Thursday, 29 March 2012

Central Bank chief says population will bolster growth

Elaine Ramos Alanguilan
Manila Standard

A large pool of young workers will support economic growth in the next few years, Bangko Sentral Governor Amando Tetangco Jr. said Wednesday.

Tetangco said in a speech before the Philippine Investment Forum the country’s large population of young workers with purchasing power provides the economy with the so-called demographic dividends that are good for consumption and investments.

He said the Philippines would enter the demographic sweet spot by 2015.  “Population would be a source of economic growth,” he said, adding that the concept of demographic dividends has been proven historically.

“That concept, the demographic window, is that period in an economy’s history where more people or a prominent portion of the population is of working age.  That means these people have the purchasing power, purchasing capacity, which can drive consumption, investment and therefore faster economy,” said Tetangco.

“Our average age is 22.2 years. So by 2015, we’ll reach that window.  We’ve seen the experience of other countries — Thailand and Indonesia—in the region that have benefited from these demographic dividends,” said Tetangco.

He said the Philippines would be the last major economy in Asia to enter the so-called demographic sweet spot. “If you’re an investor and you’re looking at the potential of an economy in terms of the size of the market, they will consider these demographic window that the Philippines is about to enter,” said Tetangco.

Tetangco noted that nearly half a million graduates enter the labor force each year, providing companies with a big pool of manpower to fill their requirements.

“If the economy is growing, underlying that growth would be the increase of employment as well.  So as you grow, you can generate more employment and therefore you can have more people employed who are able to spend and help fuel growth in the economy,” said Tetangco.

(Published in the Manila Standard Today newspaper on /2012/March/29)

The conspiracy behind high oil prices

Business Mirror

“To most people dirt is just dirt; to a farmer it’s potential.”—B. Grewal

HUMANS, in spite of all the technological achievements, are not much more sophisticated in some ways than our ancestors were thousands of years ago.

While we know now exactly how solar and lunar eclipses occur and no longer attribute them to a monster eating the sun or moon, we still look for simple explanations for things that we do not understand.

How could Elvis Presley just die? Obviously he faked his death. How could Marilyn Monroe die of a drug overdose? Maybe she was murdered.

How could ancient Egyptians build the pyramids? It had to be with the help of space aliens.

Also when confronted with circumstances that are uncomfortable and unchangeable, and at the same time unable to fully explain the “why,” people often find alternative answers. These alternative answers are always believable to a certain degree, but they usually fail when subjected to a much closer examination of the facts.

English writer and poet Alexander Pope wrote, “A little learning is a dangerous thing.”

Over the last 50 years, we have experienced some of the most profound and significant economic changes the world has ever had. This period ranks right up there with the age of exploration and discovery and the industrial revolution.

The last half of the 20th century brought with it enormous advances in technology, but also a never before seen globalization of the world economy and financial structure.

Change, particularly fundamental systemic change, brings gains and losses. Without the new world economic order, China would, for the most part, still be a nation of subsistence farmers. The citizens of the oil-producing Middle East countries would be tending their flocks, not dining in six-star hotels. In spite of the inequalities, global life expectancy has never been any higher as also with world per capita income.

But the downside, even the short-term situations, are confusing and we look for answers that are very hard to find. We look for someone to blame for the bad stuff.

With local gasoline prices nearing P60 a liter, it must be the fault of the oil companies. Or maybe it is because of government laws and regulations. The financial markets are all crooked so it must the traders and speculators who are guilty. And of course, it is a conspiracy to take extra money from the people.

Between 1971 and 1973, the price of soybeans tripled as did the price of wheat, cotton and orange juice. By 1974 you could add hogs and cocoa to the list. Two years later in 1976, coffee, lead and zinc all made the triple list.

And when do you think the price of crude oil also tripled? Between 1971 and 1973.

Would you believe me if I told you that the price of crude oil is the same today as it was in the year 2000. In fact, 2012 crude oil is priced at the same level as in 1962. No, that is not a misprint; nineteen sixty-two.

There is a conspiracy but it is not with the traders/speculators and it is not a 2012 conspiracy to rob your wallet.

What is the magic about 1971 that caused prices of hard commodities—including oil—to dramatically increase? The Western governments decided that they, with the central banks, could manage money and took the world off the gold standard.

Two things were fairly constant from 1950 until 1971; the price of oil and the amount of dollars in circulation. After 1973, both exploded to the upside.

