Lemmings

In January, a government official (I won’t name him so he’s not further embarrassed than I hope he is already) said: “The Philippines is feeling the impact of the global crisis. But our economy is tough, and this has been acknowledged by many rating agencies. The economy will be even more resilient as pesos are poured into kilometers of concrete.

“Part of the Plan is the P300-billion fiscal stimulus package to pump-prime the economy. This package includes the Php100-billion fund that the government and private sector shall create to help spur the economy and redirect resources to important infrastructure projects. We are also tapping the resources of other government financial institutions for infrastructure projects. The government is investing in infrastructure to create and save jobs, boost growth, and upgrade the country’s capital stock so the economy grows more efficiently and at a faster rate. It is also improving the absorptive capacity of its infrastructure agencies by ensuring that they “hit the ground running” in the first half of 2009.

“This can be done by ensuring that procurement plans are implemented and contracts are awarded in the first quarter of 2009, moving away funds from slow-moving projects to the fast-moving ones, deferring the implementation of new projects that do not have Investment Coordination Committee and NEDA Board approval or are difficult to implement immediately.”

Well, none of it happened. The P100-billion joint fund died, as my cynical brain expected the day it was announced. There’s been almost no significant infrastructure project started. The front-loaded pump priming didn’t happen, consequently the economy went into recession by the correct definition for a poor country.

Another (also to be unnamed) government official said, also in January, that we should expect P288 billion in BOI investments this year and P170 billion into export zones. Well, so far this year, combined investments registered with the Board of Investments and Philippine Economic Zone Authority have been a measly $377 million, or roughly P18 billion. That leaves a gap of P440 billion (combined BOI & PEZA) to fill in 9 months. Totally unrealistic, no wonder credibility is lost. If you know no investment is coming in, you work hard to do some major changes to get it back. If, instead, your head is in the clouds you fall off the cliff from the slippery soil you can’t see because of the rain from the clouds below you—and where everyone else lives.

Adding to that credibility problem is the fact that the government keeps saying the Philippines is less affected by this dreadful crisis because of the economic reforms that were put in place. But what were those reforms? I’ve had a hard time finding them so maybe the Office of the Press Secretary can send me a list. I agree with every other serious analyst that the country is less affected because it’s less involved, not because it’s a strong economy.

Take electronics exports, which comprise about 60 percent of all exports. Last year we shipped $28.5 billion, but $24 billion of this was imported component. So only $4.5 billion was added to a $170-billion economy. Hence if electronics exports fell 42 percent (as they did in the first quarter) so too did imports to make those products. The impact on us here was marginal, only 1.5 percent of GDP suffered. Our (electronics) connection to the world is only 2.6 percent of the economy.

We are weathering the storm because of a weak economy, not a strong one. The sooner the government recognizes that, the sooner we get out of this crisis.

Perhaps if there is less of a focus on the economy and more on genuinely getting half the Filipino nation out of poverty, credibility might be restored. There are more people in poverty (which is several levels below being poor) today than there were nine years ago. Gross domestic product growth means nothing to these people. The highest level of international reserves might get economists and bankers excited, but the poor couldn’t care less, $39.3 billion doesn’t put one grain of rice on their table (if they have a table, the floor if they, as too depressingly often, don’t). A positive balance of payments is irrelevant to someone who has no money to make any payments of any kind.

You don’t focus on the economy, you concentrate on building an environment businessmen will love because they’re the only ones who can get people out of poverty. Jobs, not doles, provide genuine, sustainable family income. Jobs are created in an environment where everything works – which it surely doesn’t on the South Luzon Expressway anymore. There’s no way anyone with any common sense will put a factory in Laguna or Cavite now. Thanks to an inutile government that despite my weekly protests has still done nothing to rectify this catastrophe. Our dinner guest for Wednesday night turned back after two hours getting absolutely nowhere. That’s just for a dinner. I wonder how many businessmen have turned back too. Who’d put up an export business in Cavite today?

But the executive branch is not the only one, Congress is acting quite irresponsibly too as it selfishly self-interestedly (sic) refuses to pass desperately needed laws to increase government revenues.

Mind you, in one way I don’t blame them because the executive branch equally refuses to put any of the big and many tax cheats in jail. Why penalize the honest guys even more? It’s a valid question Congress could well ask, but they won’t because that isn’t the reason they’re sitting on tax changes. Loss of votes for being known as a “tax man” is the real, selfish reason. Citigroup warned the budget deficit could hit P400 billion this year and tax revenues fall to 12 percent of GDP (from the 17 percent under Ramos). The fiscal crisis the 12 percent VAT averted may now become a reality. It’s certainly now a possibility.

So which one has to give in? Or must we all suffer as the economy melts down from insufficient funds properly spent? Don’t for a moment think the election booty would be properly spent. We won’t get roads – we’ll get vote-catching fiestas. Instead of being the boost to the economy, elections normally bring this. One could well drive us all over the cliff as the tough decisions a crisis requires don’t get done: Politics predominates.

When one lemming goes over a cliff, the rest follow. Well that cliff is very close now. –Peter Wallace, Manila Standard Today

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