Thursday, 6 August 2009

The next Philippine president is not prepared

Outside the Box
John Mangun
Business Mirror

THE image that I keep of Cory Aquino is one of the late President at the New York Stock Exchange on November 8, 1989. Her appearance on the trading floor marked the launching of First Philippine Fund Inc.

This closed-end mutual fund traded at $13.75. The total value of traded shares of the fund that day was $12.7 million. As a side note, First Philippine Fund was liquidated in 2003 for a total value of less than $25 million.

As it turned out, investing in the Philippines in 1989 made great sense; investing in the fund was a financial disaster.

As a visiting head of state off to see then-US President George H. W. Bush, going to the stock exchange to ring the opening bell in celebration of the launching of the Philippine Fund was appropriate. Having the President of the Philippines mingle on the trading floor with brokers was disrespectful to her and showed poor judgment on the part of Mrs. Aquino’s advisors.

Looking back on the events that brought President Aquino to the highest position of political power in the country, her ascent not only replaced Ferdinand Marcos, but brought down the government. I doubt that on February 25, 1986, anyone believed this was anything more than a transfer of power. But in fact, it was first the destruction of virtually the entire Philippine government and then the rebuilding of that government.

It was not that the faces had changed but that also there was little left of the traditional institutions of what we call a “government.” President Aquino began her term with very little left of the “infrastructure” of government. People honor her for having restored democracy to the Philippines. In my opinion, in a sense, that task was easy in comparison to her having to create a government from what amounted to the ashes of Edsa.

The government is not all about political power but the power of the public sector to protect and deliver vital services to the people.

Cory Aquino was constantly criticized for not being politically astute. That may have been true and was probably a good thing. The Philippines, at that time, did not need a politician. The Philippines needed a “housewife.” You see, housewives and mothers are the ones with the ability and capacity to prepare food, bathe the children and keep the family safely together when the typhoon has knocked out the electricity, the roof is leaking and the floodwaters are threatening at the front door of the house.

Her advisors were ready to assume the political power of the government but only Cory Aquino was ready to restore the functions of the government. For that, the Philippines cannot honor her memory enough.

I fear, though, that similar to President Aquino’s advisors’ lack of preparedness, those who have expressed the desire to be the next president of the Philippines are not ready for anything more than to assume political power as opposed to managing the government and the country.

As the signs were clear in 2008 that there were fundamental economic changes ahead in the US that required bold and creative thinking, now also 2010 and beyond looks even more eventful globally, requiring more creativity.

Make no mistake. The Obama administration is not creative. Its policies are a replay of strategies that did not work in the 1930s, the 1970s or the 1990s. The only difference is the current scope and size of past policy failures of government spending and government economic control. Their idea is that if a little government debt and economic control did not work successfully in the past, maybe massive government debt and control will work now. It will not.

As attention yesterday was focused on the Aquino interment, two business stories were ignored. Philippine Long Distance Telephone Co. reported that its second-quarter 2009 net income rose an astonishing 15 percent. Further, Philippine inflation fell to 0.2 percent in July, the lowest level since 1987. Put these together and consider that 22 years ago, inflation was so low because the economy was comparatively so bad.

Corporate-profit growth combined with very low inflation creates a wealth-building scenario perhaps unprecedented in Philippine history. But how is that going to be accomplished?

The point is you cannot apply past policies to a world that has changed so much. And from what I read, none of the presidential aspirants have a single new economic idea to deal with a radically changed economic environment here and abroad.

What ideas have been offered to deal with a world economy where the US role is significantly reduced? How does the next president suggest the Philippines handle foreign investment that triples, not declines, as cash rapidly flows to emerging economies? Any ideas from the presidential wannabes that, if high inflation starts in the US, reducing purchasing power for millions of American retirees desperate for a safe haven, how we can benefit?

The one who wants to be ready to lead the Philippines in 2010 should already have formed a team of practical economic thinkers to prepare realistic scenarios and creative responses to those scenarios to make this economy stronger. Business-as-usual politically inspired thinking will not work in 2010 and the Philippines will miss perhaps the greatest opportunity in its economic history.

2010 may ultimately be the most important transfer of authority of government in the Philippines on the same scale as when Cory Aquino stood inside Club Filipino in 1986. The Philippines was never the same and, I believe, it well could be true again.

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