EDITORIAL: Kinks in the economy

Manila (Philippine Daily Inquirer/ANN) - After the euphoria-inducing investment-grade rating given to the Philippines during the Lenten break, a string of not-so-good news has hit the economic front. Foreign direct investments-or money that goes into productive undertakings like tourism, agriculture, or industrial projects-registered a net inflow of US$576 million in January, down by nearly half from $1.05 billion posted in January last year. Merchandise exports fell 15.6 per cent in February, the steepest decline in more than a year, according to the National Statistics Office (NSO).

Growth in manufacturing output likewise eased to 8.7 per cent in February, after posting double-digit growth in the previous month, as domestic and global demand for local goods declined.

Revenues from exports declined to $3.74 billion in February from $4.43 billion a year ago. The drop was reported to be the biggest since December 2011, when exports contracted by 18.9 per cent. The latest data brought total exports in the first two months of 2013 to $7.75 billion, down 9.4 per cent from $8.55 billion in 2012. Global bank HSBC has expressed concern that the decline in electronic exports could indicate that the Philippines is losing its competitiveness in semiconductors, and noted that the first two months of the year showed electronics falling by more than 30 per cent.

Electronics shipments-which accounted for 39.7 per cent of total export earnings-shrank by 36 per cent to $1.48 billion in February from $2.33 billion a year ago. The NSO observed that the double-digit decline in electronics exports was also the steepest since the 36.6-per cent drop in October 2011.

Businessmen were quick to blame the peso's strong performance for the decline in exports and local manufacturing output. Donald Dee, vice chair of the Philippine Chamber of Commerce and Industry, was quoted as saying that the peso's appreciation weighed on local production even as consumption was driving demand; he pointed out that prices of imported goods had become more competitive than those of locally made products.

The peso averaged 40.67 to a dollar in February, as against 42.66 in the same month last year.

The peso's strength is due to the continued remittances from overseas Filipinos and investments in the BPO (business process outsourcing) sector.

Add to that the fact that the Philippines is attracting the "wrong" or "unproductive" kind of money. The net inflow of foreign portfolio investments to the Philippines reached $1.09 billion in the first quarter, more than double the $464.45 million registered in the same period last year, according to the Bangko Sentral ng Pilipinas. This is money put mainly in local stocks, which have been experiencing a bull run. It is called "hot money" because of its fickle nature: It can leave as easily as it came in.

And these are not the only kinks in the economy. There are the delays in big infrastructure projects under the Aquino administration's flagship Public-Private Partnership (PPP) programme. including the expansion of the Mactan airport and other regional air terminals, and the connector road for the north and south Luzon expressways. Even the acquisition of additional coaches for the MRT 3 railway is just taking too long. Also, investments in the mining sector are on hold due to the absence of new guidelines to govern the industry.

Governance-wise, the Aquino administration has accomplished a lot in just three years in office. But on the economic front, it has much to do to draw in real foreign investments, boost exports, enhance the agriculture and tourism sectors, and truly strengthen and maintain a resilient domestic economy. Perhaps it can start by listing the structural reforms that it intends to initiate for its remaining three years.

In the past decades, neighbours like Thailand and Malaysia have overtaken the Philippines economically. Bloomberg reported last week that Vietnam's stock market-a barometer of business expectations for the next year or so-is now being favoured by many investors after its communist government promised to open up the economy. Vietnam is preparing to remove bad debts from the banking sector, ease restrictions on foreign ownership of listed businesses, and change its constitution to limit the "leading role" of state companies that comprise about a third of the gross domestic product (GDP), Bloomberg said.

We should not wait for Vietnam to overtake us this time.

