Friday, 18 May 2012

New Neda chief bares tack vs poverty


CAI U. ORDINARIO
Business Mirror
http://www.businessmirror.com.ph/home/top-news/27306-new-neda-chief-bares-tack-vs-poverty-

IF the government could improve the poor’s access to basic and other services and achieve high economic growth, it would be possible for the Philippines to reduce poverty by 2 percentage points every year in the medium term, the new chief of the National Economic and Development Authority (Neda) said on Thursday.

Newly appointed Socioeconomic Planning Secretary Arsenio M. Balisacan, who also serves as director general of Neda, told reporters in his first news briefing that this would also help the country achieve the United Nation Millennium Development Goals (MDGs), particularly in halving poverty to 16.6 percent by 2015.

Balisacan is considered a poverty and agriculture development expert. He said poverty reduction and growth were possible through the proper implementation of projects and programs, such as the government’s Conditional Cash-Transfer (CCT) Program and the public-private partnership (PPP) initiative as well by hitting close to the 7-percent to 8-percent growth target in the Philippine Development Plan (PDP).

He said the government must give poor households access to basic services, particularly health, education, even technology.

Farmers must also have access to finance for and other opportunities, he said. “[They must have access to] opportunity sa ekonomiya, opportunity in human development, if you address those ones, you should be able to hasten the rate of poverty reduction. We should be able to make the growth process more poverty reducing and that’s the essence of inclusive growth,” Balisacan said.  “[The] 2-percentage points reduction per year [is possible] if we manage to grow near the target of the PDP, and we are able to accelerate the investments in social capital, ’yung mga interventions natin sa health, sa education, ’yung CCT natin, if we make those more effective, we would be able to achieve that,” he added.

Balisacan said poverty reduction has been slow because of weak economic growth. He said that historically, the country’s gross domestic product (GDP) growth was only 4.5 percent, which is significantly low compared to the country’s peers. This is why it is necessary, he said, for the government to increase historical growth to 7 percent to 8 percent.

He added that while the Philippine economy grew above 7 percent in 2010, this was not sustainable because internal issues must be addressed. Without addressing structural weaknesses in the economy, no matter how high economic growth hits, it would revert to the historical growth rate of 4.5 percent.

Balisacan also said in his studies in the past 30 years, given the structural weakness of the economy and the crises that hit, the country’s potential long-term growth rate was only about 1.5 percent per year. This analysis makes the country’s above 7-percent growth in 2010 a mere “aberration” or a fluke.

“What we are trying to do is to raise that potential growth path of the economy from 4.5 percent to 7 percent to 8 percent. We can do that by addressing critical constraints to growth like infrastructure, human capital underdevelopment and so on,” Balisacan said.

“I think we have identified those constraints and I think the programs are laid out there. Our job at Neda is to ensure that we facilitate the implementation and completion of these programs.”

Addressing critical constraints, Balisacan said, includes not making the same mistake of neglecting agriculture growth and rural development in the next few years. He said this is because two-thirds or two out of three poor people are in rural areas and are mostly engaged in agriculture.

Balisacan also said focusing on increasing agricultural productivity in the country is not something that the government must do just because there is now a resurgence in the interest to increase agriculture growth globally.

A robust agricultural sector, he said, would keep food prices down and put less pressure on increasing wages prematurely. This, in turn, would make industry more competitive and attract more investments from domestic and foreign investors.

“I have always claimed that poverty is a rural phenomenon. Even the urban poverty that you see is simply a reflection of the hardships you see in the rural areas. We have made a mistake in the past of neglecting agriculture, rural development, a big part of that rural development is really agriculture development so improving productivity in agriculture, must be a fundamental part of our agenda to lick the poverty problem,” Balisacan said.
He said this is why programs like the CCT and the PPP initiative, would contribute to poverty reduction.

The CCT program, he said, could help poor families obtain access to health and education services, while PPPs would help address infrastructure constraints that have been the cause of the country’s weak economic growth in the past.

Balisacan also said PPPs could help alleviate the government of some of the pressures of development spending. He said with the private sector helping in the financing of various projects, the government frees up some of its limited resources.

These resources can then go to products like the CCT or other social-development programs that can directly improve the access of poor Filipinos to services that they need to take advantage of economic opportunities and lift themselves out of poverty.

