Under promise, over deliver

It is really frustrating to see the P-Noy administration falling for the same mistakes of the Arroyo administration: it over promises and under delivers. The reverse is what it should be.

I guess that’s the sickness of politicians. They have this over eagerness to promise more than they can deliver. And when they fail to live up to the promise, they blame external factors.

They are also prone to claim credit for good things happening even if their role is largely incidental. Both the Aquino and Arroyo administrations were quick to claim credit for good macroeconomic numbers or a bullish stock market and even for, strangely enough, a strong peso. But become eerily silent or mumbling excuses when the good trend reverses.

And it isn’t just the politicians who are guilty of this fault. Even the technocrats, the economic technocrats who should know better are quick to claim credit where credit is not in honesty, totally due.

During that bad Tuesday last week when the local stock market index went down the lowest since the 2008 financial crisis, our economic managers were at a loss for explanations. It was easy to blame international economic developments and indeed that’s what it was about. But people are wondering: what happened to everything they have said about how great our economic situation is?

Actually, even market analysts were divided on how to explain the 318 point drop in the index June 11 and 442 point drop the next trading day June 13. Our own PhilStar columnist Valentino Sy explains “the indiscriminate selling which caused the market to drop and the peso to depreciate sharply has nothing to do with fundamental reasons, but because of the unwinding and indiscriminate selling by foreign funds which at some point will end.  Fundamentals not only remain the same, but have actually improved.”

Sy bravely predicts that “when deleveraging ends and normalcy returns – we believe that fundamentals will prevail.”

Indeed, inflation is benign and our fiscal health is great. OFWs and BPOs are generating enough forex to help us withstand hot money outflow. But the administration can’t claim much credit for what OFWs and BPOs do for our economy.

Business Mirror columnist John Mangun, who is also active in the local market, has this view: “Three pieces of information negatively impacted local investors’ stock-market sentiment.

“Merchandise exports declined 12.8 percent year-on-year in April. While the export business is only a small contributor to the overall economic activity, a few million Filipinos depend on the income that exports provide. The key to the deal about our exports is that in two major markets, consumers are not buying. Shipments to the US fell 10.2 percent and those to China dropped 8.3 percent. One month of data does not make a trend. However, April exports fell 6.7 percent from March…

“More depressing news came with the latest unemployment numbers. The National Statistics Office (NSO) Labor Force Survey reported that unemployment in April reached 7.5 percent, significantly higher than the 6.9 percent in the same period last year. Our current unemployment rate is the highest since the eight percent recorded in 2010…

“While not the first time this has happened, the Philippines in March accomplished something that is usually expected of nations in a civil war or experiencing economic collapse: negative foreign direct investment (FDI). A year ago, FDI was a positive $178 million, which in itself is a grain of sand on the global beach of foreign investment. But this time, Philippine FDI actually lost $78 million, meaning foreigners took more investment money out of the country than they brought in. FDI is the ‘good’ kind of investment that is going to create jobs. In fact, total first-quarter net FDI is 8.5 percent lower than in 2012.”

AFP, the French news agency explained that “investors have begun pulling money out of emerging economies mainly because they think that the US Federal Reserve may be about to wind down its easy-money policy which has supported the economy and pushed funds into the financial system.

“This prospect has reduced the willingness of fund managers to take risks even though only a few months ago their focus was more on a rapid rise of stock markets and signs that maybe assets prices were overheating.”

But our officials presented to us a raging bull market which they claimed was brought about by increased confidence in P-Noy’s Daang Matuwid program. It had been shown last week that the raging bull market was more because of factors in the world financial markets.

All that money printing of western central banks were finding their way to our market and now they are mostly going back home. At that time, investors were turning a blind eye or discounting structural problems in our economy. Now, all those factors are important again as Mangun pointed out.

This is why I have always said during Ate Glue’s watch, and also now during P-Noy’s, that there is a need to always tell the people what’s really happening. Painting a momentary positive development as a consequence of good Palace management has a way of reducing credibility when it turns out it wasn’t really just so.

I will concede the point that P-Noy’s image as a clean, anti-corruption fighter contributed a good portion of the favorable economic news generated in recent years… maybe including the credit ratings upgrade. But there are still so many fundamental changes P-Noy has not acted on or refuse to act on before he can claim he is responsible for the good news.

Rather than just the GDP number, we need to dramatically bring down the unemployment figure. To make that happen, the FDI rate will have to go up too. Constitutional changes in the economic provisions are needed to show the world we are no longer hopelessly protectionist… there is level playing field. Those are the easy ones.

The more difficult one has to do with dramatically improving the investment climate. That includes bringing LGUs to agree to cut red tape and corruption. And an honest judiciary and a noticeably less corrupt Customs bureau would be nice. That will make even locals invest more here rather than keep their money in bank vaults. In short, job creation and cutting poverty and hunger rates are the most meaningful measures of economic progress for us.

In large part, the good news the Palace was claiming it generated was due to international economic developments that benefited emerging economies like ours. And what international economic developments gave, it also took back last week.

Some cabinet members in the economic cluster must not play amateur PR. They don’t understand the making of public opinion and end up promising a lot and delivering little. The much ballyhooed PPP program is a good example of that. The drumbeating on the credit ratings upgrade and unusually high GDP numbers are other examples.

Thus, when things don’t work out we have observers like Mr. Mangun validly pointing our: “On the way up, the government was saying how its economic policies were responsible for the PSE reaching record highs. Now there is silence about why the market was down on our very bad Tuesday. Success has many fathers, but failure is an orphan.”

It also doesn’t help the Palace when they try to nitpick official statistics. It is probably true that changes in weather patterns resulted in a higher unemployment rate in the agricultural sector that affected the national figure. But the effect of weather is minimal and the fact remains our underemployment rate remains high. And that in itself is very bad.

I am hoping to hear a truly realistic SONA from P-Noy next month that identifies in no uncertain terms the most important problems and what could be reasonably expected from him. If it is clear that DOTC will be unable to deliver any project before 2016, he should say that now and reduce expectations and frustrations.

P-Noy effectively got a reaffirmation of his mandate in the last election when his senatorial ticket decisively trounced the opposition. It is only fair that he must tell the people, his bosses, what he is ready to deliver to them in return.

Let us have a report card by which we can measure the success or failure of this administration. No one expects P-Noy to solve our long term problems but surely he must make a discernible dent before he leaves office.

From now until 2016, P-Noy and his boys must under promise, but work like mad to over deliver. That’s how he can be remembered positively after he has gone back to Times street.

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 Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco