MANILA Philippines — The United States’ biggest pension fund gave a thumbs up to its continued investment in the Philippines.

In a press statement issued from Washington D.C. on Feb. 2 Albert del Rosario Philippine Ambassador to the U.S. announced that the Philippines was given a score of 2.13 by Wiltshire Associates — the consulting firm of the California Public Employees Retirement System. “This not only maintains the Philippines as a permissible investment destination for CalPERS but also improves its standing compared to other markets ” he said.

The news was met with cheers from the country’s economic managers and pushed the local currency to a three-year high of 51.91 to the U.S. dollar the following day.

CalPERS is the biggest U.S. pension fund with an investment portfolio estimated at $194 billion. It is a recognized leader in the international investment community and wooed by countries and fund managers for its funds.

According to the Philippine Embassy in Washington D.C. the Philippines score was the highest ever achieved by the country which in 2005 got a score of 2.00. This year’s score improved the country’s ranking among 26 other emerging markets pushing it four notches higher from its No. 18 rank in 2005. The new ranking means CalPERS will choose to put more money in the Philippines ahead of other major investment areas such as Malaysia China Russia and India.

The pension fund’s list of permissible investment destinations is based on the review and recommendations made by its consulting firm Wiltshire Associates every year. To ensure a place on CalPERS’ investment list a country must earn at least two points on a three-point scale.

Amando Tetangco Jr. governor of the Philippine Central Bank told the Journal “[The CalPERS’ decision] is a recognition of the country’s improving macroeconomic fundamentals and commitment to sustained fiscal and other economic reforms. This should encourage other foreign investors aside from CalPERS to take a stake in the Philippines.”

Margarito Teves secretary of finance of the Philippines likewise hailed the good news and said “This is a chance for foreign direct investments to increase in the Philippines as we cannot just rely on government [finances].”

Lower import tariffs reduced the tax collection effort of the Philippine government pushing it to source ways and means to narrow its budget deficit.

“I hope we can sustain this positive development ” Teves said of the CalPERS’ decision. “As you know 2006 is a crucial year. If we can hurdle 2006 … bring down the [budget] deficit to P125 billion and attain a growth of 5-7% [we will be okay]. For the poor to be immediate beneficiaries [of our economic reforms] we have to attain [a growth] of at least 7% ” he said in an exclusive interview with the Journal.

The CalPERS news came on the heels of the government’s announcement that the economy grew by 5.1% in 2005. The budget gap amounted to 146.5 billion pesos ($2.82 billion) in 2005 lower than the official ceiling of 180 billion pesos ($3.46 billion) and the previous year’s 187.1 billion pesos ($3.6 billion).

Among the economic reforms being pushed by the Arroyo government is the value-added tax a sales tax which on Feb. 1 was raised to 12% from the 10% rate imposed on most goods and services last November. The higher VAT covers medical consultations and treatments favored by Guamanians who travel to the Philippines.

While most Filipino consumers consider the VAT increase an additional burden the government considers it necessary medicine to treat the government’s poor financial shape. “We have already proven that we can bite the bullet for the sake of the economy and the whole world is looking upon us to fully implement our fiscal and economic reforms ” Ignacio Bunye Jr. press secretary to the president told a press conference on Jan. 31.

Teves said to counter the immediate ill effects from the higher VAT rate such as increased consumer prices and slower spending the government will be “pump priming” the economy allotting some 35 billion pesos ($673.08 million) to mostly infrastructure projects. “If we can have quality spending on basic services social services and infrastructure this would generate employment people will have more income and spend more…. We will (invest) in projects to (increase) food supply to dampen inflationary pressures … ” he told the Journal.

He added that 30% of the VAT proceeds would be allotted specifically for the pump-priming activities.

In his press statement Ambassador del Rosario said “Despite recent political controversies the Philippine economy continues to make significant strides under the president’s leadership. The peso was the best performing currency for 2005. Foreign investment in the Philippines has remained robust. Our equities market was the best performer in Southeast Asia. Our inflation is still single- digit despite soaring oil prices.”

In 2003 the Philippines was removed from CalPERS’ list of “permissive emerging equity markets” after Wiltshire Associates gave the country failing grades on political stability its legal system lack of adequate market regulation and measures to protect investors.

A sustained campaign by del Rosario and key leaders in the Filipino-American community in the U.S. making presentations to CalPERS’ board of directors and its consulting firm allowed the Philippines to be partially reinstated on the fund’s investment list in 2004. The Philippines was reinstated and placed back on the list in 2005.

In 2005 foreign direct investments in the Philippines reached $933 million from January to September up 45% from $642 million the same period in 2004. MBJ