Pork will affect business confidence

So far, so good. GDP growth is at 7.5 percent in the 2Q. That means the country has notched a 7.6- percent growth in the first half, up from 6.4 percent in the same period a year ago. It follows the impressive 7.7-percent growth rate for the first quarter.

BSP business confidence index is also still good as we enter Q3 2013 but less upbeat at 42.8 percent compared to the 54.9 percent in Q2 2013 survey. As BSP noted, the number of optimists declined even if still greater than the number of pessimists.

Respondents to the BSP survey attributed their less buoyant outlook to among other factors, stiffer competition particularly from China and volatility in peso movement. Uncertainties in the global economy also contributed to lower optimism.

Malacañang, DTI and DOF apologists may minimize the economic impact of the latest political problem surrounding the pork barrel scam. But the level of citizen anger and the clumsy handling of the problem by the administration will definitely have an impact on our political stability climate that investors look at.

Unless handled a lot more skillfully, there is also the danger that P-Noy will lose the only real selling point he still enjoys with potential investors: honest governance. Pork is all about corruption. Unless he does something credible about the P10 billion of pork funds lost to scammers, P-Noy’s Daang Matuwid is a hard sell.

A Wall Street Journal editorial captures how this pork scandal is being viewed in the world’s financial circles. “Now a scandal will test the President’s resolve and the faith of investors,” the WSJ declares. “More broadly, the case highlights why the Philippines struggles to eliminate corruption.”

The Journal also points out the world will be watching how P-Noy responds to the challenge. “For now, this scandal creates an opportunity for Mr. Aquino to deliver the tough action against corruption that he promised. Philippine voters and foreign investors will be watching to see whether he follows through.”

Unfortunately, P-Noy’s position on pork is disconcerting. Indeed, now it seems P-Noy is on the other side of anti corruption reforms. The business-as-usual message of P-Noy – insisting on retaining pork by a name other than PDAF – has put doubts on his sincerity and ability to deal with corruption under his watch.

There is a need for P-Noy to understand where the citizen anger is coming from. Someone in one of my e-groups summed it up well:

“We pay one of THE HIGHEST TAXES (both local and national) in Southeast Asia, yet we have the POOREST INFRASTRUCTURES (lack of highways, classrooms, etc.) and the WEAKEST MILITARY in the region.

“How come the government has to resort to PPP and FOREIGN LOANS to build the necessary infrastructures?  WHERE ARE OUR TAXES GOING? The answer is very obvious, our TAXES go to the POCKETS OF POLITICIANS or wasted on a HUGE AND VERY BLOATED BUREAUCRACY.

“I took a look at the article of former National Treasurer Leonor Briones on the 2014 budget which amounts to P2.268 TRILLION. Two of the biggest items in the appropriations are: INTEREST PAYMENTS FOR DEBT SERVICE at P352.7 BILLION; INTERNAL REVENUE ALLOTMENT (IRA) P341.6 BILLION; Plus PORK BARREL in case it is not abolished of P27 BILLION for a total of P721.3 BILLION.

“Our INTEREST PAYMENTS alone plus the IRA and the PORK BARREL is MORE THAN 31 percent of our 2014 budget of P2.268 TRILLION. No wonder we have to resort to PPP and foreign loans to fund our infrastructure projects.

“The large amount going to INTEREST PAYMENTS means the government has been INCURRING BUDGET DEFICIETS just to keep running the government and yet most of the money end up either in the pockets of our politicians or wasted on a bloated bureaucracy. We are effectively mortgaging the future of this 100 million people country and the future of our children and grandchildren so that a few thousand government officials can become filthy rich.”

Of course it does not help that P-Noy’s Daang Matuwid campaign has not gone beyond his speeches and the social media feeds of his communications staff. Anyone dealing with government today knows that corruption is very much alive. The corruption problems in Customs, which P-Noy himself acknowledged in his SONA but has failed thus far to address, speaks loudly of the administration’s helplessness.

Indeed, we haven’t heard what happened to the claim of the Czech Ambassador on the alleged extortion attempt of DOTC officials. Either the Czech Ambassador is declared persona non grata for making unfounded accusations or guilty parties from DOTC should be facing cases at Sandiganbayan. We can’t just forget this like almost everything else after a few headlines.

 This pork scam couldn’t have come at a more inconvenient time for P-Noy. The local stock market has of late, become the worst performing market in the region. Much of what it has gained is being lost as foreign portfolio investors withdraw their money in torrents each trading day.

The peso is down to almost P45 to the dollar which should be good for local producers, OFW families and the call center industry. But it is also removing the luster of a fast strengthening economy that the P-Noy drumbeaters have been so proud of… until now.

The impact of the series of bad news in recent weeks is yet to be reflected in our GDP growth rate. Still, it could be said that our economy was simply more resilient as turbulence in the western economies have started to impact the emerging economies… thanks to the OFWs.

But we need strong citizen confidence in the leadership in these difficult times. I can understand the need for P-Noy to accept the surrender of Napoles at the Palace. But the decision of P-Noy to personally deliver Janet Napoles to Camp Crame is a serious setback. It zapped confidence big time.

More than just a failure to delegate, it implies a lack of trust on the part of P-Noy on the ability of his police officers led by Gen. Allan Purisima to handle what is essentially a police matter. If the President cannot trust his own Police Chief, how can citizens or foreign investors for that matter?

Even assuming the best intentions on P-Noy’s part, it paints a political leadership that is naïve and unable to carefully calibrate its reactions to crisis situations. Optics are important in this social media world. P-Noy did squander a lot of political capital that evening. The political noise generated is not good in building up investor confidence.

So it is back to the sidelines for many who would now watch and wait for developments to take shape. The bloodbath in the equities market plus the less than reassuring political instincts of the administration will make investors hesitate to risk capital in job creating businesses.

But it isn’t that bleak. On the plus side it is good to know we have one of the world’s top central bankers in control of BSP. Our OFWs have proven to be recession-proof. We also seem to now have a fired-up middle class, which probably includes a lot of overseas Pinoys, who are more actively engaged in assuring good governance. That’s good too.

But the strength of the economy really depends on a stable political environment and a more honest, more competent bureaucracy. We can’t have agencies like DOTC that can’t seem to do anything right… unable to get the infrastructure projects in its sector going. And we can’t have a P-Noy who seems unable to deliver Daang Matuwid, if that’s all he will deliver by 2016. 

And what happens after 2016? I noticed that in social media, some are talking of Ping Lacson or Rodrigo Duterte for President. That to me, indicates people are getting tired of namby pamby leadership and are willing to risk electing a strongman to Malacañang.

Impatience is on the rise. As they look beyond the next three years of P-Noy, people are thinking they have had enough of the seemingly good guys who are unable to deliver.

The price for continued confidence in government is clear:

People want senators and congressmen, and Napoles too, to hang for the pork scam. They want to get their billions of pesos of tax money back. If P-Noy can’t deliver, maybe Ping can… or better yet, Duterte will do it for us in the middle of the night with the least fuss.

I won’t be surprised if potential investors will just wait until after P-Noy’s term before making a decision to invest big. That’s how important it is for P-Noy to assure we are capable of good governance… the health of our economy depends on it.

Thieves

Here is a classic Pinoy joke.

Man 1: Holdup ito… akin na ang pera mo.

Man2: Hindi mo ba ako kilala… congressman ako.

Man1: Ganun ba? Akin na ang pera ko.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco