEP)
Objectives: • Generate 456,595 jobs
• To hire for emergency employment
• To fund and supervise
p livelihood pprojects
j • Upland
p forest work,, farm to market roads,,
irrigation, fertilizer production, roadside
Activities are aligned to: maintenance, classroom construction, other public
works projects
• Super Region priorities
• Needs of the 12 poorest provinces
• Total cost: P 10.45 billion
• Needs of the 12 most food-poor, provinces, and
the food-poor in NCR
Protecting the most vulnerable OFW Layoffs

Overseas Filipino Workers
Others 7.1%
• 24 x 7 monitoring of overseas labor-market Brunei 2.3%

displacements Macau 2.9%
• Contract monitoring of job orders Canada 3.4%
• Identification and development of new market niches UAE 5.6%
• Redeployment to emerging foreign labor markets Taiwan 78.7%
• Repatriation assistance
• Expansion of livelihood /business formation programs
• Business counseling, strengthening reintegration services
• Massive skills upgrading and retooling services
6
Top Areas Affected
Protecting the most vulnerable by the Global Crisis
Region 4A, mainly
Workers in the export sector 49,613 Laguna and Cavite
• Quick Response Teams (QRTs) in DOLE regional 10,225

Caraga, mainly
offices; maintain early warning system to track Surigao Norte and Sur
struggling
li fifirms
Region 7, mainly
• Job placement facilitation 8,529 Mactan and Mandaue
• Livelihood formation/enhancement
• Assistance in claiming unpaid salaries 6,212 Region 3, mainly
Subic and Clark
• Advocacy for companies to adopt alternatives to lay-offs
• Promotion of non-wage benefits 3,906 National Capital
• Emergency employment Region
*as of February 16, 2009
Protecting the most vulnerable

P 100 billion for large infra projects
Expand social protection programs • Large infrastructure projects, some mentioned in
A. Double budget for conditional cash transfers the 2007 SONA
B. Accelerated Hunger-Mitigation Program
• Longer time frame: after 2009
• Drawn from the master list of the Comprehensive
C Add P 1 B NG contribution to PhilHealth indigent program
C.Add
and Integrated Infrastructure Program (CIIP)
D.Add P 5.66 billion for Training for Work scholarships • More time for public scrutiny; important to stress
E.Hike DOH allocation for primary and secondary hospitals transparency
F.Deploy nurses to underserved areas (NARS program)
G.More student loans
H.Matching grants to LGUs
7
Comprehensive and Integrated
Infrastructure Program (CIIP)
P 30 billion for additional benefits
2008-2010 and beyond
Total investments = PhP 2,006.26 billion
To increase purchasing power
Support to ARCs
Social
Infrastructure
31.88
Relending
Provide additional benefits for PhilHealth, GSIS and SSS
2%
167.91 Programs members for at least 18 months
Communications 8% 36.69
56.49 2%
Transportation
F d taken
Funds k ffrom the
h diff
difference between
b contributions
ib i andd
3%
754.69 claims and benefits.
38%
Water Resources PhilHealth Board of Directors approved on Feb 12 the
347.53
17% revised Inpatient Benefit Package
Results in a 35% increase in annual benefit payments
Power and
Electrification
611.07
30%
Government Spending:
Largest Projects in History
1000
NASA
900
SOME RECENT UPDATES 800
usted)
USD
700
in billions of U
(inflation-adju
600 The New Deal

500
Race to S&L
400 the Crisis
Louisiana
300 Purchase Moon
200 Marshall Plan
100
0
1803 1933 1947 1958 1969 1986
Source: Intel
8
Government Spending: “We have agreed to make available an
additional $850 bn of resources thru the
Largest Projects in History IMF and MDBs…we will ensure availability
of at least $250 billion over the next two
3500 ’09 Rescue
Funds years to support trade finance… ”
3000
– G20 Communique
usted)
USD
2500
in billions of U
(inflation-adju
2000
1500
The
"This could well be a turning point
NASA
1000 New
Deal
Race to S&L
because the authorities got together and
Louisiana
500 Purchase Marshall
Plan
the
Moon
Crisis they have taken the steps.”
0 – George Soros
1803 1933 1947 1958 1969 1986 2009
Source: Intel
US Fed Chief Bernanke tells Congress:

