Tuesday, 19 January 2010

P150 coffee causes bad thinking

John Mangun
Outside the Box
Business Mirror

It is an issue that I have complained about for many years: economic analysis done from the coffee shop of a five-star hotel. When you are discussing the Philippine economy while drinking a P150 cup of coffee and eating a P200 doughnut, just maybe, you do not have a clear perception of what is going on in the real world.

It is sort of like the politician driving through the streets of Metro Manila with two police motorcycle escorts up front and two more in the rear mentioning that he doesn’t think traffic congestion is a big problem in the city.

In this case, however, that coffee-and-doughnut conversation, for some reason, usually leads to the conclusion that all is bad and probably getting worse.

Viewing and analyzing the Philippine economy requires both a peek inside the five-star coffee shop but also at the local carinderia. You cannot get the big picture without looking at both ends of the economic spectrum. In addition, there are many more street-side eateries than places that serve P100 coffee, and the people who patronize these little establishments add more to the economy than those in the coffee shops.

Banking giant—which may not be a compliment these days—HSBC says the Philippine economy will have the slowest growth of any of our Southeast Asian neighbors.

From HSBC’s Macro Asian Economics First Quarter 2010 report entitled “They say it may get bumpy”: “A crucial harbinger of the current state of the economy is fragile exports, which is projected to contract 21 percent in 2009 and may recover only gradually, given sluggish consumer demand in the West.” By contrast, Thailand, Taiwan, Singapore and Malaysia are all expected to do better. That will probably be true. But the analysis is faulty since all of those countries are more dependent on exports for growth than the Philippines. The analysis does not make sense.

Further, all those nations went into recession in 2009, so of course, any comparative grown in 2010 will look enormous considering where they came from in 2009.

I am firmly convinced that there is a universal mindset among the “experts,” both local and foreign, that is the same as Floyd Mayweather Jr. who cannot believe or accept that Pacquiao is the best. The economic experts just cannot believe or accept that the Philippines can achieve any level of economic success.

The comments from the experts in the newspapers seem not to connect with the real world in the articles right next to their bashing the Philippines. While the commentary says “No investments for the Philippines,” the articles say things like “Kuwait’s Al-Mal Investment Co. said it has bid for a tender to develop an airport in the Philippines, valued at about $1.2 billion.” Or “Foreign-portfolio investments yielded a net inflow of $388 million in 2009, a reversal of the $1.8-billion net outflow recorded in the previous year, according to the Bangko Sentral ng Pilipinas.”

But the disconnect reaches much farther down into the economy in stories that will never reach the business pages.

There is a large outsourcing zone in Muntinlupa called North Gate. In fact that is where HSBC does its customer-service business, along with several other multinational companies, employing thousands of Filipinos in jobs that did not exist five years ago.

I was talking to a taxi driver the other morning at about 1 a.m. He had just dropped off a call-center employee who was starting his workday. The driver mentioned that at this time, he and all other cab drivers charge two or even three times the metered rate to bring these employees to work. Business from these employees is so active and profitable that he has changed his shift to work only nights to service the call-center personnel. Further, the man who owns the taxi intends to buy one more unit, again to service this nighttime trade.

Buses and shuttles arrive 24/7 at the Mall of Asia also to service call-center agents. This is business that did not exist a few years ago, never mentioned by the experts and is not affected by politics, corruption, peace and order and all of the other negatives that the experts cite as a reason for the Philippines being the last place on earth to make any money.

The experts also seem to want to ignore the macroeconomic issues that they should be aware of, showing the activity occurring every day in this country. From Malaya.com.ph: “The Bangko Sentral ng Pilipinas reported last Friday that the Chinese renminbi or Chinese yuan (CNY) transactions of Philippine banks have been growing rapidly. The settlement bank for renminbi banknotes trading in the Philippines posted remarkable expansion of CNY-denominated assets from CNY 0.5 million as of December 2008 to CNY 174.6 million at the end of 2009.”

This is a significant story as this is money coming in from China, not going out to buy imports. Further, “Five local banks launched their renminbi deposit products in the last quarter of 2009.”

Despite what you read in the newspapers, 2010 is going to be a very positive year economically for the Philippines. The stock market is going to boom again. Foreign investment is going to dramatically increase. Hopefully the people will finally elect a president who understands the needs of business and the economy, and more important, the proper relationship between government and the private sector that can produce positive results.

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