Thursday, 29 July 2010

Is the government ready to do business?

Written by John Mangun
Outside the Box
Business Mirror
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=28180:is-the-government-ready-to-do-business&catid=28:opinion&Itemid=64

You need to be serious about increasing your wealth starting today. Not tomorrow, today.

The next 12 months are going to bring wealth-creating opportunities to the Philippines not seen in a decade or more.

Sure, I know that I am going to get a ton of e-mail telling me all the things that are bad about the Philippines. I am used to it. When in early 2009 I said the stock market was going to rally like never before, I was called a pro-Philippines propagandist who was out of touch with reality. The ones who agreed with me doubled the value of their investments in less than a year. And I am telling you it is going to happen again.

While those who are mostly interested in politics listened to President Aquino’s State of the Nation Address (Sona) perhaps with mixed feelings, those who are interested in making hard-earned profits should be jumping for joy. This is the most pro-business speech coming from the lips of a government official or politician since the days of Fidel Ramos.

The people expected Mr. Aquino to speak about good governance, corruption, wasteful spending and all the other sins that the government too often commits and outline a clear and concise and feasible program for solving those problems. He did.

In fact, his speech could have lasted only a few minutes. All the President needs to do and accomplish to resolve so many of the harmful issues facing this country and the economy was contained in two long sentences.

“The never-ending horror story of registering business names, which used to take a minimum of four to eight hours depending on the day, will be cut down drastically to 15 minutes. What used to be a check list of 36 documents will be shortened to a list of six, and the old eight-page application form will be whittled down to one page.”

If the President can accomplish that single task at the Department of Trade and Industry and then cascade that policy throughout every government agency and department, he will have changed the way the Philippine government has been doing business with the private sector for the past 50 years.

Every government document that both the average citizen and the billion-peso corporation need approved increases tenfold the opportunity for public corruption. Every hour that is spent dealing with some inefficient government bureaucracy diverts financial resources that would otherwise be used for productive individual and national wealth building.

Although criticized by some who believe that the government should be some sort of rich Santa Claus, the President’s comments about the Metro Rail Transit (MRT) were honest and factual. “The government tried again to buy the people’s love. The operator was forced to keep the rates low. In effect, the guarantee given to the operator that he will still be able to recoup his investment was not fulfilled. Because of this, LandBank and the Development Bank of the Philippines were ordered to purchase the MRT.”

The build-operate-and-transfer (BOT) scheme was brilliantly implemented here in the Philippines and became a model for other countries to follow. Yet, government politicization of the BOT with the MRT project nearly killed this method of financially sound and profitable partnership between the public and private sector. If the President holds to his promise to “make sure that the build-operate-and-transfer projects will undergo quick and efficient processes. A process that used to take as short as a year and as long as a decade will now only take six months,” it will create a potential flood of new infrastructure projects.

You need to start increasing your wealth by turning off CNN, CNBC and all the other nonsense foreign news and concentrate on what is happening right here. Yesterday’s newspapers were filled with stories of Philippine economic activity.

Imports went up 35 percent so far in 2010, the leader being electronics inputs, which are then exported as finished products. The Philippines imported $2.85 billion more than it exported but the vast majority of things we purchased from aboard—transport equipment, industrial machinery, minerals and fuels, all help increase economic activity and growth.

The country’s manufacturing output grew 25 percent in May and the sales of locally made goods rose 25 percent also. Average capacity utilization in May 2010 for total manufacturing increased to 83 percent. Compare with the US at 72 percent.

This increase in activity is showing up in corporate profits. Philippine Savings Bank (PSBank) recorded a net income nearly 30 percent higher than during the first half of 2009. Food-and-beverage conglomerate RFM Corp. nearly tripled its profit in the first half this year.

Companies are spending their profits to make even more money. Robinsons Land Corp. is spending P1 billion to redevelop five malls this year. Ayala Land Inc. plans to invest as much as P10 billion in property projects over the next two to three years at Fort Bonifacio. San Miguel Corp. intends to raise about P75 billion through issuing new shares, the country’s biggest stock sale ever. And that P75 billion will go for expansion and acquisition.

Private-sector business has built a great momentum over the last 12 months and it is evident in the stock market, corporate profits and expansion, and in economic activity. If the administration can focus its efforts on even just the practical things mentioned in the Sona, then that momentum will grow and flourish at an even faster pace. When the President speaks of public-private partnerships, I hope he means it. The private sector has been waiting a long time for the public sector to come on board to help this country realize and achieve its economic potential. The private sector has been doing all the heavy lifting and it is about time for the government to properly do its share.


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

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