COPYRIGHT: ASIA NEWS NETWORK

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • OIC asked to complete review of peace pact with MNLF
    OIC asked to complete review of peace pact with MNLF

    The Philippine government is asking the 57-nation Organization of Islamic Cooperation (OIC) to finally complete the tripartite review process of the implementation of the 1996 peace agreement with the Moro National Liberation Front (MNLF). The review – snagged  for several years as government had its hands full with the peace process with rival faction Moro Islamic Liberation Front (MILF) – tackles how the 1996 peace pact with the MNLF has been implemented and centers on the three remaining …

  • Alleged Binay dummies appear in Senate probe
    Alleged Binay dummies appear in Senate probe

    Eight of the resource persons ordered arrested by the Senate finally attended the 21st public hearing of the Senate Blue Ribbon subcommittee into the alleged anomalies involving Vice President Jejomar Binay, but the proceedings turned out to be a review of matters previously presented. For over three hours, the subcommittee heard presentations regarding the alleged hidden assets of Binay and the issue regarding the supposed P200 million in kickbacks he received from a deal between the Boy …

  • DOJ wraps up Mamasapano probe
    DOJ wraps up Mamasapano probe

    The Department of Justice (DOJ) is wrapping up its investigation into the “massacre” of 44 members of the Philippine National Police Special Action Force (PNP-SAF) in Mamasapano, Maguindanao last Jan. 25. A joint team of prosecutors and NBI (National Bureau of Investigation) investigators is about to finish the second part,” Justice Secretary Leila de Lima has told congressmen. She was responding to questions raised by former senior police officer and now Rep. Samuel Pagdilao of party-list …

  • APEC meet in Bataan seen to boost tourism
    APEC meet in Bataan seen to boost tourism

    BALANGA CITY, Bataan – More than 2,000 delegates of the Asia-Pacific Economic Cooperation (APEC) and international media outfits are expected to enjoy the splendid coastline of Bagac town, which faces the West Philippine Sea, as they converge for a workshop in this province next month. …

  • DOST opens P54-M research facility
    DOST opens P54-M research facility

    A P54-million research and development facility of the Department of Science and Technology (DOST) was recently opened in Bicutan, Taguig for scientists and researchers to develop technology and techniques to allow Filipino fashion and clothing designers and manufacturers to produce more mainstream products from local, tropical fabrics like piña, banana and abaca. Science Secretary Mario Montejo said the Innovation Center for Yarns and Textiles (ICYT) is the DOST’s flagship effort at reviving …

  • DFA worried about alleged violations of convicted Pinoys’ rights
    DFA worried about alleged violations of convicted Pinoys’ rights

    Philippine embassy officials in Doha have raised their concern with Qatari authorities over coercion and human rights violations in the alleged forcing of three Filipino workers convicted of spying to provide information and confess to the crime. Speaking to reporters, Department of Foreign Affairs (DFA) spokesman Charles Jose yesterday said the embassy has raised the matter during several high-level meetings with Qatari officials and the national human rights committee in Qatar. “Our embassy …

  • US affirms ‘ironclad’ promise to defend Phl
    US affirms ‘ironclad’ promise to defend Phl

    US Defense Secretary Ashton Carter told his Philippine counterpart on Wednesday that Washington’s pledge to defend the Pacific nation remains “ironclad” and called for an end to land reclamation in the South China Sea, officials said. In talks in Hawaii with Voltaire Gazmin, Philippine secretary of national defense, the Pentagon chief “reaffirmed” the strong ties between the two countries and discussed territorial disputes in the contested waters of the South China Sea, where Beijing has been …

  • ‘Conflict to affect economic growth, stability in SEA’
    ‘Conflict to affect economic growth, stability in SEA’

    Conflict in the South China Sea can affect economic growth and stability in Southeast Asia, New Zealand warned yesterday, amid China’s aggressive reclamation activities in disputed waters. New Zealand is marking its 40 th year of diplomatic ties with the Association of Southeast Asian Nations, and hopes to intensify trade and other linkages with the 10-member grouping. ASEAN members Brunei, Malaysia, the Philippines and Vietnam have overlapping territorial claims with China over the Spratly …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options