It is as simple as this: if you want the economy’s Bull Run to continue, you have to hope, pray and work for a clear victory of P-Noy’s senatorial ticket this May. I realize those who hate P-Noy will not like this message. I may or may not like this message too but it is my job to report important developments. It doesn’t matter if I have to roll my eyes while doing it.
The mid term election is now being seen as a referendum on P-Noy’s leadership. If P-Noy’s candidates win a rousing victory, the bull market at PSE will scale new highs. The economy will also continue to have positive investor sentiment. If P-Noy’s ticket gets clobbered by UNA candidates, investors will take pause because it signals noisy gridlock politics as usual.
I have been attending investor briefings and reading analysts’ reports on our economy the past couple of weeks and it seems they are agreed about our economy’s positive trajectory. And they are also agreed that the most important common element for this positive investor sentiment is P-Noy and his anti-corruption drive.
Having been around for quite a bit already, I have a more skeptical view of things. I know P-Noy means well and his sincerity about his Daang Matuwid is genuine. But I also know from experience that good intentions are never enough. I am impatiently waiting to see more proof on the ground that this anti corruption intention is happening and more importantly, solid accomplishments will follow.
I am amazed that normally cynical financial and economic analysts are this excited over a single issue of corruption and the prospect of a successful battle being waged against it by P-Noy. I guess they see this corruption issue as a major stumbling block to our serious development. If we get over it, greater things can happen… we can be a breakout nation.
But good things are happening not just because of P-Noy. Our economy is tied to the ups and downs of business cycle and the global economy. There are favorable world economic developments these days that are also behind the bullish sentiments towards our economy.
The global headwinds that drove down sentiment for the world economy are dissipating. At least for the moment, world economies seem to be on the mend.
The EU economies are not about to disintegrate tomorrow. China is suggesting a soft landing. Japan is once more alive and raring to fight deflation with an inflation target of two percent. And the US stock market is breaking record highs and the real economy seems slowly but surely getting better.
The Bull Run in our stock market is also powered by low interest rates and high liquidity. Folks who were normally happy to collect interest income from government securities and SDA accounts must now be more creative.
Not only are ROPs paying the lowest interest rates ever, the BSP also lowered interest rates on SDAs. Getting into equities seems the only sane thing to do even for housewives, retirees and old maids who would normally balk at even the smallest risk.
So it isn’t just P-Noy and his Daang Matuwid powering all that positive sentiment. But we have to credit the positive sentiment for P-Noy in our economy’s ability to join the party. In the past when we had less credible presidents, the whole world would be having an economic boom but we would be ignored… left alone like an unattractive girl in a high school prom.
But positive sentiment is actually quite fleeting. It is important for P-Noy and his economic managers to realize that. I sensed that caveat even among bullish analysts. They say that they are watching the sustainability of the P-Noy reforms.
More specifically, they are looking at 2016 and whether P-Noy’s successor can have the same credibility in fighting corruption and maintaining a level playing field. This explains why some of them are for now just focused on the next three years, enjoying the ride while the positive sentiment lasts.
Infrastructure and the PPP are in their checklist. They are watching whether this administration can deliver on infrastructure or whether the current logjams in the bureaucracy such as what is happening at DOTC will persist.
So these analysts and investors want to see a clear victory of Team P-Noy this May. They are tired of our dirty and unproductive politics. They see an UNA victory to mean an early start for the 2016 campaign. It would herald a kind of obstructionist politics that will render P-Noy inutile for the second half of his term.
It seems the names of the candidates are unimportant. What they want to see is a clear way for P-Noy to get his programs through with a minimum of political grandstanding from the so called opposition, specially the presidential wannabes.
I agree. We must also deny P-Noy the excuse of blaming the opposition for failures rightfully attributable to his inept technocrats.
Interestingly, a blog on the economy being written by a Pinoy expat manager also touched on the need to go beyond Daang Matuwid. Romeo Encarnacion noted that “beyond ‘daang matuwid’ we need to focus on a set of starter building blocks for PHL development if we are to translate foreign interests in PHL (generated by ‘daang matiwid’) into tangible foreign direct investments.”
I agree with Mr. Encarnacion that we need to “signal to the world, including foreign investors, that we are pulling the country together.” He is correct to observe that we are unable “to forge a national agenda and develop critical industries while perpetuating oligopoly.”
Rather than wasting our time on politics as usual, there is a need to unite and focus on the competitiveness of our national brand as we have often pointed out in this column. The Asean Free Trade Area will be upon us in two years and we still hear people crying for protectionism. They should instead be working on ways to be competitive with the likes of Thailand and Malaysia.
The hue and cry over the investment incentives given to a Thai hog raising company, for example, misses the point. Of course it is easy for old time politicians to exploit the issue as emotionally as they can. Instead of banning the Thai firm, local hog raisers should ask government for the same incentives, the same level playing field to be competitive.
People forget that come 2015, that same Thai company will be selling their produce here anyway. It makes more sense to let them in now, pay rent for the land, buy locally produced feedstock and build facilities they will need and maybe even transfer technology to the local industry. Maybe some synergies can be worked out or they can export out of here.
The key word is sustainability. Our economic gains cannot be sustainable unless we are competitive as a nation. A victory by UNA that promises a repeat of that shameful behavior we witnessed in the Senate last month can give investors reason to pause. That is like aborting our take-off, shooting ourselves in the foot… things we often do.
A Congress that cooperates more with the President will not endanger our democracy. In fact, I think the best guardian against an abusive administration or one that’s inept is not an opposition led Senate or Congress. It is an alert citizenry empowered by social media. In today’s times, even mainstream journalism is kept on its toes by instant and often merciless reaction from alert netizens.
I realize it is difficult on our conscience to vote for many of the people in P-Noy’s senatorial ticket as it is totally distasteful to vote for almost all of those in the UNA slate. But taking the cue from the analyst briefings and papers, I may just have to pinch my nose to give P-Noy a renewed mandate.
Just think of it as taking the political equivalent of cod liver oil. It is to our interest to take the foul smelling, ill-tasting medicine in the hope that doing so will ensure the health of our economy.
Year to date, the performance of our stock market is at 13.1 percent. If you did nothing but placed your money in a PSEI tracking fund during the first few days of January, you would have made gains your SDAs and ROPS wouldn’t have been able to deliver. Why will anyone want to risk that for the rest of the year by voting badly?
I know it is difficult to vote for Chiz or Loren or Koko and Trillanes. To suspend or not our better judgment is the dilemma we have to grapple with between now and May.
Democracy
Democracy means government by discussion, but is only effective if you can stop people talking.
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Source: Boo Chanco, Demand and Supply, The Philippine Star, 25 February 2013
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