Those were words uttered by Alan Greenspan and he was talking about America’s fiscal deficit problem last week. He could have been talking about ours, and with a lot more urgency. The elections may be over, but the reality of our economic crisis stares us in the face, crying for attention. As John O’Callaghan of Reuters wrote late last week, "no matter who wins on Monday there will be no easy solutions to the economic, security and social problems that continue to plague the archipelago nation."
Indeed, "old millstones of debt, graft, poverty and division await her, or any other leader, from the first day in office." Investors will quickly refocus on the health of debt levels, tax collection, exports and the peso, Mike Moran, regional economist at Standard Chartered Bank in Hong Kong told Reuters.
"I don’t think it makes any difference whether you elect Gloria or you elect FPJ," Scott Harrison, managing director of Manila-based risk consultancy Pacific Strategies & Assessments and a former official at the CIA told Reuters. "Both of them will not be able to solve the problems of the Philippines. They don’t have the resources," he said.
The euphoria and the anguish related to last Monday’s electoral exercise are still keeping adrenaline levels pretty high. The counting, at least the official one, would probably go on for a couple of weeks or more. There is a need to urgently reverse official populism and address the damage to the economy and to our prospects for economic growth arising from our kind of politics.
On the one hand, there is her populism that made Ate Glo the only economist I know who seems to believe in "the free lunch." On the other hand, there is the destructive kind of opposition from the Erap and Angara camps that made damn sure she would fail from the first day she assumed office. It didn’t matter to the opposition that the country suffers as a consequence of their blind anger and vengeance.
The final outcome of yesterday’s exercise will not change the awful reality that faces the nation. Last week, we wrote about how the fiscal deficit problem and its neglect by our politicians are taking us down the road recently traveled by Argentina. That neglect, and the fact that we must borrow to service debts of US$61 billion rather than build basic infrastructure, is a negative consideration that make potential investors lose interest in us.
Foreign aid allocations to help build urgently needed infrastructure go to waste because we do not have necessary counterpart funds. Investors also think twice before risking capital here because we still have to fix security, reduce graft and work with the judiciary to remove legal uncertainties, all major concerns for investors. We need resources to do all that, assuming we finally elected a real leader yesterday.
Then, there is our shocking decline in competitiveness. We have declined to 22 from 18 out of 30 countries reviewed, according to the World Competitiveness Yearbook. To the extent to which technological, scientific and human resources meet the needs of investors, we rank 30 out of 30 in terms of basic infrastructure.
We are number 30 out of 30 in terms of ideal pupil-teacher ratio; 30 out 30 for dependency ratio (working people and their dependents), 30 out of 30 for pollution problems; 30 out of 30 in terms of distribution infrastructure and 29 out of 30 in terms of expenditure on research and development.
While we still rate high in terms of trained manpower, that advantage is fast being eroded because we have somehow neglected public education for many years now. While education still commands the largest share of the budget after interest payments, its share has gone down from 20 percent in 1997 to 15 percent this year.
On the other hand, interest payment has gone up from 16 percent in 1997 to 31 percent this year, denying education an increased share that is commensurate with population growth. Then again, the total national budget may have gone up from P476 billion in 1997 to P864.8 billion this year but in dollar terms, it has declined from $18.2 billion in 1997 to $16.1 billion this year.
The key thing here is, because we must service our giant debt, we no longer have the resources needed to train and educate our people, supposedly our best and most important natural resource. An educated population is our current competitive edge, the one thing enabling us to earn all that foreign exchange from millions of Pinoys working abroad. If we lose that edge, we can’t get those foreign jobs or those outsourced jobs from abroad. All we are left with are more mouths waiting to be fed.
As if the troubles we caused are not enough, there are also problems we are powerless to influence one way or another. I am talking about rising oil prices. The era of the $40 a barrel oil is now upon us. Panic created by the violent attacks on foreigners and oil installations in Saudi Arabia has caused the oil market to move to the stratosphere.
Market analysts are worried that Islamic terrorists may succeed in causing sufficient damage to Saudi oil facilities or cause a political upheaval that would remove the House of Saud from power. Such a catastrophe would remove about 60 percent of the world’s crude oil supplies and put the Islamic militants in the driver’s seat.
It does not help at all that there is increased world demand for oil, not only from the United States but also China. Any abnormal price movement or supply disruption would cause resurgent economies to falter. America is particularly vulnerable, given the tentativeness of its economy’s recovery and the seriousness of its fiscal deficit problem. The stability of the dollar would be affected and if that happens, so would we.
This is why I say, let us get the counting of votes from last Monday’s election done as quickly as possible. We must know with all legal certainty who our next leader is. We all have to unite behind this leader quickly, if we are to alleviate the negative impact of our domestic and international problems.
The elections are over. The only winners we should be concerned about are the Filipino people. A government of national unity is going to be our best bet to survive the turbulent months and years ahead.
"A politician thinks of the next election. A statesman, of the next generation."
Unfortunately, we are plagued with a surplus of politicians and hardly any statesman. Or why would we be in this mess?
Boo Chanco’s e-mail address is bchanco@bayantel.com.ph