Thursday, 26 February 2009

Reality and the experts

John Mangun
Business Mirror

From December 18, 2008: “The current crisis is going to be solved like all crises: one person, one family, one community at a time. That is, as long as government does not make it worse and government does help out a little and in a constructive way. The latest world doom machine is the financial crisis. And it is not going to happen.”

I know what you’re thinking: Who am I to disagree with the International Monetary Fund (IMF), World Bank and all the top economists? These people are all experts talking about the United States and Philippine economies. I mean, I spend most of my working day sitting in front of the computer wearing a pair of jogging pants and an old Boracay T-shirt. House slippers are optional.

We have studies, report and analyses all saying the same thing about the Philippines. For example, overseas Filipino remittances are going to go flat or worse because the number of overseas workers is going to drop like a rock due to the bad global economy.

I know that workers and remittances are an important issue. Thousands of jobs have been lost in the United States in the financial and construction industries. Sure, there are probably some, maybe even many Filipinos who work in those sectors. But the bulk of US remittances comes from school teachers, nurses, IT people and the like who are not going to lose their jobs.

But this is just the beginning, we are told. Just wait until the full force of the economic disaster reaches our shores like some giant tsunami that takes days or weeks or months to travel this far. You might think, though, that after nearly nine months of gloom and doom, something bad ought to be happening even now.

Philippine Overseas Employment Administration (POEA) Administrator Jennifer Manalili reported the number of Filipinos going abroad to work this past January was 25 percent higher from a year earlier, “As of end-January, we have deployed 165,000, and that’s higher than last year, and also considering that there is crisis.” And the POEA still has 400,000 unfilled job offers. I particularly like this quote from the Inquirer: “She [Manalili] said the data was the opposite of what the government had expected.” Reality different from what the experts predict? I am shocked and amazed.

I think remittances are going to grow at least as much as in 2008. Suppose you are a Filipino nurse working in Chicago. Two years ago, your extra cash might have been able to buy a car or a condo. Not necessarily in 2009. So what do you do? Send that money and maybe more money home to RP.

If a person listens to and believes what he hears all the time, then he/she might act according to all the gloom-and-doom prediction. If there are not going to be any overseas jobs available, why would any potential employee even try to apply? I think people are smarter than the “experts.” The “dumb average citizen” just does what he thinks is right even if the smart guys are telling him he is wrong.

In the United States, the biggest “gloom and doomer” is President Obama. From Reuters: “Since he took power on January 20, Obama’s rhetoric had taken a turn into grim territory, with bleak warnings that the damage to the US economy may be irreversible and that a catastrophe lay just around the corner.”

Except, while Obama is yelling the sky is falling, the Conference Board’s index of leading US economic indicators has risen for two months in a row. But that is not all. Existing home sales rose in December. Pending home sales went up in December.

New orders for consumer and nonmilitary capital goods went up in January. The index of manufacturing went up last month. The index of services rose last month for the second month in a row. Hourly earnings rose 4.5 percent in December following a 3.3-percent increase in November. Money and investment are starting to move gain, with corporate-bond markets thawing out as $127 billion in dollar-denominated debt was issued in January, the most for any month since May 2008.

Amid all the negative talk, Americans are starting to realize that 92 percent of the work force has jobs. While the housing sector is badly hit, 95 percent of all homeowners are paying their mortgage amortization every month.

Here, too, those with a negative mindset are still preaching the end of the economic world, but events are changing the reality. From a local economic expert writing yesterday: “Filipino seamen, about one-fourth of overseas Filipino workers, are extremely vulnerable. There has been a sharp decline in world trade.” I cannot argue with that. Except the Baltic Dry Index, which measures the cost of shipping key raw materials like copper, steel and iron, has more than doubled from its recent lows. That means, gradually, demand for ships to carry cargo is increasing, pushing lease prices to double what they were at the bottom only a few months ago. This brightens the outlook for all economies, including ours.

Yes, the government needs to target and immediately financially assist certain industries that are under severe pressure. Small industries such as furniture exporters must be subsidized, absolutely without any delay. The numbers coming from the Cebu Furniture Industries Foundation are devastating. The Philippines needs a few billion pesos invested properly in this economy right now. Not a few hundred billion pesos in Obama-size pork through the rest of the year.

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