OUTSIDE THE BOX
AS we enter into the last quarter of 2011, it becomes more obvious every day that the confidence of January has turned into the confusion of October.
Simply put, the national economic and social strategy of the administration is not working.
It is not at all strange that while the President enjoys very high ratings in “trust,” there is no doubt that it is the reverse in “confidence.” People vote on “trust” with their hearts; they vote on “confidence” with their money.
Growth forecasts continuing to be lowered
Every new gross domestic product growth forecast is lower than the one before. Sure it is a hostile global environment. So what? These forecasts always make a point to say the Philippines is better able to withstand global shocks. Remittances are up. BPO income is up. The Philippines has record-high international reserves. Consumer spending is strong.
So what is the problem? The government is doing very little, if anything, for the economy. It seems to be all show. While the government is so proud that the Philippines’s credit rating might go higher, it means nothing to the economy. The only reason for a better credit rating is to reduce government borrowing costs to be able to spend more on those areas that will help grow the economy and that is not being done at all. This credit-rating thing is nothing but political image unless it is translated into concrete government spending and investment. I see no indication that policy is going to change significantly in the medium term.
Consumers are spending and saving, not investing
Dr. Bernardo M. Villegas wrote a column yesterday in the Inquirer and said this: “The Philippines, although awash with domestic savings today, direly needs long-term capital for the vast requirements of…very capital-intensive investments.”
If you couple Dr. Villegas’s statement about high savings with the fact that Filipino consumer spending is growing at a healthy rate, that is a bad sign for the economy. Studies are showing that even remittance money is being put into the banks, not being used for personal wealth creation.
Saving money is a good idea. Saving too much money versus investing is a bad idea that shows a caution and hesitation about the future. While the administration tells the people that the Philippines is able to handle external shocks, the public is not acting like it is true. They are cautious. It may be because they are not confident in the ability or the desire of government to act. If the Philippines is in such good shape (which I firmly believe it is) relative to other countries, why is not the government out there building, spending, and building?
Showcase govt-spending program an illusion
After 18 months of this administration, public-private partnership is a stillborn program. From Bloomberg: “The Philippines said it may offer at least two projects to investors under the so-called public-private partnership starting this quarter, scaling down from an earlier plan for 10 proposals this year. There are four projects worth P34 billion in advanced stages of preparation.” That amount is absolutely nothing. It is less than 2 percent of the total national budget. That is like you spending P100,000 and then worrying for a year how to spend P2,000. San Miguel Corp. will have profits of about P34 billion in 2011.
A fiscally sound government like the Philippines’s is expected to use the people’s money on projects for the people’s economy. It is not happening. There can be only one of two conclusions. The government is afraid of the future and does not want to act. The government is not competent and does not know how to act.
Foreign investment just isn’t there
Presidential press releases notwithstanding, there is an important old saying. “The deal isn’t done until the money is in the bank.” And the foreign-investment money is not in the bank. One word describes the investment climate in the Philippines: uncertainty. Mining permits are not being issued. Foreign-ownership rules such as with Philippine Long Distance Telephone Co. are completely unresolved. The government keeps talking about raising taxes while saying government finances are sound. The Autonomous Region in Muslim Mindanao is in chaos. The New People’s Army operates at its own will. Peace negotiations are in a coma, if not dead.
Now the good news: Not one of these conditions is permanent. With true economic leadership, all the above negatives could very quickly become the positive that drives the economy upward.
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