Post-crisis, investors should exploit privatization opportunities

MANILA, Philippines – Investors in emerging market (EM) nations, including the Philippines, should prepare to exploit privatization opportunities once the economic crisis is over, according to Eurasia Group, a global research and consulting firm.

In a report, Eurasia Group said EM nations may generally become more selective and cautious before selling additional assets to foreign investors, especially in strategic sectors such as banking and energy.

“Investors must build local networks now in order to take advantage of later privatization opportunities in countries where the sale of assets is temporarily frozen due to the adverse market conditions,” Eurasia Group said.

Still, the research group said each country will have a different take on privatization in the aftermath of the crisis, given their varying economic and political conditions.

“(But) this does not mean that they will scrap plans for further privatization altogether, but they are expected to pursue a more gradual and selective approach,” Eurasia Group said.

For one, Eurasia Group said the Philippines is likely to take on a “wait-and-see” mode when it comes to privatization once the global economy recovers from the crisis, along with China, Turkey, and Thailand.

This is contrary to Poland, Romania, Ukraine, India, and South Korea, which are expected to be “full steam ahead” in selling government assets.

Meanwhile, Mexico, Indonesia, Vietnam, and Malaysia are expected to be “wary” about privatization, while Argentina, Brazil, Russia, and South Africa are likely to be “statist.”

Desperate?

Contrary to what Eurasia Group predicted, the Philippines has been scrambling to sell big-ticket items to meet its revenue goal for 2009, in an effort to plug its swelling budget deficit.

As of November last year, the government has generated P1.09 billion from the sale of public assets, a far cry from its privatization goal of P30 billion.

Of the amount, P844 million came from the Presidential Commission on Good Government, the agency tasked to oversee sequestered assets from late dictator Ferdinand Marcos and his allies, while P206 million was contributed by the Privatization Management Office.

The government was eyeing to dispose of the P13-billion Food Terminal Inc. property in Taguig City, P12 billion worth of shares in PNOC-Exploration Corp., and the P3-billion to P5-billion Fujimi property in Japan. It has, however, given up on selling these properties within 2009, and moved it to the first quarter of 2010.

Privatization is crucial to plug the country’s budget deficit, which likely reached below P300 billion last year. — Karen Flores, abs-cbnNEWS.com