Notice also that in 2009, oil was priced at $30 a barrel. That is the year that the US government began its money printing operation called Quantitative Easing. The money printing has not stopped and both the price of oil and gold has continued to rise.

If you remove inflation, another word for currency devaluation, since the Federal Reserve was created in 1913, oil is actually $22 a barrel and gold is $18 per ounce.

The real speculators who created the high price of oil are the central banks and the governments. They gambled that they could manage currency better than the free markets, believing that money should have an intrinsic and underlying value and not just be valued on the wisdom of governments.

The governments speculated in 1971 and lost. But it is the people, as usual, that have had to pay off the gambling debts then, now and in the future.

On a personal note, I am planning to do my stock-trading seminar on April 28, 2012. Please e-mail me at if you are interested in attending. I will send you the details.

E-mail to and Twitter @mangunonmarkets. PSE stock-market information and technical-analysis tools provided by, Inc.

Wednesday, 28 March 2012

The solution to economic problems

John Mangun

THE Philippines grapples with the problem of poverty and everyone knows exactly what the solution is: jobs.
We spend countless hours discussing why economic growth is not spreading down the economic food chain and we all know exactly what the problem is: jobs.

The government battles with revenues being insufficient for its spending plans because there is not enough tax revenue and we all know exactly where that additional revenue could come from: jobs.

And successive leaders assure the public that they are trying to solve the situation of a lack of jobs.

That great wise man in the Stars Wars universe, Jedi Master Yoda, put it very simply, “Do or do not. There is no try.”

But government keeps “trying” and not doing it.

Perhaps we need to look at what a “job” is. A job is being paid to provide a service or to produce and supply a product to others in the economy that they are willing to pay for. To be paid for doing a job well, you must offer the goods or services in an efficient and profitable manner. Profit means that there is some money left over after selling a product or service and paying all the associated costs.

One thing that surprises about the current administration’s job-creation problem (and there is one no matter what the press releases say) is that the current secretary of finance outlined his jobs program in 2004 when he was secretary of trade and industry.

Secretary Purisima said then that, “To create one job which pays the minimum wage in a micro or small-sized enterprise, that enterprise needs to allocate around P50,000 in capital investments.” For a high-paying job it requires P1,000,000 in investment.

So what is the problem except maybe that the campaign slogan should have been “With jobs, there is no poverty?”

According to Secretary Purisima, to create 250,000 high-paying jobs and 5 million standard jobs, it requires an expenditure of some P500 billion.

The secretary clearly outlined his plan in 2004. “If we would be able to help improve [existing Filipino] SMEs’ productivity level, its impact on our country would be tremendous. The country could generate over 800,000 new jobs if each SME would add one employee. If we had spent as much time helping Filipino business in the last years as we did attracting foreigners, we really might have created jobs.”

To create just these 800,000, 200,000 high-paying and 600,000 standard wage in the SME sector would cost some P230 billion. And 800,000 new jobs would have a significant impact on the economy and poverty.

The government’s typical response is to ask where the money is going to come from to fund a job-creation program.

The government spent over P20 billion on the Conditional Cash-Transfer Program last year and that amount would have nearly funded the 600,000 standard-wage jobs.

The difference between the projected budget deficit and what was actually spent was P100 billion, which could have been used to create jobs. Had the government increased the 2011 annual budget by only 6 percent, Secretary Purisima’s job-creation program would have been fully funded and 800,000 more Filipinos would have jobs today.

It is a simple exercise to discover how much added revenue would have gone to the government from those added jobs and how much larger and faster the nation’s economy would have grown.

Jobs require investment in sustainable business, not handouts. The government can be the largest source of investment capital in the country. However, it takes a long-term vision, as Secretary Purisima explained, and it takes the desire to make the government a meaningful engine of economic prosperity.

Interestingly, Secretary Purisima also said this before the Supreme Court in 2004: “Various offices of the Executive branch found that we can quickly channel the private sector’s energy into industries where we have proven to be highly competitive, where our natural endowments clearly give us an edge. Mining is one industry in which we clearly have a competitive advantage. One great advantage of the mining sector over other industries is that this sector has an almost 100-percent value added which means that almost all of the elements of production are sourced locally.”

Perhaps this person needs to be listened to more often and given more attention.

On a personal note, thank you to all who attended the seminar on Saturday, some pictures are posted on the MangunOnMarkets Facebook page. It was my pleasure meeting you. We are planning to do this again in April so please e-mail me at if you are interested.

Sunday, 25 March 2012