All--Time Low Global Interest Rates
All
recession over by end
end--2009
6 • Economy to bottom out, then turn up later in 2009
5 • US GDP contracts by 6.1% in Q1, but largely due
4
to depletion of inventories.
3
• “As inventories are worked down, then firms will
be able to increase their production to meet what
2
Fed Funds Rate ECB Key Interest Rate looks to be some stabilization in final demand.”
1
• Firms may still be cautious about hiring
0
2003 2004 2005 2006 2007 2008 2009
9
China’s Stimulus Package is Working
Overseas employment holds up
• Stock market up 47% in April from trough in
October 2008 • 15,000 to 20,000 jobs offered in Guam, 60,000 in
• Car sales hit monthly record in March Saudi Arabia, 20,000 in Qatar
• Cement sales of biggest manufacturer up by • Saudi Arabia building 5 mega cities; Filipino
15% workers favored
• New loans of $670 B in Q1 almost as much as • Deployment to the Middle East will push
for whole 2008 remittances higher in the second semester
• Index of entrepreneurs’ confidence up in Q1, • Only 6,695 OFW layoffs so far, compared to
after plunging in Q4 3,000 OFWs deployed per day
Inflation rapidly falling,

will boost personal consumption Stock markets still on the uptrend
14
12.3 12.4
11.8
12 11.4 11.2 Market Lowest Latest % Change
9.9
9.5
Rate (in %)
10
8.3
8
8
7.1 7.3 DJIA 6,547.05 8574.65 30.97
6.4 6.4
(9 March)
M h) (8 May)
M )
Inflation R
6 5.4
4.9 4.8
4
Nikkei 225 7,054.98 9432.83 33.70
(10 March) (8 May)
2
FTSE 100 3,512.10 4462.10 27.05
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr (3 March) (8 May)
2008 2009 PSEi 1,769.67 2265.55 28.02
(16 March) (8 May)
Source: National Statistics Office
10
Exports start to grow again
Job losses here now tapering off
Growth of Merchandise Exports (%)
Month-on- • SEIPI: Electronics industry starting to recover
Year-on-Year Month “We are seeing month-on-month
improvements …it looks like the market has
Oct-08 -14.8 -10.5 bottomed out.
out ” – Arthur Young,
Young SEIPI chair
Nov-08 -11.4 -11.5 • Sec. Roque OF DOLE: 14,000 employees
displaced by the crisis got their jobs back as
Dec-08 -40.3 -23.9 companies started to rehire
Jan-09 -40.6 -6.1 • Sec. Panganiban of NAPC: 75,000 have been
Feb-09 -39.0 -0.2 accepted into the CLEEP
Mar-09 -30.9 15.9 • NLEX Phase 2 C5 to create 100,000 jobs
Layoffs bottom out

Workers Displaced by the Crisis
- Smoking gun of Leave no one behind.

October ’08 4,454
impending recovery:
November ’08 11,116
y
layoffs sharply
p y drop
p
December
b ’08 11 961
11,961
in April
January ’09 10,333 Walang iwanan.
February ’09 10,228
March ’09 14,512
April 1-15 ‘09 1,026
Total 63,630
11
Rosario Bella Guzman
The Global Economic Crisis: A Persepective
from the Civil Society
Guzman is the Executive Editor of IBON Foundation Inc., an independent development institution established in 1978 that pro‐
vides research, education, publications, information work and advocacy support on socioeconomic issues. Her authored book,
"The Global Food Crisis: Hype and Reality" is one of her many writings on socio‐economics. She has given many lectures across
the country and round the globe in support of people’s campaigns and struggles.
6/26/2009
From crisis to crisis

