Where is all that money going?

We have been told that the Philippine elite are cornering a good part of the growth in our GDP. The interesting question is… where is all that money going?

Expensive cars? Possibly. We see a lot of those around. That probably explains why Robert Coyuito Jr. is now the country’s eighth ranking Filipino dollar billionaire, with a net worth $200 million larger than Jollibee’s Tony Tan Caktiong. Coyuito is, among others, the local distributor of high end cars like Audi and Porsche.

But they can only buy so many cars. Besides, buying one now guarantees an automatic BIR review of one’s income tax return. And using family owned or even publicly traded corporations under their control to buy those expensive cars is not as simple. I am told the BIR has ruled that any car bought for over P2.5 million can no longer be charged as corporate expense.

High end condos? They are buying a lot of that too. In fact, the more expensive condo units in the reputable developments often sell faster.

But in the condo market, foreigners are driving the sales too. David Leechiu, country head of Jones Lang LaSalle, told abs-cbnnews.com that many Hong Kong, Singapore and US citizens are buying condominiums here.  

“There’s a cluster of buildings (near De La Salle University in Taft Avenue) where 500 individual Singaporeans have bought property 18 months ago. They made installments and all they’re looking to do is get higher returns on their money...That’s probably the most interesting trend we’re seeing,” he said.

And yes, the local rich folks are buying up property too. That explains why property prices in the top subdivisions in Metro Manila and Cebu are appreciating beautifully. It helps that renewed foreign interest in investing in the Philippines is also creating a market for rentals.

The Sys in SM and the Gokongweis are investing heavily in property and mall development here. The Ayalas are doing that too and have added power plants in their portfolio. The Aboitizes are putting money in power development, as are the Lopezes. We have yet to see significant investments from the local elite in manufacturing and agriculture, the segments of the economy where jobs have to be created the most.

The taipans are investing abroad, in China particularly. Meralco and the First Pacific Group just announced they bought into a power plant in Singapore. Of course they have long been buying real property in the US, Hong Kong among other places.

What about you and me who read the PhilStar business section? It takes so little to be considered a part of the elite. Most of us would probably feel very surprised that based on our income profile, we are already part of the elite even if we feel pretty much “masa”. If you have some amount of disposable income or savings, you would likely be classified by national statistics as part of the elite.

Where do you put your savings… you petty elite you? Our reflex reaction is to put excess funds in a savings or time deposit with a bank. But interest rates are next to nothing these days in those accounts. You lose out to inflation.

Indeed, the BSP has reported that people have been bringing down the levels of their savings and time deposits in local banks by quite a bit over the last year. Government bonds are also useless for the retired folks living off interest income. Good for the National Treasury, bad for retirees.

For a while, many of us were putting our money in special deposit accounts with the BSP because it paid better than the usual deposit accounts. The SDA is a mechanism BSP uses to mop up excess peso liquidity in the system that has also been brought about by BSP buying all those dollars for pesos to keep the peso from getting too strong.

That SDA option is also no longer as attractive. The BSP is incurring a substantial loss paying an interest rate for all those pesos it has sterilized that is higher than the interest BSP can earn on the dollars it has bought. So the BSP has decided to bring down the interest rates on SDAs too with the idea that banks and rich folks will get off their comfort zones and do something productive with their money.

Luckily for many of us, the stable exchange rate, indeed, a strong peso is attracting foreign fund managers. It helps that we also now have an economy with strong forex flows from OFWs and BPOs fueling a consumer boom. The local stock market as a result, is setting new highs all the time.

Local investors are now taking a larger position in the local equities market that had long been dominated by foreign buyers. Banks and insurance companies like SunLife, Manulife and Insular Life have successfully convinced middle class investors to buy into their investment funds that buy into the equities market. Other local investors are even braver as they pick and choose from among the issues being traded at PSE.

Maybe some of that money seeking better returns will also be invested in small and medium scale enterprises that create jobs. Maybe those SMEs will produce new entrepreneurs like the one who made himself a billionaire out of something as simple as Mang Inasal chicken and its all-you-can-eat rice.

As for the real elite, the oligarchs so to speak, not the fake elites like many of us who got into the classification due to sheer statistical accident, it is hoped that they will invest beyond their comfort zones. They should take more commercial risks in manufacturing and think in terms of the Asean market. This is how to create jobs that bring about more social harmony which is also to their interest.

The local elite should also loosen their grip on the economy by allowing competition laws to accomplish what more level playing fields have done in some more mature economies. The good governance thrust of P-Noy is a good start but not nearly enough to make inclusive economic growth attainable soon.

Maybe if the economy starts moving up the next levels, more people can get excited over GDP growth rate increases. Until then, more than half of our people will remain mired in poverty. Heaven knows we can’t go on like this much longer. Something simply has to give at some point in time.

CAAP

If it is true that ICAO has been satisfied by the reforms instituted by CAAP so far, that is indeed a feather in this administration’s cap. The downgrade happened during the Arroyo watch when then DOTC Sec Leandro Mendoza simply ignored the problem and just passed it on to the new administration.

But I find it strange ICAO has not said anything official. All the good news statements are coming from Philippine government sources. I give them the benefit of the doubt and hope their story is corroborated soon by ICAO.

In the meantime, there is still a lot of work to be done. Here is a letter I received from Leo Tecson, a PhilStar reader.

A classmate who is a retired international PAL pilot with the rank of captain gave us a talk during our regular first Friday class reunion. He said that NAIA is one of the most dangerous airports in Asia since the navigational aid equipments are always on the blink, and this is most dangerous during bad weather. 

I can attest to this, a few years ago we were flying back to Manila from Cebu and kept flying around when we got to Manila. The same retired pilot told us that the reason we kept going round and round in circles is because the radar in NAIA broke down and so slowed the landing of planes.

 He said appointing Air Force generals to head CAAP is less than useless.  He said our Air Force bases have less navigational aids than NAIA and so the generals have little knowledge of the navigational aids that passenger jets require.

 He said that the most modern planes are all computerized and all the pilot has to do is to input his destination in the computer and the plane will fly to that direction and I think practically land itself with the aid of navigational aids, thus the importance of maintaining them properly.

Directions

Speaking of navigational aids, actually there were four wise men on the way to Bethlehem. One of them said he knew a shortcut.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco