Gov’t, business watch Trump’s first steps

BOTH the government and the country’s business community are waiting with bated breath to see how US President Donald J. Trump will translate to specific moves the “America-first” policy he proclaimed in his inauguration speech last weekend.

Saying that “[e]very decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workto ers and American families,” Mr. Trump then had declared: “Protection will lead to great prosperity and strength.”

Philippine officials viewed Mr. Trump’s message with caution.

“We need to see his protectionist stance translated into policy… what the policy will turn out to

be… within the first 100 days. I’m sure things will crystalize soon,” Rosemarie G. Edillon, deputy director-general of the National Economic and Development Authority, said in a text message when sought for comment.

“Of course, we also need to monitor how Fed(eral) Reserve would react to Trump’s protectionist stance.”

The Fed raised rates by a quarter of a basis point last month — the second such hike in nearly a decade of near- zero levels in the face of signs of sustained economic improvement — and has signaled prospects for three more increases this year, in turn heightening volatility in markets across the globe.

Ms. Edillon added that much will also depend on Mr. Trump’s choice of economic managers saying: “If we know what their philosophies are, dun natin makikita (we will see) if it will be protectionist… and we also need to see if the US Congress will be supportive of his policies.”

For now, Budget Secretary Benjamin E. Diokno said, the economy rides on a strong domestic economy that has so far weathered external headwinds.

“Right now, we control our future,” Mr. Diokno said via text.

“It is less dependent on what Mr. Trump does or fails to do.”

Trade and Industry Secretary Ramon M. Lopez said he is monitoring “more concrete pronouncements on trade, healthcare, tax reform and infrastructure spending.”

WAIT AND SEE

But the Philippine business community is preparing to navigate more uncertainty as Mr. Trump ushers in a new era of trade protectionism, even as leaders of the sector downplayed its impact on the country’s business process outsourcing (BPO) industry that has increasingly become a key driver of the economy.

Several business executives and analysts said it was too soon to comment about the impact of Mr. Trump on the Philippines, underscoring the fog of unpredictability that continues to envelop the market.

“At this point, everyone is taking a very cautious wait-and-see approach, but [Mr.] Trump’s ‘ buy American, hire American’ motto could eventually translate into protectionist policies that could imperil Asian economies, which rely on American export markets and capital,” political analyst Richard F. Heydarian said.

A barometer of investor confidence, the Philippine Stock Exchange index (PSEi) slipped last Friday and was little-changed for the week ahead of Mr. Trump’s inauguration, as investors stayed on the sidelines awaiting clearer policy direction from the new leader of the world’s biggest economy.

“I think his influence may be more negative than positive for the Philippines as a whole given the slant of his pronouncements throughout the campaign period and after,” said Jose Luis F. Gomez, president of RCBC Capital Corp.

His election victory strengthened the US dollar on bets that infrastructure spending and tax reforms will spur economic growth, prompting the Fed to signal more interest-rate hikes on the horizon.

That, in turn, sparked a selloff in local equities, sending the benchmark PSEi to a second straight year of decline.

“Local corporate deals won’t really get too affected. Our markets are resilient enough especially for peso bonds and domestic-only (initial public offerings). The local investors are still hungry for good assets,” BDO Capital and Investments Corp. President Eduardo V. Francisco said.

PwC Philippines — a provider of audit and assurance, tax and advisory services to corporates — said Mr. Trump’s speech projected a “protectionist environment” and could derail plans of American firms wanting to expand or move their operations to the Philippines.

“US companies will have to face some headwinds to justify their plans to bring jobs and money outside of the US. That will impact US outbound deals. I think smaller deals will fly under the radar but mega deals will be scrutinized,” said Mary Jade Roxas- Divinagracia, managing partner for deals and corporate finance at PwC Philippines.

One potential loser of the Trump administration’s protectionist policy will be the BPO industry, one of the key pillars of the Philippine economy with annual revenues of roughly $25 billion.

“BPOs, being significantly American, may be affected. This we have to see. [Mr.] Trump may require BPOs to return to American shores so, in that case, property sales from this sector may decrease,” 8990 Holdings, Inc. President Januario Jesus Gregorio B. Atencio said.

The low- cost housing developer plans to build integrated condominium townships that will house BPO firms.

While the real estate billionaire’s protectionist stance sent shivers across the BPO industry after he won the Nov. 8 election, Mr. Trump’s deeply populist inauguration address was taken with a grain of salt this time.

“On BPOs, I don’t think they ( US businesses) would be able to shift gear and put up these outsourcing. It’s too expensive for them,” said George T. Barcelon, president of the Philippine Chamber of Commerce and Industry (PCCI).

“Consumers will lose in a protectionist environment. They will pay higher prices or put up with poor service. But business is business and like water that will flow to the low lands, businesses will seek over cost producers/service providers,” PwC Philippines’ Ms. Divinagracia said.

For John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines (AmCham), the US is still better off in a globalized world.

“American firms have invested in the Philippines for over a century in step with Philippine economic growth and intend to continue. We support globalization and believe the American economy can become stronger without being isolationist,” Mr. Forbes said.

PCCI’s Mr. Barcelon pointed out that the Philippines shouldn’t “worry too much” since it seems the newly inaugurated US President is targeting China among the global powers.

“I wouldn’t worry too much on our side although we have exports to the US. We are not in their crosshair. It’s China that is in the crosshairs of President Trump,” Mr. Barcelon said.

In fact, Mr. Barcelon said, Mr. Trump’s threat to slap a 45% tariff on imported goods from China can be beneficial for the Philippines, as punitive duties could trigger Chinese investments in “light industries such as shoes, clothing, and what not” in the Philippines since it will be “too costly” for them to absorb the higher tariffs.

The PCCI, the country’s largest business group, will closely watch how the Philippines’ bilateral relations with the US will unfold.

President Rodrigo R. Duterte had unleashed verbal tirades at former US president Barack H. Obama for criticizing the former’s war on the illegal drug trade.

“In Mr. Duterte’s phone call with Mr. Trump, it seems our President is more open to President Trump in the discussion. So that’s a good point as opposed to the previous administration,” Mr. Barcelon said, adding that he would like to see how this would affect non- trade ties such joint military exercises.

Sales of Philippine goods to the US are down, according to latest available data from the Philippine Statistics Authority. Philippine merchandise exports to the US dropped 3.9% to $7.96 billion as of November last year from $8.287 billion in 2015’s comparable 11 months.

‘WE’RE SPECULATING’

Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation, Inc., hopes Mr. Trump can move to calm the market, which is gripped by volatility amid uncertainty surrounding his economic and fiscal policies.

“Everybody — the Europeans, the South Americans — doesn’t know what to expect so we’re speculating. Because of this speculation, the market is suffering…,” Mr. Ortiz-Luis said.

“The tendency is mukhang nagso- soften up na siya sa pronouncements,” he noted, adding: “baka naman ma- calm ‘ yung market.”

Michael Gerard D. Enriquez, chief investment officer at Sun Life of Canada Philippines, Inc. shared this view.

“What struck me was his mention that he is willing to have an alliance with other nations,” Mr. Enriquez said.

“This should be more positive than his previous pronouncements.”