The Global Economic Crisis: A
Perspective from Civil Society  Subprime mortgage crisis – 2007-08
 Fuel and food price crisis – early 2008
 Global financial crisis – late 2008 to today
 Given systemic imbalance between production &
consumption,
ti capital
it l sought
ht profits
fit from:
f
IBON Foundation 1. Cheap labor & raw materials
May 28, 2009 2. Capturing markets for goods
3. Capturing markets for services
+
1. Debt-driven consumption
2. Speculation in finance & commodities
Since 1980s: globalizing the

End of globalization? Philippine economy
1. Stalling global trade  Trade & investment now much larger share of
 World exports 4Q-08 decreased by 20% (Q-o-Q) or 11% (Y-o- domestic economy (as % of GDP)
Y) (c/o WTO)
2. Stalling capital flows (investment/debt)  Trade doubled:
 Worldwide FDI inflows shrank 21% in 2008 to $1.4 trillion (c/o 52% (1980)  95-105% (2005-2007)
UNCTAD)  Foreign investment quadrupled:
 Note: FDI flows to 3W still growing in 2008 albeit by only 4% 4% (1980)  16% (2007)
from a rise of 21% in 2007
 Net private debt and equity flows to 3W will fall from $1 trillion  Record joblessness in last 8 years; 4.1 million
in 2007 (7.7% of GDP) to $530 billion in 2009 (3%) (c/o WB) jobless
 Net private-capital inflows into 3W: $929 billion (2007) halving + 6.6 million underemployed in 2008
to $466 billion (2008)  est. $165 billion 2009 (c/o IIF)
 3W bond market transactions $50 billion in 2Q-08 down to $5  Deep poverty:
billion in 4Q-08
 ODA flat in 2005-07 falling by $20 billion in 2009 (c/o ODI)
 approx 70 million Filipinos live off P110 or less/day
3. Stalling migration  … P18/day in poorest 10% of families
 Remittance flows: $281 billion (2007), $305 billion (2008)  + then for succeeding deciles P28, P36, P44, P54,
est. $290 billion (2009) (c/o WB) P68…
1
6/26/2009
Since 1980s: globalizing the Since 2008: globalized sectors at

Philippine economy greatest risk
 Growing inequality  Internal weaknesses + greater
 Top 20% (3.5 M families) account for 53% of external vulnerability
total family income… poorest 80% (13.9 M  Unprecedented dependence on low
families) divide remaining 47% value-added exports,
p , one-sided foreign
g
 Record economic refugees investment & overseas remittances
 9-10 million OFWs  84% of exports to just 10 countries
 77% of FDI from just US, EU & Japan
 Manufacturing smallest share of economy  88% of remittances from only 10 countries
since 1950s, agriculture smallest in country’s  Source countries all seeing drastically
history slowing or even negative growth
Deepening Philippine crisis Deepening Philippine crisis
1. Drastically slowing economic growth 3. Falling real incomes & worsening

 2008: growth slowed in 60% of economy poverty
 2009: Will fall to less than 3% which is less
than half growth in 2007  2006, at approx P110 or less per person per
2. Worst joblessness in country’s history is rising day:
even further  Poor families – 13.9
13 9 million (official: 4.7
4 7 M)
 2008: 10.7 million unemployed + underemployed  Poor Filipinos – 70 million (official: 27.6 M)
 2009: Could rise to some 12-
12-13 million  2009: Worsening poverty due to
 Of which at least 5 million outright jobless (increase of joblessness and falling incomes
900,000)
 More poor
 Retrenchments, less job creation, deteriorating quality
of jobs  Deeper poverty for already poor
2
6/26/2009
Urgent relief: Give people more of social

services & economic share long denied
Government ‘response’ them
 Pseudo-stimulus/mitigation measures 1. Restore real per capita social services spending

