Strong peso a vote of confidence

The Luneta hostage crisis and its less than competent handling will likely have a negative impact on international confidence on the new administration. Sayang. Up until last Monday, the strong peso was already being seen as a vote of confidence for the new P-Noy administration.

Our ability to shoot ourselves in the foot just as we are about to take off is legendary. And last Monday, we were true to form. While hostage taking can happen in any country, what the international community is angry and disappointed about is our very visible mishandling of the whole thing.

Based on what the world saw on live television, the police could have immobilized the hostage taker as early as before noon. That was when he was on the steps of the bus seemingly posing for photos as published in the websites of our news organizations. A police sharpshooter could have taken him then. We should have a rule that once anyone does something like hostage taking, the first order of business is to immobilize or even kill him.

Well, the hostage crisis will probably moderate the peso’s strength as investors entertain serious doubts on the competence of the new administration. Our exporters and OFWs may yet be saved from the problems related to a strong peso in the worse possible way.

Up until Monday, there were concerns about the strengthening peso. Nicholas Kuan, research head of Standard Chartered Bank suggested that Filipino-owned companies should be encouraged to invest in ventures offshore to help prevent a steep rise of the peso. He is seeing a surge in foreign capital inflows in the months ahead.

We have not previously benefited from positive investor sentiment for emerging economies because of the very negative international image of the previous administration. The election of Mr. Aquino has changed investor sentiment to positive even as investors are also still waiting to see solid proofs of change specially in the areas of corruption and infrastructure.

Standard Chartered expects the peso to settle at P44.50 against the US dollar by the end of this year and to strengthen further to P41.50 in 2011. Currently, the peso hovers in the P45-to-a-dollar territory, appreciating from its average in 2009 in the P47 level.

In any case, Albay Gov Joey Salceda was unimpressed by the suggestion of the StanChart analyst for our policymakers to encourage Filipino investments overseas. Gov Joey asserts that “if local firms invest at home, it would have similar effect on the peso since investments in the Philippines require massive importation of capital equipment and raw material and therefore would use up forex.”

Joey thinks that local entrepreneurs and firms should show more faith in the local economy as a means of encouraging foreign investors to come in. He cited statistics showing that “the Top 1000 SEC have accumulated profits of P3trn plus non-cash of P1trn over the past ten years but reinvested only P1.1trn…”

Gov. Joey continues: “With investment rate at only 14 percent of GDP, way below our neighbors and the required rate of 23 percent to grow 8-10 percent, there are enough domestic opportunities in modernization of existing inventory of infrastructure and industrial plant and equipment and in the expansion of capacities in tourism, transportation, housing, IT and IT-enable services.”

The Albay Governor sees the first wave of investments under the Aquino administration to likely focus on items that reduce costs of doing business or enhance ease of doing business. The government is targeting 18 percent investment rate in 2011 basically from private domestic sector given fiscal constraints capping public infra.

“That would require total private investment of P940bn – the import content would at least account for 50 percent of investment costs or $10.4bn. Furthermore, the government is reducing its own foreign borrowing program, so its capital outlay of four percent of GDP and its import content would likely draw down on the regular forex flows.”

There is no shortage of things investors can invest on locally. Agriculture is a good place to start. I recall a proposal worth $1-billion made by San Miguel Corp. and the Kuok Group on food production. San Miguel had said that it is ready to provide financial and technical expertise for the development and cultivation of the food plantations, the produce of which all would be bought by SMC.

After a lavish ceremony attended by then President Gloria Macapagal-Arroyo, Kuok Group chairman Robert Kuok, then Agriculture Secretary Arthur Yap, SMC chairman Eduardo Cojuangco Jr. and SMC president Ramon Ang, nothing more was heard of the project. It was typical of the press release mentality of the previous administration… Ate Glue thought her job was done after the ceremonial signing and press release.

Government was supposed to identify the idle lands that could be used in the project but it apparently failed to do this. Now, DENR Secretary Ramon Paje has said he will do what is expected of his department: identify the million hectares of idle land to help boost production of rice, corn, sugar and other crops in the Philippines.

But this is not the only such project that failed to see the light of day. As I had been writing in this column, I personally witnessed the signing of MOUs for similar projects when I joined trade missions to China during the previous administration’s watch. The big Chinese agricultural companies also promised financial and technical assistance plus a ready export market in exchange for our providing land and manpower for such agricultural ventures.

I was told they encountered legal problems, land reform implications among others. But we have a surplus of lawyers in this country. Surely there should be enough lawyers savvy enough to craft the legal framework that would make such ventures possible under our current constitution and other laws.

Then again too, we have to do something about peace and order. An ex-cop holding a busload of Hong Kong tourists hostage resulting to eight deaths and a South Korean being killed by gunmen as two others are kidnapped are not the kind of stories that build confidence in a country. The story on the Koreans said: “The motive for the attack was not clear, although kidnap-for-ransom gangs often target foreign tourists and businessmen in areas near Manila and in the provinces.”

Not very reassuring for investors to come here, no matter how positive their sentiments on P-Noy may be!

Yangzhou

One of the Chinese cities we visited last week was Yangzhou, more familiar to Filipinos because of the Yangzhou fried rice dish we all enjoy here. Unlike lumpiang Shanghai which is non existent in Shanghai, Yangzhou fried rice is an authentic Chinese dish and the one they served us tasted like the one we have here.

Located in Jiangsu province, Yangzhou is a city of about four and a half million people with some 2,500 years of history. We were told that Marco Polo once served as a municipal official here. Yangzhou once upon a time acted as a major national political, financial and trade center and a transport hub.

Historically, it is one of the wealthiest of China’s cities, known at various periods for its great merchant families, poets, painters, and scholars. According to Wikipedia, it is the most intensively researched city in Chinese history after Beijing and Shanghai in English-language scholarship.

Local officials led by its vice mayor and those responsible for foreign affairs in the local government hosted our group to a grand dinner in a historic house once owned by a wealthy salt merchant. Salt was the product that made many Yangzhou natives very rich in olden times.

Every dish served during that dinner was delicious and different from the usual Chinese food we get in the Philippines. One of the dishes which I hesitated to eat but was prodded successfully by the vice mayor to try is the poisonous puffer fish.

I was reassured that the chef was licensed to cook the special dish. But I still voiced the concern that the chef may have fought with his wife before coming to work and may not have been as attentive to details. Well, I survived. And that dangerous dish was easily the highlight of that banquet for its exquisite taste.

Now I am sure Yangzhou has plenty more to offer than Yangzhou fried rice!

Trivia

Atty Sonny Pulgar sent this one.

Well, I lost the Trivia Contest during our church pot-luck dinner last night by 1 point! Not only did I get the last question wrong, but was immediately asked to leave.

The question was: “Where do women have the curliest hair?”

Apparently the correct answer is *Fiji Islands*

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