Reflating domestic demand
September 30, 2002 | 12:00am
Last week, I caught an interesting episode in Ces Drilons nightly show, Get Real. Her guests that evening were pretty ordinary folks who managed to make successful entrepreneurs of themselves. There was this man who, with his wife, parlayed a minimal capital into an export earning business. Starting with just one sewing machine and just his wife, they now employ 100 people in the garment sub-contracting business.
The episode dramatized the need to give small and medium scale enterprises a fresh view. They are doing something like this too in Thailand as part of the economic policy of Prime Minister Thaksin Shinawatra to reflate domestic demand. Given the reality that the days of export-led growth may be over, countries like ours will have to give a lot more thought and resources to the idea of reflating domestic demand as a way to achieve economic growth.
In this sense, the official pronouncements of Ate Glos government seems to be in the right direction. She has constantly called for greater financial support to the SMEs as means of generating jobs, fighting poverty and now, powering economic growth. Indeed, the heartwarming stories in the public service advertising of Planters Development Bank and San Miguel Corp. on ANC, the cable news channel of ABS-CBN, indicate that there is something to it that cries out for greater attention.
No doubt, a significant shift in attitudes by the local commercial banking system is called for. Banks will have to develop the expertise of Planters Bank in picking the right SME project and managing the account to success. The commercial banks will have to learn to shift their sights from luxury real estate that are in any case, largely speculative at this point or from sunset industries that are no longer competitive in a free trade regime or from other industries that are experiencing an overcapacity on a national basis.
Our population is fairly large but we can hardly use that to power domestic demand. Extreme poverty has caused the slackening in demand for consumer goods to the point that mass marketers have introduced cost cutting measures that have affected related industries like media advertising. In fact, our low inflation figure could well be a result of anemic buying power of a poverty stricken market.
Experience shows that well managed lending activities directed towards small and medium scale enterprises have been profitable. Repayment rate is in the high 90s, showing that the common folks are better credit risks than some of the big boys. That shouldnt really be surprising, given that the Indian usurers have made a living out of extending credit to that segment of the population our banks wont touch.
But lending programs to this non traditional market should be handled by the private sector. Somehow, the common folks dont feel an urgent need to repay anything that obviously comes from government. There is this sense of entitlement that makes government financial programs meant to help the common man nothing short of colossal failures.
Maybe Planters Development Bank, based on their highly publicized success stories on ANC, has developed a way of successfully handling SMEs. Other banks should explore ways of linking up with Planters or buying their expertise so that the banking system can finally play a role in addressing poverty and helping the national economy move faster.
If all that the commercial banks will do is to buy government securities while the economy remains uncertain, they should just surrender their banking licenses because they are not behaving like bankers should. Planters showed financing the SMEs can be done. You just have to know how.
The resignation of Fe Barin as chair of the Energy Regulatory Commission and her assumption of Teddy Montecillos seat at the Monetary Board is unfortunate, from a national perspective. The ERC assignment of Ms. Barin is an important one. And because the requirements of the job could be highly technical, it takes time for an appointee to get in the groove.
Now, we effectively lost a year. The replacement of Ms. Barin at the ERC will need as much time to familiarize himself or herself with the requirements of the job. Yet, we have no time to spare. The Power deregulation law needs a strong regulator to make it work according to expectations. You cant have a strong regulator if appointees do not serve their terms of office.
Of course the job is difficult and the Monetary Board job is nothing in comparison. Ms. Barins health will definitely fare better with her new assignment. But she should have known that when she accepted the ERC job. Now, I doubt if the deregulation of the power sector, complete with spot markets and an independent Transco can still be realized according to original schedule.
As always, our laws may have the best of intentions but we suck in the implementation.
A bum, who obviously has seen more than his share of hard times, approaches a well-dressed gentleman on the street. "Hey, Buddy, can you spare two dollars?"
The well-dressed gentleman responds, "You are not going to spend in on liquor are you?"
"No, sir, I dont drink," retorts the bum.
"You are not going to throw it away gambling, are you?" asks the gentleman.
"No way, I dont gamble," answers the bum.
"You wouldnt waste the money at a golf course for greens fees, would you?" asks the man.