for now… to at least 1997 levels
 Reported plan/package: P330 billion  Additional P205 B (education), P36 B (health) and P5
 P160 B increase in 2009 natl govt (NG) budget B (housing)
 P40 B corporate/individual tax breaks
 P100 B off
off-budget
budget infrastructure fund (GOCCs
(GOCCs, GFI,
GFI private 2. Support consumption:
sector)
 P30 B additional benefits to GSIS/SSS/PhilHealth members • P125 ATB nationwide wage hike, P3,000 increase in
 + Alternative livelihood programs, jobs placement services & government salaries
loans
• Protection against formal/concealed cuts in wages,
 … before returning to “business as salaries & benefits
usual” and globalization policies 3. Remove VAT on food & oil products…
which have supposedly built “sound
fundamentals” • … increase taxes on wealth, luxury goods & services,
unproductive assets & transactions
Urgent relief: Give people more of social

services & economic share long denied
Radical economic reforms: back to
them basics
1. Agrarian reform & agricultural development
4. Shift public spending to labor-intensive & basic
rural infrastructure projects that directly  Land to the tillers, extension & support services
improve people’s livelihoods  Cooperativization & modernization
 Ex. P100 billion not for a few big projects but small 2. Building national industry
irrigation systems, farm-to-market roads and post-  Filipino industry is possible…
h
harvest t facilities
f iliti  .. and essential for jobs, incomes, capital accumulation,
5. Free up public resources: technology & sustainable growth
 Stop debt payments and cancel odious/illegitimate 3. Ensure gains from foreign trade and investment
debt  Protect the Philippine economy
 Crackdown on corruption  Support Filipino agricultural & industrial producers
 Reducing spending on military and war which just 4. Banking, finance and fiscal policy
feeds human rights violations
Resources towards national agricultural, industrial & social
development
Crackdown on wasteful spending & corruption
Oppose financial services liberalization
3
Clarence Pascual
Challenges in MSME Development in a
Global Crisis Situation
Pascual was educated at the UP School of Economics where he gained a Bachelor of Arts Degree (1979‐1983) and subsequently
a Master of Arts (1994‐1996).

He has worked extensively in government and the private sector as a researcher and professional economist. He has conducted
research for local non‐government organizations as well as international organizations including the International Labour Or‐
ganization (ILO), the Asian Development Bank (ADB), and the World Bank.
Recovery and
Reconstruction Some key issues facing the
Philippine
pp economy y and the
Finding Alternatives to the Impact of the impact of the global crisis
Global Financial Crisis
FSSI Public Forum
28 May 2009
Clarence G Pascual
Growth and unemployment in

Labor left behind in last growth cycle
past crises and recovery
 Inability of the economy to create enough Unemployment during crisis and recovery, % of labor force
jobs, let alone quality jobs, lies
11.0 11.0
behind the slow progress in 10.6
10.1
tackling mass poverty and hunger
8.4 86
8.6
1985/1990 1991/1996 1998/2006
1
Unemployment and hunger rates Net job losses in last 2 crises
Asian Crisis, 1997/98
Unemployment and Hunger Rates, SWS Global Crisis, 2008
0 0
40
-50 -50
Thousands
-100 -100
35
-150 -150
Unemployment
-200 -200
30
-250 -250
Jan-08 May-08 Sep-08 Jan-09
Jul-98 Nov-98 Mar-99
2
25 Mfg
Mfg Construction
20
15
Hunger  Mfg employment down to 2.8 M in Jan 2009
10
from 3 M in Oct 2007 or net job loss of 280,000
5
 Net losses of 40,000 in construction and
0
30,000 in finance in Jan 2009
Ja 8
Ja 9
Ja 0
Ja 1
Ja 2
Ja 3
Ja 4
Ja 5
Ja 6
Ja 7
Ja 8
99
00
01
02
03
04
05
06
07
08
09
l-9
l-9
l-0
l-0
l-0
l-0
l-0
l-0
l-0
l-0
l-0
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Source: NSO, LFS various quarters
Dismantling of manufacturing Weak job creation before crisis

