Let's Prove The IMF Wrong

MANILA, Philippines - In its World Economic Outlook Report released last week, the International Monetary Fund (IMF) announced that the Philippines would post one of the slowest GDP growth rates in the region, trailing Thailand, Malaysia, Indonesia and Vietnam for this year and 2013. According to the international creditor, the Philippines would be stymied by rising oil prices, weak global demand for exports and trickling investment, and as such, would expand by a mere 4.2 percent in 2012 and 4.7 percent in 2013.

I couldn't believe it. After all the advances made towards strengthening our fiscal position and improving our investment climate, 4.2 percent was all the IMF saw us growing by? This couldn't be right-it was too conservative a forecast, I thought. Either the IMF was amiss in its computation or our economic managers have been feeding us inaccurate data on our true economic state of affairs.

As most of my regular readers know, I have been a keen observer of the Departments of Tourism, Trade and Industry, Finance, NEDA, the BSP, Transportation and Communication, and Public Works since the Aquino administration took over. I've seen how each department has progressed in their respective agendas of reform, and have faithfully reported it in on this space. Some have done spectacularly well while others could work with more urgency. I've praised and criticized our economic managers in equal measure. Through it all, however, I have always maintained that a faster pace of sustainable growth could be achieved in the near future. My reasons are predicated on the fact that the very root of our economic maladies-corruption, imprudent fiscal management and poor public governance-is now being addressed.

The IMF Report seemed to have negated the achievements of our entire reform agenda. I must admit, it was a big blow to morale, to mine and the millions of Filipinos out there banking on the success of our reform programs. I needed to put the IMF Report into context, if only to give clarity to all those disheartened.

So I asked DTI Secretary Gregory Domingo, the man on whose shoulders our export performance, investment haul and state competitiveness lies, for a few minutes of his time. Without much fuss or fanfare, the hardworking Secretary granted me an audience the very next day. Although I had met the Secretary only once, this was the first time we connected on a one-on-one level. He struck me as a man on top of his game, spewing-out facts, figures and action plans relating to his department like a machine gun. The last time I was this impressed with a DTI chief was during the time of the late Rizalino Navarro.

The IMF's Forecast

The IMF, as with most financial institutions, uses a country's three-year historical performance as basis for their forecasts. These are imputed into an economic model where certain assumptions are factored in to compute future trends. Such assumptions can range from global economic trends, projected oil prices, interest rates, etc. Most of the time, however, the assumptions used only take global trends into consideration and not domestic ones.

The trouble with the IMF's projections, Sec. Domingo explains, is that it doesn't consider the most recent developments in our economic landscape. For instance, government spending is more robust today than anytime in our history given that 91 percent of capital spending budgets have already been released as early as January this year. Such conditions were not present in the last three years. Also, exports have rebounded strongly while tourism and the BPO sector are both growing at double digit pace. These factors were not imputed into the IMF matrixes either.

The Secretary believes that we are well positioned to grow beyond seven percent this year. He warns, however, that the first quarter will be the least robust given that PPP projects are not yet on stream. He sees the economy expanding by 4.5 to six percent in the first quarter and accelerating further as the year progresses.

Since the Secretary brought up the issue of PPP, I wasted no time asking why the program seemed to be moving at a snail's pace. So far, only one PPP project has been awarded-the four-kilometer Daang Hari Road.

Sec. Domingo was honest enough to admit that they had underestimated the time it would take to build the PPP infrastructure. It takes time, he bemoaned, to prep the bureaucracy, hire the right people (for the PPP center), hire the right consultants and get the feasibility studies done. What they thought could be achieved in six months turned out to be an 18-month affair. But things are more or less in place now, he assures. He looks forward to the forthcoming bid of the LRT1 extension, as well as two more DPWH projects before June.

On Foreign Direct Investments (FDIs)

Many of us are given to comparing the country's FDI performance to our neighbors and flagellating ourselves afterwards for having a smaller take. I am guilty as charged.

While official reports put Philippine FDIs at only $1.26 billion last year compared to Indonesia's $9.6B and Vietnam's $7B (see, here I go again...old habits die hard), Sec. Domingo clarifies that only FDIs registered with the Board of Investments, PEZA and the Bangko Sentral are actually taken into account. Investments made by companies outside our industrial parks are not added on. Last year, for instance, fresh capital infused by Coca-Cola, Nestle, P&G and Texas Instruments, etc. did not figure in the BSP's computation. Sec. Domingo estimates last year's true FDI haul to be in the region of $4 billion. The error in computation methodology was brought to the attention of the Central Bank and is awaiting revision.

"There are two darlings in the investing communities these days-Indonesia and the Philippines." These were the words uttered by the good Secretary with a beaming smile as I started to talk about new investments coming in.

The Secretary excitedly relates how in the first quarter alone, the DTI entertained four top level missions from Japan exploring investment opportunities. Four! With a separate cast of investors each time. Investment missions from far-flung countries such as the Czech Republic, Turkey, Russia, Qatar, etc. have also been coming over to the great (surprise) and delight of the DTI folks.

Rising costs in the southern provinces of China and the floods in Thailand have prompted many companies to move their manufacturing plants elsewhere. The Philippines has a strong cost and geographical advantage, making it a candidate as a new or alternative investment site. It is said that if we play our cards right, a $6 billion investment is within reach using the corrected computation method.

Playing devil's advocate, I cajoled the Secretary that perhaps we might miss the opportunity again if we are not aggressive enough in following through on our new investment inquiries. He assured me that this is not the case. If there is anything working against us, he says it is our higher power cost and the unprofessional treatment investors get from some local government units. In fact, we are even casting a wider net to attract a larger audience of investors through new ads on the Internet and on television. The uber-creative DOT Secretary Mon Jimenez is spearheading this effort.

