Investors wary of gov’t’s ability to solve political, eco problems

The Asian Development Bank (ADB) has expressed satisfaction over the way the National Government handled the Severe Acute Respiratory Syndrome (SARS) outbreak resulting in a negligible impact on the Philippine economy.

The multilateral agency also saw "positive indications" in the case of the fiscal deficit that had been almost uncontrollable in the past five years.

However, ADB Philippine country manager Tom Crouch said that investors are starting to have negative perceptions towards the manner by which the National Government has been managing the overall health of the economy and the political situation.

"There is uncertainty in the perception of the investors on the NationalGovernment’s control in the political and economic problems," Crouch said during the formal launching of the bank’s poverty-alleviation joint venture project with the Philippine Business for Social Progress (PBSP).

The July 26 Oakwood mutiny, the alleged money laundering activities of First Gentlemen Mike Arroyo, the peace and order situation in Southern Philippines, the suspension of key central bank officials, and the 2004 national elections are among the critical political issues that are being anxiously watched by the foreign and domestic investors.

"The National Government can not ill afford to be careless (in handling the political and economic problems)," the ADB official cautioned.

The continuous weakening of the peso vis-à-vis the dollar has also raised concerns along with the national government’s ability to absorb ODA funds.

The cost structure of foreign debts is affected by the continued weakening of the peso vis-à-vis the US dollar. While the debts are mostly denominated in dollars, it is the debt servicing which will affect the national budget in that the value of the debt service will actually be higher.

Higher cost of debt servicing would in turn result in less funds for more critical areas of growth like education, health and other social services.

But it is the fiscal deficit that is considered the pricipal or primary barometer for foreign investors.

The Bureau of Internal Revenue and the Bureau of Customs have so far been making positive collections or meeting their targets which should result in higher revenue collections. In turn, less government expenditures should result in a lower-than-expected fiscal decifit for year 2003.

ODA donors such as the World Bank, the Japan Bank for International Cooperation, the International Monetary Fund, and the ADB are likewise concerned over who the key players are for the 2004 national elections.

"What are their economic and political programs, especially towards the existing and proposed ODA funds? Will there be continuity in these programs?" they asked.

The ADB expressed dissatisfaction over the inability of the Philippines to utilize approved loans amounting to $1.8 billion. Of the total, only $700 million has been utilized by the different government agencies.

The Philippines is one of ADB’s largest loan recipient, yet it is also one of weakest in terms of implementation.

This year, several major and minor program loans were reviewed and subsequently cancelled. The $175-million Grains Sector Development Program (GSDP) was junked lock-stock-and barrel.

The ADB also terminated funding for the Third Airport program loan in Mindanao amounting to $70 million and another $33 million for the Sixth Road Project.