 Long-term decline in manufacturing,
Net Job Creation, mfg
a key driver of growth in high performing
Asian economies 200
150
100
Thousands
s
50
0
-50
-100
-150
89
91
93
95
97
99
01
03
05
07
09
19
19
19
19
19
19
20
20
20
20
20
2
Shrinking manufacturing sector Falling investment spending
 Free fall in investment spending
Share of mfg to total employment
since 1997 for unknown reasons
12% constrains future growth prospects
11%
10%
9%
8%
7%
6%
5%
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
Investments, % of GDP Diminishing public social services

25  Squeeze on social services owing to
ill-advised policy to balance the budget
20 exposes poor to risks posed by globalization
15
10
0
2000 2001 2002 2003 2004 2005 2006 2007
Cumulative gap: 35% GDP
3
Social services, % of GDP Lessons
 Short term impacts must be attended to
6
 Welfare impact of job loss can be dramatic
for the displaced worker and family
5
 Deep scars that will take time to heal
4  Lost productive capacity cannot be
replaced overnight
nt
percen
3  Investor confidence takes time to recover

 Labor market lags in terms of recovery
2  Crisis shook confidence on many cherished
beliefs (and silly thoughts) about the economy
1
 Globally, a rethinking of major planks of growth
strategies and economic policy (e.g. export-led
0 growth, finance, regulation, deficits)
2000 2001 2002 2003 2004 2005
Cumulative gap: 7 % GDP
Two principles
 Long-term elements (reconstruction)
embedded in short-term programs (recovery)
Need for a bold program of to achieve impact and sustainability
short-term recoveryy and  Fundamental reversal of direction and
strategy: we must reject the “free-market”
long-term reconstruction policies, esp in their extreme forms
4
Some elements
 A more realistic fiscal policy
that promotes growth and job creation
 Industrial policy that pays attention to
the linkage between industry and
agriculture and producer incentives
agriculture,
 Full employment as the central goal of
development (poverty reduction follows)
5
Jerry Pacturan
Community Experienes:
Sailing Through Rough Times
Pacturan. Jing is the Executive Director of the Philippine Development Assistance Program and Chairperson of the Organic Certi‐
fication Council of the Philippines (OCCP) . He has been at the forefront of rural enterprise development and peace and develop‐
ment for almost twenty years. He initiated and managed a GTZ‐funded country entrepreneurship project of the Department of
Trade and Industry, as well as the World Bank‐funded community based training enterprise development.
Changing Agricultural Context
 Agriculture, a key issue in trade
Social Enterprises in negotiations
Organic Agriculture:
Opportunity to put SA/OA in the development debate, agenda
& priorities of governments & multilaterals; food crisis
Small Farmers  Rise of supermarkets
Response to the New markets, new approaches
Economic Crisis  Preference for healthy foods & organic

products
J.E.Pacturan US$40B organic market; 31 million has. of certified organic
farms; Philippine market of about US$20M
 Food security & hunger reduction

Per FAO halving hunger by 50% in 2015 can’t be met; need to
seek new solutions to address FS & hunger (SA/OA & VC)
PRIME Value Chain & Stakeholders Examples of community