"Never," says the bum, "I dont play golf."
The man asks the bum if he would like to come home with him for a home cooked meal. The bum accepts eagerly. While they are heading for the mans house, the bums curiosity gets the better of him. "Isnt your wife going to be angry when she sees a guy like me at your table?"
"Probably," says the man, "but it will be worth it. I want her to see what happens to a guy who doesnt drink, gamble or play golf."
(Boo Chancos e-mail address is [email protected])
The episode dramatized the need to give small and medium scale enterprises a fresh view. They are doing something like this too in Thailand as part of the economic policy of Prime Minister Thaksin Shinawatra to reflate domestic demand. Given the reality that the days of export-led growth may be over, countries like ours will have to give a lot more thought and resources to the idea of reflating domestic demand as a way to achieve economic growth.
In this sense, the official pronouncements of Ate Glos government seems to be in the right direction. She has constantly called for greater financial support to the SMEs as means of generating jobs, fighting poverty and now, powering economic growth. Indeed, the heartwarming stories in the public service advertising of Planters Development Bank and San Miguel Corp. on ANC, the cable news channel of ABS-CBN, indicate that there is something to it that cries out for greater attention.
No doubt, a significant shift in attitudes by the local commercial banking system is called for. Banks will have to develop the expertise of Planters Bank in picking the right SME project and managing the account to success. The commercial banks will have to learn to shift their sights from luxury real estate that are in any case, largely speculative at this point or from sunset industries that are no longer competitive in a free trade regime or from other industries that are experiencing an overcapacity on a national basis.
Our population is fairly large but we can hardly use that to power domestic demand. Extreme poverty has caused the slackening in demand for consumer goods to the point that mass marketers have introduced cost cutting measures that have affected related industries like media advertising. In fact, our low inflation figure could well be a result of anemic buying power of a poverty stricken market.
Experience shows that well managed lending activities directed towards small and medium scale enterprises have been profitable. Repayment rate is in the high 90s, showing that the common folks are better credit risks than some of the big boys. That shouldnt really be surprising, given that the Indian usurers have made a living out of extending credit to that segment of the population our banks wont touch.
But lending programs to this non traditional market should be handled by the private sector. Somehow, the common folks dont feel an urgent need to repay anything that obviously comes from government. There is this sense of entitlement that makes government financial programs meant to help the common man nothing short of colossal failures.
Maybe Planters Development Bank, based on their highly publicized success stories on ANC, has developed a way of successfully handling SMEs. Other banks should explore ways of linking up with Planters or buying their expertise so that the banking system can finally play a role in addressing poverty and helping the national economy move faster.
If all that the commercial banks will do is to buy government securities while the economy remains uncertain, they should just surrender their banking licenses because they are not behaving like bankers should. Planters showed financing the SMEs can be done. You just have to know how.
Now, we effectively lost a year. The replacement of Ms. Barin at the ERC will need as much time to familiarize himself or herself with the requirements of the job. Yet, we have no time to spare. The Power deregulation law needs a strong regulator to make it work according to expectations. You cant have a strong regulator if appointees do not serve their terms of office.
Of course the job is difficult and the Monetary Board job is nothing in comparison. Ms. Barins health will definitely fare better with her new assignment. But she should have known that when she accepted the ERC job. Now, I doubt if the deregulation of the power sector, complete with spot markets and an independent Transco can still be realized according to original schedule.
As always, our laws may have the best of intentions but we suck in the implementation.
The well-dressed gentleman responds, "You are not going to spend in on liquor are you?"
"No, sir, I dont drink," retorts the bum.
"You are not going to throw it away gambling, are you?" asks the gentleman.
"No way, I dont gamble," answers the bum.
"You wouldnt waste the money at a golf course for greens fees, would you?" asks the man.
"Never," says the bum, "I dont play golf."
The man asks the bum if he would like to come home with him for a home cooked meal. The bum accepts eagerly. While they are heading for the mans house, the bums curiosity gets the better of him. "Isnt your wife going to be angry when she sees a guy like me at your table?"
"Probably," says the man, "but it will be worth it. I want her to see what happens to a guy who doesnt drink, gamble or play golf."
(Boo Chancos e-mail address is [email protected])
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