Tuesday, 1 February 2011

BM editorial: "Investing in good will"

Business Mirror

THE official report on Monday that the Philippine economy grew 7.3 percent in 2010—within the National Economic and Development Authority (Neda) forecast of 7.0 percent to 7.4 percent—indicates quite strongly, the Neda says, that “the economy is on a path of strong recovery.”

In his statement accompanying the release of the full-year 2010 National Income Accounts, Neda Director General Cayetano Paderanga Jr. cited “significant economic developments both from the supply and demand sides” that he said “characterized output expansion in 2010.” Here he singled out the key role of industry in boosting last year’s growth—notably brisk manufacturing in electrical machinery, petroleum, coal products and food—and added this is consistent with “strong pickup in domestic demand and the rebound in external trade.”

Yet while domestic demand was a growth engine for the economy in 2010, investments provided “a strong support to growth,” according to Paderanga, who is concurrent Socioeconomic Planning secretary. Here he zeroed in on private-sector investment in construction and in machinery and equipment, attributing to this the “robust 17-percent growth in gross domestic capital formation.”

Mercifully, agriculture’s growth was “subdued” but not totally wiped out, despite the continuing risks from extreme, unpredictable climate.

Mr. Paderanga says it makes sense to anchor the growth outlook in the next few years on steady increases in investments in infrastructure, among other productive sectors. He makes a pitch, in this wise, for promoting public-private partnerships (PPPs), the centerpiece of the Aquino administration’s programs, and promises to ensure the Medium-Term Philippine Development Plan currently being crafted under the Neda’s leadership will reflect such priorities—along with, of course, its thrust to pour in huge resources into social services through the controversial conditional cash transfers, where the state puts in money direct into the hands of families on condition they keep their children in school and in good health, among other things.

Sorry to rain on the Neda chief’s parade, but the continued inflow of investments in the remaining five-and-a-half years of this administration will rely not so much on government pronouncements of its policy bias but on actual developments on the ground. It must prove it is serious about transparency and ensuring fair terms in treating investors, that rules won’t be changed midstream, that contracts will be honored. It’s not so much a matter of the state guaranteeing ROI of investors and making vague promises of reimbursing them should the courts later rule that their contract terms were onerous and against public policy. The important point is that, in the first place, all bidding and related processes for those big-ticket PPPs on parade are done in a fully transparent, timely and efficient manner; that their results are honored and that both the investor and intended beneficiaries will gain something from them.

At this point, one glaring example of how shabbily the government can treat certain investors is still there, sticking out like a sore thumb: the P18-billion project to dredge and rehabilitate Laguna de Bay, won by a Belgian contractor, only to lose it in the most disgusting manner possible. By some sleight of hand, the Belgian contractor awoke to find out it had lost the government’s go-ahead for the project. Various excuses were floated to justify that shabby handling, none of which made sense. And now, the latest word is that some “agents” are luring the administration into entertaining a much more expensive, similar project, pitched by certain Chinese contractors, according to one of this paper’s columnists.

Will wonders never cease in the land of NBN-ZTE, the Naia 3-Piatco fiasco and the handsome “sendoff” gifts for generals as foot soldiers die or get beheaded in Mindanao?

This isn’t meant to take anything away from the growth record of 2010, nor to belittle the thrusts for the next few years. It makes eminent sense to pin one’s hopes of growth on investments in strategic industries and sectors, especially the ones that could be quite impervious to the continuing climate-related risks, as well as those beamed to emerging economies where the market outlook is stable. But first the government must clean up its act and decide firmly that if it wants to anchor growth on more investments, it cannot keep tearing to shreds its commitments of fair play and transparency.

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