efforts in mainstream
NGAs, LGUs, Academe, NGOs,
Donors, Private Sector
 Policy support; Information;
Technology; Communication
2 Industry Associations +
markets
1 Marketing Corporation
CONSUMERS
FIs/CPs
 Financing for
trading, equipment,
Sells
• Don Bosco Foundation in North &
working capital; South Cotabato
DISTRIBUTORS
 Organic & Conventional Rice
production
Trades
BDS (NGOs)
 Capacity bldg for
technology,
organizational &
LMCs • Sultan Kudarat Muscovado
enterprise devt
Trades
Farmers & Millers Corporation
 Muscovado Sugar
MEs
Trades
• Pecuaria Development
Cooperative in Camarines Sur
 Organic Rice
Farmers
1
Don Bosco - Bios Pecuaria Coop Snapshot (6years growth)
Indicators Year 2002 Year 2008
Dynamis Coop Area Planted to Organic 55.5 262
Rice (in hectares)
• Sales composition: 60% OR, 40% CR No. of farmers involved in 37 100
OR
Productivity or yield per 60 sacks 90 sacks
• Increasing annual sales from P27M in hectare
2007 (8mths); P54M in 2008; projected Total production cost per
hectare* P 20,000 P24,978
P64M in 2009 Farmgate price per kilo P 20 P 35
UMFI buying price per kilo P 25 P 35
• 2.2 % net income in 2007 & 3.8% in No. out outlets/buyers in
Metro Manila
Selected SM Supermarkets,
Shopwise,
All SM Supermarket
All Rustan’s Supermarket
2008 All Ever Supermarket
All Shopwise
Sh i SSupermarket
k t
All Robinson Supermarket
• OR production cost per hectare All South Supermarket
averages P17k compared to P35k for All Puregold Supermarket
CR All ROB Supermarket
All CVC Supermarket
All Tropical Convenience
• OR retail price is higher at P34-40/kg. Store
All Walter Mart
compared to P31-35/kg. for CR
Local market Selected outlets of All Robertson
• OR gross profit margin of 10% Robertson Supermarket;
Liberty Commercial Center;
Supermarkets; Liberty
Commercial Center; other
compared to CR 1% other institutional buyers institutional buyers
Farmer’s income (per ha.) P 16,000.00 P 26,718.00
• Distribution channel through local Coop Sales from OR
Coop Net Income from OR
P 1.7 M
( P .533 M )
P 14.7 M
P 1M
shops ensures faster sales turn-over *Bulk of the costs are land preparation, transplanting, post-harvest (harvesting, threshing) and irrigation
Pecuaria Cooperative SKMFMC

• P7M sales in 2007; P14M in 2008 due to •Muscovado yield of 6.5tons/ha. or P195k
expansion outside of estate gross sales/ha.; with mill rental of 48k; net
• Jan-March ’09 sales is 40% only of sales is 147k; less prod’n cost 35k, farmer owner
of same period last year; temporary slump makes 112k
in demand in Metro Manila market
•300% increase in farmgate price within 4
• Manila market in previous years is 75% of years (P14/kg in 2005 to P40/kg in 2009)
OR sales; 25% local/Bicol sales
•P9M sales in 2007; P5M sales in 2008;
• iin 2009
2009, market
k t expansion
i & P18M sales
l projected
j d in
i 2009 (slump in sales
diversification will be carried out in  due to conflict last year & climate change)
local/Bicol, Visayas & Mindanao
•Sales in malls continue to increase
• From ABC to BCD market
• ABC consumer market is 540,000 HH with
• Diversification into organic fertilizer will fill- 20kg annual HH consumption or about
in the drop in OR sales; from P3M OF 756M (@70/kg); grows 5-10% per annum
sales in 2008, projected is P6M in 2009
•Diverse market for MS
• ABC consumer market for OR is  households
160,000HH @ ave. of 225kg/HH/year =  industries
1.44B (@ P40/kg)  export
2
Some Key Lessons &
Implications Product/Market Development
• Organic agriculture offers low production Strategy Formulation Framework
cost & attractive market prices
Same Product Same Product
Same Market Different Market
• Crop/product diversification boosts incomes
at HH & coop levels Penetration Market
Development
• Product-market development &
diversification; market for OR commodities is Different Product Different Product
largely untapped Same Market Different market
• Industry-oriented using VC approach Product Diversification

Development
From the PDAP family…

Daghang salamat!
Maraming salamat!
Thank you!
3
Loreta Rafisura
MSME Sector: Surviving in a Period of Crisis
Rafisura is founder and director of Salay Handmade Paper, a family‐owned business that started in 1987 with the objective of
providing a sustainable livelihood for the people in the local area. It makes its paper out of cogon grass – a weed that grows
naturally among the crops.

