Thursday, 27 May 2010

The troubles that are not the Philippines’

Written by John Mangun
Outside the Box
Business Mirror

If we had any common sense as did our forefathers, the hot days of this prolonged dry season should slow us down.

But this is the 21st century, when everyone is wired to the world 24/7 and no one takes a break. A stranger might think, though, that a country like the Philippines—stuck in the middle of the ocean and physically separated so far from the rest of the world—might have a different outlook on life.

In fact, we should. So little that happens in the rest of the world comes close to touching these islands. Yet there seems to be the overwhelming—and I think a little psychotic—need to feel part of the bigger global picture, especially when it comes to negative events and situations.

A local commentator talked about the situation on the Korean peninsula the other day. From the drama and fear in the words that were used, you might think that he was talking about a running gun battle taking place a few streets away. Except for the few thousand Filipinos in South Korea, from a realistic standpoint, who cares?

Another says that the Philippines faces a large political and social risk. Why? Look at what is happening in Thailand. Thai protesters closed the central business district for a month and ended by burning down Thailand’s largest department store because a prime minister was ousted for corruption. If I remember correctly, the same thing happened in the Philippines 10 years ago. Except that after the protest, Filipinos went to Shoemart to shop, not to set it on fire.

I have written extensively these last weeks about the global financial markets. In truth, it is only an interesting intellectual exercise, because my analysis is that the worst-case scenario if the whole thing falls apart is relatively neutral for the Philippines.

The local stock market is performing badly. Yet every single comment and analysis you read about why local stocks and the peso are going down talks only about things happening half a world away, with no thought as to why these events have anything at all to do with the Philippines.

Our banking system is virtually uninvolved, not holding any of the bad debts of Europe. A comment about crashing European economies hurting our exports cannot even quantify the effect because exports are such a small part of the Philippine economy. All the conversation that we heard last year about thousands of overseas workers being sent home was so wrong that no one even mentions it anymore. It is hard to say it when overseas-worker remittances keep hitting records month after month.

The local financial press gives blow-by-blow coverage and analysis of the falling stock markets in New York and Europe as if it was important to the Philippines. You know what? I really do not care if they closed all those stock exchanges. Not one centavo of my wealth depends on what happens on those stock markets, and that is true for 99.9 percent of all Filipinos. How about you and your wealth?

The US dollar rises against the dying euro, and locals rush to sell pesos. Eventually, they will regret it. But in the meantime, crude-oil prices are falling like a rock, bringing local gasoline prices down. Yet we cannot take full advantage of the oil-price drop because some people here are betting on the US economy and currency, instead of putting their faith in the Philippines. I really wish these people would take their dollars and move to the US. They would probably be happier, and the Philippines would probably be better off.

While the local press is filled with stories from the West, what is not mentioned at all is what is happening, the good things that are happening in the Philippines.

The largest single foreign investment in the history of the Philippines is ready to come together. Now you would think that would be front-page news, told over and over again. Xstrata Copper, headquartered in Brisbane, Australia, is going to invest $5.2 billion for the first phase of developing perhaps the most important mining project in all of Asia. The Tampakan copper field in South Cotabato is considered of critical strategic importance for economic development across Asia because it is Southeast Asia’s largest untapped copper-and-gold deposit. Literally, tens of thousands of direct and indirect jobs will be created, and the multiplier effect of that investment will be enormous. Zijin Mining Group Co., China’s largest gold producer, is set to buy Australia’s Indophil Resources’ stake in Tampakan for $493 million. Zijin Mining has more confidence in the Philippines than many Filipinos.

Ayala Corp. unit Integreon, a leading global outsourcing company for back-office work, signs a 10-year contract with a large British legal and tax firm worth over $800 million, and a local “expert” says that outsourcing in the Philippines is near the end of the road. And local investors have sold Ayala shares for the last several months.

Realize a few things. The unemployment rate is higher in the US than in the Philippines. By almost every measure of fiscal and financial soundness and stability, the Philippine national treasury is in better condition than most of the European Union countries. While more than 10 percent of all US banks are on the watch list and are ready to fail, our local banks exceed existing global banking standards and are even financially stronger than the new banking standards that the major Western governments say must be implemented to insure their banking system does not totally collapse.

I am trying to figure out the mindset of someone who seems to wish the Philippines was a part of the world’s problems. Maybe it is not a mindset. Maybe it comes from standing under the hot El Niño sun too long without an umbrella.

Buy the peso. Buy the PSE.

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