Yet another lost year

The year that is about to end can probably be best described as a period of disappointment, such that the Philippines – in almost every aspect – failed to seize the window of opportunity that was left open after its Asian peers reeled from the SARS outbreak and its debilitating impact on their economies.

It does not come as a surprise in fact to learn that Filipino consumers have remained to be the most pessimistic in Asia, with only a third of the population expecting things to improve in the next 12 months.

The online survey of research firm ACNielsen in a way suggests that despite the SARS’s less tragic impact on the Philippine economy, our confidence as a nation remains clouded with fear that as other economies in the region recover, we will again be lagging behind.

Political and security uncertainties play such a crucial role in the country’s disappointing performance, while economic performance can best be attributed to luck – or the lack of it.

Gross domestic product (GDP) is expected to reach the lower end of the government’s 4.2-percent to 5.2-percent target for the year, but Filipinos feel the economy’s growth is not having much impact on their daily lives.

Even Socio-economic Planning Secretary Romulo Neri admits at least a seven-percent growth in GDP must be achieved to make a dent on the lives of the Filipino people.

Export – to which the country is much dependent – was almost flat at about a one-percent growth over last year, far off from the at least five-percent year-on-year improvement the government had set for the year.

Sales of Philippine-made products overseas failed to pick up as expected in the second quarter, particularly on concerns that exporters may find it difficult to meet orders on time in the light of security concerns – particularly after the July 27 failed military mutiny in Makati.

Nothing was to be expected too from agriculture, a sector comprising at least a fifth of the Philippine economy. Its lackluster performance is primarily due to the El Niño weather disturbance – something that is beyond our control. That was the bad luck part.
SPVs never came
How we welcomed seeing the Special Purpose Vehicle (SPV) bill – a measure that is intended to assist the banking sector unload some P600 billion in non-performing assets – passed after such contentious deliberations in Congress in December 2002. Yet nothing to date has happened.

Yes, the regulatory and legal framework for disposing non-performing assets (NPA) has been set, but the actual thing has yet to take off.

To think the banking sector essentially got what it wanted – tax exemptions, fee privileges, and longer time to book their losses arising from the discounted sale of their assets. Could it be that banks are asking for more?

Apparently, the issue really here is the pricing of the assets. Banks obviously want to get more, and the SPVs are of course asking for a steep discount – P0.70 for every peso – because only through such an arrangement could any margin be made. Most banks, however, would rather wait for the economy to turn around and for the property sector to boom.

Of late, there was news that the central bank received applications from banks intending to dispose P6.1 billion worth of non-performing loans through a dacion en pago or payment-in-kind arrangement. Are we finally seeing the start of a process, albeit long and tedious?
Power investors not biting
The much talked about privatization of Napocor and disposal of its assets, remained as such, much talk but nothing concrete. It could be that the selling agents were not better equipped to make a sale or that the power assets to be sold are not too desirable to behold?

Or perhaps, investors may have been "burned," knowing all too well what happened to their predecessors. Called as messiahs during the 1990 power crisis, investors in the IPP (independent power producer) sector were subsequently pilloried by politicians.

It was easier to join the bandwagon of public outcry and blame the IPPs rather than explain that when in a bind, one has to pay a premium. The economy then was in hostage when "brownouts" occurred without let up.
Waiting for panic time again
Maybe again, prospective investors are on a wait-and-see mode, and just waiting for the opportune time to re-enter the Philippine power sector.

But when could the right time be? Well, when lights are about to go off and we find ourselves in a bind again. Then our government will start grabbing every proposal that would come their way out of desperation and will pay again a premium.

That time is not too far off from now. Come election time, power failures are expected to hit areas in the Visayas, and then all parts of the country thereafter.
A year gone, deeper in throes
For the year 2003, the negatives just outweigh the positives. Graft and corruption continues to weigh down government revenue collections. Smuggling flourishes and remains unabated. Thus, the government is in deficit spending and the financial burden on the Filipino taxpayers becomes heavier and heavier.

I wish we could have ended the year on a more positive note. The lyrics of an old song keep ringing in my ears as we end 2003 and start a new year, "another day older and deeper in debt."

However, there is also a cliché that goes: "hope springs eternal." So here’s wishing you, our readers, prosperity and a better life for the coming new year.
Oil price and Meralco rate hikes on TV
"Isyung Kalakalan at Iba Pa" on IBC News (4:30 p.m. and 10:30 p.m., Monday to Friday) starts today the discussion of the double whammy that hit the consumers before the year 2003 ended. The successive oil price increases during the past weeks and the impending hike in electricity rates starting 1st January 2004 are hard issues that candidates and the electorate will confront as election date approaches. Watch it.
‘Breaking Barriers’ take a holiday break
"Breaking Barriers" on IBC-13 (11 p.m. every Wednesday) will not be aired on the 31st of December 2003. The next episode is on 7th January 2004 when the show will feature the highlights of the interviews conducted during the last half of the year. Those who missed some of the previous episodes will have the opportunity to catch up on the discussions of the episodes during the 2003 season. Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.

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