“The essence of the PPP is [because] government resources are very limited, they compete with so many development requirements, for education, health, infrastructure and so on. If you could get the private sector to help, you save a lot of resources to address your problems with education, with agriculture, with health. The PPP is a modality to fast-track infrastructure development,” Balisacan said.

He said as the new Neda chief, he would “push for a quicker implementation of these programs.  Continuity for me is very important so I don’t see a departure from the past two years in so far as focused and inclusive growth and poverty reduction is concerned.

Meanwhile, the National Statistical Coordination Board [NSCB] earlier said the country’s poverty incidence in 2009 was 26.5 percent, higher by 0.1 percentage point than the 26.4 percent rate recorded in 2006.

This means that to achieve MDG 1—the goal of halving poverty by 2015, the country needs to bring down poverty incidence to 16.6 percent. If the country reduces poverty incidence by 2 percentage points every year, poverty incidence in 2011 should be at 24.5 percent; 2012, 22.5 percent; 2013, 20.5 percent; 2014, 18.5 percent; and 2015, 16.5 percent.

With the 26.5-percent poverty rate, the country is eight years behind in achieving the MDGs and was only able to achieve the MDGs at a medium pace or a pace of progress of only 0.5 and 0.9 percent.

Tuesday, 15 May 2012

PHL and the euro crisis


JOHN MANGUN
OUTSIDE THE BOX  
Business Mirror
http://www.businessmirror.com.ph/home/opinion/27136-phl-and-the-euro-crisis

A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.—Douglas Adams
WITH the local stock market heading south at a fast rate, it might be more appropriate to look at the internals of the listed companies and the macroeconomic picture of the Philippines to understand the “why” behind the drop.

But investors are just people whose decisions are influenced by what they read and hear not unlike your buying a particular brand of toothpaste because of the advertising.

The recent advertising about the stock market and the recent fall in prices has centered on the ongoing “euro crisis.” And like all advertising, it is not the whole truth nor is there the mention of a direct correlation and relationship to the Philippines.

The euro and the euro economic community was designed to be foolproof. But the fools in several individual countries have broken the financial system probably beyond repair.

Europe has a disease not unlike cancer. The outward symptom is found in Greece. This is a bankrupt government burdened by too much debt coming from absurd amounts of spending using borrowed money on programs that did not create any wealth and did not add anything meaningful or substantial to the economy.

The disease itself is found in Spain and its banking system. Spain, the 13th largest economy in the world, has just taken over Bankia, the nation’s fourth largest bank. Bankia was a government creation made from several of Spain’s cajas, or regional banks. These cajas are worse than any Philippine rural bank. Virtually unregulated, the cajas gave loans to any one regardless of their ability to pay. Some of the cajas had defaulted real-estate loans equal to 80 percent of their loan portfolio.

Remember when we were concerned when major Philippine banks had nonperforming loans (NPL) at 8 percent to 10 percent of their total loan portfolio? Overall, Spanish banks are now running at an NPL rate of 20 percent of their total capital or value. US banks are shut down when their nonperforming loans are at 5 percent of their capital.

Spain needs and will have to borrow an amount equal to 25 percent of their total annual economic activity to support their banks and that amount is for this year only.

And all the other euro banks are also in bad shape since they lend to each other. Worried about your local stock portfolio? Société Générale, the major French banking group, has seen its stock go from €140 to €17.20 since 2007.

The European banking system will not fail but the effects will cause those economies to go from bad to worse. For the short term the European stock markets are going to be disaster areas.

The European Central Bank has no choice but to pump a couple of trillion euros into the global money supply.

What this all means for the Philippines is very little “bad” and a lot of “good.”

The PHL economy is not dependant on Europe for any significant amount of its economic activity. We are Pacific centered including Asia and the US. Local banks have very little exposure to the European lending system.

However, some positives are already being seen in lower oil prices as decreased economic activity lowers demand for oil. Local companies are not looking to Europe for any significant share of their revenues.

As for our local stock market, subscribers to my web site were told weeks ago that when the PSE stock index reached 5,300 that would be a good place to consider a chance for some downward correction after the great price advance through the first quarter of the year.

Stock prices are not falling directly because of Europe’s problems. But there may be a side effect of constantly being told that we should be afraid of the euro crisis.

E-mail to mangun@gmail.com, web site is www.mangunonmarkets.com, and Twitter @mangunonmarkets. PSE stock market information and technical analysis tools provided by COL Financial Group Inc.