‘News on Manila off the mark’

By Lorraine Carlos SalazarThe Philippine Star 06/02/2005

Taking a quick time out from work to post this article. Bob ( take note, NOT Baby) pointed this out to me and it feels refreshing reading something positive -- hopeful, about our country. Article's quite long but worthwhile to read. Ok, back to work now...

Southeast Asian nations hit by the 1997 financial crisis are recovering. It seems, however, that the Philippines is an exception to the rule. But while at first this impression may seem true, it really is not.

A year after winning the presidential elections, President Arroyo is still faced with the daunting task of putting the national house in order. Observers of the Philippines, especially those who read the dailies, are constantly bombarded with rumors of coups, legislative wrangling on much-needed tax measures, corruption cases and rallies against price increases or for wage hikes.

The list goes on, dominated by political scandals and gossip. These reports paint a one-sided and bleak portrait of the Philippines. Lost in the swirling rumors, developments that actually paint a more optimistic picture of the country’s economic and political situation have been edged out of the headlines. Good things are happening, pointing to steady progress towards economic health.

Such a rare, hopeful message was at the core of a recent talk in Singapore by Jaime Augusto Zobel de Ayala II. The president and CEO of the Ayala Corp., one of the Philippines’ oldest companies, presented a comprehensive list of both macro- and microeconomic indicators on the current state of the Philippine economy. These do not normally find their way to the front pages of newspapers.

First, the country’s GDP has been growing for the sixth straight year following the devastation of the 1997 financial crisis. Last year, GDP grew by 6 percent, one of the highest rates in 15 years.

Second, private consumption is progressively increasing, driven by strong inflows of Overseas Filipino Workers’ (OFW) remittances. For the first quarter of this year, OFW remittances reached $2.3 billion, up 16.6 percent from the same period last year. Thanks to OFWs who send a large portion of their income to families back home, the country’s balance of payments has been positive in recent years.

Third, exports have been growing consistently for the past four years, registering a 9.3 percent growth rate last year, amounting to a total of $39.6 billion. Foreign direct investments last year grew 409 percent, while local investments grew 76 percent, signaling renewed investor confidence. Also, existing foreign investors such as Honda, Texas Instruments, UPS, Fed-Ex, Panasonic and San Miguel Yamamura, among others, are moving aggressively to expand their operations and capacities in the country.

In February this year, the Financial Action Task Force on Money Laundering, an international multilateral group, removed the Philippines from its Non-Cooperative Countries and Territories list. As a consequence, portfolio investments started to flood in, amounting to $1.72 billion in this year’s first quarter, up from a mere $146 million in the same period last year. Improved investor confidence saw the Philippine Stock Exchange’s index hitting a five-year high last month.

Interest rates are on a downward trend, making business expansion more attractive. Corporate earnings across all sectors are demonstrating strong and steady recovery, surpassing their pre-1997 levels. Also, lead sectors that were liberalized during the Ramos administration — such as telecommunications, banking, property development and investment, food, beverages, cement, TV broadcasting and stock broking — are now experiencing mergers and consolidation. This is obviously healthy.

Fourth, tourists are also coming back, mostly from the United States, South Korea, China and Taiwan — driving growth in the industry and affiliated service sectors. Last year, 2.3 million visitors arrived in the country, finally matching the pre-1997 level.

All these indicators point to the fact that the Philippines is on the road to strong and consistent growth. Of course, not everything is rosy. Mr. Zobel de Ayala cited three major challenges that face the country: its fiscal deficit problem; the increasing cost pressures on the economy; and an expected slower growth of four to five percent for this year (but growth nevertheless).

Of the three, the fiscal deficit is the most serious. As early as last July, President Arroyo identified the country’s perennial fiscal deficit as the main problem facing her administration. Yet the solutions she sought to address the matter were slow in coming — to her chagrin. But after the long-winded legislative debates and posturing finally ended, Congress last week agreed to a compromise law expanding the scope and rate of the value-added tax. Last Tuesday, President Arroyo quietly signed the law, which is the biggest revenue-raising measure to complete the reform package.

Along with changes to the VAT, new taxes on alcohol, tobacco and petroleum products, increased corporate income tax and a law providing incentives and sanctions to tax employees to improve their performance are the other reform measures now in place.

On the implementation side, the Bureau of Internal Revenue’s (BIR) April collection reached a historic high of P62.9 billion, P9.9 billion more than its previous record high of P53 billion last year. The new head of the BIR, Mr. Guillermo Parayno, is committed to improving the agency’s performance and reversing its reputation for corruption and inefficiency.

Clearly, things are looking up for Philippine businesses and the economy. The news is just not getting enough coverage. It is not as exciting as corruption, for instance. But the truth of the matter is that an accretion of evidence is adding up to a clearly rosier picture of the country’s economic health. So, no, the Philippines is not getting left behind.

Ironically, thanks to its "free and vigilant press" (a phrase used often in the Philippines), with a knack for covering scandals and gossip, the negative perception of the country is difficult to change. So we must look beyond the headlines. Credible commitment, consistency and political will are called for from the Arroyo government to keep the country on the right track. Thankfully, the government has reiterated its commitment to pursuing its economic and reform measures. Yet, to learn more about them, one should perhaps start reading the news inside-out.

(Editor’s note: This article originally appeared in the May 27, 2005 issue of the Singapore Straits Times).