Economic Success Speaks For Itself aka “the Harder the Government Spin, the Worse the Economy”

Posted by BongV on Feb 5, 2013 in Government | 0 comments

When the headlines of GDP growth translate to citizens being able to find good paying jobs in the Philippines which allows them to afford good food, decent housing, excellent health care, top notch education – I can say that there is economic success.

When the headlines of growth only benefit Aquino’s kin and pals – double digit growth for firms owned by Ayala, Cojuangco, Lopez, Pangilinan, Sy, Roxas – while the rest of citizens have to look for good paying jobs overseas, skip a meal once or twice a day, pay an arm and a leg for good education – something’s not right.

There’s an adage in the advertising industry that goes – “If business is good, advertise. If business is bad, advertise some more.”

When the government’s media group and its allies are on overdrive to exalt Aquinomics – that tells you the economy is headed in the opposite direction.

When business is good, advertise. When is business is bad, advertise some more.

As you can see for every increase in the PSE index, the sovereign credit rating, and the GDP there are also more economic indicators that show the Philippine economy is going south.

Here are some numbers that Aquino’s media cronies are not giving equal air time:

Prosperity Index

2009 – 61

2010 – 64

2011 – 66

2012 – 67

These numbers are damning evidence that 2 years after Aquino, Filipinos are worse off.

How do our ASEAN Neighbors rank for the same period?

Singapore – 17 (2009), 17 (2010), 16 (2011), 19 (2012)

Malaysia – 43 (2009), 43 (2010), 43 (2011), 45 (2012)

Vietnam – 50 (2009), 61 (2010), 62 (2011), 53 (2012)

Thailand – 54 (2009), 52 (2010), 45 (2011), 56 (2012)

Indonesia – 85 (2009), 70 (2010), 70 (2011), 63 (2012)

These numbers show that any bad day in our neighbors is still better than any best day in the Philippines.

Foreign Direct Investments – Average 2005-2010

Philippines – $2.1B

Malaysia – $6.1B

Indonesia – $8.1B

Thailand – $8.6B

Vietnam – $6.1B

Singapore has not been added to the list (it generated $52.4B in FDI in 2012). When Singapore’s FDI is added, it will make the Philippines “impressive FDI growth” look like a booger.

Aquino’s pronouncement in Davos about whether removing the economic restrictions in the constitution will help at all has been answered so many times already. The latest addition to this is the findings of the Legatum Institute stated in the 2012 Legatum Prosperity Index.

One metric that can shed light on why these Asian nations are rising is the level of FDI flowing into each country. This is because FDI, when managed appropriately, can be a source of economic growth. The graph (left) shows that among the ‘Tiger Cubs’, Thailand and Indonesia are the biggest recipients of FDI. In terms of FDI as a share of GDP, however, Vietnam outperforms the other ‘Tiger Cubs’ as FDI net inflows constitute almost 8% of its GDP.

http://www.prosperity.com/RegionalAnalysis-5.aspx

The Philippines FDI inflows become even more pathetic in light of recent developments showing that Myanmar and Cambodia had more FDI than the Philippines in 2012. Bobby Tiglao pointed out that

According to data from the United Nations Conference on Trade and Investments’ latest Global Investment Trends Monitor, FDI inflows in 2012 into Cambodia totaled $1.8 billion, a 104 percent increase from last year. Myanmar (Burma) on the other hand had $1.9 billion for 2012, a 90 percent increase from last year. (The figure for Singapore is way too big to include in chart, in 2012 at $54.4 billion.)

The Philippines, received much less than what the two countries each got: $1.5 billion, just a 16 percent increase from last year’s $1.3 billion.

Are we going to wait for North Korea to overtake the Philippines in FDI?

Comparisons: Apples, Oranges, and Lemons

The spin of government and its media cronies uses internal comparisons only. The comparisons do not make reference to how well our neighbors are doing. When Aquino’s media lapdogs like Esposo are joining Aquino’s chorus – that tells you they need more voices to drown the truth about the economy.

Yes, an improvement from F to E is still an improvement – but when our neighboring economies are consistently in the B to A bracket we need to start pointing out that F, E, D, or C is not acceptable.

What about the PSE Index and the Sovereign Credit Ratings?

Are these numbers really to brag about or are these numbers something to be cautious about?

The PSE Index

The surge in PSE Index means there is a spike in portfolio investments aka “hot money”. The money can go out as quickly as it came in. It also causes extreme swings in foreign exchange rates that not only leave exporters less competitive in foreign markets including the BPO operators.

This also leaves the economy open to the formation of real estate bubbles because the added liquity to Ayala’s real estate portfolio which has been converted into real estate inventory isn’t moving fast enough for a couple of reasons.

One, OFW buyers purchasing power is constantly being eroded by the dollar devaluation due to quantitative easing (Fed printing more money).

Two, the convoluted restrictions on foreign ownership of property in the Philippines. According to the Condominium Act of the Philippines, (R.A. 4726), “foreigners can acquire condominium units and shares in condominium corporations up to 40 percent of the total and outstanding capital stock of a Filipino-owned or controlled condominium corporation.” Other foreigners form a corporation with Filipino colleagues to divide ownership of the property. For foreigners, it would be a lot easier if these restrictive legalese went straight to the toilet.

Three, the low purchasing power of Filipinos in the homeland.

With excess real estate inventory comes the real prospect of units being sold at below development cost. When these developments which are also funded by bank loans can no longer be repaid to the bank, the banking industry will face heavy losses. When the banks face heavy losses – investors pull out their money, and government is asked to intervene. Government bailouts of course, are ultimately paid for by taxpayers.

The Sovereign Credit Ratings

In general a credit rating upgrade is good. The caveat when it comes to the Philippines is that the improved credit ratings means the Philippine government will be able to borrow more money – that’s like providing more booze to an alcoholic.

Due to the restrictive Philippine economy, the government projects funded by foreign loans end up mainly in the pockets of government officials and the crony firms to whom the projects have been awarded.

Furthermore, foreign debt is a capital infusion which needs to be repaid. And since its a debt incurred by government, taxpayers will have to foot the bill.

There is a better way to gain capital infusions – and that’s by opening the economy. Opening the economy increases the tax base. Having a wider tax base leads to more tax revenue for government. With more revenue, the government can dig into its own wallet and eliminate the need for more loans.

It’s about the citizen’s personal economy.. student

The health of the economy will be felt in the wallet of citizens. The headlines of higher PSE indexes, or higher sovereign credit ratings don’t mean anything when the reality on the ground is that people remain jobless, underemployed, hungry, and poor – people’s wallets beg to disagree with Mister Aquino.