Tuesday, 24 February 2009

Selling umbrellas

John Mangun
The Business Mirror

You have much more important things to do than following what is going on with the world economy. Keeping your wife or husband happy, taking care of your kids’ future, even feeding the family dog is a higher priority. But there is a lot going on that will affect your life and country.

Every time I say that the Philippine economy is in pretty good shape, with a positive outlook, I get these e-mails accusing me of being a mouthpiece for the Arroyo administration.

Let me tell you this. I wish I was the President’s mouthpiece. I would probably make a lot more money, and the Philippine government badly needs an economic spokesperson. Most government officials sound and look like scared schoolgirls about to cry (or worse) every time someone asks them a question about the economy.

But I cannot blame them since the questions they have to answer are based on sometimes silly and inaccurate economic analyses.

You see, there are a lot of bad things going on out there. By that, I mean outside the Philippines. When government economic leaders are asked “serious” questions, the seriousness of those questions is in real doubt. Take overseas Filipino workers (OFWs).

The Department of Labor says that as of January 30, the number of OFWs laid off has reached 5,404 since October 2008; 80 percent are from Taiwan. So then, the questions come about that subject with some wailing and whining.

Five thousand lost jobs are serious to those individuals but, realistically, it means little to the nation overall.

I would like to know the opinion of the economic leaders of a country of 90 million people what they think about Japan, for example.

Japan’s economy is now shrinking at an annual rate of more than 12 percent. This is an absolutely staggering figure. This means that 15 years of economic growth is potentially going to be wiped out in 2009. Imagine your personal net worth, cars, home value, bank accounts; they are suddenly reduced back to the level they were in 1994. This is an incredible story that is all but ignored by our press.

I want to know what the National Economic and Development Authority, Department of Finance and others think on its implications for the Philippines. As the second-largest economy in the world, I am curious if maybe there might be some impact on the Philippines, as Japan is also our second-largest trading partner. We gained about $750 million net from Japan last year through employment and exports, and I think that is more important to the economy than the 5,000 laid-off OFWs in Taiwan.

Has anybody in the government crunched the numbers on what a 12-percent contraction in the Japanese economy might mean to us? Our “askers” never think to ask.

Japan is an economic disaster that is growing into a catastrophe. Having said that, here is an opportunity. The potential of the Philippines becoming the No. 1 outsourcing hub for Japanese companies is huge. Japanese companies are surging into outsourcing their customer service. Did you know that there are more than 10,000 Filipinos studying Japanese in our local schools right now? There are some 50 Japanese companies now outsourcing to the Philippines. There could be 500 if we do something about it.

If Japan is a disaster, then Europe is disintegrating. An internal European Commission report says European banks may require a $20-trillion, with a capital “T,” bailout. That is more money than the total annual gross domestic product of the US.

Why am I telling you all these? Because too many “experts” are saying that what this means is that we should run and stay in a cave on Mount Makiling until the financial storm passes. Total, total nonsense. You want to get rich during a storm? Sell umbrellas. The bigger the storm, the more umbrellas you sell.

The Philippine Stock Exchange (PSE) spent a ton of money trying to bring investors to the Philippines when the New York market was at 8,000 on its way to 14,000, and when no one needed the Philippines. You think maybe right now global investors might be looking for a better alternative than a Dow Jones sinking below 8,000, and might be looking for a stock market where companies aren’t going broke, still making profits and stocks are cheap? So why aren’t we shouting that in the foreigners’ ears every waking minute?

Global interest rates are at historic lows like since 200 years ago, and banks are failing faster than can be counted. In the Philippines, you can actually make profit buying a local bank time deposit and the bank will not go out of business. Or how about Philippine bonds from a government that is not begging the world to buy its debt like the US, and then paying nearly zero interest?

It might be nice if Congress would spend as much time writing 21st-century laws that would make it easier for foreigners to invest in our financial markets as it is spending time on other things. I can open a stock-trading account for the London stock market online with a credit card. To invest on the PSE, a foreigner living abroad needs to hassle through at least two Federal Express deliveries to trade our market.

At the end of World War II, the Netherlands was destroyed. That first winter, tens of thousands succumbed to starvation and cold. One man picked up his ax, chopped down a tree and made coffins to sell to those who huddled inside, dying and waiting for the bad times to pass before they would get moving.

PSE stock-market information and technical-analysis tools were provided by CitisecOnline.com Inc. E-mail comments to mangun@email.com.

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