If memory serves me right, our new ad campaign (for investment promotion) also leverages the character of the Filipino as its main selling point, similar to our tourism campaign. It stresses that it is not where you do business that matters, it's who you do business with. Very Mon Jimenez. Brilliant, as usual. A glimpse of our media blitz will start this week, as the Philippines will be the "Country in Focus" on CNN. This precedes our hosting of the high profile ADB Governor's Meeting in the first week of May.

My Take

My time with Secretary Domingo confirmed what I already knew...that the agencies in our economic cluster-the DTI, DOT, DOF, NEDA, DPWH and the BSP-have a sensible reform agenda in front of them and are pursuing it with great resolve. I believe that all these efforts will eventually translate to better GDP numbers.

Sure, many things still need to be done to prime the economy into tip-top shape, not the least of which is the faster rollout of DOTC's infrastructure programs, the resolution of the power crisis, abolishing the common carriers tax and coming out with a clear set of policies for the mining industry, among others. But for now, I am quite content that department heads like Sec. Domingo are working on overdrive to make the best of what is doable at the moment. One battle at a time, as they say, and I reckon we are slowly inching our way towards winning the war.

"We will surprise the IMF," the Secretary says.

In eight months, we will know whose prognosis was right-the IMF's or the DTI Secretary's. My bets are on the Pinoy. Nothing will give me more satisfaction than to prove the IMF wrong.

Andrew is an economist, political analyst and businessman. He is a 20-year veteran in the hospitality and tourism industry. For comments and reactions, e-mail andrew_rs6@yahoo.com. Follow Andrew on Twitter @aj_masigan.

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.

  • Sandigan OKs hospital stay for GMA co-accused
    Sandigan OKs hospital stay for GMA co-accused

    The Sandiganbayan has allowed a government official, accused with plunder along with former President and now Pampanga Rep. Gloria Macapagal-Arroyo to undergo a medical procedure at a hospital tomorrow. The anti-graft court permitted former Philippine Charity Sweepstakes Office (PCSO) board member Benigno Aguas to undergo a cardiopulmonary/endocrine clearance at the St. Luke’s Medical Center in Quezon City. …

  • Sandigan recommends executive clemency for ex-envoy
    Sandigan recommends executive clemency for ex-envoy

    The Sandiganbayan has recommended executive clemency for a former Philippine ambassador to Nigeria who was sentenced to 52 years for malversation of public funds. The Sandiganbayan First Division found Masaranga Umpa guilty of misusing the Assistance-To-Nationals Stand-by Funds totaling $80,478.80 in 2007, but the anti-graft court said the former assemblyman from Lanao del Norte should be pardoned. …

  • Stargazing at the mall highlights Earth Hour
    Stargazing at the mall highlights Earth Hour

    It was a night of stargazing in 58 SM Supermalls all over the country last night as these establishments participated in Earth Hour, an annual worldwide movement encouraging communities and establishments to switch off lights for one hour to raise global awareness of overuse of non-renewable resources. The Philippines has been an active participant of Earth Hour since 2008. Last night, in the province of Bulacan, for instance, all parishes, diocesan institutions, schools and household …

  • Payanig privatization hit
    Payanig privatization hit

    BLEMP Commercial of the Philippines, Inc. (BLEMP) denounced the recent announcement of the Presidential Commission on Good Government (PCGG) to privatize the 18.4-hectare “Payanig sa Pasig” property. In a statement sent to The STAR, BLEMP lawyer Dennis Manalo said the PCGG has no right to auction the property because it has no valid title and is not in possession. The PCGG has not paid a single centavo in real property taxes for the property, he said. He narrated that it was in the early 70s …

  • New species of tarantula found
    New species of tarantula found

    Scientists from the Museum of Natural History (MNH) of the University of the Philippines-Los Baños have discovered a new species of cave-dwelling tarantula on an island off the coast of Quezon. The new species of the spider, Phlogiellus kwebaburdeos, was described in the recent issue of the Philippine Journal of Systematic Biology by MNH curators for spiders Aimee Lynn Dupo and Alberto Barrion along with their former student Joseph Rasalan. The tarantula was discovered by Rasalan during one …

  • Palm Sunday: Do not add to suffering of others
    Palm Sunday: Do not add to suffering of others

    As Christendom enters Holy Week today, Palm Sunday, an official of the Catholic Bishops’ Conference of the Philippines (CBCP) yesterday called on the faithful not to add to the sufferings of their fellowmen. Jerome Secillano, executive secretary of the CBCP-Episcopal Commission on Public Affairs (ECPA), said that while Palm Sunday is oftentimes remembered as the glorious arrival of Jesus Christ in Jerusalem, it also signals the start of the Holy Week that tells of His suffering, death and …

  • Miriam pushes tougher graft law
    Miriam pushes tougher graft law

    Sen. Miriam Defensor-Santiago has filed a bill that would make public officials liable for violations of the Anti-Graft and Corrupt Practices Act even if they are elected to a fresh term or a new position. In filing Senate Bill 2716, Santiago sought to address what she said was the doctrine of condonation in Philippine jurisprudence brought about by the 2010 case of Salumbides vs. Ombudsman. “By merely asserting the doctrine of condonation, erring elective officials are automatically given a …

  • Phl hits back at China over sea infra work
    Phl hits back at China over sea infra work

    The Philippines assailed China yesterday for contesting Manila’s planned repair and maintenance works on some islands in the West Philippine Sea, saying they are “in no way comparable” to the Asian power’s massive reclamation activities which are in violation of international laws. “The Philippines’ possible undertaking of necessary maintenance and repairs on its existing facilities in the West Philippine Sea, over which the Philippines rightfully exercises sovereignty, sovereign rights and …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options