Aborting economic take-off again?

What P-Noy made possible with our economy, he may just take back. We may not think much of P-Noy’s good governance mantra but there is no doubt it helped transform the country’s reputation from the region’s sick man to one of the most promising. Foreign financial analysts are probably too lazy to check things on the ground or just concerned with the short term.

Indeed, during the week when the country was angry with P-Noy and his mishandling of the Maguindanao SAF44 massacre, the economy was as bullish as ever. Positive sentiments arising from strong Philippine GDP growth projections for 2015 plus low oil prices and inflows from both from foreign and domestic institutions caused the stock market index to surge 6.34 percent in January to a new record finish of 7,689 (intraday record high of 7736).

Then, the Philippine Statistics Authority came out with the good news of stronger-than-expected 4Q14 GDP growth of 6.9 percent, pushing full year average to 6.1 percent.

Economic Planning Secretary Arsi Balisacan puts that growth rate in regional perspective: “on a full-year basis, our country ranked second next to China with 7.4 percent and slightly higher than Vietnam with six percent.  With this upbeat year-end performance, the economy is anticipated to gain further traction in 2015.”

Not only that… last week, while the Mamasapano crisis was consuming the nation, the Philippine peso strengthened against the US dollar as investors favored local assets amid optimism for the country’s economy. The peso gained three centavos to end the week at 44.08.

Bloomberg reports that the unexpectedly high Philippine economic growth last quarter capped the best three years of expansion since the mid-1950s according to data it has compiled.

“The key now is to accelerate infrastructure projects to expand the economy’s capacity and boost growth to the seven-to eight-percent level the government is targeting,” Michael Wan, a Singapore-based economist at Credit Suisse Group AG told Bloomberg. Low oil prices will keep inflation subdued, and “2015 should be another solid year,” he said.

A year ago, CNBC was just as positive about the outlook for the Philippine economy saying it appears to be sitting pretty, remaining on track for solid growth even if CNBC writer Leslie Shaffer warned some concerns are emerging and wondered if a bust could be on the cards.

So, what could go wrong? What could rain on our parade? What could be the bust in the cards the CNBC writer warned about?

Last year and specially now, it is in a word, politics. Specially in view of what happened last week, P-Noy could be a problem. The goodwill that came with P-Noy’s election in 2010 could just turn into a negative.

The good governance story is starting to wear out as investors realize that this is mostly hype and has not trickled down to the bureaucracy that interacts daily with business specially at the lower levels of the bureaucracy and at the LGU level.

The PPP pipeline is as clogged as ever. Their press releases claim they have “rolled out” quite a number of projects but completion or even breaking ground is another story. The first PPP project to be awarded, the four-kilometer 4 lane Daang Hari Road connection to the South Luzon Expressway is still work in progress.

As for the transport infrastructure projects of DOTC, I guess we have to write off most of them in terms of contributing to GDP during the remainder of P-Noy’s term. The LRT2 extension has been awarded on paper but yet to break ground. We haven’t heard much about the provincial airport projects.

Cebu Mactan should be alright because the private sector Megawide consortium is doing that. They have also awarded Puerto Princesa airport but there is little news on progress. They need a new airport badly in Bohol but last I heard they are still debating where to put it. The same with typhoon damaged Tacloban airport where there is an ongoing debate on whether to keep its present site or move it.

The bigger worry I have has to do with political risk. Today it seems foreign observers think political risk is at its lowest. But unless P-Noy is able to win back the respect of the police and possibly, the soldiers as well, political risk may become an important factor for investors to consider. This becomes a concern specially if it turns out last week’s Mamasapano carnage caused a serious credibility problem for P-Noy among the general population.

The change of administration through the 2016 elections is unsettling enough. But a restive situation among our armed services is definitely something to worry about. Many are angry because of the perceived failure of their chain of command to look after the SAF44 in the heat of battle.

It has happened before. Every time our economy is poised to take off… we always do something to abort the take off. The coups during the Cory years, for instance, nipped in the bud a fast growth rate for the economy generated by a euphoric return to democracy.

The next few weeks should bear watching. Negative things in the horizon like the potential for massive power outages as the summer season kicks in will make P-Noy’s public standing suffer even more.
It is good to know that international financial institutions are bullish about our economy’s growth. I hope we can live up to their expectations and not shoot ourselves in the foot at moment of take off.

Our future

We got this e-mail from “JJ” reacting to a column last week.

As per Peter Drucker’s quote “Mediocrity breeds mediocrity”. It seems this quote is the rule rather than the exception on how our current administration is operating.

Even our industry leaders have accepted the mediocre character of our government system that as long as the President does not rock the boat and allow the business to earn money, it’s ok to have an incompetent President. The taipans and captain of industry will divide their financial support to all Presidential candidates to make sure that they are in good graces with the Malacañang occupant.

Our country despite of the supposedly growing economy will be definitely left behind by Vietnam and even Myanmar because the leaders of these countries are very competent. Unless we elect a competent and decisive President in 2016, we will be in a rude awakening that our country is no longer the second highest growing economy in Asia.

Ours is a very consumption dependent economy with expensive and unreliable electricity in the next 10 years. The worldwide cheap oil will provide more growth to the more industrialized countries in ASEAN like Indonesia, Malaysia, Thailand and now Vietnam.

Coupled with the ASEAN integration, our manufacturing industry will have a tough time fighting the imports coming from the neighboring countries. As usual our only savior will be the OFW, however their earnings will still remain the same which will maintain the consumption dependent economy.

As the kanto boys in my area would always say “Wala na tayong no choice” with the current President. Our current concern should be the next commander in chief we will elect in 2016. The big question is, do we have good Presidential candidates for our electorates to choose from.

Now is the time that major networks ABS-CBN, GMA and TV 5 plus the newspapers like Philippine Star to project potential candidates that will provide the impetus for growth for our country. We need a decisive and competent leader who will sow fear in the hearts of these MILF rebels that peace is the only option… unlike the current administration where peace is very loaded in favor of the MILF.

I hope Lacson, Duterte and even Joey Salceda throw their hats to the Presidential ring. Your friend Mar Roxas ambition to become president is very remote by 2016… even becoming a senator will be a hard sell to the electorate. Also, PNoy has become the GMA of 2010 that any endorsement from Aquino will be a kiss of death.

History is repeating itself. What has happened in Maguindanao in 2009 that affected the then current administration’s bet is already happening to the probable administration’s bet in 2016.

If you will read the reactions of the netizens the past week, a lot of them are very frustrated with the speech and actions of President Aquino. All of us stakeholders should now put into motion to demand a better choice by 2016. No more mediocre, untested leadership traits and media hyped candidates. We deserve to have the best choices because we are paying 32% percent of our incomes and at least 12% is added to our purchases to finance our government.

Oopps…

There was a technical error in the column last Monday which omitted the link to the article of Criselda Yabes. Here is the link: http://www.positivelyfilipino.com/magazine/for-the-fallen

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