What the Philippines needs now
THIS is an optimist. “Everyone knows that there is a pot buried at the end of the rainbow. If you are first and get there before the rainbow disappears, you will find a pot of gold.”
This is a pessimist. “Everyone knows that there is a pot buried at the end of the rainbow. Even if you are first and get there before the rainbow disappears, the pot will probably be empty.”
This is a realist. “After having examined the end of several rainbows separated by time and distance, it is unlikely that there is a buried pot.” The only sensible analysis of virtually any subject matter is to connect the dots and see where the path logically leads.
I am taken by surprise when someone says—either with anger or respect—that I am “optimistic” about the future of the Philippines. I wonder if they remember that I am the one who in mid-2015 wrote of the cycle of political chaos coming in 2016 that gave the world, among other things, Duterte, Brexit, and Trump.
Likewise in September 2019 I wrote that you needed to be thoroughly prepared as the cycle was moving to a period of complete economic chaos beginning in January 2020. My only optimism was that the Philippines would definitely survive based on what I saw happening here and up close during the 1997 Asian Financial Crisis and during the 2008 Global Debt Crisis.
The economic “connect-the-dots” for the Philippines is relatively simple, but only if you do not have a political agenda in your analysis. I do not. My only agenda is to protect and provide for my family. Your politics means nothing to me.
In 1997 Thailand and South Korea were economically devastated because a massive amount of corporate debt was dollar denominated. Those governments lost control of their currencies because they were keeping the exchange rate artificially over-valued to save the corporations. Bad idea that failed.
In the Philippines, only a very few companies went down, as these companies had too much dollar debt. We learned both privately and publicly about too much dollar debt. So, connecting that dot to 2008, the Philippines was in good shape to weather the global debt crisis and it did just fine. The peso devalued, as did all Asian currencies.
Fast forward to 2022 and maybe even beyond. The Philippines has the most balanced economy—exports, tourism, remittances, consumer spending, government spending— of the Asean-6 nations. Without tourism, Thailand is dead in the water. Sixty-percent of Malaysia’s gross domestic product comes from exports. Indonesia has a large stake in mining and is benefiting currently from high coal and mineral prices. Singapore also depends on exports of specialty manufactured goods like Refined Petroleum Products (which the Philippines buys) and integrated circuits.
Attention is focused on the peso, which has lost more value this year against the US dollar—down eight percent—than Indonesia (-4 percent), Malaysia (-5.5 percent), or Thailand (-6.6 percent). But the 8.3 percent Philippine GDP growth is much greater than Malaysia and Indonesia at 5 percent and Thailand at 2.2 percent. Our inflation at 5.4 percent is higher than Indonesia at 3.6 percent and Malaysia at 2.8 percent. But Thailand has 7 percent inf lation.
Take some other indicators— Debt to GDP, Balance of Trade, Foreign Exchange Reserves—and the Philippines is lagging behind. Further, the “connect-the-dots” trend is not “optimistic.”
However, I think that the focus on changing the constitution in the hope—and maybe prayer—that FDI will improve is misguided. And hoping and praying that 2019 conditions will magically come back is foolish. What I will be watching to see is the government policies that move the needle positive on domestically generated—not foreign—gross Fixed Capital Formation.
We need to have Filipino companies investing in expansion and improvement in the Philippines starting today. SM Department Store closing the third floor of their SM City BF Parañaque location is not a dot that I want to see connected.