The BSP's Domestic Roadshow

Last Monday, March 5th, I had the opportunity to attend the Philippine Economic Briefing or the so-called Domestic Roadshow sponsored by the Bangko Sentral ng Pilipinas (BSP).

In addition to being a participant, I also served as panelist along with the RDs/ARDs of other regional offices but we have not responded to any issues and concerns raised by the participants from the private sector, mostly from the banking industry as the resource speakers/presentors took up the cudgels.

Among the speakers was our own Secretary, Rolando "Nonoy" Andaya. The others are his co-members/representative of the Economic Team: Secretary Teves of the DOF, Secretary Favila of DTI, Usec Ocampo of DOE, Director Amador of BSP, and Director Valero of NEDA Region VI.

The speakers took turns in presenting the state of the Philippine economy for the year ended 2006, the fiscal and monetary policies being pushed to sustain the economic momentum, and where we are headed in the medium term. More on this in the next post.

What's so special about Moody's rating?

It's all over in the major dailies! Business World reports: "Moody's lifts RP outlook to stable from negative". Business Mirror's headlines reads: "Moody's tag on RP credit now "stable". Not to be outdone, Inquirer, the country's most widely circulated newspaper posts in its Nation-Headlines: "RP credit outlook gets upgrade". But the most flattering of all the news on the credit upgrade is the one posted over the gov.ph website: "Moody's upgrade a vote of confidence for govt. economic reforms - PGMA".

To borrow a line from the rock opera, Jesus Christ superstar: "what's the buzz, tell me what's happening, what's the buzz". For one, the U.S-based Moody's Investor Service, a global debt watchdog is considered the most pessimistic about the Philippines among credit rating outfits - which includes the likes of Standard & Poor's and Fitch. The last two agencies have upgraded their ratings on the Philippines earlier this year to stable ("BB-" and "BB", respectively).

Thus, Moody's "B1" rating is some sort of a vindication or as the President puts it, a vote of confidence. It's positive effect on the economy can be summed up: (a) expected to boost financial market's confidence on Philippine stocks; (b) result in lower borrowing cost for both government and private companies; (c) strengthen the peso even more.

Why the upgrade? In a statement from Singapore, Moody's Vice President Mr. Thomas Bryne said "Based on fiscal performance through the first three quarters of 2006, it seems likely that the government will readily meet its deficit reduction target for the year as a whole".

The Moody's report also cited certain challenges that the country is confronted with, thus: "the economic necessity of trying to lure investors by way of putting up infrastructure would place additional pressures on the government's budget"; the Philippine remains highly indebted compared with other countries; and political will and strong support form Congress are necessary to sustain recent accomplishment.

Will the credit rating further improve? Moody's prescribes that "there needs to be a continued significant deficit reduction and decreased reliance on external financing by the public sector".

Big Business' "must-have" Resolutions . .

In response to World Bank's synthesis of the Philippine economy (my post of 10/19), the Philippine Business Council (PBC) will present to the President during the closing of the 32nd PBC annual meeting - three (3) sets of resolutions. PCCI President Donald Dee categorize the resolutions into "must have"; "nice to have" and "wish we could have".

The resolutions were focussed on infrastructure development, tax and reducing the cost of doing business. Under the "must haves", businessmen identified 20 priority concerns, mostly infrastructures. Let's dwell on this:

• transparency in procurement of infrastructure projects through open and competitive bidding (thought GPRA is already in place);
• on energy - reducing the cost of electricity by reducing EVAT on fuel from 12% to 5% and transmission cost by 30%; repeal of Electric Power Industry Reform Act;
  
• on airports - extending the "open sky policy" to other airports of the country, in the process, declaring airports like Subic-Clark, Laoag, Puerto Princesa, Davao, Cebu, Laguindingan and our own in Iloilo as open for international routes and as regional hubs;
• on seaports - privatization and modernization of North Harbor; fasttracking bidding of Batangas International port;
• on roads and highways - DPWH to enter into MOA with private proponents of toll road projects; resolution of road-right of way problems;
• on water - fasttracking of passage of bill strengthening the Water Resources Board;
• on agriculture - intensifying hybrid rice and corn program; giving preferential sugar tariff rates for producers and exporters;
• on taxation - retention of incentives to all export-oriented enterprises including income tax holidays, etc;
• on good governance - DOF to fast track implementation of the Lateral Attrition Law and streamlining of Customs Systems and procedures to facilitate trade; DTI to streamline procedures and reduce charges for business licenses.
  

There are several others that may warrant disclosure in this post but will reserve these next time. My fervent hope is for the national leadership to heed this business call. This is the only country we have. We live and die here - so let's go for it!

Are we heading for economic take-off?

World Bank says it's possible by 2010 . . but government should heed this prescription: "restore the country's international credibility by sending a strong policy signal" that will improve the climate for business and investments. Mr. von Armsberg, World Bank country representive urged the government to follow the rule of law, enforce contracts, pursue deregulation, and reduce transaction costs and red tape.

As it stands now, the Philippines is at the tail end (buntot) behind its ASEAN neighbors in attracting foreign direct investments (FDI). Of the $37.14 B FDI that went to Southeast Asia, last year, the Philippines garnered only a measly $1.13 B, Vietnam took $2 B, while Thailand and Malaysia $4 B each. The oftenly repeated litany of investment constraints attributing to this measly performance are: macroeconomic instability, corruption, poor electricity, high tax rates, uncertain regulatory policies, crime, and stringent labor laws.

To top it all, here's some mind-boggling yet real statistics: our average GDP annual growth is a little over 1% between 1966 to 2004, while the rest of East Asia was at nearly 6%. Our economic growth is fuelled mainly by OFW remittances and household consumption rather than by investment and productivity. We are Asia's second most active issuer of sovereign debt after Japan. Wow! "Blessed are the young for they shall inherit the national debt." We ranked number 83 in Human Development Index (HDI) with a score of .753. The World Competitiveness Yearbook ranks us 61st in the provision for basic infrastructures; 57th in Education; and 53rd in health services - out of 61 countries. Need to know more? The 2006 World Economic Forum report places the Philippines 77th in terms of competitiveness, while the International Finance Corporation put us 126th out of 175 countries in being business friendly. Singapore is No. 1, Malaysia and Thailand - 18th and 25th, respectively.

Let's not be carried away by negativism and desperation. Our consolation - we still retain the distinction as the texting capital of the world with an average of 1-B SMS a day. We have 28-M mobile phone subscribers, 96% of which use prepaid cards. Most recently, the Britain-based New Economic Foundation places us as the 17th "Happiest country" in the world.