2021: A year to hope

The year 2020 was when we shifted from the physical world to a virtual one. This 2021 will be the year we adapt to it.

As we move through 2021, politics will dominate even more, consuming our politicos’ attention as the year moves to its conclusion. “Who will it be” will be an ever more dominant question—a question that is starting even now. Names are being floated, but it should be noted, all are from the government party, or independents. There has not been a single name suggested by the opposition. Since the ignominious failure of its leader, Mar Roxas, no one has emerged to take the role. Perhaps the most visibly outspoken has been Sen. Frank Drilon. But there’s been no suggestion he’d make a run for the presidency. There are three or four independents who could throw their hat in the ring, but without major party support it would be a tough task.

It bothers me that some of the names being floated are ill-equipped to lead a country of 108 million people. One can only hope that leadership qualities override popularity in the final decision. But I’ve a sneaking suspicion that’s a faint hope. Popularity seems to trump judgment when it comes to politics. Consider the 74 million Americans who voted for a proven incompetent, Donald Trump, as an example today. It’s a demonstrated weakness of a presidential system of democracy. You have a better chance of better informed leadership in a parliamentary system, where your peers make the decision and can replace you if you don’t perform. In the drafting of the 1987 Constitution, the parliamentary system lost by only one vote. It’s a pity the constitutional change President Duterte promised won’t happen.

In the meantime, life must go on. Congress has some important business bills to pass. Those bills have been left to reemerge on Jan. 18 as sessions resume. Perhaps the most important of these, CREATE, the reduction of corporate taxes and revision of incentives, didn’t pass as expected and is still being argued in the bicameral committee level.

The passage of those bills should provide the necessary stimulus to arouse investor interest. But with the trend to shift to nationalism from globalization and the increasing shift to robotics to replace low-cost labor, added to the damage COVID-19 has caused, foreign direct investments are likely to be muted in 2021.

What will drive the early part of the year will be the passage of Bayanihan 3. There are currently two versions of the bill. The better one is House Bill No. 8059, filed by Representatives Joey Salceda, Martin Romualdez, and Sharon Garin. It will provide P247 billion additional funds to help mitigate the impact of COVID-19. And with the pandemic not yet over, it’s a needed relief.

The government can withstand the assault on its debt. At an expected 50 percent of GDP, it will lead to a deficit/GDP ratio of 8.5 percent. The US’ deficit/GDP ratio is a staggering 34 percent, while the average for Organisation for Economic Cooperation and Development member countries is also 34 percent. Fitch agrees and has retained its BBB+ investment level rating for the Philippines, although with the outlook downgraded from positive to stable.

The “Build, build, build” program will be back on track with the budget providing enough funds to keep the momentum, provided the money is spent as planned, not stolen as too often happens. We don’t see corruption being reduced to any great extent. A shift of some projects through PPP can alleviate the financial pressure on government and accelerate this program, as well as reduce corruption. This is particularly needed as donor funds shrink, with donor countries struggling with their own funding needs to counter the financial damage of COVID-19.

I can’t see international tourism recovering to any great extent in 2021. Maybe as we move into the second half, tourists will look again at the Philippines. (My son, Struan, has done an excellent promotional video for the Department of Tourism.) Much will depend on the government’s success in eliminating COVID-19 as a threat.

Where we’ll see a real shift is in consumer spending. The shift by the middle and upper classes to online shopping is now a fixed shift that won’t revert to the physical. It will shift to a mix, with dominant online mall owners substantially reconfiguring their malls if they are to survive, and with a shift to attracting the lower income earners, and in the kind of services they offer.

To be continued next week.

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