3Q02 recovery at the earliest

During the question and answer portion of last Thursday’s FOCAP affair with President GMA, the Chief Executive cited the relatively strong showing of the domestic economy in response to a question on her assessment of its state after Sept. 11. She expressed hope that sectors of our domestic economy will continue to perform well, regardless of what is happening in the world.

I thought she effectively sidestepped the question and for a good reason. It serves no purpose for her to sound downbeat. That job is reserved for media columnists like me. My only problem with not fully addressing the problem is that people may fail to appreciate the full negative impact of a world economy in recession.

For instance, I just got a copy for the latest economic analysis of Nomura Research Institute and they are expecting US economic growth to contract in quarterly terms until 2Q02. This is because US consumers are seen to turn cautious after Sept. 11 and that’s the only sector expected to pull the economy out of recession. The massive layoffs announced and the uncertainty of the nature and timing of the US retaliatory moves against terrorists contribute to the erosion of consumer confidence.

As such, Nomura says expectations of an Asian recovery as soon as year-end evaporated with the smoke from the WTC attacks. Given our dependence on the US economy, the earliest we can expect a recovery is the third quarter of 2002, if the US quickly moves out of its slump. But there is normally a lag, which means, we will recover a quarter or two after the US does.

Worse, Nomura sees domestic demand in Asia more fragile than in 1991. They warn that this economic downturn may resurrect financial/fiscal problems. "As companies default and go bankrupt, non performing loans (NPLs) will rise – undermining credit growth and investments."

Nomura has special words of caution for a set of countries it called TIPs, for Thailand, Indonesia and the Philippines. "Were a large financial company to go bankrupt over the next 12 months, we doubt respective governments would have financial muscle to launch a bailout." Indeed, we keep hearing persistent report that NPL levels of our banks are being made to look rosier than in reality.

This is why I was hoping to hear some new insights and plans of action from President GMA during her FOCAP appearance. But all I heard was more of the same. She talked about stimulating the domestic economy but didn’t say how. She talked about keeping the deficit at programmed levels, which is good. But that means government can’t contribute into any significant stimulus package.

If Nomura is right, the question is, what do we do between now and Q302?

Ground zero

Thus far, we have been discussing the state of the economy from a macro and somewhat theoretical perspective. A reader who requested anonymity, gave us a feel of how things are on ground zero.

You have indeed expressed the best thoughts in your recent Phil. STAR editorials about the present & future of our economy. The export industry, to which I belong (now for 32 years!), is in the doldrums and the recent terrorist attacks on the US have made matters worse for our already dwindled markets. I understand from the grapevine that, in the garment industry, there has been a cancellation of 400,000 pcs of exportable RTW.

Adding insult to an already heavily injured economic environment are lending institutions – banks, finance companies, gov’t guarantee corporations & others – who are now on a rampage to collect debts from companies that have, in recent years, faltered with their loan obligations. Their demand letters sound ugly & threatening. Their demand timeframes & interest clauses are rigid. They are the only victims and us, the business community, are the bad guys – the terrorists.

This rampaging bunch will destroy every hope of a business recovery. Companies who simply cannot afford a rigid restructuring of loans & interests will simply close shop and send tens of thousands of workers out to the streets. Nakakawala na ng gana ituloy ang negosyo.

I believe that while some borrowers may have been irresponsible, so were some lenders. Why don’t those lenders start lowering their guns? Mutual sharing of guilt will help resolve a lot of economic issues & point us towards a path of economic recovery. Perhaps Congress should get involved and pass a law that will restrain those hip-shooters!

PLEASE do not mention my name because I am one of those unfortunate borrowers of the past now being hounded by two banks & Tidcorp !!! I am trying to keep a small export business afloat, in these hard times, to preserve jobs. And now I am facing these monsters. I am starting to lose hope & perseverance!!

Thanks again, Boo Chanco. More power to you!

National ID system

I don’t know what the fuss is about a national ID system. If having one means it is the one card we need to transact business with any government agency, let’s go ahead and have it. I can’t understand what civil liberties will be compromised with such an ID system.

Maybe it could be made voluntary. If Blas Ople and Satur Ocampo don’t want one, they don’t have to get one. Because they are such big shots, they don’t have to go through hell in dealing with the bureaucracy, anyway. But anyone else who refuses to get one will have to endure the worse treatment the bureaucracy can offer.

I bring this up because of a recent experience trying to get my TIN card from a regional office of the BIR. Our HR people sent a messenger to get it. He was shown a room with piles and piles of IDs. If you want your ID card, go jump in and look for it. To think that our application was filed a couple of years ago! Now they tell us we can go ahead and use the old one with just our name and address.

The only reason why that TIN card is important now is because you can’t register your car or get a driver’s license without it. Maybe General Abenina should suspend this requirement until the BIR cleans up its act. I can understand the reason why the LTO and the BIR must coordinate. But not at the expense of irritating citizens because one or both of these agencies are not prepared for what they are trying to do.

Terrorist attack

Dr. Ernie Espiritu contributed this.

Bill and Doug were having a beer at the neighborhood bar.

"What’s the matter?" asked Bill of his buddy. "You look kind of down."

"My wife just told me that my lovemaking is just like a terrorist attack."

"Why’s that?"

Because it’s brief, unexpected and usually a disaster.

(Boo Chanco’s e-mail address is [email protected])