She Also founded the non‐governmental organization People’s Economic Council that seeks to provide steady employment to
the inhabitants of Mindanao. Ms Rafisura also continues to be an active member of the local chamber and the Philippine Fair
Trade Movement.
6/26/2009
WEBSITE
www.salayhandmade.net
Fair Trade & Non-Fair Trade Booked Sales
 Little Money
Non-FT Org.
27.89%
 Ignorance and rural naiveté
 No plan
FTOrg.
 No technology and
72.11%
 A cancer survivor leader
1
6/26/2009
Everyday prayer at 3:00 o’clock in the afternoon
Flexible MANAGEMENT
BY HEART!
2
6/26/2009
PhilCom provided SHAPII with a

telephone line since about 12 years ago.
DTI
Guardians
DOST
of the Earth
SHAPII
TTV-Canada DENR
3
6/26/2009
Foreign Exchange
Took us long to get

50.00
49.03 1. USD : PHP ( 2007 )
48.53 48.53
48.00
47.90
46.96
steady on our feet…
46.00
46.34
45.70
46.24 46.19
But in the meantime,
44.35
we relied on
PRAYERS
44.00
43.26
42.00
40.71
40.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
We listened to our
partners and the
government agencies
and learned from our
readings.
4
6/26/2009
5
6/26/2009
Labor and Management seek to harmoniously

work on this together
MORE focused on the
BUSINESS and
LESS on our
SOCIAL FUNCTIONS
So we will SURVIVE
Mechanization Diversification
Hog Grower Program to all
interested employees who has
their own pig pen
“Sweet Camote”
for sale to all
workers
6
6/26/2009
Just try to do your

best and
God will do the rest!
Thank you
y so much….
7
Lydia Canalija
Cooperatives Amidst Economic Crisis

Canalija is a development educator and consultant specializing in cooperative management and enterprise development. In the
last 15 years, she has been working within national development organizations, foundations, cooperatives, and government in‐
stitutions in the Philippines and in other countries in Asia. Her expertise includes institutional strengthening of financial opera‐
tions and systems development, as well as development of savings and loan products,among cooperatives. She is on the Board
of Directors of the Visayas Cooperative Central Fund Federation and currently the manager of LIPI Employees Multi‐Purpose Co‐
operative.
Milo Tanchuling
Finding Alternatives and Solutions
Tanchuling is the Chairperson is the Foundation for Sustainable Society, Inc (FSSI) ‐ an eco‐enterprise resource institute that ca‐
ters to the sustainable economic development of poor communities in the Philippines.

He has also been the Secretary General of the Freedom from Debt Coalition (FDC) since 2005 and has been an elected member
of its Board of Trustees since 1998. He is also an active member of the Regional Committee of the Jubilee South‐Asia Pacific
Movement on Debt and Development (JS‐APMDD). He also presently seats in the NGO Council of the Philippine National Anti‐
Poverty Commission (NAPC).

He has an extensive experience in rural democratization and development work. His earlier field work in community develop‐
ment was in the rural communities of the Province of Bulacan. He continued his work with the peasant sector and rural commu‐
nities during his stint with the Philippine Peasant Institute from 1983‐1996 and the Philippine Network of Rural Development
Institutes (PhilNet‐RDI) from 1996‐2005.

He has a degree in community development at the Institute of Social Work and Community Development (now the College of
Social Work and Community Development) in the University of the Philippines.
Alicia V. Euseñia
Reactor from the Government Sector

Eusenia is the Regional Director of the Department of Trade and Industry. She was represented by DTI Assist. Regional Director
Linda Ong Boniad.
Sylvia O. Paraguya
Reactor from the Cooperative Sector

Paraguya is the Chief Executive Officer of MASS‐SPECC Cooperative Development Center. A chemical engineer, she has chosen
to focus on development work after her two‐year masters in business management course at the Asian Institute of Manage‐
ment and a six‐month stint at the World Trade Center Manila.
Dina Anitan
Reactor from the Women Sector

