OUTSIDE THE BOX
It has taken more than 60 years since independence, but, finally, the Philippines has weaned itself from the economic breasts of the United States.
The first dramatic attempt to become a truly sovereign nation happened in 1991, when the Philippine Senate, despite then-President Cory Aquino’s literally marching in opposition, rejected the US bases treaty.
Over the next 15 years, there were little steps taken by the Philippines to pull away, but something always seemed to get in the way of truly breaking away from Uncle Sam. The 1997 Asian crisis was a major stumbling block to economic independence. If not for the American consumer buying Asia out of the crisis, countries such as Thailand and South Korea would have economically marched backward several decades. Japan used the US consumer through the 1980s and ’90s to keep its status as an American economic “colony” to avoid making hard domestic economic choices. And China would still be a backwater, nothing country if not for the US allowing most of its goods to be produced in places they cannot even pronounce like Shenzhen, Jiangmen and Zhongshan.
While our Asian neighbors were getting fat and strong feeding on Mother America, the Philippines was always the runt of the litter, getting only what was leftover after the others had their fill. The Philippines never fought very hard to get to the front of the line, thinking for some reason that we were Mama’s favorite when, in fact, Mama did not care at all.
But it was easy 20 years ago. All our government officials and business leaders had to do was go to the US, where crumbs and scrapes were given by the Americans to their special brown-skinned trading partners who never complained much. It must have been a wonderful break dealing with the Filipinos unlike with the “real” Asians with slanted eyes from China, Korea and Japan who fought tooth and nail for concessions into the American market. And they got those trade concessions unlike the Philippines.
But it is now 2010 and, finally after 60 years, the Philippines is no longer a colony of the United States.
We have talked so long about the Philippines “delinking” from the economy and financial markets of the US. We really never did anything about achieving that goal though, probably because we were not sure if that was what we wanted. It was almost like a young man dreaming about the big house he will buy someday, but really glad to be able to eat Dad’s food and Mother’s cooking at dinnertime. It was easy to let the ultimate responsibility for the economy, the peso and the stock market fall on the shoulders of the Americans instead of the Filipinos.
Even as recently as 1996, 35 percent of all Philippine exports went to the US. What a glorious time for our exporters. Guarantee the US market and the company would stay viable was their business model. And Japan was always a great backup, taking nearly 20 percent of the goods we sold overseas. Why should they care about China at 1 percent?
For the first half of 2010, the picture is quite different. The United States now accounts for less than half that 1996 amount; 16 percent. China imports 9 percent of our exports. Japan is down to 13 percent. Which is the growth winner in buying Philippine goods and now our largest buyer? Singapore, at 17.5 percent from less than 5 percent in 1996.
While our export sector is still whining about the peso appreciating against the US dollar, they should be looking at the movement of the Japanese yen, which is at a 15-year high against the US dollar. Also of note is the fact that with our largest trading partner, Singapore, both currencies are tracking the US dollar decline closely, offering little negatives to the peso.
Speaking of the Philippine peso, the nation’s currency has always functioned in the mind of locals, as almost the tail of the US dollar dog. Want to know which way the peso was going? Watch the dollar. But that was understandable, with the US being the only important trading partner. Remittances from overseas workers were dollar-focused, and Filipinos tended to convert excess pesos into dollars as a safe haven or may be safe heaven, for buying those condos in California.
But again, it’s 2010, when the dollar is not the currency of choice any place in the world. Seeking to diversify from a currency that may be in its death throes, now the peso is actually becoming the currency of choice for Filipinos for once. And that is a very good event.
The confidence that a people show in the national currency is an important part of creating confidence in the economy, and the Philippines is finally beginning to show both confidences. Never again will you hear, “When the US sneezes, the Philippines catches cold.” Losing that little, silly phrase may be the most significant psychological change for this economy in 60 years.
While the old-time stock-market experts and watchers will never lose the Dow Jones connection to the Philippine Stock Exchange (PSE), in truth, that connection is broken, hopefully forever.
The New York stock market is currently going up because there is little value to the US dollar. The Philippine stock market is going up because there is great value to both the peso and the PSE.
To compare the PSE to the NYSE is to insult and disparage the Philippine stock market. This is a market that is reflecting all aspects of the Philippine economy; the corporate profit growth, the validity of its currency in the global system and the future economic activity. The New York market reflects only the weakness of the dollar and the worthless Obama bailouts to the financial sector.
It has taken much blood, sweat, and tears, but now, finally, the Philippines stands on its own and stands well and strong.
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Tuesday, 12 October 2010