Anita is the Regional Coordinator of WAND Northern Mindanao and is the acting Executive Director of Touch Foundation, Inc,
an NGO operating in northwestern Mindanao with focus on natural resource management, human resource development and
agrarian and aquatic reform. She is also the chair of Pilipina‐CDO.
Noel M. Nalzaro
Reactor from the Private Sector
Nalzaro is the Vice‐Presiden of the Philippine National Bank for Mindanao Commercial Leadership Centers Division. He finished a
bachelor’s degree in Business Administration at Silliman University and MBA at De La Salle University. He passed the CPA board
examinations and is a past trustee of Oro Chamber.
Rodolfo Meñes
Reactor from the Private Sector
Menes, and President of the Oro Chamber ‐‐ the First Hall of Fame Most Outstanding Chamber of the Philippines. He is also Vice
‐President and General Manager of Pueblo de Oro Development Corporation.

MSME Development and The Financial Crisis

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MSME Development and The Financial Crisis

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FORUM SERIES

Program / Format Guest / Topic Date

Finding Alternatives to the Impact of the Global

08:00- 09:00 am REGISTRATION

09:00–09:30 am Opening Ceremony/Forum Introduction

FSSI PHTO EXHIBIT

PANEL 1: Understanding the Impacts of the Crisis

09:30-09:55am PRESENTATION 1: The Global Economic Crisis: Asian Context and

09:55-10:20am PRESENTATION 2: The Global Economic Crisis: Assessment &

10:45-11:10am PRESENTATION 4: Challenges in MSME Development in a Global

11:00-12:00nn OPEN FORUM

01:30-02:20pm PANEL 2: SHARING OF LOCAL EXPERIENCES

PRESENTATION 5:: Community Experiences: Sailing Through Rough

PRESENTATION 6: LGU Initiatives: Local Response to Global

FSSI PHTO EXHIBIT

PRESENTATION 8: Cooperatives Amidst Economic Crisis

02:20-02:50pm PRESENTATION 9: Finding Alternatives and Solutions

FSSI PHOTO EXHIBIT

03:40-04:15 pm OPEN FORUM/COFFEE BREAK

The Current Global • Latest US boom in 2004-7 spurred by

Hard Landing to Global Imbalances in the

Forum on Seeking Alternatives to the

The Current Global and Economic

Forum on Seeking Alternatives to the

The securitization of loan assets especially mortgage loans

Forum on Seeking Alternatives to the

• The issuer of the mortgage-backed securities (MBS) or

• Securitization of the loan assets made the crisis deeper with

Forum on Seeking Alternatives to the

• Part of the answer is leverage. • Part of the answer is counterparty risk.

The Deepening and Spreading of the US

Forum on Seeking Alternatives to the

• Iceland suffered financial, economic and currency collapse

The Deepening and Spreading of the US Market Failures

Forum on Seeking Alternatives to the

Forum on Seeking Alternatives to the

Responses of the US: Monetary and

Forum on Seeking Alternatives to the

• Other developed and developing countries

lenders – But it did get countries to calling for a rejection of protectionism

Forum on Seeking Alternatives to the

Forum on Seeking Alternatives to the

Forum on Finding Alternatives to the

Banks are generally in good shape for now: Data from

Exposure of some Asian banks to US

Forum on Finding Alternatives to the

Stock Price Indexes

finance losses in their financial institutions 300 BSE 100

– Stock shares and sovereign bonds also dumped by 200

domestic investors as their confidence plummeted as

Financial Markets in Asian Less Bank-Dependent

• Stock and sovereign bond market declines

Forum on Finding Alternatives to the

• Sharp currency depreciations for the Asian economies

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External funding expected to tighten

Results of Asian Crisis: East Asian economies, except

Vulnerabilities in the Real

Sector and Fiscal Sector 45.0

30.0 Korea, Rep.

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With lower investment rates (except in PRC),

• Lower investment rates is compensated by • Asia